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EU and US at odds over internet gambling

US prohibitions and trade rule blunders fuel high-stakes dispute.

A croupier deals a hand of cards for a poker at the new Casino Barriere in Toulouse, Oct. 12, 2007. The U.S. and E.U. are embroiled in a dispute about whether online poker, and other forms of internet gambling, violate trade regulations. (Jean-Philippe Arles/Reuters)

SAN FRANCISCO — The European Union recently took a shot at the United States in little-noticed trade war over internet gambling, charging that the United States unfairly interferes with internet gambling in ways that run contrary to World Trade Organization rules.

The EU is not the only WTO player at odds with the United States over online gambling. China, Canada, Japan, Mexico and the Caribbean island nation of Antigua are also using trade rules to either force the U.S. to ease its prohibitions against internet gambling — which seems unlikely though there is a bill to that effect in Congress — or else get compensation in the form of trade concessions if they can't.

The stakes are considerable. The EU report that raised the charges estimated that “remote gambling and betting” was a $14 billion industry in 2007, headed for $22 billion in 2010. “The EU has established a worldwide lead” in this market, according to the report, which said 15,000 Europeans were already employed by remote gambling firms based mainly in the United Kingdom, Malta, Gibraltar and Ireland.

“Internet gambling is a complex and delicate area, and we do not want to dictate how the U.S. should regulate its market,” said EU Trade Commissioner Catherine Ashton in a statement. “However, the U.S. must respect its WTO obligations. I hope that we will be able to reach an amicable solution to this issue.”

A spokeswoman for the U.S. trade representative said her office was studying the EU report and was already in discussions with European officials over the gambling issue.

“The United States has really bungled this,” said Professor I. Nelson Rose, who teaches at Whittier Law School in California and is an expert on international gambling.

Rose said the roots of the dispute go back to 1994 when the United States signed the General Agreement on Trade in Services (GATS) — but failed to put gambling on the list of services it planned to exclude from the free trade provisions. “Had we done that we wouldn't have this problem now,” Rose said.

The subsequent rise of the internet led to the creation of cross-border gambling sites aimed at the United States, where gambling is regulated by a patchwork of federal and states laws. Rose said U.S. authorities at both the state and federal level have generally sought to discourage internet gambling using every tool at their disposal.

The issue came before the World Trade Organization in 2003 when Antigua, which hosts internet gambling sites, complained that these various U.S. efforts to restrict online gaming constituted an unfair trade practice.