USTR Authority under Congressional Scrutiny in WTO Settlements

12 March 2008

Rep. Peter DeFazio, D-Ore., is questioning the U.S. Trade Representative's authority to negotiate compensation settlements with members of the World Trade Organization for the U.S. withdrawal of gambling services from the General Agreement on Trade in Services.

DeFazio last week circulated a letter to all members of Congress asking them to join him in requesting a copy of the concession agreements USTR Susan Schwab made with Canada, the European Union and Japan, noting that a request made by a U.S. citizen under the Freedom of Information Act (FOIA) had been recently denied for reasons of "national security." DeFazio stated in the letter that according to the vague list of compensatory adjustments that had been released, he did not feel that any of them warranted a national security classification, suggesting that the USTR was trying to avoid any publicity of which new business sectors are to be subjected to the GATS Treaty.

Nao Matsukata, senior policy analyst at Alston & Bird and former director of policy planning for the U.S. Trade Representative Robert B. Zoellick, said there was good reason the FOIA request was denied -- because the compensation talks are still ongoing. The United States has settled with the European Union, Japan and Canada, but Antigua and Costa Rica have not yet reached an agreement and until all parties close negotiations none of the agreements can be certified.

"The U.S. doesn't want other countries to be able to see these documents," Matsukata said. "In my view, [the FOIA part] is not an issue in the sense that most negotiating documents are classified during the course of a negotiation. Then when the negotiations are over the documents are declassified and the public can see them."

What's more significant, according to Matsukata, is that DeFazio is crying foul because the USTR negotiated the agreements without having the delegated authority to do so.

Matsukata explained that under the Constitution, the executive branch is not given the authority to negotiate settlements in matters of interstate commerce. But, the Trade Acts of 1974 and 2002 allowed Congress to delegate that power to the executive branch, while including the caveat that Congress must be consulted on all negotiations. The Act expired on July 1, 2007 and Congress did not renew the legislation, but the USTR still does not have the authority to handle trade negotiations without closely consulting with Congress.

While DeFazio's motivation appears to be more procedural than specifically gaming-related, it is significant to the gaming industry because it still leaves open and furthers the idea that this withdrawal of commitments may not happen unless Congress ratifies the agreement, Matsukata said.

"From the gaming perspective, you don't want the United States withdrawing its commitments," he added. "So, anything that may prevent the United States from withdrawing its commitments is important to the industry. And this letter, despite the fact that it doesn't directly advocate for the gaming industry, is hitting on the very procedure that would prevent the U.S. from withdrawing."

If DeFazio is successful in getting a number of his colleagues to sign on to this letter they could get Schwab to agree to a briefing with Congress on the situation. And if they don't like what they hear it could potentially derail the process and the compensation negotiations will not close.

View the letters to members of Congress and Susan Schwab.




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