The United States claimed victory yesterday in a closely watched international trade case challenging the U.S. ban on Internet gambling.
A World Trade Organization appeals panel accepted the U.S. claim that its ban on Internet gambling "was necessary to protect public morals or maintain public order."
But Washington's adversary, the Caribbean nation of Antigua, insisted that it had come out on top in the decision, and some WTO critics said that the ruling could have troubling implications for the United States by encouraging foreign challenges to state lotteries and Indian casinos.
The case has drawn considerable attention because of its David-vs.-Goliath nature and because of its potential ramifications for the global trading system.
Antigua, a nation of 68,000 that has developed a thriving Internet gambling industry, argues that the U.S. prohibition against online betting violates international trade rules because it discriminates against foreign gambling operations while allowing Americans to gamble at domestic casinos.
The United States counters that WTO rules allow countries to bar activities that threaten public morals -- and Internet gambling poses such a threat, in Washington's view, because it would enable children to wager.
Although many Americans gamble over the Internet, the federal government takes strong steps to discourage the practice, such as cracking down on the use of credit cards for placing bets.
A WTO panel ruled last November in Antigua's favor, raising the prospect that the Geneva-based trade body would effectively be directing the United States to change its gambling laws. That scenario highlighted a criticism often made against the WTO, that it may undermine nations' sovereign powers. The WTO cannot force any of its 148 member nations to change their laws, but a loss for the United States might have required it to offer Antigua hefty compensation and would have put Washington in an awkward position since U.S. officials often proclaim the importance of abiding by the trade body's decisions.
Yesterday's 138-page ruling, in an appeal brought by Washington, was hailed by both sides as vindication.
"This win confirms what we knew from the start -- WTO members are entitled to maintain restrictions on Internet gambling," said Peter F. Allgeier, the acting U.S. trade representative. As long as the United States "clarifies" certain Internet gambling restrictions, it will be in compliance with WTO rules, he said.
Mark Mendel, lead counsel for Antigua, disputed that interpretation, asserting in a statement that the ruling would force the United States to negotiate a compromise.
More important, some experts said, was the panel's finding that the United States had put its gambling sector under WTO rules 10 years ago as part of a global trade agreement.
If the U.S. gambling industry is covered by WTO rules, "it means that we will see cases [by other foreign governments] against the states that have lotteries, or compacts with Indians for casinos," claiming that those operations discriminate against foreign competition, said Lori Wallach, director of Public Citizen's Global Trade Watch, a group critical of the WTO.
Under WTO rules, the United States can unilaterally proclaim that its gambling sector isn't covered by the trade body's rules, but if it does so it may have to offer some kind of compensation to other member nations.