Seanad Éireann debate -
Wednesday, 20 Jun 1990

Vol. 125 No. 10

GATT Talks: Motion.

Mr. Dardis

I move:

That Seanad Éireann rejects the negotiating position adopted by the United States of America in the Uruguay round of talks under the General Agreement on Tariffs and Trade (GATT), and noting the adverse effect that agreement to the US proposals would have on the Irish economy and on our agriculture, calls on the European Community to defend the Common Agricultural Policy and the family farm.

In proposing the motion I would like to welcome to the House the Minister, Deputy Kirk. He is a very good attender here and we are glad to see him once again. I know he will convey our views to the Minister for Agriculture and Food, Deputy O'Kennedy.

In relation to this motion I have been very much encouraged in recent weeks and months to see that the Government are taking a very active and positive role in relation to the GATT talks. Certainly, there was a good deal of worry in farming circles in general that the problem, which is a very serious one, was not getting the attention it might have deserved but I note that in recent weeks both Deputy O'Kennedy, and our own party leader, the Minister for Industry and Commerce, Deputy Desmond O'Malley, have been active in this area. I was also glad to note that the Taoiseach last week said that he would wish to defend the Common Agricultural Policy. I urge them to redouble their efforts in the coming weeks and months to see to it that the position of the Irish farmer and of farmers in the European Community and that of the Common Agricultural Policy itself are defended.

I believe this matter is the most important one that has confronted Irish agriculture, and indeed in some ways the Irish economy, since we joined the Community in 1973. It is arguably one of the most serious matters that has confronted us since the time of the Economic War, and the older people among us can remember the devastation that caused. I believe there was a general lack of awareness in the country as to the implications of what the United States were telling the European Community through the Uruguay round of talks under GATT. I think that lack of awareness was very much evident in the Oireachtas and not just in the country as a whole. I realise there were members of the Cabinet and Ministers, like Deputy Kirk, who were very well aware of the situation but in general there was a marked lack of awareness of the situation, even to the point that last week, when a gentleman from RTE contacted me about the matter, I was surprised that for someone who was a well experienced journalist he did not seem to know what GATT was. I believe that is probably characteristic of the country as a whole. But the farmers certainly know what it is, because about 4,000 or 5,000 of them turned up outside the American Embassy to let the American Government know of their concern about the matter.

We need to let the US Government and the European Community know the opinion of this Parliament, this Oireachtas. We are talking about a vital national interest that is at stake and I see nothing wrong at all with defending our national interest in the Community. Other countries seem to do it almost all the time. Mrs. Thatcher seems to be extremely good at defending the British interest in the Community; in fact, the US itself is very good at protecting its own interests. I believe we must have enough self-confidence in our own sovereignty and in our own independent status to do the same thing when the need arises. My message to the House, to the Oireachtas as a whole and to all who are interested in the welfare of the Irish economy and of the people of Ireland is that the next five months are likely to be the most critical period for our agricultural industry and for the economy for the past 20 years. I hope the efforts which are being made by the Government, and indeed by certain members of the European Commission, will be fruitful and that the proposals as outlined by the United States will be rejected.

By the end of the year the 96 countries which are participating in the General Agreement on Tariffs and Trade are scheduled to agree on the measures to liberalise world trade in agricultural produce and in the process the United States, along with the big agricultural exporters of Australia, New Zealand, several of the countries of South America, Canada, the so-called CAIRNS group, want to get rid of our system of support for farm prices. Basically, that is what they are about. They might argue otherwise, but that is what it is all about.

We in the Progressive Democrats reject the US efforts to get rid of the Common Agricultural Policy and, with it, many Irish and European farmers. I think liberalisation is a perfectly acceptable and laudable thing to work towards but destitution — and that is what it would amount to — is not. There is enough poverty in rural Ireland without making it worse. From the beginning my party have defended, and it will continue to defend, the fundamental role of the family farm as the basic unit of agricultural production and as the mainstay of rural society. I am glad the stated objective of the agreed Programme for Government drafted between ourselves and Fianna Fáil is to promote the viability of the maximum number of Irish farms in a clean environment. The objective of my party's agricultural policy is, and always has been, to maintain the family farm as the central element of the rural community and as the agent of growth within agriculture. Allowing as many people as possible to make a decent living from the land through efficient farming is the best guarantee we have of being able to keep a viable rural community in place and of keeping people off the dole queues and the emigrant boats and planes. That must be an objective which, I am sure, is shared by every Member of this House. It has been a guiding principle behind our agricultural policy and it will continue to be so.

That is the reason we take such a serious view of the proposals for world trade in agricultural policy being put forward by the Americans in the Uruguay round of talks under GATT. As I said, the talks will have profound implications, not just for Irish farmers but for the whole Irish economy. They are the most significant events since we joined the Common Market, as it was then, now the European Community. It is no exaggeration to say that if the Americans were to get their way there would be no future for many thousands of Irish farmers. Already we have a situation where there are large numbers of people leaving the land. I think that would become a tide and we would have absolute devastation. Many people are only now beginning to waken up to what agreeing to the US proposals would mean.

I referred earlier to the confusion in many quarters about what GATT is and what it attempts to do. I think it is necessary for the benefit of Members of the House who are not au fait with GATT to explain what it is about. It began in 1948 after the War to try to rebuild the world economy with the idea of liberalising world trade and there are now more than 90 countries involved, the so-called contracting parties. We are only now in the process of getting into the agricultural dimension of GATT and that began in 1986 with the Uruguay round; it was named the Uruguay round because that is where the talks took place. The target for completion of those talks is the end of this year.

In April 1989 there was a declaration made which had very worrying implications for this country when it said that the Community agreed to substantial progressive reductions in agricultural support and protection sustained over an agreed period of time resulting in correcting and preventing restrictions and distortions in world agricultural trade.

The Common Agricultural Policy can, of course, be criticised for the way it has produced surpluses, but I think it is very important to remember it was instituted at a time when there was a very urgent need for food within the Community. We should always remember there is a very thin line between surplus and deficit. Those of us who live in the modern industrial society are, by and large, fortunate enough to be reasonably well fed. But there are people — I am sure in this country and certainly in parts of Europe — who can remember a time when they were not at all well fed, and that has been one of the dramatic successes of the Common Agricultural Policy. As I said, it can be criticised for the way it has produced surpluses, for the way it has dealt with those surpluses and for the way it has concentrated productive power in the hands of fewer and larger farmers.

However, it has also brought immense benefits to this country, because during the past 17 years it has kept many more farmers in business and many more workers in processing our agricultural produce than would have otherwise been the case. It results in a benefit to this country annually of about £1.4 billion. That is what our take is from the Community, and the guarantee fund brings in about a billion of that figure. I would reject the suggestion that the policy has led to dear food. Certainly, food prices have gone up; but I think food is relatively cheaper now than it was for very many years. It is of better quality, it is more wholesome and I think the price of food can be defended. I think supply management within the Community has shown a way in which surpluses can be handled without the devastation of seeing the bottom fall out of markets.

We need to remind ourselves of what would happen to rural towns and villages if, as is suggested, on the dismantling of the CAP farm incomes were to fall by 50 per cent. Farmers are consumers. People in the rural towns are consumers. People involved in services — the solicitor, the banker, the parish priest in the rural town — are consumers; and in many ways much of those people's welfare is related to the welfare of the farmers in the community around them. The rural towns will die if the Americans get their way. They want us to get rid of the price supports and inevitably to scrap the Common Agricultural Policy. If they succeed, Irish farm incomes will be more than halved.

I think we need to remind the country as a whole that in this country, 19 per cent of the workforce is employed in agriculture and in the food and drinks processing sector and that the agri-food sector contributes more than 42 per cent of Ireland's net receipts of foreign exchange from exporting. Textiles are a very important dimension of GATT, and if we take textiles into account and add that to agriculture, nearly 30 per cent of the workforce is connected with those activities.

There are immense economic consequences and it is very easy to see them. They are immense for the country as a whole. We need to remind ourselves constantly of that; they are immense for the country as a whole, not just for farming. There seems to be an attitude in the country that if farmers are doing well other people are doing badly; but if farmers do badly it is certain that the country will do badly. From the figures I have shown, it is very easy to see that to allow the US to get its way would have a much more serious effect on our economy than on any other country within the Community. That is why it is in our national interest to make a noise about it and to let our American friends and others within the European Community know the depth of feeling there is in this country, within the rural community and among farmers about this matter. It is because the Progressive Democrats view the outcome of the GATT talks so seriously that we have put down this special motion here today calling on the Seanad to reject the negotiating position. I am confident that we will get widespread support.

Another thing that needs to be said is that there is a perception abroad that American farming is not supported at all and that European farming is very heavily supported. The fact of the matter is that each American farmer gets more than twice as much money, as an individual, from the US Government as the European farmer gets from the EC. The reason, of course, is that there are not as many farmers in the US as there are in the Community. There are only about 2.4 million farms in the US and there are nine million farms in the Community. The average size of the farms in the Community — and this is an important point — is about 13 hectares and the average size of the farms in America is 175 hectares. There is a heck of a difference and that explains something about the American philosophy of competitive advantage. Obviously, at that sort of level those farms are in a much better position to survive in a competitive free-for-all. US spending accounts for 25 per cent to 27 per cent of gross agricultural revenue within the states, so America does support its farming. The figure in the Community is about 38 per cent, so the Community does support it more. But it is wrong to say that the United States does not support its farming.

One of the things I was glad to see was that when the Minister, Deputy O'Malley, went to America to attend the GATT talks there he came back and reported he had taken the opportunity to stress the importance of respecting the European farming tradition of maintaining a strong rural society not only in Ireland but in Europe generally. I was glad he said that. I know that those things have been repeated by the Minister, Deputy O'Kennedy, and others. I hope they will continue to say those things and that they will not be deflected in their course in terms of protecting and articulating the needs of the farming community both in Ireland and the Community.

As I said, Deputy O'Malley said that the negotiations must allow the EC to continue to support agriculture so that a strong rural society can be maintained not only here but in Europe generally. I congratulate him on that stand and I hope that other Ministers who are involved in the EC Commission will support him, and I am sure they will. We must remember that it is the Commission who is the body responsible for negotiating this treaty. They are the people who will negotiate the treaty and I am sure our Ministers will continue to defend Irish farming and the Common Agricultural Policy. The Council is due to discuss this matter next week and I know that the chairman of the agricultural negotiating group is to draw up proposals, I think early in July, and then Mr. MacSharry will be meeting people in Dromoland Castle later in July. I know that Deputy O'Kennedy has also been keeping a close eye on this matter. In all of that I think the thrust must continue to be one of holding the line. Quite plainly, America must be told that what it is proposing is just not on, as plainly as that.

All of us in this House and many of us in the country readily acknowledge the debt that we owe to the United States. It must also be recognised that our people have helped to make that country the great country it is. I am sure it will continue to support and understand its friends when they are critical of it. It is certain that a stand off is not going to be of any use whatsoever. It is important to reach a settlement within the context of defending the family farm. I think that can be done. There have been suggestions to that effect from the US trade representative, Ms. Hills, who said they can accommodate the CAP within the programme of which they are speaking. She even accepted the fact that in the United States protection existed. I am glad she and the other people involved have taken on board the suggestion made by the Minister, Deputy O'Malley, that there should be regular contact between the United States and the Community and that talks at official level between the Commission and the US will take place at regular intervals to help bridge the gap between the two sides. Certainly, the Community's negotiators need to be given political direction in relation to how they are progressing.

One of the areas which is of major personal concern to me is the whole question of tillage farming, because I happen to be a tillage farmer. This is one of the most serious dimensions of the GATT proposals from an Irish point of view. It is clear that the income from tillage farming in Ireland is one of the poorest in farming. One of the big reasons for this is that the Community every year imports 18 million tonnes of corn gluten. That is a low cost subsidised product of the Ethanol industry. It needs to be said quite clearly that it is a subsidised product, a by-product of that industry. The price could fall through the floor and it would still find a market. We have to compete with that. It is all very well to talk about fair and equal competition, but that is not fair and equal competition. Irish grain growers are naturally very resentful of what they see as dumping. They also know that without those imports the EC cereals market would be almost in balance and that Irish grass based livestock production would have a competitive advantage.

We admit that there would certainly be problems for the poultry and pig industry. When we joined the Community it was widely suggested that the big advantage we had was that our grass based production would have a major competitive advantage over its competitors on the European mainland. The fact is that because people in Holland, near the port of Rotterdam, have cheap cereal substitutes they can compete very effectively with grass based production. Those substitutes were part of an original GATT agreement. I understand the reason that agreement is there, but it must be part of the whole renegotiation and negotiation process. That problem of cereal substitutes needs to be tackled within the GATT.

In recent weeks some Members of the House have had a right go at farmers. One Member suggested that they were "unpatriotic and ruthless". That is my recollection of the words used. Those are grossly offensive words to people who have an average income of about £5,000 a year. There are very many people living in rural Ireland who are living in poverty. They are not as vocal and as demonstrative as some other groups within the community. They live in quiet, rural, dignified, silent poverty; and it is just as grinding as poverty anywhere else. A report from Teagasc suggested that the average income in Offaly was £5,900; the average income in cattle farming in the west of Ireland is £2,400. Of course, there are people who become wealthy from large scale dairying operations and so on. We hear a lot about them but we should hear about the other people as well. I do not know how people live on those sort of incomes.

I apologise for taking a detailed technical look at some of the matters which are proposed under the GATT talks but I think our relation to them needs to be clarified. One of the things being suggested by the US is the matter of tariffication, that there should be a fixed border duty, that goods coming into the Community would cross that fixed tariff barrier and that those tariff barriers would be eliminated over a ten year period. My objection to the fixed tariff barriers is that they do not take into account currency fluctuations. If the currency goes up or down there can be huge distortions of trade as a result. For that reason, from a community point of view, tariffication is not acceptable.

The other thing which is being proposed by the Community — and I think it is a reasonable question, one I referred to earlier that is, this question of corn gluten, of cereal substitutes and the matter of rebalancing — is that corn gluten should be restricted in return for lower domestic protection on EC cereals. That seems to be a reasonable proposition. When there was one of these interactive sessions in the US Embassy, where we could all talk to one another from the various cities around Europe and Washington, that matter was more or less rejected out of hand by the American representative. When he was asked what would he say to the one or two million farmers in the Community who would have to leave the land, his attitude was that if they were auto workers in Detroit and the Japanese could send in cars cheaper, they should find job somewhere else. That is all very well if there are jobs to be found somewhere else but we all know that within the Community, and within Ireland in particular, the job market is already saturated. I do not know how the economies of the Community can afford to see people taken out of farming, albeit subsidised at a certain level, and put on to the unemployment exchanges where the Exchequer is going to have to give them some form of income to support them. That is a very serious problem for the Community and not just a problem for Ireland.

The other matter of which the US have said they are in favour is of direct income support, in other words, they have no objection to prices being reduced and in return giving a direct income support to the farmers. There are two aspects to this. One is that from an Irish domestic point of view it will certainly be required of us to find money from our own Exchequer to finance part of that. We all know the constraints on the Exchequer and that it is not going to be easy for us to find money to give direct income support. I think there is an even more serious aspect to it and an even more negative aspect, that is, I do not think it is helpful in any way to generate a dole mentality within farming and within the rural community.

The other matter the community have been arguing about is that they should be given credits for the reductions in support prices which have been taking place since 1986. That would go quite a way to actually meeting some of the objections which are being put in place by the Americans. I think that is a reasonable proposition. Certainly, in real terms prices have been cut. There is the whole question of aggregating measures of support. How do we know what the Americans are giving? How do we know what the Community is giving? There needs to be some standard measurement of how each community is supporting its farmers.

There are other things I would like to say, and I am sure I can come to them at the conclusion of the debate. There is this whole question of the doctrine of comparative advantage, which is a very attractive doctrine. It is a good doctrine in relation to how business would operate within the country. Looking at the whole EC scene, it is even accepted that that doctrine is not a good doctrine because it has already been acknowledged that because of 1992 this country as a peripheral region should be entitled to special concessions. I have difficulties about this doctrine of comparative advantage. The US have that doctrine in place for purely selfish reasons because they know they can complete more successfully than anybody else on the world market. That is not to argue for protectionism or that market forces should not operate within the country. Market forces work perfectly well within the Community as we very well know in this country in relation to our beef and dairy products. The Common Agricultural Policy has defects but it cannot be dismantled without absolutely catastrophic effects on Ireland, not just on farming but on Ireland and the Irish economy. If a farmer wants to know what it would be like under the regime as proposed by the Americans it would be like the price of potatoes which fluctuates dramatically from year to year. People get into the potato business and people go out of that business and that is exactly what it would be like. I do not think that is desirable from anybody's point of view.

What is good for farmers is good for the economy, certainly in Ireland's case. There is no doubt about that. Farming and the agricultural industry do not operate in isolation from the rest of the economy although that impression is frequently given. Their welfare is totally bound up with the overall economy. Reasonable interest rates, a tax regime which provides an incentive to work and which rewards effort, a growing economy and general confidence are just as important to the agricultural business as to any other business. I have pleasure in proposing this motion.

Mr. Hussey

I second the motion as proposed by Senator Dardis. I can agree with the motion in relation both to the rejection of the United States approach to the GATT negotiations and the call on the European Community to defend the Common Agricultural Policy. The United States approach which wants the elimination of all supports and protection over a period goes further than the aims of the Uruguay round of negotiations and the further refinement of those objectives which was agreed by all parties to the negotiations including the United States just over a year ago at the mid-term review of the negotiations. At the same time as they are proposing the elimination of support and protection in Geneva, in Washington the United States Farm Bill is proposing to increase support for United States agriculture and especially its support of exports. This type of contradictory stance makes it difficult for the Community negotiations to find a solid basis from which to negotiate with the United States. Are they serious about the elimination of all supports? Will their Congress agree to follow such a line especially when one considers the strength of the farm lobby in that country? The United States in terms of number of farmers and size of farm bears no comparison with European agriculture. Many of the huge farms in the United States are run by companies. They do not have the tradition of the family farm that is prevalent in Europe, and particularly in Ireland.

At this stage, I would like to dwell for a few minutes on the Labour Party amendment to the motion. The amendment shows the lack of Labour interest in farmers and indeed their complete lack of knowledge of farming and related industries. Can the Labour Party gurantee that if the support mechanism of the Common Agricultural Policy were eliminated food would be cheaper to any great extent? I can guarantee that if the Labour wish was granted it would have unprecedented effects on employment in our agriculture-based industries. The Labour amendment is a receipt for unemployment and the emigrant boat. Do the Labour Senators realise that nearly 20 per cent of employment in this country is dependent on the agriculture and food and drinks industries? I would like to ask what should these industries do when their raw materials dry up? Because of the lack of import content in agricultural exports they are among the most beneficial for the country. There is not much profits repatriation in these industries.

Ireland has benefited greatly from the Common Agricultural Policy and indeed not just large wealthy farmers. I am told that over £800 million has been received under the CAP since our entry into the European Community. Would we have got so much through direct income supports? What Labour are talking about is putting farmers on the dole. They would have no incentive to produce anything. Who would pay for the direct income supports? I would like to ask, do Labour expect the EC to come up with the goods again or will it fall on the Irish Exchequer? Can the Irish Exchequer bear the cost of direct income supports on top of the additional dole payments it would have to make to workers thrown out of employment in the agri-based business?

It is quite clear the Labour amendment is ill-founded and ill-thought out. They are looking with tunnel vision so they can obviously only see one aspect of a complex mass of issues involved in the Uruguay round. According to Labour it would seem that the Agricultural Ministers, Trade Ministers and Foreign Minister in all the member states were wrong when they unanimously agreed in their separate councils over a period of months to support the Common Agricultural Policy.

This country would be a poor place without the Common Agricultural Policy and it is clear to me at any rate that the Labour amendment would have far more serious adverse effects on the less well-off sections than any possible small gains they might make by way of cheaper prices in the short-term. Really what we are talking about here is the law of supply and demand. Once the small farmers, both Irish and European, are eliminated, driven off their farms, prices would quickly come back to their current levels. It would create a monopoly-type situation for bigger, more industrialised farms. I cannot see these being interested in the price to the consumer except to get the highest price they can. The Common Agricultural Policy helps to provide a worldwide balance between the large and smaller farmers and I fully support it.

To move back to the GATT negotiations themselves, my understanding is that these cover a far wider area than just agriculture. There seems to be a number of other issues which would be of greater interest than agriculture to some of the more industrialised member states. What this country has to guard against is other member states sacrificing agriculture to achieve policy aims in other areas. I note, however, that the Minister for Agriculture and Food, Deputy Michael O'Kennedy, is keeping a sharp eye on these negotiations. He has already had the Uruguay round discussed at ministerial level in the Agricultural Ministers Council and I understand that negotiations will again be discussed at the Council next week. The Ministers for Foreign Affairs and Industry and Commerce have also done their bit in their respective Councils.

While the Common Agricultural Policy may not be perfect, considerable reforms have been carried out over the past few years. It is vitally important that in the GATT negotiations the Community get full credit for these reforms which are clearly a reduction in support levels. The Community cannot be expected to start at a point well down the road of support reductions when other countries have made no efforts to reform their support systems. Other participants in the negotiations are accusing the EC of intransigence in the negotiations but it is clear that the Community has gone further than any of the other participants in reducing support.

I honestly hope that there is a successful result to the Uruguay round because increased trading increases standards of living and everybody benefits. However, any such success cannot be achieved if the other participants insist on the dismantlement of the Common Agricultural Policy as a precondition. While there will undoubtedly have to be some reduction in support and protection by the Community there should be as little as possible interference in the operation of the CAP mechanisms, and in particular with the variable levy and export fund systems on which Irish agriculture and its related industries are so dependent.

The Common Agricultural Policy must be kept in place if our farmers are to be afforded any chance of survival. Even with the support systems in place under the Common Agricultural Policy, thousands of farmers have left the land since we joined the European Community. The family farm is the central element of the rural community and should be kept in place even if that has to be done by support mechanisms under such schemes as the headage payments, suckler cow schemes, ewe premium schemes, etc. We should let the Americans know in no uncertain manner that we will not support the dismantling of the Common Agricultural Policy. Indeed I was pleased to see the thousands of farmers who marched to the American Embassy recently to protest against the American position at the GATT negotiations. Indeed, they have every reason to be worried because if the United States gets its way, then many of those farmers will not be able to survive and the predictions Mansholt made many years ago will be realised.

Senator Dardis mentioned that the average income from cattle farming in the West of Ireland was £2,400 per annum and I just shudder to think what that income would be if all the support mechanisms that we have there at present, such as intervention, headage payments, etc., were eliminated. Thousands of those farmers would be out of their farms because there is no way they could survive in a situation like that. The dismantling of the Common Agricultural Policy would be catastrophic for the Irish economy and we in this country have every right to demand that that policy be maintained because the Irish economy could not stand the dismantling of the CAP.

It is not just agriculture we are talking about here. It is the many other industries that are depending so much on agriculture and, as I said, we have seen too many of our farmers over the past number of years leave the land. This is not just happening in Ireland, it is happening all over Europe. Therefore we have to oppose the stand being taken by the Americans at the GATT talks at the present time. We have to oppose it as strongly as we can, and I can assure the Minister that he has the full support of the farming community in this country in the negotiations he is now involved in. That is why I am supporting this motion tonight and I hope it will be accepted unanimously by this House.

Professor Raftery

Yesterday two weeks I had the honour — though I will not say the pleasure — of having a long talk in Washington with Ambassador Katz. Ambassador Katz has responsibility for negotiations on agricultural trade in the GATT and I am afraid what he had to say was not very uplifting. However, more of that later.

The current round of talks was launched in September 1986 in Uruguay and this is a sequence of events following the Kennedy round and the Tokyo round in these GATT negotiations. We all know that GATT and the success of GATT has been largely responsible for the prosperity the world has enjoyed since the Second World War. If the talks fail, the effect on world trade could be disastrous but unfortunately, if the talks succeed the effects on Ireland could be disastrous too. Failure would mean an immediate loss of confidence on the international stock markets. This, of course, would undermine the whole basis on which our prosperity was built, the prosperity which depended on free trade. We would revert I fear to a world of trade blocs, bilateral deals and economic stagnation.

Already the United States has created the legal instrument which could destroy the international trading system. Frightened by its huge trade deficit it enacted the 1988 Trade and Competitiveness Act and section 301 of that Act allows the United States to (1) determine unilaterally what is an unfair trade practice and (2) set targets for US exports to individual countries and then penalise those who fail to take the target amount. Part of the Act reads:

in cases of alleged trade agreement violation, or cases where a foreign nation's policy or practice is "unjustifiable" or cases where a foreign nation's policy or practice is "unjustifiable" and burdens or restricts US commerce, the Act makes retaliation mandatory rather than discretionary.

This type of legislation, of course, strikes at the very heart of multilateral world trade systems. Allowing individual countries to determine what is fair or unfair and setting targets for bilateral trade balance are inherently contrary to the multilateral principles on which world trade grew so successfully since 1945. These principles required that disputes be referred to an international body, the GATT, not settled by individual countries as the United States seems intent on doing.

So far fortunately the US has made little use of the new powers conferred by section 301 of the 1988 Act. The danger is, of course, that if the talks fail in December the President will be pressured to use the powers of section 301 on a wide scale. That would automatically mean other trade blocs retaliating. We would then find ourselves back into a system of escalating trade barriers of the kind that plunged the world into the depression in 1931. This I believe must be avoided. International agreement must be reached in the trade talks on a number of key issues and the principal issues in the present round are agriculture, textiles, services and protecting intellectual property. What the US, the CAIRNS group and some Third World countries want is complete free trade in agricultural products; in other words, world prices for commodities.

I would have to say that world prices are not realistic prices. Most countries just export the commodities of which they happen to have a tiny surplus. If I may take milk as an example, only about 7 per cent of total world milk production is traded internationally and countries are prepared to dump that on the world market at whatever price is available. Senator Dardis has already given the example of potatoes which is a very good example. I have often used potatoes as the example. You get prices and production going up and down like a yoyo and that is not good either for the producer or the consumer.

We have to resist it for other reasons, too. Food is strategicaly important and we would be very foolish in the Community to make ourselves over-dependent on other trade blocs because of all the dangers that can exist with droughts or whatever else might cause scarcities. I am old enough to remember when we were heavily dependent on the US soya bean for stock feeding in the Community. Under President Nixon the US overnight slapped a ban on exports of soya bean just because the US felt it did not have enough for its own home market. That might happen with human food as well. There are many other reasons for it which I will go into later if I have time.

On the question of textiles, some Third World countries, particularly those in the Far East, are looking for changes in the multifibres agreement which we have. They want it dismantled. They talk of free trade. Free trade is all very well provided it is fair trade. When you are dealing with some of these countries in the Far East, as we know only too well from experience with the Japanese, free trade is not always fair trade. It is quite clear that some of these countries have targeted markets and they are prepared to sell their products at below what they are prepared to sell on their own home market for the purpose of gaining access and undermining our markets in the Community.

With regard to services, the Community would be looking, for instance, for access in banking to the US market and that is fair enough. Perhaps the US will not be as anxious for free trade in that situation. With regard to intellectual property, I think both the Community and the US and perhaps other groups would like to prevent the scale of piracy of other people's innovations which is taking place at an alarming rate. These are the main areas in which we must try to find compromises and agreement.

The aim of the talks will be to get a series of trade-offs on these issues. For example, the United States wants to free agricultural trade but in turn it may be forced to accept banking, the European banks entering into the American market. Countries like India and others in the Pacific rim want greater access for their textiles to European and American markets. In return they may be forced to give greater protection to the intellectual property rights of multinational companies. This is where the real problem arises for Ireland.

Ireland wants to keep an open international trading system. We are a very open economy. We export about 60 per cent of what we produce. We live by trade; in fact, few countries in Europe depend as much on exporting as we do. On the other hand, we have the protection of the Common Agricultural Policy for our agriculture. We also have a greater dependence on agriculture than any other country in the Community, and indeed most countries on this globe. Sixteen per cent of our population live on farms and over 40 per cent of net exports come from our agriculture. As against that, only about 8 per cent of the Community citizens live on farms and less than 3 per cent in the US. In relation to what Senator Dardis said already about support for agriculture, the US has roughly four times as much land as we have in the Community. It has roughly a quarter of the number of farmers that we have in the Community and the support for their farmers is more or less the same as Community support. The US, with all its talk, is supporting individual farmers by about four times the amount the Community is supporting each individual farmer.

If European markets were open to imports and export subsidies were abolished, Irish farm incomes would be at least cut in half. Most European — I would have to say from my experience — do not want this. The European Community, fortunately, has adopted a negotiating position which will protect the Common Agricultural Policy. We have to wait and see if this is just lip service. What will happen when the crunch comes? If the European Commission is faced with the choice between the collapse of the talks and a major scaling-down of agricultural protection, which will it choose? Given that agriculture contributes roughly 2.5 per cent of GDP in the Community, one has to ask will the Commission and the larger powers in the Community risk the 97.5 per cent for the sake of the 2.5 per cent? I am not sure. I hope they will take a strong stand on behalf of the 2.5 per cent.

This is where hard economics will come into the picture. No other country in the Community, as I have already said, needs the Common Agricultural Policy as much as Ireland does. Let us take for example the other end of the scale — Germany. Germany is the principal financier of the Common Agricultural Policy. It has also surprisingly, been one of its strongest supporters but, objectively, Germany is a big loser from the Common Agricultural Policy. A recent IMF study claimed that if the Common Agricultural Policy was abolished consumer prices would fall by almost 2 per cent in Germany, employment would rise by 5.5 per cent and domestic product would grow by 3.5 per cent. All this would happen despite the fact that there would be a fall in employment in German agriculture of 11 per cent. The benefits in lower prices and lower taxation it would seem would far outweigh the loss among the farmers in Germany. The same study showed that Ireland and Denmark are the only countries which gain significantly from the CAP, after the benefit to farmers is subtracted from the cost in extra taxes and higher prices.

If these figures are valid, one can see how the European Community's strong support for the CAP could wilt under pressure and the consequences for all Irish farmers, but especially for the small family farm, would be disastrous. The drop in the value of agricultural exports would turn our trade surplus into a trade deficit and the economy of rural areas would be decimated with the decline in farmers' purchasing power. This is where the IMF figures are inadequate. They do not quantify some of the benefits of a healthy agriculture, the efficient use of rural infrastructure for instance and a healthy rural environment, nor do they quantify the value of security of food supplies in emergencies. There is an economic cost to the extra urbanisation necessitating new homes and schools and infrastructure in urban areas while rural areas would be depopulated by such a dramatic cut in farm income.

Farming is not the only sector that has cause for alarm about this round of GATT negotiations. The Irish clothing and textile industry employs about 22,000 people, some 12 per cent of our total manufacturing employment. If the multi-fibre agreement were abolished most of them, I fear, would be out of jobs. The textile industry is the largest single industry in the Community with 5.5 million people employed and as such is likely to get——

An Leas-Chathaoirleach

The Senator has five minutes to conclude.

Professor Raftery

I have half an hour.

An Leas-Chathaoirleach

No, the Senator has 15 minutes.

Professor Raftery

——and as such is likely to get substantial backing from the Commission and the Council of Ministers. The European Community has already agreed to the gradual dismantlement of the multi-fibre agreement but it has set pretty strict conditions. These include the complete opening of Third World markets to exports from the developed world.

Mr. H. Byrne

On a point of order, I do not want to interrupt Senator Raftery because I am very interested in what he has to say, can we be told if a decision has been taken on a 15 minute limit? That was my understanding.

An Leas-Chathaoirleach

That is my understanding under Standing Orders.

Professor Raftery

I was misinformed. I move amendment No. 2:

To delete all words after "defend" and substitute "the principal objectives of the Common Agricultural Policy in the interest of both producer and consumer in the Community.".

I introduce that with a view to making it obvious to the consumer and to the public in general that the CAP is not just for farmers and that the threat in the GATT negotiations is not just to farming, it is to the entire economy, to all consumers and certainly to all farmers.

Mr. Dardis

On a point of order, is there any way we can accommodate Senator Raftery?

An Leas-Chathaoirleach

It is under Standing Order 41 of the House.

Mr. Neville

I second the amendment. In no period during the past 15 years has there been such a sudden drop in the fortunes of the agricultural community. The future looks very bleak. There is a major problem ensuing for the smaller farmers and the exodus from the land will escalate. In that context the GATT negotiations and the proposals made by the US and the CAIRNS group is frightening. We should bear in mind that, if the US and the CAIRNS group are successful we will see milk down to 60 pence per gallon, beef cattle at 55 pence per pound and lamb will drop £20 per head. An example of this is that New Zealand lamb on the Irish shelves and on European shelves is 20 per cent less than Irish lamb.

Under the Common Agricultural Policy farmers are guaranteed a reasonable income and customers get top quality food at reasonable cost even in times of great scarcity. The CAP regulates the supply of food to the market. This is why I second this motion — that the cycles of over-supply and scarcity will be corrected by the approach of the Common Agricultural Policy thereby protecting the consumer. If this is withdrawn it will create enormous difficulties for the customer. We will have food shortages and high prices as a result of market forces we experienced pre-EC membership. I was involved in the meat business at that time and this trend was very pronounced. We have to realise that food shortages can occur for reasons other than the effects of demand and supply. They are often created by natural disasters, weather or other difficulties in the farming area. Not alone do the laws of demand and supply, the market forces, affect the supply of food but natural disasters also do. For that reason the consumer must realise that the Common Agricultural Policy has a protective mechanism for them as well.

In the early seventies, all farmers voted for, and the farming organisations supported strongly, our membership of the EC on the basis of the benefits that would accrue from the Common Agricultural Policy, but even with the benefits of the Common Agricultural Policy the number of small farmers throughout Europe has declined dramatically. Farming activity and farming life are very uncertain and circumstances other than market forces affect their incomes. For example, disease is a big factor in family farms. A disease can wipe out a farmer's income for a year. Price fluctuations can also create great difficulties. The EC must ensure that two million farmers in the United States do not dictate the future of nine million farmers in Europe. We must have a firm resolve to ensure that this does not happen. If it does, it will be worse than the economic war in the thirties or the disastrous situation in 1974 when farmers could not sell their products. I can quote what happened in my town. A farmer took a calf to the market, could not sell it, left it in the trailer went in for a jar and found two calves when he came out. Somebody put another calf in the trailer because he could not get rid of it either. The farmer had to take the two of them home. That is the way it was. We will go back into that situation if the present proposals are accepted. We must look at the reasons for the Common Agricultural Policy in the context of our amendment. During the war many people throughout Europe starved because of the Nazi policy and at the end of the war the Germans were starving. The Common Agricultural Policy dominated the objectives of the Treaty of Rome to ensure that such a scarcity and such a situation would never happen again.

The Irish Government and the European Commission must challenge vigorously the policy of the United States and the CAIRNS group and put forward an alternative policy to the GATT proposals which will protect the Common Agricultural Policy while also restoring balance to the agricultural markets. The EC must formulate its agricultural policy to fulfil its objectives and ideals and not satisfy the US or the CAIRNS group. The Government and the EC must ensure that long-term agricultural policy within the EC must continue to recognise the fundamental role of the family farm as the mainstay of our rural community throughout Europe. EC price policy for farm products must take full account of the cost structure of the efficient, smaller family farm. Farmers deserve incomes in line with the non-agricultural community.

The Common Agricultural Policy has provided a stable environment for food producers, and security and stable prices for customers. We must recognise the difficulties with milk production and the effects the quota has on many family units throughout Ireland. The proposals under GATT will make the quota problem seem like a very minor issue indeed. Our present milk quota system has reduced the quota volume to a level that has achieved stability in the EC. Producers with small quotas should be granted priority access to quotas becoming available. This has been said over and over again and bears repeating. The smaller farmer must have access to quotas becoming available to ensure he has a viable income from his land.

In the case of beef, the EC Commission projections up to 1996 indicate a good balance between producers and demand in the EC. The most effective way of avoiding surpluses of beef in the EC market is the maintenance, or preferably the improvement, of consumption and no other way. The EC beef premium must be increased to help to provide more effective and direct support for the beef producers' income without increasing beef prices and thus aid beef consumption in the EC markets.

It is not possible at this stage to predict the outcome for agriculture of the present GATT negotiations. It is not possible to predict even if an agreement will be reached. The current indications are that the negotiations will probably continue to the end of the year. For an agreement to be reached there will have to be a major meeting of minds between the US, the CAIRNS group and the EC. The long-term objective to provide for substantial progressive reductions in agricultural support and protection sustained over an agreed period of time resulting in correcting and preventing restrictions and distortions in the world agricultural markets clearly implies that any country or region such as the EC would no longer be in a position to implement an independent agricultural policy in the future. It was for this reason that the Irish people decided so overwhelmingly to join the EC.

The recently announced demand by the US to go further than the Geneva agreement and to reintroduce their demand for total elimination of protection and support for agricultural production or trade raises a new question mark over the possibility of an agreement in the first place. If the GATT negotiations fail and if there is no agreement, the consequences are even more unpredictable. The most likely outcome of no GATT agreement would be a trade war on world markets which would depress world market prices and exacerbate the cost of the Common Agricultural Policy. It would also mean that no progress would be made on the EC objective of rebalancing import protection. On balance, the EC Governments may find stronger arguments favouring an agreement in GATT than the contrary. The reasons the EC Governments would tend to favour an agreement on the GATT are that they will not wish to run the risks of the trade war, as I already mentioned, in particular, a risk to their industrial exports which the GATT has concentrated on up to 1990.

Irrespective of GATT, the EC is implementing its own restrictive policy on agriculture through quotas, as I already mentioned, and budgetary stabilisers. The EC would hope to gain substantial credits in GATT for these actions and use it as a negotiating lever. For the wealthier, more independent economies of the EC, the provision of direct income compensation to producers would not be a major problem so this may be a way around the situation.

The Community is committed to achieving a rebalancing of protection and this can only be sought within a negotiating framework rather than through unilateral action. The objective of our amendment is to highlight to the consumer, the benefits he and she gets under the Common Agricultural Policy. I ask the House to reaffirm this view by accepting the Fine Gael amendment to the worthwhile, acceptable and very welcome proposal by the Progressive Democrats.

Mr. O'Brien

I wish to share my time with Senator Byrne. I welcome this opportunity to support the motion by the Progressive Democrats in connection with the support of the Common Agricultural Policy in Ireland. I strongly feel it would not be good for Ireland if the GATT was to succeed in this country, as the policy of the United States of America is that any support from the EC which affects agricultural trade would be phased out over a ten-year period. This would effectively mean that any grants or subsidies from the EC would not be available to the farming community in Ireland and of course, this would have a detrimental effect on the agricultural industry and on the lives of many small farmers in Ireland.

At present the United States of America is dumping large amounts of commodities on the European market, for example, corn gluten, which is depressing the price of cereals such as barley and corn in this country. The reason the Americans can sell much cheaper is that their Government subsidise farmers in that country, something that Ireland would be unable to do. This is what subscribing to the GATT policy would bring about.

Another provision in the GATT treaty is the prohibition of restrictions on imports, which would seriously damage competition on the home market, although at the moment agriculture is exempt from this ban. The GATT treaty would also seek interference with the regional trade agreement, such as is in existence in the EC at the moment. I firmly believe that this country should call on the European Community to defend the Common Agricultural Policy. That policy is essential for the survival of the agricultural industry in Ireland. It has served this country well since its introduction in 1973. It has protected family farm incomes, on which the rural community in Ireland depend. This would be seriously damaged if the proposal of the GATT were to be subscribed by the Government. I firmly support the motion put down by the Progressive Democrats.

Mr. H. Byrne

I have no problem at all in supporting this motion. I would like to compliment Senator Dardis and the Progressive Democrats for putting down this motion because it gives me and this House the opportunity to discuss issues that are very relevant to the House and the country. I often find in this House that we discuss motions and issues that have very little relevance. I firmly support the motion.

A few things that happened here tonight have saddened me. The first is that we have failed to attract any of the media. I saw one of them here at one stage tonight. This motion is about issues that, if the US are successful, will have devastating effects on the rural economy, the social fabric or rural Ireland, and will send farmers and their families into towns to compete for scarce resources such as housing, jobs and social welfare. I find it difficult to understand why the media could not find time to come in here and let the people know what exactly is at stake. However, of far greater sadness to me is the fact that there are still people in this country — and, worse still, people in this House — who would oppose a motion like this, who would oppose the farmers getting a reasonable living. As Senator Dardis said, all of us here would agree, there seems to be a theory that every farmer irrespective of size, is a semi-millionaire.

Wexford is regarded as a very wealthy county and fairly recently the county executive of IFA carried out a study of 250 farmers in the county with farms ranging from 15 to 75 acres. The average level of indebtedness of those farmers was £9,365 per farm with loans from £3,517 on the smaller farms to £12,000 on the larger farms. This has caused tremendous problems for farmers, particularly in the recent past, when as anyone in rural areas knows — especially bank managers and the ACC — they found great difficulty in making repayments.

The Labour amendment before us tonight suggest that these people should go further into the mire. Can they not understand that if these people are taken off the land they will be competing with the supporters of this great socialist party — many of them in this House are about as socialist as I am, and I am no socialist. The proportion of farms in Wexford which reported having any difficulties in meeting loan repayments varied from 22 per cent on the larger farms to over 60 per cent on the medium sized farms. In only 8 per cent of cases were the debts written off. Others still have that millstone around their necks and are facing day to day, week to week, letters from bank managers calling them in and causing all sorts of problems that we will not discuss here.

It was found that dairying in Wexford was concentrated on the larger farms, with two thirds of dairy farms in the 50 to 75 acre group and in virtually none of the 15 to 30 acre group. Income for dairy farmers, for obvious reasons, was much greater than for dry stock farmers being over double the number on the 50 to 75 acre groups; in fact, there was only one dairy farm in the 15 to 30 acre size group. All of us who know anything at all about farming will know what the farmer's income was. This brings me on to farmers' incomes. It was found that one third of the farmers had an income level of £2,500 per labour unit while a further 26 per cent were in the £2,500 to the £5,000 category. Only 17 per cent of the farmers surveyed had an income from farming per labour unit of £10,000 or more. It can be clearly seen from that there here are people living in poverty even with the support they get from the Common Agricultural Policy.

If the Labour amendment were accepted — I know it will not — how many more people would we see move from the land? How many more people would we see hurt? How many more people would we see competing for, as I said earlier on, scarce resources? As Senator Dardis has said, and all of us from rural communities have said on many occasions, attacks are made on farmers, right, left and centre at every forum possible, as if it were wrong to make money or to attempt to make a living. I know, as I am sure does every other public representative in a rural area, that the farming community are a proud community who, under no circumstances, would ask for support, but those same people are now coming to us in the dead of night asking us for support to literally put bread on the table. This is a fact of life, I have met many farmers who find it difficult to admit that they are having difficulties, that they cannot succeed or that they cannot provide for their families.

This urban/rural divide only widens in this context. I appeal to the Labour Party and to anybody else who engages constantly in farmer bashing, to cut it out, because only by pulling together can this Nation succeed. As has been rightly said by people on both sides of the House, it is only by working together, it is only by urban people depending on those in the rural area and vice versa that we can succeed. I appeal to the Labour Party to cut out this nonsense which is just another step in their campaign to farmer bash. Their amendment has absolutely no substance and was certainly ill thought out.

The General Agreement on Tariffs and Trade was set up in 1948 and is now subscribed to by 96 or 97 Governments — I am not sure which as different publications give different figures — including the 12 EC countries which together account for almost 90 per cent of world trade. Its basic aims are to liberalise world trade and to establish rules for the conduct of world trade. There have been already eight rounds in GATT negotiations, the most recent one in Uruguay in 1986.

Debate adjourned.

An Leas-Chathaoirleach

When is it proposed to sit again?

Mr. Fallon

It is proposed to sit tomorrow at 10.30 a.m.