International Tin Agreement: Motion.

Parliamentary Secretary to the Minister for Foreign Affairs (Mr. Kelly)

I move:

That Dáil Éireann approves the terms of the Fifth International Tin Agreement, signed by Ireland on 28th April, 1976, which has been laid before the Dáil.

With the Dáil's permission I will also be moving motions seeking Dáil approval of the terms of two further international commodity agreements, the International Coffee Agreement, 1976, and the International Cocoa Agreement, 1975. Dáil approval of the terms of the agreements is necessary before Ireland can proceed with ratification. It is necessary under Article 29.5.2º of the Constitution which stipulates that "the State shall not be bound by any international agreement involving a charge upon public funds unless the terms of the agreement shall have been approved by Dáil Éireann". In the case of these agreements the charge on public funds is in respect of Ireland's contribution to the cost of administering the agreements. Ireland's contributions for the year 1976-77 amount to a total of about £10,700.

The three international commodity agreements which are before the Dáil are striking examples of continuity in that they are successors to earlier agreements covering the same commodities. The tin agreement before the Dáil is, in fact, the fifth of its kind; the first was negotiated as long ago as 1956. The coffee agreement is the third of its kind; two earlier coffee agreements were negotiated in 1962 and 1968. The cocoa agreement is a successor to the first international cocoa agreement which came into force in 1972.

It would, however, be wrong to see the agreements as being simple renewals of their predecessors. There are a number of modifications in the substantive provisions of the three agreements. These, in fact, reflect the influence on the negotiators of the ongoing debate on economic relationships between developed and developing countries.

It is not surprising that, in the context of this debate, the developing countries place great emphasis on the need to change the structure of trade in raw materials. Their high dependence on commodity exports for foreign exchange earnings and the notorious instability of commodity markets which inhibits long term investment help to explain their preoccupation.

The basic aim of the three agreements which are before the Dáil today is to prevent excessive fluctuations in the price of the commodities in question. Each of the agreements employs different mechanisms to achieve this aim.

We must recognise, however, that, whatever the mechanisms employed, there can be exceptional circumstances in which a commodity agreement can be inadequate to deal with the problems of the market. For example, the coffee agreement is quite clearly not equipped to deal with the present rising price of coffee. It is doubtful whether any agreement could provide adequately for eventualities such as the 1975 frost in Brazil, which severely affected the output of the world's largest coffee producer. We are all aware of the unprecedented increases in coffee prices which have resulted. Agreements designed to cope with all eventualities are not economically feasible. The best we can hope for is a system which will reduce the uncertainties of a normal commodity market.

Explanatory memoranda on the three agreements have been prepared and are available to Deputies. These give a detailed account of the provisions of the individual agreements and cover the question of the costs involved in Irish participation in them. I propose to confine myself to making some general remarks on the three agreements.

I said earlier that the present tin agreement is the fifth agreement of its kind. Each has been of five years' duration and all have been negotiated under the auspices of the United Nations. The International Tin Agreement has the distinction of being one of the oldest commodity agreements in continuous existence and it is the only international agreement covering a major metal commodity. Throughout its existence it has served as a model of producer/consumer co-operation in the field of commodities. However, the present agreement has not yet entered definitively into force. This is due to the fact that Bolivia—one of the principal tin exporters—has delayed ratification. The latest information available suggests, however, that Bolivia will now ratify the agreement in the near future and thereby ensure its definitive entry into force.

The main operational mechanisms are the use of a buffer stock and the application of export controls when necessary in order to adjust supply to demand. The operation of the buffer stock is related to floor and ceiling prices which are fixed at intervals within the Council by majority vote, or much more frequently by consensus, taking into account market conditions and production costs.

Tin is not produced in Ireland and Irish consumption of tin is the lowest of those states subscribing to the International Tin Agreement. However, the availability of tin and materials containing tin is important to Irish manufacturing industry, particularly to the can making and canning industry.

While many of the provisions of the 1976 coffee agreement are similar to those of its two predecessors, its emphasis has been changed. The new agreement is designed to deal more effectively with the complex trade relationships between developed and developing countries. To this end the agreement provides, inter alia, for a mechanism for the establishment of price ranges and price differentials for the principal types of coffee, a system of export quotas and a price mechanism for the adjustment of quotas.

The International Coffee Agreement would have implications for the Irish coffee processing industry whether or not we adhered to the agreement because about 98 per cent of the world's exports of coffee will be controlled by the new agreement.

The 1975 International Cocoa Agreement is, like its predecessor, based on a dual intervention mechanism for stabilising prices within a fixed range, that is, an export quota system, subject to adjustment, to maintain cocoa bean prices within the price range and complemented for this purpose by a buffer stock with a maximum size of 250,000 tonnes of cocoa beans. The buffer stock is financed by means of a small levy on cocoa beans, and, proportionally, on other products, payable on first export from a member country or first import by a member country from a non-member country.

The Irish cocoa and chocolate industry use a significant amount of cocoa beans for the home and export trade and generally imports its requirements from producing countries in Africa. The substantial increase in cocoa bean prices over the last 3 or 4 years, especially in the past year, has been a source of concern to the Irish industry and its counterparts in other countries. Adverse weather conditions and crop disease have been major contributory factors to the shortage of cocoa supplies and consequently to high prices. Market prices for cocoa beans are still considerably above the maximum of the price range in the 1975 cocoa agreement and, as in the case of the 1972 cocoa agreement, this has resulted in a situation where certain important mechanisms of the agreement, such as the export quota and buffer stock systems, are not yet operative.

These three agreements—on tin, coffee and cocoa—are going to influence our trade in these commodities whether or not we adhere to the agreements. By becoming party to the agreements, however, we are enabled to participate in the decisions made and to influence them. In addition, the adherence of all the member states of the Community is necessary if the Community, as such, is to participate fully in the agreements. Thirdly, and also of importance, is the fact that through participation in the agreements Ireland can demonstrate its readiness to co-operate with commodity exporting developing countries within commodity agreements. This is of particular significance at the present time in view of the developing countries' preoccupation with the establishment of an Integrated Programme for Commodities. I commend the motions to the House.

Mr. O'Kennedy

This motion is very much in line with other motions we have been dealing with recently. The last one dealt with the programmes for food development projects in the developing countries. We are concerned in these motions, as we were in that agreement, with establishing a better order of market arrangements between the producer countries and the consumer countries. These motions indicate fairly clearly, first of all, the increasing dependence of the consumer countries on the developing countries for what are for many of us our basic commodities, coffee, cocoa, tin, and tea also. It shows—I have been saying this for a long time and there is agreement on both sides of the House—the dependence of the developed world on the developing world which to a considerable extent, is being highlighted every day. The need to have new and acceptable market arrangements between the producer and the consumer countries, which basically correspond to the developing and the developed world, is absolutely essential.

To that extent, therefore, I support both the intention and the content of these three agreements. This side of the House will support their being put into effect without delay. It is important, though, that we should consider the overall position when giving effect to these international agreements. Within each of the producing countries there have been climatic conditions that have brought about a decline in the production of coffee or cocoa and leading to a world shortage which, consequently, has led to increases in the world prices for these commodities. That is one element of the situation but when, on the other hand, we have regard to what is happening in the agricultural countries, our own included, of the developed world, we realise that there is a fall-off in overall production in that area. Obviously, there is a need to consider the whole question of our economic programming and development with special reference to the agricultural food producing sector in order to ensure that we produce to the greatest extent possible on our own capacity and also that we would endeavour in some way to direct or modify the eating habits of our people in order to take account of the commodities that are increasing continually in price. In other words, we should encourage the consumers to rely more on native produce.

Mr. Kelly

The founder of the Deputy's party was on the same line about 40 years ago when, for the same reasons, he suggested that we drink light ale for breakfast instead of tea. The difference then was that he, and not the producers, had caused the adverse conditions.

Mr. O'Kennedy

The fact that the distinguished founder of this party made that statement 40 years ago confirms me in my expression of that view now, not to the exclusion of imports from other countries but to highlight the situation. The Parliamentary Secretary must recognise that there is a fall-off in food production at home. This trend is regrettable. We must do everything possible to encourage increased food production because should we become a consumer as opposed to a producing country, we would be in real trouble, as these agreements indicate clearly.

The agricultural Bill which has just been concluded can do a lot not only to change the nature of our agricultural production but to influence our people to consume more native products rather than imported produce. At the same time, it is important that, in so far as we need an established world order which can be maintained and promoted in the interests both of the producer and consumer countries, such order would be effected through agreements of this nature, agreements which, as the Parliamentary Secretary has said, are successors to original agreements which, generally, have been effective. However, there are some hidden factors that are not covered by this agreement. For instance, in regard to coffee the Parliamentary Secretary said:

For example, the coffee agreement is quite clearly not equipped to deal with the present rising price of coffee. It is doubtful whether any agreement could provide adequately for eventualities such as the 1975 frost in Brazil, which severely affected the output of the world's largest coffee producers.

That seems to relate the increase in the price of coffee very significantly to the 1975 frost in Brazil. It is a simple enough relationship of cause and effect. However, when we look at the objectives of the agreement we find that somewhere between those objectives and the Parliamentary Secretary's statement there seems to have been some change because in the explanatory memorandum circulated we read that the general objectives of this agreement are to help us to arrive at economic provisions designed mainly to secure adequate supplies of coffee to consumers at fair prices and to secure markets for coffee at remunerative prices for producers.

That is not consistent with what the Parliamentary Secretary has said here. The explanatory memorandum goes on to refer to the avoidance of excessive fluctuations in the level of world supplies which are harmful both to consumers and producers. It says that the aim of the agreement is to produce and increase the consumption of coffee by every possible means and to further international co-operation in connection with world coffee problems in recognition of the relationship of the trade in coffee with the economic stability of markets for industrial products. In other words, it attempts to achieve what the Parliamentary Secretary says cannot be achieved. This is why I refer to hidden factors. During the past three years, for instance, the retail price of eight ounces of coffee has increased from about 80 pence to £2.10 or almost 300 per cent. Can all of that increase be related directly to increasing prices to the producer in Brazil? Are the producers there receiving almost three times as much for their coffee as they were getting three years ago? They are not receiving any such increase.

When the Parliamentary Secretary says that this agreement cannot maintain or control the price of coffee I agree to the extent that the market arrangements in the consumer countries are such as to prevent us, perhaps, from controlling the spiralling prices of coffee. What control have we in regard to the processing industry? Can we relate the entire increase simply to climatic conditions in Brazil in 1975 and then imply that that was where it all started? Similarly, in relation to the increases we have experienced in petrol prices, we cannot place all the blame on the Arabs because while their contribution to the increase was small, the Government were responsible for by far the greatest proportion of the increase and this has been responsible in turn for the inflation that followed.

Therefore, to the extent that the agreement we are discussing is not directed to the middleman, it cannot achieve what the Parliamentary Secretary claims it can achieve—regulate effectively the price of coffee to the consumer which, in effect, is what we are concerned with in the final analysis.

Mr. Kelly

Although the price of coffee has increased it is still far cheaper here than it is, for instance, in Germany, where one will not get a cup of coffee in an ordinary cafe for less than 50 pence.

Mr. O'Kennedy

There are two reasons for that. First, the standard of living and the wage structure in Germany are much higher than they are here.

Mr. Kelly

No. It is because coffee and tea are placed in the luxury groups there and, consequently, carry luxury tax.

Mr. O'Kennedy

I accept that, but one cannot compare the consumer price of coffee, tea, whiskey, brandy or anything else in Germany with the situation at home because the consumer in Germany in paying for these commodities is, in effect, paying mostly his tax because of the indirect taxation system in operation in that country as opposed to the system of direct and indirect taxation here. The level of direct taxation in any of the EEC countries is much lower than it is here so that when continentals pay for their coffee they are, in effect, paying their income tax also. We are not really comparing like with like and all this nonsense of comparing prices in Ireland with France and so on does not tell the full story. The countries in Europe have a much greater tradition of coffee consumption than we have. We are gradually catching up.

Mr. Kelly

That should tend to push the price down rather than up.

Mr. O'Kennedy

That is so if there is a greater demand between them and the other countries. I am not saying that this is a question of market supply, but with the tendency towards increasing coffee consumption here it is vitally important that we would, in so far as we can through the European Community and the agency of an international agreement, try to get what the Parliamentary Secretary says we cannot really get. Suppose that next year is a good year in Brazil, can we expect a reduction? I do not suppose we can. It would be unfair to the producer countries to say that they have been the cause of the increase. They have not to that extent.

What is true of coffee is also true of cocoa. Again we find that it is mainly the less developed countries who are the main producers of cocoa and we have to expect that at some stage inevitably, having regard to the imbalance which exists between their economies and the developed economies, they were going to try to rectify this imbalance, and understandably.

What is being attempted in these agreements is to co-ordinate consumer need with producer capacity and to ensure that there will be justice and fair play for both sides. We have seen a huge increase in the price of cocoa in the last two or three years, perhaps not to the same extent as with coffee. Again there may be some good reason for looking at the marketing and processing of coffee and cocoa as distinct from the production. It is the middle stage that we have to examine in order to see to what extent the big international interests are getting a big cut before the product reaches the table of the consumer. This is a real problem.

Why is it that we are only now getting these agreements? In each case they were ratified in 1975. If we want to give effect to what these agreements represent so that we can have a binding commitment between the producer countries—I do not know what votes we have, but we have votes—surely it would have been desirable to introduce these proposals before the House 12 months ago when they would have met the same ready response as they are going to get now. The need would not have seemed to have been as great 12 months ago as obviously it is at the moment with the huge increases in the three areas concerned. Could I ask the Parliamentary Secretary to explain why there is not a similar agreement for tea, or if there were what effect it would have? This is the commodity we consume probably more than any other of these beverages. Tea has increased in price over 100 per cent in three years. We as a consumer of these commodities, and of tea in particular, are going to suffer unless we can look to international arrangements to control these price increases to some extent, unless we can gear our own agricultural products and our own drinking habits to ensure that our balance of trade apart from anything else will not be upset.

Regarding the balance of trade, irrespective of the optimistic forecasts which may be made, figures for the early months of this year, for January and March in particular, indicate that this nation is becoming a consumer nation. Our balance of trade is widening all the time and our consumers must become aware that this trend must not continue. We are ignoring some obvious realities. This again is where an increase in our native production must be encouraged and if possible there should also be warning signs with regard to increases in the import of consumer goods.

The tin agreement would not seem to be directly of concern to us to the same extent as the coffee and cocoa agreements. Bolivia, which I recall from my school days is the biggest tin producer in the world, has not yet ratified this stage of the agreement. I want to know the reason for that, the effect of it, and to what extent this agreement has any reality without the concurrence and support of Bolivia for what it is intended to do. While we might not seem to be a big consumer of tin, every day all of us meet with new forms of packaging and processing and new drives for hygiene. If we look at any of our stores or supermarkets we see that tin does play a big part in our economy to the extent that we are importers of it.

Mr. Kelly

I always understood that what we conventionally call tin is not tin at all, it is actually very fine iron.

Mr. O'Kennedy

I think the Parliamentary Secretary referred——

Mr. Kelly

I was surprised to hear myself say that because I do not think there is any tin in a tin can.

Mr. O'Kennedy

That is reassuring. Whether it is a tin can or other substance we use for light engineering, I would like to know the full figures in the last year for imports of tin and how much they have increased over the last number of years. It is a matter of great concern to us.

Mr. Kelly

The Deputy should put down a question on it. I have not got that information with me.

Mr. O'Kennedy

Can the Parliamentary Secretary tell me why we have not had it before the House before now? If there is any hope that a similar agreement for tea and the related beverages could be made between the producer and consumer countries we should make proposals that the European Community, speaking of the European Community as a group, should make arrangements to try to get to the real cause of the huge increases in each of these matters, namely the distributing and processing industry as distinct from the producers. It is the only way we can guarantee that the huge increases in these areas will not continue.

To the extent that any agreement we reach here will be effective then it has our support. I note that the cost to us of signing and approving these agreements is something notional; it is a matter of some thousands of pounds in each case. In so far as this expenditure gives us an influence and a voice through the agencies of these agreements it must be welcomed. I hope we can see more effective control over the next few years, particularly in the area of coffee and cocoa, than we have seen recently.

Parliamentary Secretary to the Minister for Foreign Affairs (Mr. Kelly)

I should like to thank Deputy O'Kennedy for his contribution and support for these motions. He asked a question which he did not include in his final summary in regard to Bolivia. I understand that the reason as one might have guessed, why the Bolivians have not ratified the tin agreement is that they are not happy with the price range. I cannot tell the Deputy anything more about the situation in detail. In regard to the delay in bringing these agreements before the House I should like to tell the Deputy that all these agreements contain a clause which empowers signatory Governments to apply them provisionally in advance of ratification. In the three cases before the House the Government have done that. In regard to tea I am told that an agreement on tea is in the course of negotiation in the FAO. With regard to the Deputy's final question, I hope that the EEC which is taking a part as the EEC in the so-called north-south dialogue, will play a useful part in getting at what the Deputy calls the real causes for the price rises in these commodities.

The truth is, unpalatable and difficult though it may be for an Irish consumer to absorb, that we have been used all our lives to getting the commodities we are talking about, cocoa, coffee and tea, at an absurdly low price considering that these are all either tropical or sub-tropical products which have to be transported not just to another country but to another continent. I can remember 20 years ago when cocoa actually fell in price. The price of Fry's Cocoa dropped by about two pennies from eight pence per quarter 1b to six pence for a finely processed and very nutritious food. That quantity would keep a cocoa drinking family going with cocoa for a couple of weeks. The idea that a country producing this in West Africa could process it and transport it to be sold to the consumer at that price is something mind boggling. Something similar is true of the situation in relation to the other products. We find it an incredible price to pay, £1 per lb for tea, compared with other beverages but when one considers the difficulty of getting it here, of packaging and distributing it, it is still a relatively cheap commodity. We are not able to see that because we have been spoiled for so long.

The reason we were spoiled was that the people in the tea gardens and in the coffee and cocoa plantations were being paid next to nothing for their labour. We were getting these products so cheap because they were produced at what would be regarded as absolutely sweated labour. The substantial increase in the price of these commodities will find its way into the pockets of those who work to produce them. If that is what Deputy O'Kennedy meant in the course of his contribution we all agree with him. I am sure that is what is in the mind of the EEC in the part it is playing in the north-south dialogue. It is largely an attempt to make sure that the producers of such commodities——many countries have only one such commodity that is worth talking about —are paid enough to enable those who work on such plantations to get a decent wage so that they can live decently and do not work themselves to an early death.

Dáil Éireann debate -
Wednesday, 18 May 1977