Trade Negotiations Insights • Volume 9 • Number 4 • May 2010

A betrayal of the Caribbean rum industry

by Sir Ronald Sanders

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Caribbean sugar, Caribbean bananas, now Caribbean rum; soon there will be nothing left but the words.

The European Commission (EC) convinced Caribbean’s negotiators to sign a full Economic Partnership Agreement (EPA) with the European Union (EU) in 2007 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. Now, the European Commission (EC) is reneging on its undertakings and many rum companies face a grave financial crisis.

The single paragraph on rum in the EPA was not worth the paper it was written on. In March, a ministerial meeting of EU and African, Caribbean and Pacific (ACP) countries initialed the text of the second revision of the Cotonou Agreement, which is the legal basis for relations between the EU and the ACP. No attention was paid to the plight of rum producers.

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 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.

Some weeks ago, however, the West Indies Rum and Spirits Producers Association (WIRSPA) was told formally that the EU funds under which its members benefited will be cut-off on 30 June 2010.

As a result, Caribbean rum producers who have borrowed money on the strength of EU pledges to upgrade their production facilities or undertake marketing projects will be left to carry the debt. This despite the fact that of the original €70 million that the EC had pledged to this programme, there is still approximately €8 to €10 million unspent.

The EC has told both WIRSPA and Caribbean government representatives that a European Council regulation prohibits them from extending the fund for the 18-month period the rum producers need. It has also repeatedly told WIRSPA that it should look to the EDF’s 10th Regional Programme for the money the rum producers need, and should ask the governments of CARIFORUM for an allocation under this programme.

But the EC conveniently forgets here that the rum programme was the result of a political deal struck at the end of the negotiations of the Cotonou Treaty.

The outline sum agreed at that time (€100 million) was to facilitate a finite transition process in the context of a trade agreement and was not a development programme. It is only in 2000 that the specific sum of €70 million was agreed and inserted into the regional programme using unallocated EDF funds. This was solely for the use of rum and for a programme to be delivered by WIRSPA. It was a key part of the political agreement to end the Cotonou negotiations and to facilitate the industry’s survival in the light of the fact that, three years earlier, its markets were liberalised without reference to the Caribbean.

In a more sinister development, the EC has been busy trading away the small and limited preference that Caribbean rum has in the EU market. On 18 March the EC formally told the Caribbean that they have already settled liberalised tariffs and quotas with Colombia and Peru and are now talking in similar terms with Central American and Andean countries.

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 dispatched to Europe now, not only to talk to governments but also to take the case beyond governments to the media, and non-governmental organisations. Another potential ally, as suggested by Patrick Chatenay, a strategy consultant to the sugar and ethanol industry, is the European Parliament. As Chatenay points out, “the Treaty of Lisbon gives it the power to block international commercial agreements negotiated by the Commission, and it has not been shy in using those powers”.

Caribbean governments too have an obligation to act boldly and to do so now.

Author: Sir Ronald Sanders is the a consultant, writer and the former High Commissioner to the United Kingdom for Antigua and Barbuda and Ambassador to the World Trade Organization (WTO). This article is an abridged version of two recent commentaries authored by Sir Sanders, available at http://www.sirronaldsanders.com/