EU and US Reach Deal on Online Gambling?

Online gaming companies in Europe were dealt a blow on Monday as the European Union accepted a US offer to open some other services markets as compensation for shutting foreign companies out of America’s lucrative gambling industry.

The EU said the bilateral deal would provide European businesses, such as TNT of the Netherlands and Deutsche Post of Germany, with unspecified new opportunities in the US postal and courier, research and development, storage and warehouse sectors. The US had also made concessions in the testing and analysis services sector.

However, the deal, signed in Geneva, disappointed the online gambling industry, which claimed the EU had lost vital leverage in the effort to open up the $15bn-a-year US online gambling market. Millions of dollars were wiped off share values in October 2006 after the US made it illegal for credit card companies to process online gambling transactions, effectively closing the market to foreign competitors. The World Trade Organisation had ordered the US to grant compensation after it withdrew a commitment to liberalise the sector. The withdrawal came after the tiny Caribbean state of Antigua and Barbuda, which hosts a large gaming industry, brought a successful dispute case at the WTO. The WTO will rule soon on Antigua’s request for $3.4bn compensation.

A spokesman for Peter Mandelson, the trade commissioner, refused to put a figure on the US offer, and said it could not be linked to the campaign for equal treatment in the US online gambling market. A spokeswoman for the US trade representative, who hatched the agreement, would also not discuss specifics but said she was confident the package provided WTO members with economic opportunities “at least as valuable” as the US gambling market. The US had also reached agreements with Canada and Japan.

Clive Hawkswood, chief executive of the Remote Gambling Association, which represents companies that say they are losing at least $4bn in revenue a year, claimed the EU had handed over its primary weapon in the fight. He said:

“The Commission can still press for an opening up of the market, but the leverage of the outstanding [compensation] negotiations has been taken away.”

Mr Mandelson said he would continue to press for equal treatment and is placing hopes in legislation proposed by Barney Frank, chairman of the US House Financial Services Committee, to liberalise and regulate the online gaming industry.