It’s the little things that ultimately have the biggest impact. Or conversely, it’s the little foxes which spoil the vine. Take your pick. The U.S. recently made internet gambling illegal by prohibiting banks and credit card companies from processing claims from online gaming companies. It’s important to note that the bill excludes “US-based online betting on services like horse racing and lotteries and has no impact on American casinos and other gambling operations.”
Why is that important? WTO. The World Trade Organization. Yeah, the U.S.’s little sock puppet. The U.S. has been pushing the world to following the WTO forever. The WTO’s rules say that it’s okay for a country to outright ban certain goods and services, but you can’t carve out domestic exceptions. In other words, you can’t prohibit other countries from selling booze in your country if you’re going to allow domestic companies to sell it. It’s called free trade. If you’re going to allow Coors to sell beer in the U.S., you’ve got to allow other countries to sell their beer here as well. You can’t have a law which makes the sale of beer illegal but carves out an exception for Coors and other U.S.-based companies.
Now, armed with that knowledge, re-read the first paragraph. Yeah. Congress really stepped in it this time. And the little island of Antigua cried foul and filed a complaint against the U.S. with the WTO. (Technically, Antigua’s complaints pre-date the recent bill, but is based on similar claims.) And guess who won? Antigua. Can you believe it? The U.S. can’t. Actually, the U.S. is trying to pretend that the WTO decision never happened. According to the Boston Globe:
The World Trade Organization has given the United States until April 3 to allow Antigua-based online gambling companies to offer Internet horse-race betting, or face the threat of retaliatory trade sanctions. Sanctions levied by a country of only 70,000 people might have an imperceptible impact on the US economy. But the ruling offers a stark example of the challenge of regulating Internet commerce and could place the United States at odds with some larger allies that have embraced online gambling. So far, there’s no sign that the United States will avoid the showdown. The US Justice Department says that Internet gambling is illegal, even though millions of Americans do it, and federal law has made an exception for horse racing. ‘‘It looks like the US is just going to ignore the World Trade Organization opinion,” said I. Nelson Rose, professor of law at Whittier Law School of Costa Mesa, Calif., and an expert on gambling law.
The article goes on to point out that “failing to resolve the dispute would leave the United States in the embarrassing position of appearing to bully a small nation that is playing by the rules. That could damage the authority of the World Trade Organization, the global trade body that the United States worked so hard to establish.” Nice.
So what’s a small nation, who filed a WTO complaint and won, to do when the other nation won’t recognize the complaint or the WTO’s mandate? Here’s the good part. They can pursue retaliatory trade sanctions.
Huh? (Insert sound of laughter.) Antigua pursuing trade sanctions against the U.S. would be like a mosquito seeking damages from a human for swatting at it. What kind of damage can tiny Antigua do? Antigua’s primary industry is tourism, so unless they’re going to start turning away U.S. tourists, there’s not much they can do. And frankly, turning away U.S. tourists would only hurt Antigua’s economy. The U.S. would hardly notice it. According to Wikipedia:
[Antigua’s] agricultural production is mainly directed to the domestic market; the sector is constrained by the limited water supply and labor shortages that reflect the pull of higher wages in tourism and construction. Manufacturing comprises enclave-type assembly for export with major products being bedding, handicrafts, and electronic components.
In other words, they make beads and trinkets. Hardly a threat to the U.S. economy, right? Oh no! Who’s going to make my handicraft? China. Taiwan. Pick your sweatshop.
But wait. Here’s thing gig. Antigua will be entitled to retaliatory trade sanctions, and Antigua gets to decide exactly what those sanctions will be. Hmm. What could a little pirate island in the Caribbean do to retaliate against The Man? How about refusing to recognize the U.S.’s intellectual property? How about refusing to recognize U.S. patents, trademarks and copyrights? The Boston Globe continues:
This would make it possible for Antiguan-based companies to produce knock-offs of American intellectual property, like video and music recordings or computer software. Such a tactic would get the attention of major US firms like Microsoft Corp. and entertainment titan Time Warner Inc. It would also put tiny Antigua’s trade war against the United States on front pages around the world.
Enforce this bill, and you could well see a couple of dozen countries that house gaming servers follow suit, each declaring themselves safe havens for IP pirates. And not just tiny bumps in the ocean. Britain stands to lose a couple billion in tax revenue from this bill. All of this could well mean a mammoth clash of wills and special interests is in the offing, with Big Pharma, Hollywood, Big Software, and RIAA butting heads with the moral crusaders, eBay, and professional sports. And that, of course, would be terrific fun for the rest of us.
Fascinating. Yet it seems like an awful big gamble just to protect Paypal.
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