Cari­com has re­it­er­at­ed its con­cern over the threat posed to the com­pet­i­tive­ness of Caribbean rum in the Unit­ed States mar­ket by sub­si­dies grant­ed to rum pro­duc­ers by the Unit­ed States Vir­gin Is­lands (USVI) and Puer­to Ri­co (PR).Unit­ed States has been run­ning a Rum Cov­er-Over Pro­gramme since 1917. This con­sists of a tax levied on sales of the spir­it in the US mar­ket, most rev­enue from which is trans­ferred to USVI and PR to aid these ter­ri­to­ries' eco­nom­ic de­vel­op­ment.

How­ev­er, ac­cord­ing to the Fi­nance Com­mit­tee of Puer­to Ri­co's Cham­ber of Rep­re­sen­ta­tives, USVI has, since 2007, used much of the re­im­burse­ment to en­cour­age the lo­cal rum in­dus­try.

Faced with this sit­u­a­tion, Puer­to Ri­co has sought to lim­it the im­pact of such mea­sures. It has sub­mit­ted a bill to the Cham­ber of Rep­re­sen­ta­tives to pre­vent PR and USVI from us­ing the re­im­burse­ments to pro­vide un­rea­son­able sub­si­dies for rum pro­duc­ers and has pledged to pro­vide in­cen­tives for cer­tain firms to main­tain min­i­mum pro­duc­tion in its ter­ri­to­ry.

These in­cen­tives con­sist in re­im­burs­ing the ben­e­fi­cia­ry com­pa­nies for around 50 per cent of levies from the US im­port tax on their prod­ucts. This is at the ex­pense of oth­er com­peti­tors, such as pro­duc­ers in Cari­com coun­tries. At its 35th meet­ing in George­town, Guyana, in De­cem­ber, a Coun­cil for Trade and Eco­nom­ic De­vel­op­ment (Cot­ed) com­mu­niqu� called on the Unit­ed States to work to­geth­er with Caribbean coun­tries to re­store the com­pet­i­tive ac­cess of Caribbean rum to the US mar­ket.

This con­cern was al­so voiced at the 33rd Reg­u­lar Meet­ing of the Con­fer­ence of Heads of Gov­ern­ment of the Caribbean Com­mu­ni­ty in Ju­ly 2012, where lead­ers said such sub­si­dies are con­trary to WTO pro­vi­sions.The Agree­ment on Sub­si­dies and Coun­ter­vail­ing Mea­sures (AS­CM) of the World Trade Or­ga­ni­za­tion (WTO) pro­vides re­quire­ments for a mea­sure to be de­fined as a sub­sidy: it must be a fi­nan­cial con­tri­bu­tion made by a gov­ern­ment, which in­volves the grant­i­ng of a ben­e­fit. (In­tal)

It must al­so com­ply with the cri­te­ri­on of speci­fici­ty–tar­get­ing cer­tain com­pa­nies or a par­tic­u­lar sec­tor. These re­quire­ments ap­ply to sub­si­dies grant­ed by PR and USVI to rum-pro­duc­ing com­pa­nies in­stalled in their ter­ri­to­ries. How­ev­er, not be­ing tied to ex­port per­for­mance, they do not fall with­in the group of pro­hib­it­ed sub­si­dies. How­ev­er, they can be con­sid­ered re­view­able and can on­ly be ap­plied as long as they have no ad­verse ef­fects on the oth­er mem­bers' in­ter­ests.

Rum is Cari­com's biggest agro ex­port. Ac­cord­ing to da­ta from the US In­ter­na­tion­al Trade Com­mis­sion (USITC), the Caribbean bloc's share as a sup­pli­er of rum to the US mar­ket has fall­en in re­cent years. In 2000, it ac­count­ed for around 70 per cent of the to­tal, 50 per cent in 2008, and 42.3 per cent in 2011, equiv­a­lent to US$38.7 mil­lion.

Bar­ba­dos and Ja­maica are re­spon­si­ble for most of the de­liv­er­ies (two thirds), fol­lowed by Guyana and Trinidad and To­ba­go.In 2011, PR record­ed US sales of US$148 bil­lion, four times more than Cari­com.

In­tal