Piracy as trade retaliation

The U.S. recently lost a WTO suit brought by Antigua. Basically the U.S. had outlawed overseas internet gambling, but allowed certain types of domestic gambling sites. The WTO sided with Antigua and told the U.S. it had to change its law. Today is the deadline for the U.S. to make that change and it doesn’t seem like it will. For one thing, the U.S. has little incentive. The normal course in this situation is that Antigua would be allowed to place trade sanctions on U.S. imports. But for a country with a population of 70,000, this would hurt them more than it would hurt the U.S. So, the Antiguans are looking for other options. According to the Boston Globe,

Antigua is considering retaliatory moves that could enable the tiny nation to punch above its weight. … the country may refuse to enforce American patents and trademarks. This would make it possible for Antiguan-based companies to produce knock-offs of American intellectual property, like video and music recordings or computer software. Such a tactic would get the attention of major US firms like Microsoft Corp. and entertainment titan Time Warner Inc. It would also put tiny Antigua’s trade war against the United States on front pages around the world.

There’s also an NPR story on the Antiguan affair here. Easier than actually producing physical knock-offs, they could allow online businesses a la Napster, My.MP3.com, or AllOfMP3.com to go up within their borders. I wonder how far this will go. If they just want to get attention and put pressure on the U.S., or if they’ll go further. Also, what will the WTO make of this? Under the Dispute Settlement Understanding, sanctions aren’t the express remedy. The treaty states that if a settlement can’t be reached by the parties, the plaintiff can seek the WTO’s OK “to suspend the application to the Member concerned of concessions or other obligations under the covered agreements.” The TRIPS Accord would be a candidate for suspension. Although it looks like the WTO Dispute Resolution Body has previously demurred on the topic, some have made the case that TRIPS can “serve as an enforcement device for developing countries in the WTO.”

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