Last Updated on Thursday, 21 April 2016, 12:22 by Denis Chabrol
Caribbean rum producing nations have so far failed to take the United States (US) to the World Trade Organisation (WTO) over its subsidies to Puerto Rican and United States Virgin Islands rum producing companies that end up unfairly competing against their counterparts in Caricom.
A well-respected trade expert told Demerara Waves Online News that all the studies have been done by West Indies Rum and Spirits Association (WIRSPA) and Caricom, but the cost of legal action at the WTO’s Trade Dispute Settlement body would be enormous. With that much already stated by Guyana’s President, David Granger, the only option appears to be diplomatic pressure. “Litigation is likely to be extremely expensive and exhausting. The Caribbean Community must use its diplomatic strength to help to resolve this problem that is affecting the health of our economies and the wealth of our countries,” he said at the recent launch of the Demerara Distillers Limited (DDL) 50-year old rum in honour of Guyana’s 50th Independence anniversary.
However, Demerara Waves Online News was told that the US-Caricom Rum issue is not on the agendas of the Caricom ministerial Council for Trade and Economic Development (COTED) being held in Guyana from April 21 to 22, 2016 in Guyana or the US-Caribbean Trade and Investment Framework Meeting slated for mid-May.
Charge D’Affaires of the United States Embassy in Guyana, Bryan Hunt said the issue requires a “great deal of discussion” between the US and Caricom.
At the centre of the dispute is the fact that the US provides a rebate of excise tax on all rum imports to Puerto Rico and the US Virgin Islands which is then passed on to major rum producers like Diageo and Cruzan. The original plan was for only a percentage to be transferred to rum producers on those US territories while the remainder would have been spent on the overall development of those islands but now huge chunks are being transferred.
US law provides for Puerto Rico and the US Virgin Islands special excise rebates on rum, based on production levels. Puerto Rico – where both Diageo and Bacardi make rum – gets as much as $400 million, while the US Virgin Islands collects about $80 million. Governments, in turn, use some of those monies to assist rum producers.
However, Caricom and WIRSPA analysts have said that the subsidy has resulted in Diageo and Cruzan being able to lower their costs of production significantly and unfairly compete against Caricom rum producers like Barbados, Jamaica and Guyana. The President of Guyana recently reiterated Caricom’s concern about ongoing market distortions of the rum-market by the US. The allowance of a tax rebate, estimated to be valued in millions of dollars to producers in the US Virgin Islands and Puerto Rico, distorts the market. The rebate acts as a subsidy to rum producers in those territories and affords them an advantage over other Caribbean rums in highly competitive international markets,” Granger has said.
Noting that the Caricom’s Council for Trade and Economic Development (COTED) has protested against such a discriminatory measure that is inimical to the sale of Caribbean rums in the US market and threaten the long-term viability of the region’s industry, Granger said the Caribbean would lose hundreds of millions of dollars and thousands of jobs unless there is fair trade in the rum industry.