A Closer Look at the EU-US WTO Settlement

18 December 2007

Compensation talks between the United States and the European Union ended on Saturday at the World Trade Organization with an agreement to open new trade sectors, none of which would directly benefit the Internet gambling industry.

The two WTO members have been negotiating an agreement since May over the United States' decision to withdraw gambling services from its commitments to the General Agreement on Trade in Services. Under GATS, WTO members may modify their commitments, but in doing so must compensate other members affected by the change.

The agreement reached on Monday relates to warehousing services, technical testing services, research and development services and postal services relating to outbound international letters, said Gretchen Hamel, spokesperson for U.S. Trade Representative.

Nao Matsukata, senior policy analyst at Alston & Bird and former director of policy planning for the U.S. Trade Representative Robert B. Zoellick, explained how the parties arrived at the agreed upon trade sectors.

"A lot of the negotiation focused around what had already been offered at the Doha round, and one chapter of that multilateral negotiation was the services sector," Matsukata said. "So, what they started doing is pulling some of the offers that they had on the table for that and offering them to the EU. Other items on the agenda had already been acknowledged by the European Union as things that they had wanted."

The value of the agreement has not been revealed, but it is thought to be far less than the $100 billion the European Union was reportedly hoping for.

However, a European Commission official said the package was "substantive with meaningful commitments for the EU." And while the Commission accepted the offer -- which may not have been favorable for the I-gaming industry -- it said it would continue to push for non-discriminatory legislation in relation to gambling rules, vis-à-vis EU companies.

In other words, European Internal Trade Commissioner Peter Mandelson, who visited Washington, D.C., in November and met with lawmakers and trade representatives to discuss possible legislative solutions to the trade rift, will continue to use the channels available to carry on a dialogue with the United States in this area, according to an EU trade spokesperson.

The agreement applies to Canada and Japan as well, but only in the sense that whatever is negotiated for each trading partner effects every member of the WTO, Matsukata said. Both countries completed their respective negotiations with the United States in recent months.

Gaming companies for the most part have remained silent following the announcement, but Clive Hawkswood, CEO of the Remote Gambling Association, said his organization was disappointed by the news, but would continue lobbying for I-gaming regulation in the United States.

"We do not know what value the European Commission has attached to the concessions that have been agreed, but on the face of it we would be surprised if they were in any way equivalent to the losses that have been suffered by the online gambling industry," Hawkswood told IGN. "This is at best disappointing and we would hope that the European Commission will now pursue the interests of our industry through other channels. We believe there are still plenty of hurdles for the U.S. to cross before it can claim to have extricated itself from this problem completely."

Talks continue with India, Antigua and Barbuda, Macau and Costa Rica. Once all negotiations are complete the United States will have to submit each agreement to the WTO, who will in turn have to send them out to every member of the WTO to see if there are any objections, Matsukata explained.

Meanwhile, the delayed decision from the WTO arbitration panel in the dispute between the United States and Antigua and Barbuda is due to be released on Friday, said Mark Mendel, lead counsel for Antigua.

Emily Swoboda is the senior staff writer at IGamingNews. She lives in St. Louis, Mo.