Condemnation Of The U.S. Over Poker Shutdown Only Have Themselfs To Blame

Since the DoJ took the dot com domains of PokerStars, Full Tilt and Absolute Poker, condemnations against the U.S. have been steady. Parties within the EU have expressed their disgust at the action, Kahnawake is clearly upset and Antigua threatened to sue the U.S. government and take them back to the WTO courts. In the past this reaction may have initiated some concern at the offices of the U.S. Trade Representatives (USTR) and even in the White House, but now it almost certainly just results in a shrug. And the world that now condemns the U.S. only have themselves to blame for that indifference.

Let’s start with the WTO itself. Throughout the years the United States has been the biggest beneficiary of WTO decisions and when decisions are made in the favor of the United States, the USTR expects immediate compliance. However when the WTO has ruled against the USTR in almost every instance the United States has dithered and in some cases even refused to comply. This happened with the Canadian softwood lumber dispute where the WTO ruled for Canada and the U.S. refused to accept the ruling; it happened with Brazil over the cotton dumping dispute; and it appears it will happen with the ruling in favor of China regarding the anti-dumping complaint by the United States. But for gamblers the decision that almost always comes to mind is the Antigua gambling complaint where the USTR has steadfastly refused to accept the ruling.

In 2003 the tiny island of Antigua issued a WTO complaint against the U.S. regarding America’s prohibition of cross border gambling services. According to Antigua, the U.S. signed a GATS agreement that permitted the offering of cross border services to U.S. citizens including remote gambling. The U.S. chose to ignore the complaint and simply stated that gambling that does not take place on U.S. soil is illegal stateside. Antigua requested the U.S. to discuss it over and over but the USTR said there was nothing to talk about. So Antigua went to the WTO with their complaint and documentation and in 2004 the WTO ruled in favor of Antigua. The WTO agreed that the U.S. signed a GATS agreement that required them to allow for free trade in the area of gambling. The U.S. stated it was a mistake, ignored the ruling and said they would not comply although they did appeal the decision suggesting that remote gambling goes against the country’s “morals”. The USTR stated this despite the amounts of legal gambling in the United States including remote gambling on horse racing and lotteries. The WTO Appellate court upheld the original decision stating that the morals defense was invalid because the U.S. already allowed for remote gambling in the area of horse racing. In better words, the U.S. are hypocrites and the WTO weren’t going to fall for it. The Appellate Court did, however, give the United States an “out” suggesting that if the U.S. revoked the Interstate Horse Racing Act, then they would reconsider the morals argument. Not surprisingly, the horse racing industry called foul and the USTR didn’t budge. The U.S. ignored the decision as long as they could and at one point even said they were in compliance with the WTO decision despite doing nothing. By April 2006, the United States’ time to comply with the decision ran out so the U.S. instead announced it would rewrite its commitments. That announcement was unprecedented, unethical and unfair. If any other country tried that tactic against the U.S. no doubt there would have been hell to pay but the WTO agreed they could rewrite their commitments provided they agreed to the provisions of rewriting them.

The provisions for rewriting commitments meant that the U.S. had to come to terms with concessions for any countries who claimed they were affected by the decision and Canada, Japan, India, Antigua, Macao and the EU all asked for concessions. At the same time Antigua, as the initiator of the dispute was entitled to further compensation as a penalty against the U.S. This is where the WTO failed miserably. Antigua asked for $3.4 billion in annual concessions which may have appeared high but when one considers the $100,000 license fee Antigua charges and the percentage of revenue from the multi-billion dollar industry it was likely not unreasonable. One can’t forget that projections were that hundreds of companies would operate in Antigua prior to the U.S. interfering with their industry. Antigua also factored in the projected growth of poker. But to the WTO’s failing they only considered the amount of money they believed Antigua lost from horse racing when they announced the penalty and in December 2007 awarded Antigua a measly $21 million per year in annual concessions. This didn’t even cover the cost of the dispute. The WTO could have made a bold statement to the United States that they were not so important that they could skirt their responsibilities and commitments but instead, as they have always done, the WTO backed down in the face of controversy and gave the U.S. a sweetheart deal. To the WTO’s credit they allowed the concession in the area of TRIPS, i.e. allowing Antigua to receive its settlement by ignoring U.S. intellectual property rights.

Antigua’s failing in the whole situation involved the latter. Antigua couldn’t be faulted for any of their actions up until the final decision by the WTO and in fact should be commended for agreeing to take on the challenge. Where Antigua was to blame was their inaction after the award. Without question $21 million was a fairly insignificant sum but what was relevant was the WTO allowing them to apply it to intellectual property rights. In fact the USTR were so concerned about that award they told Antigua not to do anything drastic until the U.S. could come to a different settlement. That statement itself should have caused Antigua to jump on the opportunity and flood the market with cheap knockoffs of American products. Five dollar copies of Windows 2007, $1 DVDs etc. all fully legal and functional with product key codes should have been available from the island of Antigua. Even if the products weren’t sold in the United States it would have certainly had management at Microsoft, Warner Brothers, etc. screaming foul and forced the USTR to meet with the country to work out some kind of settlement that was more realistic. However, Antigua chose to sit on the judgement and to date never took up the option or for that matter even threatened to use the judgement. It’s not surprising, therefore, that when Antigua now threatens to take the U.S. back to the WTO courts it results in nothing but a laugh.

The other countries like Canada and Macao can be blamed for not demanding the United States live up to their commitments, particularly when those countries have been screwed over by the U.S. on other WTO issues, but the EU especially deserves responsibility. There was absolutely no question that the U.S. actions were going to affect the EU drastically. After the passing of the UIGEA numerous European companies, including Party Poker and Neteller had to leave the U.S. market. Billions were wiped off the AIM stock market and estimates had the UK alone losing billions in potential revenue by the decision. Groups within the EU like the Remote Gaming Association cried foul and practically begged the EU to stand firm against the United States and force them to live up to their agreement. If not, the groups demanded that the U.S. pay upwards of a billion dollars in trade concessions, which could be given to affected gambling operators. The billion dollars was seen as a conservative estimate of how much gambling operators like William Hill, Party Poker and Bwin could have made offering gambling to the U.S. market. Instead, Peter Mandelson, the man in charge of the EU trade negotiations, came to an agreement with the USTR for $14.4 million in trade concessions in the areas of shipping and storage. The gambling groups in the EU were naturally disgusted. Not only did the EU not get what they deserved, but they also allowed for the trade concessions in areas that wouldn’t benefit EU gambling entities one iota.

So is it any wonder the U.S. could care less about the threats made to them now? Actions speak louder than words and the actions of all countries that are now threatening them again have proven fruitless in the past. Perhaps the best analogy of what is occurring would be a schoolyard bully who routinely picks on other kids. Whenever a kid is picked on, that kid goes to the principal, who in turn tells the bully to smarten up or he’ll receive a stiff punishment. When the bully acts out again the penalty given by the principal is a short detention. The next time the bully picks on a different kid the same result occurs. Naturally at some point the bully just shrugs at the threats by the principal or the kids he bullies. He knows full well the principal won’t take real action against him and the other kids won’t go over the principal’s head because they fear later retribution from the bully. The actions by the other countries have proven just that. They have set a clear precedent that the WTO is a paper tiger that either fears the U.S. or just doesn’t have the power to mete out real penalties against them. And the other countries have shown that they aren’t willing to challenge the U.S. in any real way for fear of later retribution. To make matters worse, to date the U.S. has not rewritten their WTO commitments, no countries have received any compensation from the U.S. yet the United States rules their world in the area of trade.

If the WTO and the other countries want the U.S. to take them seriously, they need to stand up to the USTR and force them to live up to their commitments. The U.S. may threaten retribution but at some point the WTO needs to call their bluff. If they don’t, the U.S. will continue to rule the roost in all areas of trade.

Related posts:

1. Senator Jon Kyl Set To Retire in 2012
2. Full Tilt Poker, PokerStars and Absolute Poker Are Charged With Fraud And Illegal Gambling
3. Full Tilt Poker Announced That They Will Ban US Players From Their Site
4. The European Union yesterday published a Green Paper on online gambling.
5. Titan Poker: $2000 White Monday Freeroll

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Posted by Senior Editor on Apr 24 2011. Filed under Poker legislation & Law. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.