Trade and Morality: The WTO Public Morals Exception after Gambling

Abstract

Despite a broad commitment to the liberalization of trade in goods and services, Member States of the World Trade Organization (WTO) retain legal authority to impose trade-restrictive measures "necessary to protect public morals." As a matter of first impression under WTO law, in April 2005 the WTO Appellate Body interpreted the term "public morals" as it is found in the General Agreement on Trade in Services (GATS). The Appellate Body held that certain U.S. laws prohibiting the cross-border provision of Internet gambling services, alleged by the United States to be necessary to protect U.S. public morals, were inconsistent with U.S. obligations under GATS. This paper argues that the test adopted by the Appellate Body to determine whether a given trade-restrictive measure is "necessary to protect public morals" improperly impinges on the autonomy of WTO Member States. The paper proposes an alternative doctrinal framework which would better protect Member State autonomy while guarding against potential protectionist abuses and trade-regulatory inefficiencies. The increasing likelihood that trade-morality conflicts will arise in a heterogeneous WTO, the extensive employment of public morals clauses in trade practice worldwide, and the potential relevance of the public morals clause to the integration of international economic law and human rights suggest the growing importance of this emerging area of international economic law.

Keywords: trade, morality, gambling, GATT, GATS

JEL Classification: F10, F13, K33