Prepare to repel Lobbyists!
The USVI deal to build Cap’n Morgan a new haven is meeting increasing heat, and has moved on from the silliness of tying to Obama bashing and stimulus packages. I still think Caricom should be banging on the doors in Washington and at the WTO demanding rebate on US excise duties..but I have to admit to some prejudice. As a rule of thumb, if Lott and Breaux support something – it’s worth opposing!
Rumpundit
Breaux and Lott now working for The Captain
Source: Washington Examiner
By: Timothy P. Carney
12/21/09 12:37 PM EST
Former senators Trent Lott, R-Miss., and John Breaux, D-La., have entered the Caribbean Rum Rumble that pits the U.S. Virgin Islands against Puerto Rico. The basic story, as I wrote in a recent column, is this:
USVI is offering generous corporate welfare subsidies to liquor company Diageo if Diageo builds a Captain Morgan distillery in the USVI. Currently, Captain Morgan is made in Puerto Rico. Puerto Rico is now lobbying for a federal limit on the corporate welfare the protectorates can offer — a sort of multilateral disarmament treaty.
From a lobbying registration filed last week, we learn that Diageo has hired the Breaux Lott Leadership Group to lobby against this bill.
This is what corporate welfare does: spurs more lobbyists. That’s why big government is good for K Street.
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SERRALLES URGES FEDERAL ACTION AND REGULATION ON BEHALF OF PUERTO RICO IN RESPONSE TO USVI’S UNREASONABLE RUM DISTILLER SUBSIDY PROGRAM
Source: Catch 21 Consulting
Dec 17th
Clock is Ticking for Decision on H.R. Bill 222 that says ‘No’ to Anti-Competitive Rum Production Subsidies. Legislation Proposes to Level the Playing Field Between Puerto Rico and US Virgin Islands.
Roberto Serralles, Vice-President of Destilería Serrallés, Inc., challenges the anti-competitive nature of the exaggerated subsidies that the U.S. Virgin Islands (USVI)
is offering to rum distillers that locate themselves in their territory.
“The key issue is that the USVI is abusing federal law in order to subsidize rum production in amounts greater than the cost of producing the rum itself,” states Serralles.
“Passing H.R. Bill 2122 is critical to preserving the vitality of rum distillers-such as ourselves-who are established outside of the USVI.
We will not be able to compete fairly in the marketplace due to the exaggerated size of the subsidies the USVI is offering.”
The dispute stems from a controversial deal the USVI signed with London-based Diageo, PLC (owners of the Captain Morgan rum brand), to lure them to set up a rum production operation in the USVI beginning in 2012. Since 1985, all the rum used in the Captain Morgan rum brand has been produced by Destilería Serrallés in Puerto Rico. But that would all change under the terms of the deal signed in June 2008. The USVI agreed to finance for Diageo a $165 million, state-of-the art plant; pay the $18 million in annual financing costs; and provide molasses, production, and marketing subsidies to Diageo of over $60 million annually during the 30 year deal. All of this will be funded by the USVI’s portion of the rum cover-over program which returns to Puerto Rico and the USVI the excise tax paid by consumers in the U.S. from the purchase of rum produced in the two jurisdictions.
Puerto Rico officials are extremely concerned that the USVI is proposing to give more than 50% of the cover-over funds as subsidies to USVI-based distillers because this threatens the viability of the rum industry in Puerto Rico and jeopardizes the future and integrity of the rum cover-over program. Pedro Pierluisi, Puerto Rico’s Delegate to Congress recommends emulating Puerto Rico law, which limits to 10% the amount of subsidy from the cover-over program that can be returned to the local rum industry.
This assures the majority of the funds are used for financing local infrastructure projects; environmental conservation programs; health services; and education programs, which are the intended beneficiaries of the program. Pierluisi has introduced H.R. Bill 2122, which would similarly cap the amount of funds from the cover-over program that can be provided as subsidies to the rum industry to 10%. According to Pierluisi, the dispute is not about any particular producer, but instead is about the rum cover-over
program, as a whole. “What’s happening here is that the government of the U.S. Virgin Islands is creating an anti-competitive situation by giving extraordinary and unreasonable subsidies to producers located in the USVI. The rum market should work just like any other market in the U.S., which is based on fair competition, among the players. Congress needs to decide on rules that regulate how the rum cover-over funds are used by both Puerto Rico and the USVI. Otherwise no rum producer will be able
to fairly compete in the rum marketplace” Pierluisi said.
“Recent press coverage regarding the rum cover-over dispute is missing the point,” Serralles states.
“Those trying to justify these questionable rum subsidies argue that all states provide subsidies to attract business.” Serralles agrees but adds, “we are certain that not one state provides subsidies larger than the cost of production. Imagine if a given state trying to lure new businesses decides to give an international car manufacturer a subsidy-using federal funds-larger than the cost of producing a car, and in addition, provides funds to cover the financing of a new plant. Congress would be outraged. This is exactly what the USVI is doing in the rum industry and USVI officials expect everyone to believe it is an appropriate economic development program.” Serralles is not opposed to incentives to promote industrial development, but he states that “these incentives, funded by public dollars, need to be reasonable and shall not violate one of America’s most cherished values: fair competition.”
“We are prepared to compete and responsibly bring the best products to market for our customers,” said Serralles. “We’ve been making exceptional rum for six generations and we plan to do it for at least six more. But the fact of the matter is that unless some sense of responsibility and fairness is brought to the rum cover-over program, the future existence of our company, one of the USA’s oldest family owned and operated companies, and one responsible for over 500 direct jobs in Puerto Rico, will be put
at risk. All we ask is that fairness prevails and that we are allowed to compete in a level-playing field.”
The H.R. 2122 bill has seven bi-partisan co-sponsors: Reps. Luis Gutierrez (D-IL), Jose Serrano (DNY), Nydia Velazquez (D-NY), Joseph Crowley (D-NY), Darrell Issa (R-CA), Walter Jones (R-NC), and Dan Burton (R-IN). Lawmakers requested time on the Ways and Means Committee schedule to consider the bill and brief members on the panel about it.