David Jessop, Contributor

As discussions continue in Germany to see whether an outline agreement is achievable on a new global-trade round, a more fundamental exchange is just beginning in Geneva.

It is one that raises important questions about whether rules based on international systems can beused by the relatively powerless if the most powerful choose to ignore or circumvent the World Trade Organisation's (WTO) legally binding decisions.

At issue is whether the United States (U.S.) will comply with a WTO ruling in favour of Antigua and compensate its government for loss of earnings as a result of Washington's decision that effectively led to the ending of online gaming from or through the United States.

In an extraordinary twist that turns the issue from one in which Antigua was essentially alone in pursuing justice, it has emerged in the last few days that the small island has been joined by Europe, Brazil, Japan and others in its claim for compensation and the matters of legal principal involved.

The background is complicated but in outline, it is as follows.

In 2003, Antigua brought a WTO complaint against the U.S. for Washington's failure to comply with international trade rules regarding cross-border internet gambling, an industry that the island had attracted as a part of its efforts to diversify its services industry.

GAMING PROHIBITION

In 2004, a WTO panel ruled that a ban in the United States on Internet gambling violated global trading rules and was an unfair trade barrier that hurt Antigua's gaming industry.

U.S. prohibitions on Internet gambling, the ruling said, were inconsistent with U.S. obligations under the 1995 General Agreement on Tariffs and Services (GATS).

The WTO also noted that the U.S. ban on online gambling represented an "arbitrary and unjustifiable discrimination between countries" and was a "disguised restriction on trade".

As a part of its defence, the U.S. had argued that it had never intended to include cross-border gambling in its original GATS offer and thus should not be penalised. The U.S. had also suggested that the remote supply of gambling raised significant concerns relating to the maintenance of public order and the protection of public morals, an exception provided for in both the GATS and the General Agreement on Trade and Tariffs (GATT).

But in response to this defence, the WTO panel ruled that "a specific commitment cannot depend upon what a member intended or did not intend to do at the time of the negotiations".

It also suggested that while cross-border gaming might conflict with U.S. laws to protect public morals or public order, the U.S. had not explore such as engaging in bilateral and multilateral consultations with Antigua to determine whether it was possible to address such moral concerns in a WTO-consistent manner.

A NEW TWIST

During all of this, it also emerged that a number of WTO members, including a number of EU states, had explicitly excluded cross-border gambling from their services commitments in their GATS commitments made during the Uruguay Round.

It also became known that until the U.S. started to change its policies, U.S. officials had met with their Antiguan counterparts to discuss how the sector could be better regulated.

Now, in the last few weeks, there has been another twist.

In an attempt to make its position WTO, compatible, Washington has announced that it would use GATS procedures to modify its multilateral commitments so as to explicitly exclude internet gambling.

In doing so it argued that it need not provide compensation to countries that might negatively be affected by the change, even though WTO rules require that this is done under such circumstances.

The U.S. sought to justify its actions by again arguing that they are necessary to protect public morals and that such changes were thus permissible under WTO rules.

In response, Antigua's ambassador to the WTO, Dr. John Ashe, was unforgiving: "There is something clearly wrong with the concept that after a long, difficult struggle covering years of dispute resolution at the WTO, an offending member could ultimately avoid the consequences of its loss by withdrawing the commitment that gave rise to the claim in the first place."

He also encouraged all WTO members to demand compensation from the U.S. if it sought to close off the sector, noting that they did not need to have an existing internet gambling industry in order to do so.

Since that time, WTO members have had until June 22 to file for compensation in response to the U.S. request to change its services commitments.

Among those that have done so are Japan, the EU, Brazil and India. In doing so, they have indicated other damaging inconsistencies in the U.S. approach to online gaming.

As a consequence, the dispute now has all of the characteristics of one that will tax ingenuity to settle as it potentially opens the doors for negotiations of a number of parallel settlements or will have to eventually go to arbitration.

Antigua is seeking compensation of about $3.4 billion a year, which it wants in the form of being allowed to ignore U.S. copyright and patent laws, denying royalties to U.S. companies.

In response, the U.S. appears to have become more conciliatory to Antigua while saying it will fight the claims of its other trading partners.

Although there are many, including me, who have no love for gambling, the outcome of this case has become an important global issue. Justice and equity between all nations has to be a central principle if economic globalisation is ever to be seen as having benefit to all.

David Jessop is director of the Caribbean Council. Email: david.jessop@caribbean-coun cil.org