My days of toasting the New Year with a glass of smooth belly-warming Barbados rum are under threat but that is inconsequential. The real issue is that the rum industries of Caribbean Community (CARICOM) countries are hanging on the region’s ability to get the United States to support fair trade.
Given the US’ recent behaviour to the region, I am fearful. Who wouldn’t be when a big bully is carrying the whip? I shudder.
The United States gives its territories, the United States Virgin Islands (USVI) and Puerto Rico, a tax rebate which according to a 2010 report by the Congressional Research Service provided Puerto Rico with US$371 million and USVI with almost US$100 million in 2008. The worrisome issue for the Caribbean is that this money helps finance companies in the USVI and Puerto Rico that produce and promote rum for the US market and compete with Caricom rum producers globally.
In other words, they get a subsidy. We are talking about big brands like Bacardi Limited in Puerto Rico and the USVI’s Cruzan Rum, which is owned by United States spirits owners such as Jim Beam and Maker’s Mark.
The subsidy has the potential of luring other rum producers to those territories, following the example of London-based Diageo PLC. That company is expected to start full production of the Captain Morgan brand on St. Croix this year “in exchange for a chunk of the excise-tax revenue estimated at US$2.7 billion” under a 30 year deal.
In fact, Diageo is getting “a new plant built at taxpayer expense, exemption from all property and gross receipt taxes for the length of the deal, a 90 per cent reduction in corporate taxes, plus marketing support and production”. The New York Times described these incentives as “so rich they are doubled the cost of actually producing the rum.”
So technically, you can say Diageo will be producing rum free of cost and with a bonus to the company. This is what Caricom producers will be competing with on the global market.
“Our … distilleries need to export rum in order to survive. But bigger subsidies in the U.S. islands means we don’t get a level playing field for our exports, and it’s going to affect both small and large producers ….” That is what Anthony Bento, managing director of the 80-year-old Antigua company that makes English Harbour Rum told the Associated Press.
From a CARICOM perspective, it is a lot of unfair money being pumped into these US territories’ rum industries; money that represents a subsidy; one actionable under the World Trade Organisation (WTO) rules. It is not what trade liberalisation, in name or in spirit.
We have to fight this bad behaviour by the US, but we are severely hamstrung. Note that as Caribbean governments were using diplomatic channels to effect a settlement, the United States’ fiscal-cliff bill, passed on New Year’s Day extended the offending tax break by two years.
Not surprising! Diageo spent US$2.25 million last year on lobby and has engaged the services of former Senators John Breaux and Trent Lott to push its case on Capitol Hill. These large corporations have the fire power to get themselves in the right positions.
It looks as if the Caricom governments will have to go the WTO route. Accessing the WTO dispute mechanism costs money though some help is provided for us, small fishes. But even if we win, the United States may simply ignore us or at least make it impossible for us to get a speedy settlement. Our rum industry could die in the meantime.
My views are based on how hegemonic US dealt with Antigua after the WTO 2004 and 2005 rulings in favour of that small country in an on-line gambling case against the US. Reading what Antigua and Barbuda’s High Commissioner to London, Carl Roberts said eight years later (December 2012) to the WTO Dispute Settlement Body offers nothing but despair. He said:
“Over the years since our last WTO proceeding in this matter, our government has not been sitting idly by. Nor have we been imposing unrealistic or unbending demands upon the United States. In point of fact, Antigua and Barbuda has been working hard to achieve a negotiated solution to this case.”
“We have tabled proposal after proposal to the US government, and attended session after session, in pretty much every case involving our delegation travelling to Washington, D.C., in hopes of finding some common ground.
“But to date, the United States has not presented one compromise offer of their own, and in particular the USTR (United States Trade Representative) has made, to our belief, no sincere effort to develop and prosecute a comprehensive solution that would end our dispute.”
Therefore, from where I sit in the Caribbean, it looks as if the US wants to run us off the economic map. It is not only rum in the mix; I think about the bananas and sugar, industries the Caribbean once had. Economists call us price takers. In effect, on a world scale we produced such small quantities that we had no effect on price. It we left the market no one, but ourselves, would’ve noticed.
In the 1990s, the US responding to the cries of their companies such as Chaquita Brands International, complained to the WTO about the banana regime operated by the European Union. The WTO upheld the US case and small insignificant Caricom producers were among those adversely affected. Our countries, struggling under dis-economies of scale could not produce at a price competitive with large countries given their wide expanse of fields and large multinational corporations. The banana and sugar industries in our countries heard the death knell. Thousands were thrown out of work and into poverty.
Some Caricom governments hoped that their off-shore financial sector would shore up their ailing economies; but that attempt at diversification was squeezed by the United States and other large countries citing tax havens to implement international rules and regulations that stifle the growth of such centres.
Even marijuana farming and exportation in the Caribbean is locked off by the United States. On moral reasons, I agree with that action, but what can I think when I see states within the US legalizing the drug as their country try to stamp out its growth in the Caribbean.
Are our small countries to produce only hungry beggars for that is what will happen if the US stamp us down at every turn? That will be left for us?
The International Monetary Fund (IMF)? The IMF to dictate our lives in exchange for a few dollars worth of loans?
I know the United States is looking out for its capitalists’ interests but why not let the Caribbean do its fishing instead of grudgingly dropping us a fish? If we are price takers, can we at least be left with something to take that price? Is the position from which big countries operates one of unadulterated greed? I once believe not but today I am unsure!
Level the playing field in the rum industry and give our industry a chance!
Updated: STATISTICS found on the Trinidad Guardian site:
Rum is Caricom’s biggest agro export. According to data from the US International Trade Commission (USITC), the Caribbean bloc’s share as a supplier of rum to the US market has fallen in recent years. In 2000, it accounted for around 70 per cent of the total, 50 per cent in 2008, and 42.3 per cent in 2011, equivalent to US$38.7 million. Barbados and Jamaica are responsible for most of the deliveries (two thirds), followed by Guyana and Trinidad and Tobago. In 2011, PR recorded US sales of US$148 billion, four times more than Caricom.
- Caricom confronts US on unfair rum trade (kaieteurnewsonline.com)
- Rum, rivalry, resistance (trinidadexpress.com)
- “Serious concerns” regarding competitiveness of Caribbean rum – CARICOM (caribbean360.com)
- Rum, Rivalry, Resistance (kaieteurnewsonline.com)