I was saying at the conclusion of the debate before lunch that I was very impressed with Deputy Joe Walsh's contribution. He is probably the most knowledgable Member of the House regarding dairying matters seeing that he has long practical experience of the business. A number of the comments he made had a great deal of significance. It was a most enlightening speech. He is a very modest Deputy as he does not attempt to force his points too strongly. He is most forthcoming in relation to the knowledge he possesses on the issue.
Deputy Walsh spoke in particular about the need for better marketing and research in dairying in this country. This is a very interesting point. He said we had gone into the mass production of two commodity items in the dairying sector, butter and skimmed milk, without paying sufficient attention to the production of other products. He said we were placing undue reliance on the EEC's intervention system. He is quite right in that. It is rather late in the day for us to admit this fact but it is as well that we should admit it. We are producing commodities which are in vast oversupply and vast overproduction in the Community. The sooner we get away from this type of production the better.
The EEC intervention stocks of butter at the moment amount to 765,000 tonnes of which 53,000 tonnes are stored in Ireland. The intervention stocks of skim milk powder amount to 970,000 tonnes of which 124,000 tonnes are stored in Ireland. One can see that there is an enormous surplus of the two commodities which we are primarily producing and manufacturing here so there is a great need to get away from this system. Deputy Walsh was quite correct when he said that we have not paid proper attention to marketing. When the system lends itself to vast production of these commodities and placing them into intervention he is dead right that we should have got away from those two commodities and be producing a wide range of dairy produce. You need money to do that. It requires a considerable amount of money to diversify into new products.
In my area the Waterford Co-operative Society are now manufacturing yogurt. To market that on one-sixteenth of the British market I believe it has cost them well in excess of £2 million. It cost that huge sum of money to promote that one product. I believe they are manufacturing the product at Inch in County Wexford under licence from a French company so the cost to actually research and develop it would be greater than that. That leads to the point I raised in my opening address, which was referred to by a number of speakers, the fund which Bord Bainne have advocated for research and development of new products. They mention a figure of £5 million initially. It is a very commendable suggestion by them. We need a whole range of new products and it takes money to produce them.
We have not got the reserves in this country, whether it is technologists or research facilities to do this kind of work. I noticed recently that a number of the major co-operative societies in the country are undertaking their own research and development projects. That is a very costly item for any of our co-operative societies. They may look very big but in an international context they are not very big at all. It would be much more logical if they had one central research agency rather than having ten or 12 different co-operatives doing their own research and development projects. We must look at this aspect of it from a national point of view not from the point of view of each individual co-operative society in the country. There are about ten or 12 very big co-operative societies and a larger number of smaller co-operative societies. If there was one central development agency the research could be done on that central basis. I know of no funds available for research at the moment, because of the usual problem, division of responsibilities between Departments. It is not clear whether that responsibility lies with the Department of Industry, Trade, Commerce and Tourism or the Department of Agriculture. As we have always said, that responsibility has never been given to one Department and I intend to look further into that. Exceptionally fine research facilities for dairy development are available in UCC, and I intend to pay a visit to the university shortly to see for myself the capacity and potential of the resources available with a view to developing the type of research I have been speaking about. The production of new commodities is a very costly item which needs very thorough investigation and planning and it would be far better if it was synchronised and done on a central basis than to have a number of individual groups doing it.
Deputy Leonard in his very outstanding contribution showed his objectivity and his practical approach to the problem facing us in the dairy industry. I agree with what he had to say about the sensationalism attached to the recent stories about the level of antibiotics in milk in that it did a great deal of damage to the dairy industry here and it was blown up out of all proportion. Of course, 80 per cent of milk here is processed by the co-operatives and they have their own penalty system whereby they penalise people who deliver milk with a level of antibiotics which is not acceptable. The test in question is very sensitive and the result is that the milk used by the co-operatives is almost invaribly free from any antibiotics. There was a small level of abuse by some suppliers who were delivering liquid milk to dairies, but as a result of measures taken by my Department in the past nine or ten months the degree of abuse in that area has been considerably reduced if not eliminated. As Deputy Dowling said, it is unfortunate that the consumption of liquid milk in his co-operative area dropped by some 12 per cent because of the publicity given to what was a relatively small abuse. Nevertheless, it was an abuse, and we should be very vigilant in seeing that any abuse, no matter how small, is eliminated because it entails an inherent danger to health. In the country as a whole the level of milk consumption at that time dropped by 12 or 15 per cent. I am glad to say that there has been a considerable recovery and milk consumption is virtually back to normal.
Deputy Kirk, who spoke shortly before the break, gave a very reasoned and outstanding run down on the state of the milk industry and again I thought his a very objective contribution. He made a number of statements with which we could all agree. One was that the major development of agriculture would be a very slow process. We will not get results overnight or in a matter of weeks or months. We must be prepared to spend a considerable time adapting our approach, whether in producing new products or adopting new policies. The Deputy made the point, which I have made in this Chamber previously and which some people chose to ignore, that we would not be under the threat of the milk super-levy if action had been taken to correct the problem of overproduction of milk several years ago. Deputy Kirk was quite adamant that such action should have been taken in good time, and of course he is right. Here we are in 1984 trying to resolve a very serious problem which originated in the 1970s, and it is grand to be so bland as to come in here and say, "Go out to Brussels and veto the super-levy proposals. We did it before, why not do it again? There is no problem". Of course there is a problem. If some restriction is not put on milk production within the EEC we will have desperate problems in the future because the people who contribute to the EEC budget have made it quite clear that they will not increase their contribution until there is reform of the CAP and some reason is brought into areas where at present overproduction and therefore surpluses are vast. You cannot compare the present situation with that which pertained when previously a super-levy on milk was proposed. You cannot make comparisons because previously there was still money in the EEC budget. Today there is not. The EEC budget was absorbed fully in 1983 and, therefore, the method of financing with an increasing production pattern is not adequate for us to carry on as before. Something must give. Either we cut back on production in the EEC as a whole or we increase expenditure. The net contributors to the budget, the British and the Germans, have stated emphatically that they will not increase the budget unless we rationalise spending in the agricultural sector. It is quite ridiculous, unrealistic, stupid to say that the situation is similar or parallel. It is quite different and it is so serious that it must be treated in that light. We have said at the talks in Brussels, Athens and Luxembourg during the past seven or eight months that we appreciate there is a difficulty. The people we are dealing with are not fools and it would be very silly of us to insinuate that they are. We are all adult enough to know that there is a serious problem and that a cut in production must take place. We must put our finances in order as a result. Because of that severe financial budgetary situation we had a set of proposals from the Stuttgart summit last June. Those proposals were published by the Commission in July, and there are dozens of them. The milk super-levy proposal is the one upon which all the attention is focused and there are dozens of others not quite so serious but some with fairly serious implications for this country. One relates to the abolition of the calf premium, which was advocated by the Commission. It would cost the country £38 million in one year. That is one of the subsidiary proposals from the Commission.
I will direct my attention now to the proposal for the super-levy on milk. Last week I was accused of having changed my approach to the milk super-levy. That is untrue, absolutely incorrect. I have always said that I would not want to insult the intelligence of people in Europe. I appreciate that something has to be done about the overproduction of milk. There is a need for corrective action but that corrective action would not have to be so drastic if it had been taken five or six years ago. However, such action will have to be taken and we are facing this showdown in Europe. There is need to take corrective action. The super-levy proposal should apply to the countries who have caused the problem by their intensive method of producing milk; the proposal should not apply to us. There should not be any question of a super-levy proposal applying to us until we have reached the same level of production as our partners in Europe. There is no question whatever but that we are seeking a derogation from any such super-levy proposal until that time arrives.
The reasons for the underdeveloped state of our industry are well known. We have infrastructural problems and there has been underfinancing going back 60 years. Those matters have been major factors in the failure of Ireland to attain European production levels. Another factor is that some of our European partners have been using huge quantities of cheap imported cereals to produce milk on a massive scale. Such importation must be cut back. There is little point in Members telling me that I should stop this immediately, because it should have been stopped years ago. I will give a simple statistic which explains the reason why there has been such a dramatic increase in milk production in the Community. In 1976 the Community imported six million tonnes of cereal substitutes and that figure has risen to 16 million tonnes by 1982. There is little point in pointing the finger at me and telling me I should stop that completely; it should not have been allowed reach that level. Probably the greatest contributory factor to the milk surplus in Europe is that cereal substitutes were allowed into the Community for a long period. I do not wish to play politics on this issue but it is not fair or correct to point the finger at the Government and accuse them of being responsible for the position that exists. That is not playing the game; it is not true.
A serious problem is confronting us and if we do not succeed in getting a derogation from the proposal we will suffer a terrible set-back, not just in agriculture but economically. The economy of the country will be affected. However, I am confident that we will get the derogation we are seeking. I should like to explain the progress made so far. I am sorry if I must repeat myself but my greatest difficult in this super-levy debate is to get people to understand the issues involved, because they are extremely complex. There is considerable misinterpretation and misunderstanding. At times I believe the misinterpretation is accidental but on occasions it appears that it is deliberate.
The vast majority of people do not understand the full implications of the super-levy proposal. The simplest way to explain it is in terms of figures. Milk production in the Community in 1981 was 96 million tonnes and Community officials estimate that the consumption of milk and milk products rises by ½ per cent each year. Taking into account 1982 and 1983 they set the figure for the milk super-levy at 1981 production levels, plus 1 per cent. The 1981 production level was 96 million tonnes and if 1 per cent was to be added it would be 97 million tonnes. A figure for milk production for the future was fixed at 97 million tonnes annually. Milk production in 1983 was 103 million tonnes. At the rate at which milk production is increasing, and if we do not do anything about it, by the end of 1984 it will have increased to approximately 105 million tonnes. The self-sufficiency of the Community is approximately 80 million tonnes of milk. Considering those figures Deputies can see the massive surplus of milk we have in the Community. If we continue as we are at the end of the year we will have 25 million tonnes more milk than we need. People have the cheek and the nerve to come to the House and tell me that we do not have a problem, that all we have to do is to go to Europe and shout "veto" and the problem will go away. Do such Members take the people to be fools? There is a very real problem.
The Community are satisfied that it will be possible to get rid of 17 million tonnes of that surplus on traditional markets. It is not easy to get rid of that amount of milk but it will be got rid of even if the Community have to pay to get rid of it. However, once we go over that 97 million tonne level we are in dead trouble. We might as well pour that milk down the drain. It would not be possible to get rid of it even if we wanted to give it away. We would be as well off pouring it down the drain. Hence our problem. Considering those difficulties I believe we made a lot of progress between July and December to be offered by the Greek Presidency to be allowed produce milk not at the 1981 level but, initially, at the 1983 level and, finally, at the 1983 level plus 10 per cent. That amounted to considerable progress in the face of tremendous difficulties but we were not satisfied with that and we sought complete derogation bearing in mind that the Greeks quantified the original Commission super-levy proposal as being for a four year period with a review after three years and not forever. We made it known that we were not satisfied with the 1983 levels plus 10 per cent.
Some countries would not agree with the Commission's proposals. Their position from day one has been: the super-levy proposal for everybody, no exceptions, no exemptions. Three countries continued to adopt that attitude up to the conclusion of the Athens summit. At present we are negotiating again and the Council of Agriculture Ministers are debating agricultural questions, primarily the milk super-levy. We had an inital meeting where we adopted procedures, we had a meeting last week, another meeting on 27-28 of this month, the next meeting will be on 5 and 6 March, another meeting on 12 and 13 March and the summit will be on 19 and 20 March. Contrary to what Deputy Byrne said, the summit will not be in Paris but in Brussels. The French have the Presidency of the Council at the moment but there will be two summits during their presidency and the first summit will be in Brussels.
Besides the milk super-levy proposal there are many other controversial proposals involved. Positive MCAs cause considerable trade distortion in the agricultural marketplace. The Commission and a number of countries, including Ireland, want those positive MCAs to be dismantled over a period of years. We would be delighted if they could be dismantled immediately because they would put our farmers in a more superior trading position than they are in at present, but the Commission proposed that they be dismantled over a three-year period. The Germans are opposing the elimination of MCAs, they are fighting this move tooth and nail because their farmers will suffer a considerable reduction in income if the MCAs are abolished at a time when price increases within the Community are minimal or nil. We can all see their point because they are major net contributors to the Community budget. We can understand the Germans saying: "Why should we pay for other countries, why should we subsidise them and take a cut in prices ourselves?" In my view it is very logical that they should object, but I am hoping a solution will be worked out. The French Presidency is working very hard trying to resolve such difficult problems.
There were other major issues: one is the problem I mentioned some minutes ago, the importation of cereal substitutes. We want the importation of cereal substitutes to be reduced. The countries which have been using them and which have caused the milk problem — the Dutch, the Germans and the British — do not want them reduced; they do not even want them stabilised. They want cereal substitute imports to continue to increase. The contradiction in their attitude towards the milk super-levy and the increased importation of cereal substitutes defeats me. I do not understand it. It does not make sense. They want a cut-back in milk production and they want a vast increase in the commodity which is causing that increase. Like ourselves, the French are demanding that there be a cut-back. The Commission are suggesting that the level of importation of cereal substitutes be stabilised, and that is as far as they will go. As I said earlier, the importation of cereal substitutes should never have been allowed to reach that level.
Another issue being debated is a tax on intensive milk producers — in other words, factory-type farms. If the milk production is deemed to be unnaturally promoted in factory-type farms a tax will be levied on the production of that milk. We fully support that move, but again the people who caused that problem are fighting to stop that tax being imposed.
Another burning issue is the tax on vegetable oils and fats. The idea is to make milk products, in particular butter, more competitive in the face of products such as margarine and other vegetable oils and fats. That could bring in a considerable amount of money to the Community — 600 million ECUs was the estimate, or about £400 million — which would go quite a distance to pay for the milk surplus which is at present causing a problem. Countries with large numbers of consumers are opposing that tax vigorously because they feel it would increase their cost of living. The tax is at a very low rate — I think it varies from 0 to 6 per cent — and it would not have a major impact on prices.
Those are some of the major bones of contention. The Commission advocate that the calf premium be abolished. This would hit us very hard. They have not recommended that the variable premium which is damaging our cattle trade and meat factories be continued and we support their attitude. I hope they stick to their guns because this is causing a lot of problems for our meat factories. Some factories have to lay off hundreds of workers and others are threatened with closure. There is also the attendant danger to our export markets. Markets which Ireland traditionally held are now being threatened by meat exports from Northern Ireland and Britain who are not traditional meat exporters. The variable premium is a subsidy for the export of beef which is being partially financed by the EEC — in other words, it is partially financed by the EEC to put our factories out of business. This is inconsistent and I am glad the Commission have not proposed that the premium be continued. It should never have been allowed to do that damage, but we will wait to see if the Commission go through with what they promised.
I want to refer to New Zealand butter which is causing problems not just in this country but within the Community as a whole. This is probably a suitable day to refer to New Zealand butter because the New Zealand Prime Minister, Mr. Muldoon, is coming to Dublin tomorrow. With a name like Muldoon he will get a typically Irish welcome, but that is as far as it goes as far as I am concerned. Contrary to what has been said here in the last week our attitude to New Zealand butter is not ambivalent or contradictory and never has been. I traced the background of New Zealand butter within the European Economic Community. In 1972 the Community agreed to allow the continued importation of New Zealand butter because New Zealand has been a traditional supplier of butter to Britain.
I have here a copy of the Accession Treaty and the relevant regulation relating to New Zealand. It is Protocol 18 of the Accession Treaty of 1972. Under that regulation New Zealand were to be allowed import in 1973 165,000 tonnes of butter into the Community. That amount was to decrease over five years so that by 1977, the amount was to be down to 138,000 tonnes. At the end of 1977 that agreement was continued on a decreasing basis, but nevertheless was continued; it was not phased out completely. They were also allowed export cheese to the EEC, starting off in 1973 with 68,000 tonnes coming down to 15,000 tonnes at the end of 1977. An interesting thing about the cheese, which as the House knows requires a lot more milk for its manufacture than does butter, is that the imports into the Community from New Zealand stopped at the end of 1977. For some mysterious reason I can never find out they were allowed resume those imports into the Community in 1980 — admittedly a smaller quantity — but they are still allowed that quota of cheese.
In 1983 New Zealand had a quota of 87,000 tonnes of butter into the Community. It has been a diminishing quantity ever since 1973 but it has always been there. The Commission have put forward proposals reducing that quantity of New Zealand butter further to 75,000 tonnes over the next four years. What I have said at the meetings of the Council of Ministers in Brussels is that I will not agree to any long-term arrangement for the importation of New Zealand butter into the Community. First of all, I want to see the outcome of the talks on the super-levy proposal. New Zealand's concession ended on 31 December 1983; but, because of the traditional market they have had in the Community, the Commission put forward at the end of 1983 a proposal that they be allowed continue at a reduced rate coming down to 75,000 tonnes. What I said then, what I have said since and what I am saying now is precisely the same: that I will not agree to that until we see the outcome of the super-levy talks.
Therefore, what has been happening is that New Zealand have been given an interim allocation originally on a two-month basis — we agreed that in January — while what the Commission proposed was a five-year agreement. Those two months will expire at the end of this month. I think Members of this House will agree that our attitude has been entirely consistent and is what the public would expect of us in this matter. The situation is far too serious to allow New Zealand butter to come into the Community without any qualification. There is that qualification; it is being done on this bi-monthly basis until such time as we will have seen the outcome of the super-levy negotiations. In connection with those super-levy talks I might mention that President Mitterand of France is paying a visit to Ireland next Tuesday. As the House is aware, he is an exceptionally important person in the context of these talks because he will be chairing the summit of 19 and 20 March next. I must say that throughout these super-levy negotiations we have found the French to be extremely helpful and sympathetic to our case, as we experienced with the previous host nation, the Greeks. The French are traditional allies of ours in EEC matters, particularly in agricultural matters. As I said, we found them extremely helpful and hope that will continue.
Deputy Hugh Byrne in the course of his contribution said that the average milk yield in Europe — he was drawing a comparison between Ireland and Europe — was in excess of 1,000 gallons per cow per annum. That is not absolutely correct. The average yield within the EEC in 1982 was 926 gallons per cow per annum. That increased slightly in 1983. Deputy Hugh Byrne may have been thinking about what we call the Northern European average, the intensive producers about whom I have been speaking. If one takes Britain, Germany, Holland and Denmark one will get an average in excess of 1,000 gallons per cow per annum. But if one takes Italy, France, ourselves, Greece, Belgium and Luxembourg, then the average is 926. We would be closer to 700 than 800.
A most important thing about the final decision on the level of production in the milk sector allowable in each country is our increase in the last two years. One might ask what was our average annual milk production increase in the first ten years in which we were members of the EEC, from 1973 to the end of 1982. I bet I would not get the right answer from anybody in the House. Some people might say it was 10 per cent, perhaps others 8 per cent or 9 per cent. The average increase in our milk production per annum has been as low as 4 per cent. Everyone is surprised at the mention of that increase and does not believe it. The fact is that in 1980 and 1981 there was no increase at all in our milk production. In one of those years the level actually decreased. Everyone has the notion that we have zoomed up, year by year — we have not. The average has been 4 per cent, which is a rather sobering statistic. Our increase in 1982 over 1981 was 8.1 per cent and our estimated increase — because we have not yet a definite calculation — in 1983 over 1982 is 8 per cent. We have increased slightly over 16 per cent in those two years. That is why it would be so terribly damaging to us if we were tied to the 1981 production level.
To be recognised as having a very real difficulty and to have a proposal put that we be allowed milk production at 1983 level plus 10 per cent is an absolutely massive improvement over a 1981 proposal for this country, particularly by comparison with any of the other countries. Most other countries in those two years instead of having had a 16 plus percentage increase in milk production would have had an increase of somewhere around 5 per cent. Their industries were so developed that there was not that same massive potential for considerable increase.
The final proposal put forward by the Greek Presidency in Athens was that instead of a general production level of 1981 plus 1 per cent, people should have an option as follows — and this may be a little difficult to follow: 1981 plus 2 per cent, or 1983 minus 5 per cent. If we were in that league — and we are not — it would suit us to take 1983 minus 5 per cent because that would be the same as 1981 plus 11 per cent. It just illustrates the point that most countries had quite small increases between 1981 and 1983. You might say that that option was not too bad, that it was a little improvement on the original offer. However, that offer creates problems. Instead of sticking to the figure of 97 million tonnes, which was the original super-levy proposal, that offer would allow countries to increase their production so that the overall total would be not 97 million tonnes but 99 million tonnes.
There was an added complication in the Greek proposal. The Greeks were to be totally exempted. Of course, their milk production is irrelevant in European terms because they produce a very tiny amount and actually import most of the milk used. The Italians were to be given the 1983 level of production. The proposal was for us to get 1983 plus 10 per cent. Might I say that those exemptions and the choice allowed as between 1981 plus 2 per cent or 1982 minus 5 per cent did not just bring the figure up to 99 million tonnes; it brought the figure from 97 million to 101 million tonnes. Therein lie considerable difficulties for the Community and the Commission. The difficulty is in getting back to 97 million tonnes and at the same time giving out complete exemptions. At recent meetings the French were looking for exemptions for their small farmers, of whom there are many tens of thousands, especially in the mountainous regions and in the south. Luxembourg is looking for an exemption also because all that country is classified as a disadvantaged area under Directive 159.
There would be so many exemptions that the Heads of State may say "To hell with the super-levy proposal. We will do the easy thing, that is just cut prices and save the money we need to save by doing so". That would be a much worse solution as far as we are concerned. It would put approximately 10p on a gallon of milk. It would be a simpler but a drastically unfair way to solve the problem. Too many people seeking, demanding and getting exemptions cause us all sorts of problems. We are the only country singled out for special treatment. That point is repeated time and time again in the Commission documents. We are not too madly happy when we see other countries seeking to knuckle in on our bit of the action.
I want to re-emphasise how the Community are financed. 1 per cent of all VAT receipts in the Community form the major part of the Community's financing, together with customs and excise duties receipts on goods imported into the Community and also import levies on agricultural goods. The Community have advocated that that level of finance be increased by increasing the rate of VAT from 1 per cent to 1.4 per cent. This is our greatest difficulty. What makes the whole problem so complex and the resolution of the surpluses so absolutely necessary is that the large countries will not agree to increase their VAT proceeds from 1 to 1.4 per cent until the Common Agricultural Policy is reformed or overproduction brought under control.
I wish to refer now to some of the points made by other speakers this morning. Deputy Jimmy Leonard told how he had come across an hotel in Cork which would not provide him with cheese on request. Unfortunately, that is all too frequently the case in this country. We are not noted for being high consumers of cheeses or dairy products in general. I hope that yesterday's initiative of the National Dairy Council will bring about an improvement with regard to milk and related products. Our consumption of cheese is not as high as it might be. I should imagine also that the availability of several varieties of cheese is also a factor in the low consumption rate. Deputy Sheehan absolutely bemused me today with the variety of cheeses which he had come across or knew about. I had never heard of lobster cheese, periwinkle cheese or crab cheese.
