Our visitors are most welcome. The Minister and the Government have an extremely onerous duty with regard to the future of Irish agriculture. They must relentlessly pursue the best policy in the national interest with the utmost vigour and the fullest resources of Government in Brussels.
Santer Proposals: Statements (Resumed).
May I share my time with Senator Avril Doyle?
Is that agreed?
Very reluctantly.
There are ten minutes remaining. Is that agreed? Agreed.
I thank the House for agreeing to a further division of time.
This is an extremely important debate and we cannot understate the seriousness of the current proposals. If implemented, they will have an extraordinary and extensive impact not only on agriculture but on all of society and community life, particularly with regard to the traditional family farm which, unfortunately, has been eroded over the past 25 years. Members from the west recognise the reduction in the number of farm holdings and farming families. The Department of Agriculture and Food, in conjunction with many other Departments, should formulate and implement a proper rural development policy. Its main priority should be to at least maintain the current level of farm families. However, if the Santer proposals are implemented, there is no way that objective will be met.
It is usual for the Opposition to criticise but I have sympathy for the Minister. All Members have a responsibility to work together on this matter in the national interest and to secure the country's future. It is important that the views expressed in this and the other House are unanimous in their call for strong negotiations. The strongest possible negotiations in Brussels are necessary in the year ahead. The skill and expertise developed over the years in the Department of Agriculture and Food and other Departments will be fully tested on this occasion. I wish the officials every success, and they will need the full support of all parties to ensure a successful outcome.
The proposals are shocking and frightening. The Minister suggested that the total loss to the economy would be £226 million. However, other research puts the figure at £260 million. It is important the facts are clear before the negotiations begin. We must know the exact premise of our argument in terms of what may happen in the future. The Department should double check those figures.
The beef sector has become increasingly important, particularly since the introduction of the milk quota system. It is important to all sectors of the community, from east to west and north to south. The proposed reduction of 30 per cent in prices is totally unacceptable. It is excessive and out of order. It must not be accepted by the Minister in the negotiations in Brussels. Proper intervention price support must be maintained. This is vital to the beef sector. In addition, the suckler cow premium is important to small farmers who have moved out of dairying and introduced a suckler herd as a replacement for the dairy herd. Proper support for these herds is most important. Grant aid should be increased to at least £250.
The current limit on the number of cattle qualifying for the special beef premium is 90. There is a case for a review of this limit with a view to increasing the number. I will not suggest what the number should be, but there is a case for substantially increasing it. It is also most important that the Government is prepared to increase the national contribution in that regard. It has been suggested that our suckler quota should be reduced by 93,000. That is unacceptable. It must at least be maintained at the present 1.114 million level. It is also proposed that the special beef premium quota be reduced by 258,000 which is also unacceptable. It must remain at the 1.258 million level.
Dairying is being reduced in importance in my part of the country, given the numbers of small and medium sized farmers who are going out of business. In the early 1970s it was recognised that dairying was nine and a half times more important to Ireland than the other member states. It is now considered to be six times more important to our economy than other member states. On that premise alone the Minister has a strong argument to use to seek special allocations for the dairy sector.
I thank my colleagues for sharing time with me. The Minister's place in the record books depends on his getting this change right. It is critical for the agricultural and food industries to ensure the right result for Ireland over the next 12 months of negotiations.
When we joined the EEC I understood the original premise was that production would be concentrated in the areas of natural advantage. I considered that was why we had so much to offer to Europe beyond our size and economic impact in gross product terms. Can the Minister explain where this set of reform proposals meets the premise of concentrating production in areas of natural advantage?
The natural advantage for the Irish agricultural sector lies in grass based production and the extensive nature of Irish farming. Look what is being done to the beef and dairy sectors and to the extensification principle. The better extensive farmers will be driven into intensification because of the change in the criteria to meet the 1.4 livestock units per hectare that would be required. Every animal on a farm is now to be included. That said, I could never understand how a farmer could qualify on livestock units per hectare yet only count some of the animals. At the same time, we need to be more generous with the livestock units per hectare and still allow extensification because the better farmers will be driven back into intensifying since it will be the only way for them to continue to operate. It makes no sense when talking about grass based, environmentally friendly farming, which is where our natural advantage lies. There is a principle underlying Irish agriculture and what we bring to the wider European arrangement and that principle is being abused by the proposals before us.
There is no evidence in the changes proposed to the CAP of rewarding quality production. A farmer can produce a scraw of an animal and receive the same premium and headage payment as for a quality beast, having bred a cow through a quality bull or having it meet the fat and protein requirements. Farmers are being rewarded for producing poor quality products at the same rate as those who go to the trouble to get quality production. The balance of advantage should lie with quality production and we should reward it.
In the early 1970s we traded any advantage in the Common Fisheries Policy for advantage in the CAP because we saw that as being where our advantage lay, given the importance of the agricultural sector to our economy and being a net exporter of agricultural produce. We let down our fishermen, let our fishing waters go and we did not fight the fishing issue because of the advantage of the CAP. The CAP has already been reformed once and it is now to be reformed again and so further disadvantage Irish agriculture. We must look carefully at the advantage we are to trade away. We must welcome the accession of east European states whose agricultural sectors are in a poor state and we must also accommodate the requirements of the WTO, but we must not sell out the agricultural sector as we sold out our fishermen and our fishing industry.
I ask that the time for the debate be extended to 5.15 p.m. to allow Senator Dardis to contribute and the Minister of State to conclude.
Is that agreed? Agreed.
I thank the House. I take as read the significance of Irish agriculture to the national economy and in the European context, our dependence on exports and the percentage of the population engaged in agriculture. Those points are a major factor in terms of the negotiations ahead. I thank the Minister of State, Deputy Treacy, for his attendance this afternoon. I commend the Minister, Deputy Walsh, for his address and I hope he will be successful in the negotiations.
I agree that there could be a potentially great negative impact on the country, not just on farming and agriculture but on the economy as a whole. However, despite the challenge that confronts us, there is also a major opportunity. We must be clear that this process started in Punte del Este with the original GATT negotiations. Whether we like it or not, the next world trade round is bringing us to a point where it is expected that at some stage the prices on the European market will be those of the world market, whatever they may be. The difficulty that arises is how to protect agricultural population within the EU, particularly in Ireland, in that context. We must be aware that is where the train is going. The speed of that journey is what is at issue.
We have benefited enormously from the CAP and our membership of what is now the EU. There has been a significant positive impact on rural life and on the national economy. The most recent agricultural statistics would give some cause for concern. Last year agricultural incomes in the EU declined by 2.8 per cent. In Ireland the decline was at about that level whereas in the UK and Italy the figure was of the order of 25 per cent and there were a few countries where the income increased. It is the first time for many years in which the incomes have declined.
We need to be aware of the country's capacity to compete. Senator Avril Doyle is right that the original doctrine was about comparative advantage. When the MacSharry reforms were instituted they were about comparative advantage — production would go to those areas best capable of undertaking it. In that context the country has a significant advantage, not just in the EU but globally. We are highly competitive in milk, beef and grain production. Our grain yields are highly competitive. We have a structure capable of exploiting that comparative advantage in international markets which is comprised of the plcs and the agriculture co-operatives.
The heroes of the Celtic tiger are people like Mr. Pat O'Neill of Avonmore/Waterford, Mr. Denis Brosnan of the Kerry group and Mr. Philip Lynch of IAWS. They have the capacity to put Irish agricultural production to the forefront in the world. If they cannot do it within the context of what is produced in Ireland they do it internationally by establishing their companies abroad, and they are to be congratulated for setting up in the US, the UK and further afield. We must ensure that the capacity within those companies to exploit that comparative advantage in production is expressed in the market place.
That leads us to wonder about the milk quota, which was introduced as a vehicle for controlling production and guaranteeing income. When it began it was contested hotly and there were negative feelings about it but it succeeded in its objective. The difficulty with quotas is that when the international market requires more milk or meat, we are prevented from expressing our comparative advantage on the world market. That is particularly so in the case of milk.
The inevitable consequence of the idea that co-operatives should be able to process as much milk as possible — because unit costs will come down and they will have a competitive advantage — is that there will be fewer people on the land, because it will be more difficult for them to create an income to sustain their livelihood. We will then have a few large farms producing all our milk and beef, which has huge disadvantages.
The task confronting the Government and the EU is to resolve this basic conundrum. How do we get to the place where the World Trade Agreement is directing us while at the same time protecting the rural communities which are so central to the social and economic life of Ireland and Europe? That task would face the Government whether it was led by Fianna Fáil or Fine Gael and I would have confidence in either to fight that battle all the way. There are huge potential opportunities for us, we must be aware of them and within that context protect the vulnerable.
That leads us to another inevitable conclusion — the only way to do it is through the "cheque in the post" system. As Professor Séamus Sheehy of UCD said, the only thing worse than a cheque in the post is no cheque in the post, and we must bear that in mind. It is possible to combine the task of optimising our production and competing on world markets with protecting the vulnerable. In certain circumstances we must accept that this is as much a social welfare problem as anything else, unpalatable though that may be.
There is a huge and fundamental contradiction in European policy. It is stated that the model of European agriculture must be versatile, sustainable and competitive, but how does that explain headage payment schemes which lead to the destruction of the hills of Connemara, Mayo and Kerry? We are ruining those environments — I have walked those hills and I know what is happening. The EU has a lot to answer for; I do not blame the farmers because they were told to stock those hills with sheep and that they would be paid for every head. How can the EU have a rural environment protection scheme on one hand while allowing the hills to be destroyed with too many sheep? It is a total contradiction and I expect the Government and the Department to tackle it in the talks.
We must also be concerned about the renationalisation of the CAP. There is talk of subsidiarity and modulation, whereby countries would be given money and allowed to spend it. That is fine, but if the wealthy German economy can provide its farmers with a VAT refund up to five time greater than ours, there are huge consequences for us in the marketplace. If anything is to be achieved we must have a level playing field in which the wealthier economies like Germany and France are not allowed to re-nationalise their policies, while our Exchequer attempts to pay what those countries can meet comfortably. That must be stopped.
I thank all those who have contributed to this discussion on the Agenda 2000 proposals. These reform proposals present a formidable challenge to us and the stakes are high in the forthcoming negotiations. The ultimate objective is to secure an outcome which will involve no loss or disadvantage to our agriculture or food sectors but will provide them with an environment within which they can expand incomes and employment.
The outcome of these negotiations will be crucial because two of the sectors concerned, beef and milk, account between them for 71 per cent of Irish agricultural output, 37 per cent and 34 per cent respectively. In the entire EU the only agricultural sectors which exceed those percentages are the meat sectors of Luxembourg and Finland. When the contribution of agriculture to the economies of the member states is taken into account, the economic importance of beef and milk to Ireland far exceeds that of any agricultural sector in any other member state.
The Government, in particular the Minister for Agriculture and Food, is fully alert to the implications of these proposals and will work strenuously for a satisfactory outcome. In making Ireland's case we will have the benefit of the expertise of the four consultative groups established by my Government colleague, the Minister, Deputy Walsh — one each for beef, milk, arable crops and rural development, on which farmers, processors, promoters of rural development and academics are represented. We are looking forward to solid, positive contributions from these groups and the formal bodies which are representative of the agriculture and food industries. We must make a concerted effort to win the changes necessary to these proposals.
Senators raised important and interesting points and I endorse what they said. Their sincerity, commitment to and knowledge of the industry is obvious and I will comment in response.
The EU has been a source of major financial support to Ireland. A couple of key statistics put the matter into perspective. In 1997 Ireland received some £2.3 billion from the CAP and the Structural and Cohesion Funds. This represents 5 per cent of Ireland's estimated GDP and 56 per cent of the estimated PAYE income tax receipts for the year. In practical terms EU funding plays a huge role in our major infrastructural projects and some of our key social programmes. The CAP is the cornerstone of farmers' incomes in Ireland.
The stakes are clearly high for Ireland in the Agenda 2000 negotiations. We will approach them in a positive frame of mind. We have always adopted a positive approach to our EU membership. We have not been afraid of change but always sought to participate actively in shaping this change in the best interests of Ireland and Europe. When the Council discussed the original Agenda 2000 proposals the Minister, Deputy Walsh, reluctantly accepted their broad thrust. While he was deeply concerned about the inadequate levels of compensation then being proposed, he was prepared to accept the proposals as a reasonable basis for the commencement of negotiations. The present proposals contain major, unexpected changes which will adversely and fundamentally impact on Ireland. As a result the new proposals do not constitute a reasonable basis for negotiation. They are, in short, absolutely unacceptable.
I will briefly indicate the more significant adverse changes. If implemented, Ireland will seriously suffer from the reduction in beef and dairy premia to create the "national envelopes". The proposals include reduction in the male beef premium ceiling, the introduction of a suckler cow premium ceiling, the abolition of the suckler cow supplementary payment, the abolition of intervention before the full impact of the price reduction can be known, and the larger price reduction for milk. In addition to these losses, Ireland does not gain from the allocation of milk quotas to mountainous regions. the restoration of the maize silage subsidy, or the increase in the extensification premium because of the changes in calculating the stocking rate.
The balance of the proposals has changed dramatically for Ireland since last July. We realise there are losses involved in the changes for other member states but there are also compensatory gains. For Ireland the changes are overwhelmingly negative.
There is nothing in these proposals which will assist the sustainability of our very important sheep industry. That is a great pity. We are now in the spring lamb season and the market is volatile. On behalf of the farmers of the country, who have toiled so industriously all winter, I call on the meat factories to recognise their responsibilities and ensure there is a commercial, transparent and bona fide market price immediately available for spring lamb and thus ensure there is no impediment, latent or otherwise, placed in the way of a proper return to hard working sheep farmers for the new crop of lambs coming onto the market at this time.
The negotiations on the Agenda 2000 proposals commenced at the meeting of the EU Council of Agriculture Ministers last Tuesday. The proposals for the various sectors have been referred for detailed discussion in a number of EU agricultural working groups. They will be difficult and lengthy, probably lasting at least a year. In any event, there will be no conclusions before the German elections next autumn. In the meantime, the Minister will be endeavouring to secure support for the Irish position at meetings of the Council and through bilateral contacts with other agricultural ministers and the Commissioner for Agricultural and Rural Development.
Senator Rory Kiely questioned whether the Commission's proposed cuts in beef prices would result in improved access for our exports to Asian markets. I believe there is a reasonable prospect that the proposed cut in prices will permit EU traders to export beef, especially cow beef, without export refunds. The difficulty is in determining the quantities involved.
Senator Connor questioned the efforts made by the Minister to shape the proposals considered by the Commission. Since last July, the Minister met Commissioner Fischler on a number of occasions to impress on him the issues of vital importance to Ireland. In addition, senior officials in the Department have been in constant touch with senior officials in the Commission for the same purpose. In the final analysis, the detailed proposals now put forward seriously disadvantage Ireland and most other member states. The Minister has made clear to Commissioner Fischler and his fellow Ministers that the current proposals are unacceptable and he will leave no stone unturned in trying to ensure they are suitably amended to meet our concerns.
The Senator also expressed concern about delays in headage and premium payments. In so far as payments under the 1997 headage and premium schemes are concerned, the position is that, to date, almost £650 million has been paid to farmers under the various schemes. The vast bulk of eligible farmers have been paid their entitlements. For example, 97 per cent of applicants under the 1997 disadvantaged areas headage scheme have been paid and 96 per cent of 1997 ewe premiums applicants have also been paid. Some 94 per cent of May 1997 suckler cow applicants have been paid their first advance, while 89 per cent have been paid their balancing payments.
A similar pattern emerges in so far as the 1997 special beef premium is concerned. In the case of balancing payments under the scheme, the 40 per cent balancing payment cannot be made until such time as the definitive position is known regarding our national special beef premium quota usage. When it was brought to the attention of the Department of Agriculture and Food that the overshoot in quota would lead to a delay in making the 40 per cent balancing payment, it was immediately arranged for a second advance, representing 30 per cent of entitlement, to be paid. In the past few days alone, £26 million was issued under this arrangement. Any remaining amounts due when the quota cut has been taken into consideration will be paid during the month of May.
Senator O'Brien raised the question of national envelopes. We would like to see a greater proportion of the overall compensation for the beef sector being devoted to general increases for the premia rather than to the national envelopes because the proposed distribution key for the national envelopes is based on the share of EU beef production. It tends to favour member states where beef is a by-product of dairying and is more intensive. Ireland has 12.1 per cent of EU premia but only 6.7 per cent of EU beef production. The reason for creating a national envelope system is to provide funds to permit member states to aid certain production which would not benefit at all, or insufficiently, from the premia payments. In our case we could use these funds to compensate heifer producers, for example. The economics of heifer production would be extremely precarious following a 30 per cent fall in cattle prices and unless appropriate measures are taken there would be a serious question mark over the future of this segment of beef production, which accounts for 27 per cent of cattle slaughterings in Ireland.
The envelopes could also be used to assist those producers who do not benefit significantly from the premium system or to top up existing premium. While we have no problems with the principle of national envelopes, we have serious concern regarding the distribution key and we will make every effort to ensure this is changed.
Efforts have been continuing to reopen the live cattle trade with third countries. On 10 March an invitation was issued by our embassy in Rome to senior Libyan officials to visit Ireland for discussions on any remaining obstacles to a resumption of the trade. A response to this invitation is still awaited.
The House is aware that Egypt prohibited imports of live cattle from Ireland since January 1997 because of the BSE crisis. Detailed proposals for a trial shipment of live cattle was presented to the Egyptian authorities last November but no decision has been taken on the proposal. I assure the House that the Minister will continue to make every effort to ensure that exports of live animals to Libya and other third countries can recommence as soon as possible. I am also pleased that exports of Irish beef to Egypt increased substantially in the last year, almost doubling that of the previous year.
I thank all the Senators who spoke for their interest in this important issue. For the foreseeable future, agriculture will continue to be a substantial employer and creator of wealth in Ireland as productivity improves. However, employment in primary agriculture is likely to decline. There are 136,000 in Ireland who put agriculture as their primary occupation, with approximately another 157,000 working part-time in agriculture. Gross agricultural production in 1997 was just over £2,608 million, or 6.2 per cent of GDP. It is in the long term interest of Europe and Ireland that European agriculture should become more competitive on world markets and be developed on a sound, stable and sustainable basis. A fundamental plank of our position would be to ensure the maintenance of a fair income for farmers, or, in the words of the Treaty of Rome to ensure a "fair standard of living for the entire agricultural community".
Farm incomes must remain at an acceptable level, not only for reasons of equity and social cohesion but also because the predominance of agriculture as an economic activity in rural areas makes it so important to them. In his opening statement the Minister stressed that he had told the Agricultural Council last Tuesday that the current proposals were not acceptable. I assure the House and the farmers of this country that he will do his utmost to ensure that Ireland's crucially important interests in the agriculture and food sectors are fully protected in the forthcoming negotiations and that the final package will be equitable and will provide the optimum framework for the development of our agricultural and food sectors. I thank Senators for their dedicated contribution to this vitally important national debate.
When is it proposed to sit again?
At 2.30 p.m. on Tuesday.