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Old 04-03-2010, 08:52 AM   #1
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Default Caribbean Rum in Grave Danger

Caribbean Rum in grave danger. Urgent government action needed
Sir Ronald Sanders 01.APR.10

THE European Commission (EC) has, once again, let down the Caribbean. This time on rum. All rum producers in the Dominican Republic and Caribbean Community (CARICOM) countries are facing the grim prospect of losing their markets in Europe.

Having convinced the Caribbean’s negotiators to sign a full Economic Partnership Agreement (EPA) with the 27-nation European Union (EU) on the basis that it was not necessary to include specific language on rum because it was covered in Declaration XXV in the Cotonou Convention, the EC is now reneging on its undertakings and many rum companies face a grave financial crisis.

CARIFORUM countries - the independent member states of CARICOM plus the Dominican Republic - agreed to a full EPA in December 2007 under considerable pressure from the EC, including the threat that if they did not sign, a higher tariff would be applied to their vital exports, such as sugar, rice and bananas, making them uncompetitive with other countries.

The single paragraph on rum in the EPA was not worth the paper it was written on, and a few weeks ago - on 19th March, a ministerial meeting of EU and African, Caribbean and Pacific (ACP) countries initialled the text of the second revision of the Cotonou Agreement, which is the legal basis for relations between the EU and the ACP, with no attention paid to the plight of rum producers. The EC objected to specific language on rum in the revised text, overriding ACP protests that it did not provide the substantial guarantees that the original Cotonou Declaration gave to the rum industry.

Why Caribbean country representatives allowed this to happen is a very relevant question, and perhaps, at some point, an explanation will be given.

There are several important points in this whole saga.

The West Indies Rum and Spirits Producers Association (WIRSPA) was realistic enough to recognise that the EC would not continue to give them preferential access to the EU market. Therefore, in 2002 they accepted the EC’s proposal of “a reasonable period” (up to between 2016 and 2018) to adapt their production facilities and brands so that they could compete equitably with other producers such as the Latin American countries.

The EU agreed to establish a fund of 70 million Euros under the 8th European Development Fund (EDF) to facilitate the adaptation of production facilities by Caribbean rum companies. But to access this fund, companies first had to provide at least matching amounts of money, recovering the EDF grant element only when their upgrading or marketing projects are completed.

Many of the companies borrowed money on commercial terms to undertake the projects. They did so expecting the programme to continue until at least June 2010 when the funding window was scheduled to be closed.

However, with about 14 million Euros still in the Fund, the EC is closing it this month (March) on the basis that the rules of the 8th EDF demand it. This means that the rum companies cannot get reimbursement for the money they’ve invested on projects that cannot be completed by the cut-off date on which the EC has insisted.

The original cut-off date of June 2010 was unrealistic, and the new date of March 2010 is even more so. This fact was recognised by the EU’s own Programmes Monitors who supported an extension of the Fund for 18 months to December 2011.

In a more sinister development, while the EC has been hiding behind a Council Regulation that prohibits the 18 months extension, it has been busy trading away the small and limited preference that Caribbean rum has in the EU market. Earlier this month (March 8th) the EC formally told the Caribbean that they have already settled liberalized tariffs and quotas with Colombia and Peru and are now talking in similar terms with Central American and Andean countries.

These deals are accelerating Latin American access to the EU market and seriously undercutting the period that Caribbean rum producers had been led to believe would exist to facilitate the adaptation of their production and their readiness to compete.

Caribbean rum producers have expressed their “anger” at Europe for “reneging on previous agreements that aimed to ensure a smooth transition into a fully competitive European market”. And, so they should, for they were among the most vocal in supporting the full EPA that CARIFORUM countries signed with the EU. They have a right to feel betrayed.

Many Caribbean commentators at the time spoke out against the EPA, warning that there should be no reciprocal trading arrangement between small Caribbean countries individually and the huge EU collectively. They also argued that Europe had an obligation - if not rooted in historical exploitation, at least founded in the principles of fairness and equity - to provide Caribbean countries with the means to become less uncompetitive in an international economic system that favours the large and powerful.

At the very least, they argued, the Caribbean should be given sufficient time and adequate financial and technological resources to cope.

Despite these calls, Caribbean governments signed an imbalanced EPA that went beyond requirements of the World Trade Organisation (WTO) in giving the EU unprecedented right of access to, and establishment in, CARIFORUM countries.

Now we have the major fall out of Caribbean rum.

The EC will not agree to two reasonable things that rum producers are requesting. The first is an extension of the 8th EDF funding by 18 months to allow them to be reimbursed for the money they spent trying to keep up their end of a bargain with the EU; and the second is an impact study of the effects of early liberalisation on the Caribbean’s rum industry.

Letters written on behalf of the region by Belize Prime Minister Dean Barrow, Barbados Foreign Minister Maxine Maclean and Suriname Foreign Minister Lygia Kraag-Keteldjik to the EC have all fallen on deaf ears.

Letter writing is not enough. It’s time for Caribbean governments to do more; and to do so more militantly and robustly than in the past.

A high-level team should be despatched to Europe now, not only to talk to governments but to take the case beyond governments to the media, non-governmental organisations and, ultimately, the people of Europe. It would take only a handful of determined EU governments to persuade the EC to find ways around the regulation that prohibits this very necessary extension of the fund for rum, and to conduct the impact study.

There are some EU governments ready to help, and they lament the absence of strong Caribbean government representation.

Informed observers in Europe are convinced that the European Commissioners believe that Caribbean governments are supine and, therefore, the EU can carry on stitching-up deals with Latin America that leave the Caribbean on the sidelines.

Caribbean governments must prove the EC wrong, or they, too, will be guilty of failing the region’s iconic rum industry.

Responses and previous commentaries at:
The Rumelier
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Old 04-03-2010, 01:14 PM   #2
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There is a lot of posturing going in the Caribbean and Europe in regards to the rum industry which is one of the most visible exports from the region. It will be interesting to see how this chapter plays out. And once again it looks like the big winners will be the attorneys.
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Old 04-03-2010, 11:02 PM   #3
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There's an election coming up in the UK, probably on 6th May 2010, and it looks as if it's going to be the closest one for 36 years.

There is a large Caribbean diaspora in Britain, and a lot of these people live in marginal constituencies. CARICOM governments, therefore, have a golden opportunity to encourage West Indian expatriates living in the UK to exert pressure on their local candidates. Such an opportunity may not come around again for some time, so it is essential that West Indians, both in Britain and in the Caribbean, take advantage of it.

Otherwise the EU will trample all over CARICOM again, as they did with bananas and sugar.

The British, in particular, have a moral obligation to their former colonies, as Britain did very well out of the slave trade.
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Old 04-05-2010, 01:54 PM   #4
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Ok...i read the OP...and im still not sure what the issues are...... anyone care to explain it to me in simple terms.... thank you in advance.
Why is the Rum Gone?.....
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Old 04-05-2010, 07:10 PM   #5
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Default Arrhhh!

Ok, what brands should I stock up on? How soon will the winds of change began to blow my way?
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Old 04-05-2010, 09:29 PM   #6
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Originally Posted by thrall View Post
Ok...i read the OP...and im still not sure what the issues are...... anyone care to explain it to me in simple terms.... thank you in advance.
I think it really affects Europe more than it does the US. But in the long run any damage to sales in Europe may affect the the bottom line of any distillery in the Caribbean.
Much money (millions) was left on the table after the WIRSPA benefits ran out of time. Shame some of us couldn't get some of it to promote Caribbean rums!!
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Old 04-09-2010, 11:44 PM   #7
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Sir Ronald Sanders has just written a follow up article on this topic:
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