The Impact of EU Bilateral Trade Agreements with Third Countries on the Caribbean Rum Sector

Provides the empirical evidence of the effects of preference erosion for the Caribbean rum sector. It shows that if the EU agrees a free trade agreement (FTA) with Central America, Peru, Colombia and the Mercosur trading bloc, Caribbean rum exports would decline by 3 per cent (i.e. equivalent to three quarters of a million euros), affecting individual Caribbean countries, and particularly Guyana very badly. A complete EU liberalisation of rum trade would lead to annual losses for the Caribbean of 5.5 per cent or €1.3 million each year. Annual losses would accumulate to nearly €10 million over the period 2014–2020. The Aid for Trade (AfT) initiative is intended precisely to address such instances of trade preference erosion. And thus how it can help the Caribbean to adjust, by making its producers more productive and/or by encouraging diversification should comprise an important policy issue.