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Diageo argues the complaints of smaller producers are overblown. Spokesperson Brooke Lawer says the subsidies the British company receives are similar to incentives from U.S. states or other countries to attract industry and do not create a competitive disadvantage. Quoting figures from the Geneva-based International Trade Center, Diageo says Caribbean Community rum exports to the U.S. increased by 18 percent in the first half of 2012 over the same period last year. Ward said that's misleading because most of the growth is due to a temporary inventory surge by a single Barbados company. He said other major exporters were down during that same period. He insisted that some Caribbean distillers are already being hurt by the subsidies now, even if most of the impact will come as the subsidies mount in coming years. Small rum distillers in Central American nations such as Guatemala and Nicaragua also have concerns about the fairness of the U.S. subsidy regime but "they really don't feel they have a voice to challenge it with the United States," said Edward Hamilton, a Chicago-area man who authored a rum guide and runs the "Ministry of Rum" website. So far, no Caribbean governments have declared their intentions to challenge the United States, the region's biggest trading partner, with a WTO complaint. The Caribbean Community, which groups 15 Caribbean nations and dependencies, said it is trying to achieve a "negotiated settlement" with Washington. The bloc recently sent a letter to President Barack Obama and regional officials have had talks with U.S. officials, though little progress seems likely in an election year. Complicating matters, some of distillers that are complaining about unfair U.S. subsidies themselves provide bulk rum to Diageo. As a result of luring Diageo and its Captain Morgan brand, the total amount of the Virgin Islands' federal rum subsidies has skyrocketed due to increased production. In 2007, total rebate revenues in the U.S. Virgin Islands were $86.7 million. That rose to $199.4 million this year, the first year with partial Diageo production on struggling St. Croix, where a massive refinery closed down earlier this year. Revenues for 2013, the first full year of Diageo production, are projected to be in the range of $236 to $276 million, according to government spokesman Jean Greaux. Greaux argued that the rum deals and access to the national bond markets provided by the rebate revenues were allowing the islands to avoid spending cuts "that would have been economically and socially devastating."
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