EU puts pressure on US regarding gambling

European Union Trade Commissioner Peter Mandelson visited Washington last week, seeking resolution to the pending $100 billion trade gambling dispute between the US and the EU.

Mandelson's visit is expected to help bring a resolution to the ongoing dispute regarding the size of the compensation due to the EU because of the US’ withdrawal from its WTO free trade commitments. This dispute, brought on by the small country of Antigua, has been already sentenced against the US by the WTO court, and the amount of the compensation due to all affected countries is still in negotiation. In the case of Europe it could be as much as $100 billion – the estimated value of the US gaming industry.

The unprecedented withdrawal of the US from its WTO commitments has been severely addressed by Mandelson in this visit. "When a member of the WTO defaults on its commitments, compensation is due," he said in an interview with Reuters. "That's the case with online gambling. […] We're in talks about the magnitude of that compensation. I think what we're asking for is reasonable and realistic. The numbers aren't quite as large as has been advertised, but they need to be substantial." According to the Washington Times, once a sum has been agreed on, it will not be paid through a fine - instead, the experts will agree on a comparable market that isn't yet open or negotiate tariffs on other goods to make up the difference. Sallie James, a trade policy specialist at the Cato Institute, said some possible options are opening the U.S. insurance market by removing certain state restrictions or allowing some foreign ownership of airlines, remarking that both of these options are very politically sensitive.

Mandelson did not hesitate to call the US gambling ban discriminatory, telling Reuters: “What we need to see is a change in US legislation that removes that discrimination against EU operators." He also stated that the U.S. Congress should either re-open its gambling market to other countries or compensate Europe for blocking the American gambling market to European operators. As a way to steer the conversations in a more positive direction, Mandelson commended Rep. Frank’s IGREA initiative as a viable, desirable solution, stating: “I think (Frank) takes a fair-minded, common sense approach to this and we look forward to that being effective legislation."

Trade experts who have been following this case have spoken in a positive way of Mandelson’s visit, and are hopeful that he will help sway Congress into reconsidering its stance on gambling.

Nao Matsukata, formerly Director of Policy Planning for USTR Robert Zoellick and now a Senior Advisor for Alston and Bird LLP, highlighted that “[Mandelson’s] willingness to meet with Chairman Frank suggests that Mandelson is open to finding a legislative solution to the problem. The meeting on Friday initiated a mutually supportive effort to resolve the unfortunate decisions of the United States to withdraw from its GATS commitments, and should help create positive momentum for the Frank legislation on Capitol Hill.”

And Lode Van Den Hende, a trade expert in Brussels used strong language to refer to the US Trade Representative: “It is possible for US legislation to create strong consumer protections, facilitate consumer choice, and provide durable tax revenues for the future. Since the US Trade Representative's sole interest seems to be to continue to violate US treaty obligations under the WTO, it is incumbent upon the EU to work directly with the US Congress to develop a responsible solution.”