I welcome Ms Bridie O'Neill, principal officer, and Mr. Michael Kelly, assistant principal, from the Department of Agriculture and Food to discuss the communication from the European Commission to the Council and the European Parliament on sugar sector reform within the sustainable agricultural model for Europe through the reformed CAP. This matter was discussed at the Council of Ministers meetings in July and November and has also been examined by officials at a number of Council working group meetings. I ask Ms O'Neill to make her opening presentation.
Scrutiny of EU Proposals.
Ms Bridie O’Neill
I thank the joint committee for its invitation to attend this meeting to discuss the European Commission's proposals for reform of the sugar regime. I propose initially to outline the current EU arrangements for the sugar sector and say a few words about the significance of the sector in Ireland before going on to deal with the reform proposals.
Reform of the EU sugar regime has been placed on the agenda because of WTO and other international pressures. In a communication to the Council and the European Parliament last July the European Commission outlined its broad proposals for reform of the regime. These proposals envisage a reduction in support prices for sugar and sugar beet and in production quotas across all member states. Partial compensation to farmers for the price reduction is proposed. In their current form, the Commission's proposals would have serious repercussions for the sugar industry in some member states, including Ireland. It is important to stress, however, that the proposals contained in the communication are not legislative proposals. Formal legislative proposals for reform of the sugar regime are not expected from the Commission until May or June 2005.
Sugar beet growing and sugar processing in Ireland date back to 1926 when the first sugar factory was established in Carlow. The sugar beet crop is an important element of the agricultural economy and a valuable source of income to the 3,800 farmers growing sugar beet. On the manufacturing side, the industry provides direct employment for about 650 people at sugar plants in Carlow and Mallow in addition to supporting employment in associated industries.
The production of sugar in all member states is regulated by the EU sugar regime which forms part of the Common Agricultural Policy. The essential features of the regime are rules on prices, quotas, production levies and trade with third countries. I will briefly run through these four key features.
The rules on prices specify a guaranteed price for white sugar and minimum prices for sugar beet which sugar processors are obliged to pay beet growers. There is also provision for the Commission to set annually an additional premium known as the deficit premium in the Community's sugar deficit areas.
A production quota for manufactured white sugar is allocated to each member state. The quotas are broken down into A and B quotas. The EU guaranteed prices apply to production within these quotas only. While sugar in excess of the quota can be produced, it cannot be marketed within the European Union. This sugar can be carried forward as part of the following year's quota, or classified as "C" sugar and exported at world prices without export refunds.
The main cost of the EU regime — the cost of exporting surplus quota sugar — is covered by production levies paid by processors and growers. Therefore, the cost of the current sugar regime, as a proportion of the EU budget, is relatively low.
The fourth key feature of the EU sugar regime is its trade with third countries. White sugar sells in the European Union at approximately three times the world price. High border duties provide significant protection for the EU market from imports. Almost all of the sugar that comes into the European Union is imported under preferential agreements. The European Union has reached an agreement with India and the African, Caribbean and Pacific countries to import 1.6 million tonnes of sugar annually from them at the EU guaranteed price. The sugar in question is imported either free of duty or at reduced duty. As the European Union is a surplus producer of sugar, a quantity of sugar equivalent to that imported from the countries in question has to be exported from the Community each year, at a cost of approximately €800 million in export refunds. This expenditure is not financed by production levies but is a direct charge on the EU budget.
Under the EU sugar regime, Ireland has a quota for manufactured sugar of 199,000 tonnes, or approximately 1.1% of the EU quota. Under EU regulations, this quota must be allocated to sugar manufacturing enterprises in the member state. The Department of Agriculture and Food has allocated Ireland's sugar quota to Irish Sugar Limited, the only sugar manufacturer in the country. Irish Sugar Limited places annual contracts with farmers to grow a specific tonnage of sugar beet that is sufficient to manufacture the sugar quota. It should be noted the EU quota relates to manufactured sugar, as there is neither a quota for sugar beet nor a sugar quota at farm level. As well as receiving a price for sugar beet, growers here receive the deficit premium, sometimes referred to as the regional allowance, of €1.90 per tonne of beet. Ireland is not a deficit area for the production of sugar as it produces enough for its needs, although it is closely linked to the UK market. The United Kingdom and Ireland form a common deficit area in which the deficit premium applies.
The European Community produces 20 million tonnes of sugar per annum and consumes approximately 16.3 million tonnes. Of its surplus of 3.7 million tonnes, 1.2 million tonnes is quota sugar and receives export refunds on export, while 2.5 million tonnes is "C" sugar which is exported without export refunds.
The EU sugar regime, established in 1968, has been adjusted and renewed on a number of occasions but never fundamentally reformed, unlike other sectors which were significantly reformed under the MacSharry reforms, Agenda 2000 and in recent mid-term review of Agenda 2000. The current regime runs until the middle of 2006. Its reform is high on the EU agenda, mainly as a result of international pressures which fall under the three main headings of the everything but arms agreement, the WTO Doha Round and the WTO panel's findings on a complaint by Brazil, Thailand and Australia.
The everything but arms agreement, adopted in 2001, extends duty and quota-free access to all products, other than arms and ammunition, which originate in 49 of the least developed countries. The package was developed in response to claims that the least developed countries were getting a raw deal from global trade liberalisation. The initiative will open the EU market to all goods, other than for military equipment, from 49 of the world's poorest countries. While the agreement is being introduced gradually to the sugar sector, the European Union is committed to allowing duty free access for any quantities of white and raw sugar from the least developed countries in question from July 2009. As the internal price of sugar in the European Union is considerably higher than the global price, the provision of unlimited access for cheaper sugar from the least developed countries in question will lead to a significant surge in imports, thereby affecting production and price in the Union.
Pressure is generally being brought to bear by those who favour the liberalisation of trade under the Doha Round of the WTO. The European Union's observance of the WTO's current limits on subsidised sugar exports has been challenged by Brazil, Australia and Thailand which have complained that the Union is in breach of its WTO obligations by omitting two quantities — 2.5 million tonnes of non-quota or "C" sugar which is exported without export refunds but which the complainants maintain is, in effect, cross-subsidised by the profits from quota sugar, and 1.6 million tonnes of sugar of ACP and Indian origin which is re-exported with the benefit of export refunds — from its calculation of its total subsidised exports. The complaint was considered by a WTO panel, the initial finding of which was against the European Union. The Commission plans to appeal the decision and an outcome is expected in March or April 2005. An unfavourable ruling would have serious consequences for EU sugar exports as it would further restrict opportunities for EU exports of sugar.
The Commission has not proposed formal legislative proposals for the reform of the sugar regime. However, in a communication to the Council and the European Parliament on 14 July 2004 it set out broad proposals for reform. I will mention the key parts of its proposals. It recommended a reduction of 33%, in two stages, in the institutional price for white sugar, from €632 per tonne to €421 per tonne. A similar two-stage reduction is proposed in the minimum beet price, from €43.60 per tonne to €27.40 per tonne. It suggested that partial compensation of 60%, in the form of a decoupled direct payment, should be given to farmers for the reduction in price. In the case of quotas, it has proposed a cumulative reduction over four years of 2.8 million tonnes, or 16%, across all member states with a view to bringing EU production into line with domestic consumption. It has recommended that quotas for sugar production should be transferable between member states. It has also proposed a reconversion scheme for factories which are no longer viable and the sugar quota of which is not transferred. Such factories would be entitled to a once-off compensation payment of €250 per tonne of sugar processed under quota.
I wish to discuss the reaction to the Commission's proposals which were communicated to the Agriculture and Fisheries Council in July and discussed again by the Council in November. They were examined by officials at a number of Council working group meetings when they were the subject of severe criticism from a majority of member states, including Ireland. A small group of member states not only welcomed the proposals but also argued that they did not go far enough. The proposals have not been well received by the least developed countries which hoped to enjoy duty free access to the European Union at the current high EU prices. Such countries claim that the drastic cuts in prices proposed by the Commission would spell disaster for them.
The Minister has made clear to the European Union that the proposals would have serious repercussions for the Irish industry, at growing and processing levels. She has declared that they are not acceptable. With Ministers from nine other EU member states, she has signed a letter to the EU Agriculture Commissioner stating the Commission's proposals would have a devastating effect on farms and industrial enterprises in the sector. The ten Ministers accept the need to modify the existing regime but feel the reforms should try to maintain the existing distribution of sugar beet and sugar production on the entire EU territory. They believe reform should be based on certain principles which I will outline. An import system from third countries should be put in place which would ensure predictable and regular import quantities. The price reduction should be significantly less than that proposed and implemented more gradually. The impact of the quota reductions should fall mainly on those member states that are net exporters of sugar. The transfer of quotas among member states should not be allowed.
While it seems clear that international pressures will force change in the sugar regime, our view is that the proposals in the Commission communication of July 2004 go too far. They are not legislative proposals. Formal legislative proposals for reform are not expected until May or June 2005. The publication of these proposals will, it is anticipated, be the start of a long and difficult negotiation process. The Minister's stated objective in these negotiations will be to protect the viability of sugar beet growing and processing in this country and she will be working vigorously with like-minded member states towards that end.
I thank Ms O'Neill for her presentation.
I thank Ms O'Neill and Mr. Kelly for briefing us on this vital industry. As one from the Border area of Cavan-Monaghan, I note that we have no direct involvement with the sugar regime other than in terms of using some of the sugar pulp. I am sure Deputy Ned O'Keeffe and other members will be able to fill any vacuum I might leave in my comments on this industry.
It is very clear from the proposals that they will have major implications both at farm and industrial levels. I will commit my party to supporting the Minister in every way possible to ensure the existence of a viable industry at farm and factory levels.
The proposals comprise another example of an international law with nothing to do with farming having an impact on the family farms of Ireland. People are only beginning to understand the seriousness of the review of Agenda 2000 and its effect on the industry. There are now many farm visits and people are being put through the mill in a way that they did not expect. It must be stated clearly that this has nothing to do with the sugar regime but concerns the future viability of farming. The nitrates directives and other such measures all have major implications. I spoke to a farmer some days ago who is involved in both dairy and pig farming. He has to cut back dairy production by 10% to meet the requirements of the nitrates directives and will have to abandon pig production completely if he cannot get an outside source to deal with his slurry. These are the sorts of issues that arise at farm level.
The Commission's proposals are totally unacceptable and will result in the closure of our industry. It is not just a question of their having an impact thereon. There is no way that our farmers could continue in production if the proposals were realised. The proposals must be fought at every level.
I thank Ms O'Neill and Mr. Kelly for their presentation. The paper is very helpful because it simplifies this quite complex area very well. There is no doubt that the proposals, although they are not legislative, would impact significantly on those engaged in sugar beet growing and sugar manufacturing.
One point made by Ms O'Neill is that white sugar sells in the EU at three times the world price. That is a significant mark-up. Is it sustainable or acceptable? We must assess its impact on developing countries. The Ministers' recommendations certainly sound reasonable. They suggest that the price reduction should be significantly less than what is proposed and should be implemented more gradually. What exactly do "significantly less" and "more gradually" imply? What would be the impact of this recommendation on Irish sugar beet farmers and the sugar industry in general? How would it affect developing countries, which would suffer from a knock-on effect?
I, too, thank the delegation for its informative presentation. There are currently 3,800 producers of sugar beet. The profit margin is hairline, such that most producers, particularly the smaller ones, are barely surviving. The proposals for a gradual reduction in support can only put them out of business. That is why I am alarmed by the proposals.
The industry has been in existence since 1926. It was once labour-intensive in that all the work was done on one's knees or standing up with a hoe. The industry has created tremendous employment but, according to the figures presented by Ms O'Neill, its labour force on the manufacturing side has been reduced to 650. However, the reduction has been far greater. In this regard, one should take into consideration those who transport the beet to Mallow and Carlow; the back-up services required by the farmers to harvest their crops and load the beet on to lorries; the employment created in the provision of different types of manure; and the employment of the machine operators in the beet production industry. I have no doubt that a reduction in the profits of the producers will represent the end for them, or at least for very many of them. Those producing 20 to 30 acres of beet will go out of business and others will take over their quotas and produce perhaps 100 to 150 acres of beet. This will effectively result in a decrease from 3,800 growers to perhaps 800. That is why the proposals must be fought hard.
Am I correct in my contention that Ireland is in the A and B export categories rather than the C category? Ireland, taken in conjunction with the United Kingdom, has a deficit in production. Bearing this in mind, what will be the effect of the implementation of the plans proposed by the Commission, which have yet to be agreed and which will not be subject to legislative approval until 2005?
Consider the 1.6 million tonnes of ACP sugar imported to Europe. Is it being exported again as a C product? If the European Union is over-producing and imports are arriving to be exported again, this is the height of stupidity and will penalise the 3,800 Irish people dependent on the land to generate an income for themselves and their families. This sort of lunacy is being allowed to continue. I assume that most, if not all, of what we produce is for domestic use.
I also welcome Ms O'Neill and Mr. Kelly and thank them for their concise presentation.
Although Ireland is self-sufficient in sugar, farmers continue to receive the deficit pay. How will this impact on us when the reforms are implemented? I support the Minister's defence of the sugar beet sector but why are we being so vigorous in our opposition to the transfer of quotas among member states? Would there not be benefits if it was opened up?
I am a beet grower with a 500 tonne quota and welcome the statement of the officials from the Department of Agriculture and Food. This is a very important rotation break crop for farmers and there will be a serious effect if there is a downturn in the acreage grown because those who grow cereal crops will have no break crop. The sugar beet industry dates back to the 1930s and that great leader of my party, Éamon de Valera, who fostered and developed it in those years. It was an excellent cash crop for small holders until the 1950s when it was placed in the hands of larger growers and the conacre people came on board.
I welcome the fact that the Minister is fighting on behalf of Irish growers. We have the worst growing climate of any of the pre-enlargement countries; even Finland has a better growing climate. Therefore, I cannot see why we are being victimised in the scale of the cut and the drop in quota. Huge acreages of beet are grown in France and Germany. The proposed quota cuts are grossly unfair to the smaller countries of the European Union.
The Cairns Group in the Pacific and south Atlantic poses the major threat to us. It has labour rates substantially lower than ours. There is much talk about the WTO and equality, that we have more advantages than those countries but when it comes to wages, labour and management costs, they are at an advantage. In Brazil an ordinary factory worker only earns $100 a month. People here make that in a day. These are the disadvantages we face. There must be a correction because they are trying to get our market. As the economies of these countries expand, their production costs will increase but that is a long way off.
I support Deputy Crawford who knows a great deal about agriculture and makes a great case on behalf of farmers. I often regret he is on the other side. The nitrates directive will have serious consequences for intensive farming in Ireland. There are frightening noises from Brussels that such farming will be challenged. If every farm must produce a nutrient management plan, it will be expensive.
The future of the sugar beet industry is vital to the economy. Recently in north Cork Nestlé declared its intention to withdraw from the manufacturing of chocolate crumb in Mallow. It buys 18,000 tonnes of manufacturing sugar and 80 million litres of milk, while Cadbury's nearby buys significant quantities of sugar. Tenders have gone out for sugar across Europe at a cheaper rate which may bring about further change. If the industry is rationalised, there will only be one plant in operation here.
We must fight hard if Ireland is to succeed. The issue of the production price is a serious one for farmers. If we are to hold on to what we have, there must be substantial improvements in the proposals from the European Union. The Minister is committed to agriculture and it is clear to the agricultural community that she will fight her battle hard. She enjoys my full support. I hope we will achieve a good outcome and that she will not accept the quota as proposed because it is grossly unfair when we look at the total number of hectares of sugar beet produced in France and Germany. There is no equality. This must change. We must receive preferential treatment.
There is no advantage in quotas transferring across borders because all Irish quotas will be transferred. That has happened with milk quotas in the United Kingdom where quotas are being transferred to Northern Ireland to no one's advantage. We should retain borders and have more flexibility in quotas at farm level. There should not be reductions at the levels suggested by the European Union.
I compliment Ms O'Neill for the presentation of the document and simplifying Eurospeak to language we can understand. I compliment the Minister for Agriculture and Food and the Department on their stand. I also compliment the former Minister, Deputy Walsh, because I asked him about this issue at the last meeting of this committee that he attended.
I welcome Deputy Crawford's support for the national stand, although we may disagree on some issues. I refer to quota A and quota B. We have a 10% quota B. However, France has a quota in excess of 35%. That is the kernel of the argument. With the linkage of quota A and quota B, the impact on pricing militates against us to a much greater extent than against French growers. There is room for argument here because there are times when agricultural producing countries such as France and Ireland work together and support one another well. This case however is extremely difficult because the marrying of the two quotas, A and B, creates the greatest difficulty.
Ireland, Britain, Portugal, Finland and Spain are involved in the regional support allowance. If one refers to the deficit premium, for example, and the minority blocking situation in which the Minister is engaged and will hopefully be successful, the impact on the price to the producer as an average of what we are growing, and the price compared to the price that is on the table, mean the producer would lose almost €1 per tonne to produce a crop and will get 60% decoupling payment, if one wants to call it that. This is not a legislative proposal but a negotiating position.
No Irish farmer, not Deputy Ned O'Keeffe nor I, nor any other farmer, will produce beet at a net loss of almost €1 per tonne. There is no sugar industry left here. Employment in the factories is approximately 650 and there are between 3,000 to 3,500 in the industry. That is the employment loss but it also has a value in tillage operations.
I have no problem with the African Caribbean and Pacific countries. If we are socially minded we cannot reject them and that was why the European Union made concessions to them. They do not impose a severe regime on their people and the money returned to them is well used. We should be fair about that. As an island nation that suffered at the hands of others in the past we should offer them the hand of friendship and I welcome that opportunity.
I am concerned, however, about the dominant position of the Brazilians, the Australians and others. The exploitation of labour in Brazil is at slave labour rates. The country is past the era of the landlord but the moguls hold the power. For example, the €2 one pays for a cup of coffee does not go back to the misfortunate man or woman — by and large women and children are the labourers. The same is true of the sugar cane produced there. They are trying to manipulate more profits for the bottom line. There is an obligation on the European Union, and on us, to hold the line against them. We cannot sell everything down the road and out of the country for the benefit of industrial production and sales abroad to match that.
I differ from Deputy Ned O'Keeffe about the impact this will have in the south and south-east where the beet is mainly grown. I would prefer to grow fewer acres at a profitable rate than no acre or acres at a loss. There is room to give.
I note the comments that an import system from third countries should be put in place, which will ensure predictable and regular import quantities. That is fine. It was also said the price reduction should be significantly less than what is currently proposed and should be implemented more gradually. We cannot take what is on the table. The Minister must move back from that. Why should there be any cut in the price? If there must be, let it be minuscule. We can get over that. The Minister also claimed tha the impact of the quota reductions should fall mainly on those member states that are net exporters of sugar. I would prefer to grow X acres less and make money and maintain the benefit it provides to the community than take the 60% and get out of the business. That is the choice. A concession may be more acceptable in the acreage grown to produce the quota because there could be flexibility there. My discussion with the farmers suggests that is the favoured route, if an alternative is sought.
The transfer of quotas between member states should not be allowed. This takes the business out of the country because as it is structured we will not have a beet industry. The French or another country want to take it away from us and gobble it up.
I do not know where to start after listening to all that. I welcome the officials this afternoon and their presentation which is a very helpful explanation of what is happening. Deputy Ned O'Keeffe taught us some history today when he praised the former leader of his party, Éamon de Valera who set up the beet industry in 1926.
Did the Senator not also know de Valera at the time?
No. I am not involved in beet because another of Deputy Ned O'Keeffe's former leaders ensured that people like me would no longer have an input into beet production when Greencore closed the factories in Thurles and Tuam, thereby doing away with small producers in Tipperary and the west. He did not compliment that leader.
I support the officials and the Minister. This will be the mother of all battles in that it follows official EU policy on small peripheral countries such as Ireland. We see it in the beef industry too. The policy is to close down as many small farmers as possible, to corral the others into large producers and plant the rest of the country. This adds to that policy. Ireland's overall contribution to this is minimal, with only 1.1% production. EU policy should be such that in any industry or way of life, there is a level that is not touched, similar to the minimum wage. For example, a country producing a quantity as low as 200,000 tonnes of sugar should be exempt from anything. Above that the cutbacks should be made on a pro rata basis from the large countries — the more they produce the higher the percentage cutback. Ireland should be exempt.
What co-operation have the officials sought or are they getting from the British Ministry of Agriculture? They pointed out in their presentation that when combined with Britain we are a deficit area. I was surprised to hear my colleague from North Tipperary saying the Irish sugar producers should not get the €1.90 payment from the regionalised area payment.
That is not what I said. I would like the opportunity to clarify that at a later point.
That is the way it appeared, although Deputy Hoctor would not intend that. I will give her the opportunity to correct it.
We should fight this on the basis that there should be an exemption for countries under 250,000 tonnes of sugar. We are the major suppliers to the European Union and we are both island nations. There should be no cutbacks whatsoever. Those proposed would be absolutely disastrous for farmers. There is no doubt that, when one has a 25% B price cut proposed for 2005, rising to 37% in 2007, the small producer would go. In my day Deputy O'Keeffe would have been considered a major producer. Now, as a result of EU policy, he has become one of the smaller ones in terms of output. The proposed cut of 2.8 million tonnes amounts to 16% of total production, once again pointing to the elimination of the small producer which seems to be the policy. I am not in favour of this and support the Minister and her officials in fighting it.
The other element which we must consider is the 36% cut in import tariffs agreed under the World Trade Organisation's Doha agreement. It will have a devastating impact on the production of sugar, for example. It will really hit small industries such as sugar production in Ireland. However, the proposals are not being supported by what Ms O'Neill described as the "least developed countries", the LDCs. They do not support them either, and are the ones about whom we should be concerned. The proposals are tailor-made for the big corporate producers such as Brazil, Australia and Thailand. If that is the route the European Union is taking, heaven help countries such as Ireland.
I do not want to dwell on this issue since I have covered most of what I wanted to say. I thank the officials and wish them well in their battle. We will certainly be supporting them every step of the way.
Perhaps Deputy Hoctor would like to clarify her position.
I shall clarify the point I directed at Ms O'Neill. It is strange Senator Coonan seems to be the only person who misheard me. My observation is that it appears the Irish farmer is currently in receipt of the allowance on the strength of the deficit in the United Kingdom since we have been informed we are self-sustaining in our production of sugar. I hope this will not backfire on us eventually in view of the proposed reforms, particularly those mooted from May 2005 regarding future European sugar beet production. I hope I have now made my point clear.
Is the Chairman taking questions?
I shall come back in then, if that is all right.
Ms O’Neill
I thank members for their comments and support. Everything that has been said today I can agree with since it echoes the viewpoint and concerns of the Department and the Minister. Deputy Upton has mentioned EU sugar sells at three times the world price and asked whether this is sustainable and acceptable. It is fair to say international pressures will force down the EU price which will be set following the outcome of the Doha Round. It will be affected by the EBA when imports start coming in duty free from less developed countries.
On that issue, reference has been made to the fact that less developed countries were not happy with the Commission's proposals. That is true since they realise that when the imports start to increase, the price will come down and they will not be able to enjoy the same value as they thought. Under the EBA, they have sought the continuation of quotas and the phasing in of the agreement on a more gradual basis than that proposed. It is to enter into force in 2009. They want an additional ten years for it to be introduced. The Minister has said to the European Union it should meet the LDCs on this issue to see what would suit the two parties. Deputy Upton also asked what level of price reduction would suit us and the gradual implementation we had in mind. All I can say is that the matter is being examined. As the proposals are being examined in the Department, I cannot give a definitive answer today.
Deputy Ferris raised several questions, the first of which related to "C" sugar production. Irish Sugar Limited does not set out to produce surplus sugar. In a good year when yields are good we will have a little extra which is exported as "C" sugar. However, the quantity is only marginal.
There were several questions about the deficit premium and how it affected the proposals. It is very clear from the Commission's proposals that the premium is not included in the level of compensation, the reduced price or the minimum price for sugar beet. We have suggested to the European Union that farmers should continue to benefit from the premium of €1.90 but have been refused. It will not be paid to farmers after the reforms are implemented.
There are two issues, the first being the cost of compensation. The reform proposals must be budget neutral. Paying the deficit premium as hitherto would preclude this, meaning that it cannot be included. On whether it can be included in the reduced price to farmers, as I have explained, we do not qualify for the premium. We are not a deficit producer since we produce enough for our own needs. It is only when we are added with the UK market that the full area is in deficit. The United Kingdom accepts these proposals and is among the member states which feel they may not be going far enough. Since it is not concerned about the premium, we are on our own and have a very poor case.
Deputy O'Keeffe and others have said the quota cuts are unfair as they are linking the A and B quotas. We agree since member states with a higher percentage of A quota will suffer a greater reduction in price. The difference between A and B quotas is that the first is the basic EU quota — each member state's share of the domestic market. The B quota was initially the margin to ensure the A quota was filled but it has developed into an exportable surplus. Our B quota, as some mentioned have mentioned, is 10%. The EU average is 18%. Some of the bigger member states have a B quota of 29% or 30%. Our argument has been that the cuts in quota should hit the member states with the higher B quotas first before the A quota is considered. That is what the Minister meant when I said member states which were net exporters should take the brunt of the cuts. We are saying the B quota should be hit first.
Brazil was mentioned. We also have concerns. If the market is opened up, Brazil will benefit. It is the country which has increased production tenfold since the 1990s, while EU production has remained static. Brazil's exports are around 11 million tonnes, while EU exports are only approximately 3 million tonnes. We are concerned that the least developed countries will not keep pace and that Brazil will simply take over the market.
I think I have answered all the questions of which I have a note. I hope I have not missed any.
There will now be supplementary questions, the first from Deputy Crawford.
It is more a comment than a question. I am worried that this is supposed to help lower income states. I visited Jamaica many years ago when it was clear big ranchers controlled most of the sugar production and that small farmers who were supposed to be benefiting were not. The message goes out that we are doing this for the sake of the less-well-off areas, whereas big business is benefiting. The EU was set up to guarantee products for its own people, yet we have gone a long way from that. We must at least keep a base for our own needs and production. The point was made that Brazil is exporting 11 million tonnes and the EU is exporting little in comparison. That has to be part of the overall issue. I am afraid big industry will win out in this battle and that ordinary family farms and the Irish sugar industry will be the losers. I want to reiterate our support for the Minister.
The difference here is that all sugar in Ireland is refined from sugar beet. In other countries, almost all sugar is made from sugar cane. Why is there not a different case being made for sugar beet than for sugar cane? Sugar cane is more efficiently refined and produced than sugar beet. I am not aware of any country in Europe that produces sugar cane, unless in France.
If there is a 33% drop in the price of sugar beet, whether it be A, B or C quotas, I see no future for the industry. If the acreage for growing sugar beet is to be cut by 50% among the 3,000 farmers, the industry will not have an economic future here. The issue is about quotas and the drop in prices. There should be a different argument for sugar beet than that for sugar cane. The French, who are our allies most of the time in negotiations for CAP, are not supporting us on this occasion. We have the worst beet growing climate of the 15 member states prior to enlargement. We have the highest rainfall along with Britain, while Finland has a much better beet growing climate and has a higher sugar content. It is all based on the efficiency of sugar production. With more sunlight for the crop, the leaves get more photosynthesis and sugar goes into the root.
Beet growing started in my area in the 1930s, when Eamon De Valera opened a factory in Mallow. My family have been growing beet since then.
Who owns the beet quota? Is it the person who grows it, the person who produces it or is it the State? One can make a sustainable case, just as one can for dairy herds. That is all very well, but if one's family has been growing beet since the 1930s, then who produced it? It is not the factory. The factory was put there as a method of industrial production. There was no State involvement. Who really owns the quota? In my view it is the farmer.
Ms O’Neill
Deputy O'Keeffe is right when he states that conditions in Ireland are one of the poorest in the EU for growing sugar beet. That is why we are most vulnerable to reductions in prices for sugar beet and for sugar. It is one of the reasons we are opposed to the proposal to transfer the quotas, because there are other member states where it is more profitable to grow sugar beet. These states are very anxious to get their hands on quota.
I am transferring the quota on reaching the border.
Ms O' Neill should be allowed to speak without interruption, the Deputy can come back in with supplementary question afterwards.
I was only trying to help.
Ms O'Neill does not need help. She is well capable of answering the questions.
Ms O’Neill
I was agreeing with the Deputy that we are one of the most vulnerable countries to reductions in the price. We are most concerned with the proposals for the transfer of quotas. No sugar cane is grown in the EU. There is a special price set for imports of sugar cane, which is derived from the reduced price for sugar beet.
Ownership of quota has not been an issue until now. We have managed for 30 years without identifying who owns the quota. Under the regulation, we had to allocate the quota to the sugar processor and we did that. We could not allocate it to the farmer. It could not be bought or sold, so the question of ownership did not arise. It is now an issue following the publication of these Commission proposals. A number of member states have asked the Commission to clarify the ownership of the quota. I do not think the Commission is sure itself, as we have not got a straight answer. It stated that when its detailed proposals are published, they will contain proposals on the transfer of quotas and they might address the issue of quota ownership. In the meantime, the Department is considering the issue.
It will be a battle royal.
I thought the golden share was owned by the Government and that we discussed that in the Dáil during the Irish sugar industry privatisation debate. The sugar quota became a natural issue for Ireland, having being developed over the decades. The Department of Agriculture and Food is the regulatory authority for the sugar beet industry. There is a major Irish input. Whether it goes to the European Parliament or the European Court of Justice, Ireland owns that beet quota. It was debated in the Dáil when Greencore was privatised and the golden share was mentioned. It was also debated a couple of years ago when there was another dispute in the sugar industry. At that time, the Government did yield to the demands of the farmers and had to negotiate on a settlement. There is precedent to prove that Ireland owns the sugar beet quota.
Ms O’Neill
We in the Department have our own views on who owns the quota. It has never been legally clarified for us. The Minister has a special share which prevents the disposal of the Irish Sugar Company assets.
On behalf of the committee, I thank Ms O'Neill and Mr. Kelly for attending and for responding to questions raised by members. This is a communication only and no legislative proposals have been formulated. The joint committee will keep this under constant review and it agrees with the manner in which the communication has been handled by the Minister and her officials to date. It has serious repercussions for Ireland and its sugar industry. I hope the officials agree to keep this committee updated on a regular basis and that they attend a meeting next April or May to advise us on developments at that stage. We are all singing from the same hymn sheet on this.
The clerk to the committee is drawing up a work programme for 2005. If members have anything they wish to have included, they should correspond with the clerk.
The joint committee adjourned at 1.10 p.m. until 4.30 p.m. on Wednesday, 15 December 2004.