I move: "That the Bill be now read a Second Time."
This Bill provides for the amendment and extension of the Dairy Produce (Miscellaneous Provisions) Act, 1973. Essentially, the Bill involves the continuance of the guarantee which, with the consent of the Minister for Finance, I may give in respect of loans obtained by An Bord Bainne Co-operative Limited.
An Bord Bainne Co-operative Limited were established by the Irish dairy industry in 1972 and took over from the semi-State body An Bord Bainne. The essential purpose of the board is the purchase and centralised marketing of dairy products produced by their members. Due to the seasonality of the production of milk and dairy products in Ireland and the fact that sales by the board are effected on a fairly even pattern throughout the year, they are obliged to borrow heavily to enable them purchase their members production during the peak production period. The board's assets — in spite of the fact that they have shown commendable growth in recent years — are not yet sufficient to enable them to borrow to the very substantial extent necessary and it was to assist the board in borrowing that the State guarantee was provided by the 1973 Act and enlarged and extended in 1976, 1977 and 1979.
The initial State guarantee in 1973 provided coverage for borrowings by the board up to a maximum at any one time of £20 million. This figure was increased to £40 million in 1976 and to £90 million in 1979. The purpose of the Bill before the House is to extend the application of the guarantee, which expired at the end of last year, for a six-year period to 31 December 1989 and to broaden the guarantee's scope to cover a range of borrowings, thereby bringing it more into line with the actual pattern of Bord Bainne's credit needs. Previously, the guarantee covered only ‘loans', as strictly defined and it is felt that the amendment proposed now will increase the flexibility and usefulness of the guarantee to the board. Also the additional six years will afford the board a reasonable opportunity to accelerate the build-up of their own resources and so become less reliant on State backing for a proportion of their borrowings. The maximum amount of the guarantee is to be retained at the level of £90 million. In essence, we are guaranteeing £90 million up to 1990.
The dairy industry is the backbone of much of our agricultural industry. Its continued expansion is of immense importance for the economic and social development of our country, but its continued prosperity is greatly dependent on maximising efficiency in processing and marketing. Centralised marketing of dairy products has a major role to play by enabling us to develop and exploit markets in a planned and economical way and by earning and maintaining an internationally respected position for Irish dairy products.
Since we joined the Communities Irish milk deliveries have increased by about 72 per cent. The value of the milk intake of creameries and other processing plants has increased by almost 100 per cent in the same period. Marketing this extra production has, of course, been a major task and one which has been accomplished with success and, until recently, little reliance on intervention. That this is so, is an indication of the role played by Bord Bainne who have successfully sold an expanding range of Irish dairy products in an increasing number of international markets. By 1982 the total value of Irish dairy exports was £710 million per year, or about 12 per cent of the value of all our exports.
We are at the present time facing an extremely difficult situation both within the EEC and in the international market place. We face proposals from Brussels aimed at restricting Community milk production to the 1981 levels and at reducing the cost for the Community budget of support for the milk sector. These proposals will continue to be the subject of negotiation in the Council of Ministers in the coming months, as will the Commission's parallel farm-price proposals for 1984-85.
As the House probably knows, these talks commenced yesterday. We are talking about the Commission's original proposals and subsequent progress which was made up to and including the Athens Summit in tandem with the Commission's price proposals for the 1984-85 marketing year. When I speak about the difficulty in the international market place I would like to point out that the milk problem is aggravated by production in third countries, that is countries outside the EEC. That is why I make reference to the international market place. Not alone has the EEC been overproducing milk in recent years but the United States had also been overproducing vast quantities of milk. We have to compete with them on the world markets. This makes our task of getting rid of our own surpluses all the more difficult. Bord Bainne have seen a number of their markets disappear because of competition from the USA.
We had a very good market in Mexico for milk products which we lost because our price was undercut by the Americans. There are also markets in other parts of the world in the Caribbean, South America and North Africa, a portion or all of which we have lost because of price cutting. The Americans have set in motion methods to reduce their milk output with the objective of getting rid of their surplus. The EEC has now in train an endeavour to do likewise.
We also face competition in the international market place from New Zealand. It is not just to Britain or to the EEC that they sell butter and dairy products. They sell them throughout the world and we again have difficulty in competing with them in some of the areas which I mentioned, particularly in North Africa and the Middle East. They have got to sell their agricultural produce because of their small internal domestic market. The international market place has become vastly overcrowded in recent years with dairy products and is a very large contributory factor to the problems in the EEC in getting rid of its surplus milk and milk products. While talking about the price proposals from the Commission in 1984-85 for milk, while formally a freeze has been proposed, related technical changes would result in a price reduction. I will refer to that later on. The Government are not under any illusion that the task facing us will be an easy one but we are fully determined to secure agreement or arrangements which are fair and balanced and which take due account of our special situation in regard to milk.
Our primary objective is to ensure that our dairy industry can face the future with confidence. But it is obvious that now more than ever before, efficiency in production, processing and marketing will be of crucial importance. If indeed we ever could afford the luxury of running our dairy industry at less than optimum efficiency, we certainly cannot afford it from now on. The central importance of dairying to the agricultural industry in Ireland and to the national economy as a whole is understood now as never before. All who work in it must do their utmost to see that we maximise the contribution it can make to our overall prosperity. Bord Bainne's pivotal role in all this involves an increasing challenge in the future.
It is now clearly essential that we make an all-out effort to reduce our present heavy dependence upon intervention. Because of the limited size of our domestic market and increasingly difficult trading conditions in our major traditional market, the UK, this means that henceforth, we must make more efforts than we have ever made before to sell competitively on other markets.
Not alone must we increase sales of existing products in present and new markets, but we must also develop new products and identify new market opportunities. New product development is, however, a slow and expensive process requiring heavy investment over a long number of years. Yet if we are to market successfully our anticipated increasing milk output in the years ahead, product development and diversification are areas in which we cannot afford not to get involved. I am greatly heartened that Bord Bainne have definite proposals in this area.
In extending the State guarantee as now proposed, we shall be giving tangible support to the board and recognition that the board's ability to obtain the finance necessary for their operations, as easily and economically as possible, is clearly of vital importance. As I have already stated, the backing of a State guarantee is still necessary for the present if the board are to discharge their essential function in the best and most efficient way. In providing the guarantee the Government or taxpayer have not had to pay one penny to Bord Bainne. They have been able to operate on a commercial basis without taking up the guarantee which is an indication of their ability to trade in this area and an indication of their competence. Hence my proposal to extend the guarantee for six years and to make it more responsive to the board's actual borrowing needs.
The existence of the State guarantee has up to the present enabled An Bord Bainne Co-operative Limited to obtain adequate borrowing facilities to meet its funding requirements. No claims have ever been made under the State guarantee and no question of expenditure by the Exchequer has arisen up to now; neither is any such claim likely to arise in the future. The present Bill, therefore, affords the House a timely opportunity to demonstrate our confidence both in An Bord Bainne and in the future success of Irish dairying.
I want to make a few further points. There is such a thing as credibility in all these negotiations and that credibility applies in Europe just as it does here at home. We have been negotiating the milk super-levy proposal together with some dozens of other proposals which were put forward by the Commission last July. We have been discussing those for about six months now. It has been tough. As well as negotiating we have been lobbying our European colleagues, and I am glad to say that they have recognised for the last couple of months, since Athens, that we have a real difficulty in accepting that the milk super-levy proposal should apply to Ireland. Our negotiating and our lobbying have been extremely effective in getting this recognition. I heard yesterday that Deputy Noonan raised the matter of my statement on the super-levy. I do not know why it should be raised. It was the same as I have said all along, that there is a need for a super-levy within the EEC but we are adamant that we should be exempt from such a levy. That is what we said on Monday and yesterday in Brussels and we will continue to say it.
As I have said, there is an acceptance that we have a very special case. The degree of the acceptance by other countries of our special position varies. Some countries, while recognising that it would create enormous difficulties for our economy, nevertheless feel that we should share the burden of the cuts which have to be made in the dairying sector, and that if the whole CAP and the price support system are not to collapse these cuts must be made. The alternative to a milk super-levy would be direct price cuts which would amount to approximately 10p per gallon of milk. I do not want anybody to go away with the impression that by shooting down the milk super-levy the problem of over-production of milk in Europe will go away. I do not believe anybody could be so stupid or unrealistic. The problem will not go away, and the obvious alternative if there is not to be a milk super-levy is a direct cut in price which it is quite clear would be much more detrimental to agriculture and to the economy of this country. If anybody has any bright ideas as to other alternatives I would be only too delighted to hear from that person. If anybody is so naive as to think that nothing will happen, that prices will increase or at the very worst remain static if we do not deal with the problem of over-production of milk in Europe, that is just too bad because that is not reality, it is fairy-tale. Nobody could be so naive as to think something need not be done about over-production of milk. Something must be done but I have yet to hear anybody give me any alternative to the milk super-levy or a direct cut in price. If somebody has some brilliant scheme which has not been bandied about previously I will be only too delighted to hear about it especially if it would be to our benefit and if it meant that we would not have to take any share of the cuts.
In the past we have demanded, and we will continue to demand in resumed negotiations, that Ireland be granted a complete exemption from the super-levy on the grounds that its implementation here would have a most serious and disproportionate effect on not only Irish agriculture but on the economy as a whole. We require this exemption until at least we reach the level of development which is the norm in the dairy industry elsewhere in the Community.
As Deputies know, the Greek Presidency last autumn advocated that the milk super-levy proposal be for a period of four years with a review after three years. We support that view and feel that such action may well solve the problem created by the over-production of milk within the Community. In other words, if the super-levy proposal were to come in and to bite — as I think it will — it would encourage a great many of the intensive producers in Europe to reduce their production or, better still, to get out of milk production completely and, who knows, at the end of four years we could have a completely new ball game. I do not want to sound over-optimistic, but it is possible that milk production in Europe at the end of the four-year period would be in deficit. It could happen. If we could be exempted from the rigours of the super-levy for that four-year period we might find that come 1988-89 we were in a position to take off and continue to increase production all over again. It is a very interesting outlook, but of course at this stage it is all just supposition. However, I am hopeful that the super-levy proposal if implemented for those countries which have caused the problems would reduce milk production immediately and bring us back to where we could continue ad infinitum to increase the milk output. It is vital that we get rid of the surpluses which are putting a severe strain on the Community's resources and we are insistent that the countries which created the financial difficulties bear the burden of the cost of its elimination, and that is a terribly important aspect. These are the people who have involved themselves in factory-type farming, who have imported vast quantities of cereal substitutes from third countries in order to boost their production. We do not see why we should have to pay for their indulgence in this regard because we did not benefit from those cheap imports or massive factory-type farming which has generated huge profits. This is where we take issue with other countries at the negotiations. We will continue to make that point clearly in the future.
So far in our negotiations we have made considerable progress although some politicians here maintain we have not. I can truthfully say that we have not met one farmer who is not pleased with the rate of progress the Government have made to date in the super-levy negotiations.
