Reports on Developments in the European Communities: Motion (Resumed) .

Debate resumed on the following motion:
That Dáil Éireann takes note of the Reports:
Developments in the European Communities — Thirteenth, Fourteenth, Fifteenth and Sixteenth Reports."
—[Minister for Foreign Affairs)

: Before moving the adjournment I was suggesting that in order that border regions could avail fully of the funds in the non-quota section and of the regional fund generally a development board should be established to co-ordinate the efforts of the various groups at present handling this matter—there are the regional development organisations, county development teams and local authorities all involved in the formulation of proposals and suggestions. During the month of September Bord Fáilte placed an advertisement in provincial papers seeking suggestions from groups and individuals regarding the development of tourism in border regions. While they are to be commended for seeking such suggestions and endeavouring to get a consensus in that area they should have been doing so about five years ago. Public representatives and the other groups I have mentioned have been deeply involved over the last four or five years and Bord Fáilte should have been active during that period.

Mention was made in the Minister's speech and by the previous speaker of the accession of Greece. Its inclusion in the EEC, bringing the number of member states to ten, should not be in conflict in any way with our membership. Probably it will be an ally as far as the common agricultural policy is concerned. I agree with the previous speaker on the importance of the common agricultural policy. It is generally agreed that to date it has been the most successful of all the common policies of the EEC. Indeed it has come under increasing attack recently. I should like to congratulate the Minister for Agriculture on his successful efforts during the year against the imposition of the milk super levy and also in his opposition to the suspension of intervention beef in the summer months. The suspension of intervention beef during the summer months — coming at a time when many beef producers would not have been prepared for it and were dependent on grass in the early months of the summer to finish their cattle — would have been very serious indeed.

I mentioned earlier Regulation 1820 of 80, approved on 24 June, in regard to agriculture in the western counties under which some £150 million in FEOGA aid will be matched £ for £ by our Government over the next ten years. Certainly it will provide a unique opportunity to set up a proper agricultural structure in the 12 western counties with regard to the development of our resources, processing and marketing. Under this heading it was maintained that there would be some £8 million in FEOGA aid available, with a 50 per cent subsidy from the EEC for calf to beef systems to improve our method of production. This form of interest subsidy on loans of £100 for two years for each calf reared to the fattened state would be available provided that an applicant followed the planned scheme.

Under the heading of marketing and production there is an allocation of £32 million, a special FEOGA project scheme, with again a 50 per cent subsidy, which would increase the grant aid for processing and marketing from 25 to 50 per cent. The various Departments involved should take a very close look at those two proposals to ascertain how best those funds can be utilised because the present method of marketing of our beef products leaves a lot to be desired.

In the October edition of Farm and Food Research there was an article entitled “Do beef prices make sense”. That article outlines very clearly fluctuations in beef prices, showing that in the 12 months since July 1979 prices varied from 76p to 64p, then back up to 76p and back down to 68p, this at a time when the retail price of meat had steadily increased and was 6 per cent higher in both England and Wales. Admittedly during that period also slaughter by-products and hides fell drastically but in no way accounted for this type of price variation. We must face the fact that over one-third of our beef sales takes place in the last quarter of the year. These continuing variations of prices in Britain account for 60 per cent of our meat. Within the EEC an effort will have to be made to increase marketing outlets throughout Europe because, when one realises that one penny in the £ amounts to approximately £5.60 per hundredweight, or £56 for a 10 hundredweight animal, one realises that that type of situation is not desirable.

Those two measures must be carefully examined in an endeavour to implement the calf to beef system which would mean also a steadier flow of animals into the factories. It is important in the meat trade that we have some type of selling agency. Apparently at present when slaughterhouses and factories find it difficult to sell or are beyond their cut on the British market they endeavour to offset that variation by charging steep prices to the producer. This is a very serious situation and one that must be closely examined.

Also included in those measures are rural water supplies with 40 per cent FEOGA aid. I would ask the Minister to have this measure implemented as quickly as possible because there is a large number of group water schemes throughout the country awaiting this aid. We are delighted that the Minister was successful in his efforts in this respect, which was a great achievement.

There is £16 million devoted to the rural electrification scheme. I hope in this case that not alone would this money be spent on improvements to existing supplies to farmers who are putting in larger motors and heavier equipment but that they would also subsidise farmers by way of subvention to first time house builders who at present are faced with high quotations from the ESB. In many rural areas there are small industries where a three-phase supply is essential, where they can no longer operate machines on the single phase and I hope that money will be provided for that. We have also the proposal for £51 million for farm investment with 50 per cent FEOGA aid. This would go by way of capital investment to increase livestock numbers, where grants for development would be paid to farmers. There would also be special exemption for western farmers in regard to the restriction of investment aid on dairying, 40 per cent of grant aid rather than the present 30 per cent.

The final measure which was outlined was £8 million for farm training and for agricultural colleges. In an area where only 25 per cent of farmers avail of the advisory service, farm training centres would be ideal. Not alone should money be spent in that way, but the new agricultural body, ACOT, should consider withdrawing almost completely the advisory service from top bracket farmers, farmers who over the years have accumulated sufficient knowledge, and should consider concentrating instead on the lower income farmers by trying to improve their production methods and management systems.

There is also £18 million in respect of forestry development. It is welcome at a time when so much emphasis is placed on alternative sources of energy. I mentioned earlier that those two — cross-Border regional aid plus the aid for western development — should be looked at as one. This money was to be provided for both State and private planting. Therefore, it would be an opportune time to concentrate on providing aid and assistance to both individuals and groups, either for timber or for short rotation forestry, for this biomass production which is on trial in various areas. It is accepted that we should now be in a position to save about £45 million per year by using the produce of our forests rather than importing timber. Those are the measures which were introduced from 1978 to 1980. In that field there has been a great measure of success and with proper planning of those two schemes, the face of the whole western region — those less developed counties in the west, plus the three Ulster counties — could be transformed by these measures. It would ensure continuation of our rural communities.

: The Minister is to be congratulated on obtaining a seat for Ireland on the Security Council of the United Nations. It is worthy of him and of the country that we will have a full seat there for the next two years.

The Minister mentioned that the present fixed limit of 1 per cent has almost been reached. As I understand it, we are at over 95p for this year of that 1 per cent and that does not account for any extra spending. It is very important for the Minister to press ahead to get this 1 per cent increase because we depend on it for the common agricultural policy, for the regional fund and the other funds there. If the European Commission have to increase the 1 per cent it would have to be approved by all the Parliaments of the member states and, in view of the row that Britain kicked up last year over their contribution to the European Fund, it will be very hard for any Prime Minister to get it through their Parliament. We should try to have the 1 per cent increased to ensure that the Community has money for the different funds from which we benefit. Parliament could use that 1 per cent as a basis for controlling the amount of funds coming to this country under CAP, the regional fund, and the social fund. They could very well say that they cannot give us any more than 1 per cent. We all know the battle that has to be fought by the agricultural community when prices are fixed every Spring.

I would like to compliment the Minister for Agriculture for getting roughly double what was originally proposed. In addition quite a number of restrictive practices were abolished in the case of milk and intervention beef. In achieving that the Minister did a good job, but unfortunately quite a lot of it did not go to the farmer, particularly in regard to milk.

The returns which our farmers are getting this year for butter fat seem lower than those of last year or two years ago. We had this year as good a grass year as one could ask for, but using the milk produced by the same number of cows, the butter fat is lower. The creameries must be tightening up on this question of butter fat. I have seen cheques for the same amount per gallon of milk as two years ago, although there were two increases in the price, one last year and one this year. One farmer who had done his sums very accurately, projected his figures for his bank, and by the month of June, on re-examination of his financial position, had his account showing a reduction on what he thought should be there. When a check was made on all his milk cheques it was discovered that his butter fat had dropped for no reason whatsoever as compared with last year or the year before. He had produced more milk, but his cheques were lower. When an agreement is reached, the benefits should come down along the line and not be held up by bodies engaged in the buying of farm produce.

The Minister should try to keep a vigilant guard on the quantity of imports into the Community from the Third World countries, some of which are excessive and are having a detrimental effect. It appears odd that milk imports are coming into the Community while there is in existence a butter mountain. These imports affect other industries as well as agriculture and are clearly visible in our shops. Imports into the Community should only be allowed where there is a shortage of the produce in the Community itself, thereby creating a barrier against industrial and agricultural imports from Third World countries. Hong Kong, Taiwan and other areas are sending in an amount of material, and New Zealand are still importing into the Community despite their agreement with Britain being obsolete by now.

Certain areas in north Meath and north-west Meath have been put forward by the Department of Agriculture for inclusion in the European Community's underdeveloped areas. There will possibly be a decision on this within the next few months and the Minister should ensure that as much of the country as possible is included in this category of underdeveloped areas, thus bringing in extra grants.

The Minister has given a very comprehensive report on these particular aspects of the European Community.

: I refer very briefly to the possible complications of enlargement within the European Community. No doubt, the Minister is aware of this important development and its consequences for us. The Joint Oireachtas Committee on Secondary Legislation issued a report on 21 February 1979. In that report, they highlighted the concern of the Joint Committee, composed of members from all sides of the House, regarding enlargement of the Community. They referred specifically to likely imbalances and their significance for this country and to regional, internal imbalances in the African countries which are already considerable and which could be aggravated following the liberalisation of trade after accession. In the Commission's view, corrective measures in the form of large-scale regional policy will be required. The then Minister for Foreign Affairs, addressing the House on 15 February 1978, confirmed that with the imminent membership of Greece and the possibility of speedy negotiations with Spain and Portugal, it was imperative, in the view of the Joint Committee, that the time to implement the review of the financial structures of the Community was then well at hand.

With the advent of the EMS and the economic difficulties of the western world in general, enough progress has not been made on rectifying the imbalances within the existing Nine. We must be particularly concerned over the accession of Greece on 1 January 1981 which will create a greater drain on Community resources. As Greece has a major agricultural section, this will further aggravate the situation.

I urge the Minister to make every possible effort to get our partners within the EEC to recognise the need for changes, particularly in the economic and financial aspects of EEC policy. The political considerations of expansion are quite realisable and easy to implement but the disparities which may arise as a result of the accession of Greece at this time may create problems of which we must be very well aware and must make our partners also well aware. In EEC policy, we have a special situation which needs attention.

The report of the committee went on to refer to the budgetary consequences of the Greek entry. It referred in detail to the units of account which the Greek Government and the other two applicants would be entitled to. That highlights the tremendous drain that could come on the already limited EEC funds. The Minister in his address this morning recognised the need for changes and referred to the present limit as archaic and said that we are making every effort to emphasise to our partners the need for change in the funding of the Community. It has been a particularly difficult time because of the British situation in getting their contribution rectified. Difficulties arose as a result of what the British felt was a major contribution on their part. Because of the enlargement of the Community the financing of the social and regional funds will have to be brought into line. This is of significance to us and time is running out. Will the Minister pay attention to urging our European partners to rectify some of the anomalies in relation to raising the finance within the Community prior to the accession of Greece?

: I thank the House for a constructive debate on the reports of developments within the European Communities. I will do everything I can, I hope with the co-operation of the Whips, to ensure that these debates are held as a matter of course after the publication of the six monthly report. The report emerges every six months but there has been difficulty in regard to making arrangements between the Whips about having debates. It is not good enough to have this type of delay between the publication of the report and the debate in the House.

Deputy O'Keeffe referred to the question of the UK budgetary contribution and suggested that at that time we should have raised the question of increasing our own resources. It was not on at that time as our main objective was to secure our settlement of the package involving price increases, the capital moneys for western development and the other aids to agriculture, as far as Irish agriculture was concerned. That had been held up by reason of the British recalcitrance over their contribution.

The major problem that has faced the EEC since our entry is now looming up in the shape of the ceiling of the one per cent VAT which is the major financial source of the own resources finances available to the Community. This ceiling will be almost reached in the 1981 budget which is now being prepared. It is only by very careful pruning that the Community will be able to stay within that one per cent even in the current year. It is quite certain that the Community cannot finance itself for 1982 unless the ceiling of one per cent is breached, and unless there is some radical pruning of basic policies, which would be intolerable to a number of countries including ourselves. If the ceiling of one per cent is not breached for the 1982 budget the Community will cease to have any meaning where convergence is concerned and that is a major policy to secure the transfer of resources from the prosperous to the less prosperous areas. The funds will not be there to provide for an adequate social or regional fund to effect such transfers. In addition, the CAP cannot continue in any meaningful way unless there is a breach of the one per cent ceiling. This is not a radical suggestion put forward in Ireland's interests. The very important McDougall report commissioned by the Community on the role of public finance in European integration published in 1977, argued strongly that a budget representing two to two and a half per cent of Community GNP would be required to make any significant impact in reducing any inequalities in living standards between the member states.

The suggested budget in their report in 1977 would be roughly three times the size of the Community budget in 1980. That is the sort of unreality we are living in — a limitation to about .9 per cent of Community GNP next year with an overall ceiling of one per cent — when what is required to have a minimum policy is a budget requiring two to two and a half per cent of GNP. The argument is quite clear but we will have to fight to have our partners realise that this is a matter of fundamental national importance to us. It is a matter in which we can plead the highest national interest. At present we are not getting anything like the transfer of resources that would merit any approach nearly resembling the degree of convergence that was envisaged by the various summit meetings where convergence was laid down as a major policy aspiration within the Community. Ireland at present stands at around 50 per cent in the most prosperous regions in the Community. That highlights the degree of transfer of resources involved and the degree of investment required to make some impact on lifting our level of prosperity up to somewhere near the general European level.

Another important aspect is that the Germans particularly say that in purely accountancy terms they are the main contributors to the Community budget. Looked at in narrow accountancy terms it is true that they are substantial contributors, far more than anybody else in the Community. They make that case in accountancy terms, and also that most of us are in one way or another recipients. This case does not take into account the central fact that the customs union involving the market as such has put Germany in a tremendously advantageous position as regards providing a market for her highly skilled production and providing a basis on which she can export abroad. Germany is the biggest single gainer in the market——

: Hear, hear.

: ——by reason of the customs union within which she with her highly skilled technology, expertise production and marketing can sell. On the basis of that Community performance, Germany is enabled to make third country arrangements all over the world with countries with whom the Community also does business under various agreements and so on. I will give one figure which bears out the importance of the customs union as far as a country like Germany is concerned, and the same applies to a greater or lesser degree to other vast industrialised countries within the Community like The Netherlands and Belgium. Some indication of the relative importance of the customs union can be deduced from the fact that while the budget represents less than one per cent of Community GNP the intra Community trade of member states represents about 25 per cent of Community GNP. The main beneficiary from that 25 per cent from Community GNP which is quite enormous is Germany. While Germany is also the main contributor to the budget it is still a budget that is less than 1 per cent of Community GNP. The argument is very firm in that respect.

The other aspect of the CAP as far as Ireland is concerned is that firstly 20 per cent of our population work on the land. No other member state has a figure remotely like that. A further point is that our agriculture production is largely based on inputs derived from our own country. We do not have an agriculture industry that utilises imported feeding stuffs from third countries. Our grass and grain, the main inputs into our cattle, sheep and pig industries are produced at home. We do not contribute in any way to surplus situation that has bedevilled the CAP. That surplus situation has arisen by reason of industrialised farming utilising imported imports such as soya beans and tapioca. In some countries oils and fats are imported from third countries and force fed to animals to fatten them quickly in broiler fashion in shed conditions. They are fed in an industrialised turnover manner in certain Community countries. That type of farming was not envisaged for protection by those who initiated the CAP. It is that type of farming that is contributing to the surpluses. It is an artificial type of farming and is largely prevalent in countries like Germany, Holland and Denmark.

We will have to prepare strategy immediately in regard to our position on those vital issues of breaching the ceiling of the one per cent VAT in regard to the own resources financial provision and also in maintaining the CAP. With that in view the Government set up an inter-departmental committee to look in depth into the whole question of the Community budget and its proposed restructuring. It investigated it in relation to Community policies as they affect Ireland, such as the CAP and the social and regional funds. We hope to receive that report from the committee in the near future. I have been given a preliminary copy of the report and it is hoped that the full definitive one will be presented shortly. That will form the basis of the case which the Taoiseach will present at the European Summit. At that meeting the Taoiseach will lay down the correct lines as far as we see them and he will indicate the appropriate marker as far as our fundamental national interests are concerned.

: Will that report be published.?

: I hope to publish a summary of it in due course. The preliminary report has just come to hand. We must, at every level within the Community, embark on a strong and balanced campaign to promote and project our case in a responsible and constructive manner. We have a strong case and we must put it across firmly at every level. We must put our case at home so that our people understand our approach and we must put it across within the various institutions of the Community. The Commission are engaged in a similar exercise at present on how the budget should be restructured. They may not necessarily coincide with our views but it is important that our views are made know to the members of the Commission at an early stage.

Apart from the importance to Ireland of the CAP it is also important from the strategic point of view as far as Europe is concerned. That is what was envisaged by the founders of the Community. They saw what happened in the past when food shortages occurred over the centuries and they wanted to see a balance of agricultural production to ensure a continuation of food supplies. It is only by ensuring a stable floor price in regard to food production that one can avoid cyclical excesses or recessions in regard to farm production. While acknowledging the importance of avoiding surpluses and acknowledging that the CAP needs to be reformed so as to avoid surpluses, the fundamental principle of having a basic floor price mechanism for farm products is all important to ensure a guaranteed and continuing food supply for the 300 million citizens of the Community. Experts are now predicting that we will have to face a crisis in a few years' time that will not be related to oil or energy. They are predicting a food crisis. Any region that has its agricultural policies so organised that it can ensure a steady flow and guarantee of basic food products, without surpluses, will always survive in any difficult situation in regard to food supplies.

Very serious challenges are now posed on the inter-related areas of the budget resources, and the one per cent ceiling being reached, on the financial side and the need to preserve the CAP while avoiding excesses in regard to surpluses. They will provide the great challenging debate of 1980 in the Community and they are matters which must be resolved before 1981 because in that year the Community just cannot plan because it will not have the financial resources available to plan on a proper basis for 1982 and thereafter. These issues I am talking about will be the fundamental issues for major debates within the Community in 1981.

Having said that, it is no harm to point out the other side of the coin which is that basically the Community has been beneficial to this country. The dangers are looming up now but heretofore the benefits have been quite clear. I refer here to the 16th report where one sees that in 1979 in terms of transfers of money under all headings to Ireland there was the highest transfer within the Community of £536 million. The importance of the guarantee section within the common agricultural policy is shown within that figure when one finds that under the FEOGA guarantee scheme £401 million was the amount secured by Ireland. So, of the total transfer of moneys under all headings of £536 million within the Community in 1979 £401 million related precisely to the guarantee section of FEOGA. The remainder relates to the guidance section of FEOGA, grants for restructuring and so on, the social fund — £38.7 million — the regional fund, £44 million and various research and pilot schemes. One sees then immediately in that stark figure of £400 million out of £536 million the enormous interest that we have in a continuation of the guarantee section of CAP.

Also in 1979 we secured £243 million in loans, subsidised loan facilities under the European Investment Bank, the Ortoli Facility and through the European Coal and Steel Communities. That is a substantial benefit to the country. There is no question about the benefit heretofore as far as Ireland is concerned but these substantial benefits which we secured heretofore will be undermined and eroded unless we maintain the CAP and retain a funding system that will enable substantially more transfers of resources under the social, regional and other headings.

That is the reality facing us in the coming year. The Community itself, apart from Ireland, faces a very serious problem in this way also. If this is not done and if the Community budget is not made a meaningful implement then we shall slip back into the old ways of national aid for agriculture and industry. In that way the real slippage will start. We shall no longer have a Community then but just an association of nations each doing its own thing for its own special sectors. In that scenario we would fare very badly because the wealthier countries would obviously be able to afford far higher national aid to their smaller farming communities in terms of numbers than ours and from their greater prosperity would be able to hand out greater aid to their own farming communities or any other sectors they wished to help. It would then become a situation of the more powerful nations going ahead on their own and the whole raison d'être of having a Community would have ceased.

I emphasise that particularly because from the point of view of overall political strategy and co-operation the smaller nations within Europe are a very decided benefit to the larger nations. It is in the interest of the larger nations from the political and strategic points of view to have a number of other nations with them. However they may regard these smaller nations as recipient nations of largesse from them, the fact is that without these smaller nations some of the larger nations would be in a very naked position strategically and politically.

All in all it will mean that the coming 12 months will be a test of the political will of the Community to ensure that there is a real convergence in regard to economies, to prosperity, whether there is a real feeling and meaning in saying that we are in a Community together and not just a collection of powers in which the richer powers grow richer and the poorer ones weaker. The amount of money available at present within the Community budget is just not enough money to redress the imbalance that exists between the larger and more powerful countries and the smaller countries. If the wealthier areas of the Community want to continue along that path. I say very advisedly that means the end of the Community. If they want to proceed instead on the more constructive and responsible path of seeking to redress the imbalance by having a reasonable transfer of resources by pursuing their declared policy of convergence, they will raise the limit and permit a reasonable transfer of funds to take place by allowing financial resources to be freed and available to them under the one per cent system. They will also acknowledge the fact that as regards the rural areas of the Community which guarantee its essential food supplies there must be a basic guaranteed prices policy in regard to these areas. On our part, we must freely acknowledge that there must be the necessary reforms of CAP to ensure that surpluses are eliminated.

I thank the House for a very constructive debate.

Question put and agreed to.
The Dáil adjourned at 4.30 p.m. until 2.30 p.m. on Tuesday, 4 November 1980.