Letter: Betting on Obama's Good Sense

4/23/09 - European Voice

By Erika Mann & Nao Matsukata

The US president may have been dealt a poor hand by his predecessor, but he has another chance to avoid a WTO dispute over online gambling.

The administration of US President Barack Obama has issued many statements repudiating protectionism. 

The White House now has a chance to match its rhetoric with action, by halting its unfair discrimination against European businesses involved in online gambling.

In March, the EU launched a formal investigation into the prosecution of European online gaming companies by US legal authorities. The resulting report found that the US has discriminated against European companies and individuals by launching criminal prosecutions for past business activities permitted under US trade commitments, but nominally illegal under US domestic law. This retroactive enforcement was found to discriminate against European firms because US companies engaged in identical businesses have not been prosecuted. The report opens the door for the European Commission to pursue a formal dispute at the World Trade Organization (WTO).

The Commission has displayed commendable restraint: Catherine Ashton, the European trade commissioner, has made it clear she would prefer a negotiated settlement. Washington should welcome this overture, as the political wages of increased protectionism are particularly high at this stage of the global economic crisis.

A new WTO dispute with Europe would, at best, be a difficult way for the Obama administration to initiate trade relations with the world's largest trading bloc. Such a dispute might also result in the WTO judging that the US is unfairly applying criminal laws that extend well beyond the normal areas of international trade. If so, neo-isolationists would probably crowd the floor of the US Congress to raise doubts about American involvement in the WTO.

But today, more than ever, the rules-based trading system requires a genuine demonstration of commitment and leadership by the US. The US' recent victory in a WTO challenge against China's failure to protect intellectual property provides fresh evidence that the WTO dispute process is worth preserving.

So the question for the Obama administration is whether it truly believes that fair trade is a two-way street. Obama has inherited a poor hand in this matter: George W. Bush refused to abide by a WTO ruling that the US had violated its existing commitments on gambling and sought to abrogate commitments on services trade made in 1994. Congress has already held hearings on the issue; the EU's report may well stimulate new congressional interest.

Obama's trade team has a straightforward alternative to a WTO dispute: it could freeze the prosecutions and enter into negotiations with the EU to craft a durable solution.

Obama's choice will provide a clear signal about America's true position on protectionism.
Obama and his senior trade officials came to office stating that enforcement of trade laws to ensure trade is free and fair was a top priority. This is a chance to prove that. It is also a chance to restore credibility to the world's trading system.

From:
Erika Mann MEP
Brussels
Nao Matsukata
Senior policy adviser
Alston & Bird LLP law firm
Washington, DC