I propose to share my time with Deputies Leonard and Brendan Smith.
Private Members' Business. - Common Agricultural Policy: Motion.
I am sure that is satisfactory and agreed.
I move:
That Dáil Éireann, mindful of the importance of the Common Agricultural Policy to the economy in general and the rural community in particular, demands that the Government enunciate a cogent and focused response to the EU Commission proposals for change, and that this response be based on an interpretation of the national interest that seeks to maintain as many viable farm holdings on the land as possible.
Fianna Fáil has tabled this motion to focus public debate on the reform of the Common Agricultural Policy, the importance of initiating this debate having been highlighted by the decision of Agriculture Commissioner Fischler to bring forward his proposals for reform. Policy makers in Europe and further afield are thinking ahead to the next round of world trade talks, enlargement to the east of the European Union and the implications of a single currency for agricultural policy. In contrast, a passive approach to policy making has been the hallmark of this Administration's approach to date.
In contrast to the cogent, focused response from Government this motion reasonably seeks, we have what is now a complete policy chasm between the Government partners. The furious row between the Tánaiste and Minister for Agriculture, Food and Forestry on reform of the Common Agricultural Policy is the latest manifestation of Government disarray on the range of issues defining our relations with the European Union. Despite having been repeatedly promised since last spring, the publication of the Government White Paper has been long fingered again. It is evident there is no agreement in Government on issues fundamental to the totality of our relations with the European Union.
The squabble reported in today's papers between the Tánaiste and the Minister for Agriculture, Food and Forestry leaves our entire negotiating position in a state of chaos, the Tánaiste reported as having said that European Union enlargement was not only a political necessity but would present new markets and chances for Ireland. In flat contradiction, the Minister is reported as saying that backward Eastern states would never be compatible with membership. It is against that background of in-fighting and incompetence on the part of members of the Government that vital issue of the Common Agricultural Policy is being debated publicly for the first time.
The Common Agricultural Policy is a vital component of our entire economic structure, having been worth £1.3 billion in total in 1994, of which £669 million was disbursed in direct payments to farmers. The reform of the Common Agricultural Policy goes to the heart of our national interest, placing the future economic viability of the majority in rural areas on the line.
Commissioner Fischler's proposals must be given more consideration than their curt dismissal by the Minister for Agriculture, Food and Forestry, whose knee-jerk reaction was rendered even more ridiculous by the total absence of any policy on his part.
Commissioner Fischler outlined three main options for reform of the Common Agricultural Policy, the first being to maintain the status quo which, for want of any constructive policy suggestion, apparently is the Minister's preferred option but not that of the Commissioner. Commissioner Fischler's premise is that, in the light of changing circumstances, the status quo is not sustainable.
The second option outlined by Commissioner Fischler was for radical reform. If adopted, such moves probably would range from no support for prices or others very close to world price levels to further decoupling of compensatory payments and their reduction over time. For example, reducing milk and sugar prices to world levels would necessitate huge transfers of resources if compensation were to be achieved. For a range of political and economic reasons, Commissioner Fischler has indicated that radical reform is not his preferred option in the short-term.
The third option outlined by the commissioner is to deepen and widen the 1992 reforms which approach, according to him, implies a reduced reliance on price supports, where necessary, compensated by direct payments whatever may be their concrete form. The linkage between income support and maintenance of the environment — already a feature of the rural environmental protection scheme — would be strengthened in such a scenario, this last option appearing to be that preferred by Commissioner Fischler.
The lack of coherence in the broader areas of foreign policy, if not tackled, will have a serious impact on our ability to successfully articulate a cogent response to reform of the Common Agricultural Policy. The internal structures of the European Union are also being subjected to reform, agricultural spending at present ring-fenced until 1999 resulting from intergovernmental agreement. However, in an evolving European Union, in which the Parliament will have increased powers, that type of commitment may be impossible to achieve and its potential consequences for Irish agriculture extremely serious.
Fianna Fáil demand that the Government articulates its definitive position on these crucial structural problems. We must avoid a scenario in which, because of a lack of planning on the part of the Minister, the Government of the day in 1999, will be placed in the position of running around endeavouring to rearrange the deck chairs on the Titanic.
The long-term prospects of Irish agriculture are being retarded by the Minister's refusal to lead this important debate; having come into office when the policies of his predecessors were bearing fruit, his immediate problems were few and far between. With the exception of the immediate problem in the sheep sector, the main issues were long-term. It has become abundantly clear the Minister has given the latter little or no thought, he being typical of an X generation kid, with everything being geared to instant gratification. If there are no photo opportunities in planning for the future the Minister simply is not interested.
The determination of the Fianna Fáil Party to pursue reform of the Common Agricultural Policy is based on the following considerations. In its own right reform of the Common Agricultural Policy is one of the most important economic issues with which Ireland will have to deal in ensuing years. A shambles of historic proportions looms under this Government's management, the major policy issues being a matter of bitter public disagreement between the Tánaiste and Minister for Foreign Affairs and the Minister for Agriculture, Food and Forestry. Furthermore, temperamentally, the Minister for Agriculture, Food and Forestry is disinclined to admit of lateral thinking. Most dangerously of all, the Minister has made a political calculation that, come what may, he will not be in Agriculture House in 1999 — no doubt seeking further evalations in the meantime — and, accordingly, has no intention of interrupting his rise without trace in Irish politics in order to deal with this or any other difficult issue.
Regardless of what the Minister may say, enlargement is firmly on the agenda of the European Union. The challenge to Government is to meet that challenge rather than run away from it. Basic questions must be answered. Will the Government move to veto enlargement given the statement of the Minister for Agriculture, Food and Forestry? If, as everybody else in Europe believes, enlargement goes ahead, what are the views of the Government on the conditions for transition? Should it extend over a five, ten or 15 year period? What type of transfers should be effected within that period? The resolution of such questions will have a profound effect on our agriculture sector.
The Government must begin to articulate its position, otherwise its passivity in the policy area will result in the future of our rural communities being decided in Brussels. As at present operated, the Common Agricultural Policy is virtually a charter for land clearance. As matters stand, approximately 60 per cent of Irish farms are small, or moderately small, in terms of economic size. Of these enterprises, non-intensive and non-dairy livestock predominate; in 20 years the number of farms with dairy cows has halved. In the same period there has been a dramatic shift towards dry stock systems. This is in spite of the fact that dairying is five times more profitable. Specialisation has gone hand in hand with a reduction in numbers.
Eighty-four per cent of dairy cows are on 16 per cent of farms. The 97,000 dairy producers in 1972 has been reduced to 41,000. It is officially predicted that if current trends continue — and it seems that Agriculture House is intent on continuing with present trends — up to 12,000 dairy farmers will be out of milk production in the next five years. The small dairy producer is being eliminated. As matters stand, 50 per cent of producers are trying to survive on only 22 per cent of the quota. Of the half of all producers trying to survive on less than 40,000 gallons, it is likely that half of them will be out of business in five years.
Another disturbing trend is that the prohibitive price of quota is keeping new blood out of the industry. Prior to the introduction of quota, for every two people leaving milk production, one new entrant was taking up the enterprise. The trend has been not only to bigger and fewer units but, away from the disadvantaged areas. The acute lack of policy that characterises this Minister's performance is evidenced by the 10 per cent clawback on quota introduced by him. It will have no effect on the continuing haemorrhage of quota from disadvantaged areas. This is a classic case of a policy that is in direct variance with what is required. The Minister's apathy should not obscure the fact that there are many policy instruments available at national level. What is required is preparedness on the part of the Minister to stand up to vested interests.
Not only is the national quota slipping into fewer and fewer hands, but a real chance to get more quota and to do something for people on the margins of the industry is being allowed to pass. In March 1984 when the milk quota regime was introduced, the special position of Ireland and its dependence on dairying was recorded. It was promised then that in the event of future quota becoming available, Ireland would have a priority claim. Not only is our claim not being pressed, the Irish quota has been reduced by 9 per cent. In contrast Italy has secured an 11 per cent increase in quota, while Greece got a 20 per cent increase. There is a need for the Minister to give a commitment that securing delivery of that promise of extra quota for Ireland will become an urgent priority.
I am not prepared to accept the argument that this is something Brussels simply will not countenance. We are seeing huge discrepancies between dairying and dry stock sectors and great variations in income levels within sectors. Even within the dairy sector there are variations. We have structural problems in our agriculture because we have so many holdings in European terms, but the direction of policy in Agriculture House is to get the money and to send it out in the post and that it does not matter if we have thousands fewer farmers or if in five years time we only have half of the 50,000 farmers whose viability is threatened at the present time. The policy is to keep up the momentum, to keep the cheques going out in the post and to concentrate on the large sums of money we are getting. No one is looking behind. The whole thrust of Teagasc, who is supposed to be an advisory service, seems to be to get in the money. There is no developmental arm in Teagasc at the moment, no planning for the future. Only recently has the rural economy unit been revitalised, having done nothing for the last ten years in keeping with official policy. Can any Teagasc adviser point to one demonstration farm as an illustration that if farmers involve themselves in that sort of activity they will have a viable family farm in the year 2005? There is not one demonstration farm at the moment because no one seems to know what the situation will be in 2005. We are told that the good times are here, that everyone is reasonably happy and that if some cannot make it that is tough luck. There is not sufficient debate, and I challenge the Minister to use this opportunity to lead the debate that must take place here if we are to maintain as many people on the land as possible.
How can we maintain people on the land if there are no new entrants to the most profitable enterprises? What are we doing about changing the trend for the disadvantaged areas scheme where quota is running out and we are seeing concentration of a national asset in fewer hands? Commercial farmers will survive the reforms that are coming on-stream but what are we doing for rural economies and rural communities, for the next band of 50,000 farmers whose viability is threatened even before we move into the more competitive forces and more liberalised external trading environment after the next world trade organisation talks? Are we prepared to initiate policy in Brussels rather than being the policy takers we have been for so long? Is it not the case that, despite increased output, increased value from the farm gate to our export markets, fewer people are in this business and that every official survey confirms that there will be fewer people in the business in the years to come? Is that to be our response in policy terms at national level to have viable agriculture for the future? Thirty years ago Mr. Mansholt was told to go back to Brussels. We are implementing policies now that would bring about the scenario that Mr. Mansholt predicted. We are doing it with official agreement, and we are not prepared to go back to Brussels and, in the next phase of CAP, talk about what is happening now and do something about it.
According to the farm survey of 1994, there are huge variations between the sectors — 57 per cent of the beef herd are on dairy farms. We are seeing concentration of profitability in fewer hands and more farmers going to the wall. We have advisory services which are not planning for the future, which are not dealing with people who are on the margins and whose viability is threatened. Rather we are concentrating in making sure that they make their returns and that they are commercial in terms of generating income. That is as far as we are looking in terms of our agricultural research and advisory services. That is not good enough. If we continue this way, we will end up with just 50,000 or 60,000 farmers, and what impact will that have on rural communities and rural economy in the future? It will have a serious impact and the social implications of these reforms will have to be taken into account.
We are heading for a more liberalised trading environment. We have certain competitive advantages. The fact that we have a grassland based agriculture can make us more competitive than others. The one sector that, because of the strength of vested interests, did not undergo the changes that took place in the other sectors in the CAP reform, was the dairy sector where prices are still subsidised. We have not seen that in regard to beef where we implemented direct payment and compensatory measures instead. That will change but we are making no effort, and no new entrants are going into the most profitable enterprise in agriculture which is dairying. Official predictions are that fewer farmers will be in this business. The co-operatives would love to have just five people to collect their milk from outside the gate if possible, because that would reduce their costs, but in terms of the country and the impact on our rural communities that is an unacceptable scenario.
It is time we made hard choices, took a pro-active approach and went into the country to talk to farmers' representative organisations and to farm families, and took some tough decisions to ensure we do not end up with a land clearance policy which it seems will be the outcome of the CAP reform. We do not know where we will stand after 1999. Whatever about plan B? Plan A is a blank sheet at the moment and this is not acceptable.
There are opportunities. The on-farm investment schemes should be a powerful instrument for policy to help secure viability on smaller holdings. We have failed to give priority to those areas where there has been a serious lack of investment in the last few years. Those farmers cannot and will not be able to compete in the second phase of CAP reform if we are not in a position to allow investment in those farms to make them more competitive.
The Teagasc Agricultural Research Forum which was published earlier this year put it better than anyone when it said:
This vision of a three track farming system is based on the assumption that the pathways for future adjustment are already fixed by the structure which has evolved over three decades and by the limits set by the external market and policy environment. An alternative scenario would see this prospect as too passive a stance to take for a country which is so dependent on its natural resources. It would claim that the shaping of structural change in farming is not altogether dictated by inevitable and external forces.
It would argue for the full manipulation of those levers that we in Ireland can control for ourselves in the pursuit of a model of development best suited to our circumstances. It might see possibilities in having research and development capacity more expressly focused around the different sets of problems of different regions in the country. It would seek a more optimal balance than at present between palliative support measures and the required supports for resource development.
There is need for more systematic thought and study on these or other options for the future of farming and other resources.
To put it another way, the Minister should get on his bike. There is a need for a greater policy input and a greater attempt to start deciding what our priorities are and fighting for them as the second phase of the CAP reform procedures begins.
I am glad of the opportunity to speak on this motion, the last words of which are "to maintain as many viable farm holdings on the land as possible". It is to this aim that we should give our attention. I have been consistently critical of the Department of Agriculture, Food and Forestry for not conducting a review, especially in areas like Mayo and other small farm regions.
This time last year we were looking to 1995 with great expectations. We recommended that people fill out the control of farmyard pollution forms. In my constituency over 1,000 applied under the scheme. At present, the Department is dealing with last December's applications and hundreds of people who hoped to have buildings provided were cut off last spring.
The food industry is on its knees as far as competitiveness and the exchange rate are concerned. There are difficulties on small farms with cattle production. In November the IBEC news report carried an article stating that the food sector needs help now to ensure competitiveness with the UK. The area from which I come has no worthwhile inward investment and no international companies. The primary producers in the area depend completely on the food industry. Last year we believed that the operational programme and INTERREG presented a great opportunity for job creation. Over the last few months the Irish pound has been strengthening against sterling and hard earned markets in British multiple stores are in doubt. Rather than expanding as people thought they would last year, they are doing well to maintain the status quo.
A group from the constituency came to Dublin to meet representatives from the IDA and Forbairt. There is talk of a £200 million investment in the Border region under INTERREG, the operational programme, Leader, the county enterprise boards and the IFI. In our discussions with the IDA and Forbairt we were told that they could get industries into the counties of Cavan and Monaghan if they had the money to build factories. They have no money and moreover no remit from the Government to assist the development of the peace initiative in the Border counties. They have no programme for factory building and they told us to build the factories and they would look for somebody to go into them. That is not good enough. Hard earned markets should be recognised and everything possible done to retain them.
I mentioned the farm pollution scheme. As I said, 1,088 people in my constituency applied and then the scheme was cut. This is similar to what the Coalition Government did in 1983 when it slashed the farm grants. They have slashed them again and processed a trickle of applications.
There has been much talk of alternative farm enterprises and there are many areas which we should examine with a view to developing markets. A recent report by the nutrition advisory group stated that Ireland has the lowest consumption of fruit and vegetables in the EU. That is disgraceful. I asked a parliamentary question about the importation of frozen chips, crisps and so on. Some 50,000 tonnes, worth £28 million, are imported in a year. Those are areas which the Minister should examine because they present opportunities for job creation. There is an opportunity to do away with import substitution but there is nothing being done in that area.
A few months ago a group of free range egg producers told me that their adviser had been given different work and they now had no one to advise them. There are 55 flocks in the constituency representing alternative enterprises to supplement dwindling farm income. Some 39 of them in the Cavan area have 1,000 hens each while 16 in the Monaghan area have 500 hens. They are now dependent on a poultry adviser from Dublin. There are two poultry advisers in the alternative farm enterprise section — one in Cork and another in Dublin. This is the rejection people face when they try to develop alternative farm enterprises.
I put down a parliamentary question in June to ask the Minister when the results of a study on dry stock farmers' income would be available. The reply was that the results of the study, being carried out by the economic unit of the Department in conjunction with experts from Teagasc and agricultural inspectors within the Department, would be presented to the Minister in September. I rang the Department today and was told that the report was not yet completed and that I should check again in the New Year. If the Minister is serious about an area with a low return of income it should not take six to eight months to carry out a survey. I ask the Minister to address this right away.
A number of co-ops in the Border area are asking for a peace dividend milk quota for farmers below the 30,000 gallon threshold. They base their case on the benefits this could have for milk producers on both sides of the Border. It would have the effect of fostering good relations and common interest between farmers of different political viewpoints and it would be a positive initiative in support of the small dairy farmers in the region. Within the EU approved operational programme 1995 to 1997 to promote peace and reconciliation in Northern Ireland and the Border counties, there is scope for both the Irish and British Governments to cooperate at a practical level in implementing a scheme to achieve an EU allocation of a peace dividend milk quota to the small dairy farmers as well as a chance to secure a long-term viable future for family farmers in the Border area.
It has been established that the only long-term future in farming is in milk production. The impact of the value of additional quotas would be enormous. Each one million gallon milk quota is worth £1.5 million. That would support 80 extra jobs.
As regards TB eradication, it is time to pay special attention to black spot areas. Fianna Fáil provided extra resources and manpower for this before leaving office. I hope this Government does the same and comes to grips with TB eradication. Some 27 per cent of County Monaghan is disadvantaged and was not reclassified as severely handicapped. An irrefutable case could be made to include a large proportion of that area and an appeals system should be established to make that case.
I welcome the opportunity to contribute briefly on this motion, the subject matter of which is immensely important. In his contribution Deputy Cowen mentioned that the three options outlined by the Commission are to maintain the status quo, carry out radical reform of CAP and develop or build on the 1992 reform. All deserve careful consideration.
Initially the response I received from those involved in the agriculture industry favoured building on the reforms already in place or maintaining the status quo. Those two options are attractive to farmers but they contain difficulties for the industry. All sectors involved in the industry — farmers, agri-business, the Department and elected representatives — must carefully consider the future of the CAP.
The Government should initiate the widest possible consultation and debate on the future of farming beyond the end of this century. Agriculture must have a secure future as it is vitally important for the good health of the economy. The reforms of the CAP initiated and carried out by Commissioner MacSharry have been of tremendous benefit. The last few years have seen a considerable growth in farm income with consequential spin-off benefits for all sectors of the economy.
My constituency of Cavan-Monaghan is one where food and agriculture dominate in terms of employment and account for over one-third of the workforce. The combination of heavy drumlin soil and small farm units resulted in low farm incomes with much underemployment. While the poultry, mushroom and pig industries are well developed, associated employment is of a part-time nature. Industry consists of medium to small type businesses with only eight manufacturing industries employing more than 200 people; the majority, 64 per cent, employ fewer than 15. Dairying is the major income earner in the north-east and north-west of this country. Unfortunately, too many farmers have totally inadequate milk quotas.
In the lakelands catchment area the number of quota holders declined by 2,217, representing a decline of 36.4 per cent, between 1983 and 1993. The drop in the co-ops' milk pool of almost 6 per cent represents a serious loss of income for the economy of the area. In 1984 it was understood that we would obtain additional milk quotas but this has not come to fruition.
At Question Time recently I raised the issue of seeking an additional quota for both sides of the Border region. Deputy Leonard made the case adequately. The programme to promote peace and reconciliation is an obvious mechanism through which to seek an additional quota as two of the stated aims are to promote rural and urban regeneration and create employment. This is particularly important in that the majority of farmers on both sides of the Border depend on dairying. It accounts for one-third of the gross agricultural output of the region. The provision of additional milk quotas would help to regenerate that economy and its positive effects would be obvious immediately.
In order to secure a long-term viable future for family farms in Border counties that additional quota is needed. It is particularly relevant to note that farmers on both sides of the Border share similar problems. The majority of them depend on dairying and because of the restricted milk quota regime, which has been in operation for some years, farmers' income is not sufficient to sustain viable family farms. The farm family population is in the decline with a consequent loss of economic and social benefit to the rural community in general.
I instanced the serious decline in the number of milk quota holders in the lakelands catchment area. That decline has serious consequences for the population of the area because of the importance of dairying in creating farm income and employment in the agri-industry. If farming is to survive into the next century additional milk quotas must be made available.
Recently the Minister stated that the average family farm income in less favoured areas increased to two-thirds of the national average. Obviously, CAP reform compensatory payments had a significant impact on income in those areas but further supportive measures are needed. The Minister and the Department must realise and act on the basis that agriculture is the single most important sector in the north and west of this country. Its role in the economy in that area is twice as great as that in the economy as a whole.
In order to maintain viable rural communities the maximum level of dairy production and processing must be maintained. We need vibrant and labour intensive agricultural enterprise. When one accepts the need to promote economic regeneration and balanced regional development, then the case to provide additional milk quotas cannot be contested.
I welcome the ring fencing of quotas in disadvntaged areas. The subsidisation of quota restructuring is essential. Action is needed to prevent the loss of quota from those vulnerable areas. Another important incentive to retain quotas in those areas is to have grant schemes administered in such a way that they do not hinder a farmer in carrying out necessary improvements and making necessary on-farm investments.
I know from contacts with people in the agri-industry that they are concerned about the reduction in export refunds. Such decisions seem to be made on an ad hoc basis. This is not acceptable and makes planning practically impossible. Markets for milk powder and other products to countries such as Mexico depend on adequate export refunds being in place. It is not acceptable to have decisions made on an ad hoc basis that affect the availability of supply to markets which, by their nature, necessitate long-term planning and continuity of supply and price.
One of my fears about increasing the role and extent of direct payments under CAP reform is the easy way such assistance could be dismantled. Increasing the scope of direct payments might appear attractive but it could be a short-term attraction. Paying for production would be a better philosophy. In discussing possible options on the reform of CAP the Government and the EU Commission must be mindful of the farm bill which will be discussed by the US Government and Congress. Their decision on whether to increase or eliminate farm supports will be crucial to world farming.
Unfortunately, many producers in the Border region, where dairy farming is crucial, encounter serious difficulties in increasing their quota and upgrading their on-farm facilities. Those farmers want facilities put in place to meet relevant hygiene standards. The dairy hygiene scheme introduced by the Minister's predecessor, Deputy Walsh, was targeted specifically at small producers. The number of approvals issued in County Cavan under that scheme, as outlined in a recent reply to a parliamentary question, make poor reading. The same applies to the control of farmyard pollution scheme. I appeal to the Minister to increase the number of approvals under those schemes.
I move amendment No. 1:
To delete all words after "particular," and substitute the following:
"approves of the Government's policy in relation to negotiations on the future development of the European Union and in particular their intention to protect the interests of the Irish agriculture, food and rural sectors."
I welcome the debate. It provides an opportunity for Members to debate an important issue and for me to set out the Government's policy in that regard. I enjoyed Deputy Cowen's rather colourful anecdotes which portrayed me as a short-sighted Minister, rudderless, without policies or planning and only interested in photo opportunities. While this may make good Dáil sketch material, it is far from reality. My Department has forcibly set out a dual strategy for Irish agriculture with the objectives of achieving an internationally competitive food industry with an additional market share and less dependence on intervention and EU subsidies and maximising the number of family farms here and in Europe. That is our dual strategy and all policies are aimed towards those overall objectives.
The motion in the names of Deputies Cowen, Byrne, Ellis and Nolan has been prompted by the EU Commission's communication on the effect of enlargement and the accompanying agricultural strategy paper. The motion demands Government action on foot of what is described, in their words, as "the EU Commission proposals for change".
The first point to be made is that there are no such proposals, neither of these Commission documents contains any proposals. They are discussion documents and extremely important discussion documents. They have their origins in a request of the European Council which met at Essen in December 1994 for "an analysis of the effects of enlargement in the context of the Union's current policies and their future development". This request followed from the decision of the European Council in Copenhagen in June 1993 that "the associated countries in Central and Eastern Europe that so desire shall become members of the European Union". The Commission's documents will be on the table for discussion at the next meeting of the European Council which will be held in Madrid on 15 and 16 December.
There are at least ten countries in Central and Eastern Europe that are potential members of the European Union. Poland, Hungary, Slovakia, Lativa, Estonia and Romania have applied for membership and the Czech Republic, Bulgaria, Lithuania and Slovenia have declared their intention to do so. In addition, Cyprus and Malta have also applied for membership.
Enlargement of the Union to include the ten Central and Eastern European countries would add 106 million to the population of the Union and 1.1 million square kilometres to its area. The increase in the Union's population and area would be 29 per cent and 33 per cent respectively. However, the combined GDP of the ten represents less than an estimated 4 per cent of the GDP of the existing Union. The average GDP per head in the applicant countries is about 30 per cent of the Union average, with Romania, at 16 per cent, at the bottom of the range and Slovenia, at just over 50 per cent, at the top. Each of these countries is still, to a greater or lesser degree, in the process of transition from a centrally controlled economy to a market economy. The immediate impact of the change was a deep recession, from which recovery has been gradual and variable.
On average 7.5 per cent of the applicant countries' GDP is derived from agriculture compared with 2.5 per cent in the case of the Union as a whole. The proportion employed in agriculture in the applicant countries is 26.7 per cent on average compared with 5.7 per cent in the Union as a whole. These averages mask a wide variation in range. The Czech Republic has the lowest dependence on agriculture, with only 3.3 per cent of its GDP and 5.6 per cent of its population dependent on it. At the other extreme, more than 20 per cent of Romania's GDP and 35 per cent of its population is dependent on agriculture. Those figures reveal that the countries of Central and Eastern Europe do not have similar economies, they are at different stages of development and their size and dependence on agriculture also differs.
Recent studies conducted by the Agricultural Directorate of the European Commission identified three key structural problems facing the agriculture and food sectors of these countries. Access to capital is the first difficulty. Producers have little spare cash to invest, the State cannot afford to intervene and banks will not accept land over which there are ownership disputes as collateral. Poor farm structures pose another difficulty. Many farms are too small to achieve economies of scale and others that operated under centralised controlled bureaucracies are too large to be efficiently managed.
There are also structural problems in the servicing and processing sectors of the food industry. Many upstream and downstream firms servicing agriculture or processing its products are still State owned, monopolistic and inefficient. The studies carried out by the Commission conclude that "By the end of the decade supply and demand patterns in CEEC agriculture could be expected to have adjusted to the transition shock". The report also states:
In most countries, completion of land reform and restructuring of the food chain will take at least till the end of the decade, while farm structures could be expected to evolve even slower as the capability of agriculture to attract investment will remain limited.
... the CEECs would be less in need of a high level of price and income support for their farmers than of targeted assistance for the restructuring, modernisation and diversification of their productive capacity in agriculture and the downstream sectors and for improvement of their rural infrastructure.
It is clear therefore that it will take until the end of the decade at least for the majority of the CEECs to have reached a stage where, in the words of the communiqué issued by the European Council at its Copenhagen meeting, they will have "the capacity to cope with competitive pressure and market forces within the Union" in the food production sector at least.
Negotiations on the terms of accession of at least two applicants, Cyprus and Malta, will commence six months after the conclusion of the Intergovernmental Conference and take into account its outcome. The conference which is expected to commence next year during the Italian Presidency will address, inter alia, the conditions necessary for the proper functioning of the Union's institutions after enlargement. It is my experience that the tour de table with 15 member states is somewhat unwieldy. In any expansion all facets of the decision making process will have to be examined. That will be the purpose of the Intergovernmental Conference.
In relation to the Commission's discussion documents to which a number of Deputies referred, the Commission's strategy paper published last week identified three possible options for the Common Agricultural Policy in the context of enlargement. Under the status quo option, the CAP would be extended to the new emerging states in Central and Eastern Europe. In the broader external and internal context of the turn of the century, the Commission considers that such an approach may turn out to be short sighted and that a major drawback with this option is that EU agriculture will become increasingly constrained in its development. This option would involve full acceptance of the regime of quotas and restricted output.
On the one hand, even without enlargement to the east, yields will continue to increase and lead to further production growth in a number of key sectors, including cereals and beef and excluding sugar and milk where production quotas exist. On the other hand, the quantity of subsidised exports is limited and may, in the context of further international trade negotiations, become even more restricted in the future. During the next five to six years, starting from 1 July this year, the volume and value of export subsidies beyond the Union wll be constrained. Before the next GATT Round we will have that limitation.
Neither, in the Commission's view, is internal demand going to increase substantially. In such circumstances growing surpluses could lead again to major market imbalances in the existing 15 member states. The Commission concludes that enlargement to the east under status quo conditions for the CAP would add to the emerging market imbalance and accelerate the deterioration. In simple terms, the new member states would have to be absorbed within the existing quota structure.
Eventually the Commission expects that the situation could become increasingly untenable from a market and budgetary point of view and a major CAP reform would probably be unavoidable and inevitable. Each reform after enlargement runs the risk of being particularly difficult, in terms of securing agreement, and costly. Since farmers in the CEECs would have enjoyed high EU prices for a number of years they would have to be compensated at least for price cuts that take place after enlargement in the same way as their colleagues in the west. The Commission concludes that the status quo option which appears to be logical at present would present major long-term market and budgetary problems. Clearly, it does not favour that approach.
The second option is radical reform. Proposals for further radical reform of the CAP have been presented by some agricultural economists both in the context of and independently from the question of further enlargement. In general, such proposals involve the abolition of price support or a reduction to world market price levels, time limited income compensation and abolition of quotas and other supply management measures. Direct income payments and payments of an environmental nature would be on a national basis with or without Union co-financing.
Although such a radical reform would involve large scale financial savings once compensation payments ended, it would imply a number of social and environmental risks which at least in some regions could lead to negative effects. It would also, initially, before the phasing out of compensatory payments, require extra budgetary resources. For example, if world prices were introduced for milk and sugar with full compensation, direct payment costs would be between £8 billion and £12 billion.
The Commission recognises that if such payments were to be made directly from member state budgets, the question of economic and social cohesion would arise and transfer payments between member states would become necessary to bridge the gap between the richer and poorer countries to get the system to work. Consequently, Union control over agricultural policy would be difficult to maintain. In fairness, the Commission does not advocate this approach.
This option would involve a move towards world prices and we would run the risk of renationalising the compensatory aids. That is the worst case scenario from Ireland's point of view and I am glad the Commission has rejected it. Unlke the Germans and the French, the Exchequer could not afford such national aid. This would undermine the principle behind the CAP and of co-financing.
The third option explored by the Commission is the extension of the 1992 CAP reform process. This would involve a reduced level of price support compensated, where necessary, by direct payments. Lower prices would enable the Union to participate more fully in the expansion of world trade. Given the existing and possible future limitations on subsidised exports, the ability to export without subsidies will, the strategy paper argues, become more and more crucial. Equally, it is the case that growing competition in the Internal Market through increased market access will further emphasise the importance of competitiveness.
The strategy paper also identifies the environmental and social aspects of the direct payments currently in place and raises the issue of strengthening these links. These direct income payments include headage premia in respect of the social aspects and grants under the REPS in respect of the environmental aspects. The paper also suggests that a further move away from market support to income support would allow greater freedom to member states in the implementation of EU legislation, in particular in the field of income support policies.
It is the conclusion of the Commission that a resolute continuation of the 1992 reform approach would cause less economic distortion than the other options. It would, in the Commission's view also tend to facilitate future integration of the CEECs.
The attitude of the Government and its predecessors to the question of enlargement, as expressed in the Conclusions of the Copenhagen and subsequent meetings of the European Council, is open and positive. The Copenhagen European Council Conclusions state:
The associated countries in Central and Eastern Europe that so desire shall become members of the Union. Accession will take place as soon as a country is able to assume the obligations of membership by satisfying the economic and political conditions.
That remains the position of the Government. We believe that enlargement is necessary to consolidate peace and stability in Europe. We also believe that enlargement can bring greater prosperity to existing and prospective member states by increasing trade and investment opportunities, provided the overall conditions are right.
To achieve those conditions the process of enlargement should respect a number of key principles. Applicant countries should accept Union policies as they have evolved to date. The common policies should not be changed to meet conditions in applicant countries. This has been a guiding principle which has been applied to all previous enlargements and should continue to be respected. Derogations will be required, but these will have to be temporary. The transitional periods — in effect, the timescale for derogations — should vary with the applicant country to take account of the varying degrees of difficulty in the implementation by the applicants of Union policies on the one hand and possible absorption difficulties which the Union may have on the other.
Agreement will have to be reached in advance by the existing member states that the financial resources necessary for the continued implementation of Union policies in the existing as well as the new member states will have to be provided, in other words, budgetary approval will have to be given in advance by the existing 15 member states.
The principle of common financing of the CAP must be fully respected. The maintenance of this fundamental principle is an essential condition for the Government. To ensure there is no ambiguity the principle of common financing and not renationalising is fundamental. Also within the Union institutions there should be a comprehensive study of and debate on the effects of enlargement on each of the agriculture sectors to ascertain what problems may lie ahead and satisfactory solutions will have to be found and agreed for them. The implications for the dairy sector, the various meat sectors, the grain sector and the veterinary sector will have to be carefully and individually studied in specific detail.
As I stated earlier, if the conditions are right, the enlargement of the Union will bring major benefits to all member states. The consolidation of peace and stability which will result is not only a highly desirable objective in itself, it will also provide the framework without which economic and social development is, at best, retarded and within which business confidence is nurtured leading to investment and growth. Already the evidence for that substantial growth potential is there: since 1989, exports from the EU to the applicant countries have tripled while their exports to the EU have doubled. It must be acknowledged that a substanital trade imbalance exists in the EU's favour at present.
In considering the broader European picture, however, I have no intention of overlooking the problems that may lie ahead for Ireland. There is, of course, the potential for difficulties for Ireland deriving from enlargement. However, I am determined that Ireland's interests will be fully secured. They will be, if the enlargement process is conducted by respecting the principles to which I have referred. In that event, the 140,000 farmers that make up the Irish agricultural sector and the 40,000 employees that make up the Irish food sector need have nothing to fear. On the contrary, I believe that the basis for further advances will have been laid.
As I said earlier, the motion in the name of Deputies Cowen, Byrne, Ellis and Nolan is misguided. It attempts to address proposals which have not been made. The Commission's documents are a basis for discussion, in the first place at the Madrid European Council meeting later this month. We have opened a debate, rather than commenced a process, in relation to the CAP.
The approach which the Taoiseach and the Tánaiste will adopt at that meeting will be along the lines that I have indicated to the House. That, I and the Government believe, is the correct approach at this stage. As the enlargement process continues, the Government will adopt more detailed positions in defence of the Irish agriculture, food and rural sectors, in line with the same general principles as will inform our approach in Madrid. For these reasons, I commend the amendment to the motion to the House.
A number of points were raised with which I want to deal, having set out, in concrete terms, the Government's exact position. This matter was discussed by the Council of Ministers, in the context of agriculture, on Wednesday night last. The Irish position, as I have outlined it, of commitment to the CAP found a real resonance among other member states. While not wishing to pre-empt the public position of any member state, I believe that the fundamental principles of the CAP have very strong support among the key member states in the Union. This is something which has taken many years to build and accounts for 45 per cent of the Union's total budget. I do not believe it will be dismantled.
The entire process of detailed decisions on enlargement will only be taken following the Intergovernmental Conference. The Intergovernmental Conference will commence under the Italian presidency. Ireland will play a key role during its own presidency. I do not know when the Intergovernmental Conference will end. However, the decisions on the institutional and other arrangements arising from the Intergovernmental Conference must be put in place before the questions in relation to the CAP can be addressed.
I wish to make clear that there is no need for panic among farmers or others in the food processing sector. These events will take place a considerable way down the road. Deputy Cowen made the point that the Department has no planning process. I wish to make it clear that some of the photo opportunities for which I am so criticised all took place in relation to the key national food strategy. The investment of £640 million was aimed at providing a long-term direction to the application of innovation, technology and marketing expenditure towards becoming less dependent on the CAP and developing a more vibrant, competitive and dynamic food industry. I am conscious of the fact that that is the future direction of food policy. Whatever daily decisions I make, the ultimate objective of winning extra market share for the Irish food sector and developing process technology, products, etc., is absolutely critical in this regard. There should be no misunderstanding in relation to this issue.
How many dairy farmers are included in the Minister's plans?
That brings me to my next point. I will not take a cheap shot by inquiring with regard to what was done in relation to the national milk quota between 1984 and 1994. However, am I to suddenly parachute into Brussels and obtain an extra milk quota for Ireland? The milk quota regime is embedded. I would be interested to hear from Deputy Cowen with regard to what is Fianna Fáil's direction in relation to milk?
The price of a gallon of milk in New Zealand, and the régime there, is such that unlimited production exists. There are no quotas. People can produce as much milk as they like and new entrants can follow a career in dairy farming. However, the price of milk in New Zealand is 56 pence per gallon. The price of milk in Ireland is 113 pence per gallon, roughly double that of New Zealand. Europe is faced with a choice. The best way to retain small viable rural holdings is through milk quota; milk quota at a price; milk quota which is heavily subsidised in relation to the price of milk. With regard to all the dairy, ice cream and butter supports which exist in terms of export subsidies, I believe it is in Ireland's interests to have a strong support system which permits clear profitability. It is generally agreed that the cost of producing a gallon of milk varies, from the most efficient to the most inefficient, between 40 and 70 pence per gallon.
I wish to make clear that simply allowing access to new entrants and ignoring the super-levy is desirable, but, when the details are considered, it is apparent that a serious market imbalance would be created in terms of overproduction of milk. We must remember that 60 per cent of the dairy exports outside Europe could not be carried out without substantial aid and supports.
I will not indulge in an endless period of navel-gazing. I will proceed with the job of vigorously defending the Irish farm and food sector and setting out a clear context and plan for its future development in terms of a national food strategy. With the Taoiseach and the Tánaiste, I will articulate — in Government, this House and Brussels — a clear policy that Ireland's political commitment is to maintain the social and rural fabric of Europe. We do not believe in denuding Europe of family farms. We believe that the essential income supports should be sustained and market balances should be adhered to within our overall GATT obligations. I ask the House to accept my amendment.
With the agreement of the House, I wish to share time with Deputy Ned O'Keeffe.
Is that agreed? Agreed.
I thank the Minister for providing a very broad outline of his views on reform of the CAP. While the Minister stated that he and the Government are open to, and positive about, reform, he also stated that he will not accept the motion. I regret this but I hope the debate will be of some assistance in relation to the Madrid European Council meeting. I am glad that support for the Common Agricultural Policy exists within the European Union. I would not like to see the process of reforms, particularly those carried out by Commissioner MacSharry which provided a significant boost to small farmers in the west being dismantled.
I understand that proposals have been made by the European Commission. Since the European Union may expand to include up to ten countries from Central and Eastern Europe, I hope we will consider closely the three options proposed: the status quo, radical reform of the Common Agricultural Policy and development of the 1992 reforms. The Minister explained that each of these options have major implications for farmers and everybody employed in the agri-food sector. Those of us who are interested in the future of Irish agriculture, particularly the farming organisations, public representatives, the agri-food industry and the Government, must examine the Commission's proposal in some detail and quickly agree on an Irish position. The objectives must be clearly defined during the course of a major debate on the future of the Common Agriculture Policy which is certain to follow publication of the Commission's White Paper.
We should rule out the option of radical reform of the CAP. Such a development would risk dismantling the CAP and would not be in Ireland's interest. On the maintenance of the status quo, which has been of benefit to farmers, as the Commission points out, that option would risk provoking a major reform after the Eastern European countries have joined the Union. The Commission's view is that we should develop the 1992 reforms, and the Minister spoke along those lines. That could have many attractions from an Irish point of view but it would pose the risk of renationalising the CAP, which would not be in Ireland's interest. Our priority should be to examine these options and take a definite position, with strong emphasis on small family farms — the Minister referred to family farms and rural development.
One of my recent major concerns has been store producers and smaller farmers in the west. The 25 per cent reduction in export refunds affects Irish farmers, particularly small producers — that represents a reduction of 40 per cent in export refunds since last September. Many allegations have been made as to why that happened. The IFA stated that beef producers made a concerted effort to reduce beef prices as a result of the scare on refunds, but there is no basis for these price reductions. I understand last week there was only a partial restoration of the refund cuts and the industry is very dissatisfied with the small increase. The Minister will have to fight very hard in that regard. Export refunds have been a very effective method of dealing with beef production, particularly in regard to third countries. To pick the sector at the bottom of the profit scale of European agriculture defies explanation.
The Commission's decision, which effectively contributes to instability in a sector that merits quite the opposite treatment, is ill-advised, particularly since we were told that the cut was on foot of allegations about certain practices that had not been proven. Such knee-jerk reactions are unacceptable. Allegations must be fully investigated. If there are wrong doings they must be corrected, but it is irresponsible to impose such measures before an investigation takes place. We are lucky that people in the business are wise enough to buy stock well into spring and therefore there should be no reduction in prices. However if the Commission continues along these lines in other sectors, agriculture will have a very bleak future.
I wish to refer to some of the points made by the Minister, particularly on the milk sector. For some time I have heard suggestions about a B quota system. If such a system is introduced the smaller dairy producer will be badly affected. I would be totally opposed to the introduction of such a quota. The Minister spoke about the position in New Zealand and Australia, but the world market for European product has reduced significantly — between 1980 and 1994 production dropped from 16.6 per cent to 11.1 per cent, with a reduction of approximately 50 per cent in dairy exports. If GATT was as successful as it should have been, every other participating country should have experienced reduced production also, but New Zealand and Australia increased production on the world market by 53 per cent.
I do not believe that when we cut back production it is not for the benefit of other producing countries; I would like to think it is for the benefit of the farmer. The supervisers of GATT are at fault in that they have not penalised those who are guilty in that respect. Europe's answer is simple: release quota and increase production. To introduce a B quota would be the worst evil because our farmers would be expected to produce milk at 70p per gallon, to sell to a marketplace where the price is £1.10 per gallon and where people allegedly claim they are not subsidised. Since the Minister referred to New Zealand and Australia, we have granted to those countries a tonnage of butter at prices equal to our own. They supply the market and take the profit which they use against the European Union and the rest of the world. They claim the price charged is a world price, but we in the EU are the subsidisers of that price. A B quota should not be introduced because farmers are not capable of producing milk at 70p per gallon and the consumer does not require them to do so.
It is significant that the Irish Dairy Board has not addressed the key issue of a B quota and the impact on farm incomes, which at the end of the day is the real issue. Some people believe that a B quota is a priority in other member states of the EU. It may be a priority among processors and marketeers, and in some instances national policy makers, but it is not a priority for farm producers. For example, in France a recent statement was to the effect that the introduction of a B quota would destroy milk prices and directly reduce incomes. There are many ways to proceed with the A quota. For example, the African nations, the developing countries where population is estimated to increase from 620 million to 900 million in the next ten years, must be taken into account as a new marketplace for our products.
We owe a huge debt to our young farmers because of the mismanagement of the milk quota to date and the promises made to them when they were prepared to take over farms and try to make them viable. The assurances given by Governments and the European Commission regarding start-up quotas were not adhered to. That debt which is owed to a vibrant part of our society must be met. I see no problem with increase the A quota, in a planned way, to meet the needs of today and help young farmers.
I support the motion as proposed by Deputy Cowen. Being used to Brussels-speak, it is not usual for a European Union Commissioner to convey a clear message when outlining Community farm policy for the next ten years or so, but a blunt and bad news message is even more unusual considering the Commissioner in question is a former Austrian Minister for Agriculture. The message was simple — more changes in the CAP are inevitable and are on the way. Many of my farmer friends were most critical of Ray MacSharry when in reality he did a fantastic job for Irish agriculture. Now that he is no longer a Commissioner for Agriculture we all realise what a big loss he is. He was much criticised by the Minister's party who told us about his Cromwellian tactics and claimed that the collapse of Irish agriculture was inevitable. Instead it prospered. He saved the day and we have a vibrant and strong agricultural sector. The Minister is reaping the rewards derived from proposals of a Fianna Fáil Government which put agriculture on a proper footing.
The future of our economy depends on how the Minister handles the proposed CAP reforms. We need to be well positioned to meet the challenges to current agricultural policy. These challenges hold greater importance for urban than for rural Ireland. People who live in urban areas are probably more dependent on agriculture and related services than those living in rural areas and on small farms. Munster is heavily dependent on the agricultural industry. The boom in agriculture has resulted in increased employment in many dairy co-ops, beef processing industries and bacon and pork factories across Munster, the east coast and the west.
The extra money mooted for Leader schemes pales beside the loss of even 1p per gallon in the price of milk. The current blueprint as set out in Dr. Franz Fischler's paper on agriculture is a reform of reforms. Already Dutch and French farmers are pressing for changes in the set aside schemes and in quota restrictions. We are all aware of the large factory farms in the Netherlands. Many of their dairy herds housed in intensive units never see the light of day and are fed from grain grown in other countries and well preserved fodder grown in their country. Any reform of the Common Agricultural Policy in that area will help to develop Dutch agriculture. The French have large ranch-type farms in the Paris Basin, in the grain growing and dairy and beef farming area. We are aware of the changes in CAP they would favour to give them an edge to develop an industrial type of agriculture which is not in the interests of countries similar to ours.
Some European agricultural products are coming close to being set at open prices on the world market. The Minister is aware of that position and he will be further aware of it if he survives for another year and a half on the opposite side of the House. We must never forget that, despite the silver tongues of Carla Hills and Mickey Kantor, the United States system of subsidising farms continues, but in a totally different way from our price support mechanism. While European prices and world prices may be converging in some cases, that is not so in the case of our country's principal agricultural products, beef, milk and sugar beet.
The MacSharry reforms allow for compensation payments. Any reduction, of these payments, phased or otherwise, must be resisted in our national interest. In the tough negotiations ahead, we will rely on the Minister to follow the Fianna Fáil-MacSharry act and the Fianna Fáil party policy. The Minister will receive my support and that of my party, but he will have to carry the day in the interests of Irish agriculture.
In case there is any doubt about the Commissioner's blunt warning. I would like to review briefly the forces seeking further changes in the CAP, apart from continuing complaints from the UK and other countries about its high cost. The forces to which I refer include those involved in the next round of world negotiations in the year 2000. That is only four years away and we all remember the tough negotiations which took place two years ago. The next round could have devastating consequences for our agricultural economy. We have seen the effect on our pockets of the accession of Greece, Spain and Portugal to the European Union and up ten more countries are queuing to join. The Social Fund is the major issue for new member states. The main idea is to draw down increasing funds which leaves less available for us. The surpluses which necessitated the last reform of the CAP are reemerging due to a mix of initiatives, weather conditions and technology.
Dr. Franz Fischler has a major task ahead of him. It is up to our Minister to plan ahead, create alliances and protect our national interest. The CAP was the main reason the people voted to join the Common Market in 1972. It is still relevant as we have benefited from it and it is important that we do not erode our agricultural position.
A frightening scenario is building up in the Government comprised of the Fine Gael Party and two left wing parties, one more extreme than the other, which have a hatred of agriculture. I believe the Minister will not have the support in Cabinet he deserves to make a strong case for Irish agriculture and that he will not have the support of a united front when he goes to Europe. The thinking of the extreme left wing of the Cabinet is to erode agriculture, to destroy the family farm and to support what is good in industrial agricultural, but that cannot be the way forward. I appeal to the Minister to fight his corner and, if necessary, to resign from Cabinet if he does not get his way. I am aware of the type of policies favoured by the Minister for Social Welfare, Deputy De Rossa, and some Dublin left wing Labour Deputies who would like to see agriculture go further into the doldrums. I am nervous that the Minister's party who have a lust for power——
Where did we get that from?
——will stay there for the next year and a half or two years at any price. We have seen what the Minister has done in the past few weeks and months. The Government will sell us out and leave us to the wolves of an enlarging European Union and Irish agriculture will be much poorer as a result. Irish agriculture could revert to its form in the days of the Famine.
Steady, Deputy.
The truth is often bitter when heard from across the House.
I wish to refer to the BSE scare. The Minister said in the past few days that its cost to the Irish nation could be in the region of £50 million. I am worried about it, but the less said about such an issue, the better. Non-European countries which are large importers of our products could stall or cease trading with us and the cost would be much more substantial than the £50 million mentioned. It is unfortunate that I must raise this issue, but many people in the industry have brought it to my attention in recent days. The industry must be protected. We have possibly the best beef farmers, the best quality beef in the world and we must protect it. I urge the Minister to be more cautious in future when he makes such press statements, and I do not say that in any damaging way. He should take into account the value of the Irish beef industry at farm, processing and export levels in order to save it, protect it and rectify it.
Debate adjourned.