I move:
That Seanad Éireann hereby approves of Control of Imports (Quota No. 50) (Superphosphates) Order, 1959.
Control of Imports (Superphosphates) Order, 1959: Motion of Approval.
Quota Order, No. 50, is the Order which restricts the importation of superphosphate. The Order applies both to single superphosphate and to triple superphosphate. Licences are granted freely for the importation of triple superphosphate. My intention is that this arrangement should continue until such time as the home fertiliser industry is in a position to meet the demand for triple superphosphate.
Senators will recall that, in October, 1956, the then Government announced that they had decided to arrange for the supply of superphosphate to Irish farmers at world prices, while ensuring that the entire output of the Irish fertiliser industry would be taken up. The implementation of this decision involved the suspension of the 20 per cent. customs duty on superphosphate and the payment of a subsidy to home manufacturers, representing the difference between their economic price and the price of imported superphosphate. In addition, it became necessary to pay a freight subsidy to the Irish manufacturers in order to equate the cost of Irish superphosphate with the cost of imported superphosphate delivered to any part of the country.
Subsequently, in the 1958/59 fertiliser season, a further subsidy of £4 per ton on both imported and home single superphosphate, as announced in the Government's Programme for Economic Expansion, became operative. The object of this further subsidy was to achieve a rapid expansion in the use of phosphates on grasslands which is one of the main objectives of Government policy.
As a result of the subsidy scheme, a substantial increase in home production of superphosphate is developing. Plans for increased production, not only by existing manufacturers but also by new entrants to the industry, made it clear to the Government that home production will soon be sufficient to meet the entire home demand for superphosphate, due allowance being made for the increased user of superphosphate by Irish farmers as a result of the subsidy scheme.
The Government also had regard to the threat of dumping in this country of low-priced Continental superphosphates. In these circumstances, while not interfering with the subsidy, which enables the farmers to obtain their supplies at world prices, reduced by the £4 per ton subsidy, the Government considered it essential to control the imports of superphosphates in the interests of the Irish superphosphate industry and the Order now before the House for confirmation was made by them. Under the Order, arrangements will be made to allow for imports of superphosphate to balance any shortfall which may arise until the plans of home manufacturers for increased production come to fruition.
I should say that the statutory requirement is that this Quota Order will cease to have effect under Section 4 (2) of the Control of Imports Act, 1934, within six months from the date of its being made, unless it is approved by each House of the Oireachtas by a resolution passed before the expiration of six months. The Order imposing the restriction in this case dates as from 1st August, 1959. It was made by the Government on 28th July, 1959, and therefore it must accordingly be approved before 28th January, 1960. I confidently commend the Order to the House.
The Fine Gael Party opposed this Order in the Lower House and that was a decision with which I am in complete agreement. Before considering exactly what this Quota Order means, it is necessary for us to take a view of the fertiliser industry and the special facets of it that are different from those of any other industry. The first thing you must remember is that there was only one fertiliser or sulphuric acid manufacturer in this country up to the present and at the moment there is still only one. There is, in fact, a second manufacturer who has stated that he intends to set up a sulphuric acid plant which is necessary for the production of superphosphate but so far that has not been done. In fact, therefore, the production of superphosphate here of the single type referred to by the Minister is a monopoly. It is entirely in the hands of one manufacturer, or, if not in the hands of one manufacturer, he holds a controlling interest in all the plants that make up the entire production unit for vitriol or sulphuric acid in this country. In fact, he has nobody to compete with and the price of superphosphate can be fixed at any level he desires, if there is no competition from abroad.
Up to some years ago, there was a 20 per cent. tax on superphosphate. This was a prohibitive tax. For four years, all the tax that was paid totalled £85. That, I think, is proof enough that it was a prohibitive tax. You might think, therefore, that the industry was completely efficient, that the price was as low as it could be, that 20 per cent. was not so much, but when you come to consider the type of industry it is and the type of article it manufactures and the volume of trade, one finds that five per cent. represents a fortune, and that the sales of superphosphate involve such large sums of money that 20 per cent. was an efficient prohibitive tax, as evidenced by the fact that for the past four years I scrutinised, the total amount of duty paid was £85. Somebody, presumably a manufacturer or that individual to whom I have referred, brought in a quantity for trial purposes.
In 1956, we had a decision of the Government to remove this tax and in order that the 1,500 people engaged in the superphosphate industry should not lose their jobs and so that, at the same time, the Irish farmers could be quite sure of getting superphosphate at world prices, the then Government guaranteed that they would pay the difference between the Irish price and the imported price. At that time, it was freely admitted that the Irish units were not wholly efficient and in fact that very large sums of money— I think £1,000,000 was mentioned— would need to be spent to bring the Irish units up to efficient production standards. It was hoped as the years passed that this subsidy would vanish as the Irish manufacturer became just as efficient as his English or Continental counterparts and able to compete with them on equal terms.
We now have this Quota Order and the Minister has just stated that he hoped home production would soon be up to the level at which imports of single superphosphate would be unnecessary. I want to give my personal opinion that it is up to that level now and that in fact while he will freely give licences for triple superphosphate for compounding—as he said he would—because it is not manufactured in this country, still, he will find himself in the position of not giving any licence for the imports of superphosphate. The net result is that this instrument we are asked to pass now is a more efficient blockade than the 20 per cent. tax which prohibited the import of single superphosphate over a period of four years.
There is a grave danger that the Irish farmer will no longer get his single superphosphate at world prices. I know there is a subsidy of £4 per ton which has come about since. That is a very good measure but the moneys for that are distinct from the moneys for the first subsidy. The first subsidy was as a result of the easing down of both sections of the Land Project; the second subsidy was largely financed by the compulsory ending of Section B. The net result of this measure will be to let out the Government on the first subsidy and then to leave them with the second subsidy to be paid for by the two withdrawals of money from the Land Project funds.
It is an extremely intricate piece of finance and I think I should explain. When a man goes to buy something, he has to bargain. Over the years, he finds the cheapest supplier. When there is no single superphosphate imported into this country, as I believe there will not be, who will be able to say the price at which superphosphate will be imported? Nobody will know. You must remember the sort of market you are dealing in. I know a man who has gone into the fertiliser business. He compounds his own fertilisers. He set forth from Ireland one day to find out if he could import slag direct. That is already done by five or six firms and has been done for two decades. He contracted one firm in London and was told they would not supply him with slag. He then went to Germany and contacted a second firm which was supposed to have no affiliation with the first. Yet he was told the minute of the day when, and the place where, he interviewed the first man, and the answer on the second occasion was the same as the first.
This kind of thing is breaking up all over the Continent, as it is breaking up here. Various firms are now compounding fertilisers besides the large firms here. If there is no import of single superphosphates in this country, the Government fixing of an imported price may be faulty. When one is dealing with large cartels, of which there are probably only two or three on the Continent of Europe, it is difficult to know what price will be fixed for imported superphosphate. Is it the price fixed for the academic man who merely wants to have a figure, or is it the price that a keen buyer can get by saying: “For the next five or six years, I can give you an order for so many thousand tons; what reduction per ton will you give me on ruling prices?” I do not know, but there is a grave danger that one of the subsidies for single superphosphate will disappear. That would be of benefit to the Government. I am not saying that the Government would wish it to disappear, but certainly the virtue of keen bargaining cannot exist when the Government merely go out as an academic buyer who will spend no money.
The Minister mentioned the threat of dumping of low-priced Continental superphosphate on the Irish market— that is a nice, round-sounding phrase —and this threat might mean the disemployment of certain employees of manufacturers here. I can see the Minister's difficulty. One must look at it this way. When we sell our produce abroad at the moment, we are competing in markets with farmers who are paid subsidies before their goods are sold. For instance, there is the deficiency payment on beef, the deficiency payment on eggs and the deficiency payment on grain. The farmer sells his grain to the mill at 45/- a barrel, but three weeks later his deficiency payment of 15/- comes from the Government. We have to compete with that 45/- per barrel. We have to compete in that meat trade where the deficiency payment can be as much as 39/- per cwt. But at the same time we must not compete with dumping of Continental superphosphates. I can see the Minister's difficulty. It would be solved completely if it were a fact—as the Minister seems to believe but I do not believe—that we are not capable of manufacturing all the superphosphate we want here.
I said we would be.
You said we would not.
I said in the Dáil that we would be.
You implied here that we would not. You look forward to the time when home production will start but——
That surely does not mean "will not"?
I am sure the Minister is referring to the proposal to set up another sulphuric acid plant. That is to cost a great deal of money and it is very much in the future. The Minister implied we were not up to full production. I maintain we always were. Are we not to be allowed to use any of the superphosphate at world prices?
What is the world price? I hold that the dumping price of Continental superphosphate may well be the world price. I do not know how you will solve the problem between the 1,500 employees and the farmers who must sell on a dumped world market, but I say you have admitted that the farmers in future will not enjoy the first subsidy. I know you are in an extremely difficult situation. At the same time, if the Government faced up to the undertaking given by their predecessors——
What are we doing but implementing it?
You are implementing it but at the same time you are now saying that there is a threat of dumping of low priced Continental superphosphate and therefore you are putting a quota restriction on the import of single superphosphate. In my view, therefore, it is not being implemented. The Irish farmer will no longer get the benefit of the first subsidy. Whether the first subsidy might be greater or less than the second subsidy, I do not know. I do not know what the price of dumped continental superphosphate will be, but, if it were only £5 per ton, dumping at that level would mean that the £4 subsidy would be a far lesser subsidy than the first subsidy which is now being dispensed with, in my view.
It may be that I am not too quick on the uptake but I fail to see what exactly the Senator is complaining about. His first remarks seemed to have regard to sulphuric acid, an industrial raw material used in the manufacture of superphosphate but used also in many other manufacturing industries. The Senator said we had only one producer of sulphuric acid. I must admit that was news to me. I thought we had none and that all our supplies were imported. However, I take the Senator's word for it. The price of sulphuric acid is of equal importance to others engaged in manufacturing processes in which that commodity is essential. If the price were causing hardship and if it is true that there is a stranglehold on that raw material, we would have heard bitter complaints from those engaged in manufacturing processes in which sulphuric acid is required and those making the complaint would have their advocates here and in the Dáil. We would know all about the cornering of the market by those engaged in the manufacture of this very important raw material. We would have heard of the abuse of privilege.
I did not say they were abusing their privilege at all. They are all right.
I may be slow on the uptake. Possibly I misunderstood the Senator. I gathered that he said there was a hidden element of exorbitant profit ploughed into the manufacture of superphosphate because there is only one producer here of sulphuric acid.
No.
That would appear to be the principal ground on which the Senator based his case against the making of this Order. It would be alarming if he should prove to be right. I am not prepared to accept, without further inquiry, that he is correct. As I have said, there are other manufacturers using sulphuric acid and they would have complained bitterly if the position were as the Senator has stated. They would have their advocates here and in the Dáil on both sides of the House. If the Minister saw that there was an abuse of a privileged position, surely he would take action and do something to remedy the situation, as any Minister would?
Sulphuric acid is imported and, if there were any inclination to exploit, then the acid could be imported and such exploitation prevented. It would appear from the Senator's remarks that the price of superphosphate manufactured here is somewhat higher than the price at which it could be imported. That argument applied at one stage to cement. It was stated it would not be possible to manufacture cement here and sell it at the same price as the huge concerns on the Continent could produce and sell it. Some of us remember the criticism and the misrepresentation when it was proposed to start the manufacture of cement here. In the long run, it paid off and to-day we have arrived at the position in which we can produce cement cheaper than it can be imported.
We must take the long view. If we close down on the manufacture of superphosphate, the international combines may gang up to sell at a cut price for a short time. Having stopped the wheels in the mills here, they would then proceed to rake off as much as they could from the Irish farmers. That has happened elsewhere; it could happen here. There are times when a surplus can be sold under the cost of production. There was a time when cement was sold here cheaper than it was sold in the country of origin. With a growing demand for superphosphate, there will be the possibility of an expansion in the industry. Production will increase; more people will be employed. I hope that that will happen and I hope the price of the home-manufactured article will be fairly competitive.
I hope, at any rate, that the position will ultimately be arrived at in which we will be able to produce all our superphosphate needs at a reasonably economic price, but we must always have regard to the fact that we are producing an article at home for a small market. Not being able to go into the economics of the matter, all I can do is express that hope. I take it that the Minister is reasonably satisfied that that position can be attained and that is why he is asking that this control be kept. I regard it just as a question of keeping that control. I should not be as anxious as the Senator seems to be to remove all control. The Senator may argue that those people selling superphosphate on the Continent are in a combine and that if you sought a quotation from continental countries, you would not get the correct price.
The opposite.
The margin would be very small indeed.
If you are quoted dumped continental prices, would the Government give a grant to cover the difference between the dumped price and the price here?
My answer to that is that I am not in possession of all the facts and neither is the Senator, but if I were in the Minister's place, I would try to give him an answer.
The Minister will have the opportunity of giving me an answer.
That is a matter for a Government decision and surely the Senator—he is an intelligent man and he knows that an issue of major importance must be one for a Government decision—cannot imagine the Minister for Industry and Commerce taking such a decision and——
That is the danger of a Quota Order.
My case is that this is a question of keeping the control. The power to keep that control should be given to the Minister or else we remove all control and then we shall have the dumped price.
I think much of the difficulty would be resolved if the Minister could tell us how he proposed to calculate the free world price.
There is no difficulty at all. It is a difficulty that is being created over there.
No; I am very reasonable about it.
Senator Donegan's point apparently is that what will be quoted to us is not a reliable figure. I think that can be got over if we have a record over the past two years of what the prevailing price has been and use it as the basis of a free world price. In the next year, if there is any variation upwards, then I think the doubts raised by Senator Donegan will be very well founded. I think the Minister should try to keep the price at the level at which it has been for the past couple of years so as to demonstrate to the agricultural community that the Government are implementing their promises and at the same time, giving perfectly legitimate protection to Irish industry from indiscriminate dumping.
It is difficult to understand the viewpoint expressed by Senator Donegan in regard to this Quota Order. He knows very well that the former Government introduced a subsidy—I think in 1956—and of course at the same time, you had the tariff protection.
They removed it.
He now says that we should not support this Order merely because we may be quoted dumped prices from the Continent. What is a dumped price?
That is the question.
How often will you be offered a dumped price? Senator Donegan is in business and is familiar with the principles on which dumping or cut-prices operation of any description is based. It is a last ditch effort on behalf of any business-man or combine to put a colleague out of business. Of course we hear about international cartels in manures, cement or other commodities, and especially in raw materials necessary for industry, but we know very well the price we would have to pay today if we were paying world prices for sugar. The same argument was used in the case of sugar. We know very well the price we would have to pay for cement and perhaps we may be fortunate enough to know in a few years' time the price we would have had to pay for superphosphate and phosphatic manures. Surely if we value the industry we have built up here for the manufacture of phosphatic manures, it is up to the Government, in furtherance of their policy of early and late grass—which is supported by all the producers and farming organisations—to give to the manufacturers of those commodities a reasonable measure of support? That is what this Quota Order sets out to do. I think it is reasonable and right and I am quite sure the majority in this House will find themselves in agreement.
I think the Senator thought that I was attacking a particular firm. I was not. The clear point is that if the dumped price were £5 a ton and the present price is, say, £13, less £4, which is £9, and if the Government gave a subsidy of £4 2. 6, then every Irish worker in the superphosphate industry would be safe.
I want to compliment Senator Donegan on making a valiant attempt to justify the Fine Gael somersault in the Dáil. I must admit I was completely taken by surprise by the attitude of the Leader of the Opposition there. He spoke about the necessity for making phosphatic manures available to farmers and then suddenly said he was going to oppose this Order. I suggested during the course of the debate that I was doing nothing more than implementing his own decision, or at least that part of it which referred to ensuring that the bulk of the Irish industry would be taken up.
Both Senator O'Reilly and Senator Carter put their fingers on the weakness of Senator Donegan's case by asking him: what is a dumping price? A dumping price is regarded in international trading spheres as the price at which a commodity is sold abroad when it is less than the price at which it is sold on the home market. The occasion for selling a commodity abroad at a price lower than that at which it is sold at home arises, perhaps, in only two instances—when there is surplus production at home or when there is a competitor growing up in the export market, a competitor supplying the same market whom the original supplier wants to put out of business. That is the root of the Order in this case, I can assure the Seanad.
The difference between the price of imported superphosphate and the economic ex-factory home price per ton over the past few years amounted to 15/- in 1956-57. It was the same in 1957-58 and 22/- in 1958-59. As a result of the subsidy between the world price and the economic, home-manufactured price, there was a certain increase in the use of superphosphate by Irish farmers but as a result of the making available of a subsidy of £4 a ton under the Programme for Economic Development, there was an increased use and as a consequence increased plans for the production of superphosphate by the Irish fertiliser industry. While it is perhaps, true to say that there is only one producer of sulphuric acid in the country there are in existence four producers of superphosphates and these four and other entrants into the industry plan very much increased production. I know what the Senator is suggesting by his wry smile—that of the four I mentioned who are already in the business, one is by far the greatest and that is the one, I take it, to which he refers as the sole producer of sulphuric acid.
The Senator probably knows better than I do that in the production of superphosphate, there are two main raw materials, phosphatic rock, which we have to buy from North Africa, and sulphuric acid. As he knows, phosphatic rock represents about 80 per cent. of the constituents of superphosphate and sulphuric acid the balance. He probably knows also that sulphuric acid is produced here from imported sulphur or pyrites. We have "oodles" of pyrites in this country and if somebody could use it for mixing with phosphatic rock to make superphosphate, we should be very happy. We could at least eliminate the importation of sulphur.
These are the fundamental facts, but, as I have already said, as a result of the two subsidies, the subsidy to equate the home price with the world price and the £4 subsidy, there was increased user by Irish farmers and increased production by existing Irish producers and plans for further increased production of superphosphate by the existing and by new entrants into the fertiliser industry. The Dutch fertiliser industry is the traditional supplier and naturally these industrialists want to hold their Irish market. When they saw this new business being done in Ireland, this new productive capacity, it was only natural that they should take the usual steps a strong international cartel will take and by various methods of subsidisation, produce at dumping prices.
They tried to do the same thing here and it was to protect the prevailing economic situation that the Quota Order was introduced and to ensure that the total output of home production of superphosphate would be taken up. But in so far as it is a Quota Order, it also provides for the importation of whatever amount of superphosphate is required by Irish farmers and that Irish producers will not be able to produce in our home factories. We shall know in that way what the world price is. I think it will be necessary to make another Quota Order when this one expires and that means that a certain amount of superphosphate must be imported and again in the second Quota Order period, we shall know what the world price is.
I would say confidently that I hope the time will be short until we will have sufficient production here to avoid altogether the necessity of importing superphosphate, and not only that, but I am sure we shall have sufficient superphosphate production to generate lively competition between home manufacturers. That, of course, will tend to keep prices down. If we can keep prices down to world level, the necessity for the first subsidy will have disappeared. There will be no necessity to give Irish producers a subsidy to equate prices at which superphosphate will be made available to Irish farmers with the prices at which it could be got by importing it. I think that makes the picture as it appears at the present time fairly clear; that dumping was about to commence by different means, by devious methods and was in fact in operation; of that there can be no doubt. I cannot see how the Senator could justify the argument that the Irish Government should pay the difference between the dumping price and the home economic price when the undertaking given, in the first instance, was to provide a subsidy on the basis of the difference between the world price and the home economic price.
The world price is the dumping price.
As Senator O'Reilly pointed out, the same argument was made when we were trying to build up the cement industry. Senator Carter produced another instance in the case of sugar. I am not going to say that one Government or another were responsible for building up our cement or sugar industries but the fact is that we are in the very happy position that we can produce sugar at lower cost than any other country in the world and, so far as cement is concerned, we can export quite substantial quantities of what is produced here. I do not know if that stage will be reached as far as superphophate is concerned but certainly with the increased production envisaged and the comparatively small difference now between the home economic price and the world economic price, I do think that stage could well be reached. There is every case for the adoption of this Quota Order by the House and unless the Senator can make a better case for it than he has done so far—even though I commended him on it; he made the best of a bad case—I fail to see why he, like the Deputies of his Party, should feel it necessary to file into the Division Lobby to do nothing but effect the disemployment of the Irish fertiliser industry workers——
No, no.
It will not affect the Irish farmers if we have regard, not to the dumping price but to the world economic price.
All the Minister has to do is to pay the difference between the dumping price and the home economic price.
Question put and agreed to.
It was originally intended that if there had been any business left over, the House should meet tomorrow as announced this morning. Since there is no business left over to be dealt with tomorrow, I suggest that the House adjourn until next Wednesday.
The Seanad adjourned at 9.50 p.m. until 3 p.m. on Wednesday, 25th November, 1959.