Questions: Can the WTO Help the Cribbean Rum Producers?

    The battle over the US subsidies that are being afforded the governments of Puerto Rico and the US Virgin Islands is heading to a new level.   A couple of weeks ago Kelly Railean's American Rum Association joined those feeling that these subsidies are unfair to American rum producers as well.   I feel that the idea of hurting a small business here in the United States while subsidizing foreign owned rum producers is something that needs the attention of our lawmakers and a newly elected president who promised to protect the small American businessman.

    These trade policies have caused the Caribbean region some serious harm through the loss of bulk rum sales to brands that are not able to distill their own rum. The Cribbean rum producers can not compete with the subsidized rum for price.   In an editorial in the Jamaica Observer, on Sunday 11 November , 2012 there is a question whether or not even the World Trade Organization will be able to help the Caribbean rum exporters.  

"Ironically, the United States, the biggest ally and friend of the Caribbean, has pursued trade policies which have caused some of the greatest harm to the region, the so-called third border. Before rum, the Caribbean was seriously hurt by US policy which resulted in the dismantling of the European Union's preferential arrangements for bananas.

The US Virgin Islands and Puerto Rico are benefiting from massive subsidies to their rum industries, in some cases exceeding 100 per cent of the fixed and variable costs of production for rum destined for the American market. These subsidies are funded by the US excise tax on rum, most of which is returned by the United States to the USVI and Puerto Rican governments.

The effects of these subsidies are already causing significant damage to the vital Caribbean rum industry. Several rum producers have lost long-term contracts to supply bulk rum. This trend will continue because subsidised production capacity is larger than the existing market share of Caribbean rum exports. This excess capacity will first disrupt the US market then inevitably affect all export markets.

The governments of the Caribbean Community (Caricom) have launched a diplomatic campaign to get the US to change its policy. To strengthen the case, Caricom is thinking of taking the case to the WTO. The problem with this strategy is that even a ruling against the US in the WTO cannot guarantee a change in American policy, as has been illustrated by the case of Antigua and Barbuda versus the US on gaming."

This issue is not going to go away soon, and with the addition of the American rum producers, feeling they are also being put at a disadvantage, things are becoming very tense in reference to the subject.