It is obvious to me from the contributions of Senators to the debate last week and again this evening that Senators have done their homework and have a clear understanding of the operation of the GATT. I do not propose, therefore, to make further comments on this aspect in this debate. It was also evident that Senators, with some exceptions, fully appreciate the importance of the GATT negotiations and the negative effects that acceptance of the US proposals relating to agriculture would have for Ireland and the Community.
As Senators will be aware, virtually all Governments intervene in a variety of ways in the management of their agricultural sectors and in agricultural trade. Such intervention varies from country to country and is generally attributable to a preferential attitude to agriculture and to a recognition of the special features and characteristics of the sector and rural areas. The justification for supporting agriculture is based on grounds of food security, the maintenance of rural populations and the strategic importance and special nature of agricultural production.
In the Community, support for agriculture is, of course, governed by the provisions of the Common Agricultural Policy, the principles of which are enshrined in the Treaty of Rome. Various interlinked and complementary support arrangements for all the major commodities, apart from potatoes, were developed throughout the sixties and seventies. These arrangements aim to increase agricultural productivity, to ensure a fair standard of living for the agricultural community, to stabilise markets, to assure the availability of supplies and to ensure that supplies reach consumers at reasonable prices.
The arrangements developed were very successful in achieving most of these objectives and, in particular, contributed to the growth of production in the Community. Indeed, whereas it had been a net importer, by the eighties the Community became more than self-sufficient in all the major commodities that can be produced in Europe. As production levels exceeded available outlets, it became necessary throughout the eighties for the Community to adapt support arrangements to the new situation.
Thus, over the last five to six years, institutional prices have been frozen and in some cases reduced in nominal terms, less permanent and more restrictive intervention arrangements have been introduced and other support measures have been modified. The latter include measures that we have all become familiar with such as quotas, co-responsibility levies and maximum guaranteed quantities, all designed to limit production. The overall objective has been to make agriculture more responsive to market forces and to progressively adapt supply to demand.
Notwithstanding these restrictions, the CAP continues to underpin the prosperity of Community and Irish farming. This support framework continues to be necessary primarily because Community agriculture is structurally weak and extremely diverse by comparison with out major competitors. In this regard, it is relevant to point out that there are some ten million people in the sector in the Community and the average farm size is about nine hectares. In the US, there are about two million farmers and the average farm size is 184 hectares.
Agriculture, of course, continues to play a major role in Irish economic activity despite the growing contributions of other sectors. In particular, the sector accounts for about 9 per cent of GNP and 25 per cent of our total export values. Employment in the agriculture, food and drinks sector amounts to 19 per cent of total employment. The expansion of the food sector, in particular, is central to the Government's policy for national recovery.
Ireland has received vast amounts of support under both the Community's guarantee and guidance funds for market support and for structural development.
Receipts under the guarantee heading since our entry into the Community amounted to £7,900 million and £600 million has been received under the guidance provision. More than 20 per cent of our agricultural exports go to destinations outside the Community with the support of export refunds.
The present round of GATT multilateral trade negotiations, known as the Uruguay Round, was launched in Punta del Este in Uruguay in September 1986 and is the eighth such round. At that time, the contracting parties agreed that agriculture would be addressed in a comprehensive and fundamental way for the first time in a multilateral trade negotiation. Agriculture is only one of the areas covered in the current round as negotiations also deal with issues such as tariffs, tropical products, natural resource-based products, textiles and clothing, subsidies, safeguards, intellectual property rights and services. However, it is generally agreed that success in the agriculture negotiations is very important to the success of the whole round.
At Punta del Este, contracting parties agreed that the agriculture negotiations should aim to achieve greater liberalisation of trade and bring all measures affecting import access and export competition under strangthened and more operationally effective GATT rules and disciplines. This was to be achieved by: improving market access through, inter alia, reduction of import barriers; increasing discipline on the use of all direct and indirect subsidies including the phased reduction of their negative effects; minimising the adverse effects that animal and plant health can have on trade.
Throughout 1987 and 1988 the negotiations concentrated on elaborating the elements of the negotiating proposals. The general direction and procedures to be followed in the final phases of the negotiations were agreed by the GATT Trade Negotiating Committee meeting in Geneva in April 1989. The committee accepted that agricultural policies should be made more responsive to international market signals and that support and protection should be progressively reduced and provided in a less trade distorting manner. The Trade Negotiating Committee agreed on the principles of short and long-term actions to achieve the objectives laid down at Punta del Este. Particularly important from the EC's point of view, was the acceptance by the committee that credit would be given for measures implemented since the Punta del Este declaration which contributed positively to the reform programme.
In the short term, contracting parties undertook to ensure that for the period up to the end of 1990, current domestic and export support and protection levels would not be exceeded. Participants also stated their intention to reduce support and protection in 1990 either by using an aggregate measurement of support (AMS) or by taking specific policy measures.
As regards the long term, contracting parties undertook to negotiate substantial progressive reductions in support and protection either through commitments on specific policies, aggregate support or a combination of both. The contracting parties also agreed to establish strengthened and more operationally effective GATT rules and disciplines encompassing import access, subsidies, export competition and export prohibitions and restrictions.
In view of the varying circumstances, it is hardly surprising that the approaches of participants to the agriculture aspects are also different. The extremes are represented on the one hand by the approaches of the US and CAIRNS group and on the other by those of the Community, Japan, the Nordic countries, etc.
The US was the first country to submit proposals on long-term reform. Its proposals effectively involve the phasing out of support and the full liberalisation of trade for agriculture. On import access, the US suggested that all border measures, including variable levies, should be converted into bound tariffs to be subsequently eliminated or reduced to low levels over ten years. Export subsidies would be phased out over five years. On internal support, measures directly tied to production or price levels would be phased out over ten years. In their definition, these measures would include price policies resulting from dual pricing arrangements, income support policies such as headage payments, marketing subsidies, etc. Other supports, unless minimally trade distorting, would be reduced and better disciplined. As regards sanitary and phytosanitary aspects, the US view is harmonisation should be pursued on the basis of sound scientific evidence while notification, consultation and dispute settlement systems would also be established under GATT.
The CAIRNS group, which includes, inter alia, Australia, New Zealand, Canada and Argentina, tabled proposals along similar lines to those of the US. This group agrees with the US on the concept of tariffication and the phasing out of export subsidies although no time limit is specified for the latter. On production and price supports, substantial reductions rather than elimination is highlighted although the ultimate objective of categorising support measures into prohibited, permitted but subject to discipline, and permitted is similar to that of the US.
The Community has made it clear that the US and CAIRNS group approaches are not acceptable to it as an outcome to the negotiations. At the same time, the Community indicated that it was willing to participate in negotiations to progressively reduce overall support to the extent necessary to re-establish balanced markets and a more market-orientated agricultural trading system. It proposed to seek out better ways to manage international markets and to redefine GATT rules and procedures. The Community is also seeking a rebalancing of support and protection for a number of sectors, including cereals substitutes and oilseeds, in order to remove distortions in trade between products such as cereals which enjoy high levels of protection and support and certain competing products where insufficient protection exists. Credit is also being sought for reform measures undertaken since 1986.
The Community is also prepared to accept some elements of tariffication on the assumption that US deficiency payments would also be included in the system and provided the problems of rebalancing protection can also be addressed in that context. Some controls on the Community's capacity to pay export subsidies are also envisaged on the same conditions. The Community is also advocating the adoption of various mechanisms to deal with monetary and world price fluctuations.
Japan's proposals emphasised the need for Governments to retain the capacity to support agriculture and issues such as food security and the exclusion of basic foodstuffs from the realm of the negotiations. Japan also supports the elimination of export subsidies.
The Nordic countries favour an aggregate measurement of support approach in reducing support to agriculture; they also suggest incentives to move towards decoupled forms of support and addressing such issues as food security and environmental objectives. As regards export subsidies, the Nordic countries indicate a willingness to work towards the elimination of most of their export subsidies. Tariffication is seen as a possible means to reduced protection but only if allied to appropriate safeguards; variable levies should also remain a possibility.
A process of clarification and elaboration of the comprehensive longterm proposals submitted by the major participants was commenced in February last. This phase has now been completed and real negotiations have commenced as the deadline of 23 July, for the development of a framework for the remainder of the negotiations, approaches. The deadline for completion of the negotiations is December next.
The Community's approach is designed to ensure that the fundamental mechanisms of the CAP can continue to be applied and that individual elements are not singled out. In this regard, it is relevant to note that the Commission represents the Community in the GATT negotiations and that it operates within the framework of mandates agreed by Community Ministers. The Minister for Agriculture and Food, Michael O'Kennedy, in his capacity as President of the Council of Agriculture Ministers, has ensured that Agriculture Ministers are fully involved in developing the agriculture framework.
In particular, the issue was discussed at both the April and June Councils. In these discussions, Ministers reaffirmed support for the global approach to the negotiations being pursued by the Commission and, in particular, the Commission's defence of the basic principles of the CAP, including such essential elements as the two-tier price system, Community preference and the role of market policy. We believe that it is essential that the Agriculture Council should continue to play a full role in the Community's input to the negotiations and in promoting the Community's agriculture interests.
For the reasons I have outlined earlier, we believe that the retention of the CAP is essential to ensure the well-being of Irish and Community agriculture. Others are seeking the progressive elimination of support and protection for agriculture over a ten year period. The Community has made it clear that while it is reasonably open in its stance, there are limits beyond which it will not go. Acceptance of fully liberalised trading arrangements for agriculture would not solve international problems but instead would lead to trade on a totally free and chaotic basis.
In this regard also it is important to note that current international prices do not represent costs of production but are merely the prices obtaining for residual production. These products would not be available at current world prices in a free trade scenario but instead prices would fluctuate widely in line with supply and demand. For example, the world price for milk used by OECD in its producer subsidy equivalent calculations for the community fell by more than 50 per cent between 1983 and 1986 and doubled between that year and 1989. Thus, the CAP also assists the consumer in assuring availability of supplies at reasonable and stable price levels. As regards the latter, estimates suggest that Community food prices would fall by only modest amounts from present levels if support and protection were eliminated.
At the same time, acceptance of world prices even somewhat higher than obtaining at present would force many farmers in the Community to leave agriculture. We could quite quickly become dependent on third countries for some of our basic foodstuffs. It is difficult if not impossible for efficient family farms, given our cost structures, to compete on equal terms with producers elsewhere, some of whom have farms extending to thousands of acres. Removing supports to Community agriculture is not levelling the playing field, it is tilting it in the direction of our competitors.
While the CAP continues to account for almost 60 per cent of the total Community budget, CAP expenditure has stabilised in recent years and accounts for only about a half of 1 per cent of the Community's GNP — a relatively small price for the benefits that accrue to both producers and consumers. I have already referred to Irish receipts from the guarantee fund. Recent calculations by Alan Matthews of Trinity College show that the net value of these budgetary transfers, together with our access to the relatively high priced Community markets for our agricultural products, represented some 9.7 per cent and 7.6 per cent of Irish GNP in 1979 and 1986 respectively. Any expectation that consumers would benefit significantly from trade liberalisation or suggestions that comparable benefits can be secured through alternative arrangements such as direct income supports are totally unrealistic.
Other studies that have been undertaken also show that the Irish economy would lose substantially more than other member states under support reduction scenarios. The losses would be felt most acutely by farmers but the services and food sectors would also be badly affected. The food sector alone currently employs 25 per cent of those engaged in manufacturing and free trade would place many of these jobs in jeopardy.
Much work remains to be undertaken during the remainder of the year if the round is to be completed on schedule. For our part, and as the Community is the world's largest importer and the second largest exporter of agricultural products, we clearly want a successful outcome to the negotiations. However, the outcome must be one which is mutually advantageous to all parties.
Our principal objective in the negotiations is to ensure that the outcome will permit the Community to continue to support farming and rural areas generally so that production, farmers' incomes and exports are maintained at reasonable levels. In this regard I believe that the Community's proposals are comprehensive, realistic and consistent both with the aims of the negotiations and our desire to support agriculture.
The informal agriculture Council meeting in Dromoland last week expressed its strong belief that the special needs of rural areas must be given a high priority by the Community. This was explained as meaning among other things the maintenance of a viable market support policy. Every opportunity has been used at political and official level to defend the CAP and the Community approach to the negotiations. I attended a ministerial meeting in Innsbruck last month where considerable support was evident for the Community's broad approach to the negotiations from both Community and EFTA countries. The Minister for Agriculture and Food will continue to ensure that the Community's Agriculture Ministers remain involved in the formulation of policy.
Senator Raftery outlined the problems which might arise if there is no agreement. However, I note that President Bush has said that the United States will walk away from the negotiations if they are not satisfied with the outcome. Despite the dangers in this course of action the Community has also indicated that it, to, has principles to defend and that these are not negotiable.
I have dealt at some length with the benefits which accrue to Irish producers, consumers and the economy generally under the present support arrangements for agriculture. I have also attempted to spell out what the Community's position is in the GATT negotiations. While it is primarily a matter for this House to determine which approach it should adopt, I believe that the case I have made demonstrates clearly that it is in Ireland's overall interest to ensure that the CAP support arrangements should be maintained to the greatest extent possible. In my view, the motion in the names of Senators Dardis, Keogh and Cullen, as amended by Senators Raftery and Hourigan, best reflects what we are attempting to do. I would, therefore, strongly recommend that approach to Senators.
