The Week in Europe
By David Jessop

On December 4th, Cariforum announced that the European Development Fund had
approved a grant of US$ 62m to support the development of the Caribbean rum
industry. This sum will be used to assist individual rum producers modernise
their distilleries, install effluent disposal systems, develop an
international rum marque for Caribbean rum and undertake marketing campaigns
in Europe. 

The grant is expected to leverage other commercial and concessional funds to
support the development of the industry.

Uniquely, it has been agreed that a private sector entity, the West Indies
Rums and Spirits Producers Association (WIRSPA) will manage this programme,
thereby making real, perhaps for the first time, the EU and ACP's commitment
to make non government entities full partners in the delivery of
development. In this and other ways the rum programme reflects in a
practical fashion the language contained in both the rum declaration and in
the Cotonou Convention and in the Treaty as a whole.

The financing decision by the European Union is the outcome of a five year
struggle that had important implications that went far beyond rum. Caribbean
Governments, trade ministers and the Regional Trade Negotiator had all
sought to have Europe recognise that when developed countries unilaterally
liberalise the market for established products from preferential suppliers
in developing nations, transitional support was essential if the industry
concerned was not to fail. For this reason rum was a test case.

The history is complicated. In 1996 the EU and US agreed to remove with
almost immediate effect all tariffs on white spirits of which rum is one.
They did so in order to achieve agreement on a completely unrelated, but for
them more significant arrangement relating to information technology. In
doing so, they failed to take account of existing tariff arrangements
supporting commodity rum producers in the Caribbean under the Lomé
Convention. But after a hard fought battle the EU agreed in the case of rum
to delay full market liberalisation until 2003.

However, because rum was a protocol product covered by the Lomé Convention,
Europe felt unable to agree at that time any arrangement to provide the
industry with the transitional support it needed to move from the production
of low-cost, low-margin commodity rum to higher value branded products. It
was only later and after strenuous representations from the ACP that the
European Union agreed in a declaration on rum in the Cotonou Convention a
package of measures to help facilitate the industry's adjustment to a
liberalised market. It is the language of this declaration that the EU has
now breathed life into through an agreement that provides substantial funds
to support an integrated development programme for the industry.

The full story of how a satisfactory outcome for rum was achieved will
eventually be told, but for the region and the African Caribbean and Pacific
states this is a precedent setting project.

Most importantly, the decision recognises that despite the policy
constraints on providing assistance to middle ranking developing economies
such as those in the Caribbean, the EU is prepared to support the process of
economic transition in those ACP countries and industries where markets are
liberalised. 

The rum decision also proves what government and industry working to achieve
the same objectives can achieve. The rum industry is well led and well
prepared. It has constantly looked over the horizon and not sought to hang
on to the past or argue for support for those parts of the industry that are
not viable. It has spent time in Europe making clear the consequences for
the region and the industry of its collapse. Its membership crosses the
language divide of the Caribbean and it has forged alliances with producers
in the French DOM and elsewhere in the spirits industry. Its close working
relationship with Caricom, Governments, ministers throughout the region, and
with Ambassadors and trade negotiators has enabled the highest levels of
co-ordination and the delivery of viable solutions. 

The decision means that the future of Caribbean rum, which had been
seriously threatened since 1997 is now brighter. As WIRSPA points out in its
press release, the industry will now have a fighting chance not just to
survive but also to expand its exports of added value branded products. This
will enhance employment and improve foreign exchange earnings for the region
as a whole. 

Although long in coming, this support for rum is welcome and a clear
recognition by Europe of its responsibilities and its continuing role in the
Caribbean region. Very soon bananas and sugar will undergo the final
transition out of preference. The details of how these related but different
market liberalisation processes will work and how the viable parts of these
industries will be supported are still a long way from being worked out. But
as with rum, no industry can afford to fail. 

In just over one year's time on December 31st, 2002 the process of
liberalising the rum market in Europe that began in 1997 will be all but at
an end. Then, Caribbean producers will have to compete with rum producers
from every other part of the world. The challenge now for the industry and
those involved from Europe is to deliver rapidly and flexibly the four-year
programme of support that has been agreed.

David Jessop is the Executive Director of the Caribbean Council for Europe
and can be contacted at [log in to unmask]
December 7th, 2001


Dr. Amanda Sives
Project Officer - Election Observation
Commonwealth Policy Studies Unit
Institute of Commonwealth Studies
28 Russell Square
London, WC1B 5DS

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