Gambling Dispute With a Tiny Country Puts U.S. in a Bind — NY Times

In 2003, Antigua filed a complaint with the WTO, claiming that the U.S. ban on online gambling violates its rights as a member of the WTO. Recently, the WTO has ruled in Antigua’s favor, a ruling with which I can’t say I’m altogether unhappy.

Complying with the W.T.O. ruling, Professor Jackson said, would require Congress and the Bush administration either to reverse course and permit Americans to place bets online legally with offshore casinos or, equally unlikely, impose an across-the-board ban on all forms of Internet gambling — including the online purchase of lottery tickets, participation in Web-based pro sports fantasy leagues and off-track wagering on horse racing.

But not complying with the decision presents big problems of its own for Washington. That’s because Mr. Mendel, who is claiming $3.4 billion in damages on behalf of Antigua, has asked the trade organization to grant a rare form of compensation if the American government refuses to accept the ruling: permission for Antiguans to violate intellectual property laws by allowing them to distribute copies of American music, movie and software products, among others.

Outside the Beltway makes some excellent points:

Let’s consider the possible outcomes of this case.

1. The U. S. could allow Americans to place bets legally with offshore casinos online.
2. The U. S. could ban all forms of Internet gambling.
3. The U. S. could refuse to comply and the WTO could impose some other penalty.
4. The U. S. could refuse to comply and the WTO could impose the penalty that’s been requested.

[…]

But it’s the final alternative that’s the most troubling. This goes far beyond allowing the 70,000 residents of Antigua to share DVD’s legally among themselves. It would turn the tiny country, once a haven for Caribbean pirates, into a haven for legalized intellectual property piracy of all kinds. Books, video, music, software, pharmaceuticals, the list is endless. U. S. intellectual property, on which it has based a substantial portion of its future, would be dead not merely in Antigua but everywhere.

For better or worse, though, the United States may not have an option but to regulate now. Surely the U.S. can’t refuse compliance with the WTO ruling if the WTO will grant the requested damages. Still, it would seem that if history is any predictor of future behavior, the WTO will provide damages other than those requested and make the WTO look extremely weak in the process. Nonetheless, that would be just another international news item that will quickly fade away.

Regardless, the most unfortunate consequence with a law against online gambling is that it isn’t stopping anyone. The necessary conclusion that must be drawn from that is that roughly $12 billion goes to the illegal activity — a significant portion to other countries — annually. On the one hand, that is money that could be taxed for revenue (and would, in a perfect world, reduce other tax rates in return); on the other hand, an individual country should be able to refuse some trade if the trade is contrary to its traditional cultural morals.