A simmering row between rum producers in the Caribbean and the U.S. government over generous tax subsidies it gives to American companies operating in the region has flared again. Officials said this week they are seriously contemplating heading to the World Trade Organization to determine whether the concessions are illegal and breach global trading rules.
The Barbados-based West Indies Rum and Spirits Producers Association is reporting a definite decline in bulk rum sales to the U.S. in the years since authorities there started to grant generous export subsidies to producers based in the U.S. Virgin Islands and Puerto Rico, making their products much more competitive than those exported by Caribbean trade bloc nations and the Dominican Republic, among others.
The issue has been ablaze for the past four years, ever since British-based Diageo PLC and U.S.-owned Cruzan Rums set up production branches in the two American offshore territories and began receiving millions of dollars in annual production subsidies from the U.S. government. The region says this support is patently unfair and designed to shut down an industry that employs more than 75,000 people across the Caribbean directly and indirectly.
Komal Samaroo, head of Guyana-based Demerara Distillers, which produces the El Dorado brand of rums, and Frank Ward, chairman of the West Indies Rum and Spirits Producers Association, both argued that regional sales are in clear decline, with Barbados producers being among the worst hit.
Ward said the body is aware of two existing legal opinions the industry sought in recent months that indicate the Caribbean has legitimate grounds to take the subsidies issues to the WTO for a ruling. “There is a case to answer at the WTO,” Ward noted.
Samaroo, on the other hand, says the “fact is that no Caribbean rum can compete against Puerto Rican and Virgin Islands rum producers because of the subsidy they get from the U.S. government. Therefore we are all seeing decline in the value segment of the market.”
Providing figures, Ward said exports from Barbados to the U.S. declined last year by half, to 5 million liters of rum. Other countries are reporting similar but steady reductions as he urged nations to consider moving to the WTO.
Latest figures indicate that an average of $450 million in tax rebates were available to producers in Puerto Rico and about a third of this amount to the Virgin Islands. For many producers south of these two American territories, it is impossible to compete because their own annual earnings are below these subsidy figures.
Caribbean leaders, meeting in Barbados earlier this month, did not bother to have the issue on their agenda, though even if they did, they were so caught up with the Guyana-Venezuela border row and the treatment of people of Haitian descent in the Dominican Republic that it would have received little or no attention, officials say.