As Caribbean nations raise their collective voices in protest against huge subsidies the U.S. Virgin Islands and now Puerto Rico are providing to major rum producers on their soil, Washington is remaining silent, almost indifferent to the concerns being expressed across the region, some diplomats say.
Two months after 14 Caribbean ambassadors in Washington wrote to Ron Kirk, the U.S. Special Trade Representative, protesting against the hefty rum subsidies which cover 100 per cent of the production costs of rum distilled in St. Croix, the Obama Administration has virtually ignored the pleas of the Caribbean for an end to what they believe would be industry destroying measures in the English, Spanish, Dutch and Creole-speaking Caribbean countries. As if to add insult to the economic injury being suffered across the Caribbean as a result of the actions by the USVI, Puerto Rico is now joining the row by providing similar subsidies to its rum producers.
“We have not received any response to our letter,” said John Beale, Barbados’ Ambassador to the U.S. “We haven’t gotten any feedback from them on that. We have had meetings with the U.S. Commerce Department and officials of the USTRA and there hasn’t been any response to us. In an election year it is difficult to get any attention on their radar screens. To most of the officials in these offices in Washington the concerns the Caribbean has raised are a non-issue but to us it can mean the difference between our countries earning hundreds of millions of dollars in foreign exchange from rum exports and providing employment for 15,000 workers and an additional 60,000 workers who are indirectly employed in the rum industry.”
In other words, it can be a life and death outcome for the rum industry.
The letter was signed by top diplomats from Antigua & Barbuda, the Bahamas, Belize, Dominica, the Dominican Republic, Grenada, Guyana, Haiti, Jamaica, St. Kitts-Nevis, St. Vincent and the Grenadines, Suriname, St. Lucia, and Trinidad and Tobago and in it, and the ambassadors warned that already the handwriting was already on the wall for their rum producers and they blamed the dismal outlook on the subsidies to Diageo and Mean Global in USVI and to Bacardi Limited and Destileria Serrales in Puerto Rico.
“Time is not on our side of the Caribbean rum industry,” warned the ambassadors. “Caribbean producers are already having supply contracts cancelled because they cannot meet the price of subsidized competition coming from Puerto Rico and the USVI. These contract cancellations have started in the price sensitive bulk rum market, which is central to the economics and financial well-being of the Caribbean rum industry.
“Over time they will spread to suppliers of bottled products as well,” they protested. “Unless these unjustifiable subsidies are stopped, they will force the closure of many Caribbean distilleries and create serious injury to the fragile economies of the Region.”
The subsidies ranged from a grant covering the full cost of construction of a state-of-the-art rum refinery in St. Croix and operating subsidies that approach or exceed 100 per cent of the cost of production of all rum imported into the United States to “generous tax breaks and other incentives” to the companies involved.
“The USVI subsidies alone will result in the addition of 18 million proof-gallons of rum capacity, around 80 per cent of current U.S. consumption, all of which will be essentially producing rum for sale in the U.S. market at little or no coast,” the letter charged. “Caribbean producers are placed at an unfair advantage, making them unable to compete with large, multi-national producers that will be receiving subsides covering virtually all of their fixed variable production costs.”
The Caribbean’s complaint to the USTR came after Caricom states had sent a somewhat similar letter to Washington several months before outlining the damage the subsidies could cause to Caribbean rum production.
“The response by the Obama administration could be described as dismissive and indifferent, charged a highly placed Caribbean source in Washington who is familiar with the content of the USTR’s communication to Caricom. “It was really contemptuous of the Caribbean’s position.”
As a matter of fact, Beale said that the “comprehensive letter” sent to the U.S. by Caricom didn’t receive the kind of reaction that would have indicated the issue was “being taken seriously.”
Because of that inadequate reaction Caricom, the DR and the Obama Administration met to clarify the situation.
“It was because of that we wrote the letter that was signed by 14 ambassadors as well as by the Dominican Republic because they too are affected by it,” said Beale. “So far we haven’t even received an acknowledgement of our letter and I don’t really honestly think that we will even get an acknowledgement because we are in a mood of elections and in all due respects this is not an important issue ((for Washington) but it is a matter of life and death for these companies in the Caribbean. This is very, very important to us.”
A possible next step may be a complaint lodged by the region with the World Trade Organization in Geneva, a move the Dominican Republic plans to make.
“The DR has decided to take the case to the WTO, they are not waiting around,” Beale told the Carib News. “They are more decisive.”
Caricom countries remain undecided about going to the WTO because of the costs involved and the fact that it would take years before a decision is handed down.
“By then the rum industry in the Caribbean may be a thing of the past,” Beale warned.