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Giddy over rum

by Shawn Cumberbatch

Barbados and other CARICOM countries now contemplating taking their fight against millions of dollars of United States rum industry subsidies to the World Trade Organisation should think again. Any such effort to solve a “current apparent dispute” would be baseless, officials of one of the companies benefitting from the support at the Caribbean’s expense have told Barbados TODAY. With diplomatic representatives from this island and their Caribbean partners in Washington DC lobbying the US government for redress, and the West Indies Rum and Spirits Producers’ Association voicing concern about the impact of the subsidisation of rum producers in the United States Virgin Islands and Puerto Rico, giant international alcoholic beverage producer Diageo says it is an innocent party. At the end of last year the CARICOM Council for Trade and Economic Development, said the region continues to have “serious concerns” regarding the competitiveness of Caribbean rum in the United States, noting that said rum production and export were critical to the socio-economic well-being of the region. Prime Minister Freundel Stuart is also on record as saying Barbados and its CARICOM partners anticipated that unless there was a reversal of US subsidisation policy “it may have to reach the WTO. “The rum industry is too important to Barbados. Yes, it is a CARICOM issue, but I don’t think any CARICOM country has any reason to be as concerned about this as Barbados. Rum is assuming an importance for Barbados that we cannot afford to ignore. So this is a front burner issue and we are following it very closely.” But in an emailed statement to Barbados TODAY, in which it said it supported the regional rum industry, Diageo said it “sees no basis for the current apparent dispute, and are actively seeking to understand WIRSPA’s issues”. “In fact, Diageo is very supportive of the Caribbean rum industry and currently sources the same amount of rum from the Caribbean that the West Indies Rum and Spirits Producers’ Association reports that its members export to the US market,” the company said. “Diageo’s USVI distillery replaces rum that Diageo previously purchased from Serrall√s in Puerto Rico for branded rum for Diageo’s products in the US premium rum market. This means that Diageo is not flooding the US market with rum; and Diageo’s premium rum does not compete with, much less displace, the bulk rum produced and sold by WIRSPA members in the US. Imports of rum from the CARICOM members have increased over the last several years,” the company added. It also sought to explain the operation of the American government subsidies which are generating concern here and in the wider region. “The US Congress enacted the cover over programme nearly a century ago with the goal to provide the USVI and Puerto Rico with revenues to promote economic stability and fiscal autonomy. Cover over revenue is generated by a manufacturer’s excise tax when its products are sold in the US, and since its inception has been considered locally generated revenue that is designated to be expended however the governments of each territory choose. “The USVI-Diageo agreement is structured to conform strictly with the rum cover over law and with the Congressional purpose.†The agreement between Diageo and the USVI enables the USVI to increase the amount of cover over they receive, which has a direct financial benefit to the island and its economy that faces severe deficits and debt,” Diageo noted. Among the Barbados industry players expressing concern about these subsidies are Goddard Enterprises Limited Martin Pritchard, whose company owns The West Indies Rum Distillery Limited, a longstanding rum producer here. “I have drank quite a bit of rum in my time throughout the region as well as in Latin America and I would say that Barbados produces the best rum in the world, there is no doubt about that. Unfortunately, we have very high costs here, our molasses really most of it has to be imported, the local sugar industry cannot supply molasses to our distillery at the West Indies Rum Distillery and hence I would say 90 per cent of our input molasses has to be imported,” Pritchard said. “And the other point is energy, energy is still a large component of our production costs and so we are disadvantaged straight away before we enter this race. We are also at a disadvantage because the US government subsidises their rum industry, especially in the US Virgin Islands, and it is virtually impossible to compete against that. “To develop a brand of high class and high quality takes mega bucks and unfortunately our group has tried but we are also in business in other areas and our resources are limited and you are also up against the big liquor giants of this world, Diageo etcetera, and they are out to protect their brands, whether they be inferior to ours, which I think they are, so it is very very difficult to develop the rum industry. I don’t know what the government can do about it, but is not … easy, it is a tough industry and so far we have not had an adequate return on our investment.”

One Response to Giddy over rum

  1. Ronnie Warren April 12, 2013 at 9:37 am

    We in Caricom have the power to dictate to these major producers that we will or will not allow their products into our countries. Why do we care what Diageo says. If they will not help us then ban their products, then we will see how quickly the leaf will turn.


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