US rum subsidies hammer Jamaica, other Caribbean producers

Monday, September 10, 2012 | 2:56 PM    

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KINGSTON, Jamaica (AP) — Rum, the sugar-based liquor that has fueled the development of the Caribbean for centuries, has become the focus of an increasingly bitter dispute with the US.

Small producers in countries such as Antigua, Guyana and Jamaica complain they are being punched by unfair trade and marketing advantages for global beverage corporations operating in US territories, and say US rum subsidies threaten to drive some beloved top-shelf Caribbean labels out of business, or force them to sell out.

It's a high stakes battle because rum, first developed on Caribbean sugar plantations in the 17th century and deeply engrained in local culture and history, is one of the few competitive industries for the tourism-dependent region's tiny, vulnerable economies.

The tipple, which can range from colourless to coppery, from almost tasteless to richly layered, generates roughly US$500 million in foreign exchange for independent Caribbean countries and more than US$250 million in tax revenue.

The subsidies come from money raised through an excise tax on liquor sold in the US. Under an obscure federal law, almost all of the money generated by rum goes to the treasuries of Puerto Rico and the US Virgin Islands. Those tropical territories in turn hand a share of it to the producers as a subsidy to do business there.

Distillers in other countries say they lived fairly comfortably with the US subsidies for decades, even if they thought the rebates gave advantages to rum giant Bacardi Limited in Puerto Rico and Cruzan Rum, a US Virgin Islands brand now owned by Beam Inc, the US maker of spirits such as Jim Beam and Maker's Mark.

But they are alarmed by recent deals that sharply increased the subsidies for already powerful corporations in the two territories.

The moves have prompted some competing Caribbean distillers to urge their governments to complain to the World Trade Organization (WTO), fearing that the US subsidies may undermine age-old rum operations in the Caribbean, the global center of production, and motivate other multinational distillers to relocate to US territories.

So far, no Caribbean government has declared their intention to challenge the US, the region's biggest trading partner, with a WTO complaint. The Caribbean Community, which groups 15 Caribbean nations and dependencies, said it is trying to achieve a "negotiated settlement" with Washington



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