US to drop WTO Internet gambling objection, open new markets to EU

The Internet gambling industry was dealt another lousy hand this morning in Geneva, as trade negotiators decided they're okay with US objections to Internet gambling as long as it takes measures that could privatize the Post Office.

Under an international agreement which took effect in 2000, nations agreed to suspend tariffs against one another in order to open each other's markets to not only goods but services. This was the General Agreement on Tariffs and Services (GATS), and the US is one of the nations bound by that agreement.

One of the categories of services under the GATS purview is gambling, which is a facet of our economy that Congressional Republicans and the President have both moved to shut down. The last Congress passed a measure which the President signed, effectively rendering illegal any transaction between a bank or financial institution and a known gambling service provider anywhere in the world. Meanwhile, US trade negotiators announced this country was unilaterally withdrawing from its GATS commitments to the World Trade Organization -- a move the WTO declared "illegal" last March, though it isn't clear whose laws the Organization was referring to.

Last month, European Union Trade Commissioner Peter Mandelson came to Washington to demand that the US lift its trade ban on Internet gambling, calling it unfair and contrary to the US' GATS commitments. This morning, Comm. Mandelson's office announced it was happy with the US' alternative suggestion: It will open up more of its other markets to EU participation, in exchange for leaving the ban intact.

"While the US is free to decide how to best respond to legitimate public policy concerns relating to Internet gambling," read a statement this afternoon by the Trade Commission's spokesperson, "discrimination against EU or other foreign companies should be avoided." That's a roundabout way of saying the discrimination will be avoided by deciding to avoid the topic altogether: Internet gambling is no longer one of the categories covered by GATS, under the terms of a new agreement this morning.

GATS was designed to be a kind of flexible system, giving nations the right to impose some tariffs within certain limits. The degree to which they refrain from imposing tariffs is considered a member nation's "liberalism," or its relative level of openness. The US has been, and will remain, closed on the subject of Internet gambling; it's just decided instead to open up the doors wider on other topics, in response to Comm. Mandelson's objections.

Which markets are those? According to both sides, the US has agreed to open up opportunities in storage and warehousing services, testing and analysis services, outsourced R&D, and most critically of all, postal and courier services.

The US Trade Representative's office this morning was careful not to make it sound like the US was changing course, even though in at least some areas, it was doing a complete 180.

"The agreement involves commitments to maintain our liberalized markets for warehousing services, technical testing services, research and development services and postal services relating to outbound international letters," reads a spokesperson statement this morning. Here, the term "maintain our liberalized markets" means to agree to levels of liberalization to which the US had not previously agreed.

It's the postal services concession which could eventually generate the most sparks. The European Union has been demanding a more open market approach that would help its companies compete here. Opponents of this approach claim that the EU is seeking to compel the US to privatize its postal service, in order to enable couriers here to adopt fair market rates across the board without government control.

Whether this spells the beginning of the end of the Post Office or not, the near-term beneficiary of this morning's concessions could very well be DHL, the courier service that acquired Airborne Express a few years ago, and whose majority owner is Deutsche Post. A reduction or elimination of tariffs for foreign courier services could help DHL reduce its rates here, potentially across the board.

But the losers in all of this are the remaining Internet gambling services in Europe -- those that managed to survive the pounding they received in International stock markets once the SAFE Ports Act was successfully railroaded into passage here.

This afternoon, the political organization Public Citizen announced its opposition to the agreement, saying that only Congress can legislate which parts of GATS apply to the US and which do not, and not the Executive Branch to which the US Trade Representative belongs. In a statement, Public Citizen also added, "Depending on the scope of commitments, the notion of putting the US postal services and safety testing under WTO jurisdiction also could prove explosive in Congress."