David and Goliath World Trade Organization Case Study
Jay Cohen and two friends established an online gaming site on the islands of Antigua and Barbuda; they named the organization World Sports Exchange (WSE). Mr. Cohen was prosecuted by the U. S. government; his conviction resulted in a battle between the U. S. and the two small Caribbean islands of Barbuda and Antigua. The epic battle of David and Goliath was mediated by the World Trade Organization (WTO) and raised a lot of interesting questions about international trade and internet gaming (Steiner, Steiner, 2009).
The following case study analysis will describe the central issue of the case and the relevant facts, as well as the external operating environments that WSE had to contend with. Furthermore the paper will provide possible solutions for the matter in the short and long term. Central Issues and Relevant Facts The primary issue seems to be that WSE was profiting from U. S. consumers and the U. S. government was not receiving any benefit. Sports organizations were upset and the country’s “social morality” was being attacked, or at least that was the opinion of the supporters of the Unlawful Internet Gambling Enforcement Act (EIGEA) of 2006.
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The bottom-line is that Mr. Cohen was not breaking any laws within the country that his business operated in. The U. S. clearly overstepped its bounds and did not conform to the General Agreement on Trade in Services (GATS) that all WTO organizations ratified in 1995 (Steiner, Steiner, 2009). The United States’ stand on gambling is hypocritical, many regions within the nation allow gambling, and the nation should not restrict gambling transactions with countries that it actively trades with, specifically members of the WTO.
In the case between Antigua, Barbuda, and the United States the WTO ruled in the favor of the smaller Caribbean nations, but the U. S. refused to concede its position, which seems to be a violation of its commitment to the WTO. In regards to online gaming, horse racing is a legal sporting event where betting is allowed to take place online and across state lines. That fact alone makes the U. S. government’s argument of morality null and void. There is no difference between gambling on a horse race and betting on a sporting event.
Legislation that attempts to control individual choice is an infringement on civil liberties and has not proven successful in the past, particularly with prohibition on gambling and alcohol. Mr. Cohen lost a significant amount of his life because he was convicted on a ridiculous charge. Where is the morality in that? Gambling continues to gain in popularity and many states are embracing the industry in order to boost tourism, increase revenue, and create jobs. This trend will probably continue as people begin to realize that the government should not decide whether or not a person can gamble.
This is a prime example of too much government; the country has more pressing issues to deal with and should focus on problems that truly affect the American people. Technological Environment Technology is a huge factor in this case because all WSE’s transactions where conducted online, telephonic, or via wire transfer. The online forum is specifically the issue that the U. S. government had with WSE’s profits generated from U. S. consumers. The country’s position was that Mr. Cohen was in violation of the Wire Transfer Act of 1961, a law that is clearly outdated because the internet was not invented at the time.
WSE should have considered that America may have an issue with the format in which it conducted its business and potentially could have avoided the legal problem that ensued. Governmental Environment The case had a high level of government involvement. The United States held the position that online gambling had a significant impact on the moral fiber of the country, particularly with the younger generation. This is a big issue for WSE because most of the companies’ customers live in the United States, so naturally the U. S. believed it had to intervene. WSE did not consider the U. S. osition because its offices where not located on U. S. soil. Another government factor is the trade agreements made between the members of the WTO. The WTO’s purpose is to assist with such disputes but the process does not work when parties refuse to comply. When operating in the world market a company needs to understand fully the potential risk that lies in foreign markets, particularly with powerful nations like the United States. Cultural Environment The main cultural issues in this case stem from the morale view on gambling and the role that that a sovereign nation plays in regulating gaming activities.
Cultural view points between the Caribbean countries and the U. S differed significantly. In addition the U. S. has created a culture that provides its people with a sense of entitlement and the country often polices the rest of the world, but in this situation the nation showed that it believed that certain rules do not apply for a world super power. In a sense some government leaders really press “Christian Values” on the general populous through various forms of legislation. Conclusion, Long Term and Short Term Recommendations
In conclusion the U. S. needs to stay true to the agreement it made as part of the WTO; the country should not be allowed to change the rules as it sees fit. The U. S should compensate Antigua and Barbuda for the countries loss in GDP, related to this case and Mr. Cohen should be compensated for the time that was taken from him. The U. S. needs to be more consistent with its laws, either gambling is legal or it is not. The trend seems to be that the American people are less opposed to gambling and many states are beginning to support the idea.
Globalization of the business world is dictating that trade relations need to be favorable and this incident reflects poorly on the U. S. , especially since the country is considered to be a global leader and an example of a free market economy. In the long run the United States efforts in regulating internet gambling are futile, banks will have a difficult time monitoring transactions that are considered illegal under UIGEA. Plus there is no way for the Justice Department to control agencies outside of the U. S. , the internet is the World Wide Web and the U. S. has little control outside of its borders.