I move:
That Dáil Éireann endorses the Minister for Agriculture's defence of Irish agricultural interests during the recent agricultural price negotiations and recognises that the outcome safeguards the essential elements of the Common Agricultural Policy.
I understand that normally the report on discussions such as these is made in the form of a statement. I would like to point out to the House that I proposed that this debate take the form of a motion because it came to my notice that certain people in the media insinuated that the Government were trying to avoid a vote on this issue. I would like to let everybody know quite specifically that the Government welcome the opportunity to debate and vote on it.
I wish to inform the House of the outcome of last week's meeting of the Council of Agricultural Ministers held in Luxembourg. First of all, I would like to set out briefly what was put forward by the Commission in its original price proposals and to outline what was agreed in the sectors of main interest to us. The Commission had proposed: first, in the case of beef, the termination of permanent intervention by November 1987 and the complete elimination of carcase intervention and the different premium systems this year; second, in the case of cereals, they proposed a 3 per cent co-responsibility levy together with average price cuts of over 10 per cent as a result of changes in quality standards for feed grain. In all, those price reductions, when added in with the co-responsibility levy, would have been in the region of 12 per cent to 15 per cent; third, in the case of milk, the introduction this year of a cessation scheme leading to a 3 per cent cut in quotas.
These proposals were made against the background of enormous Community stock levels and a critical budgetary situation—a background which called for urgent remedial action even if that involved some costs, at least in the short term. While the proposals were understandable in these circumstances, I never attempted to deny that they represented a real threat to Irish agriculture. Therefore, I set out to negotiate a substantially improved package, especially in relation to beef where the greatest risk existed. That is exactly what I have achieved. Much of the comment made since Friday morning completely ignores what has been achieved. It is as if the comments related to the Commission's proposals and not to the Council decisions. I will now outline what these decisions were exactly:
On MCAs—Following the EMS realignment there was scope for a green pound devaluation to eliminate the negative monetary gap which had been created. During last week's meeting the Commission proposed a uniform devaluation of 1.98 per cent for the livestock products, that is milk and beef, and 1 per cent for plant products, and stuck rigidly to that position. Following very strong pressure from us, the final agreement gave Ireland a 3 per cent adjustment for livestock products and 1.5 per cent for the others. This is a major gain and represents increased income of about £75 million a year for Irish agriculture.
On beef the proposal to phase out permanent intervention has been left aside for the present and longer term issues in the beef sector are to be decided before the end of this year. The possibility of carcase intervention this year is reinstated and all the beef premium arrangements—calf subsidy, variable premium, and the special Irish element in the suckler cow premium—are retained. By far the most important element of that retention is the possibility of full carcase intervention in the autumn. Ireland and Northern Ireland are the only regions in the Community which benefit from all three premium systems, their value to us being about £30 million a year. These were not included in the original set of proposals put forward by the Commission. The final phasing in of the beef classification scheme involves a beef price increase which should be worth some £10 million or so per year while the green currency change is worth close to £40 million to beef producers.
On cereals the co-responsibility levy is adopted but it will be repaid to all small scale cereal producers on deliveries of up to 25 tonnes. This will, in effect, exempt 70 per cent of all Irish grain growers. Intervention will be available on normal terms from 1 October instead of 1 December as proposed. Most importantly the price reductions are significantly less than those proposed by the Commission, especially in the case of barley where they amount to about 5 per cent. We must bear in mind the additional 3 per cent co-responsibility levy. Taking all the elements together the cost in terms of farm incomes to grain growers is about £10 million a year after allowing for the green currency change. The cost in national terms is much less since the vast bulk of cereals grown here are consumed domestically and so the lower prices are reflected in lower costs for the Irish users concerned.
On milk the agreement means that quotas will be unchanged this year but that farmers will be invited voluntarily to cease milk production in return for a payment of 14p per gallon for each of seven years. National quotas will be cut by 2 per cent for the 1987-88 marketing year and by a further 1 per cent for the 1988-89 marketing year. Individual farmer's quotas will not, however, be affected unless the quantities bought up under the cessation scheme fall short of the required national reductions. That is unlikely. I believe that the voluntary take-up on that scheme will be sufficient to cover the overall 3 per cent. I do not see that there will be any necessity for compulsory reduction of milk quotas. The agreement also provides for the restoration of FEOGA investment aid for milk processing projects involving non-intervention products, and the Commission have agreed to propose changes in the rules which would allow co-ops to run their own cessation schemes in order to facilitate restructuring of milk production.
These two elements are extremely important. First, up to now we have not had any grant aid for milk processors who wanted to diversify into products which are not causing problems on the milk market. The products which are causing problems are butter and skim milk powder. The Irish delegation got the Commission to agree that grant aid would be made available. Secondly, and this is extremely important, as regards the restructuring of the milk industry we could not get the co-operatives to agree to a national cessation scheme over the past couple of months. We have now got the Commission to agree that cessation schemes can be set up within a co-operative area. The reason we could not get an agreement on a national scheme was that some of the smaller co-ops in the north and the northwest were afraid there would be an outflow of milk in their areas into the six larger co-op areas in the south.
We can now have internal cessation schemes within a co-op area. That is a very good thing and it will allow the restructuring, which we have been seeking so badly, to take place. Furthermore, where the Community expenditure provided for the cessation scheme in any member state is not required in full, the balance can be used for restructuring. The loss terms of milk output arising from the reduction in quotas could be put at about £33 million over the two years concerned.
At farm income level the net loss is probably about £10 million, partly offset by the £5 million a year compensation under the cessation scheme. In the longer term, there will be benefits from the better market prospects that should result from lower production throughout the Community. The green currency change will, of course, mean an immediate improvement in returns in the milk sector of about £35 million per annum.
Separately from the price negotiations despite strong opposition from myself, the Council adopted arrangements which would permit reductions in Community recoupment of the storage and interest costs incurred in intervention operations. The savings will be used to assist the disposal of intervention stocks and in that respect will benefit us. However, the decision has some Exchequer implications, the precise extent of which cannot be estimated until later in the year.
All in all, the final prices agreement represents a major improvement for us over what was proposed. Over the next year, even allowing for the losses in cereals, it will means about £70 million to Irish agriculture or £100 million if the premiums are included. While the milk quota reduction will tend over time to offset the impact of the green pound devaluation on the value of dairy output, the impact of the devaluation on dairy farmers' incomes will far outweigh the consequences of the loss of quota. In addition, and most importantly, the immediate threat to the beef intervention system has been eliminated and decisions about longer term beef policy can now be taken in a calmer and more rational atmosphere. In the short term, carcases, as well as hindquarters and forequarters, will remain eligible for intervention.
This package was the best which could be achieved and in many respects compares well with those negotiated in more favourable times. In virtually every year since 1977 the price increase negotiated was less than the rate of inflation — in some years specacularly so. For instance, in 1979 the increase was 2 per cent when inflation was 13 per cent; in 1980 it was 5 per cent when inflation was 18 per cent. This year the price increase is about equal to the expected level of inflation and above the expected rate of increase in farm costs. Thus, the price levels negotiated will not be outweighed by inflation as happened in earlier years.
We would have preferred to have been able to avoid the cut in cereal prices and to have held on to our existing milk quota but because of the critical budgetary situation and the massive surpluses this was not possible. The vast majority supported the Commission line on cereals and milk and were particularly adamant that there could be no exemption for Ireland on the milk issue. The Ministers from the other important milk processing countries have come under severe domestic criticism over the past two years because of the special treatment given to us in the 1984 super-levy settlement. Even after the 3 per cent cut, Community milk production will still be some 10 million tonnes above normal consumption.
Prior to the advent of Spain and Portugal into the community the following situation existed with regard to milk output. In the base year 1983, milk output in the Community was 105 million tonnes. As a result of the introduction of the super-levy the other countries had to cut back by seven million tonnes, leaving production at 98 million tonnes. The community consumes 85 million tonnes of milk and milk products; therefore, there is an imbalance of 13 million tonnes. The latest proposal will bring that production in three years time down to 95 million tonnes, leaving a surplus of ten million tonnes of milk. One can see from that that there is a major problem in the milk sector. It would not be a problem for any country that could get rid of its milk products on the open market but for any country selling into intervention there is a problem. We sell into intervention a large degree. Incidentally, the position with regard to Spain and Portugal is rather irrelevant in this context because their production almost matches consumption. Thus, it will not be a factor in the overall calculation.
The result of not reaching agreement last week would have been market chaos because of the action which the Commission would have taken, just as they acted last year when Germany vetoed the cereals proposal. That did not do anything for the German cause at that time because a few days after the veto being invoked the Commission just came along and said they could not afford to pay extra for cereals and they cut the price to the same level as in the original proposal. We have no doubt they would have taken exactly the same action on this occasion. Incidentally, Irish farmers would lose £10 million per month in the next few months in the absence of the green rate and other changes. These are the months of high milk production, our farmers would lose £10 million per month and that situation could continue through the year until the next price fixing session.
To vote down the Commission's proposals, even if that could have been done successfully, would have been immediately politically popular with a view to appeasing public opinion at home. However, it would have been totally dishonest and, in my considered view, would not have led to any improvement in the proposals before us. In fact, quite likely it would have had devastating effects on Irish agriculture. It is all too easy to say we should not have accepted but the damage to agriculture here could have been catastrophic. We must weigh up the facts and try to do the best thing in that situation.
We must bear in mind that there was overwhelming consensus among the other delegations that tough action would have to be taken and there was a common line among them that no exemptions would be tolerated. That was the theme running through the price talks since they started last February. Every country outlined quite clearly that there would be no exemptions. They had suffered too much because of our exemption in the original super-levy deal.
In most comments made here in recent days any acknowledgement of the realities of the budgetary and market situation has been conspicuous only by its absence. It is as if 0.75 million tonnes of beef, over 1 million tonnes of butter and 15 million tonnes of cereals in intervention stocks do not exist or can be wished away. In the past few days we have heard much loose talk and stupid comment. What most of the remarks have in common is a reluctance to face any unpleasant facts. Instead, the nonsense has been trotted out that we are not responsible for the surpluses and, therefore, should not have to bear any of the burden of coming to terms with them.
We live in a real world, not cloud-cuckooland. We live in a community that has considerable over-production in a number of sectors and all who produce within the community contribute to that. Our heavy dependence on intervention — for which we can, of course, advance some valid arguments — tends to disprove the "we do not contribute to the problem" argument. Of course we contribute to the problem but we have specific difficulties and we need intervention in certain circumstances because of the seasonal nature of our production. For instance, our beef comes on stream in the autumn months and we need intervention to take the massive amount of beef slaughtered at that time in order to relieve the pressure. We also have the problem that we are distant from the market and it is not always possible for us to sell at the instant the product is produced. We need a little time.
We produce 6 per cent of Community beef, yet we hold 16 per cent of its total intervention stock. Last year we sold about 15 per cent of our total beef production to intervention as against 5 per cent sold by other member states. We sell proportionately more beef into intervention than any other member state, yet we have people telling us we do not contribute to the surpluses or to the huge expense of storage. That is a falsehood and it is about time we faced up to the truth. We have improved considerably in that area because 12 years ago our reliance on intervention of beef was as high as 30 per cent. We have reduced that amount because of aggressive marketing by a number of brilliant operators in the beef industry. We produce 5½ per cent of the Community's milk, yet we hold 10 per cent of its total intervention stock of butter. Last year we sold 40 per cent of our butter production to intervention while the figure elsewhere was 25 per cent. Against this background it is ridiculous to suggest we have no responsibility for the surpluses.
Nobody knows better than I that a curb has to be put on concessionary imports and cereal substitutes which have been largely the cause of the difficulties we face. For the past four years I have demanded that these imports should be curtailed but there has been little support. Only France has supported our line. However, at my behest, this year for the first time concessionary imports of beef will be reduced. This advance is only a beginning and we will be pressing for further cuts in the future.
Imports of cereal substitutes are also beginning to decline from 16 million tonnes a few years ago to 13 million tonnes now. Again, this is due to pressure we have applied and, again, the only country that supported us on that issue has been France. It is very difficult to reverse procedures and practices when one is in such a minority. The bulk of the other countries want the importation of cereal substitutes and beef because they export large quantities of consumer goods. They exist by trading and the only things they can take from third countries who import their products are beef and cereal substitutes. One cannot veto that kind of activity. One must have a majority on one's side but we are in a minority of two. The House will be interested to know that Ireland is not blameless regarding the use of cereal substitutes. We are now using 600,000 tons a year and our usage is rising, whereas it is falling elsewhere in the Community. Thus a "holier than thou" attitude here may not be any more appropriate on this issue than on the question of surpluses.
The blatant dishonesty of statements made over the weekend is very annoying. The facts are quite different. We do abuse the intervention system; we do use cereal substitutes. We are responsible for a disproportionate amount of these stocks which are causing this major problem. The paymasters of the Community have let it be known quite clearly that they are not prepared to continue to finance production of food which cannot be consumed in the Community or sold abroad, except at huge losses. I made the point recently that it would be cheaper to take the butter being produced in this country and dump it in the Atlantic Ocean than to store it and sell it off at 10p or 12p a pound. A number of people would like to evade that reality.
These imports come into the Community under international trade arrangements, particularly GATT, and they cannot be stopped unless there is bilateral agreement. There is a legally binding agreement between the two countries involved, the importers and the exporters. It is not easy to secure bilateral agreement between the Community and the supplying countries, so one must get voluntary agreement between the two countries concerned.
I would like to lay to rest another of the inaccuracies regularly repeated over the last few days. We did not lose most of the super-levy benefit secured in 1984. The original agreement fixed the definitive quota for most of the other member states at 1981 levels plus 1 per cent. In our case it was fixed at 1983 level plus 4.6 per cent from the Community reserve. This represented 22 per cent more than the quota we would have had on the basis used for most of our partners, the milk-producing members of the Community, The 3 per cent reduction to take place in the next few years leaves that position completely unchanged in relative terms. We will still be over 20 per cent better off than if we had been treated on the same basis as other member states. That fact appears to have been missed in some of the hysteria of the last few days.
There have also been the suggestions that we should renegotiate our terms of accession to the Community. I am not against that issue being considered if people generally want it, but I would point out that there is nothing in the price agreement concluded last week which goes against the terms of our accession. I would also point out to farmers what is at risk if we call into question our membership of the Community. Payments from FEOGA since our accession have amounted to over £4,500 million. Last year alone they amounted to some £900 million. This year they will probably be of much the same order. This is massive expenditure to support Irish agriculture, far beyond our own resources were we not in the Community. As well, Community price levels for all the main commodities are well above those applying on world markets — two and one half times higher in the case of butter, close to twice as high in the case of beef and grain. Are people aware that the price of milk in New Zealand is as low as 22p per gallon? That is the type of situation we would face if we were not in the Community.
Even though circumstances have changed, the CAP will continue to serve us well in the future compared with any conceivable alternative. The deal last week safeguards the essential elements of that Common Agricultural Policy. It will help towards restoring market balance for the main products of concern to us and so improve the longer term prospects for Irish agriculture. At the same time it leaves the beef issue for calmer consideration later, it assures us of an immediate and valuable price increase, and it maintains our relative advantage in milk production. While it involves reductions in cereal prices, it has to be remembered that all member states had to accept some sacrifices and this includes the Mediterranean countries for which price reductions for some important products were even greater than for cereals. This point is being conveniently ignored.
Personally I would like a quota system for cereals. It would be far more acceptable to us than price reductions of the magnitude with which we are faced this year, but not one other country in the Community will support us on this issue. Ironically last year the Commission proposed a quota regime in the Community but not one other country supported it and some of them were quite violent in their opposition to a quota system for cereals. It may be possible to do it in the future and if we have to press any issue it is that we should have a quota system for cereals. At present we have not a mechanism for setting up a quota system and there are 11 countries against us on the issue. It is not possible at this juncture.
Regarding the overall agreement, much of the criticism has been very hurtful. Words such as "treachery", "betrayal", "sell out" and "defeatest attitude" have been used by members of the Opposition, including their Leader. The dishonesty of these people who ignore the fact that there is a financial crisis and a major crisis of over supply is unacceptable to the people. I do not believe the public will think well of the Opposition party or of any irresponsible people in the farm sector who try to ignore the realities. If we do not face up to those realities the Common Agricultural Policy will be destroyed. That is what I am there to safeguard.
