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JOINT COMMITTEE ON AGRICULTURE AND FOOD díospóireacht -
Wednesday, 8 Feb 2006

Scrutiny of EU Proposals.

I welcome Mr. Phil Ryan and Ms Mary Lawless, EU budget section of the Department of Finance, to discuss amending letter No. 1 to the preliminary draft budget for 2006. I understand the letter deals with EU funds for compensatory aid to the African, Caribbean and Pacific countries affected by the reform of the EU sugar regime. The debate will be confined solely to this matter.

Before asking Mr. Ryan to commence his opening remarks, I draw the attention of witnesses to the fact that while members of the committee have absolute privilege, the same privilege does not apply to witnesses. I remind members 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. I invite Mr. Ryan to make his presentation.

Mr. Phil Ryan

I thank the committee for the invitation to appear before it today. The subject for discussion is the European Commission's amending letter No. 1 to the preliminary draft budget for 2006 of the European Union. The letter concerns new funds for compensatory aid to the African, Caribbean and Pacific countries affected by the reform of the EU sugar regime. I am the principal officer in the EU budget section of the Department of Finance and I am accompanied by my colleague from the same section, Ms Mary Lawless.

Before speaking about the Commission's amending letter, I wish to briefly outline the procedure in respect of the European Union's annual budget. Since 1988, the budget has been defined within a multi-annual financial framework, sometimes called the financial perspective, to use EU terminology. This multi-annual approach was introduced in 1988 to get away from having the budget decided solely in annual negotiations which had often proved to be acrimonious. The committee will probably recall the UK rebate discussions which had been spread over a number of years. There seemed to be a row every year when the budget was being decided and there was a desire to move away from that situation. The multi-annual approach also meant that the European Union's finances could be better managed by taking a more medium-term perspective. The current framework covers a seven year period. Therefore, instead of having a row every year, we have one every seven years. For example, this is the final budget year of the framework started in 2000. The committee will be familiar with the 2000-06 agreement which is sometimes referred to as Agenda 2000, to use EU terminology.

The committee will be aware that just before Christmas a further seven-year agreement was reached by the European Council of Heads of State and Government. This new agreement will cover the seven years from 2007 to 2013. As the Taoiseach reported recently to the Dáil, the outcome of the negotiations was very satisfactory from Ireland's point of view, including in regard to the agricultural provisions.

While these multi-annual frameworks provide the overall context and ceilings for spending over the periods involved, that is, seven years, it is the annual budgetary procedure that determines the actual, more detailed, level of spending in any year. The procedure for this annual budget is that in April each year, the European Commission produces its preliminary draft for the following year's budget. Thus in April 2005 the Commission would have produced its draft for the 2006 budget. This preliminary draft is examined in detail by the Council of Ministers of the member states in July. The result goes forward to the European Parliament for its consideration in October. In November the Council of Ministers reconvenes for a second time for what is called its Second Reading of the draft budget to vote on changes proposed by the European Parliament. Decisions made at this stage by the Council regarding compulsory expenditure are final. The term "compulsory" refers to certain spending required directly by the EU treaty and, in particular, includes CAP expenditure. The draft is then returned to the European Parliament which has its Second Reading in December and the final word on the remaining expenditure, non-compulsory expenditure. The President of the Parliament then declares the budget adopted.

From what I have outlined, it is evident that there is a long period involved from the time of the preliminary draft budget in April to the final decision in December. In the course of these rather drawn out procedures, the Commission may, on its own initiative or at the request of the other institutions, present a letter of amendment to the draft budget in the light of information not available when the draft was first drawn up, that is, in April. In the instance of the amending letter by the Commission before us today, the Council took the letter into account in its Second Reading of the 2006 budget in November and the European Parliament subsequently considered it during its Second Reading in December. The amending letter was finally adopted by the Council and the Parliament, the amounts in the letter were entered into the budget and the way is consequently cleared for the funds to be utilised in 2006. It has gone through the process.

I will return to the matter of the actual content of the amending letter. Before doing so, however, I should provide some background information on the relationship between the European Union and the African, Caribbean and Pacific or ACP group of countries. Some of this information is already contained in a note supplied to the Chairman in advance of this meeting.

There is a total of 77 ACP countries that are party to the Cotonou partnership agreement between the ACP and the European Union. The agreement was signed in 2000 in Cotonou, Benin, west Africa. It is the latest in a series of such partnership agreements that date back to 1975. The agreements reflect a special historical relationship between the European Union and the ACP countries concerned. In fact, many of them are former French or British colonies. Therefore, they have had a long-standing relationship with certain EU member states.

The Cotonou agreement, essentially, covers aid and trade and is particularly important for the countries concerned. It also has associated protocols covering commodity sectors, including the sugar sector. The sugar protocol involves 18 ACP countries, countries which have a notable sugar sector. Under the protocol, some of the ACP countries involved rely on the EU market for their sugar exports. They were given sugar import quotas by the European Union and received the EU price per tonne which is substantially above the world market price. As a result of the recent sugar reforms, the price the ACP countries will receive for their sugar exports to the European Union will be substantially reduced. As a consequence, the market conditions for them will be significantly altered. In addition, the adjustment process to these new conditions will be complex. This reflects the socio-economic importance of the sugar sector in the countries concerned and their significant reliance on the EU market.

In anticipation of the agreement on sugar reforms, the Commission, in its communication to the European Parliament and the Council on accomplishing sustainable sugar sector reform, committed itself to supporting the adjustment process of the ACP sugar protocol countries. It was accepted that the impact of the reform was not just an internal EU matter but also affected the ACP countries concerned. The Commission proposed financial and technical assistance, including EU budget support where appropriate, in addition to that provided for in the framework of the ACP-EU partnership agreement. The proposal offered a broad range of supports to take account of varying conditions between the countries concerned and within a single country. Activities to be supported included upgrading of the competitiveness of the sugar cane sector; developing alternative economic activity; and coping with the serious social, environmental and economic consequences of a reduction in the contribution of the sugar sector to the countries concerned.

On foot of the Commission's communication on the effects of reform on ACP countries and in line with the budgetary procedure referred to concerning changed circumstances and new information not available when the draft budget was drawn up, the Commission proposed in its amending letter No. 1 which we are discussing that additional assistance to ACP countries should be provided from the EU budget, initially in 2006. The letter proposed adding new funding - €40 million for commitment appropriations and €21.2 million for payment appropriations - under heading 4 which is concerned with external actions in the budget for 2006 to support the measures mentioned for the ACP countries affected by the reform. It was also proposed that further funding, as required in the light of developments, could be provided up to 2013.

To clarify, the amending letter has proposed what are called commitment appropriations and payment appropriations. The distinction is that commitment appropriations represent an expectation to enter obligations up to that amount that will result in actual payments over 2006, while payment appropriations represent the actual amount that specifically may be paid out in 2006. The figure for actual payment in 2006 is €21.2 million. This is a distinction made in the EU budget which is not made in our national budget.

As this is an external development issue, there were no domestic implications for Ireland other than that our contribution to the EU budget for 2006 would increase by €280,000 to cover our share of the cost of providing the €21.2 million in payments in 2006 to ACP countries. Some member states suggested this aid should be funded from within the agriculture heading in the budget rather than the external actions heading. Ireland, with most other member states, rejected this. By inclusion under the agriculture heading it would have impacted on the financial ceiling for the CAP, implying possible cuts in direct payments to farmers in the European Union, including Ireland.

As part of the normal budgetary procedure, the proposal was adopted by the Council and the Parliament and the amounts were entered into the EU budget for 2006 under heading 4, external actions, as the Commission had originally proposed. Considering the complexity of the restructuring and diversification to be undertaken in the sugar protocol countries, the Commission proposed that the assistance to the countries concerned should cover a relatively long term, that is, up to 2013. Funding for ACP countries in the years after 2006 will be covered by the new multi-annual financial framework for the period 2007 to 2013 for the EU budget agreed at the European Council in December, to which I have referred. The multi-annual framework sets out the maximum amounts and overall composition of expected future funding over that period. It is divided into budgetary headings, reflecting the main EU priorities for the period. The Council's decision on the new framework is being given operational effect in negotiation of what is referred to as the inter-institutional agreement between the Council, the Parliament and the Commission. It is envisaged that the negotiations on this agreement will be finalised before Easter. This will allow the details of funding for specific measures such as those involving ACP countries to be decided subsequently in the annual budgetary process starting with the budget for 2007. As I mentioned, the annual budgetary procedure determines the level of spending for each year and each EU measure under the ceilings set for the various headings by the financial framework which provides the overall context for a given budgetary period but the detail is provided in the annual budgets.

In this short statement I have covered the overall EU budgetary procedure, the special ACP-EU relationship and the role of the amending letter. I am aware that representatives from the Department of Agriculture and Food attended the committee specifically to discuss the impact on Ireland of the EU sugar reforms. This aspect would be a matter for that Department. I am afraid that I would not be able to comment on that domestic dimension.

We can bring Mr. Ryan up to speed on it, if he likes.

Mr. Ryan

As regards ACP countries, it seems equitable that they should receive restructuring finance to assist them to cope with the effects of the reform of the sugar regime. Many are in Africa and among the poorest in the world. This was the fundamental objective of the Commission's amending letter. While it is technical, I hope I have clarified the situation for the committee. We will be happy to provide further information or clarification that may be required. I thank members for their attention.

I thank Mr. Ryan for his presentation and ask members to confine themselves to the issues he is here to discuss.

It is tempting not to confine our comments to those issues. I thank Mr. Ryan for his presentation and especially his explanation of the interesting procedure involved in adopting the EU budget, which was well set out. As we are all aware, discussions are about to commence on how the funds to be used in Ireland will be distributed. The committee will take up that matter which is of major concern to farmers in the coming months.

I want to deal specifically with the funding provided for ACP countries. Prior to the commencement of the sugar negotiations, presentations were made to this committee and others. Each of us received correspondence. The argument made to us was that we should support the European Commission's proposals for the reform of the sugar regime as they would benefit ACP, African, Caribbean and Pacific, countries. We were told this was the way forward for these poor countries to develop their indigenous sugar industries. We now see, however, that the European Commission will have to provide €60.12 million to try to compensate the countries concerned for the foreseeable losses they will incur over the term of the reforms. Therefore, the negotiations that we were all told to support as being in the interests of developing countries, did not turn out that way. The European Commission is providing compensation, in one form or another, to restructure industries and examine alternative economic activity because the countries concerned have lost out, as we have in Ireland. It is a pity that the Visitors Gallery does not contain some of the people who wrote to tell us how beneficial the negotiations would be to them.

I would like to ask Mr. Ryan one question. As regards the EU budget for 2006, under heading 4, external actions, what is envisaged for the multi-annual framework for the period 2007 to 2013? Will the money be provided under the agricultural heading or the external actions heading? Has any indication been given on this?

Mr. Ryan

That it has been provided under the external relations heading, as the Commission proposed - this was backed by a large majority of member states - seems to indicate that that will be the source of future financing, which, of course, would suit us.

I thank Mr. Ryan for his presentation and concur with Deputy Naughten's remarks on the clarity of its delivery.

The sum of €280,000 represents the increase in Ireland's contribution to the EU budget for 2006 to cover our share of the subsidies for ACP countries. I have a good knowledge of some African countries from personal experience. I am aware of the level of destitution and poverty. In that context, it seems a small amount for which to ask.

Deputy Naughten mentioned the negotiations on the sugar regime and their detrimental effect on the Irish sugar production sector. We were told that this would be to the benefit of ACP countries in order to give them an equal footing but we now know that was not true. None of us around this table ever believed it for one minute. Given our own experience of the way the system works, the poor usually find themselves worse off after negotiations which are said to be in their interests.

I compliment Mr. Ryan on his presentation. I will support anything designed to help people in need, no matter where they are in the world. I am not as nationally-minded, in an insular way, as many suggest. Wherever there is poverty it must be combated. Those of us who have the luxury of being relatively well off have a price to pay in that respect. With my party colleagues and I imagine everybodyelse here, I am willing to pay that price to alleviate suffering, pain, poverty and deprivation. Poor conditions have been manufactured by those who exploited people in such areas, as European and world history show us.

I thank Mr. Ryan for his presentation and wish him well in his endeavours. I have no problem in supporting the increased contribution, which I consider minuscule.

Mr. Ryan

I thank the Deputy for his positive remarks which we appreciate very much. This is, essentially, restructuring finance. While I am not qualified to comment on the global sugar industry, I appreciate the Deputy's sentiments and support.

I concur with the sentiments that have been expressed and thank Mr. Ryan for his informative presentation. To what extent can we be certain that the funds to which we refer will go to those people most in need in the countries affected, the ACP countries, or is it envisaged that this is grant aid that will be channelled to governments? Will it be directed at the major moves in the industry or can it be targeted at the primary producers? That is a critical issue. Most of us would want to see that, as happens here, the support would go to those most directly affected.

Mr. Ryan

The position is as follows. In broad terms, each of the 18 countries qualifying for this aid is to devise its own national adaptation strategy to present to the Commission by the end of April. The Commission will fix the maximum amount available to each country based on two mixed criteria, first, the impact of the reform on the sugar sector and, second, the importance of sugar in the economy generally. A minimum amount of €500,000 is proposed, with a maximum of 15% of the overall amount per country. The Deputy can see that the Commission is requiring that each country devise its own national adaptation strategy and present it to the Commission.

The Commission and the working party concerned will obviously make sure that these adaptation strategies are well founded and stand up to examination. There is a general tightening up in spending on development aid in the EU by the Commission. We can be fairly sure that it will ensure that the funds are decided on the correct basis and that the funds go those entities that should receive the funds and are in need of the aid.

Deputy Ó Fearghaíl asked if the aid goes to governments or directly to factories, producers or growers. I do not have that detail and I am not sure that such detail is as yet decided. It is probably not yet decided.

Like all my colleagues, I appreciate Mr. Ryan's presence at the committee this afternoon and the explanations of the requirement given. I hope we understand what Mr. Ryan stated. Sometimes I doubt if I do.

Would I be wrong in thinking that Britain, in negotiating entry into the EEC, sought special aid concessions for its former colonies? That brings us up to the 1975 agreement. I may be correct in that assertion. The pity is that the British Government and Mr. Mandelson did not think of those agreements when Mr. Mandelson went ahead of the Commission and sought an agreement, which the ACP countries presented to us prior to the sugar regime agreement as affecting adversely their position. We now see the cost involved.

Will this figure be enhanced every year or is this a figure set out for a number of years? The logic of it would be that if a competing country was earning money, whether through special negotiations or whatever, it would have a higher earning capacity as years went by. If this remains static, does this impoverish them further? I hope my question is clear.

Mr. Ryan

My comment on the global sugar industry remains so. I am not an expert in that area.

I understand that.

Mr. Ryan

As regards future financing for the ACP group of countries, the amending letter refers to further financing up to 2013 but does not put a figure on that. I would imagine that this would be a matter for negotiation in the annual budget and that it would very much depend on the initial measures that will be implemented in 2006, for which the funding is being provided in the amending letter, and on seeing how effective is that funding and what gaps remain as we go forward. It would be a matter for negotiation each year in the context of the budget, but further financing, as Senator Callanan suggests, is definitely envisaged over the medium term, up to 2013, which is quite a commitment.

It is a further indictment of Commissioner Mandelson.

The committee is fully supportive, as Deputy Ferris stated, of people in need and people in poverty. Over the years the Irish people have responded positively, whether to people in need, people in poverty or disasters, and we hope that will continue.

On behalf of the committee, I thank Mr. Ryan and Ms Lawless for attending today and responding to the queries of members. That concludes our scrutiny of SEC (2005) 1269. The Clerk to the committee will prepare a formal report on our discussion today to lay before the House. Is that agreed? Agreed.

The joint committee went into private session at 3.37 p.m. and adjourned at 3.45 p.m. until 3 p.m. on Wednesday, 23 February 2006.
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