Léim ar aghaidh chuig an bpríomhábhar

Dáil Éireann díospóireacht -
Thursday, 19 May 1988

Vol. 380 No. 9

EC Commission Research Project: Motion.

I move:

That Dáil Éireann notes the studies published by the Commission of the European Communities on the research project directed by Mr. Paolo Cecchini.

The studies in question are, first, a book The European Challenge 1992 — The Benefits of a Single Market by Mr. Cecchini and secondly, a more analytical study entitled The Economics of 1992, An Assessment of the Potential Economic Effects of Completing the Internal Market of the European Community, published in the March 1988 edition of the Commission's journal, European Economy. The studies now published, including some material other than the two reports to which I have referred, form only a small part of the output of the research project which, we are told will run to 6,000 pages when fully published.

Deputies will certainly not have had the opportunity to read all the published material and indeed will probably have been unable to do more than absorb the main results set out in the studies I cited earlier. I do not, however, consider that this need inhibit us from using the opportunity afforded by this motion to debate some very important issues that arise out of what I will henceforth call, for convenience, the Cecchini study.

The Government welcome the publication of the study which comes at a timely moment in both the Irish and the Community context. In the domestic context, it will serve to highlight the opportunities and the challenges arising from the programme to complete the single market, at a time when the Government are seeking to direct the attention of the commercial sector of the economy to these issues. In the Community context, publication comes at a time when the Council are getting down to discussions on the more sensitive proposals in the Commission's White Paper and when negotiations are under way on the reform of the Structural Funds pursuant to the Single European Act and the Conclusions of the European Council meetings in Brussels in June of last year and 11-12 February last.

Let me deal first with the study's assessment of the potential effects at Community level. The reports suggest that, coupled with an appropriately growth-oriented economic policy — and I shall come back to this — the implementation of the 1992 programme could:

— increase GNP by up to 7 per cent;

— create 5 million net jobs;

—lower the price level by 6 per cent;

—improve the budget balance of the Member States as a group.

These are, I emphasise again, estimated gains for the Community as a whole. They say nothing about the distribution of the benefits — and I also want to come back to that matter.

These results are of great significance for Ireland. There is evidence that the disparities in levels of development and living standards between member states and regions in the Community showed the strongest tendency to narrow at times when the rate of economic growth in the Community was most rapid. In more recent years, Community growth has been sluggish — no more than 2 per cent a year over the period since 1980 and during that period the regional disparities have widened again.

The Government, therefore, welcome and support the emphasis in the Cecchini study on the need for a macro-economic policy in the Community based on a coherent growth-oriented strategy, with appropriate and co-ordinated measures on the demand side complementing the essentially supply-side benefits of implementing the measures in the 1992 White Paper. Such a complementary and expansionary policy is needed to ensure that the Community economy climbs on to the higher growth trajectory necessary if the full economic gains of the internal market programme are to be realised. In the Programme for National Recovery, we indicated that one of our main concerns in the Community would be to ensure that the co-ordination of economic policies led to a faster rate of economic growth and thus to a significant impact on the unacceptably high level of unemployment.

In line with this concern, we will be actively promoting adoption at European level of a policy stance that aims at using the benefits from the downward competitive pressure on costs and prices to increase output.

I referred to the need for such an approach if the gains from the internal market programme are to be maximised. I should explain here that the initial effects of the changes embraced by the programme, as analysed in the study, would be on costs and prices, both directly as a result of the removal of barriers and indirectly through the effects of competition and through realising previously unexploited economies of scale. The results of macroeconomic studies of these factors in seven member states — not including Ireland — were fed into macroeconomic models of the European economy and the results indicated that even with a passive economic policy, there could be a medium-term gain, over say five-six years, of 4½ per cent in terms of GDP, a lowering of 6 per cent in the price level and a net gain of two million extra jobs from full implementation of the programme. The estimates also indicated that the budget balance would be improved markedly and the current account of the balance of payments should show a significant improvement.

The study drew the further conclusion that since all the main indicators of monetary and financial balance would thus be improved it would be legitimate to consider adjusting medium-term macro-economic strategy to a somewhat more expansionary path. A number of possible variants are illustrated. In the middle of the range, for example, lies a case in which the GDP level after a medium-term period might be 2½ per cent higher, in addition to the 4½ per cent gain suggested under the passive macro-economic policy, thus totalling 7 per cent. In this case, inflation would still have been held well below the course initially projected in the absence of the internal market programme. The budget balance would also be improved while the balance of payments might be worsened by a moderate but sustainable amount.

It might be thought in some quarters that a 7 per cent addition to growth in output is not all that major an effect. But it needs to be realised that this 7 per cent would be on top of the growth that would occur otherwise — just as the 6 per cent lowering in prices would act to cancel out or abate the inflation that would occur otherwise. Moreover, as one distinguished commentator has pointed out, the 7 per cent supplement is equivalent to three-and-a-half-years normal growth in the Federal Republic of Germany and there are very few other economic policies which have a chance of achieving so much at European level. The Commission put it another way: that the potential gains could be about large enough to make the difference between a disappointing and a very satisfactory economic performance for the Community economy as a whole.

Its emphasis on policies directed at accelerating growth is a positive aspect of the Cecchini study. However, in another respect, the study is flawed. I have in mind here the disturbing failure to estimate or even deal substantively with the question of the distribution of the aggregate gains among member states or regions. The report by DG II states that this was not attempted. It may be claimed that this was not the aim of this particular research project or covered by its terms of reference. The only answer to this is that it should have been and the report is diminished in value because of this limitation.

The Commission report suggests that neither economic theory nor relevant economic history can point to any clearcut pattern of likely distributional advantage or disadvantage. They say that theories of vicious circles of divergence of regional fortunes resulting from market integration exist but that so also do alternative theories, including important recent developments in the analysis of trade between industrialised countries, that point to more balanced or indeterminate outcomes. The also suggest that small countries have proportionately the biggest opportunities for gain from market integration and that, in any case, policy instruments such as the Structural Funds, exist to provide an insurance policy to help initial losers recover.

I certainly do not wish to suggest that the internal market programme will necessarily or automatically have adverse effects for a country such as Ireland. What I do say is that our historic experience demonstrates that if the cohesion dimension in the overall policy approach is inadequate, we and member states like us may not reap our fair share of the benefits expected from the 1992 programme. In every debate we have had in this House on the effects of the Single European Act, since it was first signed in 1985, I have consistently stressed this issue which is of vital importance to us.

The report in our view is unsatisfactory in two ways. It gives too little attention to the question of regional and national distribution of the aggregate gains from market integration. It therefore avoids analysing all of the major issues of the effects that will flow from completion of the market. Cohesion is now a Treaty obligation to be taken into account in all Community policies and I want to emphasise that this obligation must be acknowledged in and must animate all Community studies and measures concerning the economic future of the Community. Cohesion is now one of the most central objectives of the Community and must be constantly and vigorously pursued.

The second unsatisfactory feature of the report is that we cannot fully accept what it says about the potential distribution of gains. The recent work on international trade shows that although the total potential benefits of trade to the European Community as a whole are greater than was conceived in the traditional trade theory, these benefits will not automatically be shared evenly unless there are countervailing measures and policies. The Cecchini report creates the impression that the trend of thinking in economics is towards the view that the gains from integration are automatically more certain and more evenly distributed. This is not our view of how thinking is developing and we will be pressing the need to ensure that cohesion must be at the forefront of all Commission thinking and action in developing the internal market. This means that all decisions by the Community affecting a less-developed economy such as ours must take full account of the extent to which these decisions will accelerate or hinder cohesion.

I would recall that the Single European Act inserted a series of articles on economic and social cohesion into the Treaty of Rome. As a consequence of Article 130 A, there is a Treaty obligation on the Community to develop and pursue its actions leading to the strengthening of its economic and social cohesion and to aim in particular at reducing disparities between the various regions and the backwardness of the least favoured regions. Article 130 B provides — and this is of particular importance in the present context — that the cohesion objectives set out in the Treaty are to be taken into account in the implementation of other Community policies and of the internal market. It is essential that the Commission take the steps necessary to ensure that the cohesion dimension is systematically taken into account as early as the design stage of Community policies and that it is not grafted on later as an addendum to be dealt with solely through the operation of the Structural Funds. Such an approach would have ensured that the cohesion and distribution aspects were given their proper place in the Cecchini research project.

Deputies will recall the Declaration made by Ireland on the occasion of ratification of the Single European Act. We intend to ensure that this is acted upon at Community level. It may be helpful if I recall the indications given in the Programme for National Recovery that the Government:

are committed to the objectives of the Single European Act to perfect the Common Market, narrow disparities in economic development and living standards within the Community and to strengthen Europe's capacity in science and technology,

are anxious that Ireland should play the fullest part possible in the completion of the internal market, subject to full account being taken of the possible serious difficulties for this economy from an insensitive application of some of the proposals involved and also to market-opening measures being matched by more effective Community action to achieve greater economic and social cohesion.

This insistence on appropriate parallelism is conditioning the Government's position in the negotiations currently in train on the Commission's proposals for a comprehensive reform of the Structural Funds, pursuant to Article 130 D of the Treaty, inserted by the Single European Act. Following the success of the European Council meeting in Brussels on 11-12 February, the Commission tabled a revised version of its proposals for a regulation on 23 March last. This proposal which reflected the agreements on the Structural Funds reached in Brussels has been under examination since then in a council working group and in COREPER. Very important issues are involved, including the list of less-developed regions, the criteria for the share-out of the expanded resources of the funds between the five major objectives and among the Objective 1 regions, including Ireland, the definition of the tasks of the Social Fund and the detailed provisions on the intervention rates to apply within the framework set by the European Council.

The conclusions of that Council provided that the framework regulation on the Structural Funds and the legal instruments covering the other chapters of the package were to be adopted by 31 May 1988. In the current negotiations, the Government are insisting that the framework regulation be speedily agreed in a form that is true to the letter and spirit of the Brussels agreements and that will ensure a major increase in the financial support from the funds to Ireland to help equip the economy to reap a fair share of the gains postulated by the Cecchini study.

Or course, how far these gains will accrue to Ireland will also depend on our state of readiness to avail of the opportunities open to a country so oriented towards exports and to meet the challenges to a country so open to imports. Many different sectors will be affected, not only obvious areas like manufacturing industry and transport but such sectors as construction, the professions, energy and telecommunications. The necessary preparations are primarily the responsibility of the individual companies in the different affected sectors of the economy, of their sectoral bodies and of their representative organisations. The Government have a major role to play both in regard to necessary adaptation in areas that are the responsibility of the Government itself or of the public sector and in promoting awareness and the necessary preparatory steps in the commercial sector of the economy. We have taken a number of steps to those ends.

First, as I indicated in the House recently, the Government have established a committee of Ministers and Departmental Secretaries, chaired by myself, with a brief covering both the steps needed to adjust to specific features of the internal market programme and how best to ensure the most effective use of the increased receipts that will be available to Ireland under the new regime for the Structural Funds. The committee has put in hands a substantial programme of work.

We will be making proposals to the European Commission on how we visualise this committee interacting with the Commission so that we can co-operate to the best possible advantage to ensure that on both sides there is full comprehension and co-ordination in what we are going to meet the 1992 deadline. Such interaction by the Commission should, we suggest, be under the leadership of DG II which is responsible for economic affairs since cohesion is the statutory framework within which the single market is to be achieved.

Secondly, the Government are preparing a campaign to alert the various economic sectors to the implications of the 1992 deadline and to persuade them to make the necessary adjustments in their attitudes, plans and approaches. This campaign will be launched in the near future. It is intended to do so at a major conference for business and other leaders. It is envisaged that the conference will be co-sponsored by the major representative organisations that are party to the Programme for National Recovery.

As I indicated in reply to Questions here on Tuesday last, the campaign is being planned at present, including consultations with the social partners and I can give some indications of our thinking. I mentioned an official launch earlier but in a sense the campaign has already begun, to the extent that I have addressed, for example, the CII and IMI annual conferences, and speeches have been made by the Minister for Industry and Commerce, the Ministers of State for European Affairs and for Trade and Marketing and other Ministers. Business people need not wait for an official launch before getting down to planning for the changed environment. Businesses should start today, if they have not already done so, drawing up their detailed plans for the period between now and 1992.

It is envisaged that the national launch will be followed up by a comprehensive programme of activities that will highlight both opportunities and potential problems and will cover all the sectors that will be affected in a manner appropriate to the varying degrees of dispersion or concentration of the impact and, therefore, of the extent of "outreach" activity needed. For example, a great many firms will be effected in sectors such as manufacturing, somewhat less in financial services and construction, while in sectors such as energy and telecommunications the number of agencies involved is fairly limited.

We do not see the campaign as something to be done by the Government centrally for the various sectors. On the contrary, we see it as a task to be undertaken by the sectors for themselves. Certainly, there will be central co-ordination to ensure that the information is getting to all who need it and that the necessary preparations are taking place; certainly, Departments and agencies will provide information, whether by way of briefings or detailed documentation, but we envisage the delivery of the campaign as being decentralised, primarily through the representative and sectoral bodies of the commercial sector and the Ministers, Departments and semi-State bodies concerned with the different sectors and functions that are relevant. For example, we envisage a substantial role for the IDA, CTT, and SFADCo, including through the European Business Information Centres attached to the latter two bodies.

This ties in with the sectorally targeted approach we intend the campaign to have, with the primary emphasis on giving the necessary information and stimulus to specific sectors and firms and rather less of the generalist type of publicity involved in some aspects of the campaigns in other member states.

Let me say here that while the awareness and preparation campaign in France has been under way since 1986, those in the UK and Germany are really only getting off the ground now, while other member states such as Italy, Denmark, the Netherlands and Belgium are more or less at the same planning stage as ourselves.

I have indicated the steps being taken by the Government in regard to the most effective use of the Structural Funds and to the awareness and preparation campaigns in regard to the measures in the internal market programme. The Government are also proceeding with the steps for the implementation of the programme approach to the use of the Structural Funds, as envisaged under the new regime expected to apply from 1 January next. This is not yet fully agreed, since, as I indicated earlier, the negotiations on the draft framework regulation are still in train, with more provisions to be laid down in the separate implementing regulations which are expected to be tabled once agreement is reached on the framework regulation but which may not be settled until towards the end of the year.

However, while some member states have been concerned that the approach may lean too much towards centralised planning or may involve an undue administrative burden, it appears likely that the provisions about the programme approach will be adopted broadly as proposed by the Commission. These involve, in the first place, each Objective 1 region preparing a regional development plan for the region: in the case of Ireland, this would effectively be a national plan for the State as a whole which remains a single region for the purposes of the Community funds.

The plan would cover all of the priority objectives set by the European Council for the Structural Funds. It would, therefore, cover measures for long-term and youth unemployment and development of rural areas, as well as the general development and structural adjustment of the region. The draft framework regulation indicates that the plan should include in particular:

a description of the regional development priorities selected and of the corresponding operations.

an indication of the use to be made of assistance available under the funds, the EIB and other financial instruments in implementing the plan.

The Commission envisage the plan as being a relatively short document. The core of it would be the measures which are envisaged in each of the years to 1992 in the areas relevant to the Structural Funds, such as capital investments in roads, telecommunications, energy, industrial buildings and plant and other areas; employment and labour market policy and priority operations planned for long-term and youth unemployment; a description of the rural development priorities and corresponding measures.

In effect, the plan would have to set out a multi-annual expenditure profile in each of these areas, together with a general indication of the type of measures on which the expenditure would take place and the particular programmes which would be prepared to implement the plan. It would also indicate the extent to which Community support is being sought from the Funds, the EIB and the other Community financial instruments.

The Commission will consider the plan we submit and enter into dialogue with us, following which it would decide on what is called the Community Support Framework. This would set out the total amount of aid from each Fund to be given by the Community in support of our Regional Development Plan. Within the framework of the latter, assistance from the Community would be mainly on foot of operational programmes. These are likely to be a mix of national programmes, embracing investments and development initiatives in a wide range of areas, drawing assistance from one or more of the Structural Funds and other Community financial instruments.

In anticipation of these developments, the Government decided last October that preparation should commence so that Irish applications to the Funds would henceforth primarily be in the form of programmes rather than the project by project approach hitherto. This decision was announced by the Minister of State at my Department, Deputy Geoghegan-Quinn, and other Government speakers. Aspects of this approach are currently being considered by the Committee of Ministers and Departmental Secretaries I mentioned earlier.

There have been some suggestions that plans for use of the Structural Funds in the immediate period ahead do not attach enough weight to public transport in the Dublin area. I would have to point out that during the eighties there has been a massive investment of resources in public transport improvements in Dublin, with the construction of the DART at a capitalised cost of about £113 million with the assistance of EC funds as well as a virtual renewal of the bus fleet. Nothing on a comparable scale was done to improve the road system during that period. The most pressing priority now at this stage is to build a ring road around Dublin at a cost of about £120 million over six years, and relieve congestion on the principal roads in and out of Dublin. No possible public transport improvements would remove the necessity to undertake this investment and there is no capital city in Europe that has not ensured a high standard of roads both around it and leading into it. We must not attempt to do everything at once. In the meantime, further improvements in public transport are continuing and I have no doubt that in due course the question of further major investments will return to the agenda.

One of the major issues we will face in the achievement of the Single Market is the harmonisation of taxes. At present, the exact decisions we will be faced with are not clear as much discussion has yet to take place in the Council of Ministers and the views of many member states will have to be accommodated. Our basic stance is to participate fully in progress, but nevertheless the serious implications of complete harmonisation for our public finances and for social policies will have to be taken into account.

Thus, the Government are moving purposefully to tackle the various issues that need to be addressed domestically in Ireland, by the Government itself, by the public sector and by the private sector and to put in place the policies necessary to adjust the economy here to the requirements of the 1992 deadline. We are playing our part to ensure that the Irish people, who have been so strong in their support for the European Community and for closer European integration, should participate fully in the growth brought about by such integration, as set out in the Cecchini study. But I return to the point I made earlier. We are anxious to participate to the fullest extent in the completion of the Internal Market. We intend to be part of developments that can give a major new impetus to growth in Europe and help the Community to keep pace with the US, Japan and the newly industrialising countries in Asia.

The community now has Treaty obligations to promote greater economic and social cohesion, including the implementation of the internal market. The Government look to the Community and, in particular, to the Commission to ensure that the various Community policies promote convergence and not the opposite. We acknowledge the constructive role of the Commission in helping to secure the agreements at the Brussels European Council in February and, since then, in the continuing negotiations on the Structural Funds and in further discussions with the Commission which we hope to arrange, we will be seeking to ensure that this constructive approach will be carried forward in respect of key elements in the internal market programme. In this regard, I am encouraged by the references to cohesion by Commission President Jacques Delors in his foreword to the popular version of the Cecchini study.

To our own people, I want to give a message of realism but also of encouragement. There will be some losses in this process of completing the internal market. There is no question of benefits flowing automatically to us in Ireland. To profit from all the potential advantages and minimise the disadvantages, what we need is a cool, careful assessment of what is involved, a readiness to adapt to change and decisive action to adjust and prepare. The state of our trading balances with the major continental member states should give us the confidence to face up to this new challenge with the conviction that we can bring to our people the benefits foreseen in the Cecchini Study.

I should like to begin by saying that I am glad that the Taoiseach has acceded to my request that we have a debate on this report. Indeed, I believe that today's discussion of these matters should not be the only debate we have; we need to return to this matter regularly. My view of the necessity of that is confirmed by the approach the Taoiseach has taken here today, which indicates to me an absolute failure to give the necessary guidance and leadership that are needed in order to equip Ireland to participate fully and effectively in the benefits of unifying the European Market.

The impression that has been given in recent times by Government statements on all these issues is that the process begins in 1992, that somehow something new will start in 1992 whereas, in fact, the intention of the Commission's proposal is that the process of unifying the market will be completed in 1992. It is wrong of the Government to be giving the impression that we need to prepare for this. What we actually need to do is to implement the provisions that will, in fact, unify the single market.

So far — and I have been listening to what the Taoiseach has said of the Government's views and actions — the only measure I can see that the Government have taken is to set up a Committee of Ministers and Departmental secretaries. The Taoiseach says that it is intended to launch an awareness campaign some time next month with a conference of business and other leaders. That is not by any means an adequate approach to deal with the specific issues that must be addressed in order that this country play its full part and gain the maximum advantage from this process of completing the internal market. The Taoiseach's presentation today leaves me with a very clear impression that the Government have not grasped the issue and it leaves me with a very real fear that the necessary action will not be taken, will not be vigorously pursued because the Government do not understand the full implications of the programme in which we are involved.

We need a planned and a co-ordinated approach to the issues that face us and they are issues that face us today. They are issues that will face us every month and every year from now until the time when the single market is finally brought about. It will be a continuing exercise. Even for those businesses or those sectors which fully grasp what is involved, it will be a daily business for them to keep up with the evolution of the market and, indeed, a daily business for them once the market has finally been unified to work at and get the advantages from it.

The first thing we need to do is to adopt a clear, a reasoned and a well informed approach to each of the 217 Directives which the Commission has already proposed for the completion of the internal market and which so far have not yet been passed by the Council. We have to identify both the opportunities and the problems that the full integration of the market will present and the agricultural sector, industry and services must all be involved in that. They are not passive spectators; they are not the recipients of wisdom from the Government; they are the people who have to make it happen. We must identify the action that is needed in order to ensure that competition, both in this country and in the European Community generally, works to the benefit of both consumers and producers so that the advantages of a unified market are fully realised.

We must identify the action required at Community level to ensure that the distribution of gains from the unification of the market is fair, takes account of the needs of the less well-off regions of the Community and translates into practice the commitments undertaken by the Community in the Single European Act in relation to economic and social cohesion. We must also ensure a proper co-ordination of our responses in all these areas. There must be consistency between the positions that we adopt in relation to agriculture, industry and services in order to make sure that the approach taken by the Government and by the economic actors and by other Governments in the Community is one that brings about the maximum benefit to all our people. We must ensure that economic policy in each member state in the Community reinforces the benefits of market unity. The Taoiseach made the barest reference to this in his statement but reading through the report and looking at the implications either of a passive or active economic policy for the growth path of the Community over the coming years, we see that this is one of the central issues.

Our experience in recent years has been that it has been very difficult to get our other partners in the Community, particularly those with stronger economies, to accept that economic policy in the member states should be integrated and that some of the member states by adopting a particular line on economic policy can help to lift the rates of growth in the Community. That whole area will be a very key area in the development of the single market in the Community and it will require a great deal of attention here.

We must also adopt a very determined and clear position on the harmonisation of excise duties and VAT. The Taoiseach's treatment of this in his statement today was inadequate in that he seems to have adopted an utterly passive position where he is waiting for somebody else to produce the proposals. He does not seem to have grasped the fact that there is an opportunity and a duty on the Irish Government to specify the path he will take towards the eventual levels of harmonised taxes in the Community. I will come back to that later.

We must also ensure that monetary policy in the Community achieves the maximum possible level of exchange rate stability and that it supports growth in the Community. It is clear that monetary policy developments in the Community will have a very substantial effect on the level of interest rates. This is an area which the Taoiseach has completely omitted to mention, even though events of the past weeks should have made it more clear to us how essential it is that a monetary dimension of the Community be active and support the kind of growth path set out here. It is clear, for example, that there is now some room to persuade our nearest neighbours that sterling would be far better off inside the EMS than outside. That would be a positive factor in this whole complex of developments in relation to the unification of the market.

If her own Chancellor cannot persuade her the Deputy cannot expect the Taoiseach to persuade her.

Deputy Quinn has adopted a very curious position. What we have to do is identify the things that will work for us and the Community. If the Deputy feels that the Taoiseach will not be able to persuade people elsewhere let us change the Taoiseach.


I find it upsetting and worrying that the Taoiseach did not identify the importance of that area in his exposition.

I do not think the Deputy read my speech.

I read it very carefully. It took less time to read it than to listen to it. It was very thin on these issues——


We are now discussing not just the Cecchini report but what we do in order to participate fully and benefit to the maximum from the unification of the European market. Although the Cecchini report my not have said much about monetary policy and other issues, they are important issues for us and the Government have an obligation to have a view on them and to put forward proposals to show how they fit in the whole process.

It is clear that no Government committee composed of Ministers and Departmental Secretaries can meet all these requirements without assistance. We need a joint effort of all the interests involved in our business, agriculture and commercial life. It is my considered view that the Government must immediately move to secure the assistance and co-operation of representatives of the main economic sectors, the professions and the unions, in guiding this work. That will be a heavy task and it will not be done——

——by having these arm's length contacts with the partners in the infamous Programme for National Recovery, and by having a conference of business and professional leaders in the Royal Hospital, where there will be worthy speeches for an afternoon and a lot of photographs taken with everybody smiling happily thinking they now understand all about 1992 and then everyone going home and the Taoiseach, his Ministers and the Departmental Secretaries going back to their Departments thinking they have the show on the road and nothing more needs to be done. We need representatives and people with expertise from all the sectors working on a day-to-day basis with the committee of Ministers and Secretaries, giving practical advice on what is involved in unifying the European market. The people sent to do that work should be told by their organisations that that work will be the main part of what they do for their organisations for the next couple of years because that is what it will take.

In relation to the directives that will be coming before the Council, there will be in all 286 directives in order to put all the pieces in place. The number has come down somewhat since the Commission made its original forecast of what would be required. I would not be at all surprised to find that as the process goes on and we get nearer to market unity, some of these directives will be unnecessary and others will be required. So far, 206 directives have been presented to the Council of Ministers who have adopted so far a grand total of 69 and I am given to understand that a common position has been arrived at on 14 others. That could mean anything. It could mean they will be adopted next month, at the end of next year or in three years time, but the pace of work in the Council does not match at all the urgency of the task before us.

These directives cover a very wide field, for instance, physical standards for products, access to professions, access to the provision of services and a great many other things. We will need not simply the Government to participate in the normal process of examining those directives and adopting positions on them, but we will need the Government to take a concentrated and concerted look at how these directives fit together and how they affect the different sectors of our economy, the professions and the services, so that as each directive comes to be debated and, hopefully, concluded in the Council, our position on each one will be part of a unified approach to all of these directives to get the results we want from them. The Government will need assistance and advice from all of the economic sectors in doing that.

The unification of the market will bring about a greater freedom in trade in the Community and greater access to markets, without the kinds of barriers, both trade barriers and non-trade barriers, that have been a feature of the Community for many years. Of course in that regard we probably have fewer barriers to bring down than most other member states simply because we have a much more open economy. I think I am right in saying that no other economy in the Community depends on trade to the same extent as we do, two-thirds of our GNP coming from trade.

What we must do is to look at how the market is going to evolve. The report states very clearly that the growth sectors, and I am speaking essentially here of manufacturing, in the Community account for a smaller proportion than they do in the United States or Japan and their growth rate is slower than in either the United States or Japan. If my memory serves me correctly the point has also been made that the differential in growth rates between those modern rapidly growing sectors and the other sectors is smaller in the Community than in Japan. The expectation of course is that the unification of the market will help to develop the contribution of those sectors.

We need to take a concentrated look at where the opportunities are going to be presented for Irish manufacturers and indeed Irish services. We should look first of all at how firms located here can participate either directly or as subcontractors or suppliers in the kind of building which is going to be done and which should be done in the growth sectors in the European economy. We should identify what niches in the market we can occupy and see how we can participate in the growth of the European industrial sector generally.

The same applies in relation to services. Our services sector must think to a much greater extent than they have up to now — although I do admit that there have been some developments — of expanding and exporting because there will be an increasing demand in the European Community in the services sector. If the growth pattern we follow is at all similar to that in the United States or Japan the services sector will grow much more rapidly than the rest of the economy creating opportunities for those who export services.

There is a particular need to identify a more aggressive approach on the part of our insurance and banking sectors than they have been inclined to take up to now. I congratulate both our banking and insurance sectors on the foreign ventures they have been involved in up to now, but they do need to have a more aggressive approach in building up their participation in the European market. So far our banking sector has tended to look to the United States for that kind of growth. There is a market on our doorstep in which there are opportunities. The same applies to the insurance sector.

All of this development will of course mean that potentially there will be more competition in our market because trade is a two-way process. I would welcome this because more competition in our market is good for our consumers and in many cases it is good for our users of services. We can all think of a range of services to industry and the ordinary consumer which would be improved by having more competition. Irish operators of course would have to gear themselves up to withstand this but the final effect should be beneficial in terms of the range and quality of services which would be made available to the Irish consumer.

During the course of his remarks the Taoiseach complained about the fact that the Commission had not done any work in identifying what the sectoral impact of all of these measures would be on Ireland and perhaps the Taoiseach has a legitimate complaint to make but I have to ask what the Government have done? The Taoiseach gave me no indication this morning that the Government have done even the most sketchy analysis of what the sectoral impact is likely to be and it ill becomes a Government to criticise the Commission for not doing something in relation to its industrial sector that they have clearly not done themselves. We need to see those assessments being done, and that is why I said at the beingning of my remarks that this should only be the first of a series of debates in this House about this process. I want to see during the course of that process assessments from the Government as to what the sectoral implications would be so that we would all know what we would be dealing with.

The report points out the necessity of ensuring that competition would work fully to bring about the full benefits of the growth path which is set out here and I must say that I agree with that. That is why my colleague, Deputy John Bruton, recently made a proposal which would insert into Irish law the competition provisions of the Treaty of Rome as this would be the most rapid way of ensuring that we would have a uniform climate of competition right around the Community.

In that connection let me digress for just a moment. I am afraid that this debate seems to have got in the way of some other activity in that my colleague, Deputy Allen, submitted a question about what the effect of these developments would be on the monopoly of the VHI but we find that this question has been ruled out of order because this debate is taking place. I am bound to say that I find it very curious that because we are having a debate of this kind we cannot pursue other detailed matters which arise during the course of this debate and which also have their own and separate importance.

It is clear that we would wish the distribution of the gains from this process to be fair and I am very glad to see that the Taoiseach has taken on board a strong commitment to the cohesion provisions of the Single European Act. I am all the more glad because his commitment in this regard is in sharp contrast with the position he took when we first negotiated the Single European Act, at which time he did not seem to be at all impressed by the cohesion provisions. We will keep the Taoiseach under close inspection to make sure that he does follow up on the implementation of the cohesion guarantees given in the Single European Act.

The Taoiseach is very unclear on what he has in mind or what his Government might have in mind in relation to giving effect to this, using the extra funds available from the Community Structural Fund. In reading the Taoiseach's statement I can find no clear exposition of just what the Taoiseach has in mind in relation to regional development and the articulation of programmes. This is something which we will have to come back to. The Taoiseach seems to have contented himself with simply nothing the fact that the debate is not over yet on the guideline directives for the Structural Fund, but we need much more than that.

In relation to the Taoiseach's remarks about Dublin transport I must say I am very surprised to find that the Taoiseach would seem to invoke the fact that we have a DART system and that we are building a ring road around Dublin as an explanation or an excuse for not having transportation needs properly built into the brief for the integrated programme for Dublin. We know the DART is there and we know that a ring road is being built and being built less slowly now, mind you, as a result of this Government's actions than it would have been before, but you cannot simply say because we have a DART system and are building a ring road that we do not need to think any more about transport needs in Dublin. That is only the beginning. All of the rest of the transport requirements have to be looked at. How do the roads and the DART system mesh in together? What do we do about public bus services, public transport services and acess to the centre of the city? These things are only a beginning.

The Deputy is missing the point. The argument is about the differences between public and private transport.

I am afraid that the Taoiseach is missing the DART, that is the problem. The Taoiseach has simply not understood that the roads and the DART are only a part of the transport system and the transport infrastructure and the transport requirements of Dublin. We have to make sure that the funds which are available to us from the European Community are used effectively, and that those funds are used in ways which will generate more growth. I would hope that the Government and all of us would agree that we do not use the scatter gun technique with those funds, that is spreading a little of them all around the place, which is what the Government appear to be doing with the national lottery funds at present. However, that is another question. The only effect of that is that one disperses the effort, getting less growth from the funds and, at the end of the day, less value for money, less employment than would be the case with a properly constructed programme.

I am sure the House will agree with me that one of the areas that should be very high on our list of priorities in the use of funds of that kind is investment in our roads infrastructure.

I intervene to advise the Deputy that some five minutes remain of the time allotted to him.

We need co-ordination about which I spoke before. Obviously we need co-ordination as between agriculture, the food industry sector and the other industrial sectors. We must ensure that the actions we take in different sectors are mutually supportive. There have been times in the past when that has not been the case. For example, approaches we took in the past to the insurance sector, which tended to operate on a very defensive reflex, have worked to the disadvantage of manufacturing services and employment here. We must ensure that that does not happen here. That is why that co-ordination of approach, using people's skills from all sectors of our economy, is essential.

I want to revert briefly to the question of tax harmonisation. The Taoiseach referred to this in the course of his remarks, contained in one paragraph. It is stated to be one of the major issues we will face in the achievement of the single market. The Taoiseach offers us, as his view on all of that, this resounding statement and I quote:

Our basic stance is to participate fully in progress but nevertheless the serious implications of complete harmonisation for our public finances and for social policies will have to be taken into account.

In terms of statement on an approach to tax harmonisation I would regard that as a definite maybe. It says nothing at all about our approach, this, mind you, from a Taoiseach and a party who, so far as I could discern, up to about 18 months ago professed to believe in that mythical beast, the self-financing tax cut. They trotted it out here year after year, in debate after debate in this House, budget after budget — the answer was going to be a self-financing tax cut. Now that the Taoiseach finds himself in the position of looking at that process in concrete terms within the EC all he can do is shrug his shoulders and say "maybe", whereas it is very clear what we should do. We should now programme our approach to the harmonisation of excise duties and value-added tax in the Community. We should set out the path that suits us. Sooner or later we will end up——

What about food?

Ah, now, this is exactly the reason I totally distrust this Taoiseach on this issue. What does he do when faced with an issue? He picks out the nearest frightener he can find. How would the Taoiseach feel if there was a directive from the Commission on his desk, the effect of which would reduce VAT on hurleys from 25 per cent to 15 per cent? What would his Minister for Agriculture think about that, the man who used to go purple with rage because we would not reduce VAT on hurleys? That is not a frightener.

Deputy Dukes should adhere to the motion before the House.

What is needed is some clear thinking, some guts and determination to carry it through. Nobody in this House could seriously contest the proposition that harmonisation of indirect taxes in the European Community will be good for the European Community, will be good for the Ireland, good for all the traders in our Border areas, for employment and jobs here, and that we have far more to gain out of it than we have to lose. If we go about the process properly in a planned way — using the instruments we put in place in the Single European Act — we can do it with the assistance of our partners in the Community without having to mewl and moan about derogations. Let us get a bit of backbone into this and get the Government to stand up and start planning properly for this process.

At the outset I should like to draw attention to the difficulties experienced by Deputies in preparing adequately for this debate. The important motion before us today reads:

That Dáil Éireann notes the studies published by the Commission of the European Communities on the research project directed by Mr. Paolo Cecchini.

It is an absolute scandal that it was not possible for Deputies, or foreign affairs spokespersons, to acquire a full set of the relevant reports prepared by the EC Commission and Mr. Cecchini and his colleagues for this debate. I must thank two of my former journalistic colleagues for the loan of the copies with which they were provided by the EC Commission when the report was launched last week.

In view of the complex nature of the economic analysis that accompanies Mr. Cecchini's report, I feel that either the Department of Foreign Affairs or Finance, in conjunction with the Office of the European Community in Dublin, should not only have made sufficient copies available to Deputies but should also have briefed Members of the Oireachtas in advance of this important debate on the advent of 1992.

The complex nature of the economic statistical assessment of full EC integration in 1992 merits more than a single debate in this House. Much of our involvement and belief in the European Community since our accession 16 years ago has been taken on trust by the people of Ireland. I believe that this partially blind faith in things European was the most significant factor in securing the passage of the constitutional amendment on the Single European Act last year.

We must be conscious of this very trust because, as public representatives, we are charged with the serious duty of scrutinising and examining, on behalf of the electorate, many matters of detail which affect the daily lives of people. In the last 16 years some of the most pervasive measures owe their origins to our membership of the European Community. The seriousness of the matter before the House today and the sheer number of proposals advocated by the Commission — in or about 350 at my last reckoning — demands special attention.

The lack of preparatory assistance to Deputies for this debate — two copies of the Cecchini report were only obtained by the Oireachtas Library on Tuesday last — reflects the need for some institutional reform of this House's procedures to enable fuller and more informed consideration of matters that will have major longterm effects on this country.

I should like to take this opportunity also, to renew my appeal to the Taoiseach to consider the setting up of a foreign affairs committee later this year.

The frequent references to the advent of 1992 and the establishment of the single market ignore and obscure the very important fact that, as we speak, the directives and proposals that make up the internal market are coming into force almost daily. In this light, it is disappointing that the Government only committed themselves to the conducting of an information campaign on the huge implications of 1992 as a direct result of Dáil pressure from Fine Gael and the Progressive Democrats. Many of the information campaigns launched by other member states are already at an advanced stage.

The Progressive Democrats are wholeheartedly in favour of the completion of the internal market in 1992. We do not want any more exemptions or derogations. We believe that it is fundamentally in the interests of this country, its economy, its industry, its long term employment prospects, that we adhere fully to the 1992 deadline, that is a mere three budgets away.

We deplore the hesitant leadership on the part of this Government who have allowed public perception of the Single European Market, since last year's referendum, to make 1992 simply synonymous with VAT on food and clothes. That is wrong and has allowed uninformed perceptions to arise.

The EC single market programme, which is well underway, involves approximately 350 proposals, the vast majority of which are overwhelmingly in the interests of this country. We are presented with a simple choice by 1992: to fully meet the opportunities presented to us to benefit, as producers and consumers, from an open market of 320 million people in four years time or to fall back into the second row in Europe. Europe will progress without us. We will not be given the right to pick and choose.

The Progressive Democrats believe that the Irish economy, business life and employment prospects could be transformed in the nineties if the ambitious and far-reaching programme is openly embraced by this Government. Instead of allowing the 1992 debate to focus entirely on VAT implications, as the Taoiseach tried to do again today, the Government should be pointing out the main objectives of a single open market. These are as follows.

Most, if not all, of the present restrictions on capital movements will be abolished. In fact, fairly important decisions in this area are expected to be made next month. It should be possible to secure loan and mortgage financing from financial institutions not established in Ireland and at interest rates only dreamt of in this country. Indirect taxation levels will be harmonised between member states and company taxation may also be harmonised in the context of 1992. National standards and regulations with which many Irish exporters have to comply will be gradually eliminated or harmonised. Significant proposals have already been tabled affecting the construction, building supplies and machinery sectors.

Restrictive public procurement practices operated by member states will be phased out. This is especially important as public contracts account for around 15 per cent of the EC's economic activity. Competition will become especially intensive in this area. Customs and VAT formalities will become progressively easier and cheaper by and large. Transport costs will be reduced as there will be more competition in the areas of road, rail, aviation and sea transport. The remaining physical restrictions on crossing EC frontiers will be progressively abolished. This could have huge implications for this country because at present our Border is an economic and security border and if the economic barriers are removed we should look at the prospects this would hold out for us. Professional qualifications will be recognised in all EC countries.

If we, in Ireland, do not prepare for the additional opportunities which will be open in a few short years time, then our continental competitors will reap the benefits from the economies of scale that a large internal market will generate. The Cecchini report is a valuable attempt to assess these economies of scale. The report predicts that overall economic gains of approximately £154 billion per year could be achieved for the European Community in the medium term as a result of the completion of the internal market by the end of 1992.

Mr. Cecchini, a former Director General of the Commission's Industrial Policy Division, claims that 1992 could have a positive impact on employment to the tune of about two million jobs, even after absorbing the significant productivity and restructuring effects attributable to the integration of the market. He argues that industry, in areas like motor manufacturing and telecommunications, is losing billions of pounds each year because of inefficiencies imposed by divergent product standards and protectionist public procurement policies. A bewildering array of price differences face consumers of essential services: car insurance may vary by as much as 300 per cent between high and low market countries; telephone charges may vary by 50 per cent from one EC country to another and the range of some key financial services can be even greater.

Public authorities, year in year out, pay around £13.5 billion more than they should in purchasing goods and services they need because of protectionist public procurement policies. EC firms pay around £6 billion, annually, or 25 per cent of notional profits, in administrative costs and delays caused by customs procedures. They forego, in addition, at least £3.5 billion, and possibly as much as £11.5 billion in lost turnover, as a result of this obstruction. Things are even worse for small or middle-size firms. Customs costs per consignment, according to the Cecchini report, can be 30 per cent to 40 per cent higher for companies with under 250 employees than for larger companies. Most companies in Ireland are in the 250 employees range.

Clearly, the list of matters that have been addressed and costed by Mr. Cecchini and his team are impressive. The elimination of the administrative and customs controls at frontiers, for example, would not make much sense if enterprises came up against a whole range of direct obstacles created by contradictory and divergent national technical standards and regulations which have to be complied with in order to trade in 12 separate markets. Many of these are expressed as safety and quality controls but, in reality, they are no more than clever obstacles that fragment markets by increasing the costs of market entry.

In order to achieve headway by 1992, and partly as a result of encouraging decisions by the Court of Justice in Luxembourg, the European Commission has abandoned its earlier efforts at attempting to get unanimous agreement on a common set of standards for separate products. Instead, it proposes in about 60 areas, measures to adopt minimum standards or a Community code which, if satisfied, will permit the marketing of products that would not otherwise satisfy the requirements of a national economy. This move is much in Ireland's interest since we are an exporting country.

Mr. Cecchini lists example of the numerous existing anomalies: products, for example, which are described as "chocolate" in Ireland and Britain, are not in Belgium, because of the inclusion of vegetable oils in their manufacture. In short, one of the messages that must go out from this debate is that if a product is fit to trade, it should be free to trade. The Taoiseach does not make that point. The Cecchini report, by and large, should act as a major impetus for a country like Ireland to fully prepare for an open and free European Market of 320 million people in 12 countries in just under four years time.

I would add just a word of caution to the Cecchini projections: the figures produced depend on a whole series of heroic assumptions about economic behaviour in member states. In particular, the prediction of a growth rate of between 4 per cent and 7 per cent of GDP in the EC arising from the internal market seems beyond Ireland's immediate capabilities from this vantage point. It would be a valuable asset if the Cecchini report were followed by a new European Commission breakdown of the impact of the 1992 programme country by country as well as a study of the fall-out effects on employment as it attempts to adjust to an open market.

The Progressive Democrats find two elements of the 1992 internal market proposals particularly appealing. The first is the acknowledgement that public sector procurement policy grossly distorts open competition and free markets and artifically raises prices for other consumers. This is without even considering the aggregate size of Government over-expenditure. This abuse is widespread throughout Europe and covers products as mundane as office supplies and as sensitive as parts for nuclear reactors. In fairness, this public sector orientation would seem to be a universal practice on the European landscape and not peculiar to socialist Governments.

The second proposal which the Progressive Democrats fully support is the harmonisation of VAT and excise duties by 1992. We were extremely disappointed, as Deputy Dukes said, with the Taoiseach's words on this matter. Basically, he did not spell out the Government's policy. I sought an assurance from the Taoiseach last Tuesday that it was not the Government's intention to seek a derogation from the harmonisation proposals because of the revenue implications. The Progressive Democrats are strongly opposed to any exemption on VAT harmonisation.

I would now like to stress a number of matters. The harmonisation of VAT does not mean a single VAT rate throughout the Community. Two VAT ranges are provided for in the 1992 proposals: a rate of 4 per cent to 9 per cent and a rate of 14 per cent to 19 per cent. It should, therefore, be possible for this Government, without undue revenue implications and a bit of forward planning, which we are not seeing, to bring food in at the lower 4 per cent rate and to compensate the poorer sections for this imposition.

The Government have taken the view over the past few months that it is in Ireland's interest to exaggerate the revenue problem so that the compensation from the EC will be greater. This in turn is putting public opinion against change and freezing existing tax structures and the tax base as though they were static and scared in their particular mix. We believe that it is in the public interest that the Government should now make a more honest assessment of the implications of VAT and excise harmonisation, and I am extremely disappointed that the Taoiseach did not attempt to do that in his contribution to this important debate today.

The Progressive Democrates acknowledge that so great is the Government's dependency on indirect taxation, estimated in the region of £650 million, that the revenue objection to the full harmonisation of VAT by 1992 is a serious one. There is however a way to meet this target. There are three objective options which could be pursued by the Government. First, Ireland could accept the revenue reductions and trim public expenditure accordingly, but given the Government's present financial imbalance this, in practice, is not a real option. Other sources of revenue could be tapped. This is an obvious and practical solution which I will return to later. The third option is to appeal to the European Community for a transfer of funds to tide us through the transition stage. The fact that Ireland's heavy reliance on indirect taxation is recognised explicitly by the White Paper, in paragraph 190, suggests that this would not seem an unreasonable request, but at most such funding would only partly compensate for the revenue loss.

We believe that a combination of the three options, accepting some reduction in expenditure and therefore revenue, tapping other tax sources — the Progressive Democrats have put forward proposals for a property tax — and receiving transfers from the Community allied to a very gradual approach towards harmonisation could and can be pushed through by the Government if they are determined and committed to the concept of tax reform within the EC. A fundamental view of the Progressive Democrats is that no derogation, no exemption is necessary. The Government should use the deadline of 1992 to provide the ideal opportunity to introduce the long overdue reform of our tax system. Members of the Government have propagated the view over the last few months that 1992 will put this country into a VAT cul de sac. They have failed to spell out the positive aspects of the completion of the internal market. The 1992 proposals, as Cecchini's cost-benefit analysis shows, would have extremely beneficial implications for the economic life of this country. The year 1992 means industrial expansion and employment expansion in the long term; it means more product markets, more choice and cheaper goods for consumers. The Progressive Democrats view is that 1992 is the ideal externally imposed deadline for a major restructuring and reform of our tax system, and we hope that the Government will take this on board.

It is very useful that we are having this debate at this time. Notwithstanding that Deputies had difficulty getting their hands on the Cecchini report I suspect even if we had got our hands on the full report the length of time it would have taken for us to read it in full would not have left us any better prepared than we are now.

I want to relate my remarks to a number of key areas. This should be the first of many debates in this area and I would suggest to the Minister for Industry and Commerce that he, in particular, has a very clear role in this area.

I welcome the fact that the Government have announced that they have established a committee comprising the key economic and social ministries related directly to the European Community under the chairmanship of the Taoiseach himself, but I would remind the House that such a committee was already in existence under the previous Government, designed specifically to look at the implications of 1992, at how it would impact on our economy and how we could co-ordinate our position on the various Directives emerging. While the committee is to be welcomed it is not necessarily new and the responsibilities of the people directly involved in it, including the Secretariat service, are so diverse and so multifarious that to rely exclusively on that committee would be a mistake.

We should all recognise that things do not happen in 1992; things will be completed in 1992, and things have already commenced and will continue to accelerate. Under no circumstances can the implications and obligations we will have in 1992 be postponed or avoided.

I share the view expressed by Deputy Kennedy in relation to the position of the Progressive Democrats that any attempt by the Government to seek a derogation after so many years in the Community would be seen as relegating ourselves to second division status. Whatever the difficulties — and there will be a lot — the Government should not seek derogations until every other possible avenue has been exhausted, and there is no evidence to date that such avenues have even been opened up, let alone exhausted. The seeking of a derogation in advance of countries like Greece, Spain or Portugal would be construed as an admission of the terminal weakness of Ireland within the Community, and I would argue strongly against that.

All of the summaries and studies that have been produced in relation to the completion of the internal market come up with the conclusion that there will be winners and losers. Nobody denies that. The first thing that the Community itself has to ensure is that, on balance, the Community itself is the winner. Simply opening up in a deregulated way the largest and richest market community in the world to outside forces such as the Japanese and the United States could result in American owned companies or Japanese owned companies exploiting the advantages of a completed internal market so that the real winners would remain outside the Community and the losers would predominate within the Community. At European level the Minister who has responsibility, with his colleagues in the Council of Ministers, must ensure that the Community itself is aware of this threat. As recently as four or five weeks ago at the CII economic conference in the Burlington Hotel in this city, the financial director for Unilever, an Irish person from this city who had reached a high level in that company, talked about how that company, as far back as the mid-sixties, had set up a committee to analyse the impact of an integrated and completed market. Therefore, the multinational corporations are aware of the benefits of this kind of market. Unless Europe, as a whole, is well organised to retain the total benefit of the released dynamics within the integrated market, then we could all face the possibility of not being the winners we think we might be.

This is not the first time that the Irish economy has had to face the possibility of a major change in its field of economic operation. In 1966-67 we looked at the reality of joining the Anglo-Irish Free Trade Agreement and at that time the Minister's predecessor set up a group whose title was the Committee on Industrial Organisation to see, on a sector by sector basis, how Irish industry that had grown up under protective trade barriers would actually perform in a free trade area between Britain and Ireland. Those CIO reports forecast pretty accurately what would happen to different sectors, like the shoe industry, which were traditional and which had provided substantial employment in our economy, unless they adapted to the realities of free market changes in the area between Britain and Ireland.

Regrettably, large numbers of private firms either ignored or disregarded or were incapable of responding to what was proposed in these CIO reports. As a consequence hundreds of workers lost their jobs because the private owners and the private managers of those companies, who had grown up under the protective barrier of the Irish economy and who had been able to charge higher prices to ensure their continued operation, ensured also, through their negligence, that Irish jobs were lost. Consequently the Irish economy was damaged. We run the risk of fooling ourselves in believing that, because the figures that officially represent the buoyancy of Irish trade, the buoyancy of our surplus of payments and the buoyancy of our apparent GDP growth rates, our economy this time round will be sufficient to benefit substantially from the possibilities inherent in an open market and that Irish employment will be enhanced. The reality is that unless Irish-owned companies operating from Ireland and with headquarters here as distinct from branches of multinational corporations — who through the IDA operate out from this country — are specifically geared to exploit the potential of the completed market in an aggressive manner, we will not be on the winning side when the accounts are drawn up for the completion of the internal market. This is not a passive thing as Deputy Dukes said. The Labour Party reject the approach of simply having a conference in the Royal Hospital in Kilmainham and talking to leaders of industry, suggesting that they should on their own look at the implications for their own sector or that, as the Taoiseach has said, that individual companies and sectors have a responsibility to do this on their own that there is implicitly no specific role for the State, the IDA and CTT. If that is the approach of the Government we reject it. I invite the Minister either today or during the next few weeks to clarify precisely what is the perceived rule of the Government of their task between now and 1992. The Irish labour movement's experience of how negligent private Irish owned industry was in the run up to 1967 does not give us any sense of encouragement that privately owned industry, which benefits so immensely from State support through low tax rates and massive grants, will of its own accord respond with the vigour and the aggression needed to secure the Irish employment of Irish taxpayers.

We do not believe there is a passive role for the State. On the contrary we believe that the State must go into that small group of large Irish companies who are capable of rapidly expanding their share of European markets. By European markets I do not mean the traditional markets of Britain, Germany and the Benelux countries. There are areas in Italy, France and Spain that have not been touched by Irish companies. I hope that arising from the Government's committee who are examining the questions of the completion of the market that a task force will be established which will assign 50 to 100 key Irish owned companies — they are readily identified, one has only to cross the street to the CII to obtain the details and that people from the IDA, CTT and FÁS would open up lines of communication with these companies and ask them to state specifically how they propose to deal with the completion of the internal market as it affects their sector and what plans for economic expansion they have into the rest of the European Community. Unless those companies bring forward comprehensive plans and programmes for a response to the completed market they should not automatically get the tax breaks they are currently enjoying and which they would continue to enjoy. There should be a carrot-and-stick approach to this matter. What is haunting me and the Irish labour movement is the lackadaisical response that Irish privately owned industry displayed in 1966-67 when it responded to the Anglo Irish Free Trade Agreement. That is the first point I want to make to the Minister who has direct responsibility.

We want to see specific planning agreements in some shape or form entered into by agents of the State on behalf of the taxpayer with these Irish companies. The reason I am specifying those is because the multinational off-shoots are already doing that. For example the large Coca-Cola company, based in Drogheda, do not need to prepare a plan for market penetration within the completed market, they already have it. Coca-Cola International will be assigning roles and tasks and market allocations to all their subsidiaries, not just in Ireland, but elsewhere as well. If we want to expand our share of employment we need to have a direct interventionist policy which can only come from the State. This is the key difference the Labour Party have with the other three conservative parties in this House: we see a positive role for the State in directing the economy. We are not hung up on the question of who owns what but we are concerned with the positive role of the State to ensure that privately owned industry which derives an enormous benefit directly from the taxpayer, through State subsidies, State grants and a low tax rate, has an obligation which, left to its own devices, we do not trust it to execute. We base that assertion on our experience from the past. That is the first point I want to make and it could be elaborated on at some length.

The completion of the internal market poses another role and another obligation on the government of the day. The peripheral economies of Europe — Greece, Spain, Portugal and Ireland and their Governments — must begin immediately to forge a particular kind of working alliance to strengthen the manner in which their economies could benefit properly from the completion of the market. State owned companies in all those countries should be encouraged to co-operate with each other for a variety of reasons. I see a specific role for Irish Ministers with direct responsibility in their own areas of activity to ensure that there are bilateral contacts between Spanish State owned companies and Irish State owned companies or, alternatively, between an Irish State owned company and a private concern in Spain or Greece, to consolidate the linkages in Europe.

In the past we had a historical alliance with France, the largest continental power, essentially because France and Ireland had the same interests in relation to the Common Agricultural Policy. An historical alliance grew up linking Ireland's political position in the Council of Ministers with that of France. At the time there was an economic and political logic to that position but that logic has now been superseded by the effective demise of the CAP and by the changing requirements that we have to ensure that employment remains in Ireland, is consolidated in Ireland and has the possibility of growing in Ireland. That has not happened and will not happen unless the State acts as a marriage broker. Because of the intrinsic small size of most Irish companies the State must seek assistance and linkage with other small European countries so that companies of a substantial scale and size would be capable of playing a role in a large European market.

My final point relates to marketing and to assisting individual Irish companies to market their commodities aggressively into the rest of the European Community markets. The various attempts so far by the Minister of State with responsibility for marketing and trade under the responsibility of the Minister here present, Deputy Reynolds, have largely, been announcements about what he is going to do with very little substance of what has actually been achieved with the exception of the few trading houses. Clearly, there is a need for a definite programme of marketing to be attached to individual companies. In this context the programme developed by AnCO in conjunction with the Irish College in Louvain is exactly the right kind of model that should be substantially extended to a whole range of small and medium-sized Irish enterprises. For less than £10,000 they can get a massive injection of direct marketing expertise on the one hand and an Irish post-graduate student can get an indepth training on the ground in a continental country. The marriage of those two needs and requirements is extremely beneficial.

I want to turn from the market itself and all the implications of the completion of the internal market to the question of social cohesion and the role the Government have in that regard. I have been appalled at the low level of activity this Government have displayed in the past 18 months in relation to the preparation of work for integrated programmes in the context of the provision for social cohesion and new Structural Funds. The thing that appalled me most of all is the obsessive secrecy that has surrounded the Government's actions in this area. That secrecy has been maintained because a battle has been fought out within the Government Departments, the Department of Labour, the Department of the Environment, the Department of the Health, and to a lesser extent the Minister's own Department and the Department of Finance. That battle was a struggle for control of the system of operation, management, and design of applications for these new integrated programmes. It was fought between those Departments and it has been lost by them with disastrous consequences for the Irish citizen.

The Department of Finance, as indicated to me yesterday in a reply by the Taoiseach, now control the working parties and committes in relation to applications for Regional Funding and Structural Funds assistance and what was previously Social Funds assistance. As a result, we have a secretive process going on which is restricting the number of applications this country is going to make for essential structural finance to enable us to bring aspects of the economy up to par with the rest of the EC.

I will give an example, with the risk of sounding parochial if I confine my remarks to Dublin. The Taoiseach in his speech was prompted into referring to a comment that public transport was excluded from consideration in the brief being prepared for consultants to, in turn, enable them to prepare an integrated programme for submission to Brussels. The Taoiseach implied that because £130 million was spent on the DART that more or less was the end of the need to invest more money in DART. He did not say that was phase one of DART along an existing surface line, that it was always intended that the second phase, which would link the rest of the city into the city centre with a very efficient and fast transportation system, should go ahead and that the west of the city could be classified as the largest black spot of unemployment in the entire country.

The west of the city effectively contains 0.4 per cent of the land mass of the State of Ireland, yet it has over 10 per cent of all the unemployed people and they have no effective system of public transport to get them into the small centre city labour market that is Dublin. This Government have abandoned formally any attempt to extend the DART system to the west of the city in phase two, and clearly they have abandoned the implications of extending the DART in phase three and phase four. The Taoiseach has attempted to suggest that instead of spending over £126 million on the western ring road this would be a compensatory investment in the public transportation system in the Dublin area.

It is quite clear that we need that western ring road. It is clear to people in this House and to everybody engaged in trade when 96 per cent of our exports travel by road in containers. The only people to whom it is not clear are the bureaucrats and engineers in Dublin Corporation and Dublin County Council. By the irony of fate, the smallness of our society, the Taoiseach's brother, the assistant city manager, is the man responsible for the implementation of this road programme. Since 1971 Dublin city engineers have been obsessed with building an eastern bypass to this city when logic and common sense would require that the western ring road to which the Taoiseach has referred should be implemented first. Even if we were to get a present of £100 million tomorrow morning from the EC to complete the western ring road, because of negligence and tardiness in regard to the entire operation in Dublin city and county they would be unable to accelerate that programme because a great deal of the preparatory work which should have been done has not been done. Instead, scarce professional resource time was used time and time again trying to come up with a new alignment for the eastern byass.

I refer to that point to draw attention to the fact that there is an enormous gap between the Government's committee of Ministers looking at the implementation proposals either for an integrated programme on the one hand or Structural Funds on the other and the reality on the ground, It is simply not sufficient to say that this Government are responding effectively or efficiently for as long as that gap remains. What is happening on the ground is a six-year programme to complete the western ring road on the basis of what the Taoiseach said today when that programme should be accelerated as priority number one.

We have had about five announcements in the newspapers from the Minister for the Environment that a national roads authority was to be established. It has still not been established and as a consequence of the announcements regarding that authority there is a degree of confusion in the local authorities in the Dublin area as to what is happening. I use that example of the fact that there is an enormous gap between what the Government say they are doing and what is required to be done on the ground.

The completion of the internal market poses an enormous opportunity and risk for the Irish economy. That opportunity must be grasped by all of us in this economy and in this State. We do not believe the private sector, no matter how much encouragement or information it gets — particularly the indigenous private sector — will of its own accord be either willing or capable of maximising the potential implicit in the opening up of the completed market. Accordingly, the State must take a positive and direct interventionist role on a sector-by-sector and company-by-company basis. The form, the shape and size of that clearly could be negotiated and elaborated upon, but nothing we have heard to date from the Fianna Fáil Administration gives us confidence to believe that that level of State intervention, guidance and leadership will come from them.

Unless this Government open up bilateral links of a positive and constructive kind with other peripheral member state Governments, we will not get the political push within the Community to have the co-ordinated growth strategy which is a prerequisite for economic growth within the community in general and for ensuring that the peripheral economies in particular get their fair share of what is going to come out of the released energies of the completed market. That co-ordinated growth strategy can take many forms but it starts with a new kind of political alliance within the community based on a recognisition of mutual interests and geographical peripheral similarities, and in many cases on the personal report between Ministers and Governments in the different member states. This Government have a task to build that kind of relationship in a way previous Governments built a similar relationship with the Government of France. There is a new reality and concern which should be worked upon. It has not been addressed up to now.

I want to comment on the preparation of a regional plan indicated by the Taoiseach and the specific integrated programmes. An appalling veil of secrecy has been drawn over this entire question for the last 18 months, which is unacceptable, unnecessary and counterproductive. I challenge the Government to remove that veil of secrecy and to open up the political process of planning and participation so that the contribution inherent in our society can be made and added to the work we are trying to do at present.

We could spend nearly all the time allotted to this debate on one or two aspects of the report and I will take this opportunity to refer, as briefly as possible, to some of the many matters I would like to deal with. It is a major debate and the fact that I do not get to certain areas does not mean that work is not continuing on the various aspects, challenges, opportunities and benefits for this country.

The title of the published report —"1992 — The European Challenge — The Benefits of a Single Market"— neatly summarises all that is involved. The report makes a major contribution to identifying the potential benefits that arise, right across the Community, from the completion of the internal market. It aims to provide a solid body of scientific analysis setting out the costs of market fragmentation in Europe and, thereby, the potential benefits that can be achieved by removing the artificial causes of such fragmentation.

The report deserves careful reading and analysis by any group — Government, business, or consumers — preparing for the completion of the internal market by 1992. I warmly welcome its publication and the opportunity which it presents for debate on the potential costs and benefits for this country arising from the irreversible impetus that is now in place towards the completion of the internal market. I intend in the course of my contribution to this debate to keep the discussion as concrete and practical as possible. Let me, therefore, get down immediately to some of the basics.

Our future prosperity and our ability to create jobs lie largely with the further exploitation of the export potential of Community markets. In this regard, therefore, the creation of a single obstacle free market in Europe by 1992 is crucial. The remaining barriers that currently fragment and divide the Community market undermine our export potential. Studies indicate that the costs imposed by international trading documentation represent 5 per cent to 8 per cent of the invoice cost of traded goods.

This is a huge imposition for Irish industry.

The objective of the Cecchini report and analyses has been to establish the potential economic benefits for the Community as a whole which will arise from the completion of the internal market. The report identifies the costs imposed on Community Governments, business firms and consumers by existing market barriers, by the regime of administrative delays now in place, by unnecessary custom procedures, artificial technical barriers and discriminatory public procurement policies.

Some of the most significant findings of Cecchini from the point of view of the business sector in this country are as follows:

The impetus to market integration is now so strong that its achievement by 1992 and beyond is in little doubt;

In practical terms this will mean that it will be far easier for Irish firms to gain access to markets right across the Community but the same will hold true for firms from all other Community countries;

Technical regulation and public procurement procedures will become more transparent and administrative delays at customs barriers will decline very sharply;

Competition on the home market and in all other markets across the Community will intensify — prices will tend to fall, productivity to increase and product innovation and development will occur more frequently as more firms fight for competitive advantage in the market place;

There will be a move towards larger sized firms based on the expansion or the amalgamation of existing firms as they seek to take advantage of the economies of scale in production, distribution and product development which improved access to larger markets will generate;

Input costs will tend to fall as supplier firms compete more intensively within more open markets and increase their efficiency under the spur of competition;

Lower relative prices will increase consumer demand for products and services right across the Community;

Many small firms operating in protected markets will fall under the cold wind of more open competition;

Many of the more negative aspects, including job losses from the shake-out of less efficient firms, will come in the short term while benefits will tend to accrue over a longer time period.

There are a number of points I want to make about the Cecchini analyses.

Firstly, it is clearly pointed out in the analyses that the quantitative estimates included in the report represent broad orders of magnitude. This underlines the need for extreme care in interpreting the findings of the report. It means that from this country's point of view we have to carry out our own analyses of costs and benefits, taking account of our own unique strengths and weaknesses as a small trading nation.

Secondly, while some degree of uncertainty will inevitably attach to the strictly quantitative aspects of the Cecchini analyses, I do not think it follows that the same degree of uncertainty attaches to many of the other findings:

The completion of the internal market will take place over the next four to five years with a very significant removal of the non-tariff barriers to trade that still exist whether in terms of barriers created by customs procedures, technical regulations, public procurement procedures, or different fiscal regimes;

Significant new opportunities will open up for EC business firms including those in Ireland;

Competition in the market place will intensify throughout the Community.

Downward pressure on input and consumer prices will be brought about;

There will be a major increase in efficiency, productivity, product development and innovation as firms try to develop a competitive edge;

Firms that do not anticipate and adapt to the new more competitive regime are in serious danger of being forced out of business altogether.

Third, there is a most serious omission in the Cecchini analyses, in that no real attempt was made to gauge the distributional impact across countries of the various measures envisaged in completing the internal market. This is a surprising omission in such an important base document concerned with the future development of a Community which has, in its underlying Treaty, the stated objective of strengthening "the unity of difference economies" of the Community and "their harmonious development by reducing the differences existing between the various regions and the backwardness of the less favoured regions".

While Ireland fully supports the measures now being put in place to complete the internal market, some of these measures are likely to present particular difficulties for us — a small island country, located on the geographical edge of a major market and still in the process of developing the full potential of our economy. The Minister for Finance has drawn attention to some of these difficulties on a number of occasions — particularly those that lie in the area of tax harmonisation and capital movements and will deal with the points raised in this regard.

For the industrial and the business sector in this country there are certain difficulties also associated with the generally small size of Irish business. While the Cecchini analysis points to the fact that existing barriers to trade bear relatively more heavily on such companies, it also concludes that many small firms will find it difficult to survive under the "supply-side shocks" which completion of the internal market will entail. This is an area that requires further study, analysis and response by the Commission and for which we will be pressing over the coming months.

One of the most positive findings from the Cecchini analysis from Ireland's perspective is the optimistic view recorded by Irish industrialists, in the surveys undertaken by Cecchini, about the implications of the completion of the internal market for their own firms. Two-thirds of Irish industrialists expect that the completion of the market will give rise to increased opportunities for their firms. The degree of optimism expressed by Irish industry is significantly higher than that for industry in the Community as a whole and in only one other country — Belgium — do firms see greater opportunities arising from the completion of the market than Ireland. There are a number of reasons for this.

Firstly, there is a recognition by Irish firms that existing technical and administrative barriers to trade within the Community are a significant constraint to the development of their exports. Irish firms rank administrative barriers, national standards and regulations and physical frontier delays and costs — in that order — as the three top barriers that they have to contend with at present. Their removal and that of other barriers would, accordingly, do a great deal to facilitate Irish firms in expanding into EC markets.

Secondly, the existing barriers bear more heavily on small and medium sized firms, which make up the vast majority of Irish industry, than on larger firms. This is an important finding of the Cecchini analysis. Large firms are better able to cope with existing barriers by the adoption of special administrative and production arrangements which, because of differences in the scales of operation involved, form a smaller proportion of total overhead or production costs than they would for smaller firms. The removal of existing barriers will, accordingly, be relatively more important for smaller firms of the type that predominate in this country.

Third, the exports of most of the overseas firms located in this country are destined mainly for other EC markets. The basic reason that many of these firms have located here has been to gain access to EC markets. Improvements in accessibility to that market will, accordingly, increase the locational attractiveness of Ireland for mobile international investment in the manufacturing sector. This is borne out by indications that have come from a number of sources in the past that industrial projects have been lost to this country by a fear that non-tariff barriers would be used to discourage exports to other EC countries if the projects located here. The Cecchini report provides further evidence that the locational decisions of internationally mobile investors are heavily influenced by such threats. The removal of non-tariff barriers now under way will be of considerable benefit to the further development of overseas companies already here and to the attraction of new overseas companies.

Developments in the pharmaceutical sector indicate what may be involved. The pharmaceutical sector in Ireland has shown very strong growth in output, exports and employment over the past ten years. Employment has increased by almost 2,000 since 1980 to over 4,700 at the end of last year. Over the same period output more than doubled in value terms to £845 million — almost 90 per cent of which is exported.

The EC market forms the single most important outlet for the Irish pharmaceutical industry. The Cecchini analysis makes clear that the market is dominated by the purchases of public authorities which account for around 50 per cent on average of the total pharmaceutical bill in the Community. Cecchini points out that his research has produced definite evidence that local performance requirements operate to favour domestic manufacturers in the fragmented market structure that now dominates the pharmaceutical industry in the Community. It is clearly of major interest to this country that the proposals now being made to remove discriminatory pricing and registration procedures are introduced and fully and fairly implemented. There are major opportunities for Irish pharmaceutical companies in the development and sale overseas of generic drugs. We will be pursuing these strongly under the Programme for National Recovery.

Finally, I think there is also a sober realisation among Irish industrialists that there is no alternative to the prudent public expenditure policies which the Government have pursued since coming to office. These will continue in place over the period of the Programme for National Recovery until the debt-GNP ratio is stabilised and reversed from the unsustainable upward path along which it has moved for many years. This means that there is little scope for Government to directly boost domestic demand and that the key to survival and development for Irish companies is to look for new opportunities in overseas markets.

The threat of the internal market for Irish industry arises not from the removal of barriers here — Irish industry has faced competition without barriers for quite some years — but rather from the stiffer competition which will result from the integration of the larger market. Irish industry will have to compete more effectively through greater attention to innovation and technical progress, through marketing and management skills, and through greater cost competitiveness. Industry will have to be flexible and fast in harnessing resources to meet market demands. Only those firms which can do this successfully will prosper.

The Government have undertaken a concerted drive to improve the cost environment for industry in the past year. Inflation has been brought down to its lowest level for over 20 years, interest rates have been reduced by between 5 and 6 percentage points, electricity and telecommunications costs to industry are being reduced. Moderate wage increases have been negotiated under the Programme for National Recovery. Steps are in hand to identify and eliminate all the unnecessary administrative burdens on industry, to deal with the problems which push our insurance costs out of line, and to increase competition in transport services and to improve our transport infrastructure. They are necessary prerequisites to improve the competitive edge of the Irish economy.

In addition to improving the environment for enterprise, the Government are pushing ahead with the measures necessary to strengthen our productive sectors. We are developing strategies for key manufacturing sectors which have the greatest development potential. We have initiatives in hand in the natural resources area to fully expolit our potential. We are pursuing imaginative policies to create jobs in the financial services area.

My Department are already undertaking assessments of the impact of the completion of the internal market on the various industrial sectors. These assessments will include the effect of developments such as tax harmonisation or the new approach to standards, and the effect of specific Commission proposals. There will be continuing contacts with industry through representative bodies such as the CII and sectoral groups, and through the State agencies with individual firms.

In the insurance industry the non-life insurance sector will be faced with its greatest challenge from 1992 onwards as a result of the compromise agreement on freedom of services in non-life insurance which was reached by the EC Council of Ministers meeting at the end of last year.

The additional transitional period postponing until 1999 the full application of the Non-Life Insurance Services Directive has secured valuable breathing space for the Irish industry but this must be utilised correctly in a strategic sense if we are to face up to the full blast of foreign competition and prosper in the long term. Buying extra time is ultimately useless if all it does is to postpone an execution.

The European Commission's programme for 1988 includes a specific commitment to bring forward during this year a proposal for a Directive on freedom to provide services across national frontiers in the field of life assurance. However, it is clear that major issues in the areas of taxation, freedom of capital movements and the appropriate regulatory regime will need to be addressed and resolved before freedom of services in life assurance become a reality.

When it does happen, all the signs are that the Irish companies operating in the life field will be well positioned to take advantage of the new opportunities that will arise. A recent study of term assurance in Europe has concluded that the Irish and UK insurance industries are particularly well placed to exploit the opportunities which freedom of services in life assurance will confer given their advantages of price, flexibility and range of products on offer due to innovative and competitive market forces.

In preparing the Irish business sector for the opportunities, challenge and supplay-side shocks which the completion of the internal market will entail, the Government can only go a certain distance. Ultimately, each business firm will have to develop its own unique response to the developments now in train, taking account of their own special circumstances and place in the market either here or overseas. For the industrial sector the Government are:

First, concentrating on improving the competitive and investment environment for firms here in Ireland and I have already outlined some of the steps involved and what has been achieved to date.

Second, launching an information campaign so that no business entity in the country will be unaware of what the completion of the internal market entails and the inevitability of the process to achieve this now coming towards conclusion; already a good deal of this work has been going ahead quietly, effectively and unobtrusively through various engagements undertaken by Ministers throughout the country and through the day-to-day contacts of Government Departments and agencies with industry associations and individual firms; it will be raised to a higher plane with the launching of a new campaign by the Taoiseach in the coming weeks following which I will be undertaking a nationwide campaign to make sure that the message of the internal market gets home to every firm in the country;

Third, firms are being helped to adapt to the challenges and opportunities which the new internal market will bring in the administration of the incentives packages for development operated through the IDA, CTT, SFADCo, EOLAS and other State agencies, where appropriate new approaches are being adopted. For example, the trading houses initiative will be particularly important in helping small firms to take advantage of the opportunities that will arise with the removal of existing barriers to trade within the Community;

Fourth, the sectoral strategies being prepared in consultation with employer bodies, industry associations and trade unions under the Programme for National Recovery will pay particular attention to the implications for these sectors of the completion of the internal market;

Fifth, special attention is being paid to helping Irish firms to develop practical business links with other firms in the Community. The IDA are strongly promoting technology transfer and license transfer agreements between Irish and other European firms. Under the aegis of the Minister for Science and Technology, EOLAS and the Commission, collaborative research projects between Irish firms and other European firms are being developed with the objective of enhancing the technological and innovation capacity of Irish firms so necessary if they are to prosper under the new competitive regime fast approaching.

As part of the programme we have adopted to encourage business links between Irish and European firms, I jointly announced with EC Commissioner Matutes some weeks ago a major EC sponsored business conference for Dublin at the end of next month. This conference —"Europartenariat '88"— is designed specifically to promote direct company to company co-operation and partnership between Irish and European firms to develop areas of mutual business opportunity. The executives of some 200 European companies will be coming to Dublin for a two-day conference with approximately 150 Irish companies in order to identify opportunities in the areas of sub-contracting, technology transfer, joint ventures and so on. Businessmen will have the opportunity to come face to face with their European counterparts in firms which have been identified as complementing the requirements of the Irish firms selected.

These are only some of the ways in which the Government are helping firms to prepare for the completion of the internal market. I cannot emphasise too strongly that the role of Government can only be supplementary to, and supportive of, industry. Too often we hear the pessimists say that this or that cannot be done. My response is that success comes to the "cans", not to the "cannots".

The Minister in opening his address said there was such a vast field to be covered that the length of the debate was totally inadequate. That is correct but no length would satisfy us. I am not sure that the structure of this debate is the right one. I suggest that we could have ten-minute contributions on Tuesday nights on specific aspects such as transport, energy and so on. We might derive some benefit from a debate of that type. It is quite impossible to cover everything today, and all of us have to be selective.

The forward to the Cecchini report states that the objective of the study is to assemble a comprehensive view of the possible impact of completing the internal market. The report is extremely comprehensive and needs careful study. I have to say that some of the language in the report is far from riveting or exciting. An example is the following sentence: "While quite a number of these individual barriers can be overcome at moderate cost, when taken together with the oligopolistic structure of many markets, they add up to a considerable degree of non-competitive segmentation of the market." That is what the internal market will mean in terms of the type of language that will be used in the future.

Europe generally is coming to grips with the internal market 30 years after the foundation of the Community. The dreams and aspirations associated with the Community had to be forced on some of the member states in the past two or three years because of the protective nature of nationalistic thinking which prevented them from creating a genuine European economy. This is in the face of the visible inroads being made into our economy by the Americans and the Japanese. At some point in the future there will be an economic unit comprised of Korea, Japan and Taiwan. This will represent a third major trading block in addition to the Americans and the European Community. Yet we will only have completed the internal market in 1992. We will have to run extremely hard to catch up with what has been happening in the rest of the world. The Single European Act with its commitment to the completion of the internal market is a little tardy.

Cecchini has quantified the savings, which are quite significant in the many areas. The removal of frontier formalities will represent 1.2 per cent of the value of goods or 9 million ECUs. The removal of technical regulations and other barriers will represent 2 per cent or 14 million ECUs. There could be huge savings in the food and beverage industries. There will also be enormous reductions in the cost of transporting goods, as well as in the area of procurement.

This is very important for this country. Regulations adopted by individual States have prevented us from competing on a fair basis, which we are legally entitled to do, with firms in those countries for contracts in the public sector. That was a big loss. Perhaps more important is the fact that firms wishing to establish here feared that they would be prohibited from getting public contracts in other countries. This fear has deterred many firms from setting up here during the past 20 years.

Cecchini identifies a saving of 4.5 per cent to 7 per cent of GDP to the Community as a whole at the end of 1992. I will deal later with how these savings are to be spread throughout the Community.

We are fortunate in that we had a debate on the Single European Act last year followed by a Referendum which heightened public awareness of the implications of the completion of the internal market, especially among the business people. This did not occur in other countries, although a recent survey conducted throughout Europe showed that here the level of awareness among business people of the consequences of the completion of the internal market was at the lower rather than the higher end of the scale. Enthusiasm here for the completion of the internal market certainly did not match that in certain countries such as France. Depending on the hypothesis used, there will be a saving of 4.5 per cent to 7 per cent of GDP by the completion of the internal market. It is also claimed that five million jobs will be created and that prices will be lowered by 6 per cent.

All these will be very welcome developments. They will re-establish Europe as a major trading bloc. However, what we have to watch is how these benefits will be distributed throughout Europe and what we must do to make sure that we get our share. It was in recognition of that that Ireland and a number of other countries were insistent, in the drafting of the Single European Act, that the chapter on cohesion was included. It would not be enough and, indeed, would not fulfil the ambitions of those who founded the European Community, if the only benefit were to be that the wealthier regions in the centre were to gain more, but the peripheral, poorer regions were disadvantaged by the completion of the internal market.

In that regard we have a number of advantages and disadvantages. We have a highly trained, intelligent, educated workforce; we have an environment that is attractive to many people to live and work in; we have a newer system of industrial development than many other countries in Europe and we are perhaps more adaptable and less hidebound in our attitude towards industrial development. As against that we have a number of disadvantages, one very serious one being our location. It is something that has not been sufficiently recognised in this country. The date of 1992 has been stamped on our minds for the completion of the market. We should also remember that we are talking about something that will be completed in 1992. It will not be enough for us to prepare to do something in 1992, to amend the regulations that will affect this country in the furure which are at present being put in place. We must work hard in that respect.

Another timescale I want to bring to the attention of the House is that sometime in the middle of the next decade the Channel Tunnel between Britain and mainland Europe will be opened. We will then be the only part of the European Community that is not physically joined together. Psychologically and materially, that will be a huge disadvantage to us. We should be considering now how we can overcome that disadvantage. Obviously, the ideal would be another tunnel connecting Ireland with Britain. There is no doubt that sometime in the future that will be designed and built. In the meantime we must try to see what we can do to get our goods on to the European mainland very much more quickly than will be possible for British industries once that tunnel is opened. The Government should at this stage start looking at the possibility of providing a train ferry to connect Rosslare with Fishguard so that, at least, we would have train transport connecting this island right into the heart of Europe. If we do not use our imagination and drive in that direction, we run the danger of being left even further behind in the race for our share of the European market than we are at present.

We will also be at a disadvantage in the field of energy. At the moment we are the only part of Europe not connected to the one electricity grid. We must again look into this. I know that studies are going on at the moment and that Bord Gáis Éireann have launched a study on the possibility of connecting our gas grid across the Irish Sea to the British gas grid and through that into Europe. We must do the same for electricity, investigate the possibility of tying in our electricity to mainland Europe——

Mr. Bruton

Hear, hear.

——thus bringing down the overall cost of our electricity in the future and probably eliminating for generations, but certainly for decades to come, any further capital investment in generating stations in this country.

The figures I have quoted from the Cecchini report about growth and the number of new jobs that will be available should not let us bind ourselves to the difficulties that will be presented in the future to Irish businesses. The report does not provide comfort for anybody concerned with our economic well-being. It is stated in the initial part A, that the removal of the constraints and the emergence of the new competitive incentives will have four main effects. The first is a reduction in costs due to economies of scale associated with the size of production units and enterprises. That is certainly true. Larger units tend to have a lower cost, which would be of benefit to the consumer. Another advantage is stated as being improved efficiency in enterprises, a rationalisation of industrial structures and a setting of prices closer to costs of production, all resulting from more competitive markets. That is also true.

We should remember when we talk about a market of 320 million people being available to us, that our small market of 3 million people will be open to manufacturers throughout Europe and that the difficulties that have been experienced up to now in running separate lines of separate products for separate countries will no longer be there and that any factory in Germany, Italy, or France will be able to produce an entire line of goods, of one product that can be sold from Donegal to Sicily without any impediment. That material will find its way on to our market. There is also the danger that some people in mainland Europe may see Ireland as a dumping ground on which to get rid of their goods. That is one of the matters we will have to watch.

The third point is that there will be adjustments between industries on the basis of fuller play of comparative advantages in an integrated market. The point made by the Minister just now about trying to twin companies in Europe and Ireland, bringing together a whole range of industries where one company would compliment another, perhaps even as a supplier to a company in Europe, is a good idea. However, if I have any criticism to find with what he has said it is that bringing 200 industrialists together in one great gathering is on far too big a scale and useful work may not be done at a conference such as that. If it is only a starting point, well and good.

Each sector must be looked at, whether it be the pharmaceutical, engineering, or technological sector. They must be in very much smaller units than that. The pharmaceutical sector must be twinned with the pharmaceutical sector in mainland Europe, France or Germany, or even in individual countries, perhaps in groups of six or ten. The material benefits from that would be far greater than bringing in people to a big conference. I am not necessarily knocking that idea of a large gathering or saying that it is absolutely useless; it is not. It is quite a good idea but the scale on which it is being done is far too great.

The final point made in the report is that there will be a flow of innovations, new processes and new products, which will be stimulated by the dynamics of the internal market. That is right. We have been slow to develop our technology. We have not to the fullest extent possible used technology because of the limitations in our ability to sell our goods. That final point does not just apply here; it is perhaps to our disadvantage that it applies everywhere. There will be more innovations, new products on the market and the possibility of more competition for our industry, but the opportunities will be there. It was recently said that Europe was a challenge but also an opportunity but there was no guarantee attached to the completion of the internal market. That is absolutely true. There is no guarantee that just because we put our hand up to back the Single European Act and because we want to compete in the internal market the benefits will flow automatically to Ireland.

Hear, hear.

We will have to work for every one of those benefits. I want to draw attention to what I have just said about the adjustments between industries on the basis of a fuller play of comparative advantages in an integrated market. That has quite an ominous ring for our industries, when you think about it. It could mean that where a factory in Germany has a sub-factory in Mayo, the logical thing to do would be to shut the sub-factory in Mayo and keep open the one in Germany. We must be very careful. The putting together of sector by sector in smaller groups seeks to protect smaller industries and that is extremely important. A debate such as this is an extremely good idea to launch the education of the public about the difficulties as well as the opportunities in the completion of the internal market. However, one debate in itself is not sufficient. I suggest that we should in the future make use of Tuesday nights after Private Members' time for an hour and a half or two hours to have a debate on one aspect of the completion of the internal market. We should confine the contributions to ten minutes. We should do that once a month or once a week and that would be of benefit not just to the Members of the Dáil who also need education in this area but to members of the public.

It is right that I remind the House that The Workers' Party are the only party in the House that argued for a "no" vote in relation to the Single European Act. Despite the distortions of that position, we were at pains at that time in outlining that our purpose in urging a "no" vote was on the basis that we should seek a renegotiation of certain aspects of the Single European Act because we considered the terms were not adequate to ensure that our people would benefit adequately from the internal market which it is proposed to create by 1992.

As far as The Workers' Party are concerned, the question is not whether Ireland should remain in the EC or pull out of the EC. The question is what type of EC we want to build. The Irish working class whom we seek to represent have specific interests to fight for. I was struck by the contributions so far to this debate, because they related almost entirely to the need for business, industry and so forth to take on board what is happening with regard to the single European market. There has been very little reference to the very severe impact which the proposals will have if they go ahead as planned, on the men, women and children of this State.

We were opposed to the Single European Act on the basis of attempting to force a renegotiation because we believed that the deal negotiated by the previous Coalition Government, and later enthusiastically adopted by the Fianna Fáil Administration, was a fundamentally bad one. We listed three main objections to it. We said it did not sufficiently guarantee Ireland's right to pursue a policy of neutrality and nonalignment. It did not guarantee the development of a progressive regional and social policy which would assist in job creation and in industrial development and which would protect the workers' interests and it did not guarantee that the operation of the internal market would ensure that benefits were passed on to the consumer or that the equalisation of indirect taxes would ensure that the tax net was widened and social services were developed instead of being cut back. Nothing we have seen or heard since then has caused us to believe that our reservations were unfounded. In fact, very little has been heard about the implementation of the Single European Act since the referendum. To that extent this debate is welcome, because we believe the vast majority of the people still have little appreciation of the enormous problems we will face unless the Government are forced to take a more vigorous stand in defence of the workers and their families.

We are supposed to be debating the Cecchini report today. I understand the report has 6,000 pages. I have not yet been able to get my hands on a copy of the report. It is not yet available. However, from the summaries which have been published it is clear that it provides a particularly optimistic assessment of the likely impact of the completion of the internal market by 1992. The report suggests that in five or six years from 1992 there will be additional growth in the GDP of the Community of at least 4.5 per cent and a cut of 6 per cent in price levels. Other economists would paint a far bleaker picture than offered in the report.

It is interesting that despite its 6,000 pages, no attempt has been made to show how the changes will impact on individual countries such as Ireland, but sweeping and unsubstantiated claims are made that the less developed economies such as Ireland stand to gain proportionately more than other countries. Some of us have long memories and many of the claims being made for the benefit of the internal market are similar to the claims made for EC membership in 1973. How many people remember the posters of the pro-EC lobby in 1973 that proclaimed "Markets in Europe — Jobs at home"? Unfortunately for many thousands, the forecast of the anti-marketeers "Into Europe, out of work" has proved to be far more accurate than we would have hoped. I recognise that the failure to capitalise on the market in joining the EC is as much the fault of private enterprise here and Government mismanagement as it is of the actual operations of the EC.

One of the areas we have been most concerned about relates to tax harmonisation. During the referendum campaign we warned that the result of harmonisation would be the imposition of VAT on food and other essentials which are at present tax free and that it would lead to a major drop of up to £1,000 million in Government revenue. Supporters of the Single European Act assured voters that these proposals required unanimity by the Council of Ministers and that the Government would veto them. However, the alarming silence of the Government since then, and other straws in the wind, suggest that this will not happen and that the Government will accept tax harmonisation and simply look for some minor compensations in other areas. The Taoiseach in his speech gave about six lines to the question of tax harmonisation. At least the Taoiseach held out the hope that he would stand firm on some aspects of tax harmonisation while spokespersons for Fine Gael, the Progressive Democrats and Labour Party indicated they are quite happy to accept it without any reservations.

The impact of these proposals has not yet been fully appreciated here. They will mean that a whole series of products and services which up to this did not carry VAT will now become liable. These include food, children's clothing and footwear, books, passenger travel, telecommunications services, admission to sporting events, funeral undertakings and so on. If there was to be one single standard rate of VAT it could be somewhere between 15 per cent and 17 per cent. The latest indications are that there are likely to be two rates, a low one of from 4 per cent to 9 per cent and a higher one of between 14 per cent and 20 per cent. The reality of these proposals is that a BMW car which now is subject to a VAT rate of 35 per cent could be subject to a VAT rate of 14 per cent, while the essentials of life for many families such as food and children's clothing which are at present zero-rated could be subject to a VAT rate of 9 per cent.

The other major implication of the harmonisation proposals which also apply to excise duties is that they would lead to a massive drop in Government revenue. The actual amount lost would depend on final decisions on the rates to apply but if the original proposal of one standard rate is to be implemented it could mean a drop of as much as £1,000 million. Even supporters of the proposal admit that it would lead to a loss of at least several hundred million pounds. This would have to be made up by either increasing PAYE tax or by a further massive reduction in Government expenditure leading to even more severe cuts in essential services such as social welfare, education, health and so on. Either course would be unacceptable.

What is more alarming is the silence of the Government on these proposals. As I have already said, the Taoiseach allocated only a paragraph of his speech to this matter. The indications are that they are prepared to accept harmonisation despite the appalling consequences. Indeed, successive Governments have clearly used a number of recent budgets to pave the way for the process of tax harmonisation by reducing the number of VAT rates from five to three and by imposing a tax on a number of items which had previously been exempt or zero rated. In this year's budget VAT was imposed for the first time on ESB bills, a development which The Workers' Party forecast at the time of the Single European Act referendum — incidentally, a claim which was denied by spokespersons of organisations who argued in favour of the Single European Act.

We argued very strongly that these matters should be sorted out prior to the ratification of the Act and that is why we called for a no vote in order to force the Government to renegotiate the Act. Supporters of the Act argued that this was not necessary but now we are clearly on the slippery slope to tax harmonisation and all the problems and difficulties that will bring with it. I am not talking exclusively about the administrative difficulties but the difficulties which will face the 1.3 million people in this State who we are told are on the poverty line. It is those who will be affected most by the increases in the prices of necessary goods.

Suggestions that our failure to agree to these proposals would jeopardise jobs in Ireland will certainly produce a hollow laugh among the country's unemployed. Whatever benefits EC membership brought it certainly did not bring jobs. When we joined the EC in 1973 unemployment was running at below 70,000 but in the 16 years of our membership the numbers out of work have increased almost fourfold. Certainly part of the reason for this exceptionally high level of unemployment, one of the highest in the Community, is the terms under which we entered the EC in 1973. The agreement negotiated by the then Fianna Fáil Government led to the collapse of many traditional industries such as motor assembly but EC membership failed to produce the jobs bonanza which we had been promised would compensate for these job losses. As I said earlier, answers are clearly required from both business and industry as to whether they will do any better on this occasion than they did on our entry into the EC in the first place. The fact is that the failure of successive Governments to tackle the fundamental weaknesses in the economy has left us unprepared to participate on equal terms within a free EC market and consequently it is essential we get the safeguards necessary to foster Irish industry and protect jobs. The decimation of a large chunk of native Irish industry following our entry into the EC is evidence of this.

One of the main economic effects of the implementation of the Single European Act will be to expose the Irish services sector, especially the financial sector, to full external competition. While this may bring short term benefits such as lower interest rates and while one may have little sympathy for the fate of the Irish financial business sector the long term effects will undoubtedly mean an even higher level of external ownership and control of the economy. This in turn will mean that the higher level forms of employment, top management, research and development and specialist services will be increasingly concentrated in the EC heartland with Ireland further reduced to second class membership of the Community with lower level forms of employment and a permanent built-in lag in living standards.

It is significant that only yesterday a representative of one of the country's main stockbrokers said that whatever additional jobs will be created in the financial services area through the Custom House Docks project will be more than wiped out by the job losses arising from the impact of the deadline of 1992. All of these issues were raised during the referendum campaign when we were assured by the supporters of the Single European Act that whatever problems the country would face from tax harmonisation and the ending of trade barriers would be more than compensated for by increases in the Social and Regional Fund allocations for this country. In fact when this came before the EC Summit in February the increases agreed by the Heads of Government, including the Taoiseach, were inadequate and considerably below the level of funding which we were promised would automatically flow from this country's ratification of the Single European Act.

We have always believed that a massive increase in structural funds, a doubling at least, was necessary to protect this country from the full impact of the completion of the internal market in 1992. We believed that given the failure of Irish capital and of successive Governments to develop our economy and infrastructure, particular measures were needed to ensure that Ireland did not fall even further behind the wealthier countries of the Community. This need has been recognised by many other people. In February the Governor of the Central Bank, Mr. Maurice Doyle, speaking in Strasbourg, stressed the need for the Community to devote more resources to the poorer member states, warning that Ireland did not want to become the apologia of Western Europe. He said that economic and monetary integration would not necessarily improve the lot of poorer countries.

Irish concern about integration represented a real fear that the achievement of economic and monetary union would actually result in the further impoverishment of the less developed countries on the periphery. It was for these reasons that The Workers' Party said that prior agreement on the extent of the increase in funding for the Social and Regional Funds should be a precondition to ratification of the Single European Act. During the referendum campaign we were assured by supporters of the Act that the total allocation for the Community's Social and Regional Funds would be doubled and that Ireland would be entitled to the same percentage of the enlarged funds as it had received in previous years for the smaller funds.

This was the proposal made by the President of the EC Commission, Mr. Delors, last year but since then persistent efforts have been made by the wealthier countries to water down these proposals. If the commitment contained in the Delors proposal had been honoured, Ireland would have stood to gain more than £860 million but it appears that the Taoiseach has settled for something less than £600 million. Indeed, it also appears that even this decision is subject to agreement being reached at the next EC Summit on outstanding agricultural issues. It is of course by no means certain that agreement will be secured on these issues.

It can now be seen that the advice we gave, that a firm unambiguous commitment on the extent of the increases in structural funding should have been a precondition for ratification of the Single European Act, was sound political sense. Supporters of the Act told the public that this was a needless safeguard but the Brussels summit has shown us that the size of the Social and Regional Funds are regarded simply as a matter of trading and bargaining between the wealthier powers in the EC and it is naive of the parties in this House to believe otherwise.

While the matters under consideration today are primarily economic ones we cannot ignore the political implications of other aspects of the Single European Act. The area of most concern for many of those who voted no in the referendum was the threat to our neutrality and our ability to pursue a thoroughly independent foreign policy. Again, certain developments since the referendum campaign would seem to suggest that those fears were well founded. A number of resolutions have been tabled in the European Parliament suggesting closer co-operation with NATO and the Western European Union and indeed there has been increasing talk of a common defence policy.

Ireland's neutrality is clearly under threat and urgent action must be taken to re-establish our position as a genuinely neutral country. The most effective way in which to do this would be for the country to apply for membership of the movement of non aligned nations which has within its ranks member states which are on friendly terms with each of the military blocs. There should be nothing inconsistent with being a member of the European Community and being the only non NATO member of the Community joining with other militarily neutral countries in the non aligned movement.

We said during the course of the referendum campaign in relation to the economic and political implications of the Single European Act that people were being asked to buy a pig in a poke. In other words, they were being asked to vote for something, the implications of which were not clear. Indeed, there was some difficulty in generating a debate on the issue and it was only when the courts declared the Act to be in contravention of the Constitution that a debate developed on the issue. The country would have been in a far stronger position had the country voted no and forced the Government to renegotiate the terms of the Single European Act for Ireland. Unfortunately, this did not happen. Every effort must be made now to compel the Government to ensure that measures are taken to recognise and allow for the special position of Ireland as a relatively weak and under-developed country on the periphery of Europe, in the implementation of all of these proposals.

In relation to the proposals on tax harmonisation, the only hope of averting major economic problems for this country and an unacceptable deterioration in the standard of living of many of our people is to force Government to honour the commitment made, prior to the referendum campaign, to exercise the veto on this matter unless and until a satisfactory arrangement is arrived at. We urge a major co-ordinated campaign by parties of the Left, the trade union movement, church groups and others concerned about the very many thousands of people in this State who would be hurt otherwise.

The Taoiseach in proposing the motion has set the context of the debate. I propose, to concentrate on the economic aspects and on certain other areas of specific concern to me as Minister for Finance.

The purpose and value of completing the internal market in the European Community must be seen within the framework of the Community's economic performance, particularly in the area of employment. For several years now, the Community has been caught in a trap of slow growth and high unemployment. Its performance on employment has been particularly disappointing when compared with that of other areas, particularly the United States.

Why has this been so? The reasons are many and varied, but by far the most important is the segmentation of the European market which has prevailed up to now, despite the progress achieved in eliminating barriers to trade in the early years of the Community's life. Twelve separate markets, all small by global standards, are a brake on economic development for the Community as a whole. The need to eliminate distortions and increase internally generated growth is immediate. The Community cannot depend on the global economic environment to provide the necessary stimulus to growth and employment in the years ahead. Essential adjustments in the international economy mean that the demand for Community exports is likely to remain subdued. The elimination of internal barriers to growth by creating a single market is, therefore, the only way forward.

The creation of a single market involves the free movement of goods, services, and the factors of production within the Community. This is not the case at present. The existing customs and administrative barriers and diverse technical regulations impose costs on Community industries. Companies cannot, consequently, realise economies of scale and are not subject to the full rigours of competition.

The framework set out in the Single European Act provides the means to complete the internal market in a manner consistent with strengthening the Community's economic and social cohesion. The Government are fully committed to these objectives.

The Cecchini study attempts to quantify some of the benefits of completing the internal market in terms of reduced costs and an improved economic performance in the medium-term. While these estimates must be treated with some caution they represent substantial evidence of the extent to which the Community is currently operating below its full economic potential, particularly in the area of employment. At micro-economic level, the gains from the reduction of costs arising from administrative barriers and technical regulations, amount to between 4.25 per cent and 6.5 per cent of Community GDP. This would represent a considerable improvement in cost-efficiency and would create scope for an expansion of output and employment.

At macroeconomic level, the actual additional increase in output and employment will depend to a significant degree on the policies pursued. Improved efficiency will lead to increased output and employment, reduce inflationary pressures, and improve the balance of payments and public finance positions of the Community, even with a passive macroeconomic stance. However, if the increased room for manoeuvre in macroeconomic policies was to be fully exploited by co-ordinated measures, the benefits in terms of growth and employment would be much greater.

The Cecchini study estimates these as a 7 per cent increase in GDP, an increase of 5 million in total employment, and a decline in the public deficit by about a half per cent of GDP, over a medium-term period. This is possible while still reducing inflationary pressures and without creating any unsustainable difficulties with the external balance. The Government regard maximisation of sustainable growth and employment as essential.

In supporting the process of completing the internal market the Government recognise that there will be costs as well as benefits. The distribution of both must be consistent with the strengthening of economic and social cohesion in the Community. Recent economic analysis suggests that the process of integration could result in a slackening of cohesion. Ireland needs to ensure this risk is minimised. The Government will seek to ensure that the necessary transitional arrangements are put in place to meet this situation.

As already indicated by the Taoiseach it is a matter of regret that the Cecchini report fails to address the issue of the distribution of benefits. It should have done so. The Single European Act, which is the constitutional mandate to complete the internal market, specifies that all policies pursued in the Community must take account of the objective of improving economic and social cohesion in the Community. The necessary countervailing measures, to compensate for any slackening of cohesion arising from the completion of the market, will have to be put in place. The Government are determined to ensure that this occurs.

Economic growth is the key to solving the problems which currently face us. The Government are committed to increased development of the economy's natural advantages and to improving its attractiveness to foreign investors. This process of developing and exploiting comparative advantage is the key to success in Europe.

The Taoiseach has already set out the measures which the Government are taking to ensure preparedness for the single market. I do not propose to repeat them. They are designed to make adaptation as easy as possible. Suffice it to say that the responsibility at the end of the day for ensuring that the economy benefits lie mainly with individual companies, who will need to make themselves aware of how the whole process will affect them.

The removal of fiscal barriers is a major element in the programme for the creation of the internal market. The structural basis for VAT and excise duties has been under examination for some time in the European Community and much progress has already been made.

The most recent proposals — those for the harmonisation of rates of VAT and excise duties — which the Commission have put forward are a direct response to Article 17 of the Single European Act which commits the Council of Ministers to adopt provisions for the harmonisation of indirect tax legislation to the extent necessary to ensure the establishment of the internal market by 1992.

There is no commitment or obligation on member states to accept in full the proposals of the Commission. I should like to make this clear. It will be a matter for discussion and negotiation amongst member states to determine what the ultimate package of necessary measures will be.

None of the member states has been able to accept, in any unqualified way, the proposals as they stand. Indeed it is clear that some member states, ourselves included, have major problems.

As I said in my Budget Statement the Government have accepted in principle the proposition for harmonisation of indirect taxes. This is a position which is perhaps even a little ahead of some other member states. We are as anxious as anybody to see lower taxes all round and, with all that this would imply for even lower inflation and a better climate for investment and development. However, there is another side to the coin.

As everyone knows the process of correcting imbalances in the public finances has been going on for some time. This has involved painful cuts in expenditure in order to reduce excessive borrowing. Where is the revenue to come from that will be needed to reduce borrowing further, to reduce the burden of direct taxation as we have done this year, and at the same time to make good the loss of indirect tax revenue that would arise if we were to implement the Commission's proposals?

Realistically and practically speaking, there is no prospect that benefits resulting from the internal market will flow quickly enough, or be certain enough, to enable the Government to absorb the loss of tax revenue that would arise from the form of harmonisation at present proposed.

There is not just the revenue loss to consider. Important economic and social consequences are also involved in the major structural changes which would accompany the new rates of indirect taxation. For example, food and other items which are at present zero-rated would become liable to VAT at a rate of 4 to 9 per cent.

Since our excise rates are among the highest in the Community, the Commission's proposals almost invariably mean a reduction from our present levels of duty. For example, in respect of beer, the Commission proposes a reduction in duty from 36.8p per pint to 5.5p per pint; in relation to petrol, the proposed rate is 120p per gallon as against the present duty of 134p per gallon. In respect of spirits, the Commission proposes a fall in the rate of duty from 55.5 per glass to 28p per glass.

The impact of the Commission's proposals on the Exchequer's revenue was evaluated by the Department of Finance in conjunction with the Revenue Commissioners. It is estimated that the full implementation of the Commission's proposals here, as they stand, would cost the Irish Exchequer a minimum annual revenue loss of £350 million, with an additional loss of £120 million arising in year one as a result of the elimination of VAT at the point of entry.

I want to emphasise that these estimates are objective and are based on reasonable assumptions about consumer behaviour after the implementation of the Commission's proposals. I do not regard them as conservative or as overstating the budgetary impact of the Commission's proposals, although of course some margin must be allowed for estimating error. To put these figures in context, £470 million and £350 million represent respectively 7.2 per cent and 5.4 per cent of total Irish tax revenue in 1987.

There are a number of options apparently open to us for the recoupment of this loss. Viewed in the abstract the revenue foregone could be borrowed, could be raised through other forms of taxation, could be offset through further expenditure cuts or through a combination of some or all of these means. However, the scale of the fiscal deficit and our already high levels of direct taxation render the use of these options singly or in combination extremely problematical. In terms of overall fiscal policy we are set on a course which is reducing the budgetary deficit and hence borrowing which does offer some relief to the income taxpayer and which clearly entails severe expenditure pruning. The continuation of these policies, which I believe to be vitally necessary, is difficult to reconcile with the adoption in full of the Commission's proposals as they stand.

This is the kernel of the difficulty which the Commission's proposals in their present form create for Ireland, and I have been at pains to make it clear to my fellow Ministers for Finance and to the Commission that while we support the realisation of the internal market it will be necessary to resolve the budgetary difficulties which the Commission's proposals create for us. I believe that the Commission must face up to the consequences of the proposals for the budgetary position of some member states. They must now begin to develop solutions to these problems. It is my intention to reiterate this message and to ensure that it is acted on by the Commission so that the various difficulties which have been raised by member states can be resolved within the available limits of flexibility.

Deputies may be aware that further discussions at Council level on the Commission's proposals took place last weekend and the matter is scheduled for discussion at next month's meeting of the Council of Finance Ministers. Thus far I would have to say that progress has been slow and there appears to be some deeply-rooted reservations about elements of the Commission's proposals among the member states. I believe, however, that progress can be made and want to assure the House that the Government's attitude is positive and supportive.

The Commission's proposals for completing the liberalisation of capital movements are currently being debated in the Council of Ministers and agreement is expected to be reached shortly. The intention is that all remaining capital controls would be removed in eight member states over the next year or so. Four countries — Ireland, Greece, Spain and Portugal — would be given a longer time-frame for meeting the new obligations. The deadline proposed by the Commission in Ireland's case is the end of 1990.

We subscribe to the aim of liberalising capital movements. As an earnest of this position, we took steps at the beginning of this year towards dismantling our existing exchange controls. Moreover, on that occasion, I indicated that we intended to complete the process as quickly as possible. Nevertheless, at the same time, we are acutely conscious of the dangers involved.

Even allowing for the strengthening of economic and social cohesion in the Community on foot of the Single European Act, full liberalisation of capital movements could, for us, result in capital outflows, particularly in the short term as investors seek to diversify their portfolios. Full freedom to move funds will also increase the volatility of such movements, particularly at times of exchange rate speculation. Both these factors could put pressure on domestic interest rates, as monetary policy will have to play an increased role in defending the exchange rate and in regulating inward and outward flows of capital. There could also be adverse implications for tax revenue, particularly from the deposit interest retention tax, since residents will be free to deposit funds abroad. We are not, however, by any means in an isolated position in this respect. Many other member states have serious concerns about the tax implications of full liberalisation and efforts are proceeding to see if an acceptable solution can be found.

Most of the member states who currently operate exchange controls also have difficulty with the speed at which the Commission is proposing that they remove these controls. For us, it is of vital importance that the Government's policy of adjusting the public finances should not be jeopardised by what could be too tight a deadline for this. While we intend to do so as rapidly as possible, we feel that, to be on the safe side, a deadline of end-1992, the target date for the completion of the internal market, is preferable to the one of end-1990 proposed by the Commission. I have asked that Ireland's transitional period be extended to that later date and I am confident that the Commission and my colleagues in the Council of Ministers will be able to agree to my request.

In considering the risks of capital liberalisation for individual countries, it is necessary to bear in mind that member states are not being required to walk a tightrope without a safety net. In fact, there will be two such nets. Both the Council and the Commission appreciate the difficulties of the economically weaker member states who will be embarking on a programme of capital liberalisation. In recognition of this, there is general agreement that member states should be able to avail of a safeguard clause which would allow them, for a period, to reimpose controls on certain capital movements if conditions warrant it. In addition, there will be an enhanced scheme of medium term financial support to assist member states who may encounter difficulties as a result of capital liberalisation. Both of these measures will be of considerable help in overcoming problems which the abolition of exchange controls may entail.

We must also remember, of course, that there is a positive side to capital liberalisation. An international perception of a control-free environment and the closer integration of the European market will enhance our attractiveness as an investment location and, provided our policies are right, we can look forward to capital inflows, with beneficial consequences for the economy. However, I could not emphasise too strongly that a condition vital to our success in this will be the continued prudent management of the economy and the national finances. It is essential that investors have good reasons to be confident in our performance in this regard. In a situation of easier movement of capital, we would be punished severely for any lapses and we must, therefore, recognise that this new situation will impose additional disciplines on our management of the public finances, but that, if we meet this challenge effectively, the potential benefits in the longer term will be very great indeed.

Within the Community, the liberalisation of capital movements and the abolition of barriers between financial markets will increase the risks of exchange rate instability. This prospect should not, however, frighten us into turning our faces against the removal of exchange controls and restrictions on financial services. Instead, it should encourage member states to take the action necessary to counter these risks and that will involve a high degree of co-ordination of economic, monetary and exchange rate policies among all member states. In this context, the further strengthening of the European Monetary System will be of particular importance.

Discussions are now in progress on ways of further strenghtening the EMS and a range of proposals is being considered by the relevant committees at Community level. We are actively participating in these discussions. At present, the institutional aspects of closer monetary co-operation are also being considered, including the possibility of establishing a European central bank at some future date. Our attitude to institutional development is a very positive one but we feel that it should be built on practical progress in the relevant areas and particularly in the economic and social spheres.

Over the past few years our domestic financial market has become more liberalised and competitive. This has come about through a combination of official action, and the activities of the institutions themselves in both competing aggressively in their traditional sectors and moving into new sectors in response to market forces.

The Cecchini report concluded that financial integration in Europe would have important implications. In particular, it identified a significant potential for a reduction in the price of financial products of the order of 10 per cent in the countries studied, equivalent to 0.7 per cent of GDP. It is unfortunate that the report did not cover Irish banks and other Irish financial institutions, so we cannot see from it how we would compare with the other countries in terms of existing costs. There is important evidence from other sources that our institutions are in a position to compete effectively. Apart from 90 branches in Northern Ireland, our two major banks already have 60 branches in the United Kingdom, where they have identified and targeted specific sectors in which to expand profitably. Irish banks are represented in the major continental centres such as Brussels and Frankfurt, and outside the Community by 12 outlets and a number of subsidiary and associated companies. It is understood that they also have plans for further expansion and linkages in other markets.

In addition a comparision of bank charges published last year showed that their charges to the personal and corporate customer in connection with a range of services were substantially below those of United Kingdom and American banks. If the efficiency and cost effectiveness represented by this comparision can be transferred into other markets within the Community, Irish banks should be in a position to benefit from any further liberalisation of banking services in the Community.

As the House is aware, the Government attach priority to the development of financial services in this country. This is evidenced by the commitment in respect of the Custom House Docks site. The response to this development and to the tax concessions and incentives offered to bring financial service companies to the site has been considerable and sustained. Projects and applications have been submitted by major Irish financial institutions including banks, insurance companies, stockbrokers and currency dealing firms. Applications and inquiries have also been received from major international financial institutions. To date 24 projects have been approved, with job commitments in excess of 750. The interest shown in the centre is a testimony to the positive view which the financial sector takes of the economy and a recognition of the advantages we have, and which we can build on in developing financial services. I am confident that we will see many fully approved companies operating from the Custom House Docks site next year.

In regard to public procurement the Commission is undertaking a programme of measures designed to open up progressively to EC-wide competition all public sector contracts for purchasing and works. Public sector procurement is estimated in the Cecchini report to represent up to 15 per cent of Community GDP. Its liberalisation, which has been given a high priority by the Commission, is regarded as an essential step towards the completion of the internal market by 1992. The Cecchini report estimates potential savings in this area at over ½ per cent of Community GDP.

For most member states as well as Ireland, the planned changes in regard to public procurement will present major opportunities as well as potential problems. Industries and individual firms that are competitive will achieve access to new Community markets while those that are uncompetitive will be at risk. At Community level, the liberalisation is expected to have profound effect on the structure of European industry, make it competitive at world level and enable it to face up to the challenge posed by its major trading competitors.

Ireland shares the objectives of the liberalisation of public procurement while at the same time being conscious of the need, in looking at specific proposals to this end, to ensure that our particular circumstances and needs are taken into account to the maximum extent possible.

We will only do well in the Europe of post-1992 if we know what we want. We will have to set priorities, which means giving less emphasis to other things. Everything cannot be a priority.

We did not do particularly well out of EC entry since 1972, and it was mainly our own fault.

We assumed that the high agricultural prices would automatically flow through into sustainable development in the rest of the economy. This did not happen. The number working in Ireland is no higher now than it was when we joined the EC in 1973.

The higher agricultural prices actually distorted our food industry — pushing the growth into commodities like butter and sides of beef. The cheese and food processing industries actually went backwards in the seventies. They were sacrificed in favour of immediate increases in producer prices. These higher producer prices fuelled an expansion of farm debt, which is now crippling many farmers. On the industrial side, where there were so many fears, we actually did better than many expected.

We used EC funds to build up a thinly spread infrastructure, and unsustainable AnCO training programmes. No growth centres were chosen for rapid infrastructural development. Many of the training programmes did not really lead anywhere. Many people were just paid with the EC money, to pass the time.

The easiest thing is to blame the politicians for this. But that is a cop out. Politicians act on official advice. A key question also is whether the Irish public service has the capacity to put the hard strategic choices about economic development clearly before the politicians? Do they prefer to let such things drift from one budget to the next, from one cabinet meeting to the next, allowing competitive bureaucratic and political forces to determine the outcome?

The approach to Europe we have had since 1973 is simply not good enough. It did not work. Incomes here are still only 60 per cent of the European average, no better than they were fifteen years ago. Four times as many people are now unemployed. In this I agree with the Taoiseach's criticism of the Cecchini report for its failure to emphasise cohesion of weaker regions with stronger. But Europe will never solve this problem for us. The main responsibility will be our own.

The following are my priorities: The most important issue is to cut the cost of access for people, goods, and ideas to an from Ireland; the second is to promote active and tough competition within the Irish economy so as to bring our costs down; the third is to promote the teaching of German, Spanish and Italian in our schools; the fourth is to ensure that the EC, and EC funds, promote independent development and not a dependent, begging bowl attitude amongst our own people, institutions and industries.

Let me say something about each of these. In regard to access, Ireland is distant from the big markets of Europe. This is a disadvantage, no matter how you look at it. If customs delays are reduced in Europe in 1992, the delays and costs associated with a sea or air journey from Ireland will become relatively more of a handicap after 1992.

Therefore Ireland must push vigorously, and as a top priority, to bring down air, sea, telephone, telex and postal costs between here and Europe.

The recent airline liberalisation package, outlined on page 97 of the report of the EC Commission on the "Economics of 1992", is grossly inadequate. It is still largely prohibited for an airline of one country to carry passengers between airports of other member states. This is allowed on only 44 of the 400 air routes in the EC.

The results of these artificial and unjustified restrictions is that Europe has too many airlines, employing too many people, costing passengers too much, and penalising the economic development of peripheral regions like Ireland. Air services in Europe are 60 per cent more costly than in America, aircraft maintenance costs are 119 per cent higher, airline administration costs 365 per cent higher, ground and passenger service costs 315 per cent higher.

The parts of Europe that suffer from this are the peripheral ones. Our Government must make reduced airline and communications costs their number one priority. They still remain ridiculously high on continental routes. That is what is needed to get our exporters out into the European marketplace. As the commission report points out:

the often unquestioned argument that demand for business travel is inelastic seems quite questionable, especially for smaller businesses.

The free internal market will mean nothing to the average Irish businessman if it costs him too much to go out to Europe to find new customers in the first place.

If a business is to survive here rather than relocate closer to the customer, it also must have rock bottom, cheap telephone, telex and fax charges. This is Fine Gael policy. As was pointed out in the Sunday Times last weekend, prices per phone connection in Europe are between £120 sterling and £265 sterling, as against only £53 sterling in America. Cheap telephone services allow businesses to stay in outlying regions. Expensive services force it to congregate in large centres. Ireland should again be the leader in pressing for a deregulated European telephone system.

As the commission report before us points out on page 98, national telephone administrations in Europe forbid large subscribers who rent leased lines to allow a neighbouring business to use these lines on an "arbitrageing" basis. This is because of the national telecom monopolies in Europe. Surely it should be the policy of a peripheral nation like Ireland to sweep away all such telephone monopolies. We should start by getting rid of any such monopoly here in Ireland.

Taking a more radical step, surely Ireland should be pressing that Europe got away form the whole idea of "national" airlines, and "national" telephone services, if it can be shown that a few competing European companies or joint ventures would provide a cheaper service particularly to peripheral regions.

Does Ireland favour maintaining national telecom monopolies in the so-called "competitive" or value-added telephone services referred to in the EC Green Paper? In my view we should take the lead in dismantling monopolies which give benefit to central regions and hurt peripheral ones by pushing up communications costs.

I also ask the Government what action they are going to take to ensure that Irish goods transiting through Britain to Continental Europe are never again held to ransom in a British seaman's strike. That is an issue that is very relevant to 1992. What does the Government propose to do about it?

Let me turn now to competition policy. Ireland starts in the European race several yards behind the starting block. We are across the sea, and we have no Channel tunnel. We will only win if we are more competitive, and more fit than the opposition. That is why we should be first in adopting new measures to promote internal efficiency through active competition policy in Ireland. This means getting rid of restrictive practices wherever they exist. Restrictions on numbers entering a profession, fixed scales of fees, deals about who does what work, and State company monopolies are all luxuries that a peripheral nation like Ireland cannot afford.

Fine Gael have proposed that we make Articles 85 and 86 of the Treaty of Rome part of domestic law. These articles would ban price fixing, limits on supply, market sharing and all other similar cosy arrangements. These should be introduced into Irish law and made applicable to commercial activities in both public and private sectors.

The third priority is languages. The biggest and most impenetrable barrier in Europe is that of language. Ireland is one of the worst performers in this regard. Only 3.5 per cent of students doing the leaving certificate achieve grade D or higher in German. Only 1.8 per cent achieve it in Spanish. Only one-fifth of our secondary schools even offer German as a subject, only one-tenth offer Spanish, and one-fiftieth offer Italian.

Meanwhile the Fianna Fáil Government rejects public opinion poll results that suggested we should spend less time on Irish and a lot more on continental languages. As I have said, 1992 is about choosing priorities. Of course, we would all like to have more time for Irish, for German, for French, for Italian, for Spanish, for English, for woodwork, and for everything else too. But there are only so many hours in the school week. We must choose which is most important.

If one speaks Irish one can speak French and Italian more easily.

I believe that German and Spanish should be pushed to the top of the timetable and that must mean less time for other languages and subjects. We should arrange to temporarily bring in native German, Italian and Spanish speaking teachers to our schools on an organised basis. We cannot, unfortunately, wait for more Irish teachers to qualify in these languages. These languages should also be put outside the quota, so that this does not threaten existing teaching posts. I also believe that European Social Fund money should be used to subsidise language teaching throughout Europe. Why should it be confined to vocational training if we genuinely want a Europe without frontiers. We should have a common European educational policy.

It is a shame that our major banks and industries, like Smurfits, are investing in America rather than Europe. Europe has better economic long term prospects. The reason for this failure to invest is language. In the Spring 1988Irish Banking Review, Liam Kinsella of AIB, identified linguistic inabilities as a major reason for lack of Irish investment in the European financial sector. Unless we develop ability in continental languages we will be pulled in conflicting directions between Europe and America.

Irish economic and social development has suffered from a post-colonial psychology. We have tended to blame others, and to look to others to solve our problems. This has manifested itself in familiar expressions like "There should be a grant for this,""The Government should do something about it," and so on.

The Government must design the programmes for the use of the EC Structural Funds in Ireland that avoid the creation of a new form of dependency on Brussels as a cure for all our woes.

European funds must be seen as something more than a hyped-up national lottery. In fact, there is a real danger that EC funds could do us more harm than good. EC intervention distorted our food industry and arrested its natural development path. The availability of EC interest subsidies encouraged us to borrow money in the late seventies that we would have been better off leaving in the bank. We should insist that all EC funds be tailored into a coherent strategy for infra-structural development of peripheral regions. We should not try to tag on additional activities unless they are part of a coherent strategy.

Above all, we must avoid accepting "aid" in the form of interest subsidised loans for unprofitable capital ventures or for the temporary maintenance of social services beyond the long term capacity of the country.

It might be better for us if the EC funded particular activities as to 100 per cent leaving us to look after other activities than that the money be spread over a large and politicised range of programmes.

Having identified the four priorities that we should set for ourselves I now turn to some of the dangers there are in the internal market.

The Commission's report, page 166, says that the welfare gains from a free internal market could be 1.75 million jobs in the medium term. But it goes on to say that, with an expansionary economic policy, the gains could be 5 million as against 1.75 million additional jobs.

If, on the other hand, the European economy were to contract what would happen? There might be no gains at all. The real problem is that there is no common European economic policy. We have a common commercial policy, but no common economic policy. This is a real danger. The report acknowledges that and I quote: "early 1988 sees a weakening of the world and European business cycle." Could this derail the whole enterprise? Does Europe have any common instrument to prevent that happening?

The traditional remedy has been to ask the Germans to expand their economy. That is no longer possible. The German budget deficit as a percentage of GNP is already higher than the US deficit. German productivity growth has fallen far behind that of Britain, France and Japan.

The engine of Europe will have to be fuelled from elsewhere. The meetings of Economics and Finance Ministers of the EC, ECOFIN, do not, in my experience, give any dynamic lead in European economic policy making. Apart from EMS issues, the meetings are little more than rituals. Does our Government have any proposals on this matter?

I am worried about the possible effect of recent developments on US investment in Ireland. Is there a chance that European economies of scale arising from the free internal market will squeeze out some of the smaller US companies operating in Ireland? The sectors listed on page 110 of the report as affected by European economies of scale include sectors like office machinery and chemicals in which there is a strong US presence here.

The vulnerability of these industries will be aggravated by recent US corporate tax changes. These changes will impose massive extra tax burdens on the Irish operations of many of the big US multinationals. Will the internal dynamics of the European internal market, and the benefits it will confer on European companies combine with those extra tax burdens to stop reinvestment by US multinationals in Ireland? What are the Government doing to avert this threat? Have they a policy?

I turn now to fiscal harmonisation. The Government should now decide on a staged annual programme to bring our purchase tax levels to within 3 per cent of the average European level. This decision should be made now. The programme can be phased over a longer period than 1988 to 1992. Perhaps we should aim at harmonised rates by 1995 but we should start a phased programme now. This will give a clear guideline to the investment and industrial community.

Ireland still depends far more than other EC countries on agriculture for employment. It is quite clear from the report, pages 80 and 81, that farmers are going to lose substantially. It is clearly stated on page 80 that the Community's strategy is "to move common prices closer to underlying world market prices." This will be a revolutionary and drastic change for the Irish economy if it happens. The cut in farm prices will affect, not only farm incomes, but the entire economy.

Surely the Government should publish a White Paper analysing the impact of this policy on farm and food industry incomes here. I call upon them to do so.

How can we have a Europe without frontiers as long as MCAs continue? All but three member states operate MCA border taxes at present. Will these MCAs be abolished in 1992? Can they ever be abolished as long as Britain stays outside the EMS? If they are not abolished, how can we get rid of Border posts?

Irish owned manufacturers, if they export at all, tend to export to Britain. The British market, with 1992 and the Channel Tunnel coming together, will now be open up to a lot of extra continental European competition. Traditional Irish firms must diversify onto the Continent if they are not to lose overall market share as a result of that competition.

The proposed free movement of capital in Europe will limit our ability to apply radically different systems of capital taxation to those applying in Europe as a whole.

The EC apparently plans to allow complete freedom for banking across frontiers as well as completely free movement of capital from one State to another.

Already there have been numerous banking collapses in the US. These have been contained by the operations of the Federal Deposit Insurance Corporation. There is no European equivalent of the FDIC. Supervision of banks and financial institutions is to be left to national authorities who will be using inconsistent capital adequacy ratios. This is not good enough.

If Ireland is to be the headquarters of a Europe-wide banking operation, located perhaps in the Custom House Docks site, and if that operation gets into trouble, who will bail it out? Will it fall to the Irish taxpayer? If not, and if there is no provision for bailing it out, will its collapse trigger a succession of failures as happened when banks collapsed in the thirties. There must be a European answer to this question.

While I acknowledge the comments made by the Minister for Finance about relative charges in the Irish banking system our domestic banking sector is not particularly efficient, and is strongly unionised. It needs to change radically if it is to fend off European competitors who will obviously tend to enter those parts of the market that are most attractive and not provide the comprehensive service that our banks attempt to provide.

Finally, I will refer to the need for an electricity interconnector. This matter was referred to by Deputy Barry in this debate. Electricity is an area in which a common market by 1992 may mean a reduction in the number of utilities, and a significant reduction in costs.

On page 85 of the Commission's report, reductions in European electricity costs worth about 6 billion ECUs are mentioned. These will arise from more cross-frontier transfers of electricity, but Ireland will be unable totally to benefit from these so long as we have no interconnector into the European grid. If other people's electricity prices go down, and ours stay as they are, we will lose competitiveness as a result of the freeing up of the internal market. The Government need to include an electricity interconnector as part of their 1992 programme.

Like my colleagues, I welcome publication of the Cecchini report. With its lengthy and comprehensive back-up documentation, it undoubtedly represents a major contribution to the completion of the Community's internal market. Its authors should be congratulated on the effort they put into their task and on the vast range of information and analysis they have provided. The report aims at explaining how the removal of internal barriers to trade in the Community could bring about economic gains and it endeavours to quantify those gains. While this quantification cannot be at all precise — who, after all, could safely predict economic variables five years ahead? — it does appear highly probable that completion of the internal market could indeed transform the Community's economic performance. The report will, I hope, help to stimulate a wide debate in this country on the preparations for 1992. The Government are very much engaged in preparing the conditions for that debate and for launching an awareness programme very shortly which will inform our attack on the enlarged internal market.

The report leaves little doubt that the single market will represent a very sizeable benefit for the Community as a whole — the potential for gains has been put at about 200 billion ECUs, an increase of up to 7 per cent in Community gross domestic product. In my view it carries considerable potential benefits for this country's economy as well, provided that the harmonisation measure are equitably and sensitively applied and provided also that the increased Community Structural Funds are made available in suitable form and adequate volume to strengthen our economy, as was negotiated by the Taoiseach at the European Council. It will be the Government's policy to ensure at Community level that those conditions are met.

In agriculture and food, the sector with which I am most familiar and in which I have responsibilities, a good deal depends on the precise methods used to achieve the single market and I will return to this point shortly. While our food processing and exporting industry still needs to make further progress in efficiency and rationalisation, there is no doubt that it has already made vast strides in recent years. Developing as it has since 1973 within a consumer market of 320 million people, our agricultural processing sector is far stronger than ever before in our history. We now have firms that can — and do — operate successfully not just on a Community scale but on a world scale.

Indeed we in this country have many advantages in the agriculture and food sector, beginning with our productive soil and generally favourable climate. Recent Community policy changes, while not always popular here, have opened up significant opportunities in the markets of other member states for Irish producers and processors. Quota restrictions and limitations on our dairy production, for instance, have posed problems for Irish producers, but they have posed bigger problems for producers in many other EC countries. Our obligation must be to maximise the relative advantages we have in supplying the new markets that exist in Europe and elsewhere.

Production cutbacks elsewhere give greater scope for our exports within the Community. In some sectors, particularly milk, the relatively more plentiful supply of raw material here has allowed the promotion of joint ventures between Irish and other member states' firms. I have personally launched two such examples recently, notably one in Waterford where Waterford Co-operative in close association with a Dutch cheese processing firm entered into a joint venture because of the lack of product in the Netherlands which we can supply here. Other such opportunities will be there and we must go and exploit them.

To maximise the opportunities that will open up for our agriculture and food sector, among others, in the single market, it is important that the right economic climate be provided in the lead up to 1992. The Government's approach to the economy, that of restraining public expenditure and inflation while reducing interest rates, is increasingly promoting the environment that the private sector needs for success in the single market. Nowhere is this more true than in the agricultural sector.

The agriculture and food sector, unlike some others, already has a fairly free market within the Community and particularly so for our major products. That has brought us major economic benefits up to now, and could bring us much more in the future. Access to a big remunerative market is, in fact, the major economic advantage of our Community membership. It is perhaps unfortunate that this basic reality is sometimes lost sight of in the more dramatic arguments and difficulties about the operation of the Common Agricultural Policy.

Let me at this point make a comment on a statement that has been attributed to a Member of the European Parliament who, as far as I know, has never been elected to that or any other assembly. I hope people like Mr. O'Malley, who has made statements which have been contradicted by members of his own party in the European Parliament, will reflect very seriously before they make such broad critical attacks on the CAP. It may well be that very few people will pay any attention to this, but as the one charged with negotiating and protecting the interests of this country at the Council of Agriculture Ministers, it is not going to help me that a young, insensitive, and indeed unelected, voice is looking for publicity by attacking the basic elements of the CAP in which we have a very strong vested interest. I join with his colleague Tom O'Donnell, MEP and others, including my colleague Mark Killilea, MEP, in saying to young Mr. O'Malley to consider well before he makes statements of the kind he has been making which can be used by others who are anxious to attack this very fundamental policy which means so much to this country as Deputy Bruton has just said. I hope I will not be hearing the arguments he has presented against the Irish cause at the next Council of Agriculture Ministers meeting.

Let me return to the CAP. The European Council in February last effectively completed the ongoing reform of the policy. A consequence of the decisions taken in that area and in relation to budgetary discipline and control is that full price support will no longer be available for unlimited output. In the future, therefore, it is clear we will have to rely much more heavily on the Community market for the returns to our processors and farmers and much less on Community mechanisms such as intervention buying. I am glad to say that is what is happening. We are relying less on intervention support in Ireland and much more on the market demand for our product. That is the way I propose to continue to direct food and agriculture policy. This and developments in negotiations at other fora, to which I will refer later, emphasise the need to have more marketled developments; to produce what consumers want and will pay a good price for.

Investment aids, particularly those from the guidance side of FEOGA, have a very important role in helping the food industry to meet that need. These have already been provided but in the past have often not been fully utilised as some firms did not take up the grants for which they were approved. I on behalf of this Government have given a major priority to seeing that this situation is radically improved and only those projects which we feel will fully utilise the grant aid will in future be recommended for support to the EC. I am glad to say that this policy is having the desired result and we are now confident that grants will be more fully utilised.

I am very confident that we will continue to maximise the draw down of FEOGA guidance funds for the processing and food sector which has been an important priority of mine since taking over responsibility for this area. We have increased the draw down dramatically over the experience of previous years. This is necessary to prepare our food and processing sector for the great opportunities that exist in Europe and world markets.

Despite the harmonisation and liberalisation achieved to date, several barriers to intra-Community trade continue to apply to the food and drinks trade. There are, for instance, restrictions in relation to chocolate and spirit drinks but barriers relating to packaging, labelling and compositional standards also apply to trade in ice cream, beer, baby food, soft drinks and other products. The Cecchini report identified some 218 such barriers applying to intra-Community trade in ten product sectors in the five largest EC countries. The report estimates the cost to industry of these barriers at between 500-1,000 million ECUs annually, apart altogether from the restrictions imposed on the consumer's choice. Savings of this order which would follow the elimination of all these barriers would represent some 2-3 per cent of the total added value of the sector which alone accounts for just more than 4 per cent of the Community's gross domestic product. Between now and 1992, the Community will be endeavouring to remove these barriers.

The 1985 White Paper Completing the Internal Market listed some 90 plant health, veterinary and foodstuffs measures to be adopted by 1992 and about a quarter of these measures have already been adopted by the Council. A number of other measures have already been tabled and the remainder are expected to be proposed before the end of this year. I am confident that the Irish food industry will be in a position to exploit any further opportunities that will be presented by greater liberalisation and harmonisation.

I would like to refer to a number of agricultural features of intra-Community trade which are of great relevance to the completion of the internal market. I will deal first with MCAs. These apply as charges or subsidies in agricultural trade in order to offset the effects which currency movements would otherwise have on the common support arrangements of the CAP. As a temporary mechanism they were acceptable; as a long term policy too they have led to significant distortions in production and trade. The Commission proposes to abolish MCAs by 1992. This will be of benefit both for the Community as a whole and for this country, and indeed essential for completing the single market in agriculture, but if we are to achieve the objective of abolishing these MCAs by 1992 we must make progress in adjusting green rates to reduce existing MCA levels between now and 1992. For that reason in the Council of Ministers I am at present pressing very hard for a green £ adjustment to reduce Irish MCAs. I will continue to press for this in the context of the current price negotiations and it is an essential precondition to our agreement, not just because Ireland says so — although that is important — but because it is also consistent with the Commission's commitment to eliminate these by 1992.

The Council agreed last year on procedures for adjustment of green rates to eliminate future MCAs over a period and this makes it all the more essential to deal with existing ones.

In relation to the European position and international negotiations, which are very essential elements to consider in the context of the internal market for agriculture, on the GATT and farm price supports there has been a good deal of pressure within the Community — and from outside in the GATT negotiations — for sharp reductions or the elimination of agricultural support prices. I do not want to go into all the details applying to different countries but the approach of the European Community is dictated by the fact that, as the world's largest importer of farm and food products and the second largest exporter, the Community has a major interest in establishing a better balance between supply and demand and more stable and realistic world price levels. Given the level of Community expenditure devoted particularly to export refunds and intervention support arrangements, a better balance of supply and demand and higher world prices would reduce support requirements while at least maintaining producer incomes. For its part, the Community has already made a substantial contribution to a restoration of balance. We are all aware of the restrictions introduced and the price policy pursued in relation to agriculture, particularly since 1984. These reforms have been undertaken on a unilateral basis by the European Community in advance of the Uruguay round and the GATT talks.

The Community, therefore, considers that the first stage of the GATT negotiations in the round must be the adoption by other countries of measures equivalent to those already undertaken within the Community. Any further reduction in support or equivalent measures should be negotiated in a balanced, concerted way and should take account of factors such as food security, the preservation of a sound infrastructure and the environment, rural development and the protection of consumers and producers against excessive risks of world price fluctuations. In this regard, the structural differences and climatic disadvantages obtaining in parts of the Community must be taken into account.

Other contracting parties, particularly the United States and New Zealand, are dismissive of the Community's actions to date and of its approach to the negotiations. While we can understand the New Zealand viewpoint — that country is in the process of removing all support to agriculture — we are somewhat sceptical of the US approach. Their proposals go well beyond the objectives agreed for the negotiations and may not, in the end, be acceptable domestically in the United States. We want to take a follow through action, to use an Irish phrase, beart de réir ár mbriathar. There is not much point in the United States coming in with proposals and at the same time not having the capacity to implement them. Their proposals must also be contrasted with the recent US action to increase substantially its own export enhancement programme. Their structural position is quite different from, for example, the European Community and Japan where food production is very heavily subsidised.

While I would prefer a greater emphasis on supply control measures, I can generally support the Community's approach which is realistic and which offers reasonable safeguards for the future of Community agriculture and rural areas generally. This is very important to us and offers an additional reassurance that the cohesion aspects which are also part of the completion of the single market will not be overlooked in the agricultural sector. I want to stress that point. The internal market which we are debating and its proposed elements are instruments to achieve the cohesion in the Delors plan. We must never, in any negotiations or statements, allow it to be assumed that Ireland will accept this or that limitation without pointing out that all those instruments must be consistent with the cohesion proposals in the Delors plan. That involves a doubling of the Structural Funds for the least developed regions, such as Ireland. We can never compromise in regard to that matter.

Plant and animal health harmonisation is a very important area for us and we have moved ahead of many other countries in this regard. We are very anxious to ensure that member states apply a uniform level of animal and plant health.

Ireland is free of the major epizootic diseases in animals and also of many serious pests and diseases of plants. Some other member states are in a similar position and it is in the Community's interests to maintain this situation and to promote progress towards it in member states which are not as fortunate.

Harmonisation of animal and plant health regulations should go hand in hand with a levelling upwards of health standards and should not lead to downgrading standards. We will always insist on the level of standards which we apply. I am hopeful of a constructive response from the Commission.

The food industry here will share with other industries the potential advantages that 1992 is expected to bring, for instance, cost reductions, new possibilities of specialisation in a fully integrated market and a climate favourable to joint ventures with other Community firms. The major benefits are indeed potential, not automatic. They have to be prepared for and grasped, not just awaited. Our role is to direct change, not to accept it. The food industry here should be in a particularly good position to improve its performance within the Community given that it already enjoys trading not far from a single market and the striking improvements in that industry in recent years.

When this country joined the Community, we well knew that opportunities, rather than guarantees, were on offer. That is still true today, with cost and other pressures on the CAP affecting the farm support system. It is fair to say that our farmers and processors made a successful adjustment to Community membership in the early seventies. They are again in the process of making a successful adjustment now to new and more challenging conditions. Between now and 1992 they will be backed up in these efforts by the convergence provisions for the peripheral regions of the Community agreed at the European Council last February, provisions now beginning to take the concrete form of structural aid measures for farming and rural areas. We were the first to submit to the Commission an integrated rural development programme since the European Council decision on the reform of the structural funds. I propose that we will be the first to make all such proposals in relation to the development funds and when the European Commission produces a comprehensive programme our experience in pilot areas will give us a great advantage over all other member states.

In all of this we are greatly helped by the fact that within the public service we have developed a high level of effectiveness and expertise in dealing with Community matters. The Government will see to it that this expertise is maintained and strengthened. More broadly, our education system is geared towards producing experts and graduates who can more than hold their own in international competition in the area of product and market development. We are determined to create the conditions that would enable them to use their skills to carve out a greater share of the Community market for Ireland.

I would like to make one final point. Farm and food production is a central and vitally important part of our economy, much more so than in most other member states of the Community. While the other member states may gain greatly from the single market in various sectors of industry and services — and indeed Ireland could have benefits there too — it is very largely to our agricultural and food exports that we must look to translate our participation in the single market into real economic gains. With increased efficiency, market led development and a suitable economic climate, it is my belief that our farm and food sector can increase its already growing impact on the Community market. In that way it will be making a major contribution to the future prosperity of this country.

What strikes me most forcibly listening to the contributions on this extremely important debate is that there is a near assumption that the definition policy — and how it will be achieved — lies in the hands of somebody else in Europe and that we are waiting here to read the pronouncement from afar. My approach to that is one of total abhorrence, I am aghast at this attitude. The parameters of what is developing within Europe are extremely clear. The final tablets of stone in detail may not yet have been set but there is ample room for us to decide, within the existing parameters, the type of policies we need to develop in many areas if we are to be successful within Europe.

There is also a presumption that somehow the single market will not come into operation for three or four years or that with the odd derogation here and there we will be able to extend it to seven or eight years. The concept of the single market, particularly from the point of view of industrial development, is with us. Many major industries have had committees reviewing the impact of a single market six or seven years ago and it is wrong of us to think that in 1992 something marvellous will happen, that the curtains will open and the market will begin. It will be fatal for us if we adopt that approach. It is obvious to me, having listened to the debate so far, particularly to the contributions from the Government side, that definite policy strategies have not been set down or decided on in regard to many areas.

The Cecchini report is a highly complicated document which deals intensively with the micro and macro economic effects. It is difficult to try to read it but what is clear in it, and should be picked up by Members who read it or by industrialists, are the broad effects of what will occur, and are occurring, in the market. If there is one overriding message to industry, which is where the big impact will occur, it is that right now industry should be changing their approach to the development of their business. Another matter which struck me forcibly was that the big impact on us will not be the removal of the financial barriers but the removal of the non-tariff barriers. In this area the gains will be far greater and the impact on our industry will be greater.

What does that mean? It means that industrialists here, particularly companies anxious to operate and expand in Europe, must see how their operation marries up in efficiency and productivity levels. In that context I have not heard anything from unions here on their approach to the demands on the labour force and the employment they will be seeking in the years ahead. I have not heard anything about how they fit in in their company or how they will develop.

I should like to tell workers, and unions, that they can forget about increased productivity starting with extra money for them to do this, that and the other. In my view it means quite the opposite; it will mean that production will demand the highest possible levels of efficiency if they are to be successful on this market. There will be a need for a combination of management and labour skills on the factory floor. They must be interactable so that the direction is cohesive. I have not heard any pronouncements from unions on how they see that development taking place here. It is to their great shame that this has not occurred. They must take action immediately and not in 1992 or beyond.

We should not be thinking in terms of the 3.5 million people who live here or worrying that somehow Europe will focus in on Ireland and our markets. They will not; in many ways they could not give one whit about our markets because they are too small but that does not worry me. We should be considering the opportunities for us to sell to the 320 million people in the Community.

In the industrial sector the opportunities to expand will be greatly enhanced. We must set in train the forces that will allow them achieve that. Irish industries must go into linkage with companies in Europe if they are to survive. Those who want to pretend otherwise will not survive the next ten years. It is better for those who think they can survive to have 50 per cent of a much greater entity in four or five years time that to end up with 100 per cent of nothing.

Earlier the Minister for Agriculture and Food referred to what Waterford Co-op have done in the development of Leerdammer cheese on the continent. That is a good example of a raw material that is available here being developed under a leading brand name in Europe and sold there. What he did not say, and what one of the leading members of the co-op movement has said, is that the food industry in Europe by 1992 will be controlled by 100 companies with a turnover not less than £2 billion. That will be the minimum requirement if a company is to be successful in the food industry in Europe in the years ahead. I do not think any of our co-ops come anywhere near such a turnover. I am glad that some of them have recognised the problems they face but it is now that they should be trying to achieve a single entity to sell their products abroad. The co-op movements as they operate at present will not survive after 1992 but three or four of them could develop into a major food producing movement. If that happens we will make maximum impact in Europe.

The only type of business I have seen developed on a European and world scale has been the accountancy finance service. We have seen world linkage of such firms and that has greatly helped Irish companies in their development in Europe but that does not appear to be happening in other sectors. In my view the major companies which are probably the biggest employers will be located on mainland Europe because there will be a greater market for the end product there but many of them could manufacture components here. It is irrelevant where they are produced because they are not the end product. We should be endeavouring to get companies to produce components here. I am thinking in particular of Japanese and American companies, producers of videos and so on. The main market for their products is on mainland Europe but many of the components that go to make up such products could be manufactured here. We should try to get such companies to set up industries here and endeavour to make Ireland the servicing centre for major consumer products. However, we do not have an industrial policy that will achieve this. I am not saying the Government should do this but they should give a direction. We should have a five-year rolling policy in train to try to get those companies to set up industries here. We should not wait until 1992 for everything to happen.

It has also been said that consumers will gain tremendously as prices drop and we get greater product choice and better quality. These are only knock-on effects as companies become far more efficient in organising and running their business. The competitive forces that will operate in a far greater market will put a downward trend on what some products are gaining by price at present. If Irish companies do not see this and do not plan to shed now all inefficiencies within their own organisations, it will be far too late in 1992. It is wrong to talk about this event occurring somewhere down the road when it is as relevant today as it will be in three or four years time.

Debate adjourned.