US Throws EU a Bone Over Net Gambling Ban

In a bid to settle a dispute arising from an aggressive effort to ban gambling by its residents, the United States has agreed to trade concessions meant to make it easier for some European companies to compete against domestic rivals.

The U.S. has approved concessions dealing with easing trade restrictions on mail services and warehousing as well as broader opportunities for European companies in the area of research and development, the EU said. The countries signed the deal in Geneva, the EU noted.

U.S. officials have confirmed the agreement, according to reports. The EU has not set a value on the deal, which is meant to settle part of a long-raging global dispute over whether the United States can unilaterally ban Web-based gaming.

Billions Lost

European-based gambling businesses, especially those in the UK, have claimed they've lost US$100 billion in revenue in the wake of the decision by the U.S. to enforce a ban on Web-based wagering.

"While the U.S. is free to decide how to best respond to legitimate public policy concerns relating to Internet gambling, discrimination against EU or other foreign companies should be avoided," said Peter Power, EU spokesperson for trade.

Even with the new agreement in place, the dispute likely will remain active at the World Trade Organization, where a complaint was originally brought by the Caribbean nation of Antigua, where several offshore gambling operations were run from before the U.S. crackdown began.

Settling Down

Concessions will include an easier path for Germany-based DHL to compete with U.S.-based rivals such as FedEx and UPS, the EU said.

"It is clear that new trade opportunities are created for EU service suppliers in important sectors in the U.S.," the EU noted.

The settlement will be one of several the U.S. will have reached following the WTO's ruling in March of this year that the unilateral ban on Web gaming violated free trade agreements, with the WTO siding almost completely with Antigua and Barbuda, which had filed a complaint in 2004.

The WTO's ruling found that while the U.S. had the ability to ban gambling to maintain public order, it was being inconsistent by allowing U.S. residents to place bets across state lines on dog and horse races.

Under WTO rules, countries can take certain punitive actions against trading partners that have violated trading conventions. Antigua and Barbuda have threatened to make it easier for its residents to violate U.S. trademarks, patents and copyrights in retaliation.

The countries claim the U.S. owes $3.4 billion in damages for the ban; the WTO is expected to rule by early next year on whether to enforce such a payment -- unless an agreement is reached first.

The U.S. has already made settlements with Japan and is reportedly close to an agreement with Canada to settle the gambling case.

More to Come?

At the behest of several gambling companies, EU trade officials had taken a hard-line stance against the U.S. position on gambling -- federal authorities essentially shut off the money flow to gaming sites by threatening to prosecute banks and credit card companies that processed such payments.

The settlement does little to address the recent woes of the publicly traded gambling companies based in Europe, Clive Hawkswood, a spokesperson for the Remote Gambling Association, which represents Web-based gambling sites around the world, told the E-Commerce Times.

"There was a hope that the EU would take this case to arbitration," Hawkswood said, noting that for many gaming companies, more than half of their annual revenue had come from the U.S. prior to the crackdown. The Antigua and Barbuda case may yet force the U.S. to make other concessions, he added.

Creating Tensions

The U.S. has long been seen as an outlier in the global Internet gambling landscape and its position helps create enormous international tensions, said Christiansen Capital Advisors analyst Sebastian Sinclair.

"The U.S. has chosen not to write new rules but to enforce old ones that predate the technology that eliminates old borders to global trade," Sinclair told the E-Commerce Times. "There is pressure on the U.S. from inside and outside the country to regulate rather than prohibit."

Bills to modernize laws and allow some Web-based gambling have been circulating on Capitol Hill, but have yet to build the critical momentum needed to overcome resistance based on issues such as exposure of underage Web users to gambling, he added.