I welcome this opportunity to speak to the House on the proposals which were unveiled by the European Commission last July for the reform of the Common Agricultural Policy in the framework of Agenda 2000. I believe that these outline Commission proposals present both challenges and opportunities and that they constitute the most important issue facing Irish and European agriculture at this time.
The Agenda 2000 proposals have been considered by the EU Council of Agriculture Ministers over the past months. At the most recent meeting of the Council last week, it agreed on conclusions for submission to the European Council which will meet in Luxembourg next month. Spain however, disagreed with that part of the conclusions dealing with the agricultural guidelines. Among the conclusions reached were the following: the long-term outlook for the main agricultural markets given in Agenda 2000 was an acceptable working hypothesis and, without reform, significant surpluses could emerge; in those circumstances the reform process begun in 1992 should be continued and deepened; it is important to have adequate, suitable resources available to complete the reform process and achieve the desired model of European agriculture and to retain the Agricultural Guideline, as a ceiling, both in principle and as at present calculated; the Commission should frame as quickly as possible its formal proposals on the basis of this agreed approach.
The Commission is expected to table detailed proposals in the first quarter of 1998 in the light of the outcome of the European Council.
I would like now to discuss the main areas of interest for Irish agriculture in Agenda 2000. It must be stressed, however, that much of the detail of these broad proposals is as yet unknown and will not be available until early 1998. Their full impact cannot therefore be estimated accurately at this stage.
In general terms it is proposed by the Commission to cut the support price of beef by 30 per cent, to increase the various beef premiums including the introduction of a new beef premium for the dairy herd and to have a reduced role for intervention. These proposals continue along the route charted in the MacSharry reform of the beef sector. The result predicted by the Commission is a balanced EU beef market on the basis of increased domestic consumption of beef and greater penetration of non-EU markets without the aid of export refunds.
Ireland accepts the need for reform but we have a number of serious concerns which I have already expressed at the EU Council of Ministers.
The proposals are designed to increase beef consumption in the EU by reducing beef prices while at the same time enabling EU beef to be exported to third countries, in particular the south east Asian market, without subsidies, thereby avoiding WTO constraints on subsidised exports. Beef consumption within the EU should increase if the price is substantially reduced but it is very difficult to predict by how much. Also, it is debatable whether the EU can achieve the export market penetration envisaged with the level of price cuts proposed. Much will depend on the price structures and production potential of the EU's major competitors. Because of the uncertainty which must exist, I do not think that the future EU beef regime can afford not to retain an adequate safety net. Reliance on aids to private storage, as the Commission envisages, would not be adequate in difficult market circumstances and where major market imbalance remains a threat.
Another key element for consideration in relation to the future direction of the beef regime is the maintenance of a reasonable income for European beef producers. I will be seeking to ensure that any cut in price is fully compensated. In addition, any final package which is agreed must ensure that extensive grass based systems are not disadvantaged as against the more intensive bull producing systems in the EU. In addition to seeking enhanced production arrangements for extensive production, I will also be seeking appropriate measures to safeguard heifer beef production which would be endangered by a 30 per cent price reduction.
The outline framework for reform of the dairy sector in Agenda 2000 is as follows: an extension of the quota system until 2006; an improved flexibility and simplification of the common organisation of the market; a gradual decrease in support prices by an average of 10 per cent over the period; the introduction of a yearly direct payment of 145 ECUs for dairy cows, adjusted to average yield, in addition to a payment of 70 ECUs per cow in respect of the dairy herd's contribution to beef production. One of the most important elements of this discussion is extension of the milk quota which is of concern to everybody in dairying. It is important that this extension be debated. The quota system has worked well in the Irish context and has saved many family farms.
The Commission claims that its proposals represent a cautious approach and that such an approach is justified because expected market developments do not require extreme measures. However, the Commission clearly indicates that in its view the present system with its intrinsic rigidities cannot last forever.
It is important to note that, despite the rigidities associated with strict supply control, the quota regime has largely benefited the dairy sector since 1984. In general, the operation of the quota has maintained high income levels among dairy farmers and has been a successful tool of economic development in rural areas. For these reasons, I agree with the Commission's analysis that there is no immediate need to make changes to the quota regime. If change is required then it is preferable to signal it well in advance to allow the EU dairy sector and individual producers adapt and assist longer term planning. Changes to the current system designed to enable the EU enhance its presence on world markets should not result in a worsening of the income of dairy farmers. An overriding principle for me is, therefore, that any price reductions or other changes having an adverse effect on price should be accompanied by an appropriate direct aid system.
In relation to the arable crops sector, the key element of the Commission's proposals is a reduction of 20 per cent in the intervention price with only half of this being compensated for by way of an increase in area aid payments. The new rate of aid would be 66 ECUs per tonne applicable to all crops including oilseeds, linseed and protein crops and also to set-aside. It is also proposed that these payments would be reduced if market prices remain at a higher level than currently foreseen. A top-up of 6.5 ECUs per tonne is proposed for protein corps. Aid for silage maize and other silage cereals would no longer be payable. The standard rate for set-aside would be set at zero instead of the present 17.5 per cent. Voluntary set-aside would be allowed and the set-aside areas would receive the non-crop specific payment rate of 66 ECUs per tonne. Penalty set-aside would be abolished. The Commission's proposals stem from its analysis that intervention stocks are expected to reach 58 million tonnes by 2005-6 unless some reform of the sector is undertaken.
While the predicted growth in world demand and price trends would facilitate the disposal of increasing quantities of cereals without export subsidies on the world market, one cannot escape the conclusion that there is a clear risk of a return to substantial levels of intervention stocks with resultant strains on the EU budget and its capacity to fund adequate levels of support for farmers in all sectors. However, if the Commission's response is to be accepted, then the reduction in prices must be fully compensated so that the incomes of growers are not reduced.
Rural development is a very important issue and I am sure Members will have major contributions to make on this subject. I believe that mainstream agriculture will remain crucial to the economic and social fabric of rural areas for the foreseeable future and that market policies will therefore remain of the utmost importance. Having said that, other measures are required to enable farmers and rural dwellers enhance their incomes and thus enable them to remain in rural areas. Given past trends in numbers employed in agriculture, the proposals for an increased emphasis on rural development in Agenda 2000 are therefore both necessary and welcome.
I also support the idea of integrating environmental goals into the CAP and believe that the best way forward in this regard is the strengthening and extension of existing measures aimed at maintaining and enhancing the quality of the environment in general. We all want a good environment as it is a very important part of our lives. Budgetary resources must be made available for targeted agri-environmental measures and for the maintenance and promotion of low input systems as it is unrealistic to expect farmers to produce quality food in an environmentally friendly manner while ignoring the cost factors and effort involved.
The CAP has already been subject to extensive reform and that process of reform is set to continue. It is in the interests of Ireland and other member states that European agriculture should become more competitive on world markets and be developed on a sound, stable and sustainable basis. However, it must also be done in a way which ensures that the principles of the CAP are preserved, the interests of member states are taken into account in balanced way and, above all, the incomes of farmers and the viability of rural communities are fully protected.
I am in the process of setting up four consultative groups, one each for beef, milk, cereals and rural development; Senators will understand that my Department, in setting up those consultative groups, is taking this proposed change very seriously. I will be inviting farmers, processors and others with a direct interest, as well as academics, to serve on these groups. These groups will remain in existence for the duration of the negotiations and I expect an expert input from them so that the strongest possible case can be put in defence of Irish interests.
I am glad the Seanad is being given an opportunity to debate these crucially important proposals. I look forward to a constructive debate and I assure Members that I will be happy to take on board any suggestions which may be put forward which would assist in advancing the interests of Irish agriculture and of rural areas as I prepare for the next phase of the negotiations. I thank Senators for their attention and I look forward to hearing contributions from both sides of the House in this very important debate. Changes will occur in both rural and urban Ireland because of the proposed reforms. Under the guidance of the Taoiseach and the Minister for Agriculture and Food, Deputy Walsh, we look forward to a very productive outcome to the negotiations.