WTO Manoevring - Opening A Slippery Slope?

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The United States is the first member to attempt to modify its trade agreement....but it may not be the last

The United States Trade Representative filed a motion to change its original World Trade Organisation agreements on the international passage of goods and services this week amid widespread criticism.

The application to cut online gambling out of the agreement and the scope of the WTO is believed to be the first made in terms of Article XXI of the General Agreement on Trade in Services (GATS) and although the Americans have attempted to sell the idea as a mere "clarification" necessary because there had been no intention to include online gambling a decade ago, few observers doubt that it is anything less than protectionism.

And it could have far-reaching legal effects.

"It opens up a slippery slope," said Joseph Kelly, professor of Business Law at Buffalo State. "This is one of the first times this has been done, and it's going to require a long period of comment and other countries are going to be able to express their opinions on this."

The U.S. move is its latest ploy to circumvent losing a long-running dispute in the WTO with Antigua and Barbuda, which challenged US actions against online gambling on grounds that its measures were protectionist and discriminatory in nature. The islanders charged that by allowing US citizens to make interactive interstate wagers on horse races and state lotteries while barring offshore companies from taking bets from U.S. customers, the US was in contravention of the letter and the spirit of its WTO agreements.

Having lost arguments and an appeal, the US Trade Representative announced recently that it would be maintaining its online gambling restrictions and instead of complying with the WTO findings would seek to change its obligations and commitments through an Article XXI application.

The application was submitted last Friday, and there will now be a 45 day response window during which fellow members of the WTO who feel they may be aggrieved or prejudiced by the application may seek compensation. The USTR has already said that his government does not feel that compensation is warranted, raising the likelihood of further friction and tussles.

Several observers have opined that other nations could deploy similar tactics in cases where WTO rulings did not go their way, or simply to alter parts of their commitments with which they were no longer content.  Media commentators have implied that China in particular could turn the tables on the USA by using the arguments in its copyright dispute with the Americans now before the WTO.

The European Union appears less than happy with the situation, too with European Commissioner Charlie McCreevy taking a wait and see position but making openly critical comments that the US activity on the Antigua dispute smacks of protectionism and could be the subject of an EU response.

The US will have an extendable three month period once the 45 day window for complaints ends. This is intended to provide space for negotiations with aggrieved WTO members regarding compensation.

"There's very little we can say until day 45, because we don't know who is going to make a claim," said the USTR official.