A Caribbean Headache for Obama's New Trade Rep

Photograph by Tan Yilmaz/Getty Images

Michael Froman, President Obama’s pick to be the chief trade negotiator for the U.S., has plenty of negotiating work ahead of him. If confirmed as U.S. Trade Representative, the former classmate of Obama’s at Harvard Law will need to address trade disputes with China and India while also hammering out free-trade deals with Asian countries (the proposed Trans-Pacific Partnership) as well as the European Union. Just a day after Obama named him for the USTR job, Froman was with the president in Mexico to help boost economic ties south of the border.

With so many challenges ahead, you can forgive Froman if fixing a dispute with the tiny country of Antigua and Barbuda doesn’t rank high on his to-do list. But unless he does find some bandwidth for the Caribbean nation, U.S. software companies, drug makers, and Hollywood studios could face significant headaches. That’s because Antigua, which has been waging a decade-long fight over American attempts to shut down the island’s online gambling industry, is threatening to allow people to ignore protection of intellectual-property rights for trademarks and copyrights.

Antigua started online gambling in the mid-1990s and enjoyed some early success before a crackdown from the U.S. Internet betting at its peak generated $3.4 billion a year for the island. By the early 2000s, though, the American government started to target the online gambling business and the money soon dried up for Antigua. The island last year had GDP of just $1.2 billion.

Antigua has taken its case to the World Trade Organization, which has ruled in the island’s favor and given the country’s government permission to retaliate against the U.S. The Caribbean nation can get $21 million a year by selling Made-in-America intellectual property—without having to pay the companies that own that IP. While $21 million might not seem like much, Antigua could potentially cause a lot of mischief by selling products for as little as a penny.

The Antigua government hasn’t done that yet, but it wants the Obama administration to be on the alert.

“We would like to echo President Obama’s hope that Froman will ‘level the playing field’ for all in the international trading system,” Antigua’s Finance Minister Harold Lovell said in an e-mailed statement to Bloomberg Businessweek. “An essential first step that should be taken is to reverse the decade-long violation of international law with respect to Antigua and cross-border gaming. For over ten years, the U.S. has consistently ignored rulings by the World Trade Organization, which has done substantial damage to the Antiguan economy. Antigua looks forward to working with Mr. Froman to restore America’s credibility with its fellow WTO members.”

With U.S. companies concerned about rampant abuse of American IP in China and other developing countries, a country with a WTO-approved policy of flouting copyrights and trademarks could set a worrisome precedent. For their part, Antigua’s leaders say comparisons to counterfeiters and pirates are unfair. “It’s not piracy if you have the right to do it,” Mark Mendel, a lawyer for Antigua’s government, told the Associated Press in January.

    Before it's here, it's on the Bloomberg Terminal.