EU-U.S. Trade Spat Yet to Reach Boiling Point, Insider Says

18 September 2008

In meetings this week with United States officials, a European Union trade delegation is investigating whether the Department of Justice's prosecutorial efforts against certain publicly traded European online gambling firms is in violation of a World Trade Organization treaty. But one trade policy expert feels that the parties are left with a familiar sense of hurry up and wait.

"My view on this is that the U.S.T.R." -- the United States trade representative -- "has no reason to show any more leg on this than they already have unless it goes to the W.T.O.," said Nao Matsukata, senior policy analyst at Alston & Bird.

"So," he went on, "anytime they come over here and talk to the U.S. government I think the view will be: 'If you really want to see where we are, you're going to have to take us to the W.T.O., and that's when we'll really start telling you what we think about what you have there.' "

In December, the Remote Gambling Association -- or RGA -- which represents European online gambling operators, filed a complaint at the European Commission alleging that the Justice Department was in violation international trade laws.

The RGA argues that the Justice Department has engaged in "selective prosecution" against European Union online gambling companies, which, at one time operated in the United States market, but ceased operations when the Unlawful Internet Gambling Enforcement Act took effect in October 2006.

The trade delegation in Washington, D.C., this week -- which includes Jean-Francois Brakeland, who heads the European Commission's dispute settlement office -- has met with officials from the trade representative's office, the Department of Justice, the Treasury Department and the Department of Commerce, according to Kasper Zeuthen, the senior press and media officer for the European Union Embassy.

Mr. Zeuthen told IGamingNews by telephone today that Mr. Brakeland would not say with whom he met, only that they were "at the level of people who 'know the nuts and bolts of what is going on.' "

Mr. Brakeland also met with members of Congress, including Robert I. Wexler, the Florida Democrat who has previously spoken out on the importance of reaching a conclusion in the dispute.

Mr. Wexler and Stephen I. Cohen, also a Florida Democrat, in August co-authored a letter to Attorney General Michael B. Mukasey requesting the Justice Department suspend all prosecutorial and enforcement action against online gambling companies that targeted America prior to October 2006.

"The Administration and Congress must take the complaint lodged by the EU regarding Internet gaming seriously given its impact on the American economy and our national interests as a whole," Mr. Wexler said in a prepared statement on Wednesday.

"I am deeply concerned that this dispute has the potential to escalate and cause even greater damage to America's reputation globally as well as our economic relationship with the EU and international community," the statement continued. "It is critical that Congress work closely and expeditiously with the Administration to avoid this unnecessary escalation. At this juncture -- the Administration must address the lack of a coherent explanation by the U.S.T.R. and D.O.J. on this issue, despite repeated requests from me and other members of the Congress."

Mr. Matsukata said that in terms of the Hill, the delegation's visit is more about education than advocacy.

"The Hill doesn't have a whole lot it can do on this," he said. "It certainly can speak out and be unhappy about the state of the relationship and what's going on, but at the end of the day it's really a negotiation between the commission and the executives.

"There is definitely a sense that they are aware of what's going on and they are not happy about it," he added. "I wouldn't go so far as to say they are frustrated about not getting the action they really want. They want something to happen, but it hasn't reached that boiling point with them. But certainly their level of understanding is greater and their level of concern is greater than five or six months ago."

The European Commission must make one of three recommendations: to close the case, to push for a settlement or to take it to the W.T.O. And that decision will be made known in November when the commission publishes a report on the negotiations.

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