Rum, a precious 17th century gift from the Caribbean to the rest of the world can be lost to the island-nations and coastal states in the region that count Washington as its closest ally.
And the death knell is being sounded by unfair and illegal subsidies being given to rum producers in St. Croix in the U.S. Virgin Islands and by Puerto Rico. Stated simply, the two U.S. territories, aided and abetted by Washington are providing hefty subsidies to Diageo and Beam Global and Puerto Rico to Bacardi and Destileria Serrales in order to allow them to dominate the lucrative bulk rum market in the U.S.
What the USVI has done is to promise Diageo enormous subsidies that would stretch over 30 years in return for the companies producing all of their rum in the American territory. Specifically, the U.S. territory has agreed to cover 100 per cent of the construction costs for a state-of-the-art production facility in St. Croix. In addition, the territory is providing operating subsidies that either approach or exceed the production costs of all rum exported to the U.S. As if those give-backs weren’t bad enough, the USVI is providing tax breaks and other concessions to the producers.
Not to be out-maneuvered, Puerto Rico has entered the subsidy give-ways business by matching what’s being done in the U.S. The upshot: rum producers in the English, Dutch, Spanish and Creole-speaking countries are quite rightly crying foul as the face the dim prospect of being squeezed out of the U.S. market.
“Caribbean producers are being placed at an unfair advantage, making them unable to compete with large, multi-national producers that will be receiving subsidies covering virtually all of their fixed and variable production costs,” Caribbean ambassadors told the U.S. Special Trade Representative Ron Kirk in blunt letter of complaint.
But what has left the various countries in the area and their top diplomatic representatives in Washington upset and disappointed, is the indifference of the Obama Administration. Earlier this year, Caricom sent a letter to Kirk outlining the case against the subsidies and appealing for consideration. But after weeks of waiting without a meaningful response, the region received an acknowledgement of the letter which was really a brush-off. That led to another diplomatic note complaining about the crisis and its deleterious financial effect on the region. And how did the Obama White House respond? It didn’t, at least not so far.
Washington knows the subsidies are illegal under World Trade Organization rules but it is a sad case of might is right, the law of the jungle. Thousands of workers across the English, French, Spanish and Dutch-speaking Caribbean stand to become unemployed if the refineries go out of business. Governments, already facing tough economic times can lose a large chunk of their export earnings if the rum industry closes its doors.
The problem facing the Caribbean is straightforward enough. Washington is concentrating on the presidential and Congressional elections and isn’t in a mood to listen to legitimate complaints about rum. It also seems indifferent to what happens to the islands and coastal states. Thirdly, it knows that if the Dominican Republic takes the case to the World Trade Organization, it would have to spend tens of millions of dollars and would have to wait years for a decision. By then, the rum industry could be facing closure. The options are ugly and disastrous
The Obama Administration should be paying much more attention to the Caribbean’s plight. For one thing, the islands and coastal states are considered America’s third border and deserve an effective response. Ignoring the issue isn’t going to make it go away. For another, the U.S. knows what it’s doing is illegal under the rules it helped to write. It just should sir back allow 15,000 people to lose their jobs. The suffering would simply be too great.
Kirk, who is leaving the USTR at the end of the year, shouldn’t display such callous disregard for the Caribbean. His attitude is unconscionable.