Unfair rum subsidies rankle Caribbean producers

By Admin Wednesday August 22 2012 in Caribbean
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BRIDGETOWN: The West Indies Rum & Spirits Producers Association (WIRSPA) is continuing to lobby regional governments to find a resolution to the dispute over unfair subsidies being given to its competitors in the United States Virgin Islands (USVI) before “terminal damage” is caused to the industry.


In a press release, Dr. Frank Ward, chairman of WIRSPA, said the matter required urgent action and early resolution if the rum industry of the Caribbean Forum countries (the Caribbean Community plus the Dominican Republic or CARIFORUM) were to survive in their present form.


Dr. Ward also opposed the recently publicized stance by multinational rum producer Diageo that it might re-think its operations in the wider Caribbean if the region did not stop calling for an end to the USVI incentives. The incentives allow Diageo’s rum to flow into the U.S. market at a cheaper price than WIRSPA’s member could offer.


“Documented threats have recently been made in public against the rum industry in CARIFORUM countries,” said Ward. “Such an approach threatens Caribbean economic sovereignty and suggests a failure by those involved to understand how small nations and their communities react to external hostility whether from multinationals or from governments.


“Such an approach will only strengthen Caribbean resolve.”


However, in the release, Ward made it clear that WIRSPA’s members were not seeking a row with Diageo.


“The dispute is between the governments of these independent Caribbean countries and the United States and not between rum producers,” said Ward. “This is because subsidies given to rum producers in the USVI and Puerto Rico from a U.S. government program threaten to damage an important sector of the Caribbean economy.”


Ward said the rum industry was the region’s largest agriculture-based export industry and generated annually an estimated US$500-million in foreign exchange for independent Caribbean countries, well over US$250-million in tax revenues, and made a vital economic contribution to small vulnerable economies.


He disputed suggestions by Diageo that Caribbean rum producers were growing their exports into the U.S.


“WIRSPA wishes to note that recent statements that exports of CARIFORUM rum to the USA increased by 39 per cent in the first quarter of 2012 are misleading. Disaggregated data shows that the choice of reference point, the first quarter of 2011, was by far the weakest period for rum exports to the U.S. in that year.


“In reality, the strong figures for the first quarter of 2012 hide the fact that this growth is nearly all attributable to a single country and is largely the result of a temporary change in inventory management rather than actual sales. Outside of that country, all major CARIFORUM exports to rum in the first quarter of 2012 to the USA were down when compared to their average quarterly exports in 2011,” said Ward.


Ward also said the combined new production capacity which is planned as part of the USVI subsidies is estimated to add the equivalent of 80 per cent or more volume to the U.S. market at its current size.


“Such massive increases in production capacity can only result in major distortions to the regional market and the demise of many rum producers in independent Caribbean countries which are not being subsidized.”


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