WTO case against China could all be for nothing

wanbet-bc518

written April 10, 2007

The Bush administration announced new trade cases against China on Monday over copyright piracy and restrictions on the sale of American movies, music and books.  But if the United States continues to pick and choose which WTO decisions they follow it could all be for nothing.  

Forces below the surface are starting to stir in the U.S. Congress in regards to the World Trade Organization’s ruling of non-compliance in the case with Antigua.  Not only are some prominent politicians concerned about the potential havoc Antigua could incite to copyright laws, there are bigger issues with the WTO.  Some very radical problems could result if the U.S. does not take this ruling in favor of Antigua seriously.

Trade law negotiations are the responsibility of the Executive Branch, the President's appointees, specifically the U.S. Trade Representative. Congress has the power only to approve or reject trade treaties.  This causes a troublesome disconnect when the WTO expects compliance because it forces Congress to act, even though the President's Trade Representative is defending the U.S.

Congress is starting to ask questions about Antigua.  Ileana Ros-Lehtinen, the ranking Republican member of the House Congressional Committee on Foreign Affairs, wrote a letter dated March 20, 2007 (http://www.antiguawto.com/LettertoUSTR.pdf) airing concerns about what the Trade Representative plans to do to ameliorate the issues in the favorable ruling for Antigua.

Rep. Ros-Lehtinen noted, "…our failure to resolve this dispute may harm our credibility as we seek to press countries like China regarding their violations on a range of issues, including intellectual property protection, subsidies, and currency manipulation."  She further warned, "In the event the United States fails to reach a satisfactory resolution of the Antigua dispute, it could provide China with an argument to ignore a WTO decision favorable to the United States."

This is good news for gamblers because ultimately change must come from Congress.  To hear they are paying attention to WTO rulings despite the outright denial of guilt by the USTR is a positive sign.  The fact it comes from a member of the President's party makes it even more promising.

The President's appointees so far have handled the case with general disdain.  The Trade Representative made a bizarre claim that horse race wagering conducted over state lines is actually illegal and just hasn't been enforced.  With responses like this it's safe to say the President's people have little intention of budging a bit to accommodate Antigua.

The letter from the Committee was sent before this week's news announcing the U.S. Trade Representative will send a complaint to the WTO regarding China and piracy issues.  The Trade Office stated they have held off on the Chinese action to give time to come into compliance, but it appears their patience has worn thin with an election cycle approaching. One wonders how long would be justified for the U.S. to bring its gambling laws into compliance?

China's entry to the WTO came with big fanfare.  China's opening its market to global products and competition has been stunningly successful. Investment and knowledge inflows have been crucial to China's growth of nearly 10 percent a year.  Foreign investment however could get locked up if China were to withdraw from the WTO.

What's worse, China has been forced to come much closer to world standards of free trade and market access.  Just as they reach a critical mass point, China could shut things down and just try to make a go outside WTO agreements should they choose.  Such a move wouldn't hurt China much as they are awash in capital investment as opposed to severely lacking capital just a decade ago.

All it takes is for China to stop seeing benefits from belonging to the WTO.  Ignoring rulings could change China's sentiment.  The first sign will come when China is ruled against in a motion such as the piracy charge.  China will say like the U.S. it disagrees and it will take no corrective action.  If China did pull out of the WTO the result for the world economy would undoubtedly be a major recessionary spiral.

Is this a price the U.S. is really willing to pay just to keep its citizens from gambling online?  In the bigger scope of governmental responsibility you would have to say no.  While the U.S. certainly has shown its willingness to stare down contrary world opinion, common sense dictates it needs to pick its battles wisely.  Preventing one small country from offering online gambling surely isn't a matter which you risk the health of the world's economy over.