Aleem Khan

British multi­na­tion­al al­co­holic bev­er­ages com­pa­ny Di­a­geo may "re-eval­u­ate its ac­tiv­i­ties in the Caribbean" over a brew­ing trade dis­pute be­tween Cari­com and the US gov­ern­ment, a spokesman for the com­pa­ny said on Fri­day. In an e-mailed re­sponse to in­quiries about Di­a­geo's pur­chas­es from re­gion­al rum pro­duc­ers, Stu­art Kir­by, spokesman for Di­a­geo Latin Amer­i­ca and the Caribbean, wrote: "Di­a­geo does pur­chase bulk rum from mul­ti­ple Caribbean pro­duc­ers. "In fact, Di­a­geo cur­rent­ly sources the same amount of rum that West In­di­an Rum and Spir­its Pro­duc­ers' As­so­ci­a­tion (WIRSPA) re­ports that its mem­bers ex­port to the US mar­ket. "In ad­di­tion, Cari­com rum ex­ports to the Unit­ed States have in­creased by more than 39 per cent in the first four months of 2012. These valu­able re­la­tion­ships could be dis­rupt­ed by a Cari­com chal­lenge at the WTO (World Trade Or­gan­i­sa­tion), which would force Di­a­geo to re-eval­u­ate its ac­tiv­i­ties in the Caribbean." Asked on Mon­day if he could ex­plain the in­crease, WIRSPA chair­man Frank Ward said he was not aware of the fig­ures but if they are cor­rect, "there could be any num­ber of rea­sons for that" but would not of­fer any.

"What I can say is that one of our dis­til­leries has lost sub­stan­tial mar­ket share in the US," since Di­a­geo start­ed ex­port­ing from St Croix. He said he was not at lib­er­ty to dis­close which dis­tillery. Asked about Di­a­geo's threat to dis­rupt "valu­able re­la­tion­ships" over a WTO chal­lenge, Ward said, "They have been say­ing that for the bet­ter half of the year," and WIRSPA re­mains un­fazed. Caribbean rum pro­duc­ers have been say­ing that in ex­port­ing to the US mar­ket, they are sub­ject­ed to un­fair com­pe­ti­tion as the Di­a­geo plant in the US Vir­gin Is­lands was built with US tax­pay­er funds, and this con­sti­tutes a de fac­to sub­sidy on Di­a­geo's ex­ports to the US from St Croix. In re­sponse to the use of cov­er-over funds as a sub­sidy, Kir­by said: "Con­gress en­act­ed the cov­er-over pro­gramme near­ly a cen­tu­ry ago, with the goal to pro­vide the USVI and Puer­to Ri­co with rev­enues to pro­mote eco­nom­ic sta­bil­i­ty and fis­cal au­ton­o­my. "The cov­er-over pro­gramme does not pro­mote un­fair com­pe­ti­tion for a num­ber of rea­sons pro­vid­ed here­in. Cov­er-over rev­enue is gen­er­at­ed by a man­u­fac­tur­er's ex­cise tax when its prod­ucts are sold in the US and, since its in­cep­tion, has been con­sid­ered lo­cal­ly-gen­er­at­ed rev­enue that is des­ig­nat­ed to be ex­pend­ed how­ev­er the gov­ern­ments of each ter­ri­to­ry choose.

"The USVI-Di­a­geo part­ner­ship is struc­tured to con­form strict­ly with the rum cov­er-over law and with the con­gres­sion­al pur­pose. The agree­ment be­tween Di­a­geo and the USVI en­ables the USVI to in­crease the amount of cov­er-over they re­ceive, which has a di­rect fi­nan­cial ben­e­fit to the is­land and its econ­o­my, which faces se­vere deficits and debt.

"The in­cen­tives em­bod­ied in the USVI-Di­a­geo agree­ment are pat­terned af­ter var­i­ous eco­nom­ic in­cen­tive pro­grammes em­ployed by main­land states to strength­en and di­ver­si­fy their economies, such as Al­aba­ma, Ten­nessee and Geor­gia, which used eco­nom­ic in­cen­tives to at­tract au­to man­u­fac­tur­ing. "Di­a­geo's USVI dis­tillery re­places rum that Di­a­geo pre­vi­ous­ly pur­chased from Ser­rall�s in Puer­to Ri­co and, to date, it on­ly pro­duces brand­ed rum for the US pre­mi­um rum mar­ket. This means that: Di­a­geo is not flood­ing the US mar­ket with rum; Di­a­geo's pre­mi­um rum does not com­pete with, much less dis­place, the bulk rum pro­duced by WIRSPA mem­bers; and none of Di­a­geo's USVI rum is sold out­side of the Unit­ed States." Cap­tain Mor­gan spice rum was made by Ser­rall�s for Di­a­geo, un­til the USVI gov­ern­ment wooed Di­a­geo with cov­er-over funds to set up its own mega-fa­cil­i­ty in St Croix. In an ear­li­er in­ter­view, Ward told the Busi­ness Guardian the St Croix fa­cil­i­ty can pro­duce more rum than any oth­er dis­tillery in the Caribbean.

US Con­gress to de­cide

On June 14, Cari­com of­fi­cials met with rep­re­sen­ta­tives of the US Trade Rep­re­sen­ta­tive (US­TR) of­fice over the rum sub­sidy is­sue. Cari­com of­fi­cials de­liv­ered an hour-long pre­sen­ta­tion and US gov­ern­ment of­fi­cials un­der­took to hold in­ter­nal con­sul­ta­tions among the re­lat­ed US agen­cies, in or­der to take the mat­ter to Con­gress for its con­sid­er­a­tion and get back to Cari­com. The Caribbean's cau­cus of Am­bas­sadors in Wash­ing­ton are to fol­low up. Though not a Cari­com mem­ber, the Do­mini­can Re­pub­lic was al­so rep­re­sent­ed at the meet­ing. Ward at­tend­ed on be­half of West In­di­an rum pro­duc­ers. For the US, rep­re­sen­ta­tives of the US­TR, the De­part­ment of State, the De­part­ment of Trea­sury, the De­part­ment of Com­merce, and the De­part­ment of the In­te­ri­or at­tend­ed the meet­ing. No rep­re­sen­ta­tives from the USVI or Puer­to Ri­co at­tend­ed, but the De­part­ment of the In­te­ri­or is re­spon­si­ble for both of those is­land ter­ri­to­ries. Recog­nis­ing the chal­lenge it would have faced, Puer­to Ri­co is al­so do­ing the same as the USVI and of­fer­ing de fac­to sub­si­dies us­ing cov­er-over mon­ey to their rum pro­duc­ers. Puer­to Ri­co now has three ma­jor rum dis­til­leries op­er­at­ing with­in the cov­er-over frame­work: Bac­ar­di, Ser­rall�s, and a new dis­tillery, Club Caribe, which was built with­in the last year with cov­er-over funds ac­cord­ing to Ward.

To date, there has been no in­di­ca­tion of what re­dress Caribbean rum pro­duc­ers may or may not re­ceive. At the June 14 meet­ing, the US of­fi­cials lis­tened, asked ques­tions, and made no promis­es oth­er than to get back to Cari­com on the is­sue. Cari­com is ask­ing for the de fac­to sub­si­dies to be dis­con­tin­ued im­me­di­ate­ly, and for com­pen­sa­tion for the sub­si­dies al­ready pro­vid­ed to re­store the com­pet­i­tive bal­ance. Though aware of the rum bat­tle, be­cause it pre­vi­ous­ly caused con­tention be­tween the USVI and Puer­to Ri­co, the US Con­gress, which will ul­ti­mate­ly de­cide on what po­si­tion that coun­try will take, has so far lent a deaf ear to the is­sue. In an ear­li­er in­ter­view, Ward said that both Di­a­geo and Bac­ar­di have lob­by­ists in Wash­ing­ton to en­sure that Con­gress con­tin­ues to take that stance to main­tain the sta­tus quo.

"This is easy be­cause to the US, this is small mon­ey, and does not ap­pear on their radar," he said. "The fight be­tween Bac­ar­di and Di­a­geo has been go­ing on for years and tra­di­tion­al­ly Con­gress has de­clined to get in­volved. We are hop­ing that would change."He said that if not re­solved, "(In the) long term, it would have a trade-dis­tort­ing ef­fect glob­al­ly."

Cu­ba, an­oth­er ma­jor Caribbean rum pro­duc­er, has been left out of the talks on the is­sue be­cause of the US trade em­bar­go against the com­mu­nist is­land.Bac­ar­di mar­kets a "Ha­vana Club" in the US mar­ket where it has the Cuban brand reg­is­tered as a US brand. With the US trade em­bar­go against Cu­ba still in full ef­fect, the US gov­ern­ment up­holds that Bac­ar­di may con­tin­ue.

On Deck

On Ju­ly 18, Di­a­geo an­nounced that Stephon Scott, a T&T bar­tender from the On Deck Pub at Tradewinds Ho­tel in St Joseph Vil­lage, San Fer­nan­do, won the 2012 Di­a­geo Re­serve World Class Bar­tender of the Year award for Latin Amer­i­ca and the Caribbean. This took place around the same time Cari­com trade of­fi­cials were ne­go­ti­at­ing with their US­TR coun­ter­parts. Asked about this time­ly an­nounce­ment, Kir­by wrote, "Di­a­geo's Re­serve World Class bar­tend­ing com­pe­ti­tion, re­cent­ly held in Rio de Janeiro, Brazil, is a glob­al cam­paign that has been held in more than 50 coun­tries around the world for the last five years. There is no con­nec­tion be­tween this event and our op­er­a­tions in the US Vir­gin Is­lands." In a re­lease, Randy Mil­lian, pres­i­dent, Di­a­geo Latin Amer­i­ca and the Caribbean, said: "We were tru­ly im­pressed by Stephon's per­for­mance in Brazil. He is the per­fect em­bod­i­ment of the pas­sion, flare and zest that rep­re­sents T&T so well, and we are de­light­ed to call him the 2012 Di­a­geo Re­serve World Class Bar­tender of the Year for our re­gion. As Latin Amer­i­cans con­tin­ue to em­brace the cock­tail cul­ture, Di­a­geo re­mains com­mit­ted to grow­ing lo­cal tal­ent like Stephon and fur­ther es­tab­lish­ing bar­tend­ing as a se­ri­ous pro­fes­sion." The com­pa­ny said 15,000 bar­tenders from 50 coun­tries "have shak­en, stirred and poured their way through na­tion­al heats, un­til on­ly the most tal­ent­ed re­mained to com­pete over the fi­nal four days of world-class chal­lenges." The glob­al fi­nal of the com­pe­ti­tion took place from Ju­ly 8 to 12. From its port­fo­lio of spir­its, Di­a­geo said com­peti­tors used Ke­tel One, Ciroc, Tan­quer­ay, No Ten, Don Julio, Ron Za­ca­pa, John­nie Walk­er Gold La­bel and Blue La­bel.