Inside U.S. Trade, ATTORNEYS GENERAL SEEK CLOSER CONSULTATION IN SERVICES TALKS

Attorneys general from 29 states called on the Bush Administration this week to consult with them more closely when formulating positions on the services negotiations in the Doha round. Sources said the letter was written in part over fears that international trade agreements are increasingly encroaching into matters subject to the jurisdiction of states, and cited in particular a recent World Trade Organization decision on the U.S. ban on Internet gambling.

'Our hope is that they'll start consulting with us in matters of state sovereignty,' said Utah Attorney General Mark Shurtleff (R), echoing the sentiments of other state officials who have expressed alarm that international trade agreements are chipping away at states' regulatory authority.

In a May 31 letter sent to U.S. Trade Representative Rob Portman, the attorneys general said USTR does not give them enough information or time to review the information it does provide with respect to its proposals on the services negotiations.

'The actual proposed commitments, including the service sectors you propose to bind and the [General Agreement on Trade in Services (GATS)] rules that would apply, rather than vague descriptions, must be submitted to states for review, with adequate time for analysis,' the letter said.

State officials may have been partially at fault for not asserting their role in the trade negotiating process, but said they are now very interested in doing so, Shurtleff said.

Shurtleff, who spearheaded the letter along with Vermont Attorney General William Sorrell (D), said many of the attorneys general who did not sign onto the letter said they did not have enough time to review it. The letter was produced and circulated very quickly in order for it to be submitted to USTR by the May 31 deadline for services offers, Shurtleff explained.

The letter was sent in the wake of a controversial decision by a WTO Appellate Body in April that found that the U.S. had made a commitment under the GATS to cover gambling services under that agreement. This finding was made during a dispute panel in which Antigua challenged the U.S. ban on Internet gambling (Inside U.S. Trade, April 29, p. 1).

The letter explicitly called on USTR to withdraw its commitment to cover gambling services under the GATS.

Even though the WTO decision focused on federal restrictions on gambling, state officials are worried that the decision could have wide-ranging implications and open up the doors to all sorts of challenges to state gambling regulations. The ruling on several underlying issues raised in the dispute 'will have a significance far beyond the trajectory of this individual case,' the attorneys general warned in their letter.

The Antigua case served to reinforce state officials' growing unease with the reach of international trade agreements, which also stems from a number of challenges to environmental, land use and public safety regulations, all matters within state control, under the North American Free Trade Agreement, several sources said.

In the gambling case, Antigua challenged federal laws, as well as a host of state regulations, which the Appellate Body did not rule on. A state source, however, pointed out that the Appellate Body refrained from ruling on the state law claims only because it found that Antigua had failed to make sufficiently cogent arguments backing up its claims.

'The Appellate Body basically said the state laws are not in violation, because Antigua didn't make a good enough case,' a state source said. 'It's just a matter of waiting for the next plaintiff with a better and stronger case.'

Moreover, although the laws challenged in the gambling case dealt with the cross-border trade in Internet gambling services, the Appellate Body found that the U.S. had made commitments on gambling services in general, the letter said. This means that an array of state laws regulating gambling, including limitations on the number on the number of casinos or slot machines, state monopoly lotteries, and exclusive Indian gaming rights, are now subject to challenge before the WTO, it said.

'We believe that under our constitutional system of federalism, states should continue to have the flexibility and sovereign authority to determine whether and under what conditions gambling occurs within their borders, without such decisions being subject to second-guessing by WTO tribunals,' the letter said.

State-level problems are not limited to gambling, Shurtleff said. The Appellate Body's interpretations of market access rules have 'significant, troubling implications for the right of states to regulate a wide range of service sectors well beyond gambling,' the letter said. This could have implications for regulations in diverse areas ranging from advertising and anti-spam rules to land-use and zoning rules.

'The prospect of WTO challenges to these kind of prohibitions should alone be sufficient to give U.S. negotiators enormous motivation to use the current GATS negotiations to secure a rule change that makes explicit the right of a WTO signatory to ban undesirable activity in a GATS covered sector,' the letter said.

Alarmed that USTR was not reevaluating current U.S. commitments on services in light of the 'troubling' Antigua case, the letter stressed that USTR should engage in more analysis and dialogue with state officials before moving forward with its services submission that would bind additional U.S. service sectors under the GATS.

Elliot Burg, Vermont's assistant attorney general, said state officials had received a fairly brief summary of what the U.S. services offer would be before the Bush Administration made its offer on May 31, but noted that it was very difficult to make informed decisions on how the proposals would affect state law with such scant information.

Sara Johnson
State and Local Outreach Coordinator
Public Citizen's Global Trade Watch
215 Pennsylvania Ave. SE
Washington, DC 20003
Ph: (202) 454-5193
Fax: (202) 547-7392
http://www.citizen.org/trade/subfederal