…USTR 2019 allocation targeted non-producing Caribbean states

WITH Trinidad and Tobago and St Kitts and Nevis closing down its sugar industry, Chairman of the Demerara Distillers Limited (DDL), Komal Samaroo, is urging the United States to reallocate the tariff rate quota it announced for these countries this year to states to Caribbean states that are still producing sugar.

The tariff rate quota announced by the United States Trade Representative (USTR) for 2019 for individual countries included 7,371 tonnes for Trinidad & Tobago and 7,258 tonnes for St Kitts & Nevis. “Interestingly, these countries have ceased sugar production quite some time ago. A case could be made to reallocate these quotas to countries in the Region, which are still producing sugar,” Samaroo told a gathering at Capitol Hill during a forum to celebrate Caribbean Legislative Week on Wednesday.

Samaroo said this is particularly relevant in light of the movement towards a CARICOM Single Market and Economy that will eventually allow for free movement of people within the Region. “Today, I take this opportunity to urge the United States, through its Members of Congress and officials of the Executive Branch, to work with the CARICOM Region to have these country-specific tariff quotas transferred into a regional quota,” he told the forum.

Earlier this week, the Sugar Association of the Caribbean stated in a press release that presently, more than two-thirds of sugar consumed in CARICOM comes from extra-regional sources, duty free, displacing market opportunity for over 200 thousand metric tonnes of CARICOM sugar, which is forced onto the low value global market. The association urged policy changes, noting that these are required to secure the integration of the sugar market within the CARICOM Single Market & Economy (CSME).

“A failure to achieve this threatens a major agricultural sector of the Region’s economy, hundreds of thousands of Caribbean jobs and questions the effectiveness of the single market in meeting its stated objectives.” The regional body said CARICOM industries investments are set to deliver to market nearly 300,000 metric tonnes of food grade sugar within the next 18 months, matching the Region’s demand.

According to SAC Chairman, R. Karl James, “SAC Directors are squarely focused on how regional integration can benefit industrial users and consumers of sugar through competitive longer-term pricing strategies, which are not directly impacted by cyclical global sugar price surges.” James continued, “Utilisation of our sugar in most of our products would reduce this risk alongside the processing and import costs associated with importing sugar from outside the Region. This would bring CARICOM in line with other regional sugar markets.”

END OF SUGAR PROTOCOL
Meanwhile, giving a background of the crisis in the industry, Samaroo noted that in recognition of its importance to the Region, sugar was the subject of special trade arrangements until just over a decade ago (2006) when the EU Sugar Protocol ended. He told the gathering that the USA imports sugar on a duty-free basis from the Caribbean countries under the tariff-rate quotas established in 1990 by the Farm Bill.

RUM INDUSTRY
Samaroo said the most lasting impact of the sugar industry in the Caribbean was the creation of the regional Rum Industry. He said that for over three centuries the Region has been producing rum from the molasses by-product of sugar production, shipping bulk rum to Europe where it was bottled branded and sold. From 1745, for 225 years, rum was served as part of a daily ration to the men who served on the British Royal Navy, until that practice ended on July 31, 1970.

According to him, from 1975 to 2000, the Caribbean exported rum to the EU under the Rum Protocol of the Lome’ Convention, a trade and aid agreement between the European Union and the African Caribbean and Pacific States. In addition, from January 1, 1984, under the Caribbean Basin Economic Recovery Act (CBERA), rum from the Region benefitted from duty-free access to the US market. “We support the extension of CBERA. It enabled our initial market access into the US and continues to provide a valuable preference against third country low-value products, which often originate in countries where the raw material inputs are subsidised, leading to artificially low product pricing,” Samaroo told the forum. He said the US Rum Market is dominated by supplies from USVI and Puerto Rico to the extent of about 80 per cent of total market as these territories benefit from the Rum Excise Tax Cover-Over that provided for generous support and subsidies.

CHALLENGING OUTLOOK
Noting that the outlook of Caribbean rum brands in the US market remains challenging, Samaroo said the region’s strategy is directed at the premium and super premium segment of the market and this is where there has been some success. “But these segments are small and still developing requiring significant investment to keep it growing. As a whole, however, our total branded volume has not grown substantially over the past decade and our bulk rum business, so important in financing our brand building, has plummeted in the face of tremendously subsidised products.”

In addition, he said there is a plethora of new brands entering the market, some with very dubious provenance. “We also see a dramatic increase in the trade of ethyl alcohol and worry that this is finding its way into rum in violation of international trade rules. Our response to these challenges has been to present ourselves as quality premium products. Our products have authentic provenance, they are fermented and distilled in the country of origin, and we follow common rules and regulations as to what can be called rum.

Rum has become the Region’s largest agriculture-based export earner, in the face of significant reduction in earnings from sugar which has been facing major marketing and production challenges. For example, in Guyana, based on information in the 2018 Central Bank report, while in 2016 export earnings from sugar was two times that of rum, in 2018 sugar earned only 56 per cent of what the rum industry earned from exports.“

Touching the Region’s economy, Samaroo said there is need to broaden the base on the regional economy, noting that the agriculture potential must be fully exploited, and investments made in agro-processing so as to move higher up the value chain. He said similar strategies must be pursued in the forestry and mineral sectors.

“The newly emerging oil and gas industry in Guyana would most certainly provide an increased revenue stream, which, once well managed, can help to create a competitive environment for the other sectors of the economy to develop in a sustainable manner, becoming globally competitive, and contributing to growth and improvement in the quality of life of its people.”