Seanad Éireann debate -
Wednesday, 2 Jul 2003

Vol. 173 No. 17

Common Agricultural Policy: Statements.

Minister for Agriculture and Food (Mr. Joe Walsh)

I am delighted to have the opportunity to present to the House the outcome of the negotiations on the mid-term review of the Common Agricultural Policy which were concluded in the council of Ministers in Luxembourg last week.

The Commission's proposals for the mid-term review of Agenda 2000 were the subject of negotiation for almost a year. Outline proposals were presented by the Commission in July 2002 and the more detailed proposals were published in January 2003. The proposals comprised the most radical reform of the Common Agricultural Policy since its foundation and have been the subject of detailed analysis and intense public debate both here and throughout the EU. The Council of Ministers has debated the proposals at each of its meetings this year. During the course of the negotiations, my officials and I had close consultations with all the farming, food processing and other representative bodies, mainly through consultative groups which I set up for this purpose. The issues and concerns have been identified and have been well known for some time. The fact that the negotiations in the Council continued for a full year is indicative of the complexity of the proposals but also of the difficulties facing Ministers in reaching a decision.

My position on the Commission's proposals was well known. My objectives in the negotiations were to safeguard the benefits to Irish agriculture and to rural economies achieved under the Agenda 2000 agreement and to ensure the best possible level of support and protection of our production base into the future. The agreement which was reached last week in the Council was the culmination of a long negotiating process and was an acknowledgement by all Ministers that it was time to end the uncertainty about the future policy framework and to conclude the process.

I am convinced that an objective and fair-minded examination of the outcome of the negotiations will establish that I have been successful in achieving my objectives and in defending the best interests of Irish agriculture. The final outcome contained substantial modifications to the Commission's initial proposals and represented a balanced agreement and a successful outcome to the negotiations from Ireland's point of view. The agreement will reshape the Common Agricultural Policy and secure its future by making it more relevant to modern society and to modern consumer demands. This is the only way forward. We have the opportunity now to exploit the new situation to full advantage. I am sure the details of the agreement are well known at this stage but I will outline them briefly for the House.

The decoupling of direct payments from production is a fundamental change to the Common Agricultural Policy and, not surprisingly, the Commission's proposal for full decoupling was the most contentious issue throughout the negotiations. In the end, the Council agreed to amend the proposal for full decoupling and to give member states a number of options which will allow them to implement decoupling in a manner best suited to their requirements. Full decoupling across the board remains as an option if member states wish to pursue that possibility.

Besides full decoupling, last week's agreement provides for other options in relation to cereals, beef and sheep meat which allow for various forms of partial decoupling. Some of the options include up to 100% coupling of the suckler cow premium, up to 100% coupling of the slaughter premium and up to 75% coupling of the special beef premium. The sheep premium and the supplementary ewe premium may now be either fully or 50% decoupled.

Furthermore, amounts up to 10% of a member state's direct payments may be allowed for the purpose of encouraging specific types of farming which are important for the environment and to improve quality and marketing. Among the major advantages of the new arrangements is that we now have a menu of options which will reduce the paperwork and red tape associated with direct payments and which will allow farmers to respond to market demands without the need to engage in production in order to qualify for direct payments.

From the point of view of the forthcoming World Trade Organisation talks, the new arrangements will enable the EU to take the initiative in the current negotiations and to negotiate from a position of strength. Decoupling and partial decoupling will enable a substantial proportion of direct payments – depending on the choices to be made by member states – to qualify as domestic support which has "no or at most minimal trade-distorting effects or effects on production"– the so-called Green Box. This has the advantage of protecting them from challenge in the WTO negotiations. I have made it absolutely clear that the outcome of the mid-term review represents the bottom line in so far as the WTO negotiations are concerned and that I will not agree to a new WTO round which requires further reform of the Common Agricultural Policy. The outcome of the negotiations on decoupling has, therefore, been most satisfactory from Ireland's point of view.

During the coming weeks I will be consulting with the social partners with a view to introducing the model best suited to Irish requirements from the point of view of maximising efficiency, competitiveness and protecting the rural economy. I will also invite submissions from wider interest groups and the public generally before reaching a conclusion. I intend to keep the arrangements under close review, particularly in the light of the facility under the agreement which provides for a review by the Commission of the operation of the new arrangements after the first two years, with a view to dealing with its possible impact on structural reform and markets.

I am particularly satisfied with the outcome which I secured in regard to degression and modulation. The Commission's proposals represented a serious threat to the level of direct payments in Ireland, which are of such crucial importance to farm incomes. I opposed strenuously the proposed reduction of up to 13% in direct payments to meet future financing needs – the degressivity proposal. The removal of this automatic system of annual reductions in direct payments was a major achievement. The compromise which was agreed requires the Council to review from 2007 onwards the financial situation annually and, if budget deficits arise, to take necessary action. This is a more responsible and reasonable approach.

In addition, the proposed rate of modulation has been reduced from 6% to 5% when fully operational and we also have the retention of the €5,000 franchise or exemption which will ensure that almost half of Irish farmers will not have modulation applied to them. My objective in ensuring that modulated funds are retained in Ireland for rural development measures has also largely been achieved. Modulation will commence in 2005 at a rate of 3%, rise to 4% in 2006 and continue thereafter at 5%. Ireland will retain 85% of modulated funds and, of the €40 million modulated, €34 million will stay in Ireland. The resultant net reduction of €6 million per annum represents only 0.5% of the €l.3 billion in direct payments which are currently paid annually to Irish farmers.

The outcome was a major improvement on the original proposal, where the combined effect of modulation and degression would have resulted in €464 million being siphoned off direct payments over the period 2006-2012. Those who criticised last week's decision have been very quiet on these elements of the outcome.

Much has been made of the decision in relation to the dairy sector. Last week's decision provides for a cut of approximately 4% beyond the level already agreed in Agenda 2000. In contrast to the original proposal for an additional 10% reduction, we got the reduction in intervention reduced to 4%. In addition, while the original proposal provided for compensation for the intervention price reductions at the same level as applied in the Agenda 2000 agreement, a rate of 56%, I managed to secure compensation of approximately 80% for the additional intervention price reduction of 4% which was agreed.

The potential losses to the dairy sector from the net effect of the 4% intervention price reduction and the increase in the dairy cow premium amount to less than €14 million a year or 1% of the farm gate value of milk output. The additional 4% will amount to a 6 cent reduction per gallon equivalent. Of that 6 cent per gallon equivalent, 5 cent will be compensated for through the dairy cow premium. The reduction is therefore a 1 cent per gallon equivalent. That reduction is intervention and if our co-ops and co-op plcs do not rely on intervention they do not have to suffer the loss at all. Obviously, the intervention price reduction will only have effect if product is sold into intervention. If product is sold where it should be sold – on the market-place – there may not be any loss at all. Depending on market prices, there could be substantial gains.

The agreement demonstrates again, emphatically, that the dairy industry must realise that sales to intervention are not the way to build a viable industry capable of remunerating its farmer suppliers adequately for its raw material. The industry must adjust to that reality. A few statistics illustrate where we are and what we have to do. In the past four years, Ireland has accounted for between 27% and 35% of EU butter intervention intake compared to our 8% share of production. The figures for skimmed milk powder are similar. Our reliance on bulk, commodity products is way out of line with, for example, Denmark and the Netherlands. Whole and skimmed milk power contribute 50% of Irish total production of dairy products compared to 23 % in Denmark and 15% in the Netherlands.

We must keep in tune with the modern consumer. If the late Henry Ford, and his company, had continued to make Model T cars and expected taxpayers to keep them in storage for him, he would have been out of business many decades ago. Similarly, if modern IT companies continued to make electric typewriters and expected taxpayers to store them and then, possibly, offload them to unfortunate third countries, it would not make for a credible future for the industry and nor is it credible for the dairy industry to insist on converting milk into products for which there is no market. It cannot expect taxpayers to pay for the storage and then offload them either onto the EU market where they will depress prices or onto third country markets which will cause mayhem for those unfortunate countries.

Notwithstanding the objective of reducing dependence on commodity products and on intervention purchases, I insisted that a reasonable period should be provided for the dairy industry to reorientate itself to a lower level of intervention availability. The original Commission proposal was for a ceiling of 30,000 tonnes per annum on intervention intake of butter and this would have been disruptive in the short term. I secured agreement, against enormous opposition and without support from any ministerial colleague in the Council, to have the intervention limits for butter improved significantly. The final agreement increases the ceiling to 70,000 tonnes initially, reducing over five years to 30,000 tonnes.

The Danish and Dutch Ministers were aghast that an Irish man would look for this level of intervention intake as they have similar industries to ours. The Danes are further from our nearest market, the UK market, yet they do not depend to the same extent on intervention. Nonetheless they did not demur and allowed my proposal to stand. It is 2003 and one would expect a modern food industry to have regard for the consumer. The five year lead-in time gives our dairy industry time to get nearer the consumer. However, the situation is urgent and the industry owes it to suppliers to ensure they get the best return and owes it to the taxpayers to ensure there is less reliance on intervention.

The new dairy cow premium will not be decoupled until the reform in the sector is completed thereby favouring active producers. Overall, I am convinced that the agreement is most satisfactory given, in particular, that the milk quota regime has been extended to 2015. A small price of approximately 1 cent per gallon was paid in terms of intervention price reductions for that objective which will play a major role in supporting the milk price until 2015.

The original proposal for a reduction of 5% in the intervention price for cereals was unnecessary in view of trends in world market prices. I argued that the intervention price for cereals should remain unchanged. This was agreed and the Council also decided on a partial retention of the monthly increments. I also managed to secure the dropping of the original proposal for ten year obligatory non-rotational set-aside, which would not have been suitable in the Irish situation. The new arrangements on set-aside are more workable in Ireland and allow for further set-aside obligations as market needs arise.

Some spokespersons have said that this was really a French intervention and achievement. The French were interested in cereals but we kept close to them. If one goes into a Council of Ministers meeting with four votes out of 87, one must create alliances with other countries. To the benefit and advantage of the Irish economy we have worked closely with the French over the years particularly in these negotiations.

I had been concerned about the overall impact of the Commission's proposals on young farmers and was anxious to secure the best possible terms and conditions for them. The strengthening of support available to young farmers by way of a special new incentive under the proposed rural development measures is another very positive outcome. The maximum support for young farmers undertaking investments within five years of setting up has been increased from 55% to 60% in less favoured areas and from 45% to 50% in other areas.

I also negotiated changes for young farmers which include the more equitable calculation of single payment entitlements for those who entered farming during the reference period, flexibility to create a national reserve using up to 3% of established entitlements, with the possibility of ring-fencing a certain percentage of entitlements for young farmers who commenced farming activity after 31 December 2002, and the possibility of allowing young farmers who inherit farms to inherit also any entitlements established by the retiring farmer.

Other changes secured during the negotiations are that the farm advisory system or farm audit will now be voluntary for all farmers, the national reserve may be used for certain early retirement cases and special payment entitlements for certain dairy and other farmers can be traded in the same way as single payment entitlements.

It is important that we await the legal text of the agreement. We have not yet received it because the legal services of the Commission are working on it and it will take another few weeks and will, I hope, be with us at the end of the month. Hereditary and trading entitlements will be critically important and we need to see the text before we can enter into serious dialogue with social partners in regard to the way forward.

In these negotiations, my objective was to preserve the benefits of the Agenda 2000 agreement for Ireland and I firmly believe that that objective has been realised. The agreement also has huge potential benefits in terms of reducing substantially the administrative and bureaucratic burden for farmers and the Department alike, while allowing farmers freedom to farm and to respond to consumer demands and signals from the marketplace. The new policy framework will ensure, therefore, a more market-orientated and sustainable agriculture and food industry which will be to the benefit of consumers and producers alike.

The package as agreed has a balance within it which repositions the CAP in the modern world. In the longer term, I believe that it will be seen as safeguarding its future. We are highly dependent on a strong and viable CAP and we are not serving our own interests if we bury our heads in the sand and ignore the external threats and challenges.

The options for decoupling direct payments will, as I have said, allow such payments to be made secure from challenge in the WTO. As a consequence, the contribution of direct payments to farm incomes and therefore to the rural economy will be safeguarded in a manner not heretofore achieved. I do not believe that the level of criticism of the agreement, which is concentrated on one element only, is in any way justified. In an effort to substantiate their case against the milk element of the agreement, certain spokespersons have resorted to misrepresentation. They have added the intervention price reductions agreed as part of Agenda 2000 to the 4% price reduction now agreed.

Even if it were legitimate to add these two price reductions together, these spokespersons would still be misrepresenting the facts, since they have failed to add in on the positive side the benefits of the 2.8% or 32 million gallon increase in Ireland's quota which was part of Agenda 2000. That quota increase valued at the price being paid currently for restructured milk quota is €45 million per annum. However, this benefit has been ignored by those who are intent on distortion to suit their misguided purposes. I use the word "misguided" because it is far from clear who benefits from distortion of the facts. The confidence of Irish farmers, and particularly young people contemplating a career in farming, can be severely dented by such distortions. It is disheartening that those who should show leadership in agriculture seem intent on spreading despondency and despair.

Following last week's agreement, I believe that we can look ahead with confidence and plan for the future in a stable policy environment. Those who continue to preach doom and gloom undermine confidence and do no service to our farmers, particularly those young people contemplating entering farming. There is a future for them and my priority now is to manage the transition from the old to the new regime so as to ensure a smooth transfer and enable Irish agriculture to exploit the new opportunities to the full.

There is a substantial amount of direct support for farming –€1.3 billion annually in direct payments and €1.6 billion annually when the REP scheme and the farm retirement scheme are taken into account. For our size of economy that is substantial as it represents about 60% of farmers' incomes which is now secure because the CAP has been preserved. Those direct payments have been safeguarded from challenge in the context of the world trade talks.

Mr. Coonan

I welcome the Minister to the House and acknowledge that, from a personal point of view, he did his best in the negotiations. Unfortunately, however, as in other cases, his best has not been sufficient. Farmers have reacted with anger and many are depressed. Newspaper headlines such as "Dairy Farmers Sold Out" have appeared.

There is no doubt that this is a bad deal. According to the leader of the IFA, John Dillon, "The Minister went to Luxembourg without a proposal," and according to ICMSA president, Pat O'Rourke, "The Minister failed to defend Irish farming interests and the national council is rapidly losing confidence in the Minister to defend farm incomes and the agri-food sector in Ireland."

Even the Minister's colleague, Deputy Ned O'Keeffe, recognised the devastating effects of the Fischler proposals. He has concluded that they will cripple the dairy industry in Munster, where 40% of Ireland's milk is processed. He has indicated that the CAP proposals will lead to job losses as a result of the reduction in output. The co-operative movement, ICOS, estimates that the industry will lose €327 million by 2007.

The dairy sector, which was the pillar of farming up to now and the only one which was maintaining confidence in the farming community, has been decimated. Mr. Fischler has given with one hand, but taken twice as much away with the other. Dairy reform has been brought forward one year in order to begin in 2004, so the adjustment period for the dairy farmer is further reduced. The minimum price for butter has been cut by 10% on top of the 15% set out in Agenda 2000 – a total reduction of 25%.

The minimum prices for skimmed milk powder will be reduced by 15% over a three year period, beginning in 2004. The proposal to abolish the target price for milk remains, which is a cause for concern because it would allow the Commission to manage the price down to or below the intervention price. There will be no milk quota increases in 2007 and 2008 and the reformed dairy quota system is to be prolonged until 2014 and 2015.

The Minister referred to the cut in intervention butter. The purchase of butter for intervention will be suspended, according to the Minister, above a limit of 70,000 tonnes in 2004, falling to 30,000 in 2007. The Minister said that is a major achievement on his part, and so it is. However, the current amount of butter in intervention is 150,000 tonnes and this is where the real cut lies, a fact which the Minister has neglected to mention. This large reduction will devalue milk quotas.

The Minister claims that reducing the rate of the intervention butter over five years from 70,000 to 30,000 will create the opportunity "to give the Irish dairy processing industry a lead in time in order to get away from its over-dependence on intervention". The Minister neglects to mention where farmers can sell their excess produce. In 2002, the amount of skimmed milk powder alone sold into intervention was 50,000 tonnes and the Minister has not explained how this shortfall will be made up. Farmers must now sell milk without compensation for 75% of the current price which ranges from 92c to 96c. A dairy farmer with an 80,000 gallon milk quota will lose roughly €7,500 as a result of these proposals. How is he or she expected to survive?

The proposals in the beef sector are like the curate's egg. We have what the Minister described as a menu but it is more à la carte than anything else. Member states can opt to retain up to 100% of the suckler premium and 40% of the slaughter premium or 100% of the slaughter premium and 75% of the male special beef premium but not both. The most likely decision on decoupling is for the entire system to be decoupled except for the slaughter premium which amounts to €80 per head.

The Minister has claimed that retaining the slaughter premium provides an incentive for farmers to produce cattle, not merely retire. However, with 45% of Irish farmers over the age of 55 years, the reality is that many will simply take the European Union income and end almost all production. If this happens, these farm families will have no future and their children will not carry on the tradition of farming. The already alarming numbers leaving the land will snowball. There were 141,527 active farms in June 2000 compared with 170,578 in 1991. Over ten years, there has been a reduction of 29,051.

We have been told that 80% of the modulation budget, approximately €34 million, will return to Ireland. Can the Minister guarantee the House that this money will be returned to the Department of Agriculture and Food for the benefit of farmers and rural development in general? If so, how will this process occur? This has not been explained.

Farm incomes have fallen dramatically in recent years because of cuts already imposed through agricultural reforms such as Agenda 2000. This decline will speed up alarmingly, as I have outlined, with a €7,500 decrease in dairy farmers' income. Some 48% of earned income on farms comes from off-farm sources while 44% comes from farming.

Franz Fischler claimed that Ireland was treated in a moderate fashion and that the Irish dairy industry must not be so dependent on butter and should diversify its dairy products. We have heard the Minister confirm his agreement with the Commissioner's remarks. Despite this, the Minister has shown no leadership to the industry in directing it towards other products such as yoghurts and cheeses. The ICMSA president, Pat O'Rourke, has pointed out that dairy products are unlikely to displace or overtake the best dairy products such as yoghurts or cheeses on the European market because larger states like Italy and France will protect their domestic markets while Ireland is very restricted as to where we can sell our produce.

The IFA president, John Dillon, has said the implications of last week's deal are such that 10,000 dairy farmers face a serious risk of going out of business with a knock-on effect of 3,000 job losses in the dairy processing and service sectors. As a result of the small farm structure and higher cost, the future of dairy farming in western and northern counties is at the highest risk.

The Minister announced that he had two objectives, one of which related to the Common Agricultural Policy. The selling point and main advantage of the CAP is that there has always been a common agricultural policy for all EU member states. The European Commission's proposals have ended this policy and opened the door to the emergence of trade distortions within and between member states. The nationalisation of the CAP will lead to its dismantling. If this happens, it will be seriously disadvantageous to Ireland relative to our trading partners in the European Union. This is a valid concern the Minister has failed to address.

The cuts agreed by the Minister in these proposals, especially in the dairy sector, in addition to his consent for the nationalisation of the CAP do not encourage confidence in his ability to ensure the position of Irish agriculture is not further eroded at the upcoming World Trade Organisation talks in September. The Minister has promised to hold the current line at the WTO. However, before entering the talks with Commissioner Fischler, he promised us that there would be no change in the terms agreed in Agenda 2000. He did not keep his word. One cannot be assured that Irish agriculture will not be further compromised at the WTO talks. Can the Minister give farmers any credible assurance that agriculture will not be undermined further?

The Minister assured us that the introduction of single payments would significantly reduce the level of bureaucracy faced by farmers when applying for farm payments. However, it appears that bureaucracy is likely to continue to increase. The Minister's suggestions on decoupling appear to increase it. He has spoken about different complex and confusing options regarding decoupling such as his suggestions to have ewe, special beef and suckler premiums fully or partially decoupled or have some of the payments fully decoupled and others partially decoupled. It is a bit of a dog's dinner. There is a need for clarification and an urgent decision to be taken. The persistent uncertainty regarding the modulation proposals continues to damage the agriculture industry. I appeal to the Minister to come to a decision in concert with the farming organisations as soon as possible.

The degressivity proposal which the Minister outlined remains but has been renamed financial discipline and will only be triggered if the EU budgetary ceiling is within €300 million of being breached. The rate has not been set. It is proposed that this would be determined in the year when the budget looks like being exceeded. This appears to leave the rate open-ended. The current proposal gives the European Commission the power to adjust any agreed rate upwards or downwards by 3%.

The farm advisory system will be voluntary for member states until 2006. The Minister has informed us about it being optional for farmers. From 2007 member states must offer advisory systems to their farmers. However, recent cutbacks in the State agricultural advisory service, Teagasc, appear to work against this. The Government has already shown its lack of commitment to farmers by slashing the Teagasc budget and closing eight advisory centres vital to hundreds of farmers in Wicklow, Loughrea, Boyle, Manorhamilton, Gorey, Mullinavat, Tullow and a sheep research centre in Carlow. How can the Minister justify his Department's disjointed policy on the essential services Teagasc provides for farmers?

Most farmers' worst nightmares have been realised by this proposal and their greatest fear is that more is to come. We hope not but there needs to be clarification. Farmers are concerned because the Minister has already conceded a great deal. When the going gets tough in Cancun, he is likely to concede more.

Mr. Callanan

I welcome the Minister, Deputy Joe Walsh, and congratulate him, his ministerial colleagues and departmental staff on representing Ireland so ably when they wore the green jersey in the mid-term review negotiations which were far-reaching and during which something could have gone wrong. I compliment the Minister for doing so well as captain of the team wearing the green jersey and achieving what he set out to achieve. He went to Brussels and Luxembourg and took part in the negotiations facing an impossible situation – to retain for Ireland the benefits that we already had. The Minister achieved the impossible and that is why I congratulate all concerned. Like the Cork team that went to Thurles on Sunday and won against the odds—

Mr. McCarthy

A bruising first half.

Mr. Coonan

Cork were favourites for the game.

Mr. Callanan

—the Minister did the same.

The Opposition will say that I have to compliment the Minister but some logic and sense would do no harm in this debate. Certain farm leaders are once again reverting to their predictable whingeing. More than 20 of them were in Luxembourg holding a watching brief in the press bar while the Minister was conducting the negotiations. When the going got tough and the negotiations lasted through the night, the whingers were tucked in their beds while the Minister hammered out a vital deal for Irish farmers. When he concluded at 7.30 a.m. he immediately briefed the farm organisations but we all know that there was already someone sleepwalking on "Morning Ireland" telling us what the package was when he knew sweet damn all about it. He was not at the briefing sessions.

Mr. McCarthy

Who was that?

An Cathaoirleach

The Senator will not name him.

Mr. Callanan

He was devoid of the facts. How could he have the facts when the Council of Ministers negotiated in restricted session from 3 a.m. onwards?

What does the package contain? The reforms will completely change the way the EU supports the farming sector. The new CAP will be geared towards consumers and taxpayers while giving EU farmers the freedom to produce what the market wants. That is what we should have been doing for the last 30 years. In future, the vast majority of subsidies will be paid independently of the volume of production. To avoid abandonment of production, member states can choose to maintain a limited link between a subsidy and production under well defined conditions and within clear limits.

The new single farm payments will be linked to environmental, food safety and animal welfare standards, as well as maintaining farm profitability and producing products that have a place in the market. We import €3 billion worth of food into this State and that is shameful. Those in the processing industry should examine that because there is a market to be entered.

The milk quota regime that was due to end in 2008 has been extended to 2015. The critics conveniently neglect to mention that the Commission had offered to leave the Agenda 2000 deal in place for the dairy industry, with quotas ending in 2008, but the Minister took the other deal because it extended the quota system until 2015 and I support him in that decision. The original proposals for an overall 10% reduction beyond the level agreed in Agenda 2000 was reduced to 4% in the reforms and relates only to sales intervention. Returns from the marketplace will not be affected by this reduction. It is time that the good produce we farmers produce is processed to meet the needs of consumers and the market.

Compensation for this additional price cut amounts to 80%, or 5 cent per gallon, of the 6 cent per gallon intervention price cut. The whingeing IFA and ICMSA spokesmen want to complain so badly that they turn 1 cent into a mountain. Needless to say, in making this mountain they had to add the price reductions agreed four years ago in Agenda 2000 to the price reduction of 4% last week, 80% of which is compensated. Have we ever heard such whingeing about a 1 cent per gallon cut in the intervention price? Surely our creameries, co-ops and processing industries can make up a fall of 1 cent by moving closer to the market place? They should move fully into the marketplace.

Naturally, these calculations also forget to include the increase of 2.8%, or 32 million gallons, in milk quota, as secured in Agenda 2000 by the Minister. That increased quota has added about €50 million to the farm gate value of the milk output. The Commission proposal was for a ceiling of 30,000 tonnes per annum on intervention butter and the Minister has dealt with that idea. The final agreement secured by the Minister increases the ceiling to 70,000 tonnes initially, reducing over five years to 30,000 tonnes. This will allow a reasonable period for the dairy industry to re-orient itself to the market. Until ten years ago the dairy industry was doing well but it has lost its direction and there is an obligation on the management of co-ops, processing and the farmer representatives on the boards to ensure the maximum is available.

I mentioned modulation five years ago when we were discussing the proposals for Agenda 2000. I was in favour of it then and I support what the Minister has achieved now – a removal of the proposed reduction of 13% in direct payments to meet future financing needs and the reduction of the proposed rate of modulation from 6% to 5%. The objective of retaining modulated funds within Ireland for rural development measures has largely been achieved. Modulation will commence in 2005 at the rate of 3%, 4% in 2006 and 5% in 2007. I agree with Senator Coonan that every endeavour should be made to retain that €34 million in Agriculture House for schemes for the smaller farming sector to ensure its fruitful existence continues.

When the agreed modulated system is fully implemented, Ireland will retain over €34 million per annum of the €40 million that will be raised through modulation. The retention of the €5,000 exemption will ensure that modulation will not apply to almost half our farmers and we should welcome that move. I congratulate the Minister again on this vital improvement. Under the original proposal, the combined effect of modulation and digression would have resulted in a massive €464 million being siphoned off from direct payments between 2006 and 2012. Genuine farmers will acknowledge and appreciate what he has done.

The Minister's greatest success is that the proposal for full decoupling of direct payments has been amended to allow member states a range of options to implement decoupling in a manner best suited to their agricultural requirements. Decoupling is best suited to Irish needs, apart from the slaughter premium. There is an option for full decoupling of all payments or several options can apply. In arable aid to cereals there can be full decoupling or up to 25% coupled. In the beef sector, suckler cow premium may be either fully coupled or decoupled at a level of up to 100%. If the SCP is fully coupled up to 40% of the slaughter premium may be retained as coupled. If, however, the SCP is fully decoupled, slaughter premium may be fully coupled or decoupled at any level up to 100%, or up to 75% of the special beef premium may be coupled. For sheep farmers there will be full decoupling of all premia or up to 50%. We are all aware of the huge benefits of that scheme, particularly for the west and south west, where there have been problems with overgrazing. The Commission has proposed the retention of the supplementary ewe premium as a coupled payment and the full decoupling of the ewe premium.

I point to a very critical fact, however. In all cases of partial decoupling, a scheme applicant would have to retain the same stock numbers, or acreage in the case of arable aid, which would have given entitlement to a single decoupling payment in order to qualify for the remaining payment. The stock or acreage reductions would give rise to proportionate reductions in premium payments. Partial decoupling would not suit our farming needs. I urge the Minister to opt for full decoupling, except in the case of the slaughter premium.

The Commission proposal for a 5% intervention price cut for cereals was withdrawn and the intervention price remains. I say, "Well done," to the Minister in that regard. We were screwed last year. We were also screwed by the farming organisations which control the co-operatives. We should not be afraid to say this. Let us call a spade a spade. When certain farmers tied to blockade the ports, the farming representatives said, "Let it in; we want a cheap product." It is time for that nonsense to stop.

I note that the monthly intervention price has been reduced by half. On the measures for young farmers, maximum support for those undertaking investments within five years of setting up has been increased from 55% to 60% in the less favoured areas and from 45% to 50% in other areas. The additional concessions secured for young farmers include more equitable calculation of single payment entitlements for those who enter farming during the reference period, and flexibility to create a national reserve using up to 3% of established entitlements, with the possibility of ring-fencing a certain percentage of entitlements for young farmers who commence farming activity after 31 December 2002.

An important Member of the Oireachtas reminded me before we came into the House for this debate that the reference years 2000, 2001 and 2003 should be extended by another year by way of giving a break. I ask the Minister to give serious consideration to this. Also, there is the possibility of allowing young farmers who inherit farms to inherit any entitlements established by the retiring farmer. In relation to the word "possibility", it would be unthinkable if those inheriting a farm, be it a son or daughter, did not inherit the entitlements that go with the farm. They have to be allowed to inherit those entitlements, with the farm. It would be unjust to do otherwise.

On the general outcome, I congratulate the Minister on a job well done. The outcome of the negotiations means that the benefits of the Agenda 2000 agreement have been retained while the change in the regime will ensure a more market orientated and sustainable agriculture and food industry. The reforms agreed by the Council will come into effect from different dates, while decoupling will commence in January 2005 at the earliest, with an option to wait until January 2007. The outcome marks a major improvement on the original proposal and if we opt for full decoupling, it will also remove the burden of bureaucracy from our farmers. There is no greater single issue of importance to them. Bureaucracy is stifling them. I realise the Minister has achieved a great deal during the years. While there was always money coming in, I strongly urge that we opt for full decoupling.

In my opening comments I was justifiably critical of farm leaders. I now call on them to give leadership to farmers, which is badly needed. Farm leaders who were elected to do a job should represent and lead them correctly into the future. There is a future for farmers. Farming is a tough business. I know because I have been in the game all my life and have never shirked from it. I have seen good and bad years but we have no business producing produce unless we can get it to the marketplace and the consumer. We produce a good quality product but do we get it through our processors onto the shelf?

I ask the Minister to bring all of the farm leaders together in the social partnership. There are more than two farm organisations. They should be brought in and let have their say but at the end of the day the Government run the country.

Mr. Quinn

I welcome the Minister. It is a challenge to follow Senator Callanan, particularly when I agree with what he said.

Earlier today we debated the Forfás consumer pricing report, published recently, and talked about the challenges facing our citizens with price increases across the board. My contribution to this debate will focus more on the consumer than the farmer.

I am sure Members will excuse me but I enjoy telling the Minister, Deputy Joe Walsh, that his title should be "Minister for Food and Agriculture". I know that is not correct alphabetically but I have always been impressed by the fact that the Minister has worn the food hat rather than just the agriculture hat. He does so again in this debate.

There are two reasons I welcome the recent agreement on the reform of the Common Agricultural Policy. The first is that it will bring Irish farming a step closer to being market-driven, a point made by Senator Callanan. Such a move is so long overdue we have to welcome it. For over 30 years the CAP has acted as a barrier between Irish farmers and the marketplace. It gave them an incentive to produce food that nobody wanted. Instead of focusing attention on meeting the real needs of the European and world consumer, this agreement will bring us a step closer to seeing the end of that policy.

Some years ago Commissioner Franz Fischler, with whom the Minister appears to have a very good relationship – he seems to be able to twist his arm and get something from him that others would not be able to get – appeared before the Joint Committee on Agriculture and Food. He spoke for 25 minutes after which I challenged him because he had not mentioned the customer once. He just talked about agriculture, farmers and food, with which I had a difficulty. When he came into this House a year or two later, somebody must have tipped him off to the business I was in because he mentioned customers in every second sentence of his contribution. I would like to think I had some influence in that regard, although I doubt that was the case.

From now on, as Commissioner Fischler pointed out, Irish farmers can turn their attention to producing food for which there is a real demand in the marketplace. They can do so – this is where the real success lies – with the comfortable cushion the Minister has managed to achieve that guarantees them an income, even if they produce nothing. For somebody in business that is difficult to understand but that is the way it is. It is a very attractive platform on which to build a business, and I am sure farmers will take full advantage of it after they have spent the usual time complaining about the terms of the latest deal. As others have said, that is what we have to expect.

Looked at positively, this agreement could turn out to be the best thing that has ever happened to Irish agriculture and farming. Until now, all the links in the chain have been in place but there has not been any focus on the final link, the customer. That focus is important because it is only through the marketplace that we can build a sustainable, long-term position. The previous position, which was allowed to continue for too long, was artificial, uneconomic and doomed in the long run. By spending so much energy during the years trying to preserve what was unpreservable, Irish farming has lost an opportunity to carve out a niche for itself in what I would call the real marketplace. In terms of the opportunities lost, I am talking mainly about dairy farming.

This was brought home to me about three months ago when I received a telephone call from Polish television informing me that it was examining the opportunities and threats arising from Poland joining the European Union. They sent a television crew over and asked if I would take them around an Irish supermarket. I went around with that television crew and we looked at what was on our shelves. They were very impressed to find that the only beef we sold was Irish beef, the only lamb was Irish lamb, and the only pork was Irish pork. They asked why this was so. These are businesses that are big in Poland and they felt threatened. I said that the Irish people were not willing to buy other products, that they have confidence in Irish beef, pork and lamb.

However, when we turned the corner in that supermarket and came to the dairy cabinet – and it was a big supermarket and there was a long stretch of products – all the fresh milk was Irish, but practically every other product was European. There were some Irish-made products but they had been produced under licence by Irish suppliers. Here were all of these European names on these added value products. The products were not Irish, or if they were, they were Irish produced but under a different brand. In terms of Irish products pure and simple, there was virtually nothing in that added value area.

This is the lost opportunity, the opportunity that we must now set out to chase. After many years of chasing the low end of the commodity market, we have to establish ourselves as premium producers at the other end of the market. The market is there, the opportunity is there. I suggest it is just a matter of having the determination, skill and ability to go after it. I believe that with a properly market-driven approach we have the possibility of building a sustainable food industry that will bring in more, in economic terms, than it ever has done in the past or was likely to do under the old system. To succeed in that, we have to change our approach radically and utterly. We have to learn that the marketplace is the determining factor.

I looked at some figures – I may not be totally accurate – and I gather that in the last 30 years we have put 540,000 tonnes of butter into intervention. I think the figure is correct. I am not great at maths but I then did a sum to find out how long it would have taken us to consume that butter ourselves. I reckoned it would have taken us 39 years to do so, if we did not produce any more. It is ridiculous that Irish farmers have been producing a product that nobody really wanted and that has been put into intervention. Producing a product that nobody wants cannot be good, even for the mental health of anybody who is in agriculture.

Two weeks ago, I attended the CIES, the World Food Business Summit, in Barcelona. That meeting was very impressive because we covered a whole range of areas. One of the speakers was an Irishman, Bob Geldof. He is not a man I would have paid great attention to in the past, but he spoke with commitment, dedication and with a fervour that I had not heard from someone like him before, and he caught the attention of the 1,000 or 1,500 hard-headed business people who were at that convention.

That is the second reason I welcome the reform of the CAP. It will free Europe, and Ireland in particular, from what I call the straitjacket of an immoral policy on world trade. As I have pointed out in this House on many occasions, it is not only the people of Europe who are affected by the Common Agricultural Policy, it is not just the citizens of Europe who have to pay a higher price in tax and health, it is the world as well. That policy has had an even greater impact on the people of the developing world, by distorting the markets that are available to them to sell their agricultural products. I am thinking in particular of Africa. Not only have we put up barriers to their selling within Europe, as we have done for the last 30 years, but we have also undermined their position in other world markets by dumping our own very heavily subsidised surpluses on them. That is unfair. These are the people who are much worse off than even the poorest people in Europe. That policy, which has been driven by the necessity to support the CAP, is immoral. That was the point Bob Geldof was making to us, correctly so, and these are words that we have used here in the past.

I hope we shall now swiftly see a radical change in European policy on this key issue, not just on that area but in world trade. I have to admit that Europe is not the only offender in this regard. The United States is as bad as we are. It is probably a lot worse than we are in that area, but if we in Europe change our policy it will have the effect of putting extra moral pressure on America to do the right thing as well.

I hope this agreement will see the end of what I call the utterly hypocritical situation in which this country has been for many years. On the one hand we claim to be a friend of the developing world and we have been relatively generous in terms of development aid. Certainly, the commitment of individuals, associations and organisations has set standards of which we are very proud. At the same time we have been among the most enthusiastic supporters of a penal trade policy that has hurt most of the very countries we claim to be friends of.

The hypocritical nature of this position has not been fully realised by the people of Ireland. I am glad it is receiving more attention than before. In recent times, it has been getting some of the attention that it should have got in the past. Our present policy on world trade is not one, I believe, that the people of Ireland would support if they were fully informed about it. The reason they have not been fully informed is the noise the farming lobby has always made in defending the Common Agricultural Policy. Now the need for that has been removed, or the first steps towards removing it have taken place, I hope that common sense will prevail, and that Ireland will place itself among the leaders of those in the European Union who argue for a much fairer approach to world trade.

Let me just go back to something I said earlier about opportunities. Senator Mary Henry is not able to be here this afternoon but she spoke to me earlier this morning on this. She quoted the New England Journal of Medicine, which she holds in high regard. She talked about an article she had read in it and pointed out the clout that the low-fat lobby, a lovely term, has managed to achieve on the supermarket shelves and right around the world by arguing that low-fat is the thing to go for, that it is the healthy alternative. According to this article which Senator Henry pointed out to me, the real healthy alternative is low carbohydrates. That is an opportunity for the dairy industry. Those who see their future in the dairy industry in Ireland should recognise that this is the real health story – not low fat but low carbohydrates. If we can manage to get that message across it is an opportunity for us in Ireland to produce products that will reach supermarket shelves not just in Europe but around the world. We have the opportunity to do that.

One other point Senator Henry made to me is the benefit of grass fed beef rather than corn fed beef, because of the benefit of fatty acids. Practically all Irish beef, for the vast part of the year, is grass fed. However, I have been to places in the United States where the animals are fed solely from those feed lots. Clearly, there is an opportunity for us to sell not just on the basis of taste, but also on the basis of health.

I believe the Minister deserves considerable praise for his achievement here. He faced challenges at the Council of Ministers and has come back with a package which is suitable in a whole lot of ways. It gives farmers a great deal more than they might otherwise have had, and the manner in which he has achieved that success certainly achieves the first steps on the long road to making sure that we in Ireland can stand with our heads held high.

Mr. Dardis

I welcome the Minister, Deputy Joe Walsh, to the House. In particular, I welcome the fact that he has responded so quickly to the requests made last week for a debate on this very important topic. I hope Senator Quinn will not be replacing all his good Irish carbohydrate potatoes with dairy products on his shelves because I think there is a place for both. I would not suggest that he would do that.

What the Minister has achieved is quite singular and he is to be greatly commended for it. It is worth recalling that when these proposals were published they were quite devastating in their effect. There was an enormous challenge facing the Minister and his officials in dealing with the original Fischler proposals. The way they have been modified is a credit to the Minister. It demonstrates the value of experience in this area. The Minister is now the most senior of his colleagues in Europe. That was to his advantage in the context of these talks.

The response of the leader of the main farming organisation on the morning the package was announced was facile. When the ministers appeared after an all-night session he suggested that the Minister for Agriculture and Food had been worn down by the Commissioner keeping them up all night, and that as a consequence his critical faculties had been somewhat eroded. The Minister has been through enough of these meetings to know that all-night sessions are a common feature. If one goes back to the time of Mark Clinton and Jim Gibbons, his predecessors, they did exactly the same thing, so it is not new. If one is going to cut a deal one is obviously going to stay there to do it. Many a farmer has stood all day long at a crossroads in various places around the country, with a couple of cattle, in the knowledge that by the time they went home that evening the deal would be cut. They stayed there until it was done. The Minister's experience of west Cork stood to him in that respect.

It was a singular achievement to obtain what has been obtained, as it was the most difficult of these rounds of negotiations. We have to accept certain realities. The European Union had to achieve a favourable position in advance of the WTO round. There was a need for reform of the CAP itself, independently of that, but to imagine that we could have gone into a WTO round and that within that round we could have continued to keep product price support as a central element of the Common Agricultural Policy would have been to deceive ourselves. I note that the Minister has said, in a very significant statement, that this is his bottom line with regard to the WTO. I welcome that and I am confident that the European Union will maintain that position within the WTO round as it develops.

A central achievement has been the protection of the Common Agricultural Policy. I support Senator Callanan's statement, and I will be more explicit, that it was quite disingenuous for the leader of the main farming organisation to denounce the deal on radio within a very short time of its finalisation. It was apparent that his statement had been prepared well in advance of the eventual outcome, and that irrespective of what the outcome had been, it would have been treated in exactly the same way. It was obvious that a pre-ordained position had been adopted. Irrespective of what the Minister might achieve at 7.30 a.m., this was the line that would be disseminated on the national media. That is wrong and does no credit to any farming organisation. Any deal of whatever description should be subject to the most severe scrutiny and criticism if that is what is required, but it should be on the basis of the facts. This was not on the basis of the facts. It had been predetermined.

This train was on the tracks even before the original Fischler proposals emerged. It was going in this direction and decoupling was likely to be a serious feature of it. The only question was what station this train would arrive at. The Minister saw to it that the train arrived at the right station, despite all its deficiencies.

There has been a central conundrum confronting European agriculture since we joined the European Union. It has become more apparent as time has gone on. That conundrum is how we reconcile the need to have an industry that is competitive and responsive to the market and gives the consumer what they want, with protecting farm incomes and keeping the maximum number of people on the land. Attempting to resolve this conundrum has created round after round of talks. It is possible to square this circle, if I may use that expression. It has been done, or at least has begun. It is now possible to maintain farm income while bringing the industry close to the market.

The point was made on the difficulty of continuing with 150,000 tonnes of butter in intervention. How do we continue that system to ensure that incomes are protected? The answer is that we do not continue that system to protect incomes. If we do, the European taxpayer, and indeed the Irish taxpayer, will ask, quite rightly, what we are doing with all this uneaten food in storage, piled there despite starving people throughout the world. How can anybody resolve or defend that? It is becoming increasingly difficult to defend it.

Intervention was required in the past and has been used, but it has had a deleterious effect on Irish farming and the capacity of the agricultural industry to compete internationally. It got to the point that the producer produced, the co-op took it away, put it into the intervention store and was paid for it. That is not the way forward for Irish agriculture. That is not the way to protect farm incomes or farmers. If Irish farmers have shown anything, it is a capacity to respond to the signals that come from the marketplace and Europe. If anybody doubts that, all they have to do is think back to the 1970s when we joined the Common Market and the rapidity with which the Irish farming industry responded to the signals that emerged.

I started farming before we joined the Common Market and I can remember how difficult it was. At that age it did not matter a damn to me. At the age of 21, one does not mind. One is prepared to work night and day and do everything that is required. That is one of the huge deficiencies in what has been preached over the years, and the Minister has referred to it. If young people, when they get up every morning, are fed on a diet of how terrible things are, is it any wonder that they walk away from the industry? Can anybody be surprised about it? I made that same point in the Minister of State's constituency, at the Forum for Europe in Loughrea, when a young man at the front of the audience stood up, after hearing all the prophets of doom, and said he was very glad to hear what I had to say as he had not heard that before. He wanted to start farming and had the capacity and enthusiasm to do it. For goodness' sake, let us encourage these young people to ensure the industry progresses in a vigorous and optimistic way.

There is more to this than just food, per se. Farm incomes have been supported through the product price. There are now other elements that are becoming more important. One of these is the environmental element, which has been partially dealt with in REPS. Increasingly, European society is asking farmers to be the custodians of the countryside and the environment, which is as it should be. If they are to succeed in this they have to be supported, in the same way as the price of the product has been supported in the past.

That is where the opportunity lies for us, in going to the marketplace with products that have been produced from the best grass in the best land in the best environment in the European Union. That is what the consumer wants and will pay for. We have the capacity to harness those things and unite them to the benefit of Irish farming.

Quality is a sine qua non. It was stated at the outset of the Common Market that all the tomato production would move to the Mediterranean countries and leave Holland, as it was based on expensive fuel in Holland and could not compete with outdoor tomatoes in the Mediterranean region. What was the outcome? The Dutch tomato industry survived and prospered because even then people were prepared to pay for quality, which is what they wanted. That is something we have to keep firmly in our minds.

Without question, the status quo was not an option. It had to be changed and the Minister did a good job in ensuring that the change will be managed to the best effect.

Senator Callanan spoke about decoupling. I agree with his comments. It was evident when the Fischler proposals were produced that the IFA thought there should not be decoupling. It then discovered that an increasing number of its members and commercial farmers were prepared to accept decoupling provided their incomes were guaranteed. Suddenly there was a slight change of emphasis. The farming organisations have a responsibility to keep in touch with their members.

I agree with Senator Quinn's comments on developing countries. Relative to the United States, the European Union's record on support for developing countries is good. Ireland, in particular, has a good record in providing overseas development aid. We also have responsibilities to ensure that products are not dumped on countries trying to develop their agricultural sectors from a small base. In addition, we must accept that we are wealthy and they are poor.

I found it significant, during the proceedings of the Forum on the Future of Europe, that a question I posed on this issue to one of the non-governmental organisations active in this area elicited an immediate defensive reaction from farming organisations, which insisted they were doing everything they could in this regard. This is incorrect. If 150,000 tonnes of butter is in store, it should be used. At the same time, we must also recognise that many countries would not accept certain products on various grounds, including religious and social reasons. Nevertheless, it is wrong to have food stores while people are starving. Somebody must pay for this.

I am not sure I agree with Senator Coonan that farmers are angry. While definitely apprehensive and fearful about the future, they are, as I stated earlier, realists who knew changes were necessary. Farmers are now asking who will guide and lead them in a manner which allows them to survive in the new environment.

This brings me to a point I have made repeatedly in the House. The dairy industry, the wider agricultural community, Teagasc and the research centres must bring forward the required solutions in terms of the need to change production and processing to a lower cost base. While I am prepared to accept that Teagasc has to make cuts because of its financial position, in every circumstance the emphasis must be on closing its offices in towns, while retaining its staff performing basic research rural research centres. Technology has diminished the need for farmers to visit Teagasc offices in towns, which farmers try to avoid in any case because of congestion and so forth. It is of fundamental importance that the basic research required to modify the industry and enable it to develop in the way it should is carried out.

There is also an onus on us as farmers to change our thinking, which traditionally has been based on the philosophy of intervention and market clearing produce away. We need to change our approach to ensure, as Senator Quinn stated, that we produce food the market wants and of a quality for which it is prepared to pay and reward us. In circumstances such as these in which there will inevitably be casualties, the European Union has the responsibility to ensure the incomes of farmers are underpinned through direct payments and decoupling, whether in recognition of their role as guardians of the environment or for wider social reasons.

I agree with Senator Callanan's remarks on the issue of inheritance of entitlement. I transferred my farm to my son last October. I can think of few farms in my area, many of which are large commercial units, in which the next generation is coming through. This returns us to the point that constantly telling people there is no future will lead them to walk away from the sector despite its opportunities.

Paddy O'Keeffe was editor of the Irish Farmers' Journal for a long time. Having worked under him, I am familiar with his ability. Now in his 80s, he is also a leading dairy farmer in County Cork. If some of the younger people had his vision or attitude, much could be achieved. Writing in the Irish Farmers' Journal of 28 June 2003, he stated:

Survival in dairying is still possible but will require concentrated action by farmer, creamery and state agencies. Closing the income gap will not be easy, yet effective savings are within our grasp. Cost cutting has been debated for long. The matter is now urgent. . . . . Tighter management can redeem the Fischler losses. Better creamery performance could bring us further. We must next plan to consolidate with added progress in low-cost dairying. Moorepark must face the challenge of further cuts in concentrate use and silage needs. Higher protein levels, labour and management convenience and healthier dairy stock must be targeted. All this will require investment in product research. To ensure the future farmers must participate with the state in funding such research. Relative to potential return the cost is small.

If the writer, with his experience of the industry, is able to take such a position, I wonder about some of the other comments I have been hearing. A transformation in the national mindset is required to tackle the challenge ahead.

Mr. McCarthy

I thank the Minister of State for coming to the House and the Minister for his presence earlier. Last year, during one of the current Seanad's first meetings, we debated at length the then imminent second referendum on the Nice treaty. One of the fundamental arguments in favour of the treaty, which all parties in the House supported, was that rejection would create a climate in which the Minister for Agriculture, Food and Rural Development, as the office was known then, would be forced travel to negotiations in Brussels with one hand tied behind his back.

There is a major difference between the original Fischler proposals and the agreement which emerged in Luxembourg last week. It must be recognised that significant advances have been made, even if the proposals will not be acceptable to all the farming organisations or the public at large. If the Minister had been capable of pleasing everybody, he would not be in Kildare Street but in the hot seat in Europe, possibly in Mr. Cox's position. The proposals in what is known is the Luxembourg deal are a major improvement on the original proposals.

I welcome the opportunity to contribute to the debate on this important issue. Emerging from the talks in Luxembourg, Dr. Franz Fischler hailed the agreement as marking the beginning of a new era which would change the way the European Union relates to farming. He is correct in that the reform proposals are a radical departure and represent a seismic shift away from the old Common Agricultural Policy. A core principle of the talks was to break the link between subsidies and production, which has been fundamental in the Common Agricultural Policy to date and correctly regarded as incentivising over-production and rewarding inefficiency.

This approach had to end, also because it was a barrier to dialogue on the new World Trade Organisation round due to take place in Cancun in September. Participants in these talks will discuss the dumping of subsidised produce on developing country markets at the expense of local producers. Senators Dardis and Quinn noted that, as a country which in many respects claims to be a friend of poorer, developing countries, our actions to date have not reflected this ethos.

The deal on the CAP does not mean the European Union no longer has a common agricultural policy, nor is it contended that it is about saving money. We will retain the Common Agricultural Policy in a different form and annual spending in the farm sector will remain at €40 billion until 2006, increasing to €48.5 billion by 2003. This accounts for roughly half of the European Union budget, a massive sum of money by any standards.

Average payments this year are running at €13,000 per head. The reform will mean these will be paid in the form of a single cheque and will be subject to environmental and animal health standards. Senator Dardis is correct that farmers were viewed within the European project as the custodians of the environment. However, we have to be realistic when so much money is at stake. Certain responsibilities and conditions must attach to how this money is spent, one of which is that payments should be subject to environmental and animal health considerations.

Many participants will not be pleased with the results of the negotiations. While it was not unusual to listen to the reaction, broadcast on "Morning Ireland", the morning after they had concluded, it is difficult to believe anybody at that early hour could have been in a position to provide a considered view of the outcome unless they had participated in the negotiations. It will require a more considered response than initial comments or short critical statements. Much of the detail will have to be considered.

The Commission and the anti-CAP lobby, led by Britain, would have been appeased by decoupling, while France has been spared much pain by the decisions taken on the cereal sector. Consumers should benefit from falling prices and improved quality. Consideration must be given to a consumer friendly outcome. Competitive pricing and improved product quality will be beneficial.

It is estimated that 27,000 dairy farmers will suffer. I spoke to a number of young farmers last week who pointed out that dairy farming had been a lucrative sector, especially for those starting in farming. The future now appears uncertain, even though the bulk of the cut had been decided in 1999 under Agenda 2000. The Minister has indicated that the amount of pain endured will depend on how each farmer reacts to changing market realities. A substantial switch in production from butter to high value dairy products such as cheese has been long overdue. The reforms contain an important element of national discretion in phasing. Such flexibility should allow welcome room in encouraging the beef industry to focus more on a higher quality premium product.

The national president of Macra na Feirme said the new reform deal had the potential to change the face of Irish and European agriculture, while the president of the ICSFA said the Minister had succeeded in negotiating for Ireland an opportunity that would save the vital €1 billion annual support payments for the livestock sector. He urged farmers, especially those in his organisation, to support full decoupling, saying it would save them €420 million, which the Commission had sought in direct income supports in the original agreement. These are conflicting viewpoints. The Commissioner, Franz Fischler, pointed out that in future many farmers would seek full decoupling. That would be an interesting development, although it is likely to happen later rather than sooner.

The new deal will reduce the amount of paperwork associated with direct payments. This has been referred to in previous agriculture debates in the House. Participants in schemes were being turned off by the amount of red tape, bureaucracy and paper chasing involved.

The agreement allows member states a number of options when implementing decoupling and to do so in a manner that suits their requirements. I welcome the fact that the new arrangements will allow a substantial amount of direct payments to qualify as domestic supports. It means it cannot be challenged in the forthcoming WTO talks in September.

The Minister indicated that he would initiate a large public consultation process on the reforms, which is to be welcomed. I hope it will not only involve sectoral interests such as the farming organisations but also members of the public, including consumers and rural dwellers, from which a consensus will emerge. I understand advertisements regarding the process will be published shortly. The Irish Cattle and Sheep Farmers Association, one of the smallest representative groups for farmers in the country, is not party to the partnership agreement, which is probably the vehicle many of the other farming organisations – the IFA, the ICMSA, ICOS, Macra na Feirme etc. – will use to implement the new deal. In view of this, I hope the Minster will widen the consultative process to include groups not involved in partnership and who would not, therefore, have a means of implementing the plan in a way that suits their needs.

Given that the agreement was concluded only after many days and nights of negotiations, it puts Ireland and the European Union in an offensive position when approaching the WTO talks next September. They can justifiably demand concessions from trading partners in return. It is now for our friends in America and elsewhere to make the next move. American has recently revived its system of supports and massively increased its trade distorting agricultural subsidies. By contrast, there has been inverted progress on the European side.

The new Luxembourg deal, as it has been termed, puts an end to the old system of subsidies which encouraged overproduction and distorted world trade. In consequence, European agriculture policy will change fundamentally. In future products will become more competitive and agriculture policy will be greener and become more trade and consumer friendly. That in itself will have made the deal worthwhile.

Mr. O'Brien

I congratulate the Minister on a job well done in Brussels. It was an excellent performance for which he deserves the congratulations of the House. I also commend the Ministers of State, Deputies Treacy and Aylward, and the negotiating team. A great deal was agreed for Ireland, despite tough opposition.

I especially welcome the preservation of the financial advances agreed under the Agenda 2000 accord and the agreement on policies which will grant farmers the latitude necessary to accommodate to changing demands and conditions. Even before the negotiations last month, the Minister had already achieved modifications to the Commission's proposals. In particular, he won concessions for young farmers who entered the industry during the reference period.

The Commission first suggested that payment entitlements would be calculated by multiplying the average number of animals in the three year reference period by the premium rate for 2002 and dividing by the average number of hectares in the three year reference period. This calculation would mean the number and value of entitlements would be less for a young farmer farming in one or two of the reference years than if he had been farming for the three years of the reference period. Following representations from the Minister, the Commission agreed that the average in such cases should be obtained by dividing by two where the farmer was farming for only two years of the reference period or by taking one year as the average where the farmer was farming for only one year of the reference period.

It is to be especially welcomed that the maximum support for young farmers undertaking investments within five years of setting up has been increased to 60% in less favoured areas and to 50% in other areas. Further changes which the Minister for Agriculture and Food negotiated include the flexibility option to create a national reserve by using up to 3% of established entitlements with the possibility of ring-fencing a certain percentage of entitlements for young farmers who commenced farming activity after 31 December 2002. The Minister negotiated also a provision to allow young farmers who inherit farms to inherit any entitlements established by the retiring farmer. Other changes secured during the negotiations include the provision which makes the farm advisory system or farm audit voluntary for all farmers, a provision whereby the national reserve may be used for certain early retirement cases and a provision to allow special payment entitlements for certain dairy and other farmers to be traded in the same way as single payment entitlements.

The Minister is to be congratulated on obtaining European Council agreement to amend the proposal for full decoupling of direct payments to provide member states with a number of options to implement decoupling in a manner best suited to their requirements. An immediate implementation of decoupling would, naturally, be too draconian a change. I welcome the Minister's commitment to negotiating with the social partners to work out the best way in which to implement the changes.

In the dairy sector, the original proposals allowed for compensation for the intervention price reductions at the level which applied in the Agenda 2000 agreement, or 56%. The Minister has achieved compensation of approximately 80% for the additional intervention price reduction of over 4% which is now agreed. The compensation will be paid through a dairy cow premium. In total, losses to the dairy sector from the net effect of the 4% intervention price reduction and the increase in the dairy cow premium will be less than €14 million a year. The Minister was correct to stress that the intervention price reduction will have effect only if product is sold to intervention. While this represents a decrease in intervention, if a farmer is not tied to or dependent on it, there is no reason prices should be reduced by that, or any, amount. If product is sold on the market, as it should be, there may be no loss at all and it is possible, subject to market prices, that there could be substantial gains. The Prospectus study published by the Minister earlier in the year emphasised clearly the need to increase the product range of the Irish dairy industry. Selling to intervention is not a feasible long-term option.

I agree with the Minister that the outcome of the negotiations means the benefits of the Agenda 2000 agreement have been retained while the changes to the policy framework will ensure a realistic agriculture and food industry which is more market orientated and sustainable. The outcome is well balanced and a new dispensation has been created which clearly seeks to adapt the Common Agricultural Policy to the 21st century. We can face the future with confidence. Stability is essential and the deal we have made delivers it by removing the uncertainty of recent months. The challenge we all face is to handle the change from old to new in a co-operative and consensual way which enables agriculture and all who work in it to look ahead with anticipation and assurance.

I congratulate the Minister for Agriculture and Food, Deputy Walsh, his Ministers of State, Deputy Treacy and Deputy Aylward, and everyone else on the negotiating team once again.

An Leas-Chathaoirleach

I welcome Councillor Mullins from Ballinasloe and his group to the Visitors Gallery.

Mr. Bannon

I welcome the Minister of State at the Department of Agriculture and Food, Deputy Treacy, to the House. I was aghast to hear Senator Callanan put a gloss on the agreement. He attempted to lecture farm leaders with regard to the showing of leadership.

Mr. Callanan

They need it.

Mr. Bannon

I wonder if the Senator remembers Deputy Ned O'Keeffe's statement to the effect that there had been no leadership in the Department of Agriculture and Food since the days of Ivan Yates.

Mr. Treacy

Senator Bannon should try to be positive.

Mr. Callanan

Ivan Yates sat on a high stool.

Mr. Bannon

The overwhelming feeling of many in the European farming community is that Commissioner Fishler's Common Agricultural Policy proposals foster a state of uncertainty and a distortion of competition among farmers, among and within sectors and among regions and member states. Subsidies are said simply to have been repackaged and farmers are being asked once again to pay the price while their livelihoods are on the line.

The first major CAP reform for over a decade promises to reconstitute the basis on which the system has operated since it was established in 1958. Instead of being guaranteed an outlet for everything they produce, farmers will be expected to adapt to market demands giving rise to arguments that the CAP reforms are driven by the world trade agenda. While the entry of ten new members, many with large and inefficient farming sectors, may be the official reason for the reforms, there have also been demands for change from European consumers who are upset by food safety scares and increasing concerns about the Common Agricultural Policy's impact on the rural environment. Mounting pressure from other World Trade Organisation members has been at least as important.

The new CAP reform deal agreed last week indicates that huge losses will be suffered at individual farm and dairy sector level and in the national economy. The inescapable fact about the impact of the Fischler proposals on Ireland is that our dairy farmers who make up the main commercial core of Irish farming will lose out disproportionately as a result of these landmark EU reforms. "Reform" is the word on which we must concentrate. The emphasis of the proposals has changed. What we now bandy about as CAP reform was originally intended to be a review. This emphasis makes a huge difference to our dairy farmers. The annual losses in the dairy sector are projected to be €113 million per annum.

Mr. Treacy

By whom?

Mr. Bannon

The farm leaders.

When the proposals were first mooted in July 2002, there was no mention of reform or review of the dairy sector. Now, however, this devastating blow has been dealt. Jobs will be lost, farms will be abandoned and communities and individuals will suffer. The IFA estimates that up to 10,000 dairy farming jobs will be lost with 3,000 more in the processing sector. These figures are dismissed by Commissioner Fischler but the indications are that the Irish dairy industry stands to lose €339 million by 2007, with a far reaching effect on the economy.

Ireland's loss will be a gain for countries such as the USA, Australia and New Zealand. Poorer countries in Africa and Latin America also stand to gain from this disaster for Irish farming. They will gain because they can produce food more efficiently and in greater quantities than we can and because their sectors are not being undermined by subsidised exports from Europe. What is seen as a long-term plan for sustainable agriculture within the European Union could more suitably be described as a development driven by the world trade agenda. The Fischler reform involves a shift away from Irish and European dairy farmers towards farmers in low cost developed countries such as New Zealand and Australia.

With 27,000 Irish dairy farmers facing losses of up to one third of their annual income, rural areas are reacting strongly and their voices will be heard in the local elections. The decoupling of direct payments from production, as intended by Commissioner Fischler, will achieve two WTO related objectives. First, decoupled payments are classified under the WTO as supports that are non-trade distorting. They are known as "green box" supports. Second, the analysis indicates that farm production in the European Union, including Ireland, will fall when there is decoupling. This will result in the European Union largely withdrawing from export markets and increasing its imports of food products, with disastrous consequences for farming in Ireland.

Under the current policy, a dairy farmer with a 40,000 gallon quota has an average income of €22,296. Under the new system, his or her income will fall to €15,443, a reduction of €6,900. This is an income loss of approximately 30% as a result of the agreement. Although Ministers have agreed the broad outline of the proposals, implementation in its finer detail rests with negotiation at national level. The Commission's final paper of 26 June stated every country had the right to an agricultural policy of its own, provided it was sustainable and avoided or limited trade distortion. It is up to the Government to fulfil its promises to the farming sector and fight within this provision for its future. Certainty is needed in order that farmers can plan ahead. The Minister must make a speedy decision on the level of decoupling he intends to implement.

As Ireland exports almost 90% of its produce, the impact of this new deal will be felt to a greater degree in this country than in other member states. In County Longford, designated a deprived area having both CLÁR and RAPID programme status, the current figure of 265 dairy farmers will drop by 100 in the next two years. With an average milk quota of 35,000 gallons, these farmers are earning far less than €20,000 per annum. There are 2,700 registered farmers in the county, of whom only 20% are full-time farmers. The average farm size is only 70 acres.

The county's farmers are suffering enough. The blow of CAP reform falls on top of the closure last week of the Glanbia meat processing plant in Rooskey, which borders on the county. It employed a number of Longford farmers. How much more can these farmers be expected to take? If it is the Government's policy to drive farmers off the land, it is at least succeeding in that regard. However, it is a success that will, in the not too distant future, come back to haunt it.

I wish the Minister would remove some of the red tape involved in farming.

Mr. Treacy

We are doing that.

Mr. Bannon

I have received representations from a farmer about extensification premium. He is being denied his payments because he was 0.0001% over the guidelines. Is this fair? The Minister must tackle the bureaucracy and red tape in the industry.

Mr. Moylan

I listened attentively to speakers in this important debate and compliment them on the sincerity of their contributions. The deal is done. From a farming point of view, we must consider where we go from here and where profits can be made.

There has been much talk about the dairy sector. Recently an IFA bulletin outlined where the money paid for the gallon of milk went. It described it as a rip off by retailers and caterers. The organisation has to tackle this. The large supermarkets get 35% of the average retail price of branded milk for simply providing shelf space for a few hours. Farmers have to deal with this. The IFA also pointed out that the catering trade, which accounts for over 16% of milk sales, charged up to ten times the producer price. It is the equivalent of approximately €3 a litre. The farmer only gets 31 cent a litre. Overall, the farmer gets about 38%; the dairy, 26% and the retailer, more than 35% of the price of a gallon of milk. From the point of view of dairying, this must be seriously examined. That is the only point that people have mentioned to me in those talks which might give rise to some slight losses.

Farmers look at savings and those of us who are in farming – I am a member of the IFA and do some farming – look at where we are going and we have to make hard decisions now. If the prices that farmers were given for store cattle in the spring continue they are not going to make money from what is predicted by the experts for the finished product. We have to make up our minds that we are in that market and if we want to make money and stay there, we have to think twice about the type of prices that we are given. In some cases we are competing with part-time farmers who use their stock as lawnmowers to consume the grass in summertime. A farmer cannot compete with that type of individual for whom farming is a hobby.

I read recently in the newspaper that when Grange Research looked at stock management they said that 20 hours per week was the most a livestock farmer with 70 units should spend looking after the livestock. That research also said that there are many more farmers who must look at alternative incomes because there is little use in spending all week walking around a farm if 20 hours is sufficient to look after 70 to 100 stock.

We need to consider the position with regard to land and, while it may not be relevant, the Minister must look at that and how a young farmer who wants to expand his holding can compete against the speculators who own a substantial amount of land. We see people who receive in excess of €10,000 an acre for land and ask how can a young farmer buy land that comes up for sale when there is that type of money available? That has to be looked at with regard to the people who can purchase farm land and continue in farming, if we want to keep them in farming.

We have to look at encouraging young farmers. Continuing to talk down farming is like talking about a hospital – talk it down and it will close itself. Talk down farming and there will be no young farmers. In the past I argued against the IFA on the deal struck on the farm retirement scheme when it was introduced. It looked all right on paper but it was not index linked. Where is it now? When young farmers took over the farms from their parents, their fathers took a pension at that time but because it was not index linked, they are still on the pension they were on when they took it out. That has to be examined in terms of encouraging the farmers who own farms to hand them over. The age profile of farmers was mentioned earlier and if we want young, active, green-cert trained farmers to take over, we have to make sure that there is an income there for them, which no doubt there will be. We also want to ensure that the farmer, the father, the uncle, or whoever is handing over the farm, will have a pension adequate to meet his needs.

The CAP reform proposals also state that more funding for rural development has to be moved in and be of benefit in the rural areas where there will be an advantage for farmers and hopefully an opportunity for alternative employment. We need to look at that aspect. The number of farming bodies has been mentioned earlier and if anyone here was a Minister for Agriculture and Food trying to get the best possible deal for the farmers and one was listening to, for example, the IFA, the ICMSA, the ICSA, ICOS, and the Hill Sheep Farmers, each with a different demand, one would have to wonder why the farming organisations do not now take a step in the right direction and amalgamate, with one overall farming body to look after the interests of the farmers in this small country. They could have sub-committees for young farmers, dairying, sheep, hill farming, or whatever, but under one umbrella group. That has to be done from a farming point of view and as a member of a farming organisation I urge them to do this. When the Minister was on television the morning after the negotiations he was surrounded by farming organisations from Ireland. Farmers in the USA would not have as many farming organisations looking after their interests. I do not know how one can deal with that point.

With regard to the negotiations for the dairy farmer, we have to look at allowing young farmers who are coming in with small quotas an opportunity to get an increased quota from whatever surpluses or quotas are available. We must look at the smaller producer to allow him to develop and expand. I have no doubt that dairy farmers work hard. In the past they have done reasonably well from farming, far better than farmers with dry stock or that type of enterprise. We hope that they will be allowed to expand to a reasonable gallonage so that they can make a living for themselves and their families. I have seen many farmers in my time but very few retired or finished or sold out as millionaires. Most farmers worked hard, earned a good living and were always able to pay their way and that is what it is about. There is too much emphasis in all sections of life on becoming a multi-millionaire no matter in what business people are involved.

I congratulate the Minister on the successful negotiations that he completed for the people. The Minister, Deputy Walsh, and his officials deserve great credit. Many good speakers have made many good points and we look forward to that continuing during the debate.

Mr. Ryan

Contrary to what people perhaps believe, there is a significant number of farmers in the Dáil constituency which I unsuccessfully contested in June and they were not rallying to my support. Apart from that, as I think the Minister knows, I have long had an interest in the CAP and in the dilemma of developing a way of sustaining life in agriculture and related activities and sustaining life in rural areas, while not creating the sort of monster that the Common Agriculture Policy was threatening to become when Commissioner MacSharry began the process of rethinking it.

I was interested in the Minister's speech. I remember Seamus Mallon once calling the Good Friday Agreement "Sunningdale for slow learners". I have a feeling that the process of re-evaluating the CAP has a similar element. When one hears the sort of figures that the Minister quoted – that in the last four years we still accounted for between 27% and 35% of butter in intervention, though we only have an 8% share of production – one sees that there seems to be some slow learning in that sector. Farmers are slow learners if they do not realise that there is no future in intervention, for it can be short or medium-term but in the long term an industry cannot be so focused on intervention. The case is similar when the Minister quotes the figures for our reliance on bulk commodities in comparison with such countries as Denmark and the Netherlands. In any attempt to analyse the outcome of these or other CAP negotiations it is worthwhile asking the reason our agriculture and food sector seems to learn so slowly the lesson that others seem to have learned and grasped, though they were involved before us, that there must be a fundamental reappraisal.

Let us be very realistic. No one seems to be sure any more how many farmers there are in the country but I estimate their number at around 100,000. There are at least 3.5 million consumers, excluding farmers entirely, though they are consumers, too. To a degree, tails have been wagging dogs here for a long time. I repeat that I have absolutely no objection – quite the opposite – to creative interventions using redistributive, taxation based measures to sustain a dignified, worthwhile life for the maximum number in rural Ireland. This country is becoming dangerously over-urbanised without planning or thought, and we are in danger of turning our capital city into a fairly horrible place to live. One of our proper social objectives should be to reduce both the tendency and the necessity to move out of rural areas into urban ones.

It is interesting that young people's value systems and their ideas about where to live have been transformed. Anyone who lives in a university city or town, or anywhere with a third level college, will contrast those places with what they were like 30 years ago or even further back. When the Minister and I were students, they would not have dreamed of going home at weekends. The place to be was the big city. Now, every Friday afternoon – not for economic reasons – there is a mass exodus to small country towns and rural areas by our otherwise urbanised students, for the quality of life for many of them is better in their home areas than in big, urban areas such as Dublin and Cork. That is quite an extraordinary statement, for the belief was that youngsters were drawn by the bright lights of the city but the evidence is overwhelming that that is not happening.

I am not even madly keen on the concept of the Common Agricultural Policy since, as a policy to sustain rural living through agriculture and other activities, it is pushing an open door regarding the inclinations of many young people and where they desire to live. However, it cannot be separated from some of the daftness taking over about rural house-building, for instance. I know that there is a national spatial strategy but there is a need to look far beyond agriculture and production, dealing instead with agriculture and rural living. It cannot be right that we have an objective of maximising living in rural areas based on farming of some form, at the same time making it almost impossible for many young people to build a house in the areas where they would otherwise wish to live.

Acting Chairman (Mr. Dardis)

I do not want to stop the Senator, as he has more time, but there are two more Members offering. The Minister should conclude at 4.20 p.m.

Mr. Ryan

In that case, I will take that gentle hint. I am not able to evaluate the Minister's achievements or otherwise precisely but those who pretend – as I heard in some speeches from this side of the House – that there is some way to sustain the status quo indefinitely are fooling themselves. There is no overall electoral advantage in pretending to farmers or urban Ireland that the old way of the Common Agricultural Policy was sustainable. The German taxpayer cannot keep us in the lifestyle to which we have become accustomed. It is as simple as that, we have to get real. Once, within the last three years, the IFA came to talk to the Joint Committee on European Affairs and in a half hour presentation by the then president, now a Minister of State, the words “consumer” and “market” were never mentioned. I find it astonishing that an organisation which represents producers who wish to sell into the marketplace never mentioned them.

Dr. Mansergh

How long do I have?

Acting Chairman

In theory, the Senator has only three minutes but if the House agrees, we can extend that a little. Is that agreed? Agreed.

Dr. Mansergh

Do I have five minutes?

Acting Chairman

Yes. Afterwards I will call Senator Ulick Burke.

Dr. Mansergh

I welcome the Minister and congratulate him and his team of officials on their success, by no means for the first time, in overcoming difficult negotiating hurdles, to all intents and purposes preserving the interests both of the farming sector and, simultaneously, the country at large. I sometimes believe our farm organisations do not always give the Minister credit, to put it mildly, for what he has succeeded in doing. He has immense experience and has essentially been at the negotiating table as Minister, and briefly as Minister of State, for the best part of 16 years. During that period we have managed to get as much out of the negotiations as has been possible.

I will give an illustration of what the Minister is up against. I came across this at random as a member of the Joint Committee on Finance and the Public Service. It is a report on a seminar held in Helsinki in February, The New Financial Framework – Challenging EU Road to the Future, detailing how the UK delegation expressed dissatisfaction with the rate of reform of the CAP to date and the need for agriculture to have an ever reducing role within the European Union. One can open The Economist, The Sunday Times and so on. It is not simply reform of the CAP that they want but abolition as soon as possible.

The Minister, with allies in Europe – I suppose the French are leading them – has put up a good battle to prevent agriculture being written out of the equation. The sickening thing about it is that the British Government, when it reaches the negotiating table, wishes to protect the interests of the largest farmers. It is the old adage that socialism is for the rich and capitalism for the poor. One hears Lord Walston crowing about how many million euro he collects each year from the CAP.

The foot and mouth disease episode showed very clearly that there was an identity of interests in this country between the farming and urban communities. At this stage that is well understood. About two weeks ago a brochure was launched in County Tipperary seeking industrial promotion and decentralisation. The front cover showed lush green fields against the Galtee Mountains with the caption, "How would you like your office to look out on this?" It shows the interdependence between our towns and the surrounding countryside. That is clear also in relation to tourism.

The overall amount of money available for farming was secured a few months ago to 2013. The Minister has managed to negotiate a wide range of options which he can discuss in further detail with the social partners. It is good that they include the farm organisations which are there to discuss and negotiate with. Decoupling is the big issue in each sector. It appears the Minister has a wide margin of flexibility and also a fund to provide support for valuable schemes such as the REPS.

Senator Moylan, whom I had the privilege to hear, made a very interesting contribution. I agree with him on the importance of confidence in farming. The problem is that most of the time farm organisations have to paint the picture in fairly lurid colours which has the disadvantage of not giving any great message of confidence for the future. No one can pretend that farming will be an easy occupation because of all the pressures. The comparative living standard it can offer has undoubtedly declined and nobody has been able to do a huge amount about this during the past 20 or 30 years. There is a process of evolution and adaptation and if it is done sufficiently gradually, that adaptation can take place without too much disruption. If there was abrupt change, as some member states want, there would be huge problems.

Countries such as the United States are not in any position to moralise given the amount of support they give to farming. We are apt to forget in the argument about developing countries that the European Union is the biggest importer of foodstuffs from developing countries by a long shot. It is of vital interest that large tracts of land are not abandoned. It is important to maintain land use and the industries it supports to keep the rural and social community alive. The Minister has provided good breathing space for the next few years as a result of the negotiations, on which I congratulate him.

Mr. U. Burke

I appreciate the Acting Chairman's efforts to allow me make my contribution. I welcome the Minister to the House for this debate. I acknowledge the difficult situation he had to encounter during the past fortnight in negotiating what has transpired. Most understand decoupling means separating land from production. I see this as separating the farmer from the land from hereon. Despite the Minister's best efforts, Commissioner Fischler has clearly indicated he wants to revolutionise the agriculture industry in Europe. In so doing he wants to displace as many farmers as possible from the land. He sees them as an inconvenience.

The World Trade Organisation is driving the whole agenda. We are non-existent in terms of ranking with regard to the WTO. The package negotiated cannot be viewed as anything other than a redundancy package for so many farmers here. Members on the other side tell us not to be negative, not to talk down agriculture as there is a future. That is fine but the reality is much different. We do not have to talk down agriculture any more because farmers are gone. In some areas there may be pockets of the most profitable forms of agriculture but the west is becoming denuded of young farmers. We have part-time farmers. This is the first step out the gate, never to return. There are reasons for this.

I draw the Minister's attention to the fact that two weeks ago in this House, his colleague, the Minister of State, Deputy Aylward, gave a guarantee, following strike action at his Department's offices, that additional resources and overtime would be provided for personnel in the Department to process REPS and other scheme applications, apart altogether from the provision for certification of animals to allow movement. I regret I have learned today that the provision for overtime working has been withdrawn breaking an element of the negotiated strike settlement. During the negotiations we were told clearly and distinctively that resources would be provided to facilitate overtime working. Since the ending of the strike not one REPS application pending for nine months in south Galway has been cleared for payment nor has even one additional new application been processed. If that is the response, it is regrettable. I ask the Minister to intervene as a matter of urgency to rectify the situation. What other sector which depends on such payments for a sizeable proportion of its income would wait an additional nine months?

I wish to make one further plea.

Acting Chairman

Briefly, please.

Mr. U. Burke

When we use the words, "from the farm gate to the plate", we eliminate the farmer from the process. Bord Bia can call on a restaurant owner and ask from where he or she gets his or her meat. In reply the owner can say he or she produces it on his or her farm and processes it and that it is quality Irish beef. If one wishes to secure certification under the Bord Bia stamp of approval, one has to obtain it through an authorised agency. The authorised agency named a particular supplier who had been traced as having most of his beef sourced outside the State from third countries. Is that what we want for Irish farming? Is that not a kick in the teeth for Irish farming? This is being done by Bord Bia, an agency of the Department. It is time the Minister rectified this problem.

Acting Chairman

Is it agreed to conclude at 4.40 p.m.?

Minister for Agriculture and Food (Mr. Joe Walsh)

Yes. I thank the Senators who contributed to the debate. By and large, the contributions were positive and objective. Some concerns were raised, including those raised by Senator Ulick Burke, which were not germane to the mid-term review. They included the CPSU strike and Bord Bia, matters I will take up. The Common Agricultural Policy has been reformed on a number of occasions. The first reform was carried out under former Minister Austin Deasy and dealt with the introduction of milk quotas. Then we had the MacSharry reforms which tried to shift support from product to individual producer. We had the Agenda 2000 reforms in 1999 and now we have the mid-term review reforms. What is consistent about all these reforms is the hostile and negative reaction from farm spokespersons.

When former Minister Austin Deasy introduced milk quotas, he was regarded as Cromwellian and so too was former Commissioner MacSharry in his time. We should not try to reverse the improvements in the development of the CAP because it needed to be developed and modernised. It was introduced after the war to secure a food supply for Europe. The original model put in place was overly successful in doing that and as a result we had to got rid of surpluses. I am pleased that individual speakers have made the point over and over that to continue converting raw material produced by farmers into products for which there is no consumer is not a sustainable way for the future.

In the dairy sector we have almost 200,000 tonnes of both butter and skimmed milk already in storage. It is absurd that any leadership could give vent to a policy of saying that we should continue with increasing that commodity type of product storage into the future. It is even worse than that as it misdirects farmer producers from the real market situation. People ask where is the market. It is here at home. Senator Quinn said one could go along rows in his supermarket and see rows and rows of food products not manufactured in Ireland. Any of us could do the same in any supermarket in the country. These foreign products are ordinary everyday items ranging from cheese to products across the board.

There are €3 billion worth of opportunities each year in Ireland because we import more than €3 billion worth of food each year. We are members of the European Community Single Market which has 400 million consumers, a number which will rise to 509 million when the ten new applicant states become members. We are well capable of producing food for the consumers of those countries.

We have made some progress. There was much brouhaha in the beef industry over the years which was shovelling beef into intervention in the 1980s. That has stopped and now we are the biggest beef supplier by far to our nearest neighbour, the British market – over 250,000 tonnes – which is one of the world's most discerning markets. To supply the range of competitive super and hyper markets there one must be good and must produce good quality. When intervention was discontinued and it was put up to us, we were able to avail of the opportunity.

When I looked for some lead-in time for intervention – we got another five years to reduce from 70,000 tonnes of butter to 30,000 – my Danish counterpart said he was appalled at an Irish Minister for Agriculture and Food looking for additional storage for an unwanted product. I explained that we needed more time and could not get the industry to change over night. He pointed out that we were nearer the British market than them but that they were beating us hands down in that market. Sadly, that is the case. Our farm and co-op plc leaders must show greater leadership.

Before Commissioner Fischler put his proposals in January I established, commissioned and paid for a Prospectus report on the dairy industry. That study pointed out the insane policy we have pursued in the dairy industry of shovelling more and more milk products into intervention. We must get away from that. We must also share facilities. There is no point in Connacht Gold, Lakeland Dairies, Arrabawn and Glanbia all having their own little processing units. We cannot afford that because we must remove costs from the processing side of the industry.

At a medium level, in west Cork we have four co-ops, Bandon, Barryroe, Lisavaird and Drinagh which now process no milk. However, the co-ops are still there and they supply hardware and store material to the farming community in their areas. All the milk goes by tanker to Carbery Milk Products in Balineen. Carbery Milk Products is doing a superb job because it does not convert the milk into old hat type products. It was one of the early pioneers of Bailey's Irish Cream and did a lot of research and provided the method of processing the cream into alcohol. It still makes alcohol products and produces Boru Vodka which is produced from milk, one of the greatest raw materials of all time. The company also produces the fabulous Dubliner cheese.

Thirty years ago in Killeshandra, John O'Neill was able to make UHT milk which was put into jigger packs and was available on every airline all over the world. However, in recent years product and process development has been lacking. That is not because of lack of support. Enterprise Ireland provides substantial research and development support for industry. However, where there is prop-up intervention there is no need for research or development. That day is now gone. The game is up and we must now get out into the marketplace and provide good quality food to the 500 million consumers we will have in the EU from 1 January next.

The change necessary is well signposted in the Prospectus study. I have met almost all the co-ops over the past few months and have told them that they will not survive with their current product portfolio but must increase their range of products. There are many opportunities to do that and they owe it to the industry and their farmer suppliers to make those changes.

The main proposal in the current reforms is decoupling or breaking the link between premium headage and getting payment. Whether they liked it, people had to keep cattle and sheep in order to collect payments because a headage payment was made. The more headage people had, the more payment they got. That resulted in a surplus and overgrazing. Then we had to introduce destocking in order to prevent overgrazing. We were promoting production on the one hand by premia and headage and promoting destocking on the other hand. When this livestock was converted into meat, I was invariably called on to visit Mr. Fischler to know if we could get increased export refunds to get rid of the surplus product. Having promoted production we were then looking for additional EU taxpayers funds to get rid of it. The unfortunate aspect of this was that we found ourselves in some of the least developed third countries and invariably ended up dumping our surplus product on these unfortunate people and their fledgling economies which wrecked and caused mayhem in them. It had to stop.

The current proposal is that we pay farmers a single farm payment based on the reference years 2000, 2001 and 2002. A farmer will now get a single payment of the average of what he got in those three years. He will make one application and get one cheque in the post each year. There will be complex cases involving inheritance and lease of land and farm pensions, etc, but these are being taken care of in the legal text. The single farm payment will be a tremendous cushion for those farmers. They will have their payment anyway and will then produce high quality products for which there is a market. The only return will be from the market. They start with a single farm payment and may then go on to produce high quality Angus or Belgian blue beef, or whatever the market demands. It is the signal from the market that will be responded to – farmers will engage in rearing livestock rather than farming headage. The concept is a good one.

I will sit down with the social partners and industry representatives and we will come up with a model, from the menu of variations on full decoupling, which will become a road map for the development of agriculture into the middle of the next decade. I hope we will come up with a sensible format which will take some of the bureaucracy out of the system and shift us considerably closer to the consumer and the marketplace.

The second big advantage of the current agreement is that it leads us into the world trade talks in a strong position. We have put our house in order by stopping the promotion and development of surplus products and taken away the considerable irritant of the dumping of subsidised products onto third country markets. The agreement will safeguard direct payments, through the single farm payment, which amount to €1.3 billion per annum. People might say that there are no longer that many farmers and their numbers are falling further. However, the figure of €1.3 billion works out at about €13,000 on average per farmer, although some get more and others get less. This figure represents up to 60% of farmers' incomes. They will be protected from challenge in the world trade talks because they are no longer linked to surplus production. They will be protected in this manner right into the next decade, which is extremely important for our farming community.

Acting Chairman

I wish to advise the Minister that we are eating substantially into the time allotted for our next item of business.

Mr. Joe Walsh

In that case, I will conclude. People say that the CAP is a costly instrument and so it is at a cost of €43 billion per annum to the European Union. However, it is only 1.5% of Europe's GDP and I believe that our farmers deserve support. The EU is not giving its farmers any more than the US Administration gives its farmers. If we want good, high quality food which recognises food safety and animal welfare standards, the people who toil on the farms deserve that kind of support. I believe that taxpayers do not begrudge farmers, provided that they produce what the consumer wants. Farming is a huge commitment which extends to seven days and nights per week. I was at a wedding on Friday which people left at 5 p.m. in order to put on their wellingtons and milk the cows before returning at about 9 p.m. I marvelled at their commitment.

Acting Chairman

I hope the Minister is not going on to the afters.

Mr. Joe Walsh

The music is too loud for me these days. Heavy metal is not my scene.

This is a good agreement and a good outcome for Irish agriculture, but it will only be really successful if we implement it properly and adequately. This means responding to the demands of the modern consumer and society and those demands are very different from those which pertained decades ago.

Ms O'Rourke

I thank the Minister and the Minister of State for coming to the House, for giving of themselves and for being open with their views. I am sure I express the views of all Senators when I say we are glad to see the Minister in our midst.