European Internet Gambling Firms Could Gain Access to U.S.

25 August 2007

The Bush administration, pressured by an unfavorable ruling by the World Trade Organization, plans to push for legal changes that could make it easier for European service companies, from engineering firms to law firms and shipping companies, to do business in the U.S., officials say.

The U.S. is required to offer trading partners greater access to the American market because in May it lost a long-running dispute at the World Trade Organization over laws that banned foreign firms from offering Internet gambling services in the U.S.

The White House plans to push for changes that could make it easier for European service companies to do business in the U.S.

After the U.S. banned foreign gambling Web sites, EU trade officials sought compensation for billions of euros in lost income.

The U.S. has been in a trade dispute over online gambling since 2003, mainly with Antigua and Barbuda.

EU and U.S. negotiators are working out details of a compensation offer to open some sectors of the U.S. services market to greater foreign competition.

Europe’s online gambling firms were hit particularly hard and complained to the European Union’s executive arm in Brussels. EU trade officials took up the matter with the WTO, seeking compensation for billions of euros in lost income. The EU invoked a rarely used WTO rule that requires a country that closes one market to foreign companies to open others to compensate trading partners.

A host of countries, including India, Japan and Canada, have filed similar claims for compensation, but the talks with the EU and its $8 trillion service sector promise to have the biggest financial impact. As a result, while any affected sectors would be opened to all 150 WTO members, European companies stand to gain the most.

The Office of the U.S. Trade Representative this month began talks with EU officials on opening some sectors of the U.S. services market to greater foreign competition.

To be sure, the issue will be contentious and subject to fierce lobbying. Congress and state legislatures would have to sign off on changing laws that now protect American service concerns. States generally control access to sectors like insurance, engineering and legal services. The federal government controls foreign access to activities like shipping, telecommunications and postal services.

The U.S. Internet gambling market is valued at more than $15 billion, so the outcome of the U.S.-EU negotiations will likely be worth billions of euros to European companies. “We have to offer something substantive,” says a senior U.S. official.

“The U.S. could make this all go away by passing legislation,” says Nao Matsukata, a former senior U.S trade official and a policy adviser at Alston & Bird, which represents clients on online-gaming issues.

The hearing set for September 4th, could also have a major bearing on the outcome.  Which is also the deadline for the extension given to the US.  As quoted by a senior US official “This could very well mean the UIGEA could be on the way out of the door.”