I welcome the Minister of State to the House. It is not before its time that these two reports are presented to us. Since this Oireachtas assembled these documents have become more and more of historical value rather than documents which should be discussed here in a comtemporary manner. Irrespective of the fact that many changes have taken place since these reports were published, we should welcome the opportunity to discuss them. The Minister in his speech gave the up-to-date situation on the topics discussed in the reports. It must be said that if one did a precis of these two reports and each of the preceding reports it would be apparent that, except for changes of dates and changes in certain figures, the objectives are much the same. The objectives have not been met and the main items discussed are usually virtually the same.
The main thrust of these discussions has been the economic and social situation and the consideration of matters which would give practical implementation to measures which would case the huge areas of disarray in social and economic activity of member states.
There has been dramatic failure by the EEC to supply the social and economic needs of the weaker states in the Community. This failure to give help and support to less well-off member states continues. There has been absolutely no change in this from the time we entered the Community. The considerable pressure at budget time each year contributes to this problem. There are pressures to eliminate the CAP and other social fund provisions which would give to countries like Ireland a fairer share of the cake within the Community. The difficulties last year when negotiating farm prices did untold damage to our economy. We must find a more acceptable way of negotiating which will give the farming community a reasonable and necessary updating of price and support mechanisms which they need.
The farming community play such an enormous part in the economic life of this country that it is essential to have proper negotiating methods which will give a continuity of economic planning to this vital sector. Without this continuity of economic planning and a negotiation procedure which will give an earlier price rise structure to the farmers through the CAP and through other support mechanisms, the benefits which have accrued in the past to this country through these supports will be dissipated totally. The ad hoc arrangements that now seem to be in vogue do not give confidence to the agri-based sector.
One of the major inhibiting factors in the industrial sector over the past few years has been the undue and in many cases penal interest rates being levied by banks in Ireland. Equally the penal rate of inflation has been an inhibiting factor. All sectors of the agricultural business are agreed that inflation and interest rates are the two major factors hampering the planned and profitable business that agriculture should be. It was extremely noticeable that interest rates were considered to be of prime importance, whether dealing with companies in the beef sector such as Clover Meats or in the dairy sector such as Avonmore.
There is a need for a long-term stabilised interest subsidy or interest rate which would give to these industries the type of help that they need to plan their business for the next four, five or six years. In a cheese factory such as we have in Avonmore up to £8 million worth of cheese has to be kept in cold storage for seven or eight months to give the breathing space that it needs before it is put on the market. One must consider the amount of money tied up and the difference it would make if the same interest rate applied in Ireland as applies to cheesemaking enterprises in Holland or Germany. The interest rates that are applied in the agricultural section here are in excess of 15 per cent, while in Europe the average interest rate would be in the region of 5½ to 6 per cent. One sees the difficulties that are experienced by this section.
The support that should be available from the EEC has not been forthcoming. When one considers Avonmore and its impact on the local economic scene one realises the value of trying to have the EEC give us some type of continuity of interest subsidy or an interest mechanism that can help out in this sector. One has to consider that there are 1,600 people directly employed in this industry and that there are 2,350 suppliers. It can be said with certainty that if you have 2,350 suppliers in the milk sector, then each of these would have at least a three to one ratio of employment on the farm. In that industry in County Kilkenny and the surrounding areas we are talking in terms of about 10,000 people.
We had the unfortunate situation in Kilkenny where we had an industry set up on 13½ acres in which Irish banking money, Irish commercial money and American commercial money was involved. The investment in Fieldcrest turned out to be £35 million which was lost to the Irish economy. That £35 million was spent on 13½ acres. There was a proposal that we could use 100 million ECUs in agriculture and that this would give to agriculture a profitable business mechanism.
I wonder how many people could justify the spending of £35 million on 13½ acres when one considers the minimal amount of money that would be required to update the meat processing factories. If one put £35 million into the pig meat factories and if we got 35 million ECUs, we would have the basis not alone for updating the facilities available in these meat factories but we would get them on to a competitive level. There is no doubt the markets are available and the product is also available.
One of the problems of the very high interest rates is that this is a time when we need to increase our cattle herd. An increase in our cattle herd is important not only to the agricultural community but to the industrial sector and our employment potential. Unfortunately farmers at present are not able to bring their cattle herds to the necessary level because we have such high interest rates. They are not able to buy at the right time and they are not able to keep their cattle for long enough because they have to keep paying off the banks at penal interest rates.
Much has been said about the export of cattle on the hoof creating major problems for the industrial sector and that it would be better to have these cattle processed in Ireland. There is certainly a place for both cattle on the hook and cattle on the hoof. There is a place for both of these individual industries. We must have enough cattle to keep factories going on a continuous basis so that when people go abroad to sell for us they can guarantee a supply. There must be an attempt made from within the EEC to provide some sort of help to bring interest rates down and this would enable an increase in our herd numbers. We can, by doing that, support the very necessary export of cattle on the hoof and also give the numbers of cattle, sheep or pigs to our factories to increase the employment.
The Community has not grasped this nettle at all and unless they do so we cannot see the full potential of agriculture being achieved. There never will be equal economic levels of activity within the Community. There must be help and support on a far greater basis than at present in these very important areas of interest support and help in decreasing our inflation problems.
I realise that an attempt was made last year, and still continues, to help out farmers who have got themselves into difficulties because of borrowing requirements which were brought about by attempts to upgrade enterprises or to purchase land to bring up holdings to an economically viable size. There were too many regulations and conditions placed on this package and because of that it has not been as successful a package as one would like to see. Of the farmers who are in economic trouble with their bank and with lending agencies only 35 per cent have either been processed or approved under these support measures. This is after nearly two years of this type of economic help being introduced by the Government and the EEC. I do not for a moment suggest that farmers or borrowers other than farmers who get into difficulties because of their own lack of business acumen or because they borrowed for non-productive purposes, or who borrowed for productive purposes and did not use the borrowings for those purposes, should be in any way helped by the banking system, the Government or by anybody else. They should have to bear the same failure problems as any other sector of the economy.
During the past few months we have had the first consciously planned devaluation of Irish currency and the actual size of the devaluation was less than the scheduled changes in central rates against the ECU might suggest, because of the 2¼ per cent band of flexibility around the central rate. In the aftermath of the realignment the Irish currency moved from close to the bottom to the top of the table while the revalued Deutschemark dropped to the bottom of the band, and this repeated the experience of revaluing and devaluing currencies in previous realignments. The outcome was to produce a change in the value of Irish currency against the Deutschemark of about onehalf the stated change in the central rates against the ECU. The basic effect of the devaluation was to offset the exceptional rise of the currency against sterling which served to warrant competitiveness still further in a period when manufacturing unit wage costs in the Republic were rising at a faster rate than in the United Kingdom.
As a non-economist it is very hard to judge if the devaluation in the long-term will have the effects that were perceived to be needed, or whether it will be a failure. There is no doubt that in the short-term it did offset some of the problems we were having when our currency was again approaching the very high valuation that was put on the English pound over the past number of years. Pressures on the Dublin money market have eased in the aftermath of the currency realignment and bank interest rates have been reduced, but not to the level which ruled before the realignment. When we look at interest rates right across the world we find that our interest rates are much higher in real terms than in any of the countries to which we are exporting or from whom we are buying.
The speculative pressures which developed in the European currency markets prior to the realignment have been removed and the prospect of a movement towards lower interest rates in European countries has been improved. The adverse impact of competitiveness from the decline in sterling from the autumn of 1982 onwards has been at least partly offset and the realignment of the green £, the artificial agricultural exchange rate, has provided an additional gain to farming income in the Republic. The devaluation of the Irish pound, however, provides no solution to the problem of declining competitiveness. The long-term inflationary impetus released by devaluation could, in the circumstances of the Irish economy, work towards offsetting the immediate competitive gain unless steps are immediately taken by the Government to contain them. A devaluation provides no soft option and no escape from the need to prevent costs from rising at a faster rate than that occurring in other countries in trade and employment, if trade and employment are to be maintained.
During the period mentioned we had the Williamsburg Summit. That meeting took place in a magnificent setting near Washington. The so-called world leaders met in that seventeenth century mansion. It is possible they were influenced by their surroundings because nothing came out of that summit that would give hope to any unemployed person in this country. From the point of view of employment potential, they have given us nothing. We heard of major conflicts at that summit because of what the United States thought should be done. We saw the protectionism of the United States coming back. They said there was a need to keep interest rates up and to stop any refuelling of the economy of the United States, except on a long-term basis. That statement was made at a time when we in Europe depend so much on the United States as a major economic unit and need their help in giving an impetus to the market place and releasing into this economic area some of the benefits that are now re-emerging because of the refuelling of the economic situation in the United States. I believe we are coming to the run-up to an American Presidential election. Within the next few months we are going to see more and more fuelling of the economic situation there, not for any economic reasons but because President Reagan will be trying to hold on to his seat. He will be trying to stimulate the American economy. If he does not help the other economic areas of the world, the present upsurge in economic activity in the United States cannot continue.
We had the European Stuttgart Summit and there is no doubt that a feeling of helplessness is emerging. We have seen in both the Williamsburg and Stuttgart Summits a hardening of nationalistic attitudes and because of this we cannot see the basic tenets of the EEC being implemented. The Minister stated that as part of this Stuttgart Summit a special emergency procedure has been instituted to speed up consideration of the basket of measures now on the table, that a series of special councils will be held involving specific Ministeries to review the entire range of questions at issue, they will report to the Athens Summit in December 1983, and that there will emerge decisions on the future financing and direction of the European Community.
That paragraph contains many of the pious platitudes which have been in the reports of the European Economic Community over the past number of years and this basket of measures now on the table is something that will read well but I would like to see what practical value these special emergency procedures have been in the European Economic Community when every month we see a rise in unemployment rates which is totally unsustainable. This rise in the unemployment rate is creating problems not alone in the social and economic fields, but it is taking away from people their dignity to live in their own community, to be part of that community, to work to help it and to feel they play a part in the structure of that community.
This range of talks is vital to the future of the EEC, and more particularly to the continued membership of Ireland within the Community. As the Minister stated, time is not on our side; and time is definitely not on our side when one looks at the social implications of unemployment. The EEC must take a lot of blame for the fact that unemployment levels have been allowed to rise in the EEC because of the economic stances taken up by individual Governments, when it appears that the dropping of an inflation rate is much more valuable than keeping 100,000 people in work and when one sees the number of young people in this country who have suggested — and it is being suggested to them every day by outside commentators — that at least one-third of them will never work. It is time for the Ministers and the EEC to do something about these problems rather than setting up special councils and meeting at special summits. I notice the next summit will be held in Athens in November. Summits were held at Stuttgart, Williamsburg and Tokyo. The range of summits that have taken place to provide answers — which they never provided — is amazing. I do not think these summit meetings do anything but create arenas where international wars can now take place without a shot being fired — something akin to the Olympic Games. If you cannot go out and fight with tanks and guns, you can fight battles in the press, on the radio and on television. These battles are of no use to anybody, except that they give publicity to the people who make the speeches.
These leaders have not settled one economic or social problem. As the Minister stated, in the year 1982 we received £64 million from the quota section of the Regional Fund and £2 million from the non-quota section, but this was not sufficient for our needs. Although in plain money terms it was an increase from £53.9 million and £0.66 million in 1981, considering our inflation rate and the increasing need to bring our infrastructural and social services up to date, it was not an increase in real terms; rather it was a decrease. The objectives of the EEC at the beginning were that we would bring the less well off countries of Europe in line with the richer nations, but this objective has not been reached.
I mentioned earlier the difficulties experienced on our economic front because of delays in implementing agricultural prices on 17 May 1983. I will not go further into that at this stage. The Minister stated that he wishes to see a speedy and successful conclusion to the negotiations on enlargment of the Community. That does not seem to be right in view of the fact that we have not even started to tackle the problems in the Economic Community. I do not see why we should speedily enlarge the Community until we solve some of the present economic and social problems in the European Community. When we look at the countries that are at present negotiating to enter or who have been accepted, we see that it is not the economically advanced countries in Europe which will be the major sufferers. We will see a levelling down of our economic standards because we are bringing in further agriculture-oriented countries. The pressure, therefore is, going to be from the economically developed countries to stop supporting what they consider to be lame duck countries. They are not lame duck countries; they are the countries which are now negotiating to get into the EEC. I do not think we should bring anybody else into the Community until we solve our present problems, until we see a deliberate and positive attempt being made to bring the standards of living of the Irish people up to those of the Germans, the Dutch or the Belgians, or to bring the standard of living of the Italians up to levels which could be sustainable. At this time to be considering enlargment is not an option we should entertain. In the Minister's statement there is a sentence which says that the link between enlargement and a solution to the future financing of the Community is recognised in the European Council Declaration. Again, I suggest that this is one of the pious, platitudinous statements which mean nothing and will not help our way forward.
When we come to the sections dealing with the Community's external relations, it would appear that the Community accept the fact that there is a deepening international recession. To put into a speech that the EEC accepts that we have a deepening of the international recession would appear to be something any schoolboy could put into a statement, but it makes no difference to the fact that we are in an international recession and I do not think putting it into the statement is going to do anything for the document the Minister has placed before us. There has been a protectionist attitude growing up, irrespective of what the Minister says, in the international economic situation. The Minister said it was heartening for Ireland as a small open economy that the Community and its major trading partners have avoided a protectionist response to the strains, and that at the GATT ministerial meeting in November 1982 delegates undertook to resist protectionist pressures. This is a fallacy. It is very easy to state at one of these meetings that we will avoid protectionist measures, but when one looks at what is happening in the open market place, there is no doubt that this statement is not true. Anyone involved in business in this country will say that there has been a huge increase in protectionist attitudes and that this has major problematic implications for us because we are a small, vulnerable and very open economy.
The Minister mentioned the problem we had with the United States regarding steel exports. He did not mention the heavy pressure exerted by the United States when negotiations and contracts were being signed for the provision of gas from the Soviets. The Community, as stated by the Minister, has sought to encourage Japan to limit their exports. It does not appear that this encouragement is succeeding. It appears that the flow of Japanese consumer durables remains at an extremely high level.
It is unsatisfactory that the economic group which includes the most advanced countries, technologically speaking, in the world cannot get our trading levels with Japan into something approaching an equitable but competitive level. It should be said here that we appreciate the level of Japanese investment in Ireland. There is no doubt that their investments in some areas have been extremely successful, and in others they have not, but I do not think the success or failure of the Japanese firms which have come here has been because of the trading situation or work relations in Ireland. The firms which are not too successful are in areas where businesses throughout the world are not doing too well, particularly in the textile area.
The Minister referred to the Community development policy to combat hunger in the world. How can this policy effectively work when in reality the people who control the supply of food and the supply of gestation seeds are multi-national companies which have no realisation of the problems of the Third World, but who will use the Third World? Their food research facilities are not geared towards providing for people in the Third World. They do not help these countries and it is left to smaller countries like Ireland through operations like Gorta, which are subsidised by the Department of Agriculture and by private donations, to provide expertise in the agricultural areas in these countries, and to provide people with the know-how to help these people to help themselves. It is at areas like this the EEC should be looking rather than at work through the EEC to help Third World countries.
Mention was made of the recent meeting of UNCTAD VI at Belgrade. There is a paragraph in the Minister's supplied speech which has been crossed out. I am not too sure why; perhaps it was because of the lack of progress to date at that meeting. The Minister said the outcome of the recent UNCTAD VI meeting in Belgrade did not live up to the concrete expectations many people had.
