Dáil Éireann díospóireacht -
Thursday, 11 Jun 1992

Vol. 421 No. 2

Estimates 1992. - Vote 32: Office of the Minister for Agriculture and Food (Revised Estimate).

Minister for Agriculture and Food (Mr. Walsh)

I move:

That a sum not exceeding £182,942,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1992, for the salaries and expenses of the Office of the Minister for Agriculture and Food, including certain services administered by that Office, and of the Irish Land Commission and for payment of certain grants, subsidies and sundry grants-in-aid.

This year's Estimate is for a gross amount of £475 million. As I have indicated on previous occasions, this represents only a portion of the overall expenditure of the Department of Agriculture and Food. In addition, my Department spend well more than £1,200 million each year from the EC budget for the benefit of Irish farmers and traders and, on average, another £500 million funded from borrowings on the intervention purchase, processing and storage of agricultural commodities. The position at the end of 1991 was that intervention stocks amounted to 247,000 tonnes of beef, 292,000 tonnes of dairy products and 84,000 tonnes of cereals.

The year 1991 was again a difficult year for the economy generally and for the agricultural sector in particular. I am glad to say, however, that in recent months, some positive indications have emerged.

It now seems likely that the volume of GNP grew by about 1.5 per cent in 1991. Our export performance was particularly impressive and this combined with improved earnings from services and increased EC transfers, produced an external current account surplus of £1,200 million or 5 per cent of GNP.

The volume of GNP is set to expand rapidly in 1992 but is unlikely to exceed 2.5 per cent. This growth rate is based on an improvement in both domestic and external demand.

Good news for the overall economy is good news for the farm economy. In recent months, there have been a number of positive developments for the farm sector. The market balance for the main dairy products has improved, and EC stocks of butter and skim milk powder have declined. The price of milk has risen in consequence, and average milk prices in 1992 should be higher than in 1991.

There is also expected to be a rise in world trade in beef during 1992. In particular, a more buoyant Middle East market is expected with imports forecast to increase. The expected improvement in the supply and demand position should mean that prices will be at least held at 1991 levels during 1992. This is a very positive development towards stabilised price levels. Pigmeat production and prices are expected to increase in 1992.

Overall, then, I would expect that farm income levels in 1992 should be somewhat improved by comparison to 1991. I expect also that the level of direct subsidies will increase in 1992 following increases in the rates and scope of payments under the disadvantaged areas scheme. In addition, the various rural development measures and schemes, including Leader and the national rural development programme, should strengthen the income and employment situation in rural areas.

The recent outcome of the Common Agricultural Policy reform negotiations has ended the uncertainty that had existed in the agricultural sector for more than 18 months. This should help to stabilise farm incomes and enable the agriculture and food sector to continue to contribute to the overall wellbeing of our national economy.

There is little doubt that the economic environment within which farmers will operate will become increasingly competitive. The challenges which this presents must be faced. The Programme for Economic and Social Reform provides that a new development programme for the agricultural and food sector should be negotiated between the Department and the farm organisations. I am glad to say that work on this is proceeding, taking account of the Common Agricultural Policy reform decisions. The Culliton report recommended that a development plan for the food industry should be drawn up by an expert group. I have recently set up such a group including farmers, manufacturers, retailers and the State sector, and have asked them to report before the end of the year.

There can be few who are unaware at this stage of the importance of the agrifood sector to Ireland. Accounting as it does for about £6 billion or almost one-third of our total manufacturing output, and making a significant contribution to employment and our positive balance of trade, it is easily the single most important industry in the economy. It is important, therefore, for the well-being of the whole country that the industry is given every opportunity and encouragement to achieve increased growth and employment.

The food industry is experiencing major changes both at national and international levels. It is steeling itself to face the many challenges being presented by the reform of the Common Agricultural Policy, GATT, the environment, the safety of food and the advent of the Single Market. Food producers and processors in Ireland and elsewhere are having to answer key questions on what, when and how food should be produced in the future. One thing is abundantly clear, the food industry cannot continue as heretofore producing commodity goods for which there are no markets with an over-reliance on intervention. The future lies in the marketplace. The industry must develop an effective market driven policy, which is fully conscious and sensitive to the demands of the consumer.

It is consumers who are setting the future agenda for the food industry. They are becoming more sophisticated in their tastes and preferences and are becoming increasingly interested in how their food is produced. They are more aware of the environmental impact of food production at all levels of the food chain and are placing greater emphasis on quality and hygiene. If Irish food companies are to survive in the marketplace, they must learn to satisfy these demands. It is interesting to note, however, that the Culliton report sees this increased level of consumer awareness as an opportunity for Irish food producers to promote Ireland's unique position as a producer of high quality, environmentally friendly and safe food, while at the same time placing some constraints on those countries more involved in intensive production.

The Irish food industry must prepare itself to take full advantage of this opportunity. We must adopt a truly European focus which is market driven, which may well entail alliances such as joint ventures and partnerships which can lengthen the reach of small companies and shorten their learning curve. We must invest much more financial and human resources in marketing and research and development. Less than 1 per cent of net output in the case of the food, drink and tobacco sector is currently invested in this area. This is totally inadequate.

There is an extensive range of European Community schemes and programmes promoting R & D which would have interest for the Irish food industry. Programmes such as Flair and Eclair, which are normally 50 per cent funded by the European Community, provide ideal opportunities for Irish companies to become directly involved in R & D projects which would otherwise prove too costly. Sadly, participation by Irish food companies in such programmes, however, has been disappointing in the past but I would hope that this will be rectified in the future.

Government policy over the last number of years has focused on developing market-led, internationally competitive food companies. Our approach and that of the grant-giving State agencies has been to support those companies who fit or have the potential to fit this mould. The Government will be continuing with this policy in an effort to move away from bulk production of intervention products. Ultimately, however, success lies in the hands of the industry itself. It must listen and respond positively to the needs of the consumer if it is to achieve its full potential.

I can hardly speak on agriculture without referring to Common Agricultural Policy reform. I spoke in this House at some length on this subject just two weeks ago so I do not propose to dwell overlong on it at this stage. However, we cannot ignore the fact that the reforms agreed will influence the production decisions of farmers for the foreseeable future. The reform will also influence the management decisions of our agribusinesses.

Under the new arrangements, direct payments, headage and premia, to Irish farmers will be in the order of £650 million in the first full year after reform. I am sure in these circumstances that Deputies and farmers generally will welcome the user-friendly approach to those schemes which I announced last week. I have made arrangements to have a copy deposited in the pigeonholes for each Deputy and Senator.

While the original Commission proposals could have involved net losses of some £94 million, the Department's initial quantification of the reform package is that there will be a net gain in the order of £70 million for farmers compared with the 1991 situation. There will also be a substantial consumer gain, estimated by independent economists, at £100 million per annum. I have already had a meeting with my colleague, the Minister of State at the Department of Industry and Commerce, Deputy O'Rourke, to set in train a mechanism that will try to ensure that the gains will be reflected in the shopping baskets of her consumers.

These estimates do not of course take account of productivity gains or changes in production systems which farmers will make in response to the new situation. Neither do they take account of the new incentive for the beef sector to become more market oriented. The foundation has now been laid for the future. It is now up to our farmers and agriculture based industry to take up the challenge and gain access to markets both inside and outside the Community.

I should also like to refer to the durability of the compensatory arrangements. While practically all sides agree that the compensatory arrangements are more than adequate, some concern has been expressed as to whether such supports can be maintained in the future. This concern relates mainly to what might arise from the GATT negotiations. In an ideal situation, it would have been better if the two sets of negotiations had been finalised in tandem. However, the GATT negotiations became somewhat bogged down and when it was clear that there would not be an early agreement, the Community had to decide if it should proceed with Common Agricultural Policy reform independently. It was decided to press ahead with Common Agricultural Policy reform and I fully supported that decision.

It appears to me now that the completion of the reform negotiations has given the Community an advantage in the Uruguay Round negotiations. We have made clear to the other 90 or so countries involved in those negotiations that we are prepared to put our house in order. It is now up to them to do likewise.

Another point to bear in mind is that had the GATT negotiations finished ahead of the reform of the Common Agricultural Policy the results would have had to be taken into account in the Common Agricultural Policy reform negotiations. Now the situation is reversed. The results of Common Agricultural Policy reform cannot be ignored by any side in the GATT negotiations. We have firm assurances from the Com- missioner that the necessary budgetary resources will be provided and that he will defend the compensatory payments in the GATT context. In any event, I cannot see any of my colleagues in the Council allowing that agreement to be unravelled in the context of the GATT negotiations. I certainly will not stand for any such occurrence.

One other issue I would like to mention is the criticism of so-called "cheque in the post" farming. By lowering support prices for the major products, Common Agricultural Policy reform has made Community produce more competitive on world markets and more accessible to consumers within the Community. However, there is no point in trying to make farm produce more competitive if at the same time you drive farmers out of business. Compensation for the decreased prices is necessary and has been provided. The added value of direct payments to farmers is that the money goes directly to them and does not get caught up in or grabbed by intermediate services or middle-men.

It has to be remembered that one of the aims of Common Agricultural Policy reform is to keep a sufficient number of farmers on the land. I fully subscribe to this aim. Many of our farmers are operating at subsistence level or below in terms of income from their farms. They make ends meet by their off-farm activities but sadly there is not enough alternative full-time employment available in rural areas. I hope the recently announced Teagasc small farm development programme, which is available free of charge, will be of considerable benefit to this sector. The direct payment system will, at least, provide such farmers with some guaranteed income. Of course, if Common Agricultural Policy reform had not taken the direction of substituting, to an extent, direct payment for market price supports, budgetary pressures within the Community would have led to increasing levels of price reduction without compensation. This would in the short term have had a devastating effect on our rural communities.

In further recognition of the role of farmers as protectors of the environment, the Common Agricultural Policy reform measures recently approved include a substantial agri-environment programme. This is designed to compensate farmers who are prepared to adopt farming practices which are particularly environmentally friendly. When the details are finalised at EC level, this programme should enable us to implement a more comprehensive agri-environment scheme than our present rather limited environmentally sensitive areas scheme.

The accompanying measures also include a scheme for early retirement for farmers which I expect to be of some benefit here in Ireland, though here again the detailed application measures will take some time to finalise. We will be having detailed discussions with the European Commission when we are drawing up specific national programmes for these two measures. In these discussions we will, of course, be highlighting matters of concern to this country so as to ensure that we can, in practice, gain maximum benefit from the schemes.

Turning now to the individual sectors of agriculture, I am glad to note that in recent weeks cattle prices have firmed up. This increase in prices, which is so vital to the viability of the winter fattener, was influenced by the successful approaches to the European Commission to buy more realistic quantities into intervention.

The broad thrust of the Commission's reform measures in the beef sector is to get EC supports directly to the producer and reduce reliance on Community intervention. While the Community's commitment to underpinning producer income remains, it is very clear that our Community partners will not allow a situation to continue indefinitely whereby intervention remains the major outlet for our beef. In future, the Irish beef sector will be expected to make greater use of commercial outlets.

In the Common Agricultural Policy reform negotiations I vigorously resisted proposals which did not entail reasonable access to intervention as a means of supporting the market. Given the extreme difficulties which have confronted the beef sector over the past two and a half years, arising largely from the impact of BSE and the Gulf War, it is vital that intervention remains as a basic means of market support. Nevertheless, the intervention system is now to change as a result of the Common Agricultural Policy reform, and operators will have to make greater efforts at commercial marketing than they have done up to now.

I am heartened by the decision of two of the country's major co-operatives — Avonmore and Dairygold — to enter the beef sector. The Irish beef sector, by virtue of its reliance on intervention, has been somewhat weak on promotion and marketing. The arrival of these new entrants should provide the industry with much improved access to supermarket outlets in the United Kingdom and in continental Europe. The agricultural coops have demonstrated that they are international in outlook and that they have the expertise and the commitment needed to compete very well with the major international food companies. The fact that they are not single product companies — they have an involvement in both the dairy and meat processing sectors — is a decided advantage since their wide range of products will appeal to European retailers.

The target of beef producers and processors must be to concentrate Irish marketing efforts not only on the UK but also on opportunities in continental EC markets. Irish vacpac beef exports within the EC have been growing steadily. Our beef exports to quality continental outlets are receiving renewed stimulus from the launching of the CBF beef quality assurance scheme.

Even with a successful reorientation of exports towards EC outlets, the pattern of a heavy end year kill means that we will still require access to third country markets. These markets are — Deputies will appreciate — more volatile than those within the Community. They are buffeted by political as well as economic factors, particularly so in the last two years. For 1992, prospects are brighter as the work put into convincing third countries of the wholesomeness of Irish beef bears fruit.

By retaining last year's significant increase in the grant-in-aid for CBF at £1.5 million, the Government are displaying their confidence in the contribution CBF makes to Ireland's effort to become more market-led, particularly in the beef sector. Industry is playing its part by maintaining a voluntary contribution while producers, through levies, will continue to provide a major part of CBF finances. The new board of CBF have a wide range of expertise in the beef sector and in marketing quality Irish agricultural products abroad. They have a challenging task ahead. Ireland's reputation as a quality food producer is only as good as the last sale. A reputation cannot be bought. It can only be earned day by day in the market-place.

Major developments have taken place in the sheep sector over the past seven years. There has been a rapid increase in the national flock from 4.4 million in 1985 to a current record level of 9 million head. Access to the French market has resulted in a profitable return to both producers and the industry as a whole. Slaughterings for both the home and export markets came to 4.2 million head in 1991, reflecting an increase of 9 per cent on the previous year's level.

In the Common Agricultural Policy reform negotiations on the sheep sector, I succeeded in maintaining existing limits of 500 and 1,000 ewes in normal and disadvantaged areas, respectively, for the purpose of payment of the premium. Payment of 50 per cent of the premium above those levels will continue, though within the individual producer limits.

The abolition of the variable premium and the abolition of the clawback on sheepmeat exports from Britain in 1992 will result in greater competition on the French market. Clearly, the future development of the industry as a result of this and the Common Agricultural Policy reform will depend on a greater emphasis on the quality of produce and market returns than heretofore. The sheep market, always liable to fluctuations, has been going through a low price period in recent months, a period when we could be thankful for the existence of the EC premium to compensate producers. I am glad to note a very recent up-turn in lamb prices.

As for the pig sector, I am happy to report that the major development plan for the pigmeat industry, announced in 1987, is nearing completion and is proving successful. All of the new slaughtering and processing plants envisaged under the programme are now operational, as are a number of downstream processing plants. Some further processing plants are either in the course of construction or at an advanced planning stage. Investment of over £90 million, which includes substantial Exchequer and EC aid, has already been approved.

The success of the programme to date can be measured in the increasing levels of Irish pigmeat exports which in 1991 were worth over £130 million — the highest export level ever. The programme has also helped to stimulate expansion in pig numbers which now stand at 1.16 million pigs. Pig throughput has also increased very substantially, and in 1991, reached about 2.7 million pigs and it is expected that the target of three million pigs a year envisaged under the programme will soon be reached and even exceeded. As regards pig prices, these are now at a reasonably good level, having risen steadily since last autumn and the prospects for the industry in the second half of the year are positive.

Turning to the cereals sector, it has been clear for some years now that the large increase in Community cereals production and in intervention stocks could not continue.

An Leas-Cheann Comhairle

I interrupt to advise the House that the Minister has exceeded his time. I appreciate the importance of what the Minister has to say and I would just like the House to agree that the excess time be deducted from the other Government speakers before he concludes. I appreciate that Deputy Ferris is anxious to make his contribution by 5 o'clock and I am assuming that the Minister will conclude by 4.20 p.m. Is that proposal agreed? Agreed.

Mr. Walsh

In the absence of other Government speakers, I will take responsibility for docking the time when the time comes. I will endeavour to allow my colleague, Deputy Ferris, to get in before 5 o'clock.

The Common Agricultural Policy reform outcome represents a very striking improvement on what the Commission had originally proposed. In particular, the price cut of 29 per cent is less severe than the 35 per cent originally proposed, while the compensation arrangements have been substantially improved for both the price reduction and for set-aside. While the setting of the threshold price — the minimum import price — at £40 a tonne above the target price will ensure that our production control measures are not undermined by increased imports of cereals. In addition, the discontinuation of all co-responsibility levies, with effect from the end of this month, will benefit cereal producers to the tune of about £16 million this year.

A further benefit will accrue to producers under the new regime as compared to the present system. At present, if the Community maximum guaranteed quantity is exceeded, all member states are penalised. Under the new regime, the Community will be divided into regional base areas and that is important for Ireland, as Ireland is considered as one region under the new arrangements.

I would like now to turn to a number of specific subheads. Under subhead B the Government are committed to ensuring that Teagasc have the necessary resources to enable them to continue to provide an effective and integrated service to the agriculture and food sectors. This commitment was demonstrated most recently in the 1992 budget when a special allocation of £1 million was provided for a small farmers' advisory programme.

ERAD, under subhead C.2, are allocated a budget of £42.75 million. This is a slight increase in the out-turn for 1991 and is indicative of the ongoing commitment to the TB and brucellosis eradication programmes. The TB eradication scheme has had a long history. This four-year term concluded in April this year. In accordance with the undertaking under the Programme for Economic and Social Progress, I initiated discussions with farming and veterinary organisations to review progress under ERAD and devise an agreed consensus on the bovine TB programme for the next four years. In the course of these discussions which have been extremely comprehensive, the thrust of the programme has largely been agreed with the exception of a small number of issues.

However, the most important development is that the EC Commission has indicated a willingness to provide substantial support for the programme of the order of £20 million per year or £60 million over three years. It is stipulating certain conditions which it considers important for the efficiency of the programme. These conditions will cause a certain amount of disruption but I think the central issue should not be forgotten. We need a strong stable programme for TB eradication, the Community is willing to put significant financial resources behind such a programme and the cost for farmers and taxpayers can be reduced. We cannot afford to dither over such an offer and I think the time has come for the interests involved to come to a final decision.

As Deputies will see, the 1992 allocation for the beef tribunal is £1 million. Expenditure this year is obviously in excess of that amount. The final cost of the tribunal will obviously depend on the length of time required to complete its work. This, Deputies will appreciate, is a matter which can be determined only by the tribunal itself. It will be necessary for me to come forward with a Supplementary Estimate later in the year to deal with that subhead in particular.

In so far as management and control in the beef sector are concerned — and there is concern about this — I can say that, following this year's budget in which £1 million was allocated for the upgrading of intervention control of activities in the beef sector, significant progress has been made in recent months. Within the intervention unit of my Department, a new beef field operations division has been established under the direct control of a senior superintending veterinary inspector. Full control for the operations at plant level of intervention activities in the beef sector will reside within this division and it will be staffed by veterinary inspectors and senior agricultural officers working from head office. In addition, some 20 agricultural officers will be in place in meat plants throughout the country in time for expected intervention intake in September. Increased training activities for officers, better communication facilities with head office and new contractual relations with beef producers will be in place very shortly.

I shall be continuing to upgrade controls in the beef sector but would stress the primary obligation for ensuring conformity with the relevant regulations and contracts rests with the processor and the deboning contractors. I intend reviewing the existing deboning contract to ensure that any ambiguities which may exist at the moment are eliminated, so that both sides to the deboning contract will be clear as to their respective rights, duties and obligations.

In the past 30 minutes I have endeavoured to give Deputies a brief account of the current situation in the agriculture and food sector. I have explained also the uses to which money voted to my Department will be put. There are many such uses, but they all have one central aim. That aim is to give maximum help to farmers and the food industry to adapt successfully to a rapidly changing European Community in a rapidly changing world. Adaptation is feasible; the plentiful evidence of growing expertise and initiative in farming and food processing is evidence of that, and gives me confidence also that we can create in this country a farm and food sector to match any in the world.

I commend this Estimate to the House.

Mr. Deasy

It is obvious from the Minister's own admission that this Estimate is not a true Estimate. The item for the cost of the beef tribunal alone is seriously wrong. The figure mentioned in the Estimate is £1 million, yet in recent days we have been told that the cost to date could be as high as £40 million. It is difficult to estimate the overall cost of the tribunal because it appears to be only about halfway through. The major players in the inquiry, that is the politicians who were in office and were responsible for the payment of export refunds have yet to appear before the tribunal. The Estimate is incorrect. I should have expected that a figure bearing some relation to the facts would be put in. It is not sufficient to write in an estimate of £1 million when the cost will be at least £40 million and perhaps £60 million or £70 million. The House is entitled to be informed in this matter. The House is discussing the Agriculture and Food Estimate but we do not even have an estimate — we have just a token figure. When the overall figure will be approximately £40 million to £60 million it is not good enough to present such an inadequate figure.

There was considerable speculation that the outcome of the Common Agricultural Policy talks would be beneficial for Ireland. That was two weeks ago. The Fine Gael Party reserved judgment and said that we would have to wait and see what happened. I made the point that the whole strategy adopted by the Government and the Minister was high risk. Lo and behold, in the past two days it has transpired that the strategy is indeed high risk and that the figures put before us here two weeks ago may not be the figures that will emerge. There have been developments even in the past 24 hours that are quite frightening. It is found that the President of the Commission, Mr. Delors, is having to fight a rearguard action in his effort to justify what was agreed in the talks on the reform of the Common Agricultural Policy. The British Chancellor of the Exchequer, for instance, feels that the amount of money being granted under the reform proposals is not acceptable. He is thereby in direct conflict not only with his own two Commissioners but also with his Minister for Agriculture. It is obvious that the countries who are net contributors to the Community budget believe that the EC cannot afford the compensatory measures. That is an area from which we did not expect an attack. In recent times we have really been dependent on Mr. Delors in many respects. One issue, of course, is the £6 billion hoped for if the Maastricht Treaty is ratified by the 11 member states. The other issue is the ratification of the Common Agricultural Policy agreement by the Finance Ministers of the Community. Recent indications are that the agreement may not be ratified. We have to consider that we may have to revise our figures and our estimates downwards.

Much more serious is the threat that I have mentioned in the House repeatedly in the past 12 to 18 months, the ongoing GATT negotiations. The Minister referred to those negotiations at some length in his statement. The GATT negotiations were always highly dangerous from Ireland's point of view. I notice that in the Minister's statement today he is now casting some doubt over the validity of the compensatory payments that we were told so much about in recent weeks. The Minister talks about the durability of the compensatory arrangements. In the past 24 hours we have experienced the Americans digging in their heels. The Americans say that they will not accept the compensatory payments, subsidies or direct payments — whatever we might wish to call them — and that if the EC does not reduce them the Americans will embark on a trade war involving agricultural commodities. If that trade war transpired it could blow the kernel of the Common Agricultural Policy reform proposals to smithereens. If the compensatory payments are taken out of the Common Agricultural Policy agreement there is nothing in the agreement for Ireland other than huge losses, because of the removal of support systems such as intervention and market export refunds. The deal was that farmers would receive compensation to make up for the loss of market support mechanisms.

What may well happen, what is tending to happen and what the Americans are demanding will happen is that the compensatory payments will be eliminated or, if not eliminated, considerably reduced. Ireland stands to get the worst of both worlds. If that happens the Common Agricultural Policy reform negotiations will have been a disaster. By the Minister's own admission today we can have very little confidence in the outcome of those discussions. Two weeks ago it seemed that the outcome would be reasonably okay, although, as I did say, they were high-risk proposals. The proposals have now become a much higher risk.

The GATT negotiations have two highly dangerous aspects, one is the resistance to compensatory payments, about which I have just spoken, not just by the Americans — they are the only people who have spoken so far — but we can be sure that the Australians, New Zealanders, Canadians and South Americans will all adopt the same attitude because they resent our system of supports within the EC. They will support the Americans and, indeed, 50 or 60 other third countries could also support the Americans. It may well be that the European Community will not be able to maintain its present position. The Minister's statement in relation to compensatory measures is frightening.

When I say that the EC may not be able to sustain its present position I am talking about the onslaught resulting from the American election in November. From now until then the Americans will demand that compensatory measures will be either toned down or totally removed and they will have a great deal of support. If the GATT negotiations are concluded before November we will be in deep trouble; even if they are not concluded we could still be in very serious trouble because the incoming president — whether it is President Bush or, perhaps, Ross Perot — will see fit to maintain that line. That is the danger and there is also a danger within the Community.

Commissioner Andriessen, Commissioner for Competition, will be negotiating on behalf of the EC; those of us who know him realise that he does not have any sympathy for subsidies, grants or compensatory payments. He comes from a country where farmers and agri-business are self-sufficient. He is a Dutch man and, like the Danes, the Dutch are so highly organised in the agricultural sphere that they can get by without compensatory payments. He is the chief negotiator of the European Community and we will not get much sympathy from him. We have already had this onslaught by the United States, other countries have yet to wade in and the Commissioner's sympathies will certainly not be with us in this regard. Indeed, I suspect that a number of other Commissioners have very similar views to those of Commissioner Andriessen.

The second element which worries me in the GATT negotiations is the demand by third countries such as New Zealand, Australia, Canada and South America for access for Community markets. They will fight tooth and nail to get into those markets and, if they succeed to any significant extent over and above what they have at present, it will be a very serious problem for us. Most of these countries can produce beef and grain at half the price of ours because of the size of their farms and their climate. New Zealand can produce milk at one third the price at which we produce it. If there is increased access — and I suspect that there will — by these and other third countries we will have an additional and significant problem.

We certainly cannot afford a trade war, which was threatened today, because of the decisions taken under the recent reform of the Common Agricultural Policy. The Americans have already drawn up a hit list — as it has been referred to in the media — which would mean that Irish liqueurs, in particular Baileys, by far the biggest seller, which makes something like £100 million per annum for this country would be banned in the US. Casein also has a earning capacity for Ireland in the United States of £125 million per year. We also export soft cheeses to the United States, it is a fast growing industry and it is very hard to put a figure on it but it would probably be in the region of £60 or £70 million per annum. We simply cannot afford a trade war. As individuals we cannot retaliate although the Community might be able to retaliate slightly by banning cereal substitutes.

Many countries in the Community are very vulnerable to reprisals in a trade war. What would the French do if their wine was not accepted by the United States? What would the Danes do if their bacon was not accepted? What would the Dutch do if their cheeses were not accepted? What would the Italians do if their spaghetti or pizzas were not accepted? They would all be in trouble.

The Americans have a very strong hand so, far from describing the outcome of the Common Agricultural Policy negotiations as superb or a magnificent victory for Ireland, my attitude all along has been to wait and see the outcome of the GATT negotiations because they will supersede anything decided in the Common Agricultural Policy reform talks. There is a very serious risk that we could lose heavily both ways because the Community has reduced our support mechanisms and compensatory payments may not be forthcoming. It would be a disastrous outcome for us if we had the worst of both worlds. It is frightening because at present, as we all know, we depend on market supports to get rid of something like 60 per cent of our main commodities, beef and milk, in storage or intervention. If that support goes and if we find if difficult to sell because of increasing competition from abroad — when I say "abroad" I mean outside the Community — we will be in a very dangerous situation. I do not think that people here realise that 60 per cent of our product is in intervention; they do not realise that we fail to sell 60 per cent of what we produce. Our track record indicates that we will not be able to sell it in the future unless we buck up considerably. It is a tremendous challenge but our performance to date indicates that we are not good at marketing. If we cannot sell we will obviously have a real problem on our hands.

The chairman of the GATT negotiations, Mr. Dunkel, is not sympathetic to compensatory payments. He supports the Americans and holds the view that such payments constitute unfair competition. We should never have agreed to a reduction in the price support mechanisms until the GATT negotiations had been concluded. At least they should have been decided in tandem because we are now exposed to the worst of both worlds.

The Minister, and his predecessors, have spopken optimistically for the last two or three years about improved prospects for selling our beef and cattle to North Africa and the Middle East. What happened? Nothing. I do not think people are being very honest in this regard. I was recently informed by a reliable source that the Iranian trade will not be as easy to regain as we had been led to believe.

Even with export refunds we are still finding it hard to sell beef to Iran at a competitive price. The Australians can sell unsubsidised beef at a more competitive price than we can even with subsidies from the European Community. That is frightening. I learned this in recent times from contacts within the trade.

The reason we have not been able to find markets for our beef in the Middle East and North Africa is not the mad cow disease, the Gulf War or any scare that may have been given in recent years but rather that our prices are not competitive enough even with the aid of export refunds. I would like to see people make the position clear and, if what I am saying is true, they should verify it and, if it is not true, contradict me.

While I have great confidence in CBF personnel — I welcome the fact that additional moneys are to be made available for that body — I still think they do not have the capacity to sell all our beef. More money needs to be provided for our marketing effort. We can support it in other ways as well. At Foreign Affairs Question Time last week I mentioned one specific example, I have seen the New Zealanders in operation at first hand and when I say New Zealanders I mean the New Zealand diplomatic corps. They are not career diplomats; rather they are appointed to the diplomatic service and their primary function is to promote their goods overseas, in particular their agricultural produce, be it butter or lamb. On the other hand, our diplomatic service is just that, a diplomatic service. I wonder if we can afford to continue in this vein.

We need people in high places who can make contacts, lobby and do much good for the country. This may not go down well with those in Iveagh House but I am not too concerned about them or about the people in Agriculture House for that matter. We never worry about the people in Iveagh House because they do not have any confidence in their ability when it comes to doing something good for this country.

An Leas-Cheann Comhairle

Tá an t-am istigh. Deputy Ferris is anxious to contribute.

Mr. Deasy

The last thing I want to do is to prevent Deputy Ferris from mounting a major "yes" campaign in Clonmel and Carrick-on-Suir tomorrow. We all want to get back to our constituencies to ensure that the vote is won. It is not just in the best interests of the country that the vote be carried next Thursday it is also in the best interests of agriculture. I will gladly give Deputy Ferris the opportunity to get back to the hustings.

Mr. Ferris

In the short time remaining to me I will try to conclude my contribution but, if necessary, I will come back tomorrow. Before speaking on the Agriculture Estimate before the House today I would like to take this opportunity to make a few points relating to Common Agricultural Policy reform. The Minister touched on this matter in what was a wide ranging speech. Despite all the criticism the Common Agricultural Policy reform package has been positively received by most of the interested farming organisations. The Government must now deliver on all the promises that have been made. In particular, they must deliver on the promise to put cheques in the post and to publish user friendly documentation. Our aim should be to pay people grants to compensate them for the drop in the price of the product.

The future of agriculture lies in our own hands. We must plan for the future now taking full and proper account of the changes that are being made. For example, the Culliton review group in their report have already called for the publication of a national food plan and this must be seen as the first priority of the Government. For years we have been calling for the publication of a proper plan for the development of the food industry which would include all the relevant interests. The essential ingredients of such a plan would include processing, efficiency of production, pricing of product, quality, diversification, green agriculture, downstream industry, rural development and value added products.

I have no doubt that the European Community will continue to help us in developing a more rounded approach to our main industry if we are serious. In other words, this is not the time to criticise or abuse one another or to pat one another on the back — that would be a waste of time — because we cannot say what the outcome of the GATT negotiations will be. It is essential, therefore, that we unite to make sure that it is to our satisfaction. The outcome of the Common Agricultural Policy negotiations should form the basis of ensuring that the GATT negotiations are successful.

In relation to the by-products of the milk industry about which we are all concerned, producers of Irish cream liqueurs and other products should not be intimidated and should have confidence in the future despite the fact that the Americans are waving the big stick. I am particularly interested in the Avonmore by-product, Miloko, which is produced in my own constituency and which has been the subject of disparaging remarks on the part of the Americans in relation to the efforts being made to have it sold on the American market. The future of Irish agriculture starts now and all the essential interests must be prepared to work together.

In relation to Common Agricultural Policy reform, various mechanisms have been reformed to allow us achieve our aims. In examining this matter we should recall what happened in the past with regard to the mechanisms that were then in place and which have been defended by some speakers. For example, during the past 20 years thousands of people who were engaged in agriculture have left the land. As against this the owners of intervention companies, the suppliers of deep freeze outfits, the owners of shipping companies and storage companies became millionaires. On the other hand, there were very few millionaires on the land apart from those who had large quotas.

We are still waiting for Commissioner MacSharry to deal with the other aspect of his brief, rural development. The Minister of State at the Department of Agriculture and Food, Deputy Hyland, has special responsibility for this area. We have already touched on its importance but having regard to the fact that thousands of farmers are being forced to leave the land it is essential that the Government emphasise the importance to the European Commission of a comprehensive rural development programme for rural Ireland. We await the Commissioner's proposals in this regard. He should receive our support in his fight to have such a programme introduced.

The Labour Party remain committed to the principle of European union and are more than aware of the importance of the Common Agricultural Policy reform package in developing a proper food industry. As I said already, we are anxious that the European Commission introduce a rural development programme to assist rural societies.

The Agriculture Estimate before the House today illustrates the Government's determination at times to under-resource essential agri-services. These are imperative if we are to develop a viable indigenous agri-business. According to Government figures, some 5,000 farmers leave the land each year. In the present economic climate the only options available to them are to either emigrate or join the dole queue. Therefore, there has never been a greater need than there is now for Government investment in research and development in the agricultural sector.

In the Estimate before the House today we note that the Government have reduced their funding on research. In the case of Teagasc, in particular, the Government having been scaling down their actions, functions and role, leaving the agency with no choice but to severely rationalise their services, forcing them to sell part of their property and offices nationwide.

As I have already said, some 5,000 farmers leave the land annually resulting from uneconomic holdings. There is a very great need for an independent research agency to advise small farmers. I am pleased to note that henceforth Teagasc will provide this service to small farmers. This is an essential part of their function. However, with the new management of Teagasc, bearing in mind cutbacks and rationalisation of their services, they could now be described as a self-funding consultancy agency rather than a national advisory service. Their advisers now operate on what is described as a commission basis, so that only farmers with a reasonable income can afford to avail of their services. I am pleased to note that some account is being taken of small farmers' needs. The Government are being particularly shortsighted in restricting funding to Teagasc even if it would appear there has been a slight increase overall in their budget. Now is the appropriate time for Government investment in research and development into alternative methods of farming with no further cutbacks.

At times the Government have continued to delay approval of the re-classification of designated and disadvantaged areas. Under the Structural Funds allocation areas classified as disadvantaged will be entitled to financial assistance. The Government, in delaying approval, have not honoured their commitment to reclassify existing disadvantaged areas and have excluded some that should have been included in the past. It is essential that all regions of the country in need of re-classification in one form or another must be effected without further delay in order to finance activities in such difficult areas.

In this revised Estimate I notice that the Government are prepared to allocate a meagre £69,000 to research and testing under the disease eradication programme. That paltry sum must be reviewed in the light of the fact that 36,832 reactors to bovine TB and 3,482 reactors to brucellosis were identified and removed last year. Those cases resulted in the locking up of many of our 172,000 herds nationwide. It is time we acknowledged that the present method of testing and research is totally inadequate to deal with the nature and scale of our bovine TB problems. What are described as the realistic expectations of the ERAD scheme have led to two main conclusions being published by the board. Their report states that largely because of a significant wildlife reservoir of bovine TB — which cannot be addressed effectively without a vaccine of TB in badgers and/or cattle, together with the absence of a laboratory-based diagnostic test for bovine TB, along with a computerised movement permit system — bovine TB cannot be eradicated in Ireland in the short to medium term. This is the opinion of the board of ERAD, a very serious assertion on the part of any Government body. Their report also states that mainly because of a range of socio-economic limitations associated with the testing arrangements, cattle movement, commitment and manpower resources, as well as the control of badgers, under this programme Ireland's persistently high bovine TB levels cannot be reduced significantly within a reasonable period of time.

Based on those conclusions it would appear that the present intensive ERAD programme should be replaced by a "least-cost, least-hardship" control programme in the short to medium term, which could be undertaken in a cost-effective manner by way of a bovine TB licensing scheme. ERAD propose that a number of the current disease eradiction measures be discontinued, which should result in savings. In addition, they propose that disease levies be reduced to the level considered necessary by those concerned to provide an adequate compensation system jointly funded by farmers and the State. Ultimately it is recommended that the current disease levy/compensation system be replaced by an insurance scheme.

Since ERAD were established, close on £200 million has been spent on bovine TB eradication. The exhaustive programmes implemented in the past three years had to be undertaken. It must be underlined that contrary to the widely held view that led to the establishment of ERAD, exhaustive testing, even when combined with a wide range of new, improved disease eradication measures, is unlikely to solve Ireland's persistent bovine TB problem. More importantly, the programmes implemented over the past three years, for the first time clearly identified and quantified the obstacles to progress and ultimate eradication. It is true that in practical terms we are not significantly nearer to halving the prevailing bovine TB levels which was the traget set by ERAD in 1988. Moreover, expenditure of an additional £200 million or more over the next three years is unlikely to lead to the progress expected. If the programme continues to be operated as at present it could be a complete failure. I should like to see more funds available for epidemiology and all the other necessary research in order to ascertain why and how these diseases are transmitted from animal to animal. Otherwise every farmer nationwide will be bankrupt through endeavouring to achieve levels of TB eradication within our system. Of course, there have been technological advances with regard to blood testing, vaccines and computerised movement systems which should be of help.

It is crystal clear from this revised Estimate that the Government have no intention of introducing anything like such a comprehensive system. The Government reacted very swiftly to the cucumber scare the week before last. The Department of Health have begun a testing programme on Irish-grown cucumbers. In the meantime, Irish producers, who were not responsible for the scare, are unable to sell their produce in the marketplace. I should like to see a quick conclusion to that investigation and publication of the results so that we may know what did happen in this instance.

Then there is the matter of the inadequacy of the funding of the Tribunal of Inquiry into the Beef Processing Industry. There has been a reduction in the subhead which otherwise would have ensured that departmental officers were of sufficient number, paid sufficiently by way of overtime and so on, to be on the spot in all our factories nationwide. This would have ensured that what happened in the past will not recur, so that we could never again have to initiate such a tribunal, which is costing between £40 million and £60 million. We should have learned the major lesson of being unable properly to control and patrol the beef industry in the past. I welcome into that industry people from the co-operative movement who have a track record in the food industry second to none, particularly under the milk regime they had been operating.

I should like to have had more time to have dealt with the greyhound racing industry where there has been increased Government input. Possibly we should examine the possibility of eliminating taxation from the fees paid on stud dogs, as we did in the case of the bloodstock industry.

We should also better utilise the food aid programme to fulfil our commitment to the Third World since we are such a rich country in food production. Any other additional costs imposed on agricultural people by Coillte Teoranta or others, in the fencing off of lands, or in respect of grazing rights must be addressed by the Minister and his junior Ministers. This will have to be done if the provisions under this Estimate are to have any relevance whatsoever in agriculture. A considerable amount of taxpayers' money is involved and we now know that it will not be sufficient to cover all eventualities.

I see that the Leas-Cheann Comhairle is looking at me pleadingly to conclude. Even though I am three minutes short of my allotted time I will hand over to my colleague, Deputy Bradford, who will resume the debate tomorrow morning.

Debate adjourned.