The minutes of the meeting on 2 November 2005 have been circulated. Are they agreed? Agreed.
Business of Joint Committee.
WTO Negotiations: Presentation.
I welcome Mr. Tony Burke, assistant secretary, and Mr. Damien Flynn, assistant principal officer, from the Department of Agriculture and Food. Before asking Mr. Burke to commence his presentation, I draw the attention of the witnesses to the fact that while members of the committee have absolute privilege the same privilege does not extend to them. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable.
Mr. Tony Burke
I thank the Chairman for this opportunity to come again before the committee. Major developments are taking place at the WTO negotiations. I will quickly sketch the background to these and outline the Irish position. I will also give some idea of the prospects for the ministerial conference in Hong Kong next month.
There have been intensive negotiations since September in preparation for the ministerial conference in Hong Kong, at which we still hope to achieve agreement on a new round. These negotiations were launched in the Doha development round. In so far as agriculture is concerned, the three main elements are: to achieve a substantial reduction in domestic support; to phase out all forms of export subsidy; and to make significant improvements in market access. These are major developments and will have a serious impact on the Common Agricultural Policy, CAP, and potentially on Irish agriculture. Development is a major focus of the negotiations to integrate developing countries into the world economy and help them address poverty and the problems of disadvantage.
Today, however, I will concentrate on the agriculture aspect of the negotiations. The Commission negotiates on the basis of a mandate agreed by the Council of Ministers. This is based on the CAP, as it stands, following reform in Agenda 2000 and the mid-term review. The Commission sets out to defend the current position. Nevertheless, the Minister has been concerned for several months that the Commission has been taking a conciliatory and concessionary approach to the negotiations. The European Union seems to give more than it gets in the negotiations and has quite often been on the defensive, whereas in our view it has much on which to take the offensive following CAP reform.
Several Ministers at EU level are concerned that the Commission is taking this concessionary approach. Last month, 14 Ministers signed a memorandum to the Commission, urging it to be more defensive regarding EU interests and more offensive towards problems that others need to address.
The Foreign Affairs Council held a special meeting last month at which the concern of several Ministers was raised. The Council concluded that the mandate remains unchanged and that the EU's negotiating position should be based on CAP reform. The Minister raised this matter at the Council in recent months and met Pascal Lamy, the director of the World Trade Organisation, in Geneva to outline our concerns.
There are 148 members in the World Trade Organisation, which reaches decisions by consensus — an extremely difficult process. The negotiations proceed in smaller groups.
One occasionally sees references to the group of four, which comprises the EU, the US, India and Brazil. There is also another group called the five interested parties, FIPs. There are many ministerials which take place from time to time. Rather than convene a group of 148, the WTO is trying to advance the negotiations in much smaller representative groups.
Despite its efforts and our view that it has been taking a concessionary approach, the EU is under extreme pressure from the negotiating partners, particularly the US and the Cairns group, which comprises major agricultural exporters including Australia, New Zealand and Canada. The group of 20 is mixed and contains countries including Brazil, a major agricultural exporter, and India and China. A group in the background includes a very large number of developing countries acting together in their own interests. With the possible exception of the developing countries, the EU is under intense pressure from all those partners to make further concessions and, essentially, to dismantle the CAP as we know it. Against the background of those negotiations and that pressure, the EU made an offer on 28 October which was an improved version of those made previously.
With regard to the three pillars I outlined, our view on domestic support is that the EU has now gone to the limit of its negotiating position. Domestic support refers to the internal supports the EU can offer to its farmers and to agriculture. I refer here, for example, to intervention, which is becoming a thing of the past. In terms of the other market supports — aids for private storage, production aids and so on — it is our opinion that the Commission has reached the limit of its position.
We are also concerned about direct payments. These are extremely important to Irish farm incomes and may come under threat in the negotiations. The threat so far has not been huge because they are currently categorised under the WTO green box. Payments made under the green box arrangements are, by definition, non-trade distorting. There is no connection between the payments and trade. We argue that direct payments currently paid in a decoupled manner do not have an effect on trade. Under previous WTO agreements, those payments were exempt from reductions. We would like to see that continue but we expect them to come under attack from the negotiating partners before the talks conclude.
The position regarding export subsidies is also fairly clear in that the EU has already offered to phase out such subsidies, which take the form of export refunds. We are prepared to do that on the basis that other forms of export subsidies would also be phased out. The crucial concern for Ireland and the EU and in terms of the WTO negotiations on the whole is market access, which essentially means tariff reductions by WTO members. Great pressure is being exerted by the negotiating partners on the EU to reduce its levels of tariffs in order to open up the EU market to increased imports. We would be concerned that, as tariffs fall, there would be more imports from lower-priced producers. We are already concerned at the extent of what the EU has offered and would be very concerned if there were any further offers.
The one qualifying factor with regard to market access is that it is possible under the new round to have a sensitive product status in respect of various products in which members would have a particular interest. I refer here, for example, to beef and milk products, for which we would seek to claim such status. That would then give a reduced tariff cut. The round will agree a certain level of tariff cuts and by claiming sensitive product status one would have a lower cut in tariffs. In compensation for that, we would have to offer a certain quantity of duty free imports. I will not discuss that matter in depth because the details have not been fixed and are subject to negotiation. In principle, there would be tariff cuts and an option for sensitive product status.
We take some comfort from the fact that the Commission has indicated that its latest offer is very much its last. We hope that will remain the case. There is currently no indication that the Commission is considering another offer. However, the pressures I outlined will intensify in the lead-up to and at the Hong Kong talks and it may well be difficult for the EU to withstand them.
Against that background, I will briefly outline the Irish position on agriculture and that of the Minister because the WTO has a very broad trade agenda. The Irish position is to defend agriculture, the Common Agricultural Policy and the benefits to Irish farmers and rural society in general. The Minister's position is that the outcome should not require CAP reform. The reform of the CAP was undertaken in preparation for these negotiations so that the EU would not be obliged to pay twice by having undertaken reform and by then being forced into further reform. There should be balance in the negotiations between the three pillars — domestic support, export subsidies and market access. For example, we do not want all of the pressure coming on market access.
A key concern for us is that there has been an attempt to sacrifice agriculture, so to speak. The focus of the negotiations so far has been on agriculture and the negotiating partners are refusing to talk about other issues such as services and industrial goods until agriculture is settled. That is tantamount to demanding that the concessions they are looking for in agriculture are offered up before the partners are prepared to talk about anything else. We have been resisting that on the grounds that agriculture should not be sacrificed and are asking why it should be sold out initially, in order to move on to other aspects, if the benefits of the round are so manifest.
Regarding domestic support, we feel the Commission has gone as far as it can in terms of market support. Regarding the green box payments, the Minister will seek to defend those as exempt from cuts. With regard to export subsidies, the EU has undertaken to phase them out but only on condition that other competitors such as the US also phase out their manner of subsidy, which takes the form of export credits. That is a different system but there must be equality of treatment. Regarding market access, we will be hoping to protect the European market from excessive imports. There will be serious reductions in tariffs. We are trying to limit the damage and hopefully gain sensitive product status for the products in which we have an interest.
The negotiations are continuing very intensively with a view to making serious progress in Hong Kong. It now looks as if there will not be full agreement there. The differences between the negotiating partners are so great and there is such a variation between the demands that it is very difficult to see where agreement might be reached. For the moment, the focus is essentially on market access and the EU is on one end of the spectrum. It seems impossible that the differences will be reconciled in Hong Kong. While the meeting will not be held until December, and there may be a breakthrough before then, it appears that further progress and agreement will be reported on some but not all issues. It may be necessary to return to the negotiations in 2006 in order to finalise an agreement.
Can Mr. Burke provide a more detailed outline of what the European Commission put on the table in terms of its latest offer?
Mr. Burke
The EU has offered to cut domestic support by 70% from the levels fixed in the Uruguay round. Generally, the reductions are made with regard to the previous agreement.
What would that mean?
Mr. Burke
It is a massive cut. The Uruguay round levels were in the region of €64 billion, that is, the EU had an entitlement to spend that sum on internal supports, including intervention. The EU offered to cut that figure by 70%. It can do so because of CAP reform, which has virtually abolished interventions. For example, there is no intervention on beef products and declining intervention in respect of milk products. By virtue of undertaking CAP reform, we can make this concession.
Although it has not agreed on an end date, the EU has offered to phase out export subsidies on condition that others will introduce similar reforms, for example, with regard to the export credit system practised in the US. The subsidies practised by state trading enterprises in New Zealand, Australia and Canada are more opaque. The EU is also targeting the food aid practices of the US, which it feels is not of the emergency humanitarian type but is a market-based activity.
A complex formula is applied with regard to market access. Tariffs currently range from zero to 150% on imports. It is now accepted that four bands of tariffs will be introduced. While there is a debate on the precise nature of these, the EU is offering to reduce 35% tariffs, which apply mainly to fruit and vegetables, by 30%, tariffs ranging from 30% to 60% by 45%, tariffs between 60% and 90% by 50% and those above 90%, such as those applied to most beef products, by 60%. These are substantial tariff reductions. Certain goods will receive sensitive product status, which will allow EU or national interests to argue that particularly sensitive products should be subject to a smaller reduction than would otherwise apply within the relevant tariff band. However, the details of this offer have not yet been decided and are not yet sufficient to avoid disappointment among the negotiating partners.
Will Mr. Burke provide examples of the 30% to 60% band and the 60% to 90% band?
Mr. Burke
Most milk products come within the 60% to 90% band. The over 90% band mainly applies to beef. The products in which we have particular interest are within the two top bands. That is the EU offer but the US is demanding that the highest tariff band be set at 60% and that the tariff within it be cut by 90%. In effect, the US is seeking the virtual abolition of tariffs and almost completely free trade in agriculture.
Is Deputy Naughten satisfied?
Yes. It is easier now to understand the ongoing negotiations. I thank Mr. Burke and Mr. Flynn for their presentation and for returning to this committee to describe the progress since our last discussions on this issue. It is critically important that we do not make too many concessions too quickly. Many in Ireland believe that the EU has given too much in these negotiations and that we are bending over backwards in order to facilitate the United States.
Mr. Mandelson's handling of this matter is open to question. He comes from Britain, where a cheap food policy is in place, and it seems he is acting as a Commissioner from the UK rather than as an EU Commissioner. That is disappointing, not only from an Irish perspective but also for developing countries because the world's poorest countries do not want an open market situation but want to be able to receive premium prices for their exports to the EU. If the US, Brazil and others succeed in their proposals, it will have a devastating effect on economies in many parts of the developing world. From that point of view, it is important that we keep to a strong negotiating position. As of 7 November, Mr. Mandelson continued to claim the backing of the Commission for an overall tariff reduction of 46%. Is that the Council's current position? What status does the mandate given by member states have with regard to the Commission and the Commissioner and how can it be enforced? What has the Department done to highlight the fact that the cuts in tariffs will wipe out the special preferential access to European markets allowed to the poorest and most vulnerable countries?
In the previous round of discussions, the former Commissioner for Agriculture, Rural Development and Fisheries, Mr. Fischler, had a prominent role. It seems that, whether through lack of interest or because of a decision taken at Commission level, the current Commissioner, Ms Fischer Boel, has taken a back seat in this round.
What is the Government doing to ensure the Commissioner for Agriculture is very much involved in these negotiations and that we have someone who can monitor what Commissioner Mandelson is doing? We spoke to many farmers last week. Perhaps Mr. Burke could briefly outline why there is such a push towards reduction in agricultural supports and indicate, from a European perspective, from where this pressure is emanating. Many people think these WTO negotiations are purely about agriculture and do not realise that other trade issues are involved. Mr. Burke might elaborate on from where the focus is coming. Does he see the 14 member states that have raised serious concerns with regard to the agenda of Commissioner Mandelson providing a blocking majority to ensure that the proposals, as they stand, will not go through?
I thank Mr. Burke and Mr. Flynn for their update. Most of the major questions have already been posed.
I am interested in discovering why Commissioner Mandelson has more or less gone on a solo run, why he has taken it on himself to virtually challenge the other European countries and why he is pushing his own agenda and acting not, it would appear and as Deputy Naughten noted, as a European Commissioner but as someone specifically representing the UK? There is clearly a separate agenda at play regarding the importance of agriculture in the UK. The witnesses might elaborate on that. They might also comment on the lack of concessions from the United States and how obstinate that country is in terms of expecting all the concessions from Europe and failing to make any significant concessions of its own.
Mr. Burke's description of the tariffs is very interesting and useful, particularly in terms of the breakdown of the bands. It is important to know their implications for Ireland in terms of being in the top two categories in particular and in the context of the very severe cuts in what is now an area of very high importance to us.
With regard to developing countries, the progress of all these discussions is quite significant. It is good to hear that developing countries see the European role in general as one they can support or that at least they are, in effect, on our side or we are on theirs. That is good and important.
I thank Mr. Burke for his presentation. As Deputy Upton said, it is helpful to know that the talks have been beneficial, particularly to developing countries. Mr. Burke said that there seems to be a fixation with resolving agriculture first. If that is the strategy of other countries in the WTO and agriculture is settled before the talks move on, that takes away from the mandate by removing the strength of the negotiations. I am also concerned that Commissioner Mandelson has up to now moved away from the mandate. He had to be hauled back. He has shown no understanding of what Mr. Burke described as the multifunctional nature of agriculture.
Can Mr. Burke elaborate on why the partners first want to settle agriculture? I am assuming it is because that effectively takes away part of the strength of the negotiations for what will come later.
Mr. Burke
Regarding the development connection, there is a coincidence of interests between the EU and developing countries on the market access issue because whatever is agreed in Hong Kong or in the next round will impact throughout the system. It will not apply only to the EU but to all members. There will be special and differential treatment for developing countries, with slightly lower levels of commitment. If there is a very high tariff cut, it will apply across the board and will mean a substantial tariff cut for developing countries too. This would probably not be the best development from their point of view at a time when sensitive and delicate economies are trying to adjust to the world economy to have increased competition from imports.
Accordingly, there is a direct connection between the position of the EU and that of developing countries. The latter are probably the only group with which there is common interest. The problem is that the EU is a sitting duck. The CAP is a very transparent form of subsidy for agriculture and, unfortunately, is the highest such subsidy in the world. It is an obvious target. The connection between it and the US is interesting. The US position is extremely aggressive in targeting the CAP because it is there and is an easy target. What the US has offered is a statement of intent and not a form of commitment. It offers that in 2007 it will introduce changes in the Farm Bill which will allow it to cut domestic supports. However, there is no guarantee that these changes will get through Congress. This is in contrast to the EU position, whereby it has undertaken reforms which are complete and on their way. By some extraordinary feat, the US has nevertheless managed to put the pressure on the EU to come forward with more concessions on the basis of the US statement of intent. Clearly, the EU and the Commission have lost the communications battle in the WTO and have been losing it all along.
Regarding the negotiating strategy and tactics, our Minister has been very critical of the Commission's approach as being too concessionary. Not to defend Commissioner Mandelson's logic but rather to explain it, his position has been to take this deliberately concessionary approach in order to extract something from the US because, up to September, it was not forthcoming with any concessions. As soon as the US made its statement of intent — which is all it is — to cut subsidies and open its markets, the EU was immediately placed on the back foot again. We will continue to be very critical of the Commission because that is not the best negotiating strategy that could have been adopted. We have not been sufficiently aggressive in targeting the positions of others.
Commissioner Mandelson and the Commission insist they are within the mandate. That is debatable. The member states have not been asked to approve or not approve what is on the table. The Commission negotiates on the basis of a mandate and, as long as it stays within that, it is entitled to do so. It insists that this is the case. There are ongoing technical briefings in which the Commission explains its position and provides the calculations and the formula it uses to justify its position. For the moment, the Minister has not agreed to it and member states have not supported it. However, it is on the table with the WTO and, once there, it is virtually impossible to take back.
There is some comfort in the fact that the Commission has repeatedly stated that what is on the table is its final offer on agriculture and that it does not intend to alter it in any way. The EU 14 signed the letter to which I refer and, through the Council of Ministers, member states were vocal in conveying to Mr. Mandelson and the outside world that the EU has reached the limit of its negotiating position. The current impasse in the WTO negotiations has been reached partly because it is recognised that the EU is at the limit of its negotiating mandate and the focus needs to shift from agriculture to services and manufactured goods. Arguments are ongoing as to whether the negotiators remain within their mandate.
With regard to Ms Fischer Boel's role, she attends monthly discussions about the WTO at the Agriculture Council. Member states are blunt in outlining what they require of her. She claims to be taking a full role in the matter but the Commissioners responsible for the previous negotiating round, Mr. Fischler and Mr. Lamy, are strong characters. All I can say is that the balance may have shifted slightly. It is awkward for a civil servant to comment on his or her political masters.
We do not disagree with that at all.
Mr. Burke
I do not wish to defend Mr. Mandelson but our impression is that he has decided to make no further concessions. That contrasts with the keynote speech made by the British Prime Minister, Mr. Tony Blair, in which he said that further progress and concessions should be made by the EU. Unfortunately, in addition to outside pressure, there is no unanimity with regard to the EU's position. A small minority of member states are defending the CAP and there is background pressure from others for the EU to make further concessions.
I attended this committee because I have a deep interest in agriculture. In the coming years, the WTO talks will become the most important issue in terms of farming. Our biggest problem arises from the fact that we export 90% of our produce. Export subsidies will be discontinued within a few years, which will mean that our produce will have to be entirely sold within the EU. It will not be viable to export beef to Russia or other countries in the future.
Tarriffs will also be a significant problem for us because, if they are reduced, Brazil will be able to export large quantities of untraceable beef to the EU. This will benefit the Brazilian ranchers who produce this beef rather than the people of that country. I am not sure whether bringing down the price of beef will be of assistance to the poor people of the world because large scale ranchers will be the only ones to profit. Not only will farmers in this country be affected but meat factories, feed sellers and others working in agriculture will also suffer.
The only good news from Mr. Burke came in the form of his comments on sensitive areas. What chance do we have Irish beef being granted sensitive status? I hope that the single payment system is in the green box and cannot be touched, at least in the short term. If the tariffs are introduced, they will have a strong effect on agriculture. Farmers, of which I am one, are merely breaking even and any decrease in the price of beef will result in people being no longer able to produce it.
I welcome Mr. Burke and Mr. Flynn, although their news is not good. What is the purpose of globalisation? What are the EU and other world leaders trying to achieve? In my view they are trying to reach the accountant's bottom line at any cost, human or otherwise. The WTO talks are about making profits rather than aiding the needy. It is evident from the way the discussions are being led that Mr. Mandelson and the current EU Presidency are like two fingers on the same hand. Is globalisation concerned with human values or profit motivations for the wealthy, the multinationals and those who can manipulate the market? In my opinion, it is concerned with the latter.
Would no agreement be better than a bad agreement? While I accept that this country should have an interest in trade negotiations because it is a substantial exporter of non-agricultural goods, will agriculture be placed on the sacrificial altar in order to achieve trade balances that may not be favourable to us? Mr. Burke referred to legislation which is due to be passed in the US in 2007 but which I doubt will be introduced one year before a presidential election. Therefore, while we may have thrown away the baby with the bath water, the US may have held on to both. There is nothing to Europe's advantage in this.
Ought not sugar beet be classed as a sensitive product? What is happening with the green box, the blue box and the orange box that were agreed in the mid-term review of agriculture? They are important aspects for this country. While we recognise that industry, trade and commerce are also involved, this afternoon the focus of our discussion is on food. Not every country in Europe has a minister for agriculture, which means that agriculture here is in a weakened position.
Three weeks ago I said in the Seanad that Mr. Mandleson should remove himself from his position. I repeat it today. Mr. Mandleson should remove himself or be removed from the position he has as chief negotiator for Europe. He must return to the original agreed mandate. I compliment the Minister for Agriculture and Food who, along with her French counterpart and a few others, has taken a very strong line in protecting what was basically the CAP. We are giving Community preference to Argentina, Brazil and any other bloody country except Ireland. As Deputy Callanan and others said, we are bringing in product that does not have the certification we would like to see. We have seen the breakdown of Brazilian beef. We do not know by what else it might be affected. Is it right that Europeans should be exposed to that product? Is it right to have displacement of market share from us, as producers and exporters of food, and allow the importation of product that is less sure and less safe? That is not a presumption; it is a fact. I again congratulate the Minister. However, it is down to Ireland, France and a handful of other countries. The Chairman might let me wander a little more.
The Senator is wandering too much.
How much preferential treatment are we giving to the poorer countries on imports into Europe? Will they be protected or will they also be losers if the proposals go through as they stand? I began by asking whether globalisation is for the benefit of mankind or the multinational. Reaching no agreement would be better than having a bad one. It has always been Ireland's wish to support poorer countries as arose with the ACP countries in the case of sugar. Do we want the ranchers of South America, with their use of slave labour, to take over that product? We appear to want to get market share for BMW and Mercedes cars and other commercial activities, including munitions, which we sell to states regardless of whether they conduct internal war to kill each other. While this may sound fanciful it is a fact of life and happens.
I thank Mr. Burke for his very honest outline of the position at the meeting. As previous speakers said, it does not make good listening and is very serious for Ireland. We export 90% of our agricultural produce, which puts us in a different position from other EU member states. Last week, we visited Spain to meet farmers. Spain is a net importer of agricultural product. It imports 30% of its milk and the same is true of the other major European countries. Based on Mr. Mandleson's proposals in recent months, it is clear that he is not following an Irish agenda. While I do not know the answer, it is very serious for this country.
I understand that a tariff of approximately €3,000 per tonne is placed on Brazilian and Argentinian beef being imported into the EU. Even at those levels, Irish farmers cannot compete. The cost of the Irish product is 25% higher than the price of imported meat, even when the tariff of €3,000 per tonne is imposed. I do not know how in the name of God Irish farmers will be able to stay in business if these tariffs are removed. Brazil has a cattle population of 200 million. It is a large country and I understand that its 5,000 farmers are really ranchers. On his radio programme, "Worlds Apart", last week, Rodney Rice interviewed people in poor parts of Brazil and also areas that have improved. It was nice to hear of people in the beef industry who were working in this country in Cork, Tipperary, Gort——
And Roscommon.
——and Roscommon. That area had improved because of the work done by Brazilians working here. Brazilian butchers are paid €90 per month or €22 per week at home. They earn between €360 and €500 per week here. What is happening is very unfair. If these proposals go through, we would be as well to be honest with Irish farmers and cut production by at least 50% to have a hope of surviving.
All the points have been made. I agree with the comments about Commissioner Mandleson and his negotiating mandate. He sees himself as making a big and brave gesture early in the process. To what extent has the Department of Agriculture and Food assessed the likely implications of the acceptance of the Mandleson concessions for Irish agriculture? What would be the immediate impact if these concessions were agreed at WTO? At a time of fundamental change in worldwide agriculture, European farmers can have little confidence in a system within Europe with no unanimity on the part of those negotiating for us. Is there any precedent in the past where the Commission has embarked upon a particular course without the strong support of the Council of Ministers as seems to be the case in this matter?
To what extent can the concessions proposed by Mr. Mandleson be accommodated within the context of the existing Common Agricultural Policy? If we are to face into another review, the CAP will become a totally debased commodity. We stated that the previous review would stand the test of time in order that farmers could look to the future with confidence. Were we to embark on another review, it would undermine the process in its entirety. Senator Callanan made the key point. Is it the case that, in the national interest, reaching no agreement would be better than having a bad agreement?
Mr. Burke
There are many questions. If I start at the end, it might help to answer some of the overall concerns. I was asked if agreement was reached now, how it could be accommodated within the CAP. As regards domestic support, it would not be a problem. The 70% cut could be accommodated because we have already undertaken CAP reform. If the green box were protected, it would mean the direct payments would remain intact and that would not be a serious threat.
The removal of export refunds would be an obvious threat because the support for our beef products would not be available. We would aim to achieve the longest possible phasing out period so that there would be a reasonable timeframe in which the trade could adjust and also find new markets within the Union. Since 2004, the EU has been a deficit area in beef. Ireland is a huge exporter but the EU as a whole is a deficit area and must import. The loss of refunds in beef would not be catastrophic if there was sufficient time to adjust. It would be serious for milk products because we export all over the world. That is the reason the EU is insisting on equality of treatment. At least there would be a level playing pitch if we cannot pay refunds and others do not pay their form of subsidies.
The crucial issue is market access and the level of tariff cuts. It is difficult to assess the implications until the agreement is finalised. Obviously that level of tariff cut on beef would be devastating for Ireland and the EU. If we had to suffer a 60% cut in the tariff for Brazilian beef, it would be devastating. We will be seeking sensitive product status, certainly for beef, at a minimum, which would be substantially less cut. Brazilian beef is coming in tariff paid. Any form of tariff cut will not, therefore, improve the position. We can only hope that through sensitive product status, increased competition and improved markets on the world market, the position will improve. It is not just the European market opening up; it is every market. Hopefully, Brazil will seek markets in China and other places where huge growth is taking place. It sounds like clutching at straws that we will not suffer the full force of the Brazilian competition. There is no disputing the fact that it will be damaging.
Export refunds will be phased out and there will be damage, which is likely to affect milk products rather than beef. In theory at least, the EU should not be exporting beef because it is a deficit area. We do export, in practice, but the loss of refunds if they took place over a period of, for example, ten years would not be devastating. The Minister is absolutely determined to protect direct payments.
I agree with almost everything Senator Callanan said, certainly in respect of globalisation. The Commission's mandate, which I outlined briefly, is to protect the European model of agriculture as an economic sector and as a basis for sustainable development based on the multifunctional role of agriculture and the part it plays in the economy, the environment and society in general. That is alien language to globalisation. It is a more sustainable form of local development in rural communities in disadvantaged areas. It is spread throughout the European Union and its family farming system which, in comparison to the ranches referred to earlier, incorporates small farms. I agree that globalisation is not the influence that would be helpful to agriculture in general or to European agriculture.
I have a list of the major benefits the EU provides through trade preferences for developing countries but I will not go into all of them. We are the biggest importer of agricultural products from the developing world. The European Union is bigger than all other developed countries together.
Do we import 80% of the products?
Mr. Burke
Yes, and more than the US, Australia, Japan and Canada. We import more than the rest of the developed world combined and, in recent times, everything but arms, duty free and quota free, from the 50 least developed countries. The European market is an open market and that concession that has not been offered by any other WTO member country. I will give the Chairman a copy of this document rather than go into it in detail. We provide huge preferences for developing countries. It is one of the concerns of developing countries that if there is a round with these massive cuts in tariffs, the preferences they currently enjoy will be eroded and they will certainly suffer. The Senator is correct in saying that this is portrayed as a development round to the advantage of the developing countries, which is not necessarily the case. The position is much more complex.
The idea that opening up EU markets further would directly benefit poor farmers in Africa is a misconception. There are all sorts of infrastructural governance issues to be addressed. The theory is fine but it is difficult. That is one of the problems. The European Union gets it in the neck left, right and centre in regard to the developing world. The NGOs are vocal and very successful in giving a simplistic message that the CAP is bad and that development is good. We have failed miserably to address that argument and the Commission is continuing to fail miserably despite all the preferences I have outlined. I can only agree with all the speakers who said that it is bad news. That is the reason I outlined the Doha mandate and, unfortunately, there is no going back on it. It was launched at Doha but we are embarked on to it. The mandate seeks substantial reductions in trade distorting domestic support, phasing out of all forms of export subsidies and substantial improvements in market access. Unfortunately, there is no going back; the die is cast.
The Minister's bottom line is that whatever happens in the negotiations should not require further reform of the CAP. It is difficult and is an uphill battle. If I could make a personal comment, no agreement is probably always better than a bad agreement. In light of what is facing us on this occasion, it is certainly no more than postponing the evil day. This agreement will come, if not this month in Hong Kong then possibly in 2006. The long-term reality is that virtual free trade will descend on agriculture. That is the goal of the WTO and of some members of the EU.
I am not sure if I have answered the point on the green box but, hopefully, we will defend it. The amber box relates to the band of 70% cuts, with which we can live. If it went any further, however, we would have a difficulty. The blue box is not of particular concern for Ireland since we decoupled. Coupled payments were within the blue box. There is an attempt within the current negotiations to reduce the level of blue box payments but it is not a problem for Ireland or the EU in general because decoupled payments are now in the green box.
On the issue of sugar, it is likely that the EU will seek to have it classified for sensitive product status. It is ironic to say the least. The current proposal is to slash the levy on sugar, but at the same time, next month we will be looking to protect sugar from imports. It is not the most logical position. I hope I have answered most of the questions. If not, I will come back to them.
I thank Mr. Burke. We will deal with supplementary questions now.
A 70% position was set on domestic supports at the Uruguay round. This allows us to spend €64 billion.
Mr. Burke
I think that is the figure.
We will not argue over the figure. How far have we come in achieving that position? While there have been substantial cuts in supports in the intervening period, where do we stand now? Will the current proposals on Common Agricultural Policy funding have any impact on the budget in place? In light of that, was it the right decision to take the decoupling route? Would we have had more difficulty if we still had coupled payments? Is it still the Commission's position that the CAP reforms constitute the limit of its negotiating mandate? I would appreciate it if Mr. Burke could clarify this as the issue seems somewhat ambiguous. Are we still talking about maintaining what is in the CAP proposals?
Who is pushing the World Trade Organisation agenda in Europe? I presume it is being pushed mainly by the services side. Will Mr. Burke elaborate on that because it is important that people understand where the pressure and the agenda is at European level? With regard to what the committee has been told about what the United States has put on the table, we are basically accepting a pig in a poke. As Senator Callanan said, on the eve of a presidential election in the United States where 50% of Congress will be re-elected, there is not a hope that Congress will accept the proposals even if the President is true to his word and puts them forward. As they stand, the current proposals sacrifice Irish farmers and feather the nests of American farmers.
Does Mr. Burke have any briefing on or detailed knowledge of the type and levy of subsidies and state aid, hidden and unhidden, that the United States pays farmers? Some years ago the soya bean crop failed in the US. If Europe had diminished its cereal producing capacity, what would have been the result in that situation?
I agree with Mr. Burke that there is no question but that the European Union will be a net importer of beef. Unfortunately, this will make no difference to Irish beef producers because of Brazilian beef exports into Europe. We will find ourselves with no market for thousands of tonnes of beef, or if there is a market, we will get a very bad price. I agree that CAP is the easy target in these negotiations. Unfortunately, Ireland is the biggest loser in that situation.
How strong is our case in the sensitive areas of milk and beef?
Mr. Burke
With regard to the 70%, both our estimate and the Commission's is that this is close to the limit of what can be tolerated. That is within 1% or 2% of what the European Union could commit to without having to undertake reforms. In other words, at 70% we can continue as we are. If it were 71%, we would have to start cutting payments somewhere. It is on the margin.
Would the proposed 50% cut in export subsidies within the milk budget come under that 70% heading?
Mr. Burke
Export refunds are separate. The production aids for casein or whatever could continue as they are, but if there was a slight increase on that, we would have to start cutting. In that sense, Mr. Mandelson has been very clever in going to the limit of the negotiating margin but not exceeding it. We could live with 70%, but a slight increase would create problems.
Would there be an overall reduction in the price of milk?
Mr. Burke
Something would have to happen. Some internal action would have to be taken, whatever it might be. We would have to cut support to live with a higher cut in domestic supports.
On the blue box category, we are better off for having decoupled because payments are now green box payments. They are not exempt from a threat as the negotiating partners may come back and attack them at some stage, but whereas there is pressure to reduce blue box payments, there is no pressure on the green box payments. One can argue successfully that decoupled payments are not trade distorting. Trade does not increase or decrease in any way as a result of them.
On CAP reform, the position as set out is the official position. We are in debate with the Commission and the Minister is pressing it to demonstrate that the offer it has made is within the terms of CAP reform and that it will not require further reform. We have not got absolute assurances yet nor can we prove that the Commission has breached the mandate. Committee members can get some idea from the figures I quoted how technical and complex the calculation is. The pressure is not necessarily from the member states with a trade or industrial goods agenda. It might be an overstatement to say there is ongoing pressure, but there is a less than enthusiastic support and defence of the CAP and the EU position from those member states that want to cut the budget. The pressure is from the internal reformers in general, including the United Kingdom, Sweden, the Netherlands and Germany. They want to see a cut in the budget rather than attack agriculture.
By giving the concessions we are giving with regard to CAP, what is the benefit for the EU? This is a trade negotiation. Therefore, while it is conceding with regard to agriculture, where does the EU see itself benefiting?
Mr. Burke
We have virtually nothing in return so far. The negotiations on services and on manufacturing goods have not advanced at all yet.
Most of the major investment banks in the European Union have signed a letter printed in the Financial Times asking for the negotiations to proceed. I presume they have some interest in them proceeding and that they did not sign it on the basis of the moneys that will be generated from farmers. What is the goal for Europe with regard to the negotiations?
Mr. Burke
In the context of EU negotiations with the WTO, agriculture is just one aspect of negotiations. The agenda of the WTO is globalisation with no frontiers for financial services, no restrictions, free movement of capital and insurance, free movement of industrial goods and no tariffs. That is the potential trade-off and each country must make a judgment on whether it is real. As a deal is being made in the middle of the night in Hong Kong, there will be potential benefit to manufacturing and services and potentially serious damage to agriculture and someone must decide if we sign the agreement or not.
There is little support for the CAP and some member states who have tried to reform the CAP from the inside will see this as an opportunity to reform from the outside. We agree with comments on the United States' position. Details of the United States' support suggest it is slightly less than EU levels in global terms. Individually the level of support for farmers is much higher than it is in the EU despite the fact that farms in the United States are much bigger, more efficient and more commercial.
Does that include transport aid to markets and ports?
Mr. Burke
We will send the Senator a note but in general the United States provides a high level of support for the farmer. It has not reformed in the way the EU has. There is a system of counter-cyclical payments whereby farmers automatically receive a payment when markets are poor. There is no intention of reforming this. Deputy Naughten described the scenario of the congressional elections and there is always an election somewhere in the United States.
The beef situation is serious and this is the critical concern for Ireland in the negotiations. We seek sensitive product status and are confident we can secure this. This would provide for some tariff cuts but not as severe as full tariff cuts.
Non-trade concerns have not yet featured in the negotiations. In theory it is recognised that EU farmers have higher food safety requirements, higher animal health and hygiene standards and higher environmental conditions. This should be recognised in trade but this is dismissed as a smokescreen by negotiating partners. This has not stopped the Minister getting some support in the Council to insist that these higher standards are reflected in final negotiations. I am not confident of success but we will make this an EU demand at negotiations in Hong Kong so that our farmers can compete in the EU market on equal terms. Our farmers incur additional costs as a result of higher requirements and competitors do not incur these costs. I am not confident as this has been dismissed and the negotiating partners do not want to address the issue. We will not concede this without a struggle.
What will happen in the doomsday scenario where we refuse to sign the agreement?
Mr. Burke
That will depend on the balance in the agreement. Is it so damaging that we will refuse to sign it? President Chirac stated he would invoke the veto and refuse to sign if the agreement was unacceptable. Legally, that is possible and before the EU can sign this agreement all member states must approve it.
There was an earlier question on the Commission embarking on negotiations for which it did not have the support of the Council. This is the same scenario where the Commission is in negotiations with the US and others but the Council is not. The Council will be in Hong Kong and the Commission will report and ask for approval. If an agreement is concluded, the Commission will present the deal to the Council and ask if it agrees. At that stage, Ministers must decide on the overall benefits and costs.
Any member state could refuse to grant its consent but in my experience it is extremely difficult for one member state to stand against 24. If there are 24 countries demanding agreement, the question asked by Senator Scanlon does not arise because of the extreme political difficulty. One would be isolated within the EU forever and isolated in the view of developing countries who would have much to gain from the agreement and would identify Ireland as the obstacle to future wealth and prosperity. One would need several member states to support that position.
We are a small island nation of some 3.5 million or 4 million people.
The two documents circulated should be given to the clerks rather than the members.
On behalf of the committee, I thank Mr. Burke and Mr. Flynn for attending and responding to a variety of questions. This is of great concern and the joint committee is unanimous in its support of the Minister for Agriculture and Food in the WTO talks. We hope everything will be done in the best interests of Irish agriculture and the economy.
The joint committee went into private session at 4.30 p.m. and adjourned at 4.40 p.m. until 3 p.m. on Wednesday, 30 November 2005.