The new law doesn’t make any additional types of gambling illegal. Rather, it merely attempts to make it harder to engage in online-gambling activities that Congress already believes are illegal—by requiring credit-card companies to identify and block transactions with online casinos. But in laying out with specificity what kind of Internet gambling Congress thinks is—and is not—already prohibited, the law likely will add to a free-trade debacle in which the United States already finds itself knee-deep.
To understand why this new law may cause free-trade problems, you need to know a little bit about U.S. laws governing both online and brick-and-mortar gambling.
For that, read the article. I’ll skip ahead to the interesting bits:
In 2003, the island nation of Antigua and Barbuda took a look at the thicket of U.S. laws governing gambling and decided that they violated the United States’ free-trade obligations, as administered by the World Trade Organization.
Antigua’s basic theory in its WTO complaint was simply that, if the United States allows any Internet gambling at all, it couldn’t, in light of its WTO obligations, impose barriers to foreign companies seeking access to its market. It was a pretty straightforward free-trade argument.
The WTO gave the United States a year to comply with its ruling by either changing its laws to fully ban online gambling or by allowing foreign access to the online-gambling market. That year ended last April, but rather than do anything to comply, the United States simply issued a statement to the effect that it had spent the year reviewing the matter and decided that it has been in compliance all along. Antigua is, unsurprisingly, challenging this response. A final decision from the WTO is expected early next year.
The obvious question is what Antigua can do with a victory at the WTO. Retaliatory tariffs plainly aren’t particularly appealing for small country like Antigua, because they would certainly hurt more than they would help. But the plucky little island paradise does have some creative options at its disposal. If the United States remains recalcitrant, under the WTO rules, Antigua would potentially have the right to suspend its own compliance with the treaty that obligates it to respect the United States’ intellectual-property laws. That, one can well imagine, might get Washington’s attention.
Want a cheap copy of Microsoft’s latest software or a nice medical device that, annoyingly, is protected by a U.S. patent? Come to Antigua. In such a scenario, Antigua couldn’t simply be ostracized as a rogue state. It would have every right under WTO rules to pursue such a course. In fact, Antigua could go down this road only in response to the United States’ continuing refusal to honor its international obligations. While there undoubtedly would be complicated issues and restrictions on the scope of any suspension the WTO approves, the United States shouldn’t assume that the world body is too timid to hand Antigua this sort of stick with which to retaliate, since it has authorized intellectual-property-based reprisal before. Antigua’s frank calculation here, of course, is that while the administration might be comfortable stiffing the Antiguan trade representative, it would probably take notice if, say, an irate Microsoft or Disney started insisting that it get this problem solved.