The United States has suffered a new setback in a four-year-old legal battle with Antigua and Barbuda over U.S. restrictions on Internet gambling, a U.S. trade official said on Thursday.
At issue is an April 2005 World Trade Organization ruling against U.S. prohibitions on online horse race betting. Since then, the U.S. Congress has passed additional legislation to ban certain financial transactions related to gambling over the Internet.
Gretchen Hamel, a spokesman for the U.S. Trade Representative's office, confirmed press reports that a WTO panel "did not agree with the United States that we had taken the necessary steps to comply" with that ruling.
At the same time, Hamel downplayed the decision contained in a preliminary, confidential report to the two parties.
"The panel's findings issued today involve a narrow issue of federal law" and the United States will have opportunity to submit comments to the WTO before it issues its final, public report in March, Hamel said.
"Nothing in the panel's interim report undermines the broad, favorable results that the United States obtained from the WTO in April 2005," she said.
The issue is a touchy one for the Bush administration, which supports free trade, but signed the gambling bill that Congress attached to unrelated, but important, port security legislation. Had Bush not signed the bill, the port security provisions would have been erased as well.
The bill passed by Congress last year, with broad bi-partisan support, restricts online gambling by going after the financial transactions passing through the United States, to and from gambling sites.
Antigua and Barbuda, with few natural resources, has sought to build up an Internet gambling industry to provide jobs to replace those in its declining tourist industry.
It argued in a case first brought to the WTO in 2003 that U.S. laws barring the placing of bets across states lines by electronic means violated WTO rules.
An April 2005 ruling by the WTO's Appellate Body, which both sides claimed as vindication, focused on the narrower issue of horse racing, saying that foreign betting operators appeared to suffer discrimination.
Antigua and Barbuda complained the United States had not complied with the decision and the WTO agreed in July 2006 to look into the matter, resulting in the ruling on Thursday.
The United States will decide after the final panel decision ruling in March whether to appeal.
The Bush administration may not have to ask Congress to pass new legislation in any case, Hamel said.
"The panel report clarifies that compliance does not necessarily require new legislation, but could instead involve other steps, such as administrative or judicial action," she said.