Will even the WTO be able to help Caribbean rum exporters?
RUM has been one of the Caribbean's most valuable exports for over 300 years. Caribbean rum is world famous for its excellent quality and its attractive price.
In a tough economic environment the rum industry has demonstrated a capacity for innovation to maintain its export niche in the world market for alcoholic drinks.
But it seems that being an efficient producer and exporting a high quality product at a competitive price are not enough to survive in the global marketplace, because this is not a market in which there is fair play.
The global market, in reality, is a jungle in which the big and powerful survive by eliminating the small and the weak. The abandonment of the rules of fair play, as encoded in the agreements which constitute the World Trade Organisation's (WTO's) rules, is a repeated and pernicious practice of developed countries in order to facilitate their multinational corporations. The consequence of these policies is the foreclosure of the export options of developing countries.
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.