Unexploded Ordinance in an Old Trade War
By Phil Elwood, SEC Newgate US
Independence Day was celebrated in the US over the weekend and for #TradeTuesday, our US colleague Phil Elwood penned an opinion piece about the implications for the US and its international trade policy of an historic dispute between the US and Antigua.
Nearly a decade ago ago, the United States committed a serious oversight in its international trade negotiations that exposes a great deal of today’s economy at risk – should a bad actor choose to exploit the loophole.
The root of the trade dispute between the U.S. and the small twin island nation of Antigua and Barbuda was online gambling. In the early 2000s the U.S. shut down online gaming – especially in the Caribbean on a day that is now know in the gaming community as “Black Friday.” Antigua had invested heavily in online gaming and this industry accounted for a significant percentage of both its GDP and labor force. When the U.S. unilaterally shut it down, Antigua lost billions in potential revenue.
Antigua subsequently took the U.S. to the World Trade Organization to seek remedy for the damage caused by the U.S. actions. The WTO has ruled on several occasions that the U.S. violated international trade law by banning online gaming. In its last ruling, the WTO granted Antigua the right to enact retaliatory sanctions against the U.S. The mechanism that the WTO blessed for Antigua to seek relief is alleged by some to be close to theft of intellectual property. Through the system known as “cross-retaliation,” Antigua can select a perfectly innocent industry in the offending nation to punish and extract the revenue owed by the U.S. Given the ease of creating a filesharing website, Antigua selected the intellectual property of the movie, music and software industries to violate the copyrights and sell their IP, with the permission of the WTO. The idea being that the IP holders would put so much pressure on the U.S. government to comply with the WTO’s decision – given the dangerous precedent this would set for international trade law. In fact, the New York Times editorialized that the U.S. should settle this dispute given the potential risks to the global economy that tactics like this could perpetuate.
That was eight years ago. The dispute is not resolved. The U.S. has not settled with Antigua. There still exists the option for this nation – or another aggrieved nation to resort to this sort of economic anarchy to resolve a trade dispute. The U.S. should settle this dispute and work to create better protocols for resolving international trade disputes that do not force smaller nations to resort to piracy to get justice.