David and Goliath World Trade Organization Case Study

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David and Goliath World Trade Organization Case Study
Assignment 4-3

Prepared for
Prof. Stephen Millett
MBA 711, H4FF
Fall 2010

Prepared by
Gary Cooper

December 2, 2010

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. 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...
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