Report signals new danger for Caribbean rum trade
McPherse Thompson, Assistant Editor - Business
Caribbean rum producers face the prospect of losing market share to Central American countries despite the Economic Partnership Agreement between Cariforum and the European Union.
Cariforum countries get tariff preferences on rum exported to the EU, but a new Commonwealth Secretariat report said a range of free trade arrangements with other nations threaten to erode them, according to former Caribbean diplomat Sir Ronald Sanders, writing for Caribbean360.com.
The EU and Central America - Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama - signed an association agreement in June, which includes "the expansion and the diversification of trade in goods between the parties, through the reduction or the elimination of tariff and non-tariff barriers to trade".
Spirits are among the manufactured goods captured under the agreement posted on the EU website.
Sanders, who brought the Commonwealth report to public attention, quoted it as saying that if those "do not have to pay duties, this will mean that EU importers will face an increase in the relative price of Caribbean rum and a decrease in the relative price of rum imports from other sources".
Dr Frank Ward, the chairman of the West Indies Rum and Spirits Producers Association (WIRSPA), declined comment on the report and its expected impact on Caribbean rum producers.
"The report is the property of the Commonwealth Secretariat, is still a final draft and has not been officially released, so I am not at liberty to give details," he said.
Ward told Wednesday Business, however, that in 2010, WIRSPA wrote to the European Commission expressing its concerns regarding its analysis of the consequences of the accelerated liberalisation of the rum tariffs conceded to Central America and Colombia and Peru.
He said the Commonwealth Secretariat report corroborates WIRSPA's contentions.
Caribbean rum producers have also been facing the possibility of losing ground in the United States market.
That is because the US Virgin Islands and Puerto Rico, two US territories that compete with other producers in Jamaica and the rest of the region, have been taking advantage of US government refunds to them, representing excise taxes on rum, to subsidise rum production and marketing for multinationals that set up business in those countries.
Regional producers contend that the subsidies were being offered in breach of the rules of the World Trade Organisation (WTO).
"It is my understanding that an independent analysis of the subsidies regime has recently confirmed that a strong case can be made at the WTO. However, no complaint has yet been lodged by any Cariforum country," Ward said.
"The WTO does not recognise Cariforum or Caricom and, any complaint would have to be by individual countries. I believe that as many as see fit can be a party to a complaint or simply be an interested party."
Asked which Cariforum members stood to lose most and the extent of the losses, Ward said "The USA is still the significant market for spirits and the subsidies will make it harder to compete, let alone expand. It is still early to accurately forecast loss at this stage, but the loss of market share is expected to be very significant across the board."
He said the European Parliament is expected to ratify the EU-Central America agreement this month.
"That the Doha round is moribund has acted as a catalyst for the forging of bilateral trade agreements in general, and not only by the EU," said the WIRSPA chairman.
An official at Jamaica's Ministry of Foreign Affairs and Foreign Trade, who requested anonymity, told Wednesday Business that Jamaica has not filed a complaint with the WTO.
no formal discussion
"There has been no discussion formally in Caricom, as far as I know, about taking the dispute to the WTO. What they have been doing is having consultations with the US on the matter. They have had several rounds of consultations with the US trade representative about this issue and we continue to monitor the situation very closely," she said.
The official also suggested that the rum dispute might take on a different complexion going forward, given Puerto Ricans' affirmative vote in a referendum last Tuesday to become the 51st state of the United States.
"You have to look at what the implications are; if they become a state this will become a domestic matter," she said.