US faces US$100 billion fine for web gaming ban

Panellists at a trade forum levelled harsh criticism at the US, focusing on a burgeoning trade clash between the US and Europe over internet gaming.

The forum believes that the US could be liable for up to US$100 billion in trade concessions to European industries after placing illegal discriminatory trade restrictions on European gaming operators.

The disputed concessions arise from Antigua's victory earlier this year when the WTO ruled that the US violated its treaty obligations by excluding online Antiguan gaming operators, while allowing domestic operators to offer various forms of online gaming.

Instead of complying with the ruling, the Bush administration withdrew the sizeable gambling industry from its free trade commitments.

As a result, all 151 WTO members are considering seeking compensation for the withdrawal equal to the size of the entire US land-based and online gaming market, estimated at nearly US$100 billion.

The European Union, along with India and five other countries, has filed notice that it intends to seek compensation.

"The US decision is a major threat to a rules-based international trading system," said Nao Matsukata, former director of policy planning for the Office of the US Trade Representative.

"If more countries follow the US lead and do the same thing, the entire WTO system could implode and that would be extremely dangerous for US economic interests and for free trade generally.

"Part of what makes the US such a formidable opponent in international negotiations is its credibility. That credibility is now at stake for the US government not just in the trade area but in foreign relations generally."

Lode Van Den Hende, a trade lawyer at Herbert Smith in Brussels, criticised the US for prosecuting foreign online gaming companies while letting domestic online gaming interests operate with impunity.

"This is absolute discrimination against foreign operators that the WTO has found to be illegal," he said.

"It is exactly the kind of practice that the WTO was set up to eliminate, and now the US is violating this very basic principle that it fought hard to put in place at the inception of the organisation."