The spokespersons have 20 minutes, and other speakers have 15 minutes; statements are to conclude at 4 p.m.
Uruguay Round: Statements.
I am pleased to have the opportunity to make a statement to the Seanad today on the very important Uruguay Round of GATT negotiations. The debate is timely in view of the likely imminent conclusion of these long-running GATT negotiations and their potential impact on the world trading system in the coming years. You will be aware that the Lower House debated this issue earlier this week when the Government's handling of the negotiations was endorsed. This is, of course, not the first time the issue has been addressed in this House and Members will be familiar with the background and history of the negotiations. Nevertheless it would be useful to recall very briefly the main events.
The negotiations commenced in September 1986 and were scheduled to conclude in December 1990 but did not do so because sufficient progress had not been made in many areas, including agriculture. Agriculture is, of course, but one of 15 different subjects under consideration in these negotiations.
The Uruguay Round is the most ambitious series of negotiations ever undertaken in the GATT and it is the first time that an attempt has been made to bring areas such as services and intellectual property rights under GATT rules and disciplines. It is also the first time agriculture is being dealt with in a comprehensive way in the GATT. This is because ever escalating budgetary costs, structural surpluses and trade disputes involving agriculture products had convinced the major contracting parties that some action was necessary in respect of agricultural trade.
However, while there was agreement on the need for action, there was no consensus on the extent of the adjustment necessary. In particular, the US and CAIRNS Group, which includes Australia, New Zealand, Canada, Argentina and Brazil, were initially insisting upon the elimination of almost all agricultural support and protection measures. They have modified their position considerably in the interim, in recognition of the fact that the Community was not willing to undermine the CAP, but, nevertheless, differences remain to be resolved before an agreement can be concluded.
In the absence of consensus on a number of issues, including agriculture, in December 1991 the then Director General of the GATT put forward proposals known as the Draft Final Act for the conclusion of the negotiations in all areas. The Community was unable to accept these because it believed they were unbalanced especially with regard to agriculture. The Council instructed the Commission to participate in further negotiations with a view to securing a more global and balanced package. After lengthy discussions, the US and Commission negotiators reached an outline agreement on some elements which modify the Draft Final Act and which together now form the basis of the current draft outline agreement on agriculture.
The main elements of such an agreement, which would be implemented over a six year period beginning in 1995 are: domestic supports other than CAP reform compensatory payments and similar payments elsewhere would be reduced by 20 per cent; border measures such as variable levies would be converted to tariff equivalents which would then be reduced by 36 per cent; minimum access commitments of up to 5 per cent of domestic consumption would be provided for and current access would be maintained; average 1986-90 subsidised exports would be reduced by 36 per cent in budgetary terms and by 21 per cent in volume terms with volumes falling to the 1986-90 average less 3.5 per cent in the first year. The Commission has agreed that existing limitations on exports to South- East Asia would be continued; and finally, a "peace clause" which the Commission claims would protect the CAP system from challenge. The essential modifications secured compared to the Draft Final Act were the exclusion of various direct payments agreed under CAP reform from support cuts, a reduction in the export volume commitment from 24 per cent to 21 per cent and the introduction of a peace clause.
It is important to make clear that the draft agreement has not yet been put to Council and as such has not been endorsed by the Community. Neither has it been accepted by the US nor by other contracting parties.
Before commenting on the draft agreement in detail I would like to state that the Government is committed to a successful and balanced conclusion to the negotiations. Such an agreement would provide a much needed boost to the world economy and also bring stability to the world trading system. This could be very beneficial to Ireland. We have a small open economy and it is of major importance that we have a stable economic trading environment for our future economic development. In this regard, almost two-thirds of Irish output is exported and a similar proportion of our manufacturing jobs depend on exports. Our reliance on export markets is even more pronounced in the agriculture and food sectors. This does not mean, however, that we are prepared to accept an agreement at any cost. We have always insisted that an agreement must be balanced and must not impose a disproportionate burden on any country or sector.
Members will be aware that we have major concerns with certain elements of the proposed outline agreement and that we expressed these concerns from the outset. In this regard I draw your attention to the following extract from the statements issued by the Minister for Agriculture, Food and Forestry, Deputy Walsh, on 20 November 1992, the day the Blair House agreement was concluded:
He remained very concerned at the outcome in regard to volume limitations on subsidised exports, particularly insofar as they will affect the beef and dairy sectors. He will need to be clear that these can be accommodated within the CAP reform arrangements before there can be any question of his acceptance of the agreement in the Agriculture Council.
We have continued to express those concerns at every opportunity and in all appropriate for a since then.
Our main difficulty is with the proposed commitment to reduce the volume of subsidised exports by 21 per cent, the timescale for applying this, the absence of arrangements to deal with intervention stocks and the continuation of the restriction on subsidised exports to South-East Asia. We have other difficulties with the draft agreement, including those relating to the scope and duration of the peace clause and the need to ensure the Community's approach to market access, particularly aggregation, if fully secured in any final agreement.
There are, of course, some positive elements in the draft agreement, in particular the exemption from GATT disciplines of CAP reform compensation and the safeguarding of Community support arrangements from GATT challenges. The Commission has also given specific assurances that it has agreed with the US that disadvantaged areas payments would be exempt from the support reduction commitment. We are seeking to ensure this understanding is legally underpinned in any final agreement.
Our view is that the current proposed commitments would create difficulties for Community and Irish agriculture in a number of sectors. This is the case particularly in the beef sector where exports would have to be reduced substantially in the first year of an agreement compared to the average levels for 1991 and 1992, although the position may not be as bad when compared to the estimated export levels for 1993. There could also be problems, but on a smaller scale, in the milk, pigmeat and poultry sectors.
It is not possible at this stage to assess in any detailed way the likely impact of the proposed commitments for individual sectors or the economies of member states. The position is that commitments would be undertaken by the Community as a whole and the actual impact in the different sectors or economies will depend on a range of factors, including any necessary adjustments to internal mechanisms to implement the agreed undertakings. This would be a matter for the Council. In any discussions within the Community, we will, of course, be seeking assurances that the internal arrangements agreed will take full account of the particular importance of agriculture for Ireland, especially in the livestock sector. In anticipation of this we sought and obtained an explicit undertaking from the Council, when the Community's offer on agriculture was being finalised in November 1990, that any adjustments would be shared out equitably, taking account of the particular difficulties of certain categories of farmers or regions. The economic and social cohesion provisions of the Treaty of Rome would, in any event, necessitate this being done. We will continue to press that particular interests in this area will have to be addressed in a meaningful way before we could give our consent to any agreement.
As I indicated already, the Government has taken every opportunity, both bilaterally and multilaterally, and in all relevant fora to raise our concerns. Most recently the matter was considered in great detail at a Joint General Affairs/Agriculture Council on 20 September 1993, when the council re-examined the compatability of the draft agreement with the CAP in the light of the Commission's acceptance that some circumstances had changed since the agreement was negotiated. More specifically, cereals stocks levels were now higher and the agrimonetary situation had partially eroded the expected impact of CAP reform.
Ireland and France expressed serious reservations on the agreement while various other delegations raised specific points of interest to them. The issues raised included the peace and safeguard clauses, the timing and phasing of commitments, disposal of intervention stocks, aggregation, growth of world markets and cereal substitutes imports. In its conclusions, the Council confirmed the Community will ensure its international engagements are compatible with the CAP and that the result of the Uruguay Round for agriculture will not, directly or indirectly, jeopardise the durability of the CAP or its basic principles. The Council also underlined the need to maintain the Community's export vocation and to ensure the presence of its agricultural products on international markets.
In the light of the discussions, certain general guidelines were defined for the Commission for the conduct of further discussions on a bilateral and multilateral basis in the search for an agreement which is balanced and acceptable to all parties. These guidelines, which include our concerns, were reconfirmed by the Council on 4 October, by the European Council on 29 October and the Agriculture Council on 17 October.
The Commission held discussions with the US on 27 September and on 13 October at which it raised the reinterpretation of the draft agreement as directed by the Council. The public US response was that it was not prepared to modify or reinterpret the agreement. This was not unexpected as the US has been preoccupied with the North-American Free Trade Agreement — NAFTA — and was unwilling to negotiate seriously on agriculture or, indeed, on other aspects of the round until this issue was out of the way. As Senators will be aware, the favourable vote in the US House of Representatives last night will now allow the Administration to focus on the GATT negotiations and will have increased the prospects for concluding the round.
I expect the US will be prepared to agree to some adjustment of the draft outline agreement on agriculture. It is expected that Sir Leon Brittan will meet again with US Trade Secretary, Mr. Kantor, next week when the situation should become clearer.
The agricultural aspects of the negotiations were considered at this week's meeting of Agriculture Ministers when our Minister, Deputy Walsh, again outlined our concerns and the conditions on which he will insist before he can accept an agreement. The Commissioner again undertook to seek solutions to the problems indentified.
In assessing our approach to any final agreement on agriculture account will have to be taken of the consequences of failure to reach an agreement. The negotiations have long exceeded their original time scale, and while this has not caused any major disruption in trade up to now, it cannot be assumed this would continue to be the case. There is a limit on the number of times the negotiations can fail to conclude without a significant loss of credibility in the world's multilateral trading system.
As I have already mentioned, agricultural products have been at the centre of several trade disputes during recent years and this would almost certainly be the case again. It is also expected that some contracting parties would challenge the Community's agriculture support systems in the GATT. There would also be an increased tendency towards regional and bilateral trade agreements which would not necessarily be in the Community's interests.
The Government remains committed to achieving a global and balanced agreement on agriculture and will continue to urge the Commission to seek solutions to the problems identified. If the outcome cannot be contained within the reformed CAP, then we will be seeking appropriate arrangements to ensure our agriculture sector and farmers' incomes are maintained at levels envisaged when the CAP reform package was agreed.
As I mentioned at the outset, agriculture is only one of the areas under discussion and there are serious problems in other areas which have yet to be resolved. Much work remains to be done in the short time remaining if a comprehensive and balanced agreement is to be reached by 15 December. The view is, however, that, given the political will, it should be possible to agree the broad outlines of such an agreement within the deadline with perhaps the details to be concluded later.
The Government's decision on a final agreement covering all areas will be taken in the light of whether, and to what extent, our problems have been addressed. I reiterate once again our commitment to concluding a comprehensive and balanced agreement and that the Government will make every effort to ensure this goal is achieved.
I welcome this opportunity to make statements on the GATT proposals. I am sorry time is limited and that we only have an hour and three-quarters.
Acting Chairman
The Senator has 20 minutes.
I was complaining about the overall time. I understood that we were to get four hours to make statements on this matter. However, this is not possible.
I welcome this opportunity, particularly at a time when negotiations are at a critical stage. It is obvious that the other countries involved in the negotiations such as the US, Canada, New Zealand and Australia are dragging their feet and taking up intransigent positions in the discussions with the EC, as we get closer to the deadline, in the hope that the French and Irish will concede to their demands. They also have the comfort of knowing that some of our partners in the EC, particularly the more industrialised nations, favour these proposals. I believe that the visit of Leon Brittan to Washington was no more than shadow boxing. I do not believe that any progress was made in view of the intransigent position which the US are taking at present.
The Minister must make this a veto issue. Ireland is relatively more vulnerable to the export cuts in the proposed GATT agreement than any other EC country. Cuts in EC markets, prices and production — especially in our vital beef and dairy sector — as proposed under the Blair House agreement are likely to be magnified in Ireland. If we examine these proposals, one important issue arises — the capping of the volume of agricultural production in the EC while the US, Canada, New Zealand and Australia are preparing for expansion in all areas of agricultural produce. It puzzles me how Ray McSharry allowed it to happen, I do not know the explanation. This is the key issue.
In such important negotiations, as far as this country and Irish agriculture is concerned I do not trust Mr. Peter Sutherland, the director general of GATT, simply because he is now playing on the world stage which is far removed from the Irish farmer. I know him extremely well, he is a good friend of mine and I have great regard for him. However, his knowledge of agriculture and its problems was limited even before he became the director general of GATT. Having examined his progress to date, it seems that he is intent on railroading through the draft Blair House agreement under the threat — and this is what I do not like — of a world economic disaster if the deal is not accepted as it stands. This seems a most unreasonable attitude and cannot be accepted by Ireland under any circumstances.
Effectively, Mr. Sutherland is saying that European agriculture should lie down and accept all the pain of a GATT deal in order to appease the US agritrade corporations. Mr. Sutherland should learn from his rebuff, particularly from the French government, that the Blair House deal went too far for the EC as a whole to accept. The draft accord on agricultural trading is a flawed deal which neither respects the principles of GATT nor the values of the European countries towards family farming. There is a grave doubt in my mind about how neutral Mr. Sutherland is in respect of European farming. I would question whether he is a pro-active agent on behalf of world trade interests rather than European farming.
As the GATT negotiations stand, the European Community will be obliged to lower its internal agricultural prices to world price levels; to reduce, accordingly, the level of export refunds and import levies required to sustain the target international price levels; to substantially dismantle price support arrangements — this is the one which I and many other people do not like. The EC will also be obliged to guarantee expanded access to Community markets for meat, dairy products and other key products by exporters in other GATT partners, while itself suffering a reduction in its ability to export. That is the crunch issue.
Finally, the EC will be obliged to accept that its meat exporters will continue to be excluded from the rapidly growing Japanese market for meat. We do not understand this. The Japanese must import almost 50 per cent of their meat requirements. They are big sellers in Europe of cars and other products, yet the Americans believe that they have the right to exclude the EC from this market. As far as we are concerned, we are building up our trade with the Japanese in several areas, including fish. This exclusion is unacceptable in every respect to Ireland.
At the same time, GATT partner countries, particularly the US, Canada, Australia and New Zealand, will benefit from new opportunities to increase their exports. They will not be obliged to accept any discipline or restriction on their production levels. Neither will they be obliged to give any reciprocal guarantees of market access to EC producers. These provisions are seriously unbalanced. The EC must suffer restrictions as its partners gain opportunities for expansion. No such imbalance can be seen in any other part of the emerging agreement. No other sector will lose as much as agriculture in the EC generally, and in Ireland in particular. The Minister of State mentioned that there are 15 other areas but agriculture is the important one to Ireland, and to a certain degree to France and some other EC countries. We have not seen restrictions in other areas such as we have seen in agriculture. The battle has been fought since 1986 and it is still going on.
The last time the Minister for Agriculture was here I pointed out the figures in respect of the different areas. I am going to restate those figures because they are important and should be taken into the equation. I will deal with beef first. It should be remembered at the outset that the price for beef is 40p per pound in Argentina and in Australia it is 50p per pound carcase weight. Those are the prices at the moment. EC beef output is about eight million tonnes per annum. As consumption stands at about 6.8 million tonnes, this leaves a surplus of 1.2 million tonnes yearly.
The proposed GATT limit on beef exports for 1994 will be less than one million tonnes. This means a reduction in exports of over 200,000 tonnes compared to the 1992 levels. The proposal to cut export refunds by 36 per cent over six years will mean a cut of approximately £32 on a 100 kilogram live bullock or a cut of 24p per pound on beef sides. Those are the figures issued by the Minister of State's Department.
If the EC has to live with a beef export limit of 800,000 tonnes there will be horrendous consequences for this country. At a minimum, there will be extensive calf slaughtering and early intervention for cattle, which we do not want to let happen. This would have consequences in respect of money earned for the country and the loss of jobs in factories. Those are the two issues which we must watch.
The situation will worsen if EC beef consumption declines. As Ireland exports 80 per cent of its beef, we will be the most exposed member state. The EC beef intervention intake for 1992 was in the order of 900,000 tonnes. Under the CAP reform agreement this was to be reduced to 350,000 tonnes by 1997. Those are the figures from the Minister of State's Department. Where will this unwanted beef go? The simple and stark prospect for Irish farmers is that there will be some 200,000 unwanted cattle. This unavoidable surplus could devastate Irish agriculture and cause an unprecendented crisis. There has never been, and probably never will be, intervention for heifers. We all know that when the market is overloaded the price of heifers will collapse, as has happened on numerous occasions.
It seems that the full extent of these decisions has not been acknowledged by the Government in its response to date. I am somewhat disappointed because it is not so long ago since the Minister was here and these things were pointed out to him. I am not blaming the Minister of State for his speech today but these issues have not been dealt with on a product by product basis. We asked the Minister during the last debate to do this. He did not. It is incredible how the Americans can have such cheek regarding access to the Japanese market.
With regard to milk, the proposed 21 per cent cut in the volume of EC dairy exports will mean a cut of 24 per cent to milk producers on the 1991 levels of production. The CAP reforms for dairying outlined two 1 per cent quota cuts. This will not be sufficient to meet the GATT requirements. It is proposed that dairy imports will rise to 5 per cent of the domestic market. The combination of both will result in the necessity for a 5 per cent cut in our national milk quota. That 5 per cent cut is on top of a 2.5 per cent cut and a 4.5 per cent cut. The figures seem to indicate another 5 per cent cut if we accept the present proposals. The position will be especially critical for cheese exporters. GATT may allow an increase in EC butter exports both inside and outside Europe but unfortunately there is no market available.
Ireland is now facing the prospect of following Danish dairy production history. Over the past 30 years in Denmark, the number of milk producers has dropped from 185,000 to less than 15,000. Their goal is to have one dairy co-operative. At present one co-operative controls 85 per cent of the total Danish milk production and they are heading towards their goal at high speed. That gives some indication of the strength of one co-operative representing almost 100 per cent of milk producers in their country and the advantages it brings.
In these circumstances, it is little wonder that the New Zealand dairy board has welcomed this GATT deal. Their price of 40p per gallon of milk is uneconomic here. Their production cost per gallon is approximately 17p per gallon which leaves a profit of 23p per gallon. The Minister must make clear in this debate what confirmation, if any, has been given that the US will allow Bord Bainne and others access to 5 per cent of the domestic consumption of dairy products. As 50 per cent of our dairy exports go to Third World countries, we are particularly exposed under these proposals.
There is no need for me to point out to the Minister the price per gallon of milk in this country. It is 17p per gallon in the countries about which we are talking and, depending on the level of borrowings in our own country, it works out at 85p per gallon approximately. How does one bridge a gap like that? How does one reduce our cost of production and compete in the same markets as these people? That is where a serious problem will arise.
Despite improvement in the efficiency of the pig meat sector, a crisis currently prevails for pig producers. Since May 1992, there has been a 30 per cent reduction in price. Early 1992 saw a level of profit of approximately £7 per pig. This has now changed to a loss of £8 per animal. The critical issue for this sector is the aggregation of imports. If more than 3 per cent of the total meat market is supplied by imports, pig meat, poultry and beef can be put together. As current beef imports exceed the requirements, this could avoid the need for any additional pig meat imports into the Community. The Government must clarify whether pig meat is to be separated from beef both on the export and import markets.
The GATT changes could result in an extra 480,000 tonnes of pig meat in the EC market. This is because in 1986 and 1988 EC imports of pig meat accounted for 0.5 to 0.8 per cent of consumption. If this has to rise to 3 per cent in 1994 and 5 per cent in 1999, the surplus will have to be disposed of on a different market. I understand the Commission are proposing a 25 per cent reduction in the basic price of pig meat. Further losses cannot be sustained in this sector if we are to ensure the survival of the pig industry.
While sheep meat does not seem to have been extensively debated in the present round of GATT talks, we have a vested interest in minimising imports of New Zealand lamb. At present there is a voluntary restraint agreement governing such imports which is up for renewal this year. New Zealand can sell up to 205,000 tons of lamb into the EC without any tariff. New Zealand has been filling its quota early in the year and arguing for an increase.
The Government must ensure a tough stance on this issue or the viability of our 52,000 sheep farmers will be put in jeopardy. New Zealand is looking for a further increase of 40,000 tonnes of sheep meat in the new agreement. This is outlandish because, particularly in the last three years, we have seen sheep producers pay dearly for the flooding of the French market. I have always argued and will continue to argue that sheep meat from New Zealand should come at a particular time in the year and not when the markets are loaded. They collapsed the French market in 1990, 1991 and 1992. It has been a slightly better this year because there has been some regulation.
The primary focus of attention in relation to cereals has been the oil seed crop. The GATT proposal is that Europe's acreage cannot exceed 5.2 million hectares. This entails a future cut of just 750,000 acres. The French are set to lose far less in this sector than we are in overall terms.
Under GATT, the volume of cereals exported must be reduced by 21 per cent. It is not yet known to what extent the CAP set aside programme will succeed in reducing grain tonnage. The targeted grain reduction of 17 million tonnes and the level of grain exports will depend on the level of internal consumption of community grain for animal feed as against cereal substitute imports. It is fundamentally not in the Irish interest to have a cheap grain feed policy to undermine our grass-based production system.
The Minister must clarify the likely effects of set aside on specific crops. Some experts have argued that the 15 per cent requirement will have to be doubled to 30 per cent of tillage land. This can only result in further imports and job losses. Winter grain production will disappear if a national average is used for individual base areas. The effects on wheat and feeding barley, which both have growth potential in this country, need to be assessed so Teagasc can give the best advice to our efficient producers.
It should be highlighted that this year the US is abolishing all set aside requirements for wheat and setting only a 5 per cent level of set aside for maize. This is amazing. How can they come here and negotiate caps on everything we have while they themselves are increasing their volume of production? That is the main argument I have with these negotiations. They have consistently done that and they are doing it this year again. I think those figures are correct. I tried to get some documentation to that effect but I could not. My information is that all the set aside is gone on one area and only about 5 per cent on maize.
Ever since the Dromoland Castle affair, in which I think Ray MacSharry did a bad job for European farming, the whole area has been dogged with uncertainty and misinformation from both the current Government and its predecessor. It is no wonder that the US negotiators are fortunate enough to find themselves hoping they can maintain their position. No doubt we can also state at this stage that the brief given to Leon Britton was only half hearted and meant nothing as far as European and Irish agriculture is concerned.
The Tanaiste, Deputy Spring, made an appalling tactical error in suggesting that internal EC compensation could solve the Irish problem. It cannot solve the problem. This is a dangerous road to go down because after so many years it is only a way of phasing out levels of production by giving some compensation and at the end of four or five years phasing it out, with a serious loss in production and loss of jobs.
That is the position, as I see it, in relation to these negotiations. The Minister's speech contained the phrase: "conclusion of these long running GATT negotiations and their potential impact on the world trading system in the coming years." What they are saying is that they are using the other 14 areas to force the agricultural issue.
I would rather the veto was used even if we were to wait until this time next year to get a trade agreement. The trade agreement was to be made two years ago and was not. There is no great disruption on trade; it is running nicely. If we get the imbalance the Americans are hoping we will get, we will be in a serious situation.
I welcome the opportunity to make a statement on GATT. I am delighted to note from the Minister's speech that the Government remains committed to achieving a global and balanced agreement on agriculture and will continue to urge the Commission to seek solutions to the problems identified. Being an agricultural country, it is important that the Government and its negotiators would treat agriculture as a priority in the GATT negotiations.
GATT was established a long time ago and this Uruguay Round — the eighth round — was launched in 1986 with the objective of liberalising trade and extending the scope of the agreement to a number of new areas. The objectives of the round for agriculture included, inter alia, bringing stability and balance to agricultural world trade through the correction of massive restrictions and distortions which have become an increasing feature of the trading regime in that sector. This objective was further refined during the April 1989 mid-term review of the negotiations when it was agreed that a fair and market oriented agricultural trading system was to be achieved through negotiations on support and protection levels and the establishment of more effective GATT rules for the agriculture sector which is the only element in these negotiations.
Agricultural trade featured in earlier rounds of negotiations but the Uruguay Round is the first to deal with agricultural trade in a comprehensive way. The discussions on agriculture and certain other areas in GATT have proved very difficult. The difficulty has arisen mainly from different interpretations of the stated objectives of the negotiations particularly between the EC and the US and CAIRNS group.
In an attempt to conclude the negotiations, the then Director General of GATT, Mr. Dunkel, put forward proposals covering all areas in December 1991, known as the Draft Final Act. The Community was unable to accept these proposals because it believed they were unbalanced, especially with regard to agriculture.
I was surprised to hear Senator D'Arcy say that he did not trust the present Director General of GATT who is an Irishman and a former member of his party. I have confidence that he will do a good job and deliver the goods for Ireland. In this respect I compliment the Minister for Agriculture, Food and Forestry and his Ministers of State. This is my first time to speak to the Minister of State, Deputy O'Shea, and I congratulate and compliment him. He is doing great work. He is a former Senator and I wish him, the Minister, Deputy Walsh, and Minister of State, Deputy Hyland, well especially in these GATT negotiations.
The Commission was instructed by the Council to participate in further negotiations with a view to securing a more balanced and global package. After prolonged negotiations, US and Commission negotiators reached an outline agreement on some elements of a possible agreement on agriculture in November 1992. The essential modifications secured, compared with the Draft Final Act, were the exclusion of various direct payments agreed under CAP reform from support cuts, a reduction in the export volume commitment from 24 per cent to 21 per cent and a peace clause.
The main elements of the draft agreement as it currently stands, which would cover a six year period, are: the CAP reform compensatory payments and similar payments elsewhere would not be subjected to GATT discipline but the total support for each sector would be limited to 1992 levels under the peace clause; other internal supports would be reduced by 20 per cent; border measures — variable levies — would be reduced by 36 per cent; minimum access commitments of up to 5 per cent of domestic consumption would be provided for and current access would be maintained; average 1986-90 subsidised exports would be reduced by 36 per cent in budgetary terms and by 21 per cent in volume terms with volumes falling to that average less 3.5 per cent in the first year; the Commission has agreed that existing limitations on exports to east Asia would be continued; and a peace clause which the Commission claims would protect the CAP system from challenge.
The draft agreement has not yet been approved by the Council and as such has not been endorsed by the EC. It has not been accepted by the US Senate or Congress or by the other contracting parties. Given our small open economy, Ireland accepts that there is merit in a successful conclusion to the round which should promote international growth and lead to the strengthening of the multilateral trading system. We have, however, insisted that the final package must be global and balanced and not impose a disproportionate burden on any sector or region.
In general, our position has been that for agriculture the final outcome must not require the Community to take additional restrictive measures over and above the CAP reform decisions of 1992. I am pleased to note that Eileen Magner, Principal Administrator of the European Commission, — who hails from New-castlewest which is ten miles from where I live — said:
The essential change represented by CAP reform is the break in the link between price support and production and the new emphasis on direct aid to farmers. European agriculture will become much more competitive.
On a more recent occasion she stated that the CAP compensatory payments will not be subject to the commitment to reduce internal supports and neither will payments from agreed policies, such as headage payments. She pointed out that if the Community imports reached a level which would undermine CAP reform consultations would be held with a view to finding a mutually satisfactory solution. She insisted that the GATT agricultural proposals fully complied with the objectives of CAP reform. We need have no worry that the outcome from GATT will interfere with CAP reform which is important to this country.
In that regard Ireland's analysis of the impact of the proposed agreement was that its commitments could not be contained within the parameters of the CAP reform decisions and that it would create serious difficulties for a number of sectors. In the case of the beef sector, for example, the analysis showed that the Community would be required to reduce output by 5 per cent, which was considerably in excess of what CAP reform would deliver. In addition, there was a serious risk that the Irish beef sector would suffer disproportionately because of its reliance on export markets. Moreover, the methodology for implementing the export restraint commitment and the existence of large scale intervention stocks would create enormous difficulties in the early years of the agreement. The analysis concluded that difficulties would also arise in other sectors of importance to Ireland.
Following the November 1992 agreement, a considerable amount of time was devoted to internal Community examination of the draft outline agreement regarding its compatibility with the reformed CAP and its general acceptability as a part of a final GATT agreement. The Commission which negotiated the Blair House aspects contended that, apart from the beef sector where it claimed difficulties existed with or without a GATT agreement, the arrangements were compatible with the reformed CAP.
In the case of beef, the Commission contended that the problems would be dealt with under CAP mechanisms. A majority of the member states either did not oppose the Commission viewpoint or were prepared to accept the draft agreement as the best attainable in current circumstances. However, Ireland and France, and Belgium to a lesser extent, consistently rejected the Commission's analysis on compatibility. Ireland and France consistently outlined the serious problems which they had with elements of the proposed agreement which they contended would require the Community to take additional restrictive measures over and above the CAP reform decisions of 1992. In Ireland's case, the problems for the beef sector were highlighted, while France concentrated on the potential difficulties for cereals. In both cases, the proposed volume restraint on subsidised exports was identified as the most potentially damaging aspect. Both sides also highlighted other aspects which would be pursued in the negotiations.
Following commitments in various fora to conclude the Uruguay negotiations by 15 December, attention has again been focused on the draft agriculture agreement. Both France and Ireland again drew attention to the potential difficulties which the draft agreement poses for Community agriculture. Both repeated their earlier concerns and stressed that development since the conclusion of the Blair House agreement — monetary fluctuations, increased stock levels etc. — had heightened these concerns.
Against this background and with an implicit acceptance by the Commission that some circumstances had changed, a joint General Council on agriculture was held on 20 September 1993. That Council re-examined the compatibility of the draft agreement with the CAP as reformed in 1992 and various delegations raised other specific points including the peace and safeguard clauses, cereal substitutes imports, the timing and phasing of commitments, the disposal of intervention stocks, aggregation and the growth of world markets. In its conclusions, the Council confirmed that the Community will ensure that international engagements are compatible with CAP and that the result of the Uruguay round for agriculture will not either directly or indirectly jeopardise the durability of the CAP or its basic principles. It is very important for Ireland.
I wish to refer to an important statement in the Minister's speech. He said, "the favourable vote of the United States House of Representatives last night will now allow the Administration to focus on the GATT negotiations and will have increased the prospects for concluding the Round." Senator D'Arcy said that he would not mind if negotiations continued for another year. It is important to conclude these negotiations on 15 December 1993. I appreciate his point that we have done well without the completion of the round but nevertheless it is important for the future that these negotiations would be concluded fairly soon. The work being done by our Minister and by EC officials will ensure that there will not be a damaging effect on agriculture. The Minister states that there are of course positive elements in the draft agreement, in particular the exemption from GATT disciplines of CAP reform compensation. This is important and I am confident that the Minister will ensure that the exemption from GATT of the CAP reform compensations will be safeguarded and that the trade agreement under GATT will be acceptable and will be of benefit to agriculture in the future.
On a point of order, I understand the debate is to be extended to next week. Is that correct?
Acting Chairman
I have no confirmation of that as yet.
Nothing was said on the Order of Business about terminating it so I think it was perhaps left open.
Acting Chairman
It was agreed on the Order of Business that the Minister is to be called to reply at 3.45 p.m.
In the discussion that took place between our Whip and the Leader of the House he said that he understood, because of the short time that was made available——
Acting Chairman
I am sorry, it is not a matter for the Chair. I have to go by the order.
I ask that between now and 3.30 p.m. the Leader of the House would be contacted to ascertain whether there is a possibility of extending the debate. We have been looking since we came back for a debate on agriculture and this is not sufficient.
Acting Chairman
It is not a matter for the Chair, it is a matter for the Whips. I have to go by what we agreed this morning. The Minister is to reply at 3.45 p.m.
I would like to share my time with Senator Norris, ten minutes each.
Acting Chairman
Is that agreed? Agreed. You have 20 minutes between you.
I may not take my ten minutes and I am sure Senator Norris, who is a much faster speaker than I am, will not even take that length of time.
On a point of information, can a spokesperson divide their time?
Acting Chairman
Yes.
So you can have two spokespersons?
Acting Chairman
No, the spokesperson can divide his or her time.
Do not be nasty, Senator Kiely, or I shall refuse to co-operate with you.
Acting Chairman
Senator Quinn please, without interruption.
I welcome the opportunity to speak and to have the Minister present to hear us talk about GATT and not, as Senator Farrelly said a few moments ago, to speak about agriculture. I stress that there is a difference. There are now four weeks to go before time runs out for the GATT negotiations. December 15 is three weeks from next Wednesday. It is time, now that the American Congress vote on NAFTA is out of the way, for everybody to get down to the serious business of reaching agreement on the future of world trade, not just on agriculture. That includes this country. Ireland's contribution to the debate so far has not been very constructive. That we have tended to identify our national interest with that of our farmers only is wrong. Our national interest is considerably wider than that.
I was delighted that the Minister of State, Deputy Hyland reminded us that the Government is committed to a successful and balanced conclusion to the negotiations. I am not sure that we as a Government have been acting in that way. In supporting the interests of Irish agriculture we have joined the French in wrecking tactics. As a result we have made the reaching of this agreement considerably more difficult within that tight deadline of December 15. Now that we have reached the fifty-ninth minute of the eleventh hour, we should give careful thought to what is likely to happen if that agreement is not reached. Many people are labouring under the illusion that failure to agree will not change the present situation. They believe it will simply be a lost opportunity to expand world trade.
Failure of the GATT negotiations would be much more serious than that. There is no question of continuing the present status quo. Failure to conclude a GATT agreement would immediately change the face of world trade for the worst. Without being sensationalist, I believe that failure would have consequences for Ireland that would be nothing short of catastrophic. Failure would signal a return to the protectionist philosophies of the 1930s, the “beggar my neighbour” attitude that created a win-lose situation in world commerce rather than the win-win situation which the GATT agreement is aiming to stimulate. We would end up with an economic trade was such as was experienced in the 1930s and in which we did not thrive. We could not look forward to a repeat of that. Failure would point the world in the direction where the biggest countries and the biggest trading block will do well but the smaller ones will not. The world would withdraw into its national trading blocks and would treat those blocks as offensive bases in an aggressive trade war.
As of early this morning the EC is no longer the world's largest trading block. That position is now taken by the new NAFTA which includes Canada, Mexico and the United Sates. Let us remember that within hours of getting the NAFTA through Congress, President Clinton went to a summit meeting of the 18 nations of the Pacific rim, another block that is rapidly coming together and in which the US also intends to be the dominant partner. What a GATT agreement can do is help make these regional blocks a springboard to wider world trade. Without the agreement these blocks will just become warring factions. Let nobody be in any doubt that it will be a dirty war. The United States has proved in the past that it knows well how to play "hard ball" on trade and it seems that it would nearly prefer to play that way.
Why is this crucial to Ireland? We hear people say that since three quarters of our trade is internal in the EC we would not be too badly affected by a trade war. That is nonsense. We would be devastated. The reason is that in a world trade war Europe would come off badly and we have to realise that our ability to grow and to create jobs in Ireland is directly related to the prosperity of the countries we trade with. If the countries of Europe are in recession as they are now our trade cannot grow. If Europe loses out in a "beggar my neighbour" type trade war then our trade will not only not grow it may even begin to contract. One of the big potential advantages of a GATT agreement for Europe is that it can improve the Community's trading performance with the rest of the world.
The fallout in Ireland from a GATT failure will be real and will cost us thousands of jobs. There is also a direct fallout for us. A failure in GATT will affect our trading relationships with the United States, which is our fourth largest market overall and the most important market for many Irish-owned firms, the indigenous companies of which we talk so highly. We need to grow in the US market also and we will not do that in the context of a trade war. Let us not be foolish enough to think that the Americans will treat us kindly because we are small or because so many of them have Irish grandmothers. The Americans see us as the soft underbelly of the EC and when they want to make a point in Europe they often home in on the products of the smaller countries in the community like Ireland.
A further way in which we would be directly affected by GATT failure is in the vitally important area of services. Last evening in this House we had a debate focusing on this issue. I argued that our economic future lies more in services than in manufacturing and that is where the jobs will come from. It is in our own vital interest that world trade be opened up for services and that is what is being sought in these GATT negotiations. That is why I react strongly to the assumption that GATT is only about agriculture. If there is agreement it will create new potential markets directly for Ireland by opening up services in this way. It will be up to us to grasp that potential but we cannot do it if the potential is not there in the first place.
These are some of the issues we should be thinking about in the next few weeks. We should stick up for our farmers but not at the risk of jeopardising the whole agreement. There are many people around the world who will be only too happy to see the GATT talks fail and are also happy to be able to blame the EC for letting that happen. It would suit them well. Let us be a part of putting a GATT agreement in place, not part of pulling the rug out from under it. Our national interest points in that direction. We badly need a GATT agreement immediately.
I doubt if I will need the ten minutes that Senator Quinn has kindly given me and I feel a little humbled — an unaccustomed feeling for me — speaking after somebody who has such a wide experience of this area. With regard to economics I am naive and I am almost totally innumerate, thanks to the Irish educational system. When I contemplate a subject such as finance I look on it almost as a theological exercise as it does not seem to be a profoundly accurate science. A former Member of the Oireachtas and Taoiseach once described the science of economics as a "gloomy science." To me money is just the symbolic representation of energy. I would regard myself still as a socialist and there are certain things about this agreement that I do not like. I regard it as part of a developing process and if Senator Quinn is correct in saying that it is a move toward a more general world view, then I hope that there is a civilised, decent and compassionate vision ultimately underlying it. I doubt it, as it seems to me that all these negotiations are the incarnation of selfishness, the promotion of self interest and what Senator Quinn described as "hard ball". I will come back to that point.
I was interested in the Minister of State's speech particularly having read Deputy Dukes's speech a day or two ago in the Dáil in which he made a blistering attack on the Government's performance. Although I did not agree with all of it, it was most interesting to read. In his speech the Minister of State talked about the US and the CAIRNS group "...initially insisting upon the elimination of almost all agriculture support and protection measures. They have modified their position considerably in the interim..." I thought this was "hot" news from the Government for the Seanad. When I looked at my notes from Deputy Dukes's speech I realised that the Minister of State was saying exactly the same thing. The only advantage as far as I am concerned is that it is a lot easier to read the Minister of State's script than to read my handwriting.
The Minister of State said domestic supports other than CAP reform compensatory payments and similar payments elsewhere would be reduced by 20 per cent and that variable levies converted to tariff equivalents would then be reduced by 36 per cent. Deputy Dukes said he found it "tariffying" that this should happen. There is a list of these things and the Minister of State is indicating that they are still in place. I am not sure of the extent to which they have been modified and perhaps the Minister of State could let us know to what extent they represent an amelioration of our position. I note that this group, the USA, Canada, Australia and New Zealand, is permitted to increase its exports into the Community whereas our exports are frozen or have to be reduced. That does not represent a level playing field.
I have some sympathy for New Zealand and Australia as I know that they were caught out when Ireland and Great Britain joined the European Community and part of their traditional market was shorn away. As a consequence, as Senator Quinn said and as I noticed when I was in Australia recently, they are no longer interested in Europe and are developing strong ties in the Pacific area, which is a significant and potentially extraordinarily wealthy region.
Significantly, while we are pulling back in terms of dairy products, New Zealand has started to increase the levels of production because they are anticipating penetration into our market. That is something which farmers have a right to be concerned about, although I agree that it is not simply a question of agriculture when considering the GATT. There are far more areas involved. Perhaps the agreement is a little unbalanced.
Deputy Dukes mentioned the fact that he sat in on a meeting in Brussels which was addressed by Sir Leon Brittan. Deputy Dukes is a shrewd observer of the scene and he suggested, in fact he bluntly stated, that Sir Leon Brittan could not give a damn about this country or its interests or the CAP and that he went to Washington for a meeting with Mr. Mickey Kantor in order to be able to say that he had done his best and had failed. It is obvious that the Minister himself is aware that the preparatory discussions leading to the signing of the NAFTA agreement meant that the American interest was principally diverted to that matter and they were not especially bothered about this issue until NAFTA had been agreed.
The NAFTA agreement divides people, and not just on a left, right basis. People like Mr. Ross Perot have come out strongly against the agreement and there is a significant feeling that it may lead to a drift southwards of jobs out of the USA because of the cheaper availability of labour in Mexico, which represents in a way a kind of exploitation. We are well aware of that here with the closure of computer firms, for example, and the way in which research and design is often repatriated back to the parent company in America, despite the fact that the Irish element may, as an individual component, be more profitable. The jobs are repatriated to America in their own interest.
One of the significant elements in this agreement which I do not believe has been much addressed is the issue of patents, such as intellectual property rights, copyright in the music and video industry and so on. I would like to see Irish native intelligence and ingenuity properly protected and not exploited in a transnational transfer of Irish ideas.
There are certain areas where one must look a little sceptically at this agreement. For example, take the phrase "free trade". What is free trade? I am putting on my naive act; I am not quite sure what is meant by free trade. I wonder about some of these terms. If, for example, one looks at the agreement on multi-fibre textiles, it is obvious under the bland language in which it is dressed up that this is a vehemently defensive arrangement on the part of the wealthier nations of the European Union and the Americans under the GATT to try to prevent the development of these kinds of industries in the deprived areas of the Third World. How happy is the Minister, a good socialist, about that? It appears that Government policy and certainly the policy of the larger trading nations is in conflict with the ethos of the Irish people, if one can determine the nature of that ethos. I believe one can, for example, if one looks at the way the Irish people contribute to famine appeals and the way that they feel strongly about the issues of marginalised and deprived peoples all over the world. This appears to indicate the way the people feel. On the other hand the Government is colluding in a situation where it is deliberately intended to continue to discriminate against the weakest sections of the world in order, perhaps understandably, to protect jobs in this country. I believe there is a moral conflict here and I wonder what the Minister has to say about this.
Ireland is in quite a good situation at present. I researched some figures and I note that exports grew from £5.7 billion in 1982 to £16.6 billion in 1992. That is a remarkable performance. The Irish economy appears to be performing remarkably well. The problem is that it does not appear to be producing as many jobs as one would like.
I was intrigued by Senator Quinn's description of American "hard ball" tactics. We have already had experience of that. I dealt during the symposium that we had last year on James Joyce with one of our major industries, Bailey's Irish Cream, and they were most generous in their sponsorship. I got to know a certain amount about the way business was going. I am sure everybody knows, I am not telling stories out of school. I remember having lunch with some of the senior executives of the company and they were chasing around the world trying to hire out jumbo jets so that they could flood the USA market with Bailey's Irish Cream before tariffs were imposed. The USA had clearly indicated that Bailey's Irish Cream was on a target list. The USA was picking the most vulnerable items out of various countries where it would hurt and pinch. As I recall, 70 per cent of the manufacturing capacity of Bailey's Irish Cream is absorbed in the USA market. If they were walloped with this massive levy they would be in serious trouble. The same is true of Waterford Glass where the figure is something like 80 per cent. I am less worried about Waterford Glass because it is now so diluted that it is scarcely worth while. I should not say this but I feel it.
Senator Norris, your time is diluted. You have one minute remaining.
I will leave Waterford Glass aside. The issue of services has arisen and I immediately thought of the financial services centre. Will the Minister confirm my opinion that this is a disaster? It has not worked. It is an interesting indicator that if we are looking at this area in terms of international agreements, how successful are we already? It appears that unfortunately the financial services centre is a white elephant. There was much fuss about it for some time and then it simply disappeared out of sight.
With regard to agriculture, I agree with Senator Quinn. It is not the most important aspect, but it is still significant. I am a little worried about the kinds of arrangements that our farmers have. I like the idea that we are still an agricultural country to a certain extent. However, if one looks at the figures, farmers in the USA are subsidised to the tune of £8,000 per year, while farmers in Europe are subsidised by £13,000 per year. It is almost twice as much. If we are honest we must admit there is a disparity.
I hope that some kind of agreement can be properly put together and signed. I very much doubt that there will be any shred of morality attaching to such an agreement. I hope that Ireland, as a former colony and an independent State, might make its position known with regard to the way in which we treat our less well off neighbours on this planet. The day will come when we will need them and when we will all be part of a kind of global economy. We should get onside with the marginalised people now.
Acting Chairman
Before I call Senator Townsend, I understand that the Acting Leader wishes to clarify a matter relating to the Order of Business.
In view of the fact that item 2 started somewhat later than anticipated, I propose that the Order of Business as agreed this morning be amended. It was agreed that the Minister would be called on to reply at 3.45 p.m. I now propose in view of the widespread interest in this debate that the Minister be not called, and that the statements on GATT continue until 4 p.m., that this matter be resumed on another day and that the Minister be called to reply on the day of the resumed debate.
I second that.
Acting Chairman
Is that agreed? Agreed.
I wish to share my time with Senator Kelleher.
Acting Chairman
Is that agreed? Agreed.
When one speaks of the GATT from an agricultural perspective, it is impossible not to mention CAP reform. They are interlinked. If the CAP had been properly reformed, the problems which we have with the GATT would not be as severe. One of the reasons the CAP was reformed in 1992 was because of pressure from the GATT countries and the EC to curtail dumping of farm produce. This was mainly done through a system of export refunds. It is surprising that this pressure was not imposed earlier when one considers the size of the export refunds on agricultural produce. In the case of livestock exports, many animals were able to attract up to £500 each in export refunds. This left the exporter in a position where he could sell below world market prices and I do not believe it is reasonable to expect GATT countries to allow this situation to continue indefinitely.
Meat factories and livestock farmers are believed to be receiving large sums of money from the CAP. The meat factories admitted at the beef tribunal they were given huge amounts in export credit insurance. One company confessed to exporting intervention meat when it should have bought animals from farmers and sold that meat. When questioned about this at the tribunal the answer given was that everyone was "at it". That phrase is often used by Mr. Gay Byrne on his programme but it may not have been used in his sense.
Intervention meat has been bought by the EC and put into storage. It is then the property of the EC, not of the factories. To call a spade a spade, the meat was stolen in container loads. The factories then proceeded to get export credit insurance cover for that meat and collect sizeable refunds. That money is called agricultural transfers when the figures are added up and people think it goes to farmers. It is worth noting that when the EC was almost dumping meat, consumers here could not afford to buy meat.
When Mr. Ray MacSharry put forward his CAP proposals in 1991 he was under pressure from the countries involved because the CAP was not working properly. He stated 80 per cent of CAP transfers were going to 20 per cent of farmers, mostly larger ones. He also explained why that was so. It was hoped the reformed CAP would change that position. The chance was missed because his advice was not heeded. Some farming organisations vigorously opposed Mr. MacSharry's plan to redistribute CAP resources. By doing that they have forfeited the right to speak on behalf of most of the small farmers of this country. Rather than help, they have made matters worse.
Recent surveys have shown that because of the way CAP was reformed under pressure from GATT, 3,000 small producers in Clare and 3,500 in north Cork will have to give up farming. We cannot claim farming is doing well. It has been said there has been a 20 per cent increase in farm incomes but a recent study by Teagasc found 58 per cent of farmers had an income of less than £5,000 per year. It also concluded that only 50,000 farm units in the country were economically viable. The ICMSA, which represents dry stock farmers, claims many of the 40,000 farmers it represents will be unable to survive because of CAP and GATT. All these bodies cannot be wrong.
Senator Quinn said recently a conspiracy on our handling of CAP and GATT had worked to the detriment of the Irish consumer. I believe he has a point. In the case of small farmers there is a conspiracy to make them believe they are earning a proper living while a large number of them are on the poverty line. Farmers are also consumers. Surveys have also shown the high-cost food policies of the EC costs the average family £20 extra per week. In that case the extra cost of food would cancel out the subsidy given to a small farmer for 50 ewes, the first 18 acres of his area aid for grain or for his first five suckler cows. The CAP has failed in one of its primary aims, that is, to keep the maximum possible number of families on the land.
There is no use burying our heads in the sand on this issue. As sure as night follows day CAP, as we know it, will be radically changed. This will happen because of a reaction from the taxpayer to the subsidisation of agricultural production, which is maintaining high food prices, and by pressure from international trading arrangements such as GATT. I do not have a crystal ball but it will be one of the paradoxes of our time if an international trade agreement like GATT reduces the price of food to the consumer and at the same time stops the flight of small farmers from the land.
The Government has a tough task when dealing with this area. It should not go unnoticed that a GATT agreement will have to deal with 14 other items as well as agriculture and the Government will have to take them all into account. We are lucky to have Deputy O'Shea and Deputy Hyland as Ministers for State at the Department of Agriculture, Food and Forestry. They have the interests of small farmers at heart. The Minister, Deputy Walsh, has taken a major step to help small farmers by placing the responsibility for the allocation of the free milk quota with the Department and the Department intends to give the quota to producers of less than 13,000 gallons.
Acting Chairman
Before we go on I wish to rectify an oversight. I should have thanked the Minister for facilitating the change in the ordering of the business. Senator Kelleher, do you wish to wait given that we have changed the way we are dealing with the debate?
How much time do I have?
Acting Chairman
Ten minutes.
I will take my time now.
Acting Chairman
That is fine.
I thank Senator Townsend for giving me the opportunity to address this matter. GATT is the most significant economic issue currently facing this country. I am delighted we are having this debate because there has been no discussion in the public domain. GATT does not only concern agriculture, it relates to trade, tariffs and a general agreement. I blame the lack of a public debate on politicians, the social partners, the press, the media and Irish society as a whole.
The only people discussing GATT at present are those involved in agriculture and that is why the public perception is that GATT is solely about agriculture. As the Minister said, GATT encompasses all forms of trade and this fact must be brought home to the people. I appeal to the social partners to spend the next few weeks bringing this issue into the public arena.
Trade is vital to this country. We are an open economy, effectively exporting two-thirds of our produce in agriculture and services. The service sector has created a great deal of employment in Ireland in the last number of years. I welcome last night's debate in this House on the service industry and we should highlight this as the growing area in our economy. Manufacturing is not expanding at the same rate and will not solve our unemployment problems.
Despite the lack of debate, all is not lost. The farming community has sensitive and genuine fears and the Minister and the Government are working hard on its behalf. However, our American partners have put the gun to our heads. They effectively dismissed the GATT until the NAFTA debate, which came to a successful conclusion for them last night, was over. This sends us the signal that they seem to be dictating the pace with regard to the GATT negotiations. The American farmer is currently experiencing serious problems and it would benefit him more than his Irish counterpart if the present Blair House agreement was implemented. We must immediately reject certain elements of that agreement because I have no doubt that in the years to come we will have to answer for the social and economic problems that this agreement will cause for Ireland.
GATT must be agreed because we are now effectively a global trading economy, but this must not be at the expense of our people. We are isolated in our arguments because we effectively stand alone on that issue. When it comes to trading, Ireland is the most open economy in Europe. We must be steadfast on this issue. It was already pointed out that the French have supported our arguments for changes in the present GATT negotiations but, at the end of the day, it will be down to our own Ministers. We have few friends left in Europe on this issue.
I also wish to refer to the service industry. In Ireland, It has grown from 42 per cent in 1968 to 57 per cent in 1991 and since 1988, there has been a net increase of 33,000 people employed in that sector. From that point of view, it is vital to get a GATT agreement. However, an agreement is not so important for our agricultural sector until the difficulties are ironed out. I am hopeful that, if we reach an agreement, the present CAP reform proposals that have been implemented will go ahead and I am delighted to see that there is a peace clause there to allow that. However, I am worried that our agricultural industry will suffer greatly if this does not come about and if it does suffer, the service and manufacturing sectors will not benefit us either.
The Minister must be steadfast and work towards a conclusion of the GATT but not at the expense of our agricultural population. From a rural point of view, it would create serious problems. It has already been seen from the American system that open economies are the way forward, but we need time to adjust. We have been isolated in the world market because we were effectively trading solely to the EC. Any product exported was funded by the EC, and this is the problem. We have not had time to adjust, we have been thrust into this situation; we have not had a proper public debate on GATT, yet a conclusion has to be reached by 15 December. This issue is of vital importance. The Minister, the Government and the social partners will be responsible because the people are unaware of what is happening. The farmers on the ground are not aware of the issue because they are doing well this year, but in two years time we will have to answer to them and tell them why we betrayed them.
We have few friends and I hope the Government and the Minister get the full backing of everyone to conclude this debate, but they must do so without sacrificing our agricultural sector. The service and manufacturing industries have developed in a closed economy and I am confident they will expand if the world economy opens up. GATT must conclude and I am confident it will within the next three to four weeks. I hope the Minister will take this on board and use all options available to secure a successful conclusion for Irish agriculture.
The agricultural provisions in the so called Blair House Agreement are seriously unbalanced to the disadvantage of the EC in general and Ireland in particular. We are to contend with quotas and other restrictions on production together with substantial price cuts over a six year period. The combination of reforms of the EC agricultural policy and the GATT proposals will place Ireland at a severe disadvantage compared to other GATT members. The United States, Australia, New Zealand and Canada will find that their trading will improve substantially while the EC's will deteriorate. In addition, the EC is being asked to give guarantees of access to its markets to its other partners without receiving any such guarantees itself. The so called interpretations and clarifications of the Blair House Agreement will consist, at best, only of changes in the timing of the disadvantages to the EC and not in its substance.
Since the cave-in by Commissioner MacSharry in August 1991, the EC negotiators have been consistently out-manoeuvred by their American counterparts. Even today, we find the US Administration claiming to be so taken up with the North American Free Trade Area Agreement that it cannot devote any attention to GATT. This is no more than a negotiating ploy and it is criminally negligent of the EC authorities to fall for such tactics.
As the GATT negotiations stand, the EC will be obliged to lower its internal agricultural prices to world price levels, to reduce the level accordingly of export refunds and import levies required to sustain the target internal prices and to substantially dismantle the price support arrangements. Under the negotiations, it will be obliged to guarantee expanded access for exporters in other GATT partners to EC markets for meat, dairy and other key products while itself suffering a reduction in its ability to export. It will also be obliged to accept that its meat exporters will continue to be excluded from the rapidly growing Japanese market.
At the same time, GATT partner countries — particularly the United States, Canada, Australia and New Zealand — will benefit from new increased opportunities for export. They will not be obliged to accept any disciplines or restrictions on their production levels. Neither will they be obliged to give any reciprocal access to EC producers. These provisions are seriously unbalanced. While the EC suffers from such restrictions, its partners gain opportunities for expansion. No such imbalance can be seen in any other part of the emerging agreement. No other sector will lose as much as agriculture in the EC generally, or in Ireland in particular.
The consequences for rural Ireland will be catastrophic. Rural Ireland has suffered greatly over the past 20 years with the loss of 30,000 jobs from farming and related industries. I believe provisions in the GATT agreement will accentuate the decline in the rural population and affect people who depend on agriculture for a living. This situation is unacceptable and the EC should restore equity. The EC must play hard ball with the US. We need reciprocal guarantees of access to markets in GATT partner states and reciprocal undertakings to control levels of production of key agricultural products. Without these, the GATT agreement will spell the end of rural Ireland and the agricultural community as we know it.
Today's farmer is limited by quotas and restrictions. Application forms must be completed for everything the farmer does. There is often uncertainty as to whether the Department's computers will complete the job or if a technical hitch will eliminate, reduce or delay the payment. Those of us who are regularly contacted by farmers in difficulty are often frustrated by the bureaucracy surrounding grant payments; I am sure the Minister has experienced this also. For example, one may be told by the Department that because one digit is wrong the farmer will be eliminated from the beef premium scheme for one and, perhaps, two years.
Under the slaughter beef premium scheme almost half the payments which should have been completed by the middle of this year have still not been paid and, in the meantime, farming families do not have enough to live on. Many farming families are dependent on premium payments, such as the suckler cow premium, beef premium and so on. Families become frustrated when they have to wait for payment, and as a result, they are obliged to ask politicians to lobby the Department to pay these premiums. Politicians are frustrated because it is often difficult to obtain information about a specific payment. If one reads the Official Dáil Reports one will see that those who have the facility probably table more written questions on grant payments to farmers than on any other issue.
The farmers are being paid as if they are on a drip.
To add insult to injury, livestock farmers are now being told they must pay £9 million for the privilege of being swallowed by this insane bureaucracy. They must now produce maps and pay up to £25 per map if they apply to the Ordnance Survey Office by 17 December; after this date it will cost £42 per map. The Department has refused to accept photocopies; I cannot understand this. The Minister should review this and the Department should consider accepting photocopies of maps. There is no reason farmers who already have maps should pay for photocopies. This is bureaucratic nonsense and exploitation of farmers.
I welcome the opportunity to make some brief observations about GATT. This is not something new as my party, the Progressive Democrats, put down a motion in this House more than three years ago warning about the consequences of GATT on farming incomes and the national economy. However, it did not attract a lot of attention at the time. In this House it always seems that when we have a debate on homosexuality, condoms or a matter of that nature the press are interested in what we have to say, but when we discuss the economy and the effects measures such as GATT will have on the people it attracts little attention. This is regrettable.
If this deal is concluded in December it will have profound implications for the Irish economy, the future welfare of farmers, people in the processing industries, etc. The fact that the US House of Representatives agreed to President Clinton's stance on the North Atlantic Free Trade Area Agreement yesterday puts increasing pressure on us to conclude a GATT deal. It must also focus our minds on future tactics.
Senator Quinn said recently on the radio that when we debate matters such as GATT in this House the emphasis is on the effects on farmers while the consumer is often ignored. I do not agree with this view. We accept the impact which GATT has on the consumer, and it is not a positive one. If the price of farm produce falls the main beneficiaries will probably be European consumers because we derive a lot of our foreign earnings from agricultural exports. In addition, if there is a reduction in the money we get for our exports it will not benefit our economy but it will benefit European and other consumers. This point must be stated because there is a perception abroad that if a GATT agreement is concluded in the morning, consumers everywhere will benefit. This is not the case, particularly as far as Irish consumers are concerned.
The doctrine of trade liberalisation and free trade across national boundaries is an attractive one to which is easy to subscribe. However, we should not have any illusions about the US proposals because they are in the United States' selfinterest. The structure of agriculture in the US is totally different to that in the EC, particularly in Ireland. The scale of agricultural operations in the US and the EC is different and it gives the US a great competitive advantage on world markets. We cannot deny this and we must protect our position in that market.
In relation to compensation, should it be allowed under the terms of a GATT agreement? We discussed green, red and blue boxes until everyone lost interest in the argument and did not understand what was happening unless they were well tuned in. It would not be sustainable if GATT allowed compensation in Europe. The EC budget is already overloaded and it will become increasingly so as a result of the MacSharry CAP reform package. Therefore, the ability of the Community to finance compensation is highly questionable, even if it was allowed under a GATT deal. This raises serious questions about the deal.
I was also disappointed that Commissioner Brittan was sent by his political masters from the EC to visit his counterpart, Mr. Kantor, in the US to try to redefine or adjust — we were not allowed to say renegotiate, but we could adjust or define or seek clarification. He was sent by his political masters in the almost certain knowledge that he would return to the European Community and inform them that he was unsuccessful and that they, in turn, would go home and tell their electorate: We are very sorry. We put our faith in Mr. Brittan's negotiating powers. He did our bidding but unfortunately he was unsuccessful and there is not a great deal we can do about it. That is washing our hands of political responsibility. This is a political matter at the highest level and this Government and others cannot absolve themselves from their responsibilities.
I wonder how much the Tánaiste discussed this matter when he was in America over the past few days. The future welfare of and peace in this island must be the overriding priority for everybody in this House and in this country but the other matter is also highly significant. It is worthy of discussion at that political level because at the end of the day, it is a political deal. Did the Tánaiste express this country's concerns about GATT to the United States Administration? We considered it appropriate to send a Minister to the United States when the future of Digital was at stake but this is much more important than Digital. We are talking about a thousand Digitals. It is a vital national interest that must be defended, not just in the interests of farmers but of consumers and the economy as a whole.
What is the state of play at the moment? Will we find ourselves in mid-December sitting down to the table and saying we did our best but unfortunately, in the interests of free trade and what we perceive might be the benefits of free trade, we will go along with it, despite our reservations, for the greater good. That will not be good enough. It may be possible to devise an agreement as we would in a contract if we were buying a business, where there were heads of agreement and, over an extended period of months or a year we would fill in the detail.
We should remember — and this has been ignored — that we are already, to some degree, locked in what we can do because we agreed under the terms of the original Uruguay Round to substantial progressive reductions in support and protection. The question is, how do we measure the degree of support and what is the extent of the reduction? The Minister of State, Deputy Hyland, gave us figures about tariff equivalents and what we have committed ourselves to. The Blair House agreement needs to be looked at, particularly in an Irish context, so that we can get the best deal possible. Senator Townsend made the point that farmers are consumers and I emphasise that point again.
I fully accept the overall need for a GATT agreement. That is not the issue. As a small open economy we need a GATT agreement and it can be to our benefit. The issue is the nature, content and detail of the agreement. Several references were made to Mr. Sutherland and his role in this matter. I think he is fulfilling his role professionally. I do not share the criticisms that have been made of him — that he is almost ignorant of Irish agriculture. Nobody who served in the capacity in which he served, either within the European Community or banking circles in Ireland, could be ignorant of its significance but he has a different remit. He is now the Director General of GATT and his remit is to get a GATT deal. It is not for us to say that because he wants a deal that is not in favour of Ireland, he is unpatriotic. That is like saying that the European Commissioner who has taken an oath to act in a collegiate sense is not doing his job because he is not looking after Ireland's interests. I might, in other circumstances, criticise the European Commissioner if he was not looking after Ireland's interests.
The last one did not look after Ireland's interests.
The point is that he should not be so sectoral about it. We were told frequently that there was no connection whatsoever between the CAP reform and GATT, but that is not the case. There was every connection between the CAP reform and GATT. If we were to achieve the targets in terms of reduction in support that we have to achieve under GATT, then CAP reform was inevitable. It was inevitable anyway because of the surpluses and the budgetary constraints. However we are now getting rid of the surpluses but the budget appears to be on the increase. There appears to be some contradiction there.
I have another big difficulty about what a GATT deal would do to us. What will happen if we have to compete on world markets and the markets improve and we are constrained by limitations on our output by European rules? In other words, we have quotas and restrictions on our output but the other countries, — the CAIRNS group, New Zealand, Canada and America — can turn on the tap and increase production over night, as New Zealand are doing with dairy products at the moment. If there is an upturn in the market we cannot increase production and if there is a downturn we suffer. Where is the attraction of free trade there? Can somebody explain satisfactorily to me how the food industry benefits from free trade? I cannot see it.
We face a serious situation in that vast areas are being progressively depopulated. We are to build super highways with Structural Funds to facilitate our people to the airports. There are many initiatives on rural development, such as the Leader Programme, global grants and the Interreg Fund. They are all welcome and necessary but what is the point if behind them we are adopting a policy which says they are only palliatives? The fundamental problem of trying to earn a living in a rural area is not being addressed. We must safeguard our farming and food industries. This is a vital national interest.
This brings us to the question of whether the veto should be used at European level. I would be very reluctant to use the veto. I do not think it is the proper way to conduct negotiations, but it may get to a stage where the consequences are so significant from a national point of view that the veto has to be seriously considered. Perhaps that would concentrate some European minds which appear to be less than concentrated at the moment.
The question of Bailey's Irish Cream was raised by Senator Norris who had visions of jumbo jets going across the Atlantic with Bailey's. I do not think that would be a very satisfactory way of shipping it. However, the point is, will there be a trade war in the event of us not reaching an agreement? That stick will be held over us by the United States and others. My view is that it is much more likely to be targeted products, such as Bailey's Irish Cream, and what will happen is that the US and other countries in CAIRNS group or elsewhere, will go to the GATT panel and say this particular practice is contrary to GATT rules. The GATT panel will rule and we may or may not find ourselves in the position of having to get our act together. The GATT panel seems to be like the European Court of Justice: sometimes it makes a ruling, which is against us or others, but it is never implemented.
There must be action at the highest governmental level, by the Taoiseach and the Tánaiste, to instil in people the significance of this particular deal to the Irish economy, to agriculture and to Irish life. It is not good enough to absolve oneself of political responsibility and say it is down to the European Commissioner to find adjustment, clarification or amendment. This is a political deal and a political responsibility.
An Leas-Chathaoirleach
When is it proposed to sit again?
It is proposed to sit at 2.30 p.m. on Wednesday, 24 November 1993. I would like to thank the Minister of State, Deputy O'Shea for his co-operation in agreeing to the change in this afternoon's business.
We, too, would like to thank the Minister.