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EU Trade Rep To Visit Washington to Discuss Internet Gambling?

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European Trade Commissioner, Peter Mandelson is coming to Washington this week and European politicians and gambling industry representatives are calling on him to engage in discussion with the United States Trade Representative, Susan Schwab, regarding compensation owed the EU and other countries following the withdrawal of service trade concessions in the WTO as it relates to cross-border trading of Internet Gambling Services.

"The United States has engaged in blatantly protectionist behavior, U.S. companies are entitled to operate in European markets, while we've been forced out of the United States, Commissioner Mandelson's visit is a good opportunity to address discrimination against responsible European companies. The US TR should be put on notice that the E.U. will not allow the wholesale denial of trade rights protected by the WTO. Brussels should take every conceivable measure to defend the system of global trade," said Clive Hawkswood, CEO of the Remote Gambling Association.

The United States has taken drastic steps to deny foreign competition in its domestic gambling market that has severely impacted not only the gambling industry, but financial and information technology companies. The closure of the U.S. market to foreign companies from the world's largest market has had devastating effects on not only gaming companies, but also pension funds, financial services companies as well as many supplier industry sectors to the gaming industry and institutional investors. The actions of the U.S. have wiped out billions of dollars from balance sheets of these companies.

Former Director of Policy Planning of the US TR, Nao Matsukata, reporting to Robert Zoellick, now a senior advisor for Alston and Bird, LLP, has stated that, "Failure to resolve the United States discriminatory practices would lead the W.T.O. to authorize countries to enact enormous sanctions against the U.S. equal to the value of the lost market access. This situation could be avoided through a legislative solution. Frankly, the Congress is already moving in a responsible manner on this issue, and should take the matter out of the US TR's hands to prevent the further deterioration of US-EU trade relations."

House Financial Services Committee Chairman, Barney Frank, has offered a solution to this situation with his Bill HR 2046 (Internet Gambling, Regulation, and Enforcement Act), which addresses the concerns of the prior congress regarding underage and problem gambler use monitoring, as well as establishing a licensing framework that would ensure that games would be fair and monies are accurately reported.

"The U.S. Congress is seeking to regulate online gaming in a competitive and fairly taxed environment that encourages the participation of responsible companies that the legislation would create strong consumer protections, facilitate consumer choice, respond to technological innovation, and provide durable tax revenues for the future," said Lode Van Den Hende of Herbert Smith, LLP. "Since the US TR's sole interest seems to be violating the rights of European industry, it is incumbent upon Commissioner Mandelson to work with the U.S. Congress to develop a responsible solution."

In the current round of trade negotiations, several key WTO partners of the US have expressed concern over the broader impact of the US TR's decisions on global trade.

"At a minimum, Washington's actions call into question the US's credibility in current WTO negotiations for greater trade liberalization," Matsukata said. "It will be readily apparent to significant economies such as China, India, and Brazil, that the United States seeks to create one standard for its trading partners, and another for itself. This risks setting a precedent in the WTO that would ultimately prove harmful not only to the global rules-based trading system, but also to the long term ability of the U.S. to remain competitive."

The US has been found out of compliance regarding trade in services in relation to Internet gambling at the WTO due to it's allowing domestic companies to provide certain Internet gambling and denying the same to foreign competition.

Congress last year enacted HR4411 which is designed to cut off financial transactions to illegal foreign operators of Internet gambling sites, without identifying what is or is not illegal, or which sites are or are not illegal. The proposed regulations for this law put the onus on banks and other financial institutions to make that decision.

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