Caribbean Rum Producers Protest EU Decision to Cut Aid

28 April 2010

A decision by the European Commission to close in June a programme designed to help Caribbean rum producers adjust to global competition has sparked protest from the industry.

The Caribbean rum industry, which faces stiff competition from several Latin American producers, says it needs more time to spend the pre-allocated funds to prevent many rum companies from going into debt.

"There is still money remaining in the program," said Frank Ward, Chairman of the West Indies Rum and Spirits Producers Association (WIRSPA), an organisation of ACP Caribbean distillers' associations. "What WIRSPA is asking for is that a mechanism be found to allow the money to continue to be made available, so that it can continue to work towards the purpose [for which] it was designed," said Ward in an interview with Bridges.

Ward estimates that €8 to €10 million from the EU funding has not yet been disbursed.

The Integrated Development Programme for the Caribbean rum sector -- launched in 2003 in the wake of a decision by the EU and the US to lift tariffs on white spirits, including rum - is intended to help the Caribbean rum industry adapt to increased competition resulting from the liberalisation of the European Union rum market.

More recently, EU trade deals with Peru and Colombia are expected to lower tariffs on rum, and similar concessions may be offered to other countries in South and Central America.

Financed by the Eighth European Development Fund, the rum programme divided a purse of €70 million among a cost-sharing grant scheme to promote production of high-quality rum; a programme to establish an ‘Authentic Caribbean Rum' brand; institutional support to WIRSPA; and long-term and short-term technical assistance.

The programme also included €65 million of co-financing from the Caribbean rum sector itself.    To access the €70 million from the EU, rum companies first had to put up the capital for projects themselves; they could then file for reimbursement once a project was completed.

Last month, the European Commission formally announced that it will no longer consider claims for reimbursement after the end of June 2010. Originally set to terminate in mid-2007, the programme was extended to 2010 in 2006, thanks to a request by WIRSPA.

"The EU had already prolonged the programme once, for an additional 3 years, but a second prolongation is simply not possible under EU rules," explained an official from the Commission. "To further support the industry, the EU has advised WIRSPA of existing options to secure further assistance, either from the tenth European Development Fund regional programme, managed by the Caricom Secretariat or from EU member states."

While the programme's rules do not allow the European Commission to extend the deadline a second time, a special dispensation by EU authorities may be warranted, suggest Paul Goodison and Corinna Braun-Munzinger of the European Centre for Development Policy Management (ECDPM), in a forthcoming article in the ICTSD-ECDPM publication Trade Negotiations Insights.

ICTSD reporting; "WIRSPA presents marque of authenticity to the Caribbean," CANA NEWS, 25 May 2009, "Caribbean rum in danger," TRINIDAD & TOBAGO EXPRESS, 1 April 2010.

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