- The Washington Times - Thursday, August 23, 2001

The U.S. government is endangering its international credibility in free trade negotiations and exposing Americans to the hidden tax burden of a trade war — all over a dispute about rum and Cuba. This month's embarrassing ruling by a World Trade Organization (WTO) panel correctly chastised the United States for a 1998 law in violation of international agreements on intellectual property protection.
Unless Congress acts quickly to repeal its own folly, the costs to ordinary taxpayers will expand far beyond rum drinkers, because the dispute could trigger the kind of trade sanctions that raise prices on all manner of goods and services.
In late 1998, Congress threw aside two centuries of respect for intellectual property when it passed a special interest law known as Section 211. It prohibits U.S. courts from enforcing rights to certain Cuban-origin trademarks and was slipped into that year's Omnibus Appropriations Bill as Congress frantically tried to get home for the elections.
Section 211's effect is to favor Bermuda-based Bacardi, which currently dominates the $1.5 billion U.S. rum market, over a joint venture between a Cuban entity and Pernod Ricard, the French liquor company. The joint venture acquired the U.S. rights to the "Havana Club" trademark in 1993 — 20 years after its original Cuban owners had abandoned the trademark in the United States — and plans to market "Havana Club" Cuban rum in the United States whenever the 40-year-old trade embargo is lifted.
But the prospect of another company selling Cuban rum in the U.S. post-embargo era was something that did not sit well with Bacardi, so the company set about to ensure this would never happen by manipulating U.S. trade law. Thus was born Section 211. The law prevented the Cuban-French partnership from enforcing its trademark rights in court, so Bacardi would be free to use the "Havana Club" name and to sell its bogus product to unsuspecting U.S. consumers.
Far from being sound public policy, Section 211 amounts to Congress picking the winner in a marketplace fight between two companies — neither of them American — and masking this special interest sop in the guise of punishing Cuba's dictator, Fidel Castro.
Section 211 stands in direct violation of the international intellectual property regime created at U.S. behest to protect its companies in the world. Because it denies certain trademark holders their day in court to defend their trademarks, Section 211 runs counter to the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), an obvious fact confirmed by the WTO panel ruling. If the United States does not eliminate the law, the European Union could impose trade sanctions.
Such sanctions, easily provoked given the current state of relations between the United States and Europe, illustrate the taxpayers' peril from government interference in the market. We've already had disputes with Europe over beef and bananas, high-tech products and other issues. There are only two outcomes: U.S. businesses lose access to overseas markets — costing American jobs — or U.S. consumers pay higher prices for imported goods because of escalating tariffs.
In either case, the result is an indirect tax on consumers. It's bad enough when the trade war is triggered by misguided efforts to "protect" an American company. But in this case, the government is putting our international trade standing at risk as a special favor to a single, non-American company. Surely it's poor policy to pick the pockets of working Americans to finance cronyism.
The simple truth is that Section 211 had no business becoming the law of the land in 1998, and it has even less business remaining so now.
In the face of the WTO's ruling and the trade sanctions that will inevitably follow, Section 211 is clearly a threat to American taxpayers, who were never asked if they wanted a trade war to subsidize a Bermudan corporation. Lawmakers in Washington should stop this tax increase by any other name in its tracks by repealing Section 211.

Tom Schatz is president of Citizens Against Government Waste, the nation's largest taxpayer advocacy group.


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