US subsidies threatening rum industry, says ambassador John Beale
As Barbados’ rum exports to the United States record a 21 per cent drop, this country’s Ambassador to the US is warning that the industry is in danger of being wiped out.
Ambassador John Beale is blaming the falloff in exports on the dispute between Bridgetown and the United States over massive subsidies given to rum producers in Puerto Rico and the US Virgin Islands (USVI) which is giving those territories a competitive edge.
He has therefore urged the private sector to join with Government and the Caribbean Community (CARICOM) to fight to protect the country’s lucrative rum industry from the heavy subsidisation of Puerto Rican and United States Virgin Islands spirits.
Beale made the appeal today during an interview with Barbados TODAY on the sidelines of the Barbados Network Consultation 2014 3rd Diaspora Conference which is underway at the Lloyd Erskine Sandiford Centre.
Lending his support to a concern recently expressed by Minister of Commerce Donville Inniss, Beale said: “Inniss is correct when he said that CARICOM was inactive and needs to take a position on this issue. Caribbean rum runs the risk of becoming another banana industry that was just wiped out [in the Eastern Caribbean].
“It is impossible to survive under the current conditions with the subsidies given to Puerto Rico and the USVI, whereby a company is virtually getting the cost of production covered. The USVI is using funds provided by the US federal government to heavily subsidize British owned rum producer, Diageo, as well as Cruzam Rum, a firm owned by Jim Beam that is in turn owned by the Japanese company Suntory.
“The level of the subsidies introduced by the USVI is so huge that it covered 100 per cent of the construction cost of the rum facilities – all production, marketing and distribution costs – as well as Customs duties, corporate income taxes and exemption from all sales taxes and property taxes. This has created a disproportionate and unfair competitive advantage,” Beale added.
Noting that the quantum of the cover-over funds is currently in excess of $580 million, Beale contended that while for Puerto Rico it is a case of giving priority to its development projects. for the Caribbean it is a case of survival.
The diplomat charged that the high level of subsidies being given to Diageo, one of the world’s largest and richest premium drinks beverage companies with reported revenue of over US$24.21 billion in 2012, can only be considered an abuse of the federal assistance programme.
“The USVI’s and Puerto Rican measures will decimate, if not destroy, the Caribbean rum industry. Due to the fact that the rum industry is a major employer as well as a source of hard currency and tax revenue in many Caribbean countries, damage to the rum sector will have a negative effect on the economic development prospects for many Caribbean rum producing countries with which the US enjoys long-standing friendly relations,” he said.
Beale charged that since Diageo began the shipment of subsidized rum from the USVI in February 2012, the Caribbean rum industry has begun experiencing lost contracts and other “deleterious market effects”.