Friday, December 15, 2017

No Caribbean appetite for a rum fight 

Ronald Sanders logo29

Mark Fraser

 It is cause for alarm that Barbados’ Ambassador to the United States, John Beale, has publicly stated that Caricom is “inactive” and needs to take a position on the issue of Caribbean rums being wiped out of the US market.  

The cause for alarm is that Caricom rum producers and governments have much to lose if their sales in the US continue to decline because of unfair competition from rum-producing companies in the US Virgin Islands (USVI) and Puerto Rico.  

These companies, the giant Diageo and Cruzan Rum, are given huge subsidies by the governments of the USVI and Puerto Rico. 

The two US territories use US Federal Government tax refunds, called “cover over”, now in the sum of US$580 million annually to subsidise the operations of their rum producers.

But, there appears to be no enthusiasm for robust resistance by Caricom governments collectively.

Ambassador Beale revealed that Barbados’ rum exports to the US have dropped by 21 per cent and he warned that the industry is in danger of being “wiped out”. 

This latest statement from the Barbados Ambassador should be no surprise to anyone. 

Throughout 2012, I and my friend and fellow columnist, David Jessop, wrote repeatedly about the grave dangers confronting the Caricom rum industry by the subsidies to large rum producers in the USVI and Puerto Rico and we urged robust action by Caricom governments collectively.

Amongst the vital considerations we pointed out were the following: Caricom countries and the Dominican Republic (DR) —collectively known as CARIFORUM—stand to lose US$700 million in foreign exchange annually, the jobs of 15,000 workers directly employed in the rum industry and another 60,000 jobs that benefit from it. 

Governments will lose over US$250 million in annual tax revenues. I had also emphasised that the CARIFORUM country that would be the biggest loser is Barbados whose exports to the US market in 2010 were worth US$17.2 m—twice as much as its exports to the European Union market. This latter observation has now come to pass as Ambassador Beale has confirmed.

On December 18, 2012, it was encouraging that Barbados Prime Minister Freundel Stuart stated in Parliament that, “We cannot rule out the prospect of this matter reaching the WTO” although he added “but that is not the first resort expedience”.  

Clearly, while the Prime Minister had in mind challenging the US government in the World Trade Organisation (WTO) over the rum subsidies, he was inclined to pursue the route of consultations with the US government—most likely the US Trade Representative’s office. 

Much valuable time has been lost and the rums of CARIFORUM countries are being displaced in the US market. 

Meanwhile, Diageo has been particularly aggressive in its marketing in the US mainland, as it has been forthright in intimidating both rum producers and individual Caricom governments.  

For instance, in August 2012 Stuart Kirby, spokesman for Diageo Latin America and the Caribbean—a British multinational company which also buys bulk rum from Caricom-producing companies—said: “These valuable relationships could be disrupted by a Caricom challenge at the WTO which would force Diageo to re-evaluate its activities in the Caribbean.”

Caricom governments have clearly been divided on whether to take the matter to the WTO for arbitration since it would involve a complaint against the US government—not the governments of the USVI or Puerto Rico that have no international standing on their own.   

The cost of doing so would be a deterring factor for any one government. Other governments to whom rum sales in the US market is negligible probably see no gain in it for themselves. Consequently, there has been no appetite by Caricom governments to act jointly in seeking a ruling by the WTO.  Yet, that was the response that was needed.

Ambassador Beale, like the Barbados Minister for International Business, Donville Innis, in bemoaning the absence of strong action in defence of their rights by Caricom countries, called on the private sector to join governments to fight what is clearly an injustice.  

Regrettably, however, it would seem that by virtue of uncertainty, lack of cohesion and delay, the opportunity for such a fight may have passed to the detriment of rums produced in Caricom and the DR.


Ronald Sanders is a 

business executive and 

former Caribbean diplomat