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“Rum industry is life or debt to the Caribbean”
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“Rum industry is life or debt to the Caribbean”

 Khadija HolderRum is strongly associated with the Caribbean and has a major impact on island economies. But Khadija Holder, 24, a Correspondent from Trinidad and Tobago, says changes to subsidies and trade agreements could threaten jobs and income across the region.

Caribbean rum’s distinct brew and strength is internationally recognized.  Whether it’s St. Lucia’s Chairman’s Reserved Spiced Rum, Jamaica’s Appleton Estate, Blackwell, and Myers Dark Rum, Barbados’ Malibu and Mount Gay Rum or Guyana’s El Dorado Rum, all are touted amongst natives and tourists alike.

To no surprise, rum has become a mainstay of the Caribbean economy. However, within recent times the rum industry has faced difficulty and turmoil, threatening the economic viability of many Caribbean countries.

On the one hand, the sector has become vulnerable to preference erosion in one of its primary markets – the EU. According to a study undertaken by Cantore et al. (2012), “If the EU agrees to a Free Trade Agreement with Central America, Peru, Colombia and Mercosur, Caribbean rum exports would decline by three per cent (equivalent to € ¾ million each year).”

Such an occurrence would significantly affect: Guyana (due to its lower level of GDP per capita and inadequate resilience capability); Barbados (as a high share of Caribbean exports to the EU in rum categories subject to quota are from Barbados); and Antigua and Barbuda, Jamaica, and St Kitts and Nevis (because of the high importance the sector plays in all three countries).”

No data is yet available with respect to the effect the already-negotiated EU agreements with Central America, Peru and Columbia has had on the Caribbean rum industry. But given that the rum sector is a substantial employer and a major contributor to foreign exchange earnings and government revenues in the Caribbean, the region’s trade structure can in no way continue as-is.

On the other hand, since the subsidy war between USVI (United States Virgin Islands) and Puerto Rico has spiralled a trade war between these US-Caribbean territories and the member states of the Caribbean Community (CARICOM), things may only get worse for CARICOM’s rum industry.

The subsidy war between USVI and Puerto Rico has resulted in approximately $450 million–$100 million to USVI, and $350 million to Puerto Rico under the US Cover-Over Program, based on 2010 estimates. CARICOM officials have however highlighted that the alleged use of these subsidies ‘specifically’ to the rum industry is against the World Trade Organization’s laws governing Subsidies and Countervailing Measures, and that the subsidy has resulted in trade distortion and the limitation of CARICOM rum producers’ ability to compete.

After the meeting of trade ministers held in May 2013 in Guyana, CARICOM Secretary General Irwin LaRocque told the Caribbean Media Corporation (CMC) that the decision to take the matter to the World Trade Organization (WTO) was endorsed primarily due to the unfair and distortive results the program presented, particularly referring to USVI located UK-headquarted Diageo; “probably the largest alcohol producers in the world” according to LaRocque.

Since the region has already been affected by Bacardi’s relocation of production from Bahamas to Puerto Rico, the industry has seen a decrease in CARICOM market share in the EU from 77 per cent to 48 per cent for bottled rum over €7.9 and from 94 per cent to 7 per cent for bulk rum over €2 over the period 1999–2011 (Cantore et al, 2012). The removal of these subsidies and the improvement of innovation in the sector can be life or debt for the CARICOM region.

photo credit: SBPR via photopin cc

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About me:

Discovering my great passion and ambition to advocate for global progress through research-writing stands as one of my most fulfilling attainments to date. I am currently a Research Fellow at the Caribbean Centre for Research on Trade and Development (CCRTD), a Research Consultant for JDR Research Solutions Barbados, a Researcher at Athens Development and am becoming internationally certified in Spanish and French. In my spare time I engage in volunteerism through organizations such as Junior Achievement.

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Opinions expressed in this article are those of the author and do not necessarily represent the views of the Commonwealth Youth Programme. Articles are published in a spirit of dialogue, respect and understanding. If you disagree, why not submit a response.
To learn more about becoming a Commonwealth Correspondent please visit: http://www.yourcommonwealth.org/submit-articles/commonwealthcorrespondents/

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