A top European trade official in Washington this week gave the U.S. government an ultimatum: Allow Internet gambling companies overseas to operate here, or compensate for lost revenues of as much $100 billion.

Peter Mandelson, trade commissioner for the European Union, urged Congress to pass legislation that would bring the U.S. in line with World Trade Organization (WTO) requirements that it permit online gambling.

“What we need to see is a change in U.S. legislation” to clear the way for foreign operators, Mr. Mandelson told Reuters this week.

The European Union and other trading partners are demanding concessions from Washington to compensate for lost revenues. Requests put forth by gambling industries in Europe could top $100 billion, a figure that is disputed by the U.S. If the parties fail to reach an agreement, the matter will go before a WTO arbiter.

The U.S. is involved in a separate but related formal WTO dispute with Antigua and Barbuda, a small Caribbean nation seeking $3.4 billion in compensation. The issue is scheduled to be decided by Nov. 30. That dispute, initiated four years ago, led the U.S. to withdraw commitments to open its online gambling markets under the 1994 General Agreement on Trade in Services. In accordance with WTO procedure, that action allows other WTO members to request compensation.

Negotiations between the U.S. and complainants are scheduled to end Dec. 14 after being extended twice.

“From purely a trade point of view, this is the right thing to do,” Nao Matsukata, a former director of policy planning for U.S. Trade Representative Robert B. Zoellick, who now is a senior adviser for Alston & Bird LLP. “I think we’ve really reached a turning point here in the direction of these negotiations.”

Mr. Mandelson met Thursday with Rep. Barney Frank, Massachusetts Democrat, who has sponsored a bill that would soften the ban on Internet gambling and create a regulatory framework under which foreign operators could obtain licenses to serve customers in the U.S.

If U.S. lawmakers don’t bring the country into WTO compliance on the issue, European gambling industries have called for as much as $100 billion in some form of compensation. The sum wouldn’t be paid through a fine. Rather, negotiators would identify a comparable market that isn’t yet open or agree to tariffs on other goods to make up the difference, said Lode Van Den Hende, a Brussels lawyer who handles EU cases.

“I think [$100 billion] is a pretty fair assessment,” Mr. Van Den Hende said. That figure is based on annual revenues of the U.S. gambling market – $85 billion – and an additional $15 billion for Internet gambling services, which don’t appear in official statistics, he said.

But an official with the U.S. Trade Representative’s Office called the number “highly exaggerated.”

“We don’t know where thesenumbers are coming from,” said the official, who added that negotiations are “going quite well.”

But the stakes of the WTO gambling dispute aren’t high only when it comes to money. Withdrawing commitments from a trade agreement could set up similar refusals, some say.

“It’s an awful precedent,” said Brian Pomper, former chief international trade counsel for the Democratic staff of the Senate Finance Committee who now is with lobbying firm Parven Pomper Schuyler Inc. “What if China withdrew intellectual property concessions? In every WTO dispute, the country that lost could just say, ‘Well, I didn’t mean to do that.’ “

Click here to go to the article.

Author Contact Info: Kara Rowland, The Washington Times