Case case study Analysis">study analysis of the Offshore internet gambling and the Wto Case Study Analysis: Offshore Internet Gambling and the World Trade Organization
Running Head: Case Study Analysis of the Offshore Internet Gambling and the WTO Case Study Analysis: Offshore Internet Gambling and the World Trade Organization Ayman Naguib
Abstract This case study analysis discusses the central issue of the case presented in the article, as well as the most relevant facts and assumptions with respect to the case under investigation. Furthermore, patterns that arise from reflection on these facts and assumptions with relation to external environment perspectives are described. The analysis also examines the consequences of not addressing the central issue of the case, and provides suggested actions in order to resolve it in the short and long term. Introduction The World Trade Organization (WTO) has been established as the world’s single international organization dealing with the rules and regulations governing trade between nations. In principal, the WTO is concerned with helping producers of goods and services, exporters, and importers conduct their business within a competitive, non-discriminatory, open and transparent global trade framework. However, in reality, achieving these objectives is far from being easy.
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The complexity of the WTO agreements signed by the majority of the world’s trading nations and collisions with national legislative frameworks, economic policies of the individual member states and political issues are the main hurdles in the way of achieving the objectives of the WTO. Consequently, several disputes have surfaced during the past decade. One of the most remarkable cases involved the Offshore Internet Gambling activities that take place in Antigua, a Caribbean island state. The importance of this case can be attributed to the fact that it was the first attempt by the WTO to examine cross-border electronic services as has been shown by Pontell, H., Geis, G., and Brown, G. (2007).
The roots of the dispute between the USA and Antigua are undoubtedly related to the criminal prosecution of Jay Cohen, an American citizen that cofounded and ran an online gambling business licensed in Antigua. The basis of the prosecution was an alleged violation of the US Wire Act (U.S. Code, Title 18 §1604) (United States v. Cohen, 2001).
The aforementioned statue was enacted in 1961, decades before the internet became publicly accessible. Antigua claimed that the USA has been using the complexity and opacity of its own legal system to deflect attention from the
fundamental issue which is to retain revenues from internet
Running Head: Case Study Analysis of the Offshore Internet Gambling and the WTO gambling within the US, which contradicts with the USA’s obligations as per the General Agreement on Trade in Services (GATS) that the USA ratified. On the other hand, the USA claimed that the disputed activity poses financial and social threats to its citizens. Identification of the Central Issue While the GATS explicitly concedes the right of sovereign states to regulate and to devise laws on the supply of services within their countries to meet national policies and strategies (Krajweski and Marcus, 2003), aligning such regulations, legislative instruments and policies to the commitments of the individual states that are signatory to the GATS and vice versa is often a problematic affair that has led to a majority of the recent disputes handled by the WTO.
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This is clearly the case in the Internet Gambling dispute. Another issue is maintaining a balance between the special needs of developing and poorer countries and those of the richer and already developed countries, as far as the liberalization of service trade is concerned. Notably, a study of the WTO dispute settlement cases during the period from 1995 to 2006 (World Trade Organization [WTO], 2006) shows that the USA has been involved in approximately 38% of all disputes handled by the organization during that period. Most of these disputes involved developing countries. Notable Facts and Assumptions Based on a study of the facts and assumptions stated in the article, the following facts can be identified:
The GATS was applicable to betting and gambling and the USA was in violation of the GATS treaty; The WTO mechanism allows sovereign states to restrict that trade of certain products or services that are deemed to pose risks to public morals and/or public order, provided that such products or services are the production of such products or rendering of such services should not be allowed domestically. However, as far as the USA is involved, gambling activities are permitted in several states, such as Nevada, Michigan and Ohio, amongst others;
The American legal framework is complicated and somehow obscure due to the variation between State level laws and Federal laws; and The USA has ratified the GATS without making exclusions pertaining to gambling activities, unlike the Senegal which made an explicit exclusion in its agreement to rule out crossborder betting (WTO,
2005, p. 63);
Similarly, the following assumptions can be pointed out: Antigua has demonstrated that it has devised rules and regulations aiming at addressing, as far as reasonably practicable, the concerns over fraud and under-age betting. In fact, the measures taken by the Antigua appear to be more stringent than those enforced within the US;
Running Head: Case Study Analysis of the Offshore Internet Gambling and the WTO Suspicions have arisen as to the true motives behind the USA’s claims, which could indicate that the claim was driven by the desire to retain revenues generated from internet gambling; and Restrictions that the USA tried to impose over Internet gambling activities, would negatively affect the Antiguan economy. Arising Patterns and the External Environment The arising patterns suggest that on the technological environment, new technologies such as the internet and related technologies pose a challenge to national legislations and international regulatory frameworks which need to address the implications of such advancements.
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Furthermore, the political environment is affected by issues arising from the power that the more developed and rich nations try to exercise on poorer developing nations in order to enforce their national strategies, which can sometimes be in contradiction to the global inclination towards facilitating the growth of developing nations. As far as the economic environment is concerned, the consequences of such disputes may be greatly harmful for developing countries such as Antigua, compared to the impact it might have on developed nations such as the USA. For example, in 1999, 10 percent of Antigua’s gross national product (US$ 0.6 Billion) was generated from online gambling, which was equivalent to only 0.006 percent of the gross national product of the US during the same year.
Consequences There are several consequences of not addressing the central issue identified in this analysis, the most significant amongst which is making agreements such as the GATS ineffective due to the collision between national interests of the more powerful countries and the brisk needs of developing countries. Furthermore, trade imbalances and discriminatory global wealth distribution will be inevitable, which will clearly be inclined towards the more powerful and developed nations will have control. Recommended Actions In light of this analysis, the short-term actions that are suggested to resolve the central issue entail working towards streamlining the internet gambling business in Antigua in collaboration with the USA to ensure that concerns over fraud and underage gambling is reasonably addressed.
Furthermore, the USA should adopt a more transparent approach that avoids double standards in deeming the legality of internet gambling. On the long term, an international framework is required in order to establish a more effective and transparent mechanism to maximise the alignment of national legislation with international treaties, without compromising the rights of each nation over its legislative instruments. Additionally, the WTO’s should enforce provisions that are meant to give developing nations a special and a more
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Running Head: Case Study Analysis of the Offshore Internet Gambling and the WTO lenient status when liberalisation of trade is concerned. These provisions should also be protected against unjust practices from developed nations. On the other hand, the WTO and particularly its developed nations’ members should assist developing countries to implement legislative reforms that ensure that such countries to achieve better governance and compliance in adopting more fair trade practices.
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Kluwer Law International, The Hague-London-New York. Lang, Andrew (2004) The GATS and Regulatory Autonomy: A Case Study of Social regulation of the Water Industry, Journal of international Economic Law, 7(4).
Mattoo Aaditya and Sauvè, Pierre, Editors (2004. Domestic Regulation and Services Trade liberalization. World Bank and Oxford University Press. Pontell, H., Geis, G., and Brown, G. (2007).
Offshore Internet gambling and the World Trade Organization: Is it criminal behavior or a commodity? International Journal of Cyber Criminology, 1(1), 119-136. Scott Sinclair and Jim Grieshaber-Otto (2002) Facing the Facts: A guide to the GATS Debate, Canadian Centre for Policy Alternatives, Ottawa. World Trade Organization (2007).
WTO Dispute Settlement : One-Page Case Summaries : 1995September 2006. Geneva: WTO Publications.
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