PLAN
The United States should legalize nearly all online gambling in the United States.
ECOMMERCE
Gambling liberalization is key to GATS policy on e-commerce – binding
commitment to market access operationalizes tech neutrality norm
Nancy J. King, J.D., MST. Associate Professor, College of Business, Oregon State University, and
Kishani Kalupahana, LL.M, LL.B. Affiliate Faculty, College of Business, Oregon State University, ’07
(“Choosing Between Liberalization and Regulatory Autonomy under GATS: Implications of U.S.Gambling
for Trade in Cross Border E-Services,” Vanderbilt Journal of Transnational Law, Vol. 40, No. 5, November
2007)
In U.S.-Gambling, the WTO Appellate Body (and Panel) challenged conventional understanding of
the market access obligation under GATS. 7 It did this by equating a U.S. ban8 on the cross-border
supply of gambling and betting services to a quota, prohibited under the market access obligation of
GATS.9 Critics were quick to condemn the ruling for its expansion of what they termed a "per se"
prohibition of an exhaustively defined list of quantitative restrictions under the market access obligation in
GATS.10 Many said the ruling erroneously expanded a GATS prohibition on market access restrictions to
include substantive qualitative restrictions based only on their quantitative effects,11 which contradicted
previous views that GATS distinguishes between quantitative restrictions prohibited under the terms of
the market access rule and qualitative regulations permitted under the general rules on domestic
regulation. 12 The WTO dispute settlement panels were accused of authorizing "WTO intrusion into the
regulatory freedom of WTO Members far beyond what was originally agreed to in the WTO Treaty,"'13
and threatening "with the stroke of a pen, the validity of scores of domestic services regulations, including
those that are nondiscriminatory."' 14 Responding to the initial Panel Report, the United States Trade
Representative (USTR) called the Panel decision "deeply flawed," stating that "the Panel inappropriately
found that our regulations on gambling services were a prohibited quota based on a faulty new legal
theory that places unwarranted restrictions on the ability of all WTO Members to regulate their service
sector.' 15 Attorney Generals of twenty-nine U.S. states called the ruling "quite troubling."'1 6 In April
2006, the Governor of the state of Oregon asked the U.S. Trade Representative to exclude Oregon from
the proposed expansion of U.S. commitments under GATS, including those that would cover gambling
services. 17
Although it may be argued that U.S.-Gambling undermines regulatory autonomy, it is less obvious that
U.S.-Gambling deprives members of any legitimate rights to regulate services covered by members'
commitments under GATS. Concluding its report on the U.S.-Gambling dispute, the Panel categorically
states: We also wish to emphasize what we have not decided in this case. We have not decided that
WTO Members do not have a right to regulate, including a right to prohibit, gambling and betting
activities. In this case, we came to the conclusion that the US measures at issue prohibit the crossborder
supply of gambling and betting services in the United States in a manner inconsistent with the GATS. We
so decided, not because the GATS denies Members such a right but, rather, because we found, inter alia,
that, in the particular circumstances of this case, the measures at issue were inconsistent with the United
States' scheduled commitments and the relevant provisions of the GATS. 1 8
The U.S.-Gambling reports confirm that both the Panel and the Appellate Body are unequivocal in their
rejection of a general "effects" doctrine from being incorporated into the interpretation of the market
access obligation. 19 Critics condemned the Panel as having "already made up its mind that the U.S.
laws are prohibited market access restrictions simply because they have the effect of a prohibition on
certain cross-border supplies of gambling services. '20 However, it is not obvious that the decisions of the
WTO dispute settlement panels extend the prohibition on market access restrictions beyond the
quantitative restrictions already prohibited by GATS to include all domestic regulation that is quantitative
in effect. 21 Moreover, as acknowledged by the Panel in U.S.-Gambling,22 the architecture of GATS
explicitly recognizes the sovereign right to regulate services, and provides flexibility for members to
regulate in order to pursue public policy objectives such as consumer protection (for example, regulations
that ensure the quality of services and the capacity of service suppliers to supply services).2 3 Although
U.S.-Gambling blurs the conventional boundaries of the market access obligation, it is not clear that
it converts these types of consumer protection regulations into prohibited market access restrictions
based purely on their quantitative effects. 24 Nevertheless, ambiguities in the U.S.Gambling decision
have prompted some to recommend a precautionary approach for members in terms of scheduling
further liberalization commitments under GATS. 25 As one legal commentator views it:
It would probably be prudent and cautious to assume that the coverage of Article XVI:2 [the GATS
provision prohibiting a list of quantitative and quantitative type restrictions on market access] extends to
measures having the same effect as those explicitly mentioned. Negotiators may therefore find it useful to
schedule more conditions and limitations to a market access commitment than they deem necessary.
Negotiators should generally be especially careful about scheduling commitments in sectors which
remain strictly regulated. Indeed, it may be more appropriate not to schedule any commitments at all in
such a sector. 2 6
The outcome of the U.S.-Gambling litigation has significant implications for cross-border trade in
e-services, which is a major component of e-commerce. 27 Indisputably, it broadens our understanding
of the sphere of the market access obligation under GATS in a manner that significantly advances
liberal trade in eservices. 28 This interpretation of U.S.-Gambling is based on a finding in the case that
the United States' commitment to liberalize crossborder trade in a services sector that included gambling
services, although made at a time when gambling services were not offered online, also included a
commitment to liberalize online gambling services. 29 This adoption of a technology-neutral
interpretation of the relevant GATS rules by the WTO dispute settlement panels will make it difficult for
members to commit to full market access and national treatment for cross-border services while
simultaneously retaining a closed market for the same types of services provided online. Clearly,
restrictions applicable to the electronic supply of such services will be treated as limitations on market
access or national treatment under GATS. 30
Also significantly, U.S.-Gambling is the first WTO dispute to directly address the application of
GATS rules to regulatory barriers restricting the cross-border supply of e-services. 31 But while it
resolves some of the general issues with regard to the scope of GATS rules to e-services,3 2 U.S.Gambling also reinforces the uncertainties of a relatively undeveloped GATS legal framework .3 3
In U.S.Gambling, both dispute settlement panels labored to establish that a U.S. ban on online
gambling and betting services, which placed limitations on the cross-border supply of electronic
gambling and betting services, was a prohibited quantitative restriction under specific U.S.
commitments on market access. 34 Given that the present rules do not satisfactorily define the
boundaries between measures that ought to be classified as market access restrictions and those that
are subject to a more limited review under the general provisions in GATS on domestic regulations, the
WTO Dispute Settlement Panels' interpretation of the regulatory reach of GATS rules in the
dynamic context of cross-border e-services trade is inevitably controversial . 35 U.S.-Gambling
reflects the prevailing uncertainty as to the dividing line between prohibited and permissible domestic
regulation. It also indicates that GATS rules on domestic regulation may be less than effective in
preventing the more pervasive and less transparent regulatory barriers from nullifying the
liberalization gains obtained through negotiations. Accordingly, this Article argues that as long as
GATS disciplines on domestic regulation remain undefined, there is little hope that these boundaries will
be resolved with the degree of precision and certainty that is required to respond to the unique issues
arising with regard to the domestic regulation of electronically delivered cross-border services.
Perhaps the clearest impact of U.S.-Gambling is that it confirms members' retention of considerable
regulatory flexibility to override their GATS commitments under the policy exceptions recognized by
the agreement. Notably, these exceptions permit members to maintain measures that achieve a
range of policy objectives that are particularly relevant to cross-border e-services trade, and more
generally, to global e-commerce . 36 This potentially broad flexibility in GATS will undoubtedly
create future tension between the predictability and security of multilateral liberalization
commitments and the autonomous regulatory rights of WTO members. 37
Unconditional access to e-commerce key to GATS liberalization – nations model
regulatory prevailing regulatory reforms in major countries – that’s key to global
norms
Aaditya Matoo, Research Manager, Trade and International Integration, Development Research Group,
World Bank, ’00
(Developing Countries in the New Round of GATS Negotiations: Towards a Pro-Active Role,” World
Economy April 2000, Vol. 23, No. 4, 471-489)
Electronic commerce offers an increasingly viable alternative to the movement of individuals. WTO
Members have decided that for the moment electronic delivery of products will continue to be free from
customs duties. There are proposals to make this decision permanent. Fortunately most electronic
commerce is already free of barriers (except of course those created by differences in standards), and so
the objective is really to preclude the introduction of new barriers. But is duty-free electronic
commerce the appropriate route?
Liberating ecommerce from duties is either superfluous or virtually devoid of value. Since the bulk of such
commerce concerns services, the relevant regime is that established by the GATS regime on crossborder trade. The GATS allows countries to decide whether to commit to market access, i.e. not to
impose quotas, and to national treatment, i.e. not to discriminate in any way against foreign services
and suppliers. If a country has already made such a commitment, then any further promise not to impose
duties is superfluous because customs duties inherently discriminate against foreign services. If a country
has not made such a commitment, then the promise not to impose customs duties is worth little, because
a country remains free to impede access through discriminatory internal taxation – which has been
carefully excluded from the scope of the decision. Worse the prohibition of such duties, may induce
recourse to quotas which are ironically still permissible in spite of being economically inferior
instruments. Hence, the focus on duty-free treatment is misplaced. The objective should rather be to
push trading partners into making deeper and wider commitments under the GATS on crossborder
trade regarding market access (which would preclude quantitative restrictions) and national treatment
(which would preclude all forms of discriminatory taxation). Table 3 summarizes the current state of
commitments on cross-border supply in some of the areas in which developing countries have an export
interest. In software implementation and data processing, of the total WTO Membership of over 130, only
56 and 54 Members, respectively, have made commitments; and only around half of these
commitments guarantee unrestricted market access, and a similar proportion guarantee unqualified
national treatment. In all professional services, there are commitments from 74 Members, but less than a
fifth assure unrestricted market access and national treatment, respectively. There clearly remains
considerable scope for widening and deepening commitments.
IV. Dealing with domestic regulations
Developing countries have much to gain from strengthened multilateral disciplines on domestic
regulations. The development of such disciplines can play a significant role in promoting and
consolidating domestic regulatory reform. The telecommunications experience is a powerful example
of this possibility. Such disciplines can also equip developing country exporters to address regulatory
barriers to their exports in foreign markets.12 For instance, unless disciplines are developed to deal with
licensing and qualification requirements for professionals, market access commitments on mode 4 will
have only notional value. However, there are limits to what can be achieved at the multilateral level, and
some of the key regulatory challenges must still be addressed at the national level. This is because
multilateral trade rules are designed to ensure market access, and not directly to promote economic
efficiency or social welfare. One of the ironies of the GATS is that among its weakest provisions are
those dealing with domestic regulations, which have such an obviously powerful influence on
international trade in services. The reason is not difficult to see: it is extremely difficult to develop effective
multilateral disciplines in this area without seeming to encroach upon national sovereignty and unduly
limiting regulatory freedom. Nevertheless, it is desirable and feasible to develop horizontal
disciplines for domestic regulations. 13 The diversity of services sectors, and the difficulty in making
certain policy-relevant generalizations, has tended to favour a sector-specific approach. However, even
though services sectors differ greatly, the underlying economic and social reasons for regulatory
intervention do not. And focusing on these reasons provides the basis for the creation of meaningful
horizontal disciplines.
Such a generic approach is to be preferred to a purely sectoral approach for at least three reasons: it
economizes on negotiating effort, leads to the creation of disciplines for all services sectors rather
than only the politically important ones, and reduces the likelihood of negotiations being captured by
sectoral interest groups. It is now widely recognized that the most dramatic progress in the EU singlemarket programme came from willingness to take certain broad cross-sectoral initiatives. In the WTO
context, the experience of the accountancy negotiations shows the propensity for single sectoral
negotiations on domestic regulations to produce a weak outcome. Even if a horizontal approach is
desirable, is it feasible? The economic case for regulation in all services sectors arises essentially from
market failure attributable primarily to three kinds of problems, natural monopoly or oligopoly, asymmetric
information, and externalities. Market failure due to natural monopoly or oligopoly may create trade
problems because incumbents can impede access to markets in the absence of appropriate regulation.
Because of its direct impact on trade, this is the only form of market failure that needs to be addressed
directly by multilateral disciplines. The relevant GATS provision, Article VIII dealing with monopolies, is
limited in scope. As a consequence, in the context of the telecom negotiations, the reference paper with
its competition principles was developed in order to ensure that monopolistic suppliers would not
undermine market access commitments (Tuthill, 1997). These principles should be generalized to a
variety of other network services, including transport (terminals and infrastructure), environmental
services (sewage) and energy services (distribution networks), by ensuring that any major supplier of
essential facilities provides access to all suppliers, national and foreign, at cost-based rates. At the same
time, there is a need to strengthen Article IX to deal with international cartels (e.g. in transport services)
which cannot be adequately addressed through national competition policy.
In all other cases of market failure, multilateral disciplines do not need to address the problem per se, but
rather to ensure that domestic measures to deal with the problem do not serve unduly to restrict trade.
(The same is true for measures designed to achieve social objectives.) Such trade-restrictive effects can
arise from a variety of technical standards, prudential regulations, and qualification requirements in
professional, financial and numerous other services; as well as from the granting of monopoly rights to
complement universal service obligations in services like transport and telecommunications. The tradeinhibiting effect of this entire class of regulations is best disciplined by complementing the national
treatment obligation with a generalization of the so-called "necessity" test. This test leaves
governments free to deal with economic and social problems provided that any measures taken are not
more trade restrictive than necessary to achieve the relevant objective. This test is already part of the
recently established disciplines in the accountancy sector. It is desirable to use it to create a presumption
in favour of economically efficient choice of policy in remedying market failure and in pursuing noneconomic objectives (Mattoo and Subramanian, 1998). For instance, in the case of professionals like
doctors, a requirement to re-qualify would be judged unnecessary, since the basic problem, inadequate
information about whether they possess the required skills, could be remedied by a less burdensome test
of competence. In sum, the telecommunications and accountancy models, suitably developed and
generalized, can together ensure that domestic regulations achieve their objectives without sacrificing
economic efficiency.
This is not to say that there is no need for sector-specific disciplines. For instance, there is valuable work that could be done to establish how best to deal with asymmetric
information and differences in standards between countries. But we can make a useful beginning by taking a cross-sectoral approach. Such a route is particularly desirable
because at the multilateral level, harmonization and mutual recognition are not meaningful alternatives to the application of a necessity test – even though they can play a role at
the regional or plurilateral level. The pessimism with regard to harmonization is based on the absence of widely accepted international standards in services.14 With regard to
mutual recognition agreements (MRAs), it would seem that even in strongly integrationist Europe, despite a significant level of prior harmonization, the effect of MRAs may have
been limited by the unwillingness of host country regulators to concede complete control (Nicolaidis and Trachtman, 1999). In any case, MRAs are like sectorspecific
preferential arrangements, and can have similar trade-creating trade-diverting effects. Multilateral disciplines must be used to ensure that MRAs are not used as a means of
discrimination and exclusion.15 Otherwise, their result may well be to create trade according to patterns of mutual trust rather than the pattern of comparative advantage.
The development of multilateral disciplines is in no way a substitute for strengthening domestic regulatory mechanisms and institutions. At least three areas are of considerable
importance.
(i) Dealing with monopolies
The telecom Reference Paper illustrates both the strengths and the limitations of the multilateral approach. The primary concern of the paper, as of WTO rules in general, is to
ensure effective market access, and hence the focus on the terms of interconnection. Wider concerns about consumer interests and how they may be affected by monopolistic
behaviour are not addressed by the Paper. While there can be little doubt that price determination is ideally left to competitive markets, and regulatory price setting is fraught
with difficulties, yet regulatory authorities in developing countries where competition is slow to develop need to equip themselves, legally and technically, with the ability to
regulate prices.16 This would seem particularly desirable in countries like some of those in the Caribbean, which have locked themselves into exclusive supply contracts with a
single telecom provider well into the next century. Importantly, while nothing in the GATS prevents a country from pursuing any form of pro-competitive regulation provided it is
not discriminatory, the capacity of most developing countries to exercise such regulation is limited.
(ii) Dealing with asymmetric information
The need for effective regulation of financial services needs no elaboration, particularly in light of the recent experiences of many countries. Again it is incumbent on the
countries themselves to create adequate mechanisms for such regulation. And such regulation is clearly necessary to benefit fully from liberalization. Other areas where the
inadequacy of regulatory mechanisms to deal with asymmetric information is a problem have received relatively less attention. For instance, in professional services, low
standards and disparities in domestic training and examinations can become a major impediment to obtaining foreign recognition. Thus inadequacies in domestic regulation can
legitimize external barriers to trade. A further twist is that domestic consumers may actually prefer cheap, low quality products. The question of how best to achieve the needs of
export markets given domestic preferences for quality is clearly an area where much more research is needed.
(iii) Achieving universal service and non-economic objectives
Attaining social objective in an economically efficient manner is a major challenge for national policy-makers. The manner in which they pursue this objective can have a
profound impact on trade in a variety of areas, ranging from financial, transport, telecommunications, health and education services. Interestingly, the telecom Reference Paper
acknowledges the right of a country to define universal service obligations provided they are administered in a transparent, non-discriminatory and not excessively burdensome
manner. But it does not prescribe the appropriate means to achieve this objective – this is left to national governments.
Historically, governments frequently relied on public monopolies to pursue (often unsuccessfully) universal services objectives, either through cross-subsidization across
different segments of the market, or through transfers from the government or government-controlled banks. In addition to the inefficiencies created by monopolistic market
structures, the burdens imposed by these obligations on existing national suppliers are even now a major impediment to liberalization in many countries. For instance, domestic
banks saddled with bad debts because of past directed-lending programmes are not well equipped to deal with foreign competition.
Nevertheless, the current handicap of universal service obligations can in principle also be imposed on new entrants. Thus, such obligations were part of the license conditions
for new entrants into fixed network telephony and transport in several countries. But as in many other cases, recourse to fiscal instruments has proved more successful than
direct regulation. For instance, in Chile, government subsidies equivalent to less than 0.5 percent of total telecommunications revenue, allocated through competitive bidding in
1995, mobilized 20 times as much private investment to extend basic telephone services to rural areas (Wellenius, 1997).
A third instrument is to fund the consumer rather than the provider (Cowhey and Klimenko, 1999). Governments have experimented with various forms of vouchers, from
education to energy services. This last instrument has at least three advantages: it can be targeted directly at those who need the service and cannot afford it; it avoids the
distortions that arise from artificially low pricing of services to ensure access; and finally, it does not discriminate in any way between providers.
V. Conclusion
Although the most important services policy reforms need to be taken at the domestic level, there is
substantial scope for constructive use of the multilateral trading system both in realising credible
domestic liberalization and securing market access abroad. This paper has discussed some of the
major issues confronting developing countries—a more comprehensive treatment can be found in Mattoo
(1999). Major recommendations are summarised in Table 1 above.
Certain policy choices made by developing countries, often under negotiating pressure, are not likely to
maximise domestic welfare. Examples emphasised in this paper were “market access” concessions that
allow increased foreign ownership of existing firms rather than new entry, and guarantee the privileged
status of foreign incumbents. Furthermore, where the immediate introduction of competition was not
feasible, too little advantage has been taken of the GATS to lend credibility to future liberalisation
plans. Persistent barriers to services exports of developing countries are depriving the world of
substantial welfare gains. These barriers include explicit quotas whose elimination or relaxation must
be negotiated directly, and implicit regulatory hurdles that must be dealt with by strengthening GATS rules
on domestic regulations. In particular, efforts must be made to break the stalemate on the movement
of individual service providers – creating “foreign labour content entitlements” is one possibility. It is
also desirable to enhance the security of market access for electronic delivery of services. This is
best accomplished by widening and deepening the scope of GATS commitments on cross-border
delivery, rather than by perpetuating the current WTO decision on duty-free treatment for electronically
delivered products.
One of the ironies of the GATS is that provisions dealing with domestic regulations are among its
weakest, even though they have an obviously powerful influence on international trade in services.
Appropriately designed GATS rules on domestic regulations (on which negotiations have already begun)
can serve a valuable dual purpose , helping both to promote reform at the national level and
meaningful market access at the international level.
E-commerce key to sustainability of WTO liberalization – the architecture is in
place, it’s a question of active norm setting
Andreas Lendle et al., economist with Sidley Austin LLP, a global trade law firm, ’13
(Simon Schropp. Sidley Austin LLP, Hanne Melin, Strategy Policy Counsel EMEA, and
Usman Ahmed, Policy Counsel, both at eBay Inc., “Can the WTO Adapt to a World Where Everyone Is
Empowered to Engage in Global Trade?” Building on Bali A Work Programme for the WTO Edited by
Simon J. Evenett and Alejandro Jara, Center for Economic Policy Research)
The internet is enabling a novel parallel model for trade. A business of any size can now utilise the
internet – and the services built on top of it – to connect directly with a customer in another country. The
internet greatly reduces the search, information, marketing, and transaction costs that have
traditionally limited the ability of smaller businesses to participate in global trade. At the same time, it has
developed mechanisms and processes that establish trust between market participants. Internet voice
and video services improve long distance communication, social platforms help to build brand,
marketplace platforms provide powerful reach, and payment services facilitate trusted transactions. We
refer to this parallel model for global trade as the ‘global empowerment network’.3
A growing evidential base on internet-based international commerce eBay Inc. has spent the past two
years researching the scale, scope, and effect of the global empowerment network. Their findings shed
light on the relevant of this recent global commercial phenomenon:
• More than 95% of commercial businesses on the eBay platform export.4 This is true for eBay
businesses based in developed5 and developing countries.6 In contrast, evidence for traditional firms
suggests that typically less than 20% of brick-andmortar firms export.
• When exporting, commercial eBay sellers reach a very large number of countries. They are what one
may call ‘micro-multinationals’. The average commercial eBay seller ships to consumers in 20 to 40
different countries within just one year. Again, this is in complete contrast to traditional offline exporters.
Evidence from a comprehensive dataset provided by the World Bank suggests that the average number
of markets reached by traditional exporters is around three (World Bank 2012).
• Finally, geographic distance (a commonly used proxy for trade costs) matters 65% less for
technology-enabled trade than for traditional trade (Lendle et al. 2012). The technology-enabled
marketplace truly is flat and the opportunity for businesses of all sizes will only continue to grow. Findings
from market research firm Nielsen demonstrates that cross-border retail trade among six key markets
alone (the US, the UK, Germany, Australia, China and Brazil) will triple to over $300 billion by 2018.7
There are significant benefits to the global trading system from the rise of the global empowerment
network:
• Small-scale and artisanal producers or retailers of niche products can reach a global market, something
that was practically impossible before the emergence of the internet. These small entities can thus benefit
from economies of scale and improve their growth prospects.
• The founding WTO document, the Marrakech Agreement, recognised the need for ‘positive efforts
designed to ensure that developing countries secure a share in the growth in international trade
commensurate with the needs of their economic development’.8 Research demonstrates that the
global empowerment network has similar effects in the developing world as it does in the developed
world. Developing country businesses that were traditionally isolated from global markets stand to reap
tremendous gains as a result of the internet.
• Consumers and small-scale producers benefit from gains in variety that are provided by technologyenabled trade, especially those in small and remote countries with struggling domestic retail sectors.
International selection increases competition all the way down to the retail level. It ensures that gains from
trade directly benefit final consumers, whereas an increase in traditional trade does not always lead to
falling consumer prices.
Moving beyond an ‘offline’ trade policy mindset
The multilateral trade rules have unsurprisingly been drafted with traditional – offline – exporters in mind.
However, if the WTO framework is to remain relevant in the 21st century, the global trading order
must start taking into account the expectations, needs, and concerns of technology-enabled
traders. WTO Members should therefore modernise and amend their trade agenda to create policies that
will be relevant for the billions of internet users all over the world.
The traditional policy issues tackled by the WTO (tariffs, subsidies, quotas and such) have limited effect
on the global empowerment network. For small transactions of, say, US$50 a 5% import duty is relatively
minor in absolute terms and will affect trade less than high shipping fees or a $10 customs processing
fee. Therefore, future tariff reductions through WTO negotiation rounds are unlikely to significantly affect
technology-enabled trade, unless policymakers complement the trade agenda with topics relevant for
21st century internet-based commerce. A revitalised work programme on electronic commerce There are
several concrete steps that WTO Members can take over the next four years ‘to develop an integrated,
more viable and durable multilateral trading system’ for the modern internet age:
• Improve and harmonise customs procedures by raising de minimis levels. The recent agreement on
Trade Facilitation represents an important first step in addressing the difficulties that modern businesses
have with customs. Inefficient customs procedures affect all types of trade, but technology-enabled trade
can be particularly impacted not only because small businesses shipping low-value items have less
capacity to deal with customs, but also because final consumers now have to deal with customs
formalities. Frequent traders with bulk shipments often receive preferential treatment through expedited
procedures, to which most technologyenabled businesses will not have access. Notably, the costs from
collecting customs on these low value shipments can exceed the revenues governments receive from
them (see Hufbauer and Wong 2011). Raising and harmonising de minimis levels (the level below which
imports are exempted from duties and paperwork requirements) will facilitate technology-enabled trade,
reduce confusion for final consumers, and enable customs agencies to save money and focus their
energies on security.
• Optimise and harmonise the postal system. In many countries, there is a large gap between cheap, slow
and untracked postal service providers on the one hand, and expensive, fast and tracked services on the
other. Filling the middle – providing efficient, reasonably priced and reliable postal services for
international shipments – is a key ingredient for the successful growth of technology-enable trade.
Moreover, postal systems rarely use harmonised systems or standards, thus once a package leaves
national borders it is difficult to track. The WTO could work closely with the United Postal Union to create
binding rules for international postal communication and cooperation.
• Structure a global consumer rights system. The emerging trade landscape is one where businesses
serve consumers directly and worldwide. Therefore, the full potential of technology-enabled trade
depends on ensuring that both businesses and consumers are confident transacting across borders.
Consumer concern about engaging in a transaction with traders in foreign markets is an important trade
barrier. Heterogeneous consumer protection rights between countries may effectively exclude consumers
from engaging in international transactions. Indeed, former Director General of the WTO Pascal Lamy
was quoted in a recent article suggesting that the WTO should act on consumer regulation and
harmonisation efforts (Financial Times 2013). The WTO could take practical steps towards ‘leveling up’
consumer legislation worldwide through a system of transparency mechanisms (e.g. an ‘exchange
platform’ for consumer legislation) and globally standardised dispute resolution.9
• Maintain the principles of interconnection and openness that form the core of the internet. The
beauty and power of the internet is that it is an open global interconnected network. National
governments around the world are exploring policies that would de facto create localised versions of the
internet in response to very legitimate concerns about surveillance, privacy, and consumer protection.
Moreover, the openness of the internet is regularly threatened by powerful actors (governmental and nongovernmental) that seek to drive users to particular services. The WTO should discourage actions that
seek to disconnect portions of the Internet or that give preference to certain services over others.
There is a tremendous opportunity for WTO Members to create new rules that will enable the growth of
the global empowerment network. The dormant WTO Work Programme on Electronic Commerce can
take a central role in driving the work outlined in this chapter. If the WTO fails to remove some of the
barriers to technology-enabled trade, the beneficiaries of the global empowerment network may be limited
to a handful of larger players – those able to internalise the costs of policy hurdles. By acting now to put
the right global policy framework in place for the internet, WTO Members can ensure that the internet
continues to operate as a powerful force for economic development in the future.
Strong WTO key to prevent hostile protectionist blocs and global warfare
Panitchpakdi 04 (Supachai, Secretary-General Conference on Trade & Development, 2/26/04,
Speech Before National Press Club, “American Leadership and the World Trade Organization: What is
the Alternative?”, http://www.wto.org/english/news_e/spsp_e/spsp22_e.htm)
I can sum up my message today in three sentences: The United States, more than any single country, created the
world trading system. The US has never had more riding on the strength of that system. And US leadership —
especially in the current Doha trade talks — is indispensable to the system's success. It is true that as the WTO's
importance to the world economy increases, so too does the challenge of making it work: there are more countries, more issues,
trade is in the spot light as never before. But the fiction that there is an alternative to the WTO — or to US
leadership — is both naïve and dangerous. Naïve because it fails to recognize that multilateralism has become more — not
less — important to advancing US interests. Dangerous because it risks undermining the very objectives the US seeks — freer
trade, stronger rules, a more open and secure world economy. The Doha Round is a crucial test. The core issues — services,
agriculture, and industrial tariffs — are obviously directly relevant to the US. America is highly competitive in services — the fastest
growing sector of the world economy, and where the scope for liberalization is greatest. In agriculture too the US is competitive
across many commodities — but sky-high global barriers and subsidies impede and distort agricultural trade. Industrial tariffs also
offer scope for further liberalization — especially in certain markets and sectors. But what is at stake in these talks is more than the
economic benefits that would flow from a successful deal. The real issue is the relevance of the multilateral
trading system. Its expanded rules, broader membership, and binding dispute mechanism means that the new WTO —
created less than ten years ago — is pivotal to international economic relations. But this means that the costs of
failure are also higher — with ramifications that can be felt more widely. Advancing the Doha agenda would confirm the WTO as the
focal point for global trade negotiations, and as the key forum for international economic cooperation. The credibility of the institution
would be greatly enhanced. But if the Doha negotiations stumble, doubts may grow, not just about the WTO's effectiveness, but
about the future of multilateralism in trade. This should be a major concern to the US for two reasons: First, the US is now
integrated with the world economy as never before. A quarter of US GDP is tied to international trade, up from 10
per cent in 1970 — the largest such increase of any developed economy over this period. A third of US growth since 1990 has been
generated by trade. And America's trade is increasingly global in scope — 37 per cent with Canada and Mexico, 23 per cent with
Europe, 27 per cent with Asia. Last year alone, exports to China rose by almost 30 per cent. The US has also grown more reliant on
the rules of the multilateral system to keep world markets open. Not only has it initiated more WTO dispute proceedings than any
other country — some 75 since 1995 — according to USTR it has also won or successfully settled most of the cases it has brought.
The point is this: even the US cannot achieve prosperity on its own; it is increasingly dependent on
international trade, and the rules-based economic order that underpins it. As the biggest economy, largest
trader and one of the most open markets in the world, it is axiomatic that the US has the greatest interest in widening and deepening
the multilateral system. Furthermore, expanding international trade through the WTO generates increased global prosperity, in turn
creating yet more opportunities for the US economy. The second point is that strengthening the world trading system is essential to
America's wider global objectives. Fighting terrorism, reducing poverty, improving health, integrating
China and other countries in the global economy — all of these issues are linked, in one way or another,
to world trade. This is not to say that trade is the answer to all America's economic concerns; only that meaningful solutions are
inconceivable without it. The world trading system is the linchpin of today's global order — underpinning its
security as well as its prosperity. A successful WTO is an example of how multilateralism can work. Conversely, if it weakens or
fails, much else could fail with it. This is something which the US — at the epicentre of a more interdependent world — cannot afford
to ignore. These priorities must continue to guide US policy — as they have done since the Second World War. America has been
the main driving force behind eight rounds of multilateral trade negotiations, including the successful conclusion of the Uruguay
Round and the creation of the WTO. The US — together with the EU — was instrumental in launching the latest Doha Round two
years ago. Likewise, the recent initiative, spearheaded by Ambassador Zoellick, to re-energize the negotiations and move them
towards a successful conclusion is yet another example of how essential the US is to the multilateral process — signalling that the
US remains committed to further liberalization, that the Round is moving, and that other countries have a tangible reason to get on
board. The reality is this: when the US leads the system can move forward; when it withdraws, the system drifts. The fact that US
leadership is essential, does not mean it is easy. As WTO rules have expanded, so too has as the complexity of the issues the WTO
deals with — everything from agriculture and accounting, to tariffs and telecommunication. The WTO is also exerting huge
gravitational pull on countries to join — and participate actively — in the system. The WTO now has 146 Members — up from just
23 in 1947 — and this could easily rise to 170 or more within a decade. Emerging powers like China, Brazil, and India rightly
demand a greater say in an institution in which they have a growing stake. So too do a rising number of voices outside the system
as well. More and more people recognize that the WTO matters. More non-state actors — businesses, unions, environmentalists,
development NGOs — want the multilateral system to reflect their causes and concerns. A decade ago, few people had even heard
of the GATT. Today the WTO is front page news. A more visible WTO has inevitably become a more politicized WTO. The sound
and fury surrounding the WTO's recent Ministerial Meeting in Cancun — let alone Seattle — underline how challenging managing
the WTO can be. But these challenges can be exaggerated. They exist precisely because so many countries have embraced a
common vision. Countries the world over have turned to open trade — and a rules-based system — as the key to their growth and
development. They agreed to the Doha Round because they believed their interests lay in freer trade, stronger rules, a more
effective WTO. Even in Cancun the great debate was whether the multilateral trading system was moving fast and far enough — not
whether it should be rolled back. Indeed, it is critically important that we draw the right conclusions from Cancun — which are only
now becoming clearer. The disappointment was that ministers were unable to reach agreement. The achievement was that they
exposed the risks of failure, highlighted the need for North-South collaboration, and — after a period of introspection —
acknowledged the inescapable logic of negotiation. Cancun showed that, if the challenges have increased, it is because the stakes
are higher. The bigger challenge to American leadership comes from inside — not outside — the United States.
In America's current debate about trade, jobs and globalization we have heard a lot about the costs of
liberalization. We need to hear more about the opportunities. We need to be reminded of the advantages of America's
openness and its trade with the world — about the economic growth tied to exports; the inflation-fighting role of imports, the
innovative stimulus of global competition. We need to explain that freer trade works precisely because it involves
positive change — better products, better job opportunities, better ways of doing things, better standards of living. While it is
true that change can be threatening for people and societies, it is equally true that the vulnerable are not helped by resisting change
— by putting up barriers and shutting out competition. They are helped by training, education, new and better opportunities that —
with the right support policies — can flow from a globalized economy. The fact is that for every job in the US threatened by imports
there is a growing number of high-paid, high skill jobs created by exports. Exports supported 7 million workers a decade ago; that
number is approaching around 12 million today. And these new jobs — in aerospace, finance, information technology — pay 10 per
cent more than the average American wage. We especially need to inject some clarity — and facts — into the current debate over
the outsourcing of services jobs. Over the next decade, the US is projected to create an average of more than 2 million new services
jobs a year — compared to roughly 200,000 services jobs that will be outsourced. I am well aware that this issue is the source of
much anxiety in America today. Many Americans worry about the potential job losses that might arise from foreign competition in
services sectors. But it’s worth remembering that concerns about the impact of foreign competition are not new. Many of the
reservations people are expressing today are echoes of what we heard in the 1970s and 1980s. But people at that time didn’t fully
appreciate the power of American ingenuity. Remarkable advances in technology and productivity laid the foundation for
unprecedented job creation in the 1990s and there is no reason to doubt that this country, which has shown time and again such
remarkable potential for competing in the global economy, will not soon embark again on such a burst of job-creation. America's
openness to service-sector trade — combined with the high skills of its workforce — will lead to more growth, stronger industries,
and a shift towards higher value-added, higher-paying employment. Conversely, closing the door to service trade is a strategy for
killing jobs, not saving them. Americans have never run from a challenge and have never been defeatist in the face of strong
competition. Part of this challenge is to create the conditions for global growth and job creation here and around the world. I believe
Americans realize what is at stake. The process of opening to global trade can be disruptive, but they
recognize that the US economy cannot grow and prosper any other way. They recognize the importance of
finding global solutions to shared global problems. Besides, what is the alternative to the WTO? Some argue that
the world's only superpower need not be tied down by the constraints of the multilateral system.
They claim that US sovereignty is compromised by international rules, and that multilateral institutions limit rather than expand US
influence. Americans should be deeply sceptical about these claims. Almost none of the trade issues facing the US
today are any easier to solve unilaterally, bilaterally or regionally. The reality is probably just the opposite. What
sense does it make — for example — to negotiate e-commerce rules bilaterally? Who would be interested in disciplining agricultural
subsidies in a regional agreement but not globally? How can bilateral deals — even dozens of them — come close to matching the
economic impact of agreeing to global free trade among 146 countries? Bilateral and regional deals can sometimes be a
complement to the multilateral system, but they can never be a substitute. There is a bigger danger. By
treating some countries preferentially, bilateral and regional deals exclude others — fragmenting
global trade and distorting the world economy. Instead of liberalizing trade — and widening
growth — they carve it up. Worse, they have a domino effect: bilateral deals inevitably beget more bilateral
deals, as countries left outside are forced to seek their own preferential arrangements, or risk further marginalization. This is
precisely what we see happening today. There are already over two hundred bilateral and regional agreements in existence, and
each month we hear of a new or expanded deal. There is a basic contradiction in the assumption that bilateral approaches serve to
strengthen the multilateral, rules-based system. Even when intended to spur free trade, they can ultimately risk undermining it. This
is in no one's interest, least of all the United States. America led in the creation of the multilateral system after
1945 precisely to avoid a return to hostile blocs — blocs that had done so much to fuel interwar
instability and conflict. America's vision, in the words of Cordell Hull, was that “enduring peace and the welfare of nations
was indissolubly connected with the friendliness, fairness and freedom of world trade”. Trade would bind nations
together, making another war unthinkable. Non-discriminatory rules would prevent a return to
preferential deals and closed alliances. A network of multilateral initiatives and organizations — the Marshal Plan, the
IMF, the World Bank, and the GATT, now the WTO — would provide the institutional bedrock for the international rule of law, not
power. Underpinning all this was the idea that freedom — free trade, free democracies, the free exchange of ideas — was essential
to peace and prosperity, a more just world. It is a vision that has emerged pre-eminent a half century later. Trade has expanded
twenty-fold since 1950. Millions in Asia, Latin America, and Africa are being lifted out of poverty, and millions more have new hope
for the future. All the great powers — the US, Europe, Japan, India, China and soon Russia — are part of a rules-based multilateral
trading system, greatly increasing the chances for world prosperity and peace. There is a growing realization that — in our
interdependent world — sovereignty is constrained, not by multilateral rules, but by the absence of rules. All of these were
America’s objectives. The US needs to be both clearer about the magnitude of what it has achieved, and more realistic about what it
is trying to — and can — accomplish. Multilateralism can be slow, messy, and tortuous. But it is also indispensable to managing an
increasingly integrated global economy. Multilateralism is based on the belief that all countries — even powerful countries like the
United States — are made stronger and more secure through international co-operation and rules, and by working to strengthen one
another from within a system, not outside of it. Multilateralism's greatest ideal is the ideal of negotiation, compromise, consensus,
not coercion. As Churchill said of democracy, it is the worst possible system except for all the others. I do not believe America's
long-term economic interests have changed. Nor do I believe that America's vision for a just international order has become blurred.
If anything, the American vision has been sharpened since the terrorist attacks on New York and Washington; sharpened by the
realization that there is now a new struggle globally between the forces of openness and modernity, and the forces of separatism
and reaction. More than ever, America's interests lie in an open world economy resting on the foundation of a strong, rules-based
multilateral system. More and more, America's growth and security are tied to the growth and security of the world economy as a
whole. American leadership today is more — not less — important to our increasingly interconnected planet. A recent successful,
and much needed, example is the multilateral agreement on intellectual property rights and access to medicines for poor countries,
in which the US played a pivotal role. It would be a tragic mistake if the Doha Round, which offers the world a once-in-a-generation
opportunity to eliminate trade distortions, to strengthen trade rules, and open markets across the world, were allowed to founder. We
need courage and the collective political will to ensure a balanced and equitable outcome. What is the alternative? It is a fragmented
world, with greater conflict and uncertainty. A world of the past, not the future — one that America turned away from after 1945, and
that we should reject just as decisively today. America must lead. The multilateral trading system is too important to
fail. The world depends on it. So does America.
Free trade dampens global conflict
Griswold 07
Daniel Griswold directs the Center for Trade Policy Studies at the Cato Institute, Cato Institute, April 20,
2007, “Trade, Democracy and Peace: The Virtuous Cycle”,
http://www.cato.org/publications/speeches/trade-democracy-peace-virtuous-cycle
The Peace Dividend of Globalization
The good news does not stop there. Buried beneath the daily stories about suicide bombings and insurgency
movements is an underappreciated but encouraging fact: The world has somehow become a more
peaceful place.
A little-noticed headline on an Associated Press story a while back reported, “War declining worldwide,
studies say.” In 2006, a survey by the Stockholm International Peace Research Institute found that the
number of armed conflicts around the world has been in decline for the past half-century. Since the
early 1990s, ongoing conflicts have dropped from 33 to 17, with all of them now civil conflicts within countries.
The Institute’s latest report found that 2005 marked the second year in a row that no two nations were at
war with one another. What a remarkable and wonderful fact.
The death toll from war has also been falling. According to the Associated Press report, “The number
killed in battle has fallen to its lowest point in the post-World War II period, dipping below 20,000 a year by one
measure. Peacemaking missions, meanwhile, are growing in number.” Current estimates of people killed
by war are down sharply from annual tolls ranging from 40,000 to 100,000 in the 1990s, and from a peak
of 700,000 in 1951 during the Korean War.
Many causes lie behind the good news—the end of the Cold War and the spread of democracy, among
them—but expanding trade and globalization appear to be playing a major role in promoting world
peace. Far from stoking a “World on Fire,” as one misguided American author argued in a forgettable book,
growing commercial ties between nations have had a dampening effect on armed conflict and war. I would
argue that free trade and globalization have promoted peace in three main ways.
First, as I argued a moment ago, trade and globalization have reinforced the trend toward democracy,
and democracies tend not to pick fights with each other. Thanks in part to globalization, almost two
thirds of the world’s countries today are democracies—a record high. Some studies have cast doubt on the
idea that democracies are less likely to fight wars. While it’s true that democracies rarely if ever war with
each other, it is not such a rare occurrence for democracies to engage in wars with non-democracies. We
can still hope that has more countries turn to democracy, there will be fewer provocations for war
by non-democracies.
A second and even more potent way that trade has promoted peace is by promoting more economic
integration. As national economies become more intertwined with each other, those nations have
more to lose should war break out. War in a globalized world not only means human casualties and bigger
government, but also ruptured trade and investment ties that impose lasting damage on the
economy. In short, globalization has dramatically raised the economic cost of war.
The 2005 Economic Freedom of the World Report contains an insightful chapter on “Economic Freedom
and Peace” by Dr. Erik Gartzke, a professor of political science at Columbia University. Dr. Gartzke compares
the propensity of countries to engage in wars and their level of economic freedom and concludes that economic
freedom, including the freedom to trade, significantly decreases the probability that a country will
experience a military dispute with another country. Through econometric analysis, he found that, “Making
economies freer translates into making countries more peaceful. At the extremes, the least free states are
about 14 times as conflict prone as the most free.”
By the way, Dr. Gartzke’s analysis found that economic freedom was a far more important variable in
determining a countries propensity to go to war than democracy.
A third reason why free trade promotes peace is because it allows nations to acquire wealth through
production and exchange rather than conquest of territory and resources. As economies develop,
wealth is increasingly measured in terms of i ntellectual p roperty, financial assets, and human capital. Such
assets cannot be easily seized by armies. In contrast, hard assets such as minerals and farmland are
becoming relatively less important in a high-tech, service economy. If people need resources outside their
national borders, say oil or timber or farm products, they can acquire them peacefully by trading
away what they can produce best at home. In short, globalization and the development it has spurred have
rendered the spoils of war less valuable.
Of course, free trade and globalization do not guarantee peace. Hot-blooded nationalism and ideological
fervor can overwhelm cold economic calculations. Any relationship involving human beings will be messy
and non-linier. There will always be exceptions and outliers in such complex relationships involving
economies and governments. But deep trade and investment ties among nations make war less
attractive.
A Virtuous Cycle of Democracy, Peace and Trade
The global trends we’ve witnessed in the spread of trade, democracy and peace tend to reinforce each
other in a grand and virtuous cycle. As trade and development encourage more representative
government, those governments provide more predictability and incremental reform, creating a better
climate for trade and investment to flourish. And as the spread of trade and democracy foster peace, the
decline of war creates a more hospitable environment for trade and economic growth and political stability.
We can see this virtuous cycle at work in the world today. The European Union just celebrated its 50th
birthday. For many of the same non-economic reasons that motivated the founders of the GATT, the
original members of the European community hoped to build a more sturdy foundation for peace. Out of
the ashes of World War II, the United States urged Germany, France and other Western European
nations to form a common market that has become the European Union. In large part because of their
intertwined economies, a general war in Europe is now unthinkable.
In East Asia , the extensive and growing economic ties among Mainland China, Japan, South Korea,
and Taiwan is helping to keep the peace . China’s communist rulers may yet decide to go to war over its
“renegade province,” but the economic cost to their economy would be staggering and could provoke
a backlash among its citizens. In contrast, poor and isolated North Korea is all the more dangerous because
it has nothing to lose economically should it provoke a war.
In Central America, countries that were racked by guerrilla wars and death squads two decades ago have
turned not only to democracy but to expanding trade, culminating in the Central American Free Trade
Agreement with the United States. As the Stockholm Institute reported in its 2005 Yearbook, “Since the
1980s, the introduction of a more open economic model in most states of the Latin American and
Caribbean region has been accompanied by the growth of new regional structures, the dying out of
interstate conflicts and a reduction in intra-state conflicts.”
Robust WTO mediated trade system is key to China’s peaceful rise – they’re
locked into conformity now but WTO degradation is destabilizing
Xiaowen Zhang, Ph.D., assistant professor of political science at Augustana College, and Xiaoling
Li, Ph.D., associated professor of law at the China Youth University for Political Sciences, ’14
(“The Politics of Compliance with Adverse WTO Dispute Settlement Rulings in China,” Journal of
Contemporary China, Volume 23, Issue 85, 2014)
Conclusion
The year 2013 marked the 12-year anniversary of China's WTO membership. When faced with adverse
rulings from the WTO adjudicative bodies, China has so far been reasonably restrained in its reactions
and has shown great respect for the authority of the WTO DSS. Nevertheless, considering the high rate
of compliance problems in WTO disputes, especially caused by large members like the United States and
the European Union, it remains to be seen whether China will uphold the record in the future.
Different than most large trading countries in the world, China has an authoritarian political system.
Decision-making models frequently used in democracies with a free market economy have limited
applicability for China. Generally speaking, a small group of top leaders determines the overall objective
and means of China's development. The current development strategy, ‘peaceful rising’, implies that an
orderly and friendly international market is a key condition of China's continuous growth. To
achieve that, China needs the WTO to maintain and manage an open international market. That
said, the legitimacy and effectiveness of the WTO DSS is of great importance to China, setting the tone
for China's performance in handling WTO disputes.
This essay brings encouraging news to China's trading partners. In most cases, they can count on the
WTO DSS to bring China into compliance with its WTO obligations. However, they also need to
understand that China's fragmented policy bureaucracy can put constraints on the regime's capacity to
comply with WTO dispute settlement rulings. As illustrated by China—Publications and Audiovisual
Products, monopolistic SOEs in China can impede the successful implementation of panel/Appellate
Body recommendations through the bureaucratic unit representing their interests in the central
government, a mechanism serving the same purpose but working differently than the special interest
politics in democracies. In addition, the political sensitivity of the measure at dispute has no doubt
increased the clout of the monopolistic SOEs involved in this dispute. Since special interest groups in
most democracies operate in a relatively open setting, following established procedures, it is not so
difficult to track their actions and predict the result. In comparison, monopolistic SOEs in China and their
allies in the Chinese power hierarchy often work in a black box. As there are no procedural laws
prescribing the proper decision-making mechanism, the prospect of compliance becomes less
predictable. That said, it is worth noting that the WTO encourages members to settle their differences first
through bilateral negotiations. For cases against China involving politically sensitive issues, bilateral
negotiations seem to be the more feasible and effective option. On the part of China, a procedural law
institutionalizing the participation and role of relevant agencies and interest groups during the
implementation stage will help reduce arbitrary decisions, avoid delays and provide more transparency,
which is also consistent with the key principle of the WTO.
The alternative is global war
Ikenberry 08
G. JOHN IKENBERRY is Albert G. Milbank Professor of Politics and International Affairs at Princeton
University, Foreign Affairs, January/February 2008, “The Rise of China and the Future of the West”,
http://www.foreignaffairs.com/articles/63042/g-john-ikenberry/the-rise-of-china-and-the-future-of-the-west
The rise of China will undoubtedly be one of the great dramas of the twenty-first century. China's
extraordinary economic growth and active diplomacy are already transforming East Asia, and future
decades will see even greater increases in Chinese power and influence. But exactly how this drama
will play out is an open question . Will China overthrow the existing order or become a part of
it? And what, if anything, can the United States do to maintain its position as China rises?
Some observers believe that the American era is coming to an end, as the Western-oriented world
order is replaced by one increasingly dominated by the East. The historian Niall Ferguson has written that
the bloody twentieth century witnessed "the descent of the West" and "a reorientation of the world" toward
the East. Realists go on to note that as China gets more powerful and the United States' position erodes,
two things are likely to happen: China will try to use its growing influence to reshape the rules and
institutions of the international system to better serve its interests, and other states in the system -especially the declining hegemon -- will start to see China as a growing security threat. The result of
these developments, they predict, will be tension , distrust , and conflict , the typical features of a power
transition. In this view, the drama of China's rise will feature an increasingly powerful China and a
declining U nited S tates locked in an epic battle over the rules and leadership of the international
system. And as the world's largest country emerges not from within but outside the established postWorld War II international order, it is a drama that will end with the grand ascendance of China and the
onset of an Asian-centered world order.
That course, however, is not inevitable . The rise of China does not have to trigger a wrenching
hegemonic transition. The U.S.-Chinese power transition can be very different from those of the past
because China faces an international order that is fundamentally different from those that past rising
states confronted. China does not just face the United States; it faces a Western-centered system that
is open, integrated, and rule-based , with wide and deep political foundations. The nuclear revolution,
meanwhile, has made war among great powers unlikely -- eliminating the major tool that rising powers
have used to overturn international systems defended by declining hegemonic states. Today's Western
order, in short, is hard to overturn and easy to join.
This unusually durable and expansive order is itself the product of farsighted U.S. leadership. After World
War II, the United States did not simply establish itself as the leading world power. It led in the creation of
universal institutions that not only invited global membership but also brought democracies and market
societies closer together. It built an order that facilitated the participation and integration of both
established great powers and newly independent states. (It is often forgotten that this postwar order was
designed in large part to reintegrate the defeated Axis states and the beleaguered Allied states into a
unified international system.) Today, China can gain full access to and thrive within this system. And if
it does, China will rise, but the Western order -- if managed properly -- will live on.
As it faces an ascendant China, the U nited S tates should remember that its leadership of the Western
order allows it to shape the environment in which China will make critical strategic choices. If it wants
to preserve this leadership, Washington must work to strengthen the rules and institutions that
underpin that order -- making it even easier to join and harder to overturn. U.S. grand strategy should be
built around the motto "The road to the East runs through the West." It must sink the roots of this order as
deeply as possible, giving China greater incentives for integration than for opposition and increasing the
chances that the system will survive even after U.S. relative power has declined.
The United States' "unipolar moment" will inevitably end. If the defining struggle of the twenty-first century
is between China and the United States, China will have the advantage. If the defining struggle is
between China and a revived Western system, the West will triumph.
TRANSITIONAL ANXIETIES
China is well on its way to becoming a formidable global power. The size of its economy has quadrupled since
the launch of market reforms in the late 1970s and, by some estimates, will double again over the next
decade. It has become one of the world's major manufacturing centers and consumes roughly a third of
the global supply of iron, steel, and coal. It has accumulated massive foreign reserves, worth more than
$1 trillion at the end of 2006. China's military spending has increased at an inflation-adjusted rate of over
18 percent a year, and its diplomacy has extended its reach not just in Asia but also in Africa, Latin
America, and the Middle East. Indeed, whereas the Soviet Union rivaled the United States as a military
competitor only, China is emerging as both a military and an economic rival -- heralding a profound
shift in the distribution of global power.
Power transitions are a recurring problem in international relations. As scholars such as Paul
Kennedy and Robert Gilpin have described it, world politics has been marked by a succession of powerful
states rising up to organize the international system. A powerful state can create and enforce the rules
and institutions of a stable global order in which to pursue its interests and security. But nothing lasts
forever: long-term changes in the distribution of power give rise to new challenger states, who set off
a struggle over the terms of that international order. Rising states want to translate their newly acquired
power into greater authority in the global system -- to reshape the rules and institutions in accordance
with their own interests. Declining states, in turn, fear their loss of control and worry about the security
implications of their weakened position.
These moments are fraught with danger . When a state occupies a commanding position in the
international system, neither it nor weaker states have an incentive to change the existing order. But
when the power of a challenger state grows and the power of the leading state weakens, a strategic
rivalry ensues, and conflict -- perhaps leading to war -- becomes likely . The danger of power
transitions is captured most dramatically in the case of late-nineteenth-century Germany. In 1870, the
United Kingdom had a three-to-one advantage in economic power over Germany and a significant military
advantage as well; by 1903, Germany had pulled ahead in terms of both economic and military power. As
Germany unified and grew, so, too, did its dissatisfactions and demands, and as it grew more powerful, it
increasingly appeared as a threat to other great powers in Europe, and security competition began. In the
strategic realignments that followed, France, Russia, and the United Kingdom, formerly enemies, banded
together to confront an emerging Germany. The result was a European war. Many observers see this
dynamic emerging in U.S.-Chinese relations. "If China continues its impressive economic growth over the
next few decades," the realist scholar John Mearsheimer has written, "the United States and China are
likely to engage in an intense security competition with considerable potential for war."
But not all power transitions generate war or overturn the old order. In the early decades of the
twentieth century, the U nited K ingdom ceded authority to the U nited S tates without great conflict or
even a rupture in relations. From the late 1940s to the early 1990s, Japan's economy grew from the
equivalent of five percent of U.S. GDP to the equivalent of over 60 percent of U.S. GDP, and yet Japan
never challenged the existing international order.
Clearly, there are different types of power transitions. Some states have seen their economic and
geopolitical power grow dramatically and have still accommodated themselves to the existing order.
Others have risen up and sought to change it. Some power transitions have led to the breakdown of the
old order and the establishment of a new international hierarchy. Others have brought about only limited
adjustments in the regional and global system.
A variety of factors determine the way in which power transitions unfold. The nature of the rising state's
regime and the degree of its dissatisfaction with the old order are critical: at the end of the nineteenth
century, the United States, a liberal country an ocean away from Europe, was better able to embrace the
British-centered international order than Germany was. But even more decisive is the character of the
international order itself -- for it is the nature of the international order that shapes a rising state's choice
between challenging that order and integrating into it.
OPEN ORDER
The postwar Western order is historically unique. Any international order dominated by a powerful state is
based on a mix of coercion and consent, but the U.S.-led order is distinctive in that it has been more liberal
than imperial -- and so unusually accessible, legitimate, and durable. Its rules and institutions are rooted
in, and thus reinforced by, the evolving global forces of democracy and capitalism. It is expansive, with a
wide and widening array of participants and stakeholders. It is capable of generating tremendous
economic growth and power while also signaling restraint -- all of which make it hard to overturn and
easy to join.
It was the explicit intention of the Western order's architects in the 1940s to make that order integrative
and expansive. Before the Cold War split the world into competing camps, Franklin Roosevelt sought to
create a one-world system managed by cooperative great powers that would rebuild war-ravaged Europe,
integrate the defeated states, and establish mechanisms for security cooperation and expansive
economic growth. In fact, it was Roosevelt who urged -- over the opposition of Winston Churchill -- that
China be included as a permanent member of the UN Security Council. The then Australian ambassador
to the United States wrote in his diary after his first meeting with Roosevelt during the war, "He said that
he had numerous discussions with Winston about China and that he felt that Winston was 40 years
behind the times on China and he continually referred to the Chinese as 'Chinks' and 'Chinamen' and he
felt that this was very dangerous. He wanted to keep China as a friend because in 40 or 50 years' time
China might easily become a very powerful military nation."
Over the next half century, the United States used the system of rules and institutions it had built to good
effect. West Germany was bound to its democratic Western European neighbors through the European
Coal and Steel Community (and, later, the European Community) and to the United States through the
Atlantic security pact; Japan was bound to the United States through an alliance partnership and
expanding economic ties. The Bretton Woods meeting in 1944 laid down the monetary and trade rules
that facilitated the opening and subsequent flourishing of the world economy -- an astonishing
achievement given the ravages of war and the competing interests of the great powers. Additional
agreements between the United States, Western Europe, and Japan solidified the open and multilateral
character of the postwar world economy. After the onset of the Cold War, the Marshall Plan in Europe
and the 1951 security pact between the United States and Japan further integrated the defeated Axis
powers into the Western order.
In the final days of the Cold War, this system once again proved remarkably successful. As the Soviet
Union declined, the Western order offered a set of rules and institutions that provided Soviet leaders with
both reassurances and points of access -- effectively encouraging them to become a part of the system.
Moreover, the shared leadership of the order ensured accommodation of the Soviet Union. As the
Reagan administration pursued a hard-line policy toward Moscow, the Europeans pursued détente and
engagement. For every hard-line "push," there was a moderating "pull," allowing Mikhail Gorbachev to
pursue high-risk reforms. On the eve of German unification, the fact that a united Germany would be
embedded in European and Atlantic institutions -- rather than becoming an independent great power -helped reassure Gorbachev that neither German nor Western intentions were hostile. After the Cold War,
the Western order once again managed the integration of a new wave of countries, this time from the
formerly communist world. Three particular features of the Western order have been critical to this
success and longevity.
First, unlike the imperial systems of the past, the Western order is built around rules and norms of
nondiscrimination and market openness, creating conditions for rising states to advance their expanding
economic and political goals within it. Across history, international orders have varied widely in terms of
whether the material benefits that are generated accrue disproportionately to the leading state or are
widely shared. In the Western system, the barriers to economic participation are low, and the potential
benefits are high. China has already discovered the massive economic returns that are possible by
operating within this open-market system.
Extinction – no defense
Goldstein 13
AVERY GOLDSTEIN is David M. Knott Professor of Global Politics and International Relations and
Director of the Center for the Study of Contemporary China at the University of Pennsylvania, Foreign
Affairs, September/October 2013, "China’s Real and Present Danger",
http://www.foreignaffairs.com/articles/139651/avery-goldstein/chinas-real-and-present-danger
Washington has also been vague about what it sees as its vital interests in the region. The United States
hedges on the question of whether Taiwan falls under a U.S. security umbrella. And the U nited S tates’
stance on the maritime disputes involving China and its neighbors is somewhat confusing: Washington
has remained neutral on the rival sovereignty claims and insisted that the disputes be resolved peacefully
but has also reaffirmed its commitment to stand by its allies in the event that a conflict erupts. Such
Chinese and U.S. ambiguity about the “redlines” that cannot be crossed without risking conflict
increases the chances that either side could take steps that it believes are safe but that turn out to
be unexpectedly provocative.
MORE DANGEROUS THAN THE COLD WAR?
Uncertainty about what could lead either Beijing or Washington to risk war makes a crisis far more
likely, since neither side knows when, where, or just how hard it can push without the other side
pushing back. This situation bears some resemblance to that of the early Cold War, when it took a
number of serious crises for the two sides to feel each other out and learn the rules of the road. But
today’s environment might be even more dangerous.
The balance of nuclear and conventional military power between China and the U nited S tates, for
example, is much more lopsided than the one that existed between the Soviet Union and the United
States. Should Beijing and Washington find themselves in a conflict, the huge U.S. advantage in
conventional forces would increase the temptation for Washington to threaten to or actually use
force. Recognizing the temptation facing Washington, Beijing might in turn feel pressure to use its
conventional forces before they are destroyed. Although China could not reverse the military imbalance, it
might believe that quickly imposing high costs on the United States would be the best way to get it to
back off.
The fact that both sides have nuclear arsenals would help keep the situation in check, because both sides
would want to avoid actions that would invite nuclear retaliation. Indeed, if only nuclear considerations
mattered, U.S.-Chinese crises would be very stable and not worth worrying about too much. But the two
sides’ conventional forces complicate matters and undermine the stability provided by nuclear
deterrence. During a crisis, either side might believe that using its conventional forces would confer
bargaining leverage, manipulating the other side’s fear of escalation through what the economist Thomas
Schelling calls a “competition in risk-taking.” In a crisis, China or the United States might believe that it
valued what was at stake more than the other and would therefore be willing to tolerate a higher level of
risk. But because using conventional forces would be only the first step in an unpredictable process
subject to misperception, missteps, and miscalculation, there is no guarantee that brinkmanship
would end before it led to an unanticipated nuclear catastrophe.
China, moreover, apparently believes that nuclear deterrence opens the door to the safe use of
conventional force. Since both countries would fear a potential nuclear exchange, the Chinese seem to
think that neither they nor the Americans would allow a military conflict to escalate too far. Soviet leaders,
by contrast, indicated that they would use whatever military means were necessary if war came -- which
is one reason why war never came. In addition, China’s official “no first use” nuclear policy, which guides
the Chinese military’s preparation and training for conflict, might reinforce Beijing’s confidence that limited
war with the United States would not mean courting nuclear escalation. As a result of its beliefs, Beijing
might be less cautious about taking steps that would risk triggering a crisis. And if a crisis
ensued, China might also be less cautious about firing the first shot.
Such beliefs are particularly worrisome given recent developments in technology that have dramatically
improved the precision and effectiveness of conventional military capabilities. Their lethality might
confer a dramatic advantage to the side that attacks first, something that was generally not true of
conventional military operations in the main European theater of U.S.-Soviet confrontation. Moreover,
because the sophisticated computer and satellite systems that guide contemporary weapons are highly
vulnerable to conventional military strikes or cyberattacks, today’s more precise weapons might be
effective only if they are used before an adversary has struck or adopted countermeasures. If peacetime
restraint were to give way to a search for advantage in a crisis, neither China nor the United States could
be confident about the durability of the systems managing its advanced conventional weapons.
Under such circumstances, both Beijing and Washington would have incentives to initiate an attack.
China would feel particularly strong pressure, since its advanced conventional weapons are more fully
dependent on vulnerable computer networks, fixed radar sites, and satellites. The effectiveness of U.S.
advanced forces is less dependent on these most vulnerable systems. The advantage held by the United
States, however, might increase its temptation to strike first, especially against China’s satellites, since it
would be able to cope with Chinese retaliation in kind.
INTERNET
US leadership key to prevent global internet fragmentation – kills the economy
Weinstein 11/12/14
Mark Weinstein, award-winning author, and the founder of MeWe, one of the world's foremost privacy
advocates, Mark has served as a Steering Committee Member of National Strategy for Trusted Identities
in Cyberspace (NSTIC), and has been named Privacy by Design Ambassador by the Information and
Privacy Commissioner of Ontario, Huffington Post, November 12, 2014, “Obama Heroically Wages
Internet War, But Misses World Wide Web Target”, http://www.huffingtonpost.com/markweinstein/obama-heroically-wages-in_b_6137324.html
I have a greater fear -- a rudderless World Wide Web and captain-less ICANN. That's why eight
months ago I preached for Net Neutrality and for the United States to push such an agenda through as
stewards of ICANN. I was overjoyed on Monday to see Obama support half of my wish list when he
released an emphatic video statement throwing his administration's full support behind Net Neutrality and
asking the FCC to implement strict rules to give weight to such an agenda. Way to go, Mr. President!
Yet there's more to do here. What's interesting about Monday's statement is for all its good, it turns the
discussion away from a global perspective to a domestic one. Obama's speech focuses on a free and
open Internet within our borders that doesn't speed up or slow down content delivery based on the whims
of broadband companies. Take that Netflix with your big ideas of Internet favoritism. At the same time, is
this a first step of a philosophy or a final one? I hope the former but fear the latter.
Imagine for a second if every country had its own Internet. The World Wide Web would become
anything but, leading to an economic and individual rights disaster that would complicate
commerce and freedom around the world.
In 1997, Bill Clinton helped create ICANN within his Green Paper proposal for privatizing the domain
name system (DNS). In that regard, our impartiality and creation of checks and balances built into the
system have led to a rather impressive run, one that has averted partisan politics and lobbyists and
helped keep the Internet as a free platform.
I think that our losing such a leadership role is a mistake for the U nited S tates and the principles of
Net Neutrality. Yet in the spirit of compromise, I commend Obama for taking a stand within our borders.
Now he needs to take the next step.
The hope I have is that whatever new governance structure emerges for ICANN in 2015 turns into a
United Nations of Internet protection where the entire world has access to a free Internet. However, if the
new structure cannot guarantee Net Neutrality, then I believe the U.S. government should revoke its
decision to relinquish leadership. The risk is too great and the ramifications too frightening to idly
stand by and allow any other conclusion.
Now is key
Pigoni November 2014
Livio Pigoni is research assistant at the Center for Security Studies (CSS) at ETH Zurich, CSS Analyses
in Security Policy, November 2014, “Internet Governance: Time for an Update?”, No. 163
*IG = internet governance
Within this second coalition, there are two groups of states whose positions are of varying degrees of
radicalism: The “censors” (Iran, Cuba, China, Syria, Saudi Arabia, Egypt, and Russia) can be
distinguished from the “moderate reformers” (Brazil, India, and South Africa). The former regard the open
internet not only as a problem, but as a potential threat to their own political regimes. This threat
narrative cannot be reconciled with approaches that envisage civil society’s participation in determining
the future of the net. China, for example, is convinced that states should further extend their
sovereignty to cyberspace. Through control over its own Domain Name System, the Chinese
government is already able today to obstruct access to certain websites. At the same time, the “Great
Firewall of China” excludes from the Chinese network those pages that Beijing regards as featuring
undesirable content. In this top-down vision of a controlled internet, states frequently use the internet as
an instrument of power to block, monitor, and persecute critical voices.
The “moderate reformers”, also known as the “swing states” (Brazil, India, South Africa, Mexico, and
another approximately 25 states) are pursuing a more ambivalent internet policy. Since the revelations
of the NSA eavesdropping scandal, they have advocated more national influence and a more inclusive
administration of the internet; however, they pursue strongly divergent interests. While Brazil is not
against the multistakeholder approach as such, India is, for example, critical of this model. The behavior
of these “swing states” and their decision for or against the multistakeholder approach will have a
decisive influence on the future form of IG.
Reform Instead of Revolution
Washington submitted to international pressure in March 2014, when the US Department of Commerce
announced that it would make the IANA functions available for new stakeholders after the expiration of
the contract with ICANN on 30 September 2015. In this way, the US would relinquish part of its control
over the internet. However, the willingness to globalize this function is better understood as an attempt
by the US to reclaim for its camp those states that were initially in favor of the multistakeholder
model through a mild reform of ICANN, rather than as an effective inclination to relinquish power
overall. The US remains categorically opposed to a multilateral regulation of IANA functions. What can
be expected for the period until September 2015, therefore, is not the revolution of a US-centered internet
order, as demanded by some states, but a sluggish reform process.
This process began at the NetMundial conference in São Paulo in April 2014. The global multistakeholder
conference was geared towards initiating a restoration of IG and formulating universal internet principles.
The result was a “multistakeholder document”; its implementation was subsequently debated in a number
of forums. The Internet Governance Forum, created in 2005, met in Istanbul in September 2014 to
discuss how the multistakeholder approach could be implemented better than in the past. The
fundamental resistance of Russia, China, or Iran remained. For the governments of those states, a
“bottom-up approach” is unacceptable, not even a reformed one. But it is not only the “censors” who
regard the multistakeholder model as the problem, rather than the solution, of the current IG debate. In
the West, too, there are voices in civil society that advocate a stronger top-down approach. They argue
that commercial IT corporations as well as intelligence agencies have too much power in the web. In
order to protect the privacy of their citizens, governments must take firmer control of the internet and
exercise leadership in the further development of IG.
The difficulty in the ongoing reform process consists of bringing together these divergent
positions. By the end of September 2015, the future trajectory of IG should have become apparent.
However, no revolutionary changes in the current system of internet administration should be expected.
The US will continue to assert a privileged position within IG, and the internet will continue to be
multistakeholder-oriented. The danger, however, is that the absence of a more legitimate, inclusive
solution could encourage certain states to promote their own national vision of the internet even
more strongly . The introduction of incompatible transfer protocols, for instance, could cause a
fragmentation of the internet along technical boundaries. In such a scenario, where
communication between different fractional networks is made impossible, it is conceivable that
cyberspace could become even more of a place of distrust and confrontation.
Legalizing online gambling key to internet freedom – it’s a Trojan horse for
widespread regulation
Telford 10/20/14
Erik Telford is senior vice president at the Franklin Center for Government & Public Integrity, The Hill,
October 20, 2014, “Ending the cycle of casino cronyism”, http://thehill.com/blogs/congressblog/politics/221124-ending-the-cycle-of-casino-cronyism
When powerful gaming interest are spearheading the fight to ban online gambling, it should give you
pause. Their main policy objective is focused on federal legislation to ban online gambling outright –
stifling their competition before it ever reaches the market. It is a glimpse of crony capitalism in its most
naked form, and represents a very troubling assault on Internet freedom , giving government a foot
in the door for a broader regulatory regime and usurping our federalist system.
The 2011, the Department of Justice’s position interpretation on Internet gambling threw the issue to state
legislatures--where it should be. Almost immediately, Nevada, Delaware, and New Jersey passed
legalizing legislation.
The Restoration of America’s Wire Act, sponsored by Sen. Lindsey Graham (R-S.C.) and Rep. Jason
Chaffetz (R-Utah) would prohibit interstate sports betting using wire services, effectively killing online
gambling across the states where it’s legal. While their pretense is to advance a moral good, this policy
would undermine the free market, encourage crime, and erodes the constitutional concept of states’
rights.
Proponents of the regulation have brought in political heavyweights to undermine legalized online
gambling, including former Arkansas Sen. Blanche Lincoln (D), who represents the Coalition to Stop
Internet Gambling, claiming that legalizing online gambling would promote fraud, addiction, and money
laundering.
"I think it's going to be very difficult to work something out,” Lincoln said, "I think it's important to put a
time-out on this and to stop and think about what it's going to mean to us as a nation in our economy, to
our children and to our society."
However, these problems already exist with black market gambling mostly run from overseas with
profits funding shady and potentially dangerous operations outside the jurisdiction of state regulation and
consumer protections.
Alan Feldman, an executive vice president of MGM notes that online gambling “is here, and it’s been
here for a very long time.” Legalizing online gambling would likely see more of a shift from illegal
to legal play instead of funneling customers away from traditional casinos and their trappings.
Free market advocates agree that consumers would enjoy more security were this pursuit made legal. “In
this black market, where virtually all sites are operated from abroad, consumers have little to no protection
from predatory behavior.” wrote officials of the Institute For Policy Innovation to several congressmen.
They then shared wider concern that “Perhaps even more concerning is the fact that this bill allows
the federal government to take a heavy hand in regulating the Internet, opening the door for
increased Internet regulation in the future.”
Just like Prohibition in the 1920’s, banning this vice would actually incentivize criminal behavior.
Those fearful of fraud, child participation, and profits diverted to gangs or terrorists should push for
legalization in every state to make the industry as transparent as possible. Legalizing this longestablished, multibillion dollar business gets the profits out of the shadows, expands market opportunities,
and puts revenue into the coffers of both legitimate business and state governments that will benefit.
Plan solves—reverse causal and signal key
Gardner, 10
(Staff Editor & Reporter-Casino Gambling Web, 9/23, Gambling Regulations Will Help Obama's World
Internet Freedom Mandate, http://www.casinogamblingweb.com/gambling-news/gamblinglaw/gambling_regulations_will_help_obama_s_world_internet_freedom_mandate_55752.html)
Gambling Regulations Will Help Obama's World Internet Freedom Mandate President Obama gave
a speech today in front of the United Nations General Assembly, and his message was largely one of
individual freedom. During the speech, Obama touched on many issues, perhaps the most aggressive of
which was having a Palestinian state separate from Israel. Obama spoke of allowing the Palestinians
their own state with the hope that Israelis and Palestinians could live side by side in peace. Obama
acknowledged that this could take a long time, but that the goal could become a reality. During the
speech, Obama spoke about how the Internet should remain free from government interference
everywhere in the world. The freedom to surf the Internet would allow people all across the globe to
research issues and learn from the wide array of news that is currently found on the Internet. "We will
support a free and open Internet, so individuals have the information to make up their own minds," said
Obama. "And it is time to embrace and effectively monitor norms that advance the rights of civil society
and guarantee its expansion within and across borders." That statement may have been much better
received had the US not had their own blocks on Internet freedom. The Internet gambling industry
currently is operating as a black market in the US due to the 2006 Unlawful Internet Gambling
Enforcement Act. The law is a form of Internet censorship that Representative Barney Frank and other
lawmakers have been trying to repeal. In the quest for Internet freedom, the US proclaims themselves as
leaders, however, the country must be careful with their plea. If the US can place Internet bans on
certain industries, then little could be done to stop other countries from banning different
industries or websites because of their beliefs. For instance, in countries where religion is unified,
there could be bans on any material that the country finds outside the rules of their particular religion. In
other countries, bans could be placed on industries that are run largely by foreign operators. President
Obama took a strong first step today by promoting Internet freedom. The next step will be making sure
the US leads by example, and one area to start would be by lifting the ban on Internet gambling.
The president has laid down the gauntlet, and now it is time for him to follow his own lead.
No alt causes
Gelb, 10
(Prof-Business & Economic-UH, “Getting Digital Statecraft Right,” Foreign Affairs, 7/28,
http://www.foreignaffairs.com/articles/66502/betsy-gelb-and-emmanuel-yujuico/getting-digital-statecraftright)
All these cases share the same fallacy -- that U.S.-directed methods can spur development in other
nations. But U.S. policies seeking to extend freedom through technology can be successful -- if the United
States refrains from acting in ways that seem less than sincere, and if it adopts a gradual, rather than
transformative, approach. U.S. protests against censorship would seem more convincing if it were
not for its own policies restricting Internet freedom. Consider, for example, the United States'
questionable prohibition of cross-border trade in Internet gambling. In 2004, the World Trade
Organization ruled in favor of Antigua and Barbuda against the United States when the United States
banned online gambling services emanating from the twin-island nation. The United States appealed the
case and lost, but in the meantime, Antigua's online gambling industry was virtually destroyed. The United
States still has not yet satisfactorily resolved this ruling and should do so by conforming to it.
Collapses the global economy
McDowell, 12
(5/31, FCC Chair, Comm'r. McDowell's Congressional Testimony, http://www.fcc.gov/document/commrmcdowells-congressional-testimony-5-31-2012)
It is a pleasure and an honor to testify beside my friend, Ambassador Phil Verveer. First, please allow me to dispense quickly and
emphatically any doubts about the bipartisan resolve of the United States’ to resist efforts to expand the International
Telecommunication Union’s (“ITU”) authority over Internet matters. Some ITU officials have dismissed our concern over this issue
as mere “election year politics.” Nothing could be further from the truth as evidenced by Ambassador Verveer’s testimony today as
well as recent statements from the White House, Executive Branch agencies, Democratic and Republican Members of Congress
and my friend and colleague, FCC Chairman Julius Genachowski. We are unified on the substantive arguments and have always
been so. Second, it is important to define the challenge before us. The threats are real and not imagined,
although they admittedly sound like works of fiction at times. For many years now, scores of countries led
by China, Russia, Iran, Saudi Arabia, and many others, have pushed for, as then-Russian Prime Minister Vladimir
Putin said almost a year ago, “international control of the Internet” through the ITU.1 I have tried to find a more concise
way to express this issue, but I can’t seem to improve upon now-President Putin’s crystallization of the effort that has been afoot for
quite some time. More importantly, I think we should take President Putin very seriously. 1 Vladimir Putin, Prime Minister of the
Russian Federation, Working Day, GOV’T OF THE RUSSIAN FED’N, http://premier.gov.ru/eng/events/news/15601/ (June 15, 2011)
(last visited May 14, 2012). Six months separate us from the renegotiation of the 1988 treaty that led to insulating the Internet from
economic and technical regulation. What proponents of Internet freedom do or don’t do between now and then
will determine the fate of the Net, affect global economic growth and determine whether political liberty
can proliferate. During the treaty negotiations, the most lethal threat to Internet freedom may not come from a full
frontal assault, but through insidious and seemingly innocuous expansions of intergovernmental powers. This
subterranean effort is already under way. While influential ITU Member States have put forth proposals calling for overt legal
expansions of United Nations’ or ITU authority over the Net, ITU officials have publicly declared that the ITU does not intend to
regulate Internet governance while also saying that any regulations should be of the “light-touch” variety.2 But which is it? It is not
possible to insulate the Internet from new rules while also establishing a new “light touch” regulatory regime. Either a new legal
paradigm will emerge in December or it won’t. The choice is binary. Additionally, as a threshold matter, it is curious that ITU officials
have been opining on the outcome of the treaty negotiation. The ITU’s Member States determine the fate of any new rules, not ITU
leadership and staff. I remain hopeful that the diplomatic process will not be subverted in this regard. As a matter of process and
substance, patient and persistent incrementalism is the Net’s most dangerous enemy and it is the hallmark of many countries that
are pushing the proregulation agenda. Specifically, some ITU officials and Member States have been discussing an alleged
worldwide phone numbering “crisis.” It seems that the world may be running out of phone numbers, over which the ITU does have
some jurisdiction. 2 Speech by ITU Secretary-General Touré, The Challenges of Extending the Benefits of Mobile (May 1,
2012),http://www.itu.int/net/pressoffice/press_releases/index.aspx?lang=en (last visited May 29, 2012). 2 Today, many phone
numbers are used for voice over Internet protocol services such as Skype or Google Voice. To function properly, the software
supporting these services translate traditional phone numbers into IP addresses. The Russian Federation has proposed that the ITU
be given jurisdiction over IP addresses to remedy the phone number shortage.3 What is left unsaid, however, is that potential ITU
jurisdiction over IP addresses would enable it to regulate Internet services and devices with abandon. IP addresses are a
fundamental and essential component to the inner workings of the Net. Taking their administration away from the bottomup, nongovernmental, multi-stakeholder model and placing it into the hands of international bureaucrats would be a grave mistake. Other
efforts to expand the ITU’s reach into the Internet are seemingly small but are tectonic in scope. Take for example the Arab States’
submission from February that would change the rules’ definition of “telecommunications” to include “processing” or computer
functions.4 This change would essentially swallow the Internet’s functions with only a tiny edit to existing rules.5 When ITU
leadership claims that no Member States have proposed absorbing Internet governance into the ITU or other intergovernmental
entities, the Arab States’ submission demonstrates that nothing could be further from the truth. An infinite number of avenues exist
to 3 Further Directions for Revision of the ITRs, Russian Federation, CWG-WCIT12 Contribution 40, at 3 (2011),
http://www.itu.int/md/T09-CWG.WCIT12-C-0040/en (last visited May 29, 2012) (“To oblige ITU to allocate/distribute some part of
IPv6 addresses (as same way/principle as for telephone numbering, simultaneously existing of many operators/numbers distributors
inside unified numbers space for both fixed and mobile phone services) and determination of necessary requirements.”). 4 Proposed
Revisions, Arab States, CWG-WCIT12 Contribution 67, at 3 (2012), http://www.itu.int/md/T09CWG.WCIT12-C-0067/en (last visited
May 29, 2012). 5 And Iran argues that the current definition already includes the Internet. Contribution from Iran, The Islamic
Republic of Iran, CWG-WCIT12 Contribution 48, Attachment 2 (2011), http://www.itu.int/md/T09-CWG.WCIT12C-0048/en (last
visited May 29, 2012). 3 accomplish the same goal and it is camouflaged subterfuge that proponents of Internet freedom should
watch for most vigilantly. Other examples come from China. China would like to see the creation of a system whereby Internet users
are registered using their IP addresses. In fact, last year, China teamed up with Russia, Tajikistan and Uzbekistan to propose to the
UN General Assembly that it create an “International Code of Conduct for Information Security” to mandate “international norms and
rules standardizing the behavior of countries concerning information and cyberspace.”6 Does anyone here today believe that these
countries’ proposals would encourage the continued proliferation of an open and freedom-enhancing Internet? Or would such
constructs make it easier for authoritarian regimes to identify and silence political dissidents? These proposals may not technically
be part of the WCIT negotiations, but they give a sense of where some of the ITU’s Member States would like to go. Still other
proposals that have been made personally to me by foreign government officials include the creation of an international universal
service fund of sorts whereby foreign – usually state-owned – telecom companies would use international mandates to charge
certain Web destinations on a “per-click” basis to fund the build-out of broadband infrastructure across the globe. Google, iTunes,
Facebook and Netflix are mentioned most often as prime sources of funding. In short, the U.S. and like-minded proponents
of Internet freedom and prosperity across the globe should resist efforts to expand the powers of
intergovernmental bodies over the Internet 6 Letter dated 12 September 2011 from the Permanent Representatives of
China, the Russian Federation, Tajikistan, and Uzbekistan to the United Nations addressed to the Secretary-General, Item 93 of the
provisional agenda - Developments in the field of information and telecommunications in the context of international security, 66th
Session of the United Nations General Assembly, Annex (Sep. 14, 2011),
http://www.cs.brown.edu/courses/csci1800/sources/2012_UN_Russia_and_China_Code_o_Conduct.pdf (last visited May 29, 2012).
even in the smallest of ways. As my supplemental statement and analysis explains in more detail below, such a scenario
would be devastating to global economic activity, but it would hurt the developing world the most.
Thank you for the opportunity to appear before you today and I look forward to your questions. Thank you, Chairman Walden and
Ranking Member Eshoo, for holding this hearing. Its topic is among the most important public policy issues affecting global
commerce and political freedom: namely, whether the International Telecommunication Union (ITU), or any other intergovernmental
body, should be allowed to expand its jurisdiction into the operational and economic affairs of the Internet. As we head toward the
treaty negotiations at the World Conference on International Telecommunications (WCIT) in Dubai in December, I urge governments
around the world to avoid the temptation to tamper with the Internet. Since its privatization in the early 1990s, the Internet has
flourished across the world under the current deregulatory framework. In fact, the long-standing
international consensus has been to keep governments from regulating core functions of the Internet’s
ecosystem. Yet, some nations, such as China, Russia, India, Iran and Saudi Arabia, have been pushing to reverse
this course by giving the ITU or the United Nations itself, regulatory jurisdiction over Internet governance. The
ITU is a treaty-based organization under the auspices of the United Nations.1 Don’t take my word for it, however. As Russian Prime
Minister Vladimir Putin said almost one year ago, the goal of this well-organized and energetic effort is to establish “international
control over the Internet using the monitoring and supervisory capabilities of the [ITU].”2 Motivations of some ITU Member states
vary. Some of the arguments in support of such actions may stem from frustrations with the operations of Internet Corporation for
Assigned Names and Numbers (ICANN). Any concerns regarding ICANN, however, should not be used as a pretext to end the
multi-stakeholder model that has served all nations – especially the developing world – so well. Any reforms to ICANN should take
place through the bottom-up multi-stakeholder process and should not arise through the WCIT’s examination of the International
Telecommunication Regulations (ITR)s. Constructive reform of the ITRs may be needed. If so, the scope of any review should be
limited to traditional telecommunications services and not expanded to include information services or any form of Internet services.
Modification of the current multistakeholder Internet governance model may be necessary as well, but we should all work together to
ensure no intergovernmental regulatory overlays are placed into this sphere. Not only would nations surrender some of their national
sovereignty in such a pursuit, but they would suffocate their own economies as well, while politically paralyzing engineering and
business decisions within a global regulatory body. 1 History, IThttp://www.itu.int/en/about/Pages/history.aspx">U,
http://www.itu.int/en/about/Pages/history.aspx (last visited May 14, 2012). 2 Vladimir Putin, Prime Minister of the Russian
Federation, Working Day, GOV’T OF THE RUSSIAN FED’N, http://premier.gov.ru/eng/events/news/15601/ (June 15, 2011) (last
visited May 14, 2012). Every day headlines tell us about industrialized and developing nations alike that are awash in debt, facing
flat growth curves, or worse, shrinking GDPs. Not only must governments, including our own, tighten their fiscal
belts, but they must also spur economic expansion. An unfettered Internet offers the brightest ray of
hope for growth during this dark time of economic uncertainty, not more regulation. Indeed, we are
at a crossroads for the Internet’s future. One path holds great promise, while the other path is fraught with
peril. The promise, of course, lies with keeping what works, namely maintaining a freedom-enhancing and
open Internet while insulating it from legacy regulations. The peril lies with changes that would ultimately
sweep up Internet services into decades-old ITU paradigms. If successful, these efforts would merely
imprison the future in the regulatory dungeon of the past. The future of global growth and political
freedom lies with an unfettered Internet. Shortly after the Internet was privatized in 1995, a mere 16 million people
were online worldwide.3 As of early 2012, approximately 2.3 billion people were using the Net.4 Internet connectivity quickly
evolved from being a novelty in industrialized countries to becoming an essential tool for commerce – and
sometimes even basic survival – in all nations, but especially in the developing world. Such explosive
growth was helped, not hindered, by a deregulatory construct. Developing nations stand to gain the most
from the rapid pace of deployment and adoption of Internet technologies brought forth by an Internet free
from intergovernmental regulation. By way of illustration, a McKinsey report released in January examined the Net’s effect
on the developing world, or “aspiring countries.”5 In 30 specific aspiring countries studied, including Malaysia, Mexico, Morocco,
Nigeria, Turkey and Vietnam,6 Internet penetration has grown 25 percent per year for the past five years, compared to only five
percent per year in developed nations.7 Obviously, broadband penetration is lower in aspiring countries than in the developed world,
but that is quickly changing thanks to mobile Internet access technologies. Mobile subscriptions in developing countries have risen
from 53 percent of the global market in 2005 to 73 percent in 2010.8 In fact, Cisco estimates that the number of mobile-connected
devices will exceed the world’s population sometime this year.9 Increasingly, Internet users in these countries use only mobile
devices for their Internet access.10 This trend has resulted in developing countries growing their global share of Internet users from
33 percent in 2005, to 52 percent in 2010, with a projected 61 percent share by 2015.11 The 30 aspiring countries discussed earlier
are home to one billion Internet users, half of all global Internet users. The effect that rapidly growing Internet
connectivity is having on aspiring countries’ economies is tremendous. The Net is an economic growth
accelerator. It contributed an average 1.9 percent of GDP growth in aspiring countries for an estimated total of
$366 billion in 2010.13 In some developing economies, Internet connectivity has contributed up to 13 percent of GDP
growth over the past five years.14 In six aspiring countries alone, 1.9 million jobs were associated with the Internet.15 And in
other countries, the Internet creates 2.6 new jobs for each job it disrupts.16 I expect that we would all agree that these positive
trends must continue. The best path forward is the one that has served the global economy so well, that of
a
multi-stakeholder governed Internet. One potential outcome that could develop if pro-regulation nations
are successful in granting the ITU authority over Internet governance would be a partitioned Internet. In
particular, fault lines could be drawn between countries that will choose to continue to live under the current successful model and
those Member States who decide to opt out to place themselves under an intergovernmental regulatory regime. A balkanized
Internet would not promote global free trade or increase living standards. At a minimum, it would create
extreme uncertainty and raise costs for all users across the globe by rendering an engineering,
operational and financial morass. For instance, Harvard and the Massachusetts Institute of Technology (MIT) recently
announced placing many of their courses online for free – for anyone to use. The uncertainty and economic and
engineering chaos associated with a newly politicized intergovernmental legal regime would inevitably
drive up costs as cross border traffic and cloud computing become more complicated and vulnerable
to regulatory arbitrage. Such costs are always passed on to the end user consumers and may very well negate the ability of
content and application providers such as Harvard and MIT to offer first-rate educational content for free. Nations that value
freedom and prosperity should draw a line in the sand against new regulations while welcoming
reform that could include a non-regulatory role for the ITU. Venturing into the uncertainty of a new
regulatory quagmire will only undermine developing nations the most.
Accesses every impact
Genachowski 13
(Chair-FCC, 4/16, "The Plot to Block Internet Freedom",
http://www.foreignpolicy.com/articles/2013/04/16/plot_block_internet_freedom?page=full)
The Internet has created an extraordinary new democratic forum for people around the world to express
their opinions. It is revolutionizing global access to information: Today, more than 1 billion people
worldwide have access to the Internet, and at current growth rates, 5 billion people -- about 70 percent of
the world's population -- will be connected in five years. But this growth trajectory is not inevitable, and
threats are mounting to the global spread of an open and truly "worldwide" web. The expansion of the
open Internet must be allowed to continue: The mobile and social media revolutions are critical not only
for democratic institutions' ability to solve the collective problems of a shrinking world, but also to a
dynamic and innovative global economy that depends on financial transparency and the free flow of
information. The threats to the open Internet were on stark display at last December's World Conference
on International Telecommunications in Dubai, where the United States fought attempts by a number of
countries -- including Russia, China, and Saudi Arabia -- to give a U.N. organization, the International
Telecommunication Union (ITU), new regulatory authority over the Internet. Ultimately, over the objection
of the United States and many others, 89 countries voted to approve a treaty that could strengthen the
power of governments to control online content and deter broadband deployment. In Dubai, two deeply
worrisome trends came to a head. First, we see that the Arab Spring and similar events have awakened
nondemocratic governments to the danger that the Internet poses to their regimes. In Dubai, they pushed
for a treaty that would give the ITU's imprimatur to governments' blocking or favoring of online content
under the guise of preventing spam and increasing network security. Authoritarian countries' real goal is
to legitimize content regulation, opening the door for governments to block any content they do not like,
such as political speech. Second, the basic commercial model underlying the open Internet is also under
threat. In particular, some proposals, like the one made last year by major European network operators,
would change the ground rules for payments for transferring Internet content. One species of these
proposals is called "sender pays" or "sending party pays." Since the beginning of the Internet, content
creators -- individuals, news outlets, search engines, social media sites -- have been able to make their
content available to Internet users without paying a fee to Internet service providers. A sender-pays rule
would change that, empowering governments to require Internet content creators to pay a fee to connect
with an end user in that country. Sender pays may look merely like a commercial issue, a different way to
divide the pie. And proponents of sender pays and similar changes claim they would benefit Internet
deployment and Internet users. But the opposite is true: If a country imposed a payment requirement,
content creators would be less likely to serve that country. The loss of content would make the Internet
less attractive and would lessen demand for the deployment of Internet infrastructure in that country.
Repeat the process in a few more countries, and the growth of global connectivity -- as well as its
attendant benefits for democracy -- would slow dramatically. So too would the benefits accruing to the
global economy. Without continuing improvements in transparency and information sharing, the
innovation that springs from new commercial ideas and creative breakthroughs is sure to be severely
inhibited. To their credit, American Internet service providers have joined with the broader U.S.
technology industry, civil society, and others in opposing these changes. Together, we were able to win
the battle in Dubai over sender pays, but we have not yet won the war. Issues affecting global Internet
openness, broadband deployment, and free speech will return in upcoming international forums, including
an important meeting in Geneva in May, the World Telecommunication/ICT Policy Forum. The massive
investment in wired and wireless broadband infrastructure in the United States demonstrates that
preserving an open Internet is completely compatible with broadband deployment. According to a recent
UBS report, annual wireless capital investment in the United States increased 40 percent from 2009 to
2012, while investment in the rest of the world has barely inched upward. And according to the
Information Technology and Innovation Foundation, more fiber-optic cable was laid in the United States in
2011 and 2012 than in any year since 2000, and 15 percent more than in Europe. All Internet users lose
something when some countries are cut off from the World Wide Web. Each person who is unable to
connect to the Internet diminishes our own access to information. We become less able to understand the
world and formulate policies to respond to our shrinking planet. Conversely, we gain a richer
understanding of global events as more people connect around the world, and those societies nurturing
nascent democracy movements become more familiar with America's traditions of free speech and
pluralism. That's why we believe that the Internet should remain free of gatekeepers and that no entity -public or private -- should be able to pick and choose the information web users can receive. That is a
principle the United States adopted in the Federal Communications Commission's 2010 Open Internet
Order. And it's why we are deeply concerned about arguments by some in the United States that
broadband providers should be able to block, edit, or favor Internet traffic that travels over their networks,
or adopt economic models similar to international sender pays. We must preserve the Internet as the
most open and robust platform for the free exchange of information ever devised. Keeping the Internet
open is perhaps the most important free speech issue of our time.
Extinction
Auslin 09
(Michael, Resident Scholar – American Enterprise Institute, and Desmond Lachman – Resident Fellow –
American Enterprise Institute, “The Global Economy Unravels”, Forbes, 3-6,
http://www.aei.org/article/100187)
What do these trends mean in the short and medium term? The Great Depression showed how social and global chaos
followed hard on economic collapse. The mere fact that parliaments across the globe, from America to Japan, are unable
to make responsible, economically sound recovery plans suggests that they do not know what to do and are simply hoping for the
least disruption. Equally worrisome is the adoption of more statist economic programs around the globe, and the concurrent decline
of trust in free-market systems. The threat of instability is a pressing concern . China, until last year the world's fastest
growing economy, just reported that 20 million migrant laborers lost their jobs. Even in the flush times of recent years, China
faced upward of 70,000 labor uprisings a year. A sustained downturn poses grave and possibly immediate
threats to Chinese internal stability. The regime in Beijing may be faced with a choice of repressing its own people or
diverting their energies outward, leading to conflict with China's neighbors. Russia, an oil state completely dependent on energy
sales, has had to put down riots in its Far East as well as in downtown Moscow. Vladimir Putin's rule has been
predicated on squeezing civil liberties while providing economic largesse. If that devil's bargain falls apart, then wide-scale
repression inside Russia, along with a continuing threatening posture toward Russia's neighbors, is likely.
Even apparently stable societies face increasing risk and the threat of internal or possibly external conflict. As Japan's exports have
plummeted by nearly 50%, one-third of the country's prefectures have passed emergency economic stabilization plans. Hundreds of
thousands of temporary employees hired during the first part of this decade are being laid off. Spain's unemployment rate is
expected to climb to nearly 20% by the end of 2010; Spanish unions are already protesting the lack of jobs, and the specter of
violence, as occurred in the 1980s, is haunting the country. Meanwhile, in Greece, workers have already taken to the streets.
Europe as a whole will face dangerously increasing tensions between native citizens and immigrants, largely from
poorer Muslim nations, who have increased the labor pool in the past several decades. Spain has absorbed five million immigrants
since 1999, while nearly 9% of Germany's residents have foreign citizenship, including almost 2 million Turks. The xenophobic labor
strikes in the U.K. do not bode well for the rest of Europe. A prolonged global downturn, let alone a collapse, would
dramatically raise tensions inside these countries. Couple that with possible protectionist legislation in the United
States, unresolved ethnic and territorial disputes in all regions of the globe and a loss of confidence that world
leaders actually know what they are doing. The result may be a series of small explosions that coalesce into a big
bang.
Best studies prove growth solves conflict
Jedidiah Royal 10, Director of Cooperative Threat Reduction at the U.S. Department of Defense,
“Economic Integration, Economic Signalling And The Problem Of Economic Crises”, in Economics of War
and Peace: Economic, Legal and Political Perspectives, ed. Goldsmith and Brauer, p. 213-215
Second, on a dyadic level. Copeland's (1996. 2000) theory of trade expectations suggests that 'future
expectation of trade' is a significant variable in understanding economic conditions and security behaviour of states.
He argues that interdependent states are likely to gain pacific benefits from trade so long as they have an
optimistic view of future trade relations. However, if the expectations of future trade decline, particularly for
difficult to replace items such as energy resources, the likelihood for conflict increases, as states will be
inclined to use force to gain access to those resources. Crises could potentially be the trigger for decreased trade
expectations either on its own or because it triggers protectionist moves by interdependent states.4 Third, others
have considered the link between economic decline and external armed conflict at a national level.
Blomberg and Hess (2002) find a strong correlation between internal conflict and external conflict, particularly
during periods of economic downturn. They write, The linkages between internal and external conflict and
prosperity are strong and mutually reinforcing. Economic conflict tends to spawn internal conflict, which in turn
returns the favour. Moreover, the presence of a recession lends to amplify the extent to which international and
external conflicts self-rein force each other. (Blombcrj! & Hess. 2002. p. 89) Economic decline has also been
linked with an increase in the likelihood of terrorism (Blomberg. Hess. & Weerapana, 2004). which has the
capacity to spill across borders and lead to external tensions. Furthermore, crises generally reduce the popularity of
a sitting government. "Diversionary theory" suggests that, when facing unpopularity arising from economic decline,
sitting governments have increased incentives to fabricate external military conflicts to create a 'rally around the
flag' effect. Wang (1996), DeRouen (1995), and Blombcrg. Mess, and Thacker (2006) find supporting
evidence showing that economic decline and use of force are at least indirectly correlated. Gelpi (1997), Miller
(1999). and Kisangani and Pickering (2009) suggest that the tendency towards diversionary tactics arr greater
for democratic states than autocratic states, due to the fact that democratic leaders are generally more susceptible to
being removed from office due to lack of domestic support. DeRouen (2000) has provided evidence showing
that periods of weak economic performance in the United States, and thus weak Presidential popularity, are
statistically linked to an increase in the use of force.
---IF FEELING SPEEDY
Ban fails – gambling liberalizations is key to setting international regulatory
norms – prohibition destroys ecommerce development
Anupam Chander, Visiting Professor, University of Chicago Law School, ’09
(“Trade 2.0,” John M. Olin Law & Economics Working Paper No. 465 (2d Series) The Law School, The
University of Chicago)
1. Technological Neutrality
Net-work providers share an Achilles’s Heel : because their services are not delivered face-to-face,
the authentication clues available through in-person presentation are unavailable. Their remote nature
thus leads to concern about fraud by suppliers (either in representing their credentials or in failing to
perform the service as promised) or potential anonymity among consumers (leading to concerns about
underage or otherwise inappropriate consumption). Can a state simply assert these concerns to protect
its local suppliers, who after all can provide services face-to-face with greater ease than foreign
suppliers? If so, this would mark the death knell of cross-border net-work. At first glance, United
States—Gambling poses exactly this roadblock to network. After all, the Appellate Body held that
the risks particular to electronically mediated services might justify ignoring a country’s free trade
commitments (so long, that is, as the country bars all electronically mediated services, not just those
provided by foreigners).114 The WTO upheld a state’s banning of online suppliers (both domestic and
foreign) because of the risks of underage and pathological gambling, fraud, and money laundering. But
even in largely dismissing Antiguan claims for access to the U.S. market, the decision laid the
groundwork for a substantial erosion of barriers to net-work. The chapeau to GATS Article XIV permits
a public order-based violation of trade commitments only if it is not in fact a “disguised restriction” on trade
in services.115 A country may not maintain an infringing trade barrier if a “reasonably available
alternative” exists—one that “preserve[s] for the responding Member its right to achieve its desired level
of protection with respect to” its public order or public morality objectives.116 But Antigua did not show
that Antiguan gambling operators could alleviate the American concerns through technical or
other means. Rather, Antigua simply relied on America’s stubborn refusal to discuss alternative
means to achieving its regulatory goals. Antigua might have instead demonstrated practical
alternatives to the American prohibition to achieve the desired regulatory goals. Antigua could
have shown that it had redoubled its financial crime efforts, strictly enforcing international antimoney laundering principles, such as the international standards offered by the Financial Action
Task Force.117 Antigua could have required independent auditors from large international firms to audit
compliance by Antiguan gambling operations, helping assure users that the computer systems and
financial payouts were sound.118 Antigua could have shown that the steps it requires to add money to a
gambling account (such as bank wire transfers) would prove nearly insurmountable for youth. And it could
have required that gambling providers make available services for gambling addicts, including
mechanisms for allowing people to limit losses or to lock themselves out.119 Perhaps the strongest
rebuttal to the American argument in United States— Gambling comes from the Supreme Court of the
United States. The dormant Commerce Clause creates a free trade area within the United States. In the
recent case of Granholm v. Heald, the Supreme Court considered a dormant Commerce Clause-based
challenge to Michigan and New York regulations barring out of state wineries from selling directly to
Michigan and New York residents.120 While Granholm involved trade in goods, not trade in net-work
services, both involve trade mediated largely by the Internet. In Granholm, as in United States—
Gambling, the defenders of trading restraints argued that they were necessary to preserve local values.
New York insisted that its rules were “essential” to promoting no less a value than “temperance,” as well
as the more mundane goal of “collecting taxes.”121 Requiring alcohol to pass through state sanctioned
distribution channels, New York argued, allows it “to effectively monitor alcohol distribution and enforce its
liquor laws.”122 The Supreme Court was not persuaded. New York and Michigan “provide[d] little
evidence for their claim that purchasing wine over the Internet by minors is a problem.”123 The states
could have “minimize[d] any risk with less restrictive steps . . . [such as] requir[ing] an adult signature on
delivery.”124 The Court held that New York’s “regulatory objectives [could] be achieved without
discriminating against interstate commerce, e.g., by requiring a permit as a condition of direct
shipping.”125 The states’ “other rationales, such as facilitating orderly market conditions, protecting public
health and safety, and ensuring regulatory accountability . . . [could] also be achieved through the
alternative of an evenhanded licensing requirement.”126 The fundamental question, the Court asked, is
whether a State’s discriminatory regime “advance[d] a legitimate local purpose that cannot be adequately
served by reasonable nondiscriminatory alternatives.” 127 The Supreme Court’s “reasonable
nondiscriminatory alternatives” formulation comes strikingly close to the WTO’s “reasonably
available alternative”;128 both give the tribunal the ability to strike regulations that unnecessarily restrain
competition from outside producers. The similarity in the Supreme Court and WTO formulations is
not a coincidence: though poles apart in their history and status, both institutions promote
commerce among jurisdictions while protecting the power of those jurisdictions to regulate
themselves. Of course, even the most robust alternative for achieving the regulatory objectives may not
prevent all potential wrongdoing . But neither would a flat prohibition of online gambling accomplish
perfectly the regulatory goals. After all, underage persons can sneak their way into casinos; gambling
addiction predated the Internet; cash in casinos can be more anonymous than an offshore bank account,
which requires extensive security measures; and organized crime is not entirely unknown in American
gambling history. The question is whether the proposed alternative achieves the “desired level of
protection,”129 not whether it promises one hundred percent compliance. In the U.S.— Shrimp dispute,
the WTO Appellate Body held that an importing nation’s insistence on a “single, rigid, and
unbending requirement” would constitute “ arbitrary discrimination” within the meaning of the
GATT Article XX chapeau.130 Contrast District Judge Marilyn Hall Patel’s standard for Napster, where
she required the online service to remove one hundred percent of copyright infringing material, a standard
that Napster rightly insisted was impossible to satisfy and that was not met even by offline distribution
systems.131 The appropriate standard should be one where the online service should be required to
achieve the regulatory goals at rates roughly equivalent to those achieved by offline versions of the
service . This is a principle of technological neutrality. Such steps would likely raise the costs of
doing business electronically as well as the costs for governments of enforcing compliance. Quite often,
perhaps, the costs today may be so high as to make net-work economically infeasible. Perhaps
governments might be willing to reduce compliance rates in some cases in view of the liberating and
economizing possibilities of the electronic medium. GATS does allow countries to prefer certain modes of
delivery of a foreign service over others. The principle of technological neutrality that I assay here
would only come into play when a country has committed to liberalizing a particular service with
respect to mode 1, cross-border trade. In such a case, to demand higher standards for electronically
provided services than services delivered in person is to engage in clear discrimination. Such
discrimination would likely violate the GATS national treatment commitment132 because foreign
suppliers would be at a natural disadvantage in supplying face-to-face services since they are less likely
to have representatives on the ground. Where the discrimination against the online service acts as
an effective barrier to online supply, it could, as in United States—Gambling , violate the GATS
market access requirement. This is an especially grave threat to net-work . After all, due to the nonface-toface nature of the medium, it is easy to challenge net-work as potentially promoting fraud. But to
insist on the complete absence of fraud on Internet-mediated services would be to conjure a preexisting
world of face-to-face transactions devoid of fraud. Fraud and other regulatory leakages are a persistent
fact of commerce and are not unique to Internet commerce. Trade law should not allow countries to
insist on a regulatory nirvana in cyberspace unmatched in real space. Such discrimination against
the electronic medium will likely disadvantage foreign suppliers, who are less likely to have the resources
to deploy service providers on the ground.