Pirates of the Caribbean

Gambling and Free Trade

In March, for the third time in three years, the World Trade Organization (WTO) ruled against the United States in a gambling dispute with the nation of Antigua. A three-judge panel found that the recently enacted Unlawful Internet Gambling Enforcement Act runs afoul of global trade agreements because it exempts state lotteries, horse racing, and other domestic gambling interests while targeting offshore Internet gambling operations.

Antigua is home to many Web-based gambling companies that once did business with U.S. customers. If, as expected, the U.S. ignores the WTO ruling, international trade law permits Antigua to retaliate for the damage the law does to its economy. But a small country like Antigua doesn't have many retaliatory options. Any trade sanction or tariff on U.S. goods would hurt Antiguans far more than it would hurt American companies.

One possibility: Antiguan authorities say they may retaliate by ignoring U.S. copyright law, transforming the country into a haven for film, music, and software pirates. Antiguans could distribute U.S. intellectual property all over the world via Web servers based in their country. Stateside, such a move would create political upheaval, pitting the enormously powerful entertainment industry against the nanny-state interests that pushed the gambling law through both houses of Congress with overwhelming majorities.

The WTO would need to approve the idea, but the organization has authorized copyright-oriented reprisals before. The most recent ruling's strong wording suggests growing resentment of U.S. intransigence on the issue. In the last six months, the federal government has arrested several executives of overseas gambling operations, despite the fact that their companies were based in, and the executives were citizens of, countries where online gambling is legal.