With the indulgence of the House, I ask that this debate will conclude not later than 5 o'clock, because of the Minister's commitments.
Santer Proposals: Statements.
An Leas-Chathaoirleach
Is that agreed? Agreed.
I welcome this opportunity to speak to this House on the detailed proposals for the reform of the Common Agricultural Policy which were unveiled by the European Commission on 18 March. Let me say at the outset that while I accept the need for CAP reform, these detailed proposals as presently constituted are unacceptable to Ireland. Before setting out why the proposals are unacceptable, I will first of all remind the House of their background.
The proposals, which were presented by the Commission in outline form last July, are designed to address the implications of enlargement of the Union to include ten Central and East European countries and Cyprus, and analyses and forecasts of world agricultural markets which suggest that surpluses could re-emerge on the Union market, particularly in the light of possible further trade liberalisation resulting from the next round of WTO negotiations.
The European Council in Luxembourg last December took the decisions necessary to launch the enlargement process for the Union and the negotiations were set in train this week in Brussels.
With enlargement to include all eleven applicants, the number of consumers in the European Union will rise by 100 million to around half a billion. Agriculture plays a much greater role in the economies of the Central and Eastern European countries. More than 20 per cent of their workforces on average are employed in agriculture, compared to an average of 6 per cent in the Union. There are serious problems to be tackled in these countries, particularly in relation to the structure of primary agriculture and of the food processing and marketing sectors; but if these deficiencies are addressed, it is quite clear that they have enormous potential for increasing food production. The Union must therefore take account of this prospect as it looks at policy adjustments into the next century.
Trade in agriculture was effectively brought within international trade rules for the first time in the Uruguay round of trade negotiations under the aegis of the GATT, the World Trade Organisation's predecessor. That round saw agreement on a considerable liberalisation of world trade in agricultural products. It is likely that the next round of trade negotiations under the WTO, which is due to begin in 1999, will see a continuation of the process of agricultural trade liberalisation, involving further restrictions on export subsidies and further dismantling of protection. Although it is obviously impossible to predict the extent of future liberalisation, preparations have to be made.
The EU Council of Agriculture Ministers accepted the broad thrust of the Commission's outline proposals last November. Among the conclusions reached then were the following: the model of European agriculture must be versatile, sustainable and competitive and it must be capable of conserving nature and responding to consumer concerns regarding food quality and safety, environmental protection and the safeguarding of animal welfare. This model of European agriculture would serve as a reference for the future thrust of the applicant countries' agricultural policies and provide a powerful force for integration in the enlarged Union. The long term outlook for the main agricultural markets given in Agenda 2000 was an acceptable working hypothesis and, without reform, significant surpluses could emerge. In those circumstances the reform process begun in 1992 should be continued and deepened. The framing of a rural development policy had an important role to play in preserving and creating permanent jobs both on and off farms. Agricultural regulations and procedures should be streamlined with more subsidiarity for member states and the arrangements to be established should not distort competition nor lead to renationalisation of the CAP.
While Ireland subscribed fully to these conclusions, which were endorsed by the European Council in Luxembourg last December, we totally reject the Commission's detailed proposals which have now been unveiled. I forcefully indicated our position both to Commissioner Fischler, at last week's Irish Farmers Journal Conference in Dublin Castle and most recently at Tuesday's Agriculture Council meeting in Brussels.
Let me turn now to the main elements of the Agenda 2000 proposals and to their impact on Irish agriculture. In general terms the Commission's proposals on beef continue along the route charted in the MacSharry reform of the beef sector. The result the Commission aims to achieve is a balanced EU beef market on the basis of increased domestic consumption of beef and greater penetration of non-EU markets without the aid of export refunds.
The proposals, most of which would be phased in over the three years 2000-2, include a cut of 30 per cent in the support price for beef; 24 per cent increase in the suckler cow premium to £143; a 56 per cent increase in the special beef premium for steers to £136; a new beef premium of £35.75 per dairy cow; an annual amount per member state, called a national envelope, to be distributed at the discretion of the member state within parameters set by the EU — Ireland's envelope will be £104m; an increase in the extensification premium from an average of £35 to £80 but with more restrictive eligibility conditions; abolition of the suckler cow premium supplement of about £20 paid by FEOGA in Objective One regions; a reduction in suckler cow premium quotas with effect from 2000 — the reduction proposed in Ireland's case is 8 per cent; a reduction in special beef premium quotas with effect from 2000 — the reduction in Ireland's case is 22 per cent but, as we have under utilised the quota in the past, the reduction by reference to 1997 usage is 8 per cent; the abolition of intervention from 1 July 2002 and its replacement by a scheme of aid for private storage. The premium rates to which I have referred have been converted from ECUs at the current Irish pound central rate.
These proposals are of crucial significance given the central importance of beef production in the economy and the sector accounts for over one third of agricultural output in Ireland. As the largest net beef exporter in the northern hemisphere we export 90 per cent of our annual beef output to other EU member states and third country markets. We are uniquely sensitive to the nature of the EU support arrangements with such dependency on export markets. The litmus test, not only for Ireland but for all other member states, is whether the proposals of the Commission, if implemented, restore market balance and sustain producers' incomes.
A 30 per cent price reduction is significant and we cannot be entirely sure about its impact. The proposals are designed to increase beef consumption in the EU by reducing beef prices while at the same time enabling EU beef to be exported to third countries without subsidies, thereby avoiding GATT constraints on subsidised exports. Beef consumption within the EU should increase if the price is substantially reduced, but it is difficult to predict by how much. Also, it is debatable whether the EU can achieve the export market penetration envisaged with the level of price cuts proposed. Much will depend on the price structures and production potential of the EU's major competitors.
Given the uncertainty which must exist, the future EU beef regime cannot afford not to retain an adequate intervention safety net. The BSE problem erupted in March 1996 out of the blue and caused severe market difficulties. A safety net of intervention was needed and we do not know what marketing problem might arise in future. I will strongly argue and negotiate for a retention of intervention in the event of difficulties. Reliance on aids to private storage, as the Commission envisages, would not be adequate in difficult market circumstances and where major market imbalance remains a threat.
We cannot be expected to accept such a cut in market support without adequate compensation and support arrangements for the market. The key element for consideration in terms of the future direction of the beef regime is the maintenance of a reasonable income for European beef producers. I will seek to ensure any price cut is fully compensated. It is widely known, particularly from the annual study by Teagasc, that beef producers are among the lowest income earners in the profile of agricultural enterprises. This situation needs to be improved and so that reasonable family farm incomes are maintained. The Commission's proposals would result in losses to the sector of approximately £152 million a year. There is no alternative but to reject these proposals because of their seriously adverse impact on the economics of beef production in Ireland.
The Commission has proposed to increase the extensification premium by a substantial amount from an average of £35 to £80. This is an effective encouragement to extensification as it a substantial increase on the face of it. However, it has also proposed to include hitherto uncounted animals while maintaining the qualifying maximum stocking rate at 1.4 livestock units per hectare which will adversely affect qualifying limits. The combined effect of these extensification proposals in Ireland's case is broadly neutral. Not only is there no incentive to further extensification, but many farmers who find themselves pushed beyond the 1.4 stocking density are likely to decide to make up for the loss of extensification premia by turning to intensive production. We should not penalise extensive producers by taking away their extensification premiums and in the process encourage them to become intensive, which is hardly in the best interest of the beef industry either in Ireland or EU.
I turn to the dairy sector. The main proposals are a reduction of 15 per cent in price supports over the four years 2000-3; compensation for the price support reduction by the following new direct payments, also phased in over the years 2000-3, including a new dairy cow premium of £80 and an annual amount or national envelope per member state to be distributed at the discretion of the member state within parameters set by the EU — Ireland's envelope will be £32 million; an increase in each member state's milk quota of 1 per cent, with priority to be given in its allocation to young farmers and the increase to be phased in over the years 2000-3, and an increase in milk quota for mountain areas as defined by EU law amounting to 1 per cent of the total EU quota, to be phased in over the years 2001-4 — Ireland does not benefit from this increase.
The Commission approach in the milk sector is that expected market developments do not require extreme measures, but that the present system, with its intrinsic rigidities, cannot last forever. I agree with the Commission analysis in principle. Despite the rigidities associated with strict supply control, the quota regime has largely benefited the dairy sector since 1984. In general, the operation of the quota has maintained high income levels among dairy farmers. The role the milk quota system plays is of equal importance in Ireland in maintaining viable farming activity in less advantaged rural areas through instruments, such as restructuring and the temporary leasing scheme, as well as ring fencing of quota in these areas. It has been a successful tool of economic development in rural areas. It has shortcomings. If one has a substantial quota it is a valuable asset, but for younger people who do not there is a difficulty with this supply control instrument.
Commission analysis suggests that the world market for certain dairy products is expanding. I broadly share this view and this will continue to be the case over the coming years. It is commercially and economically important that the EU maintains a strong presence on that growing market. Any retreat from this position over time would seriously undermine the long term viability of the EU dairy sector, but any changes to the current system designed to enable the EU to enhance its presence on world markets should not result in a worsening of the income of dairy farmers. An overriding principle is that any price reductions or other changes having an adverse effect on price should be accompanied by an appropriate direct aid system.
The proposed changes in the milk sector are seriously damaging to Ireland and would result in a loss to the sector of over £50 million per annum. The most severe cut is the proposed method of allocation of the second 1 per cent increase in milk quota. This system is incomprehensible and discriminatory. It allocates milk quota on the basis of the mountainous areas within member states and, as I said, Ireland receives no allocation from that 1 per cent.
The proposed allocation of milk quota is also incomprehensible because it ignores a solemn commitment which Ireland obtained from the Council when the quota system was first introduced. That commitment was clear and unequivocal. It stated: "When distributing quantities added to the reserve, priority will be given to Ireland". At that time there was a lot of public debate on it and great emphasis was placed on the fact that, if there was any increase in the future, Ireland would receive priority because the milk industry was so important to its economy. It is difficult to understand how the Commission can bring forward a proposal that ignores a solemn commitment of the Council.
In addition to this extraordinary proposal on milk quotas, the Commission has proposed a further 5 per cent price reduction. This price reduction is without compensation in the few member states, including Ireland, not benefiting from the maize silage subsidy or the quota increase for mountainous areas.
In relation to the arable crops sector, the key element of the Commission proposals is a reduction of 20 per cent in the intervention price in one step in the year 2000, with compensation by way of an increase of 22 per cent in direct payments to £55 per tonne. Compulsory set-aside will be reduced to zero but will be retained as a market management measure, penalty set-aside for exceeding a national or regional base area will be abolished and the maize silage subsidy will be retained.
The Commission's proposals stem from its analysis that intervention stocks are expected to reach 58 million tonnes by the year 2005-6 unless some reform of the sector is undertaken. While I believe that the predicted growth in world demand and price trends would facilitate the disposal of increasing quantities of cereals without export subsidies on the world market, one cannot escape the conclusion that there is indeed a clear risk of a return to substantial levels of intervention stocks with resultant strains on the EU budget and its capacity to fund adequate levels of support for farmers in all sectors. However, if the Commission's response — a 20 per cent price reduction — is to be accepted, then the reduction in price must be fully compensated so that the incomes of cereal growers are not reduced.
The level of compensation for the proposed price reduction remains the same as last July and would lead to a loss in the sector of about £22 million, but the net position for producers would worsen because of the new proposal for the abolition of monthly increments and the later date of payment of the compensatory aid. Therefore, the proposals fall short of full compensation and we must reject them.
The following table sets out my Department's estimate of the annual output losses, premium gains and net position for beef, milk and arable crop producers, if the proposals which the European Commission has recently brought forward were implemented in full.
|
Beef |
Milk |
Arable Crops |
Total |
|
|
IR£m |
IR£m |
IR£m |
IR£m |
|
|
Output losses |
- 380 |
- 156 |
- 39 |
- 575 |
|
Gain on increased premiums |
+ 228 |
+ 104 |
+ 17 |
+ 349 |
|
Net loss to producers |
- 152 |
- 52 |
- 22 |
- 226 |
The overall net loss is £226 million to the Irish agricultural sector. The milk and beef sectors account for almost 75 per cent of production and cereals accounts for another 3.6 per cent. Therefore, the beef, milk and cereal sectors account for 80 per cent of the sector.
These estimates assume that market price reductions will be of the same magnitude as the proposed support price reductions in the various sectors and use the current central rate of the Irish pound in converting all premium amounts, which are designated in ECUs.
I have outlined the stark reality in financial terms of the loss to Ireland as a result of the current proposals. Over the next 12 months we will have difficult but vigorous negotiations with the Commission, particularly because our agriculture sector plays such a huge role in our economy compared to any other member state. We will be insisting on a fair outcome to these negotiations. I am pleased the farming organisations, the industry itself and the marketing bodies all support my Department in consultative groups. I established these groups so that we can get the best possible economic figures and indicators to support Ireland's case. We will all work together over the next year to make sure these proposals are tailor made for us.
Last week when Commissioner Fischler came to Dublin he said that these proposals were not written in stone and that there is room for significant modifications. As an agricultural economy, we cannot afford to have £226 million per annum taken out of Irish agriculture sector. Again I will remind Europe that, as member states, we have behaved well and wisely spent our EU Structural Funds from which the economy has benefited but we started from a very low base and still have a lot of ground to make up. The average farm income is well below the average industrial wage and the European average. Farm enterprises still have a long way to go.
The next few months will be spent ensuring Ireland gets a significant improvement on these proposals. The next meeting of the Council of Ministers will be held in mid-May. Before then there will be a meeting of the Heads of Government in Cardiff where I will have an opportunity to meet representatives of the farming organisations and the industry itself. This will enable me to put together a comprehensive case for Ireland and I will enlist the support of the Taoiseach and the Government at that meeting. I will highlight the importance of agriculture to the overall economy and try to ensure everybody makes the most of this round of negotiations which will take us into the next century.
For structures and rural development the main elements are the effects of the loss of full Objective One status for Ireland in general, resulting in both lower EU co-funding rates and a lower absolute level of funds across all structural measures: as Members know, the funding rates up to now were 75/25 and the likely outturn will be to bring that to 50/50 which will make it more difficult for many enterprises and projects to go ahead.
Another element is a transfer of certain expenditure from the guidance section to the guarantee section of FEOGA. There will also be a change from headage payments per animal to area payments per hectare under the disadvantaged areas scheme. This will be a fundamental change as up to now we were all familiar with the headage payment per livestock unit. The scheme will now be based on area payments rather than headage payments.
A scheme of compulsory cross-compliance will be introduced under the disadvantaged areas scheme with payment conditional on certain environmental practices being observed. The EU is very strong on environmental issues and the possible negative effects of a scheme.
There is a requirement to go beyond good farming practice to qualify for the rural environmental protection scheme. FEOGA grants for the food industry will be confined to basic processed products and will no longer be available for certain highly processed products nor for the promotion of agricultural products. The provisions for grant aiding advisory services seem to be much more restrictive. Teagasc and the advisory services made the best possible use of FEOGA funding and a significant proportion of their budget came from Europe and any restrictions in that area would be quite serious for our main advisory and research body. Provision for research in the specific areas of agriculture, food and forestry is excluded under the new FEOGA regulation.
The Commission's proposals in this area are complex and their full implications will not be clarified until the Council Working Group commences in April. However, I welcome the consolidation of all existing agricultural structural measures into one regulation and I am also pleased to see that some very positive changes are proposed in a number of areas. I made the case to Commissioner Fischler that many people are availing of the farm retirement scheme at 55 years, allowing younger people to run the farm, but there two conditions causing great difficulty. One is the additionality clause, where farmers had to have additional land to qualify. With local land scarce, this caused prices to rise. In some cases farmers went considerable distances to acquire land they did not want, other than to qualify for the scheme, and it added to the cost. The second problem was part-time farming, that the bulk of income had to be earned in farming, so those who had an off-farm job found themselves excluded from the scheme. Many people in rural areas work with local authorities, the Office of Public Works or in local fisheries. The future of many rural communities depends on the availability of local employment. I am pleased those difficulties will be eliminated in the proposals.
I have reservations about the proposal to move funding for certain rural development and structural measures to the guarantee section of FEOGA. Such a transfer would diminish the headroom in the guarantee section and it would be imprudent to do so at a time of great uncertainty.
Although not the subject of specific proposals in Agenda 2000, incomes of sheep farmers have fluctuated greatly over the past few years. We are dependent on the French market and the number of sheep in the UK, which sometimes floods the market and creates price difficulties for Ireland. In the environment which will exist under these proposals, consumption of sheepmeat could be significantly affected by a 30 per cent reduction in beef price supports. That will affect the price of lamb. Nonetheless, there is no proposal whatever for the sheep industry, it is not even mentioned. Sheep are important to Irish agriculture, there are 47,000 sheep farmers and for many disadvantaged areas the income generated through them is critical. I asked the Commission to ensure the sheep sector is referred to in the proposals as it is not the subject of specific proposals in Agenda 2000. Consumption of sheepmeat will also be significantly affected by the reduction in pigmeat and poultry prices which would flow from a reduction of 20 per cent in cereal prices. I have therefore asked the Commission to consider the implications of Agenda 2000 for the sheepmeat sector and to submit a report on these to the Council together with appropriate proposals.
Other elements covering all sectors include proposals that direct payments will be subject to certain environmental conditions being observed; member states may modulate within certain limits direct payments per farm taking account of employment levels on the farm; direct payments per holding between £83,000 and £166,000 a year will be reduced by 20 per cent and direct payments above £166,000 a year will be reduced by 25 per cent. The modulation and capping of payments will be a critical matter. It is fine to have a national envelope but that puts the onus on the national government and the Minister of the member state to decide where the cuts will be made. Before the EU could be blamed but in future if people say it would be a good thing to level out the payments and to have more going to the smaller person and less to the larger person, taking from one to give to the other will create domestic political problems. We will face that when the time comes.
In conclusion, I refer to the common general approach which the Council of Ministers adopted last November. A key element of that approach was that the details of reform in the various sectors concerned need to be designed in such a way as to arrive at economically sound, viable solutions which are socially acceptable, which make it possible to ensure fair incomes and which strike a fair balance between production sectors, producers and regions and avoid distortion of competition.
The principles enshrined in this extract are essential elements in the formulation of major policy at EU level but they are being ignored in the changes which the Commission have made, particularly in the beef, milk and cereal sectors, since last July. The changes which have come about since the outline proposals are all negative. I indicated at the Agriculture Council on Tuesday that I could not accept the proposals. I can assure Senators that I will do my utmost to ensure that Ireland's crucially important interests in the agriculture and food sectors are protected in the forthcoming negotiations and that the final package will be equitable and will provide the optimum framework for the development of those sectors.
I welcome the Minister to the House. I thank him for coming in for this important debate. For weeks people have been talking about the Santer proposals.
As the Fine Gael Seanad spokesman on agriculture, I want this debate to be comprehensive and constructive. Above all, I want this debate to be of benefit to the State, the farmers, the consumers, the co-operative workers and all those associated with agriculture. As everyone knows, agriculture is the backbone of the Irish economy, despite the dwindling number of farmers, and will continue to be so into the next millennium. There are approximately 140,000 depending on the land for a living and thousands more working in related industries. This is a huge number by any standards. Many towns and villages depend solely on agriculture for income, even the bigger towns. Agriculture is going through huge changes and in the past five years we have seen massive changes in the rural way of life.
The Santer proposals are the most draconian proposals made by Europe since Ireland joined. Many people are amazed and the nation is worried about them. The Minister mentioned the figure of £226 million as the loss to the economy. However, other agencies, including farming organisations and independent observers, which carried out assessments on the potential loss to the economy estimate figures closer to £260 million. The situation is worse than the position highlighted by the Minister.
Town and village should unite to fight the proposals which will interfere with and have a bad effect on communities. I call on the chambers of commerce and other bodies involved in business in rural Ireland to become involved in opposing the proposals. The Fine Gael Party will do everything necessary to fight them and, if necessary, schoolchildren should also be involved because many of their future lives in rural Ireland depend on agriculture. It will be ruined by the proposals, so children and everybody else associated with life in rural Ireland should be asked to back the Government and fight the package.
A major Government initiative is required which involves not only the Minister for Agriculture and Food but also the Taoiseach, the Minister for Foreign Affairs and the other members of the Government. A huge effort must be made on our behalf. My suggestion that the Taoiseach should be involved is not light-hearted. The Minister for Agriculture and Food is committed to the agriculture brief but he has not proved himself a tough negotiator in foreign countries. He has many questions to answer about his performance on the issue of the reopening of the live cattle trade. The Minister is not strong enough to break the political wall on this matter on his own. The Taoiseach and other members of the Government must be involved.
The Commission proposals would damage our economy more than any other member state due to Ireland's greater dependence on agriculture. Beef production is ten times more important to Ireland while milk production is six times more important relative to EU averages. This is a major selling point and could form the basis of a special case that should be put on our behalf. The worst proposal involves serious discrimination against Ireland's extensive grass based production system. It clearly favours the intensive Continental system. The tightening of the extensification premium is ample proof of the purpose of the proposal in terms of grass producers in Ireland. I am pleased the Minister acknowledged this point and said the proposal would be of no benefit to Irish producers. It is a crazy proposal given that the rural environment protection scheme has been so successful and has had a major effect. Some people criticise certain aspects of the scheme, but it is a good initiative and has worked well in many places.
The proposal with regard to milk quotas is also crazy. Ireland has been served well in some areas by the milk quota system but many aspects of it need clarification. I was made aware recently of one of the most unfortunate cases I have come across in a long time. A family from Minister of State Davern's constituency visited me last week. A mother wanted to give her daughter her 16,000 gallon milk quota. The daughter and her husband's quota was only 10,000 gallons but there was no way the family could transfer the mother's quota. This is terrible and such cases must be addressed under the proposals if the numerous problems with the milk quota system are to be properly tackled.
Ireland has not made a sufficiently strong case with regard to the importance of milk production to the fabric of rural Ireland and its quality of life. People depend on milk production for their livelihoods and way of life. Of the various categories of agriculture which will be affected, the worst proposal is the 30 per cent cut in beef prices. This will have far reaching consequences. Reducing the price to 60p a pound is totally unrealistic because it is less than the cost of production. This is a disgraceful and it must be fought. The suckler cow premium will only be increased to £143. This is no compensation for the cuts that will be made. This also applies to the small increases in the special ten month and 22 month beef premia. These increases will not counteract the proposed cuts. We must aggressively fight the proposals relating to the beef sector and also the dairy sector.
We must fight every aspect of the proposals with great determination. While some of the changes regarding rural development may be welcome in certain areas, it is fair to state that they will have a devastating effect on rural Ireland. The lack of proposals with regard to the sheep sector is a major omission on the part of the Commission because it will be affected by the price cuts in other sectors. It is a pity there are no proposals to increase the sheep subsidies, particularly when sheep farmers are undergoing such a difficult time.
I call on the Minister to fight the proposals to the greatest extent possible on behalf of the nation. The future of Ireland and later generations depend on a strong case being made by the Government, the Taoiseach and the Minister for Agriculture and Food. They will be helped by the Opposition in both Houses because the proposals if implemented will have devastating effects on rural Ireland.
I commend Senator Tom Hayes for his sensible contribution, which was non-political except for one trivial lapse. I commend the Minister, as have the press and the farming organisations, for the efforts he is making to reject the proposals. I wish him well and urge cross-party support for him. The Minister mentioned the farm early retirement scheme. I am pleased that difficult requirements associated with it are being eliminated — especially the requirement with regard to extra land which deterred people from retiring — in order to facilitate early retirement and the passing on of farms to younger farmers.
We support the concept of reform of the CAP. We accept that European agriculture must be positioned to cope with the rapid changes taking place both in agriculture and in society in general. It must also meet the challenges which will inevitably arise over the next few years, including what is intended to be the biggest enlargement of the EU to date with the consequential increase in production capacity as well as from the next round of WTO. Equally, it is clear from experience that there is no advantage in delaying the inevitable. We also recognise that, by and large, the MacSharry reforms have worked well and a continuation of that approach was not unexpected.
Having bought into the concept of reform, we need to be satisfied with the direction of reform, the pace of change envisaged, the impact on different sectors and the equity of that impact on different member states. In particular, we need to be satisfied with regard to the ultimate outcome. Will the reform process leave Irish and European agriculture better positioned? The starting point for the reform process is the CAP. We perceived the MacSharry reforms as having been favourable to this country, yet, ironically, we did not fully recognise this in 1992. On the other hand, there may be an exaggerated view in other member states of the benefits we obtained. The advantage was in the beef sector, but it is worth noting that the highest levels of FEOGA expenditure per hectare of agricultural land are in the Netherlands and Belgium — Ireland comes roughly in the middle of the table.
The objective of the reform must be to protect and strengthen the special character of European agriculture. The identity is best outlined in a document agreed at the November 1997 Agriculture Council. While it is a broad statement accommodating the view of 15 member states it emphasises certain essential elements. European agriculture has its own specific characteristics which include different regional facets, a variety of products and a large number of family farms. It needs to be versatile, sustainable, competitive and spread throughout Europe and to be consumer and environmentally friendly. We can subscribe to that vision of agriculture. It is important that we work to this model because there are countries, mainly outside the EU but some within the EU, who want a more one dimensional approach. Our policy recognises the multi-functional nature of agriculture and should continue to do so.
The CAP and the agriculture policy in general had been criticised for not being sufficiently consumer friendly — a point Senator Quinn makes frequently. The criticism may well have been justified but things have changed particularly in the past few years. The traditional argument focused on the fact that the consumer subsidised the cost of the CAP through a higher price for food, although I might add that the achievement of the policy in building up a secure supply of food has been virtually forgotten. However, the requirements of consumers have moved beyond the simple demand for cheap food. They want choice, convenience, safety and quality and they want assurances about the origin and conditions of production. Control systems and the implementation of the CAP have moved substantially in recent times towards meeting those concerns. This point needs to be considered not simply in the context of consumer orientation but in the framework of supporting agriculture. Taxpayers and consumers are prepared to support agriculture, even if that implies higher prices for food. In return they are entitled to expect good quality, safe food, acceptable systems of production, a clean and well kept rural environment and equity in regard to targeting support. It is possible to have an agricultural policy which delivers on these objectives and which serves farmers and consumers. In any event, a policy which tries to do otherwise is doomed to failure.
The Agenda 2000 negotiations will shape agricultural policy over the next decade. Despite the favourable balance of the MacSharry reforms, the beef sector is the area which has experienced the most difficulty over the past two or three years. Much of that can be explained by the turmoil caused by BSE but, these difficulties notwithstanding, it is doubtful whether our beef industry is properly positioned or structured to achieve its true potential. Many of the problems arise from volatility in some of the markets we supply. Thus, there is an attractive logic in the Commission's approach of reducing prices and increasing the level of direct payment. The critical issue is achieving the right balance.
Despite reservations about having such a large proportion of farm income depending on direct payments, our experience of direct payments has not been bad, especially when judged against the support system which went before them. A major problem is the balance between intensive and extensive production. Virtually all experts have agreed that the future for the European beef industry should be based on extensification and natural production, as Senator Tom Hayes emphasises. Given our production systems we can contribute strongly to that strategy. By extensification we mean a realistic level of stocking which would allow producers to earn a decent income and, at the same time, be environmentally sustainable.
As we are highly dependent on third country markets and the vagaries of the export refund system we can see merit in a system which, all other things being equal, would reduce our dependence on refunds. However, we have four concerns about the price reduction of 30 per cent, which is a significant reduction by any standards. First, will it achieve its objective of increased exports and consumption and, in particular, will it open new markets, especially in Asia? Second, the level of compensation on offer is not enough. Third, the production base is also being attacked through reductions in the suckler cow quota and in the special beef premium. With a price reduction of that magnitude, should it also be necessary to cut the production base? Fourth, we have concerns about dispensing totally with the intervention system.
The reforms in the milk sector also present serious problems and as currently formulated are much more than the modest adjustment which was suggested in July. Apart from the obvious problems with regard to the allocation of milk quota, which is discriminatory against this country, and the inadequate compensation, there are internal tensions in the Commission's proposals.
The future of the quota regime has been the subject of much analysis in this country and in other member states. While some states favour the abolition of quotas, for widely varying reasons, a view was emerging that extra quotas could be made available as a signal to the industry, as a method of loosening the regime and possibly creating the scenario whereby quotas could be abolished in 2005 or 2006. It is also clear that the rigidities of the present system are creating their own pressures, not least in Ireland. The proposed moves against dormant quotas and the suggested clawback on leases are designed to ease some of the pressures.
However, what is now emerging are additional quotas not necessarily to deal with problems in the milk regime but for other problems. At the same time the dairy cow premium will be related to quotas, which will create more pressure for quotas. Rather than releasing the pressure on the system, the measure proposed could have the opposite effect. In addition, a price reduction of 15 per cent creates circumstances where extra products, mainly cheeses, could be exported without refunds. However, the way extra milk has been allocated does not necessarily mean that the potential will be realised. We recognise more than most the social value and dimension of milk quotas and would not quibble with this aspect being addressed, provided we get a fair share.
Under the proposals, countries like Finland and Austria stand to get a quota increase of 7 to 8 per cent while Ireland — which has a commitment from the EU, dating back to 1984, to priority access to extra quotas — stands to get an increase of only 1 per cent. I was delighted to hear the Minister say he would remind the Council of Ministers of that 1984 agreement and will press that it stands by it.
As this is the first time that a proposal to increase milk quotas across the board has been tabled by the EU since the early eighties, both the IFA and ICOS are pressing for an 8 per cent quota increase, equivalent to that proposed for Finland. This would give Ireland an extra 89 million gallons of milk. Commissioner Santer's current proposals for the distribution of the additional quota discriminate blatantly against Ireland's milk producers. We would get only 1 per cent extra quota against a proposed 4 per cent for Spain, 7 per cent for Austria and 8 per cent for Finland. This is intolerable to Irish milk producers. Ireland has a better justification and a greater ability to produce a 7 to 8 per cent increase within the overall EU 2 per cent increase proposed by Commissioners Santer and Fischler.
Back in 1984, the EEC recognised Ireland's special dependence on dairying by giving us an increase in milk quota over 1983 deliveries while other countries had to cut back substantially. We were also given a commitment that our special dependence would continue to be recognised, with priority access to additional milk quota. To date, this commitment has only been debated in the context of milk quota cuts, with little success.
Now for the first time we are faced with a proposal to increase the EU's milk quota. The 1984 commitment, written into the minutes of the March 1994 Agriculture Council meeting, must be called on by the Minister to deliver a greater share of the 2 per cent overall EU increase for Irish milk producers. He guaranteed us today that he would remind the Council of Ministers of the 1984 commitment. An 8 per cent increase would be worth up to £100 million to the Irish economy and would allow for genuinely substantial development by smaller and younger farmers, who are the most dependent.
From this year butter fat content determines a farmer's milk quota. The base year will be 1984. Some farmers are disputing the annual results because the results in their milk records are different from what the Department establishes as their quota, based on information from the co-ops. This matter must also be addressed. The levels should be measured fairly, whether using butter fat content or some other method as a guide, to ensure Ireland's milk quota is not improperly reduced. I commend the Minister and the Minister of State in contesting these proposals which are damaging to Ireland's agriculture and economy.
I am sure all Members condemn these proposals as they could cause huge potential damage to this country. Their effect on the total economy, not just agriculture, would be significant so they must be fought.
We have been down this road before — the MacSharry proposals of 1991-3 were also severe initially. Irish agriculture was at that time presided over by the current Minister for Agriculture and Food. In those years he was a weak and ineffective Minister and he has given me no reason for greater confidence since he returned to office last July. Without wishing to make a political point, he convinces neither me nor many other people that he has the wherewithal to carry forward this battle.
The proposals of 1991-3 had to be fought but it was not Ireland who won that battle — perhaps because of the often attenuated arguments the Minister put forward at the Council — but France. The French were allies of the Irish and had similar interests to us. When they said no, the MacSharry proposals were greatly watered down to become much more favourable and did not have the damaging effect on Irish agriculture which was envisaged when they were first published. That is a warning to us that this battle is only beginning. The Commission's position as outlined on 18 March is a bargaining stance. Thankfully Commissioner Fischler was in a mood for compromise when he addressed last week's conference in Dublin Castle.
There is a fundamental problem with budgeting and it is disappointing that the Irish Government has not made an issue of this. The funding for the agriculture budget throughout the 15 EU member states is 1.2 per cent of EU GDP — that has been constant for years. The current proposals have been introduced because of the decision to enlarge the Union, which we all support. Enlargement involved taking in countries like Poland, Hungary and the Czech Republic which have a much higher dependence on agriculture in terms of the percentage of the workforce engaged in it and its contribution to the national GDP. When something with such fundamental implications is about to happen, I am surprised that the Government never seriously raised the need to increase even marginally the budget for the CAP.
At present the CAP budget is about 42.6 billion ECUs, that is, about £34 billion. While the percentage will remain constant, economic growth in the Union will result in growth from 42.6 billion ECUs to 49.3 billion ECUs by 2006, or approximately £39.2 billion at constant 1999 prices. We must finance all of these reforms from that budget. In addition, the transfers to the five applicant member states must commence after 2002. However, no significant amounts of money are to be transferred to the applicant members by 2002 or by 2006, at the time of full accession.
I understand approximately 1.7 billion ECUs will be paid in agricultural subsidies to the five by 2002, which will have increased to something under 4 billion ECUs by 2006. This money is in addition to the 42 billion ECUs and the 49 billion ECUs which will be spent within the 15 member states in that period. The sums of money are not very great and there will probably be a small adjustment in GDP take to the agricultural budget of the EU.
I deplore the fact that the Government has not made this a major negotiating point on behalf of the country, and not just the agricultural economy. The suckler cow premium is currently £140 per head; it was £170 per head when the original Santer proposals were published last July but it will be £143 per head under the new Fischler proposals. The special beef premiums which are paid at ten and 22 months are currently £90 per head; they were £184 per head under the original Santer proposals and will be £135 per head under the Fischler proposals. Bone meat premium is currently £112 per head; it was £293 per head when the original Santer proposals were published but, under the Fischler proposals it is down to £175 per head from 18 March.
How did the Government allow this? The original proposals were made by the President of the EU Commission, Mr. Santer. However, the Agriculture Commissioner was allowed to publish significantly reduced figures last month. Given our crucial interest in this area what did the Government do? What did it do when the original figures were released last July? What did it do to ensure that Mr. Fischler's figures would not be significantly lower? I hope the Minister of State will address these matters in his reply.
In his speech the Minister of State rightly made much about beef. This is an important sector in the agricultural economy. It is proposed that by 2002 the price for beef will be down to 60p per lb; at present one can get 90p per lb and last Christmas the price was as low as 80p per lb. A price of 60p per lb for beef four years from today is an unimaginable prospect. It will wipe out the beef industry. It takes at least 75p, perhaps as much as 80p, to produce a lb. of beef on the farm. Yet it appears we are willing to accept a proposed price of 60p per lb. There is a supposed promise of compensation for 80 per cent of any loss. However, the real compensation could be much less.
We need to know the consequences of these proposals. We need a strong Minister and the involvement of the Taoiseach. He must build alliances with other member states who have a similar interest to ours to ensure that these proposals "shall not pass", to quote Marshal Petáin. Unfortunately, I do not believe the Taoiseach has a full appreciation of agriculture. The fact that he does not come from an agricultural background need not work against him or against his appreciation of the importance of the industry. However, his role will be crucial because the EU Heads of Government will be very important when finally deciding the shape of this package. They were extremely important on the last occasion. I paid tribute to the then Taoiseach, Mr. Haughey, for using his position as Head of Government to influence his colleagues, especially the French President, to ensure that the shape of the proposals that emerged in 1991 were greatly enhanced in terms of their advantages to Ireland by 1993.
Thousands of people have left rural Ireland in recent years. I live in a part of the country where the rural population had declined by 10 per cent. In the middle 1980s there were 10 per cent more people on the register of electors in most parts of the county in the west. The same is true of areas west of the River Shannon, west of a line drawn down the middle of the country and peripheral regions. Despite the evidence of decline in rural areas we are building towns and cities with nothing but social problems — including overcrowding, bad services, crime, etc. We are destroying and eliminating a part of the country that affords a wonderful quality of life.
Thousands of people fled from rural areas to a very bad quality of life because they could not generate an economic living. While we will not fully arrest the problem because it is a worldwide phenomenon. we have an opportunity to take some action. The applicant member states on the threshold of joining the EU must look at the balance between their urban and rural populations and extract from the Union much more sensitive policies which will preserve their rural populations.
It is madness to continue to urbanise the country, with all the social problems that ensue, while, at the same time, denuding the rural areas. Yet it is a crazy imbalance that is officially blessed and encouraged. I have no doubt we will renegotiate and get concessions on 70 per cent of the proposals because these are just the opening shots. However, if most of it is implemented the inevitable result will be to diminish the rural population and increase our urban sprawl and the associated social problems. I appeal for national unity on this issue across all sectors.
The Minister said £260 million per annum will be lost in reduced transfers but the farming organisations seem to agree it will be closer to £280 million. We cannot take such a loss on board. Some people say Ireland always has a begging bowl out looking for EU transfers. We are entitled to those transfers because we gave up a great deal when we became members of the then EEC. We are very good members of the EU and we maintain strong public support for membership.
Our membership meant some hidden losses for us, such as the job losses which were sustained in many traditional industries. Thirty years ago our clothing and leather industries employed thousands of people but those jobs were lost due to the competition which resulted from free trade. That is just a small part of the price we paid for membership of the Community. The people who glibly say we have a béal bocht attitude and are constantly holding out a begging bowl to the EU are wrong because we are entitled to those transfers.
We will now get fewer transfers because of our economic growth. However, the agricultural part of our economy is contracting. The agriculture industry is contracting worldwide, nevertheless, it is very important for Ireland. In 1900 over 85 per cent of Europeans lived in the countryside but there have been huge changes since then. There comes a point when we must cry halt.
We have an opportunity here to ensure this vital national interest is fought for and that the battle is won. This battle can be won because we have a good case. However, I hope those who make our case do everything that is expected of them. Our negotiators have the necessary influence but whether we fail or succeed will depend on the skill of those who carry the battle forward for us. I am sorry to have to express a lack of confidence in some of the main players who will carry that battle forward for us on the basis of their past and recent performance, but I hope they will get the message.
There has been a failure to pay farmers premia which have been due to them for months. Tens of thousands of farmers have not received special beef premia, suckler cow premia or cattle headage which were due last September. I cannot understand what is going on in the Department. Last year all those payments had been paid by this stage. I appeal to the Minister to ensure that money is paid as soon as possible. The people who rely on these premia have lower incomes today than last year. There is no justifiable excuse for withholding those payments. It is not an EU problem but a problem in the Department. I appeal to the Minister to honour the agreement made by the previous Minister with the farming organisations on a timescale for these payments.
It is the same system the previous Minister set up.
It is not being worked properly.
Rural depopulation would have something to do with bachelors.
I welcome the opportunity to express my views on the recent announcement of what are commonly called the Santer proposals. Everybody was taken aback by the proposals when they were formally launched by the Commission, particularly in view of the information we received some months ago and the changes which occurred between then and now.
This is, as other speakers have mentioned, a primary national issue. It is one of the biggest issues facing this country over the next number of months. As the Minister and others said, it is a case of getting everyone on board and focused on deciding our bargaining position so that we can fight these proposals in the country's best interests. We must examine the cards we hold and play the game properly. We are extremely good negotiators in Europe and, provided we do our homework properly, we can improve the situation of the agriculture industry in these negotiations.
It is very important to examine this opening shot from the Commission. The suggestion that beef prices should be reduced by 30 per cent, dairy prices by 15 per cent and cereal prices by 20 per cent is totally unacceptable. Others have rightly said this country is far more dependent on its agriculture industry than any other EU country, including the next ten countries which are seeking admission to the Union. Agriculture continues to play an enormous role in this country. The fact that 90 per cent of our beef produce is exported is indicative of how serious these proposals are for us.
The Minister said the proposals will lead to a reduction of £250 million for our beef industry. That figure must be seen in the context of the very low incomes earned by beef producers for many years. The annual farm income figures produced by Teagasc show that beef farming is always at the bottom of the league. Most, if not all, beef producers have a much lower income than the average industrial wage. I do not say that to make comparisons but to put the figures into context. A number of large beef producers are doing reasonably well but many small producers are not even scraping a living out of their enterprises. They have invested in these enterprises over the years and are committed to them, perhaps because of the type of land they have, and cannot leave them. Are we to cast these people aside? We cannot do that. It is the role of everyone in this country to look after those in need.
The proposal by Commissioner Fischler to increase extensification payments from £35 to £80 is welcome for other countries, but not for Ireland. The objective behind it is laudable and we want to see more extensification for many good reasons. The consumer wants it because the quality of the beef being consumed is of primary importance and we must give the best quality we can. We need to move more towards extensification but not by aiding certain countries through increases in the maize silage premium as proposed. That works against our grass based production, particularly our beef which has always been grass based. It will not do the country any good to give a maize silage premium to those not engaged in grass based production. We need people to continue to produce grass based beef.
The inclusion of non-premium animals in the extensification livestock units also works against this country. We want to keep the number of livestock units per hectare low because that aids extensification. To include other animals will not help from our point of view and it must be vigorously opposed. We will consider any proposals to raise the level of livestock units per hectare, otherwise the situation should be left as it is.
One of the frightening aspects of the beef proposals is the suggestion that intervention will be abolished in the year 2002. This will undoubtedly cause problems. As the Minister said, had intervention not been available in March 1996, I dread to think what would have happened when the market was totally disrupted by the outbreak of BSE. I am not saying that intervention should be used as it has been used in the past, but we need a safety net in the event of a major marketing catastrophe. These proposals must be vigorously fought because they work against this country which is more dependent on beef and beef exports than any other country in Europe.
There is much concern about dairy quotas. We were given a commitment in 1983-4 by the European Council which stated: "When distributing quantities added to the reserve, priority will be given to Ireland". However, the Commission is reneging on that commitment. A 1 per cent increase in quotas is not enough for this country. If the increase being considered throughout the EU was distributed equally, we would get a 2 per cent increase which would result in an extra 22 million gallons. I would welcome discrimination in favour of allotting that to young people because we need to encourage them to become involved in the dairy industry.
The 1 per cent increase is based on the Commission's projections of the consumption rate in the years ahead. There has been a considerable increase in the consumption of dairy produce throughout the world over the past five years which has been greater than the Commission forecast. There are plenty of reasons to suggest that growth over the next five to ten years will be far higher than that for which the Commission has allowed. If we were to take a relatively conservative estimate of what that growth would be, there would still be scope to increase the quotas further. It has been asked if quotas should be abolished and if this country would be well served by that. I remain to be convinced by that argument because economically the safety net of quotas has stood to us in the past. We should continue to try to increase our quotas.
We cannot accept an overall reduction of £22 million in the income of cereal producers. The great fear is that these proposals will lead to an increase in intervention. We want to move away from our dependence on intervention. The reason it may become more important in this area is that a reduction in prices will lead to a certain growth in demand. However, that will not compensate for the increase in production which will take place as a consequence of these proposals. We must be careful about proposals in this area.
It is reasonable to regard these proposals as discriminating against Ireland. That may be because the Commission believes we did well in the past but is that any reason to discriminate against us? We have performed well and we want the opportunity to continue to do so. We are aspiring to keep as many people as we can in rural Ireland. It is important to increase the numbers of those involved in agriculture because of the consequences if that does not happen. In its November submission to the Council of Ministers the Commission stated this would be the thrust of its proposals. I suggest these proposals are contrary to that and are discriminating against this country because of our good performance in the past. If someone does well, should they be discriminated against? I do not think so and we must fight these proposals tooth and nail.
Many young farmers are concerned about whether they should continue in farming or agricultural production. If these proposals are accepted there is a great fear that we will have few farmers in the years ahead and that those who continue in agriculture will be big producers. That is not a good direction in which to go. The onus is on the Government, the Taoiseach, the Minister and every interested party to get together and plan our best strategy to fight these proposals and to get the best outcome for this country.
I want to contribute to this debate by taking a long term view. While I respect people's instinct to hold on to what they have as long as possible, the best interests of the farming community will be served by taking a long term approach. Irish agriculture will not be helped by the short term approach which, unfortunately, is often expressed when this subject is debated. I had, I am afraid, a sense of this short term view of agriculture from what the Minister and many of my colleagues said today. We tend to be reactive rather than proactive. We must initiate change rather than merely attempt to respond to it.
The food industry presents vast opportunities. I had the opportunity last weekend to visit New York and spend some time with Senator Hazel from Nebraska. He mentioned that in the next 25 years more meals will be consumed in the world than have been consumed in the last 10,000 years. In a climate where we often hear of the decline of agriculture it is important to remember that we have a vast and growing marketplace.
The Santer proposals deal with the reality that, in the 21st century, we will have a radically new European Union. It will have a wider membership, a broader political agenda and, as the Minister said, 100 million new citizens. It will be a long way from the cozy group of six countries who, 40 years ago, had as one of their primary aims the creation of a community that would be self-sufficient in food and could, effectively, close itself off from the rest of the world.
How the world has changed since then. Our challenge, in the new European Union is that agriculture will have a smaller and less dominant role. That change is inevitable but the reaction of farming interests to this emerging reality is not. The choice is between sticking our heads in the sand and trying to resist change as long as possible or choosing to embrace change and seeking to benefit from a new set of opportunities. Neither option is without pain.
It is my belief that Ireland could play a leadership role in taking the forward looking approach. I believe, also, that it is in Ireland's interest to do that because agriculture is more important to us than to many member states. May I offer, from the perspective of one who sells rather than produces food, four suggested approaches that are needed to take advantage of 21st century realities in agriculture.
A couple of weeks ago I spoke at a very interesting IFA meeting in the Curragh and I heard words used which I had never heard before. Speakers referred to "managing the market". I do not understand that term. I am used to a marketplace which is unmanageable. I respond to what is happening in the market rather than manage it. I heard of "unacceptable prices". I come from a world where any price which the customer is prepared to pay is acceptable. I entered a business in Dublin in 1965 which, since then, has seen 18 grocery and supermarket chains go out of business. I heard none of them say it was unfair that their business had been taken away, that people no longer wanted to buy their produce or that the world had changed. We had to recognise that the world changes and we had to adapt to stay in the marketplace.
My first proposal, therefore, is that the agricultural community should adopt a customer focus. Since we joined the EU the emphasis has been on the producers' need rather than on the needs of the customer. That is changing fast and the only sustainable future for a profitable agriculture sector is one that is firmly based on the marketplace. Agricultural decisions need to be taken on the basis of what customers actually want. The priorities that should be followed are those of the customer.
Customer priorities today are safety, health, taste and value. Customers want to know if a product will kill them or make them sick? Is it good for them? Will they enjoy and relish it and is it a good deal? These are the questions customers ask every time they buy a product which is produced on a farm. These are the priorities which should drive European agriculture in the future but they were not the priorities in the past.
My second proposal is that farmers should take quality more seriously than they have done in the past. When customers consider value nowadays they are not just talking about price. They are talking about quality and price. Increasingly customers, whether they are buyers from big supermarket companies or individual shoppers, make it clear that quality comes before price. They will no longer tolerate products which are below par or about which they are not given full information. For the farmer of tomorrow, quality can no longer be an option or a vague concept. It is an essential which will need, more and more, to be quantified and demonstrated to the consumer. I am not sure that is understood. When I hear someone speaking about quality I say, "give me another word for quality". The alternative is usually a word such as taste, tenderness or flavour. We must think in terms of these words if we are to understand the idea of quality.
Irish agriculture should position itself firmly as the source of quality products, and only quality products, because we are a small enough global player to concentrate entirely on the quality end of the market rather than on mass produced, generic products which are all the same. Such a position at the quality end of the market does not come naturally or as a right. It must be earned by proven dedication to quality at every stage of the production and distribution chain. It cannot be bought by writing large cheques for marketing campaigns.
My third suggestion is that farming interests declare war on the enemies within. One or two of my colleagues were with me when I spoke about the enemies within at the IFA meeting in the Curragh. In a marketplace which depends so much on reputation, the odd rogue who will not play by the rules cannot be tolerated. A few such cheaters can destroy the reputation of the whole farming community. Neither Irish nor European farming has been totally free of the cowboy element in the past, whether we are talking about swindling the EU or using banned feed products or growth stimulators. I think of how Lord Haw Haw, during World War II, used tease the British with his knowledge of what was happening in their country, thus letting them know that there were German spies there.
The farming community must root out those individuals who are doing untold damage to the future of agriculture in this country. They must take this opportunity and not be worried about being called "spoilsports", "scabs" or "tell-tales". A change of attitude is needed so that those practices are clearly seen as crimes against the agricultural community and the wider national economic community. I suggest that a "zero tolerance" policy, which will be attractive to the Government, be put in place in this area. Until members of the farming community state that they will not tolerate such behaviour, we will not be able to eradicate the problem.
My final suggestion is that farmers must wake up to the fact that agriculture alone can no longer sustain rural communities and they should give their full support to rural development. Senators Connor and Gibbons recognised the fact that the agricultural community will not be able to provide the number of jobs it did in the past. The farming community must do something about that recognition. Tomorrow's reality is that no country, even those supported massively by the European Union, can provide an increasingly costly infrastructure for the benefit of an ever-diminishing number of farmers.
The Minister stated that 6 per cent of the workforce in the EU are employed in agriculture. In the countries likely to join in the coming years, 20 per cent of the workforce are thus employed. However, I understand that this figure will be dramatically reduced. We can assume that fewer people will be employed in farming in the future, but we must discover a way to ensure that rural development takes place.
Farmers should adopt rural development as their cause, even when what is proposed has nothing to do with agriculture. They should support rural development not from the short term perspective of "What is in it for us?" but from the long term perspective that it can help share a burden which was borne by agriculture alone in the past. By adapting in a timely fashion to inevitable change, Irish agriculture can stabilise the employment it provides, increase the economic value it produces and become the centre of a rural lifestyle which will be desired by everyone else in the country. If the choice is to bury our heads in the sand and resist change, the alternative is certain decline and decay.
What I have been saying reflects Irish national interests as I perceive them. However, we must also take account of the world perspective. In that context, Ireland can adopt a leadership role in the European Union. Europe is not an island that can cut itself off from the rest of the world. Europe, as the largest marketplace and the second richest continent, has a responsibility in the global production of food. As I stated last year on World Food Day, we in Ireland, with our folk memories of the Famine, should be more conscious than anyone else in Europe of the unacceptability of having some people starve while others eat well or to excess.
Our perspective should lead us to bear in mind not only Irish and European interests but also the interests of the entire world. We should be leaders in Europe of an attempt to integrate the continent's food policy with global realities. We must ask ourselves and our partners in Europe whether the future we envisage for European agriculture is morally defensible in the light of those global realities. Are we doing enough to share our food products with the rest of the world? Do our trade policies on food make the problems of the least developed countries worse?
Time and again the Irish people have proven to be spectacularly generous in giving to countries and people less well off than themselves. We should extend that role to the European arena. We should lead the way in ensuring that European policy on food is not only good for farmers or European consumers but is also a positive and benign force in addressing the global food challenge.
The Santer proposals do not go far enough in one direction. We must take action on the aspects of these proposals by which we feel threatened. We must look on them as an opportunity to do something to solve problems rather than merely as an excuse to react to threats.
The Santer proposals on the future of the Irish agriculture industry are of great concern to everyone and they offer a great challenge to those involved in that industry. I urge Members to put aside their political differences of opinion and unite in support of the Government — particularly the Taoiseach, Deputy Bertie Ahern, the Minister for Agriculture and Food, Deputy Walsh, and their ministerial team — in its efforts to negotiate a package of reforms which are acceptable to Ireland and will allow the vital national industry of agriculture to develop and support a standard of living for farm families in rural areas. That is vitally important for Irish society. Irish people have a special dependence on agriculture and I know the Minister and the Government will ensure that this is protected and safeguarded beyond the year 2000.
With regard to Senator Quinn's statement about quality, the standard of food has improved tremendously in recent years. I agree that more could be done, but the farming community must be complimented for embracing the great change which has taken place in agriculture.
Senator Connor stated that the Minister for Agriculture and Food is not strong enough. However, in my opinion we have a strong ministerial team comprising the Minister, Deputy Walsh, and his Ministers of State, Deputies Davern and Ned O'Keeffe. Combined with the Taoiseach and other members of the Government, I believe they will do a good job in the negotiations on the Santer proposals.
Irish farmers have worked hard to develop their holdings and businesses to provide a better future for their families and generations to come. Their great work is easy to see as you travel through rural areas. Improvements to the land through reclamation, re-seeding, etc. — even in areas where land quality is not good, such as parts of Counties Monaghan and Cavan — are a great credit to farmers. They deserve praise for their enormous investments in farmyard structures, cattle housing etc., and their efforts to use environmentally friendly farming methods, particularly control facilities to stop pollution of lakes and rivers. The cost of these investments often went beyond what was financially viable for many farmers, but they made them because of their commitment to their businesses and also to meet the challenges of the future. In addition to this enormous investment, farmers, their wives and families work long hard hours on their farms. It is this above all else which provides us with the quality of food products the consumer enjoys.
The agri-business sector has developed enormously in the past 20 years, processing a quality product which is the envy of the international food market. We must defend all involved in this great progress and development of Irish agriculture against the current Santer proposals. If implemented, these proposals will be disastrous and our key agricultural sectors will not be viable. This will spell disaster for all of rural Ireland. I have every confidence that this Government will defend our vital national interest of agriculture. I urge all our political leaders and farm organisations to unite behind the Minister as we head into these negotiations.
The reform of CAP is ongoing and inevitable for a number of reasons, including GATT, world trade negotiations, EU enlargement to the East and EU budget negotiations. However, these pressures should not mean the destruction of Irish farming as will result if many of these proposals are introduced.
The beef industry in this country has been through a very difficult period over the past two years because of the BSE shock. Farming confidence is low and the Santer proposals have come at a time when the sector appeared to be rounding the corner with 90p per pound for steers available, and the continuing efforts of the Minister paying off.
The Santer proposals on beef are outrageous and must be rejected totally. The 30 per cent beef price cut will result in a reduction in price to 60p per pound. It is accepted that production costs are approximately 85p per pound, with intervention to be abolished.
The proposed cuts in national quotas for suckler cows would reduce our national quota by 93,000 premia and the proposed cut in special beef premia would cut our quota by 258,000. The proposal to include heifers in stocking density calculations must be rejected. This would bar many farmers from claiming the premium and make any proposed increases useless.
Any moves to world market prices must be very slow, and guaranteed to be fully compensated for in Ireland. As our system is intensive and grass based, intervention must be safeguarded. The national envelope involves only 6.7 per cent of the EU shareout, whereas Ireland currently obtains 12.5 per cent of total EU premia. With no compensation for premia cuts and only 80 per cent compensation for price cuts, the beef sector could face loses of almost £200 million. This cannot be allowed to happen to our beef industry.
The proposed cuts in milk price of approximately 16.5p per gallon and a 1 per cent increase in quota offers little reward for the financial investment in dairy hygiene by farmers in recent years. The increase of only 1 per cent in quota to Ireland concerns me for a number of reasons. In 1984, it was widely agreed that Ireland had a special problem with the introduction of milk quota and it was felt that quotas would be increased for Ireland. This never happened and there were only some reductions.
I worry about whether compensation payments in the future will be secure. This 1 per cent quota increase should be much larger, because a good sized quota in 1984 is no longer viable. In 1984, a 20,000 gallon quota was seen as good; today a 40,000 gallon quota is required for survival. A large percentage of Irish farmers would not qualify for the proposed dairy cow premium due to the gallonage calculation.
The 20 per cent cut in cereal prices, the equivalent of £57 per tonne, will make cereal production in Ireland very unattractive. When these proposals were announced by Commissioner Fischler on 18 March, one could immediately feel the effect on farmer confidence for the future, particularly for young farmers taking up a career in the industry. It is essential that young people enter farming if a vibrant industry is to be maintained. With compensation payments forming the main income source in the future, it is more uncertain. Direct payments are highly politically vulnerable and a decision at a Council of Ministers' meeting could cut the level of supports drastically.
I am concerned that these proposals will result in a cut in prices to below the cost of production. In the production of beef and cereals, this means direct payments become 100 per cent of profit. Non-production on the yields of good land will be more profitable while many in the world starve. Another great cause of concern is that this type of 100 per cent profit from direct payments will lead to a low cost-low output agriculture with implications for food quality food processing, the farm inputs sector and also for those servicing the agricultural sector and farming, such as agricultural contractors, builders etc.
With the enlargement of the EU, it appears the system of direct payments will not apply to the farmers of the new member states. How long will the new member state Governments accept the sale of their products at a low price while other member states get assistance? The enlargement of the EU will have major implications for the CAP budget in the years ahead.
The Santer proposals will undoubtedly bring changes to many areas. The proposals for agriculture are unacceptable, while those for Structural Funds must be strongly resisted. I urge the Government to ensure Border counties retain the Objective One status because of the problems in the area in recent years.
I urge all interested in the welfare of Irish agriculture to unite behind the Minister for Agriculture and Food in the forthcoming negotiations in Brussels as he defends a vital national interest given the current proposals would cost Irish agriculture substantially in terms of output and £250 million in losses in farm income.
Will Members share time as the debate must conclude at 5 p.m. and I do not want to see people deprived of an opportunity to speak?
An Leas-Chathaoirleach
I appreciate an amendment to the Order of Business was made and am most anxious that everyone gets an opportunity to contribute.
Agriculture is an important industry and the Minister has our support in his endeavours at the upcoming negotiations on these proposals. He faces a difficult task but this is a crucial time for the economy because agriculture cannot be seen in isolation. The debate involves not just the Santer proposals but the future of the rural economy which is facing a period of unprecedented change. It behoves us to think carefully about the implications of the proposals published recently and to proactively examine ways in which the challenge can be faced.
In the context of EU enlargement and the liberalisation of world trade there are many changes on the way; this has been known for some time. There are more farmers in Poland than in the entire EU and the vast majority of them are poor, existing at the level Irish farmers were at 1940s and 1950s, and we will be seen as the rich farmers of Europe following enlargement. I saw at first hand the problems in the former East Germany, particularly in agriculture, before Christmas. It is difficult to take in when one thinks of what is required to transform those agricultural economies and achieve a standard which has been taken for granted in Ireland.
I urge the Government to produce an integrated and strategic policy to ensure the worst social effects of these changes will not be experienced and to look at how we could ensure that rural populations do not decrease so much that life as we know it will not disappear because of the drop in the numbers engaged in agriculture. These economic trends have implications for schools, post offices, shops, villages and the environment. I have not seen any evidence that we are doing anything but reacting to an agenda set in Brussels and elsewhere. With a diminution in the standard of farming, no space has been left for developing any proactive policy for integrating our industrial, agricultural and rural development and environmental policies which is required in terms of a response.
I am bothered that the agenda has largely been set in Brussels. While it is fine to rely on Brussels in good times, one must have a safety mechanism and a strategic sense of self-determination in that we must have control over our destiny when it comes to the rural economy. I live in north Tipperary which is already experiencing huge change and I am sure that will continue. For instance, there will be a continuous drop in the number of people engaged in agriculture and the proposals, particularly in the beef sector, will accelerate that change. What is a small farmer? There was a time when 100 acres provided a good living to support a family but nowadays, depending on quota size, one needs a great deal more land than that.
There are dangers inherent in the increase in part-time farming where an individual who works in a big electronics factory will be easily tempted to give up farming and work full-time. This ensures the next generation will have no involvement in farming. Will this be allowed to happen or will incentives be put in place to ensure people remain in farming in light of the potential social effects of a rapid decrease in the numbers on the land? One can drive around different parts of the country any day and see abandoned farmhouses, etc., which is a visual representation of an economic fact. We are experiencing the effective wiping out of the small farmer. While the amount of money circulating in the agricultural economy may not drop significantly, particularly if there is success in maintaining the level of direct aid, it will be concentrated in fewer hands.
I wish to clarify the Government's thinking on rural decline and depopulation, to see imaginative proposals, for instance, on the interdependence of a town and its agricultural hinterland, and to know whether the Government might consider incentives to ensure there would be seasonal employment to maintain farmers on the land, particularly during the winter period.
When the Sugar Company in Thurles was in operation it was common practice for small farmers in the locality to take up seasonal work in the factory to supplement their farm incomes, thus ensuring their survival in farming. Unfortunately, this type of seasonal employment is no longer available. There may be part-time or shift work available in companies like Digital in Galway or Dell in Limerick. Some IFA representatives have thought along those lines but I do not see any development of an integrated strategy in relation to the future of rural Ireland.
Senator Quinn's favourite subject is food, particularly its quality and marketing. I agree with a lot of his comments. While we may think we have done enough to market Irish produce, it is only when we travel abroad that we realise that our high quality cheeses, which we consider to be world renowned, have never been heard of. We need to market our produce with a more creative and strategic approach because we are faced with major challenges.
I support the Minister and the Government in the future negotiations, which will be very difficult.
I wish to share my time with Senator Moylan.
Is that agreed? Agreed.
I compliment the Minister for the outline he gave at the Commission's meeting last week and for his statement this afternoon. We must kept in mind the huge task that lies ahead for the Minister and the Government. We are confident the Minister, the Ministers of State, their team of officials and the Government will achieve a successful outcome in relation to the current proposals.
Many aspects have already been covered. Most Senators have mentioned the different sectors, particularly the 15 per cent cut in beef, 30 per cent cut in dairy and 20 per cent cut in the cereals sectors. It is natural for us to call for the cuts to be enhanced with proper payments so that there will be no reduction in incomes. Those cuts and all the anomalies within them are unacceptable because many farmers will not survive in the industry if they are implemented. It is against this background that we can see the conditions that have to be overcome in order to maintain a thriving rural population. The agricultural sector could possible survive with only 20,000 farmers but that is not what we are talking about. We need a balanced rural population. I call on the Minister to make two radical changes. First, we are all conscious of isolated small farmers producing beef, milk, etc. In relation to the milk industry it is important to have a transport subsidy to assist those farmers. Many small farmers are getting out of milk production because of the requirements imposed upon them such as dairy hygiene, etc. ICOS support a transport subsidy of 3p or 4p per gallon in order to combat Santer's proposals.
Premium payments for maize is also included under Santer's proposals. France grows 1.5 million acres of maize while Ireland has about 2,000 acres of maize. Other European countries grow a lot of maize and, therefore, we should also have a maize subsidy. If we had one we should also have a grass or silage subsidy because our industry is grass based. I call on the Minister to seek these subsidies.
The main reason the proposals are so unacceptable is that the enlargement of the EU is creating budgetary difficulties. If there is to be an expansion of the EU — there are currently 11 applicants — then there should be an increase in the budget to cater for the needs of the new entrants. We also have to bear in mind that Brussels is engaged in three major activities. These are: the enlargement of the Union, the single currency and the negotiations with the World Trade Organisation. The Minister correctly pointed out that these matters affect these proposals and they reflect poorly on this country. The Minister is well acquainted with the problems.
I compliment the Minister on the changes he has negotiated in terms of the early retirement scheme for farmers. It is something for which I called in the past. I am glad he announced it here this afternoon because we are talking about young people entering farming and these two changes will assist greatly in bringing them into agriculture.
Cereal growing gets little attention. If the proposals now before us are implemented, cereal growing will stop in this country. I ask the Minister to protect the growing of cereals. The users of grain as a feed base benefit from good grain for rations for feeding animals, be they dairy, pigs, poultry or for beef production. We need a continuing cereal industry and I urge the Minister to do everything possible to ensure the continuing production of cereal in this country. The losses would be around £20 million less the production costs. The compensation will not match that.
I thank Senator Callanan for sharing his time and I welcome the Minister.
I welcome the Minister's announcement that the most recent proposals are so damaging to Ireland that he could not even commence discussion on them. That puts down a marker in time. The proposals discriminate against Ireland as a full member of the European Union since 1972 by not taking into account the vital national interest agriculture constitutes to Ireland. We are an island and must find export markets for 70 to 80 per cent of our main commodities, beef, milk and sheep. Export refunds, while of assistance to market produce outside the EU, are no replacement for access to the strong markets within the EU. The current proposals go against the thrust of previous reforms by not encouraging extensive methods of production. Holland and Denmark will gain more in the dairy proposals than Ireland. Our environmentally friendly, grass based agricultural economy appears to be discriminated against.
The proposal to pay premia on heifers is welcome and I ask the Minister to include area based payments for farmers unable to access premia currently. I am concerned that the inclusion of all stock in the extensification calculation will result in a substantial number of farmers not being able to avail of extensification premia. I hope the Minister will clarify the position on this matter.
I am at a loss to understand the rationale behind the substantial cut in the suckler cow premia as currently proposed and as originally proposed in the Fischler document last July. Lack of adequate compensation has every farmer in the country frightened about the future.
The maize silage subsidy will not only benefit French and German farmers, but remove the competitive advantage the Irish grass based production system enjoys. It is up to us to identify our own equivalent to maize silage and to fight for it in the negotiations.
I congratulate the Minister on his stand on seeking more quota for Ireland and reminding the EU of commitments made on the introduction of the milk quota. I feel the dairy regime should be loosened up to allow more young farmers to enter dairy farming. Young farmers are the lifeblood of farming in this country. Some months ago Teagasc published a profile estimating that there were 150,000 farm holders in the State. Farming is the sole occupation of 103,000 of those and 47,000 have a main occupation other than farming. Teagasc projected that by 2005 there will 130,000 farms of which 30,000 will be commercial farms, 43,000 part-time farms, 33,000 farmers dependent on agriculture with inadequate incomes and 24,000 elderly farmers without successors. The age profile states that only 12.5 per cent of farmers were under 35 years of age and only 31 per cent under 45 years. Almost 50 per cent of farmers were in an age bracket of over 55 years. That is worrying. We must do something to encourage younger people to enter farming. We can only encourage them into farming if those young, well educated farmers see a livelihood for themselves.
I am concerned the current rural development regulations will not facilitate development of the rural economies to allow them to absorb those leaving agriculture. Rural development should be about more than deer farming and forestry. Area community based rural development programmes are the best way of maintaining rural populations as well as catering for the inevitable increase in part-time farming.
Some of the proposals are unrealistic as far as farmers are concerned. If we continue to produce quality, traceable produce we will win with a premium price for our quality products. We must always remember the customer pays the price, therefore he calls the tune.
Senator Connor condemned the Minister on cattle prices. From my point of view as a practicing farmer, I saw his Minister being hailed as he stood over a drop in beef prices form 105p per pound to 78p per pound when he was in Government. The present Fianna Fáil-Progressive Democrat Party Government have ensured prices have risen to 90p per pound. We do not say that is enough for farmers to stay in there but it is a move in the right direction and credit should be given where it is due.
I wish the Minister well in his work on behalf of the farmers and this country. I thank Ministers of State Treacy, O'Keeffe, Davern, Moffatt and Minister Walsh for their attention to the agricultural scene in this country
These proposals are not just frightening; they are alarming and place Irish agriculture at a crossroads it has never before faced. Small hill sheep farmers in my area are on their knees. Many of them live in mountainous and disadvantaged areas. I hope the schemes for severely handicapped regions will remain in place because they are vital.
Beef prices are still too low. I wonder what happened to the much heralded promise of the Government when in Opposition to reopen and expand the live export markets.
The former Minister, Deputy Yates, announced that on the morning of the general election. It has been done. According to him, the Egyptian market is already open.
The Government when in Opposition made promises long before that.
That side lost the election.
The Minister for Health and Children, Deputy Cowen, said it.
Deputy Coghlan without interruption.
The Government's efforts have been ineffective. The truth is that beef producing farmers are still at the mercy of the factories.
If the negotiations are unsuccessful, the Santer proposals could represent the greatest disaster ever to befall the land. We face the most difficult negotiations of this age. The possible immediate and consequential adverse impact of the proposals, if implemented, is incalculable. We must never allow any high flown European political objectives to steamroll the legitimate interests of our farmers and rural economy. We must not be prepared to write off our family farm structure which is unique and valuable, although not in monetary terms. It behoves us to ensure its continued viability.
The proposed cuts in beef and cereal prices to below the cost of production would leave producers very exposed. They would be totally dependent on direct payments and liable to extinction if the Eurocrats decided to tighten matters further. It will not encourage young people into farming. If we must take this road, the very minimum that would be acceptable are long term guarantees on CAP direct payments and the preservation of premia and area aid. I agree wholeheartedly with the farming organisations that the European model of agriculture, based on the family farm with a living rural economy, the protection of the environment and consumer demands in relation to food quality and traceability, must be legally enshrined in the next WTO agreement.
Beef and milk production represent vital national interests. Accordingly, this must be reflected in the final CAP reform decisions. Beef production is ten times more important and milk production is six times more important to our economy in comparison to the EU average. Therefore, at a minimum, we must hold our current share of the EU beef premia budget, not suffer any reduction in our suckler cow quota and be given priority in the increased EU milk quota.
There have been huge delays in all categories of payments to farmers. Under the charter of rights, farmers are entitled to payments on time. However, many farmers awaiting payments had to make arrangements with banks for extra borrowings on which they had to pay interest, even though the delays were the responsibility of the Department. Depending on the bank with which they dealt, many farmers were probably front loaded. Will the Minister give a commitment that payment schedules will be met this year and from now on?