Thursday, January 3, 2013

Caribbean Rum Producers Get Shafted In A Special 'Cliff' Provision

As more news about the special "fiscal cliff" deal manifests we're starting to see the first victims emerge, some of whom aren't even U.S. citizens. (We shall have to wait for the debt ceiling negotiations to see how many U.S. citizens- mainly of the middle and working classes, get screwed.) Anyway, under the headline '10 Curious Provisions in the 'Fiscal Cliff' Bill (Denver Post, p. 7A, today) one finds this at No. 2:

"Congress will levy an excise tax of $13,50 per gallon on rum imported to the United States. Most of the money is to be transferred to Puerto Rico and the Virgin Islands to support THEIR (emphasis mine) rum industries. In 2009, this raised about $547 million"

Now this is just plain WRONG! Indeed, this is a blasted domestic rum subsidy that needs to be taken (by the non-U.S. protectorate Caribbean rum -producers) to the World Trade Organization.  Because what it does is flouts all the rules and principles of fair trade!

It is, in fact, an amped up continuation of the U.S. Government's selective application of a cover-over program which repatriates 98 percent of all rum excise duties (raised on rums sold in the U.S.) back to the producing U.S. territories of Puerto Rico and the  U.S. Virgin Islands.   Estimates from 2010 put this unfair repatriation at $450 m, as reported in the Barbadian press. These offhand deals, made by the respective neo-colonial governments (of Puerto Rico and the USVI) and condoned by a whacky U.S. congress, have been struck with the likes of Bacardi and Serrales. It is galling to Caribbean governments which derive no similar special deals based on repatriating duties. (Hmmm......maybe they should! Cockspur rum is better than Bacardi anyway!)

Barbados Advocate News columnist David Jessop has pointed out, the U.S. congress has enabled the USVI and Puerto Rican development programs "to divert hundreds of millions of dollars to primarily provide a development program for the largest distilled spirits companies in the world". In Jessop's world:

"the U.S. - maybe wittingly, maybe unwittingly - is damaging one of the few competitive industries that Cariforum nations have and  which helps underpin the economic viability of small and vulnerable Caribbean states".

The issue is even more close to the hearts of Caribbean folk, since as Jessop has noted :

"Unlike the product of large, multinational distilling groups, the success of Cariforum producers does not result from artificial tax breaks, transfer pricing or subsidy. Instead it is an industry dominated by small local distillers whose product is export-oriented, brings much needed foreign exchange and adds value to primary agriculture.while providing signficant levels of tax revenues to governments struggling to deliver social programs"

Which is very true, since we know the Cariforum nations have one of the most progressive tax systems in the hemisphere, and unlike the faux democrats in the US of A, none of them would ever approve any form of unbalanced tax cuts, or any tax cuts, period.

In his piece from 7 1/2 months ago, Jessop concluded:

"This is why rum has always been a product worth fighting for as Europe knows to its cost and the U.S. is soon to discover".

Maybe now is the time to move beyond rhetoric and for the Cariforum nations to drag the big bully domestic run subsidizer to the WTO. After all, turnabout is fair play! (The U.S. dragged Caribbean banana producers in front of the WTO in 1998 for encroaching on United Fruit's profits!)

No comments: