Op-Ed: The Caribbean Cliff We Must Avoid

By: Caribbean Journal Staff - December 31, 2012

By Hon. Donna Christensen
US Virgin Islands Delegate to Congress


AS WASHINGTON frantically scrambles to prevent the United States from falling over the proverbial Fiscal Cliff, I am concerned to hear rumblings of a potential World Trade Organization (WTO) action by some of my Caribbean brethren that could rock our collective Caribbean economies.

Make no mistake about it: a trade complaint by Caribbean rum-producing countries against the United States and the United States Virgin Islands’ use of the US Rum Cover-Over Programme would be without merit and ill-advised. The programme, enacted by Congress nearly a century ago, does not violate World Trade Organization rules.

Recent CARICOM press releases and subsequent press articles, which in some cases inaccurately portray the facts, have intimated that some Caribbean nations are discussing a strategy for WTO trade action.

In these challenging times, we should be working together, not talking about starting baseless trade wars.

While such a desperate and off-base trade action would surely fail on its merits, it would succeed in causing unnecessary friction and animosity.

Such a decision would pit Caribbean nations against the United States and its territories in the Caribbean region, when what we really need are unity and congruence.

And any WTO action against the United States and this economic development programme will likely backfire, instead shining a bright spotlight on subsidy programmes enjoyed by our Caribbean neighbours.

There is simply no evidence that US import sales of these non-US Caribbean producers are suffering. I said in my letter to Ambassador Ron Kirk, the United States Trade Representative, in urging him to defend the sanctity of contracts that rely upon the rule of longstanding US law:

“This [allegation] is simply not true. Imports of rum into the United States from the Caribbean are up year on year, according to International Trade Commission data. Moreover, the Caribbean producers enjoy many protections from their own governments, in the form of tariffs and taxes that are inconsistent with their own WTO obligations. Many of these Caribbean rum producers are owned by multinationals similar to those with which the USVI has partnered. Some commentators like to portray this issue as David versus Goliath. I can tell you that David in this story is the USVI, fighting to grow its own rum industry and keep its economy afloat.”

The US Rum Cover-Over Programme is well-settled US law, supported by Congress. And the US government’s policy is to defend US law. The programme has been used by the USVI, part of the United States, to secure long-term, revenue-producing business commitments, just as many states and countries have done for years.

Specifically, the USVI has secured two long-term, rum-producing agreements with Diageo and Beam that have revived this historic industry, created jobs, built state-of-the-art facilities that help the environment and guaranteed exclusive production for 30 years.

This is smart, autonomous economic-development policy, exactly the intent of the United States Congress when it passed the US Rum Cover-Over Programme.

If the allegations against the USVI were accurate, one would expect to see adverse effects or harm to Caribbean rum trade.

To the contrary, CARICOM’s rum trade with the United States appears to be improving. According to the ITC, rum imported to the US from CARICOM countries and the Dominican Republic has actually increased over the last year by 12.8 percent in value and 17.5 percent in volume.

Another accusation I have read is that the US violated the WTO law prohibiting subsidies contingent on export performance. Once again, not true. There are no export subsidies involved in the US Rum Cover-Over Programme, because rum shipped from the US Virgin Islands (a US territory) to the US mainland is not an export.

This is not an easy economic time for any of us. In the USVI, our largest employer, the HOVENSA refinery, recently shuttered its operations, destroying thousands of jobs. This devastating development increased unemployment, decreased tax revenues and caused thousands of citizens to move off the island of St Croix. As a result, the rum cover-over revenue is providing hope and stability in a time of dire economic need.

This programme is helping to keep the USVI solvent, fund key healthcare and infrastructure initiatives, secure public-sector jobs and pay for urgent social services.

As a Congresswoman from the United States Virgin Islands, I have joined with our Caribbean neighbours over the years to protect our common interests, including rum.

So as we gather together this holiday season, I sincerely hope that we in the Caribbean can unite over our shared goals.

In the end, I sincerely believe we will avert the baseless trade war a WTO complaint would initiate, because this is clearly without merit and not in the best interest of the Caribbean.

The last thing we need is an unnecessary fight that, at best, disrupts relations in the Caribbean; and, at worst, creates a Caribbean fiscal cliff.

The Honourable Donna M Christensen will begin her ninth term as a Member of the US House of Representatives in January 2013, representing the US Virgin Islands. She is the first female physician in the history of the US Congress, the first woman to represent an offshore territory, and the first woman Delegate from the United States Virgin Islands. She serves as an Assistant Minority Whip in the Democratic Caucus.

Note: the opinions expressed in Caribbean Journal Op-Eds are those of the author and do not necessarily reflect the views of the Caribbean Journal.

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