SUNS4503 Monday 6 September 1999

Trade: A ray of hope for Caribbean Rum?

Kingston, Sep 2 (IPS/Richard Samuel) -- Fighting for the future of their valuable market for rum, Caribbean exporters say they have been encouraged by a change of attitude of some countries to which they have appealed for support.

The region's rum exports, mainly to Europe, are being threatened by a deregulation of the global market in spirits in 2003.

Exporters claim that their market will be flooded by rum from countries where governments have been subsidising industries.
There is now a slight glimmer of hope for our market, said Patrick Mayers, chairman of the West Indies Rum and Spirit Producers Association.

Recent meetings have brought from countries such as Germany, expressions of concern that the Caribbean rum industry will be subject to dislocation if there is too rapid a liberalisation of the market.

The region's rum exports earn $250 million per year - a market which is increasingly valuable as other commodity exports, such as bananas, are threatened.

Caribbean concern about the rum market is based on an agreement between the United States and the European Union, to remove obstacles to trade in telecommunications and spirits by 2003.

Called the "zero for zero" pact, it will remove many of the barriers which have benefitted Caribbean exporters.

Caribbean producers have always accepted that the EU market would eventually be liberalised after a carefully controlled period of transition, Mayers told a recent meeting of European interests in the rum trade.

But the region had not been prepared for the rapid liberalisation of the EU market and the almost overnight removal of their preferences.

The fears of the region's rum industry have been compounded by a recent report by F.O. Licht, a commodity analyst, which found that 87% of global alcohol production is subsidised.
Caribbean producers' preferences are being removed and the region's established markets in Europe are being endangered by the very third country spirit producers who have huge subsidy programmes, the Caribbean exporters contend.

Producers in Asia and Latin America, particularly, will benefit from the change after 2003, to the detriment of the Caribbean exporters.

The zero for zero agreement allows large rum producers in countries such as Brazil, which subsidise the industry and which do not have to offer reciprocity for EU spirit imports, to ship their rums duty free into the EU in direct competition with our producers after 2003, said Mayers.

"We receive no subsidies so we will not be able to compete."

The main Caribbean producers are Barbados, the Dominican Republic, Guyana, Haiti, Jamaica, Trinidad and Tobago, and the US possessions of Puerto Rico and the US Virgin islands. About 10,000 jobs will be lost across the region if the market is lost because of the 'zero for zero' agreement, said the West Indies Rum and Spirit Producers Association.

Puerto Rico and the US Virgins, which ship most of their rum to the US mainland, could suffer a double blow if their market is flooded by cheaper, subsidised rum.

Both possessions receive rebate from the US Federal government on the rum they sell to the mainland. They will lose these rebates, as well as their market.

"It seems that some European countries are coming to the conclusion that the problems faced by the region's banana exporters are similar to those which will be faced by rum exporters if there is too fast a deregulation of the rum market," Mayers said.

"There appears to be in Europe a slightly better understanding of the uncertain position in which Caribbean rum has been placed by the EU."