The Case of Gambling
In 2004 a WTO panel ruled that the US government could not ban internet gambling. The panel conceded ‘that the measures at issue were indeed designed so as to protect public morals or to maintain public order’ but decided that the measures were not allowable because:
the United States had failed to demonstrate that they were ‘necessary’ since it had not shown that there was no WTO-consistent alternative measure reasonably available that would provide the United States with the same level of protection against the risks it had identified.
In answer to the issue of whether a nation had the right to regulate in response to democratically formulated policy, the panel of three trade experts that made the gambling ruling stated: ‘Members’ regulatory sovereignty is an essential pillar of the progressive liberalization of trade in services, but this sovereignty ends whenever rights of other Members under the WTO's GATS [General Agreement on Trade in Services] are impaired.’
In other words, the ban on internet gambling was ruled to be a trade restriction that interfered with the rights of another member of the WTO – in this specific case the complainant state, Antigua – where at least one transnational gambling corporation had its nominal base of operations. According to the ruling, if the US wants to protect public morals it has to find a way to do it which does not restrict corporate rights to trade. Otherwise the onus is on the US government to prove no such alternative exists.
The WTO ruling requires US regulations to be changed at both the state and federal levels of government. Gambling is subject to a variety of restrictions that may now be challenged under this ruling. These include ‘state monopolies on lotteries, exclusive rights granted native tribes to operate casinos and local bans on certain forms of gambling like slot machines’.
The ruling is significant because it shows the WTO can overrule the right of democracies to decide to legislate in order to protect public morals and maintain public order when such legislation interferes with the rights of other nations, and by implication transnational corporations, to trade globally without impediment. Yet even if free trade is more economically efficient, markets are supposed to serve society rather than societies serve the imperatives of free-markets.
Some people may argue that an original commitment to opening sectors of a nation’s economy to liberalization was made democratically and so the WTO is merely enforcing an earlier democratic decision. However, this book has shown clearly that such decisions are far from democratic. In the case of developing nations such decisions are coerced and in the case of more powerful nations like the US, they result from the exercise of corporate power and manipulation. However, what is significant about the WTO is that it locks such decisions in place so that democracies are unable to subsequently respond to changing circumstances or public pressure.
At the time that the US government made its GATS commitments to opening up its recreation services in 1993 it was unable to foresee the technological changes that would lead to internet gambling being such a major problem and so it did not specify gambling as an exception. Now that internet gambling has turned out to be such a major issue, the government is no longer able to ban it, even if this is what a majority of citizens want to do. Instead it must find a way to protect public morals that does not interfere with the rights of transnational corporations to exploit gamblers via the internet.
The implications of the judgment are far-reaching. It has been suggested that the ruling would mean that under Europe’s unlimited GATS commitments for solid and hazardous waste disposal services ‘no European jurisdiction – be it local, regional, or national – can prohibit foreign-owned operations from disposing of hazardous waste by ‘incineration or other means’, even if these means are totally illegal for domestic firms under local laws.’ As with the gambling case, governments will have to find alternative ways to protect public health that do not interfere with the rights of transnational corporations to dispose of hazardous waste as they see fit.