I welcome this opportunity to speak to the House on the agricultural aspects of the Agenda 2000 proposals. We are at a critical stage of the negotiations. The Council of Agriculture Ministers will meet in Brussels on Monday next and the meeting is likely to continue for most of the week. The German Presidency is determined to reach agreement on CAP reform at that meeting. Whether they will be successful in achieving that objective remains to be seen, but one way or the other we are coming closer to the stage when far-reaching decisions, which will be vital for the future of Irish agriculture, will be taken. The European Council meeting in Bonn on Friday, 26 February is scheduled to consider among other things, the outcome of the Agriculture Council meeting. The European Council meeting in Vienna last December confirmed that political agreement on the Agenda 2000 package as a whole should be reached not later than the end of March.
It is precisely because the decisions to be taken are of such major importance that I have devoted such a high priority to forcefully putting Ireland's case at successive meetings of the Council of Agriculture Ministers. I have also used every opportunity to put Ireland's case in a series of bilateral meetings with Commissioner Fischler and with my ministerial colleagues. Here at home I have consulted widely to get the best possible advice and input. I will refer to these contacts in greater detail later.
The last statements in this House on the Agenda 2000 CAP reform proposals took place on 2 April 1998. The Commission presented detailed proposals on 18 March 1998 which contained major changes, by reference to the outline proposals of July 1997, that adversely impact on Ireland. The more significant changes which affect us were the reduction of beef premia to create the national envelopes; a reduction in our male beef premium ceiling; a reduction in our suckler cow premium rights; the abolition of beef intervention and its replacement by a scheme of aids to private storage and an increase from 10 per cent to 15 per cent in the price reduction for milk. All these changes involve a loss of one kind or another for Ireland. In addition, the Commission put forward other changes from which Ireland will not gain. These include the allocation of milk quota to mountainous regions, the restoration of the maize silage subsidy and changes in the beef extensification measures.
I accept that European agriculture has to be positioned to cope with the rapid changes taking place in agriculture and in society in general. I agree it must be ready to meet the challenges which will inevitably arise from the enlargement of the Union and the next round of World Trade Organisation negotiations which are due to commence before the end of this year.
There are a number of structural surpluses in Europe in various agricultural commodities. There is enlargement, with a number of Eastern countries applying for member status, and there is the WTO round. All these imperatives mean there must be reform of the Common Agricultural Policy. It is critically important for Ireland that we reduce those structural surpluses and bring balance into the market. Ireland has a greater interest in this aspect because we have such a dependency on exports outside the EU and within the EU. It would be preferable for Ireland, as a member state depending largely on agriculture, to have that reform brought about before enlargement. Anyone who has visited Poland, Hungary or a number of African countries will have seen massive tracts of good fertile land which are very easily worked but under-invested. In the next decade, when these countries put investment into farming and agriculture, they will be competitors for Ireland. It is important for Ireland that this reform be put in place before enlargement and the WTO round and that we reduce the structural imbalance which exists for a number of products.
Since the proposals emerged, I have made it clear at meetings of the Council of Agriculture Ministers that the proposals in their present form would seriously damage Irish agriculture and the Irish economy. From the outset, I have indicated in the strongest possible manner my concerns about the effects of the proposals on Irish farmers' incomes and the lack of equity between member states and different types of production. I have also taken every opportunity to put this case in bilateral meetings with Commissioner Fischler and with ministerial colleagues, most recently when meeting Commissioner Fischler in Dublin earlier this month and again in bilateral discussion with the Commissioner and the President of the Council, German Minister, Herr Funke, in Brussels on Tuesday of this week. The Taoiseach has also put forward this point of view in his bilateral discussions on Agenda 2000, most recently with President Chirac and Prime Minister Jospin in Paris and with Prime Minister Kok in The Hague this week.
It is significant that I obtained acknowledgment of the importance of the beef and milk sectors to Ireland by having written into the conclusions of the Agriculture Council last May a statement that the dependence of particular member states on specific sectors would be taken into account in the final agreement. For example, the beef and milk sectors together account for 70 per cent of the Irish agricultural output and for 4 per cent of Irish GDP. This is not the case in any other member state. Each of these two sectors is more important to the Irish economy than the entire agricultural sector is to nine other member states.
Through the conclusions agreed at the May meeting, the Council has recognised that major Irish economic interests are at stake in the CAP reform negotiations. I intend to ensure this recognition is honoured by the Council. In other words, agriculture is vastly more important to the Irish economy than to the economies of any other member state. This should be kept in mind for agriculture, farming and for rural communities. There is no point in going down the road of other countries who decided a number of years ago that market forces should be brought to bear and let the best man win. We have seen this happen in other countries, notably, New Zealand, where one would need a farm of at least 800 to 1,000 acres to make a living and where farmers with 100 cows get the equivalent of our dole. The United States, the champions of private enterprise, recently introduced a rescue package worth six billion dollars to support the agricultural sector.
We must take note of what takes place in farming and agriculture in other member states. We need to retain multi-functional agriculture to support farming. Some of the proposals mean the price realised by farmers will be less than the cost of production. We cannot expect farmers to produce commodities for less than the cost of production. We have seen what happened in the beef, sheep and pig industries in the last couple of months. Despite substantial direct payments a complete imbalance exists.
There is still a complete imbalance there and the industry needs to be restructured. As ours is a relatively small economy, we have to be extremely careful about direct aids. If there is any co-financing we would not be able to afford those direct aids to the same extent as more powerful economies.
For example, in relation to the beef sector there is a 30 per cent price reduction in the proposal and supply control measures have also been proposed by the Commission. These proposals go far beyond what is needed to restore market balance and will fall disproportionately on extensive grass producers. Surely, it is more important to support farmers who have this natural production method than the unnatural method of stall feeding from, in some cases, recycled meat and bonemeal. In Ireland, 95 or 96 per cent of production is from grass, out of doors, using natural production methods for steer beef. It is a low cost method with little input of concentrates and is environmentally friendly. Studies year in and year out, particularly the Teagasc studies on farm incomes, show that beef farming has the lowest return of any enterprise. We need to support the extensive system here. One of the reasons there is such a low margin in steer beef production from grass is that the average age for sale is from 25 to 27 months. On the Continent they have a bull beef system whose quality is not as good as steer beef by any means. Bulls there are slaughtered at a much earlier age – 15 to 16 months. We have to keep our animals on the farm ten or 11 months longer and it costs more to do so.
It is possible to achieve market balance through a lower price reduction than the 30 per cent proposed and a different approach to supply controls. I have put forward proposals for a solution on those lines to the Commission and to my colleagues on the Council of Ministers.
Another issue of major importance to Ireland is the level of compensation in the beef sector. The Commission proposals aim to shift the balance of compensation in favour of intensive production. I have stressed the need for changes to be made to favour extensive production and that a satisfactory outcome to this matter is crucial for me.
It is also central that an effective intervention system is retained to ensure that in the event of temporary market disturbances it will be possible to provide a floor in the market. I am not arguing that intervention should be kept as an outlet in itself, but as a support in the disruptions that unfortunately occur from time to time in the beef sector.
We had a classic example of that last autumn when the Russian economy collapsed. We were offered major increases in export refunds and major supports with aid for private storage, yet prices collapsed below the cost of production. Were it not for a relatively small intake into intervention at the end of last year and for the first quarter of this year, beef farmers would have been in deep trouble.
I am critical, and have been over the years, of intervention as a system because it is no solution to anything. However, in cases of serious disruption in the marketplace, that emergency system needs to be there.
A further difficulty in the beef negotiations is a perception among other member states that Ireland fared well out of the 1992 reforms. I have pointed out that in 1992 the Council decided deliberately to encourage extensive production and structured the premium system accordingly. It was not surprising therefore that Ireland, where 99 per cent of beef is produced extensively, would benefit from the premium system. I have also pointed out that extensive production is a low profit production system and that our beef prices are as much as 25 per cent below European levels.
The Commission's proposals in the milk sector also give rise to difficulties for Ireland. They involve a 15 per cent price reduction and compensatory premiums which would only compensate for 60 per cent of price reduction. This inadequate compensation is unacceptable. The proposals also involve a milk quota increase of 2 per cent at EU level, but the proposed allocation of this increase between member states is uneven. Ireland's share, for example, would amount to only a 1 per cent increase. So, it would be 1 per cent for Ireland and up to 8.4 per cent for other member states. There are no circumstances under which I would agree to that degree of inequity. It is clearly discriminatory and is unacceptable.
The milk system has worked out relatively well and I do not see any great reason to spend 2 billion ecus per annum to change it. However, if there are to be changes involving an increased allocation of quotas, Ireland will have to get its fair and equitable share of that, if that is what the Commission wants to push through. We will hold the Council of Ministers to the commitment it gave in writing in 1984, when we were first allocated a quota, that Ireland would get priority access to any additional quota. That commitment is as valid today as it was in 1984.
On arable crops, the compensation being proposed for the 20 per cent price cut is clearly inadequate. I am also seeking to have this redressed as well as maintaining the separate base area for maize. A number of other countries have a major advantage over Ireland in that maize is a major crop for them. We do not have that advantage. Their concentrate feed production system has the advantage of maize silage while we have only a small acreage under maize. Also, the concentrate feed production system has the benefit of cheaper cereals input while our grass based system is at a disadvantage. We have been making those points clearly and forcefully to the Commission and bilaterally to other member states as well as to heads of Government and Ministers.
On rural development we are supportive of the Commission's proposals, although significant changes are necessary, such as widening the range of eligible activities to include research, advice and promotion. Research is critical for the future of this natural resource industry of agriculture. University academics and Teagasc officials are carrying out fundamental research and those programmes must continue. We also have valuable training programmes. Training is important and we are so good at education and training that we need to continue it in relation to agriculture and farming generally.
Thankfully, the vast majority of young farmers have a formal three year post-leaving certificate education qualification which is tremendously important because they will be competing not so much in the domestic market but internationally. It has to be international because 85 to 90 per cent of agricultural production is destined for foreign markets. We export to about 56 countries worldwide and we must remain competitive. Because our younger entrants to farming have to be top of the range, we need to continue this intensive research, advice and promotion.
In relation to promotion, An Bord Bia, the Irish Food Export Board, needs to be further supported and funded. Even though the board has an annual budget of approximately £17 million, that figure is infinitesimal given that Irish exports of food and beverages are worth over £5 billion. We need to support food and beverage promotion to a greater extent given the competitive international arena in which we are operating.
I am concerned at the impact of the reform proposals on the sheep sector. We have an important sheep and lamb sector. Irish lamb is a delicacy, yet the industry is neglected in these proposals. It is not mentioned at all and there seems to be no place for the sheep and lamb industry. We have between 46,000 and 47,000 sheep farmers engaged in a valuable part of the farming industry. Lamb is a very important product. I have expressed my concerns about the flaws in the sheepmeat régime and I have pointed out that the consequences of the reform proposals for the beef sector would make the sheepmeat situation even worse. For example, there is a proposal to reduce supports for beef by 30 per cent. That is bound to impact on lamb and sheepmeat; there are no circumstances under which there will not be a knock-on effect.
At each meeting of the Council of Ministers and at bilateral meetings I have stated that if the sheepmeat industry is not addressed in the reform proposals, the entire industry will be wiped out. For example, in extensification, sheep as livestock units are taken into account for stocking density, yet there is no extensification premium for sheep. I have pointed out the anomalies and flaws in that system which I want to resolve. It is disappointing that there is no support from other member states, who regard sheep farming as a marginal activity. I have sought support from and alliances with other member states who have a sheepmeat industry; it is tough going but I will continue to highlight the matter.
A complicating factor in the negotiations is the future funding arrangements for the CAP. A report on EU financing arrangements was published by the EU Commission last October. This report addressed the complaints by some member states that the burden of their net contributions is excessive. A number of member states, most notably Germany, have said that for the past 25 years they have been net contributors in supporting the CAP and they are getting weary of it.
There is a new Government in Germany which is less committed to agriculture and the European ideal. The old CDU felt that some reparation should be made in rebuilding Europe after the Second World War, an idea which is now gone. The Germans are saying if a country wants to support agriculture, why does it not do it from its own resources? This is a major disadvantage to Ireland as we are still a relatively small economy and we do not have the resources of the major countries. This is a worry for us.
We have had financial discipline in Ireland in the past ten or 12 years which has paid substantial dividends. We understand the need for financial discipline; nonetheless the CAP is a common policy throughout Europe and has served it quite well. We need to retain the Community preference. On this my position is unequivocal. Co-financing is completely unacceptable to me and to the Government as a whole. At last month's Council of Agriculture Ministers' meeting, I pointed out that the Common Agricultural Policy has been built up over 40 years on three central principles – market unity, Community preference and common financial responsibility – and that it has contributed enormously to the solidarity which has cemented the Community over the years. I stated that, for these reasons, we cannot now begin to dismantle that achievement in order to provide a partial answer to a problem that goes far beyond the CAP.
While I am reasonably confident that, in the light of the discussions at that meeting and in other fora, the Irish views – shared by some other member states – on co-financing will prevail, there is no doubt that a majority of member states favour a tighter budgetary framework for CAP reform. In this connection a number of member states have put forward options for the stabilisation of expenditure on the CAP. In addition, France has put forward the concept of degressivity. In Europe, one has to cope with new words in the lexicon of Euro speak; "degressivity" is a reduction in direct payments to farmers by a certain percentage annually. Direct supports are reduced gradually, for example, by 3 per cent or a fixed amount per annum.
This concept now appears to have the backing of a significant number of member states and even of the Commission itself, although the Com mission has not yet put forward a formal proposal. I am concerned that degressivity will impact more on those sectors, such as beef, which are more dependent on direct payments and less, or not at all, on those sectors where direct payments are small or even non-existent, such as the wine sector.
It is nice for the French to say that degressivity is a new concept and they think it is a good idea. Their Chateau Lynch Bages, Chateau d'Yquem and Chateau Pétrus will not be affected as there is no direct support for wine production. However, countries like Ireland with routine and mundane natural production systems for beef, lamb and pigmeat will be severely affected by the concept of degressivity. In its present form it could give rise to distortions between sectors, regions and member states and in my view Ireland would be disproportionately affected. I will be stressing that if degressivity is to be applied, the different circumstances of each sector will have to be taken in to account. It will also have to exclude small scale producers and, in the event of its being applied, I will be seeking an exemption limit as high as possible to exclude as many as possible of Irish producers. For example, at the moment the exemption limit is 5,000 euros, which is about £4,000. This will catch a big number of farmers. I have asked the Department to investigate whether farmers receiving £5,000, £7,500, £12,500 and £15,000 can get more of that in direct payments, whether for cereal, beef or sheep, and to see to what extent Irish producers will be affected.
While it is clear from what I have said that there will be stricter budgetary discipline applied to the reform, I will insist that the resources available must be adequate to fund a worthwhile and equitable reform. I have already emphasised that there is no point carrying out a reform that is inappropriate simply to save money.
Throughout the negotiations, I have been mindful of the need to consult as widely as possible here at home about the implications of the Commission's proposals and on alternatives to them. That is why I set up four consultative groups early last year to which farmers, processors, academics and other interested persons were appointed. I was also, of course, conscious of the value of direct consultations with the farm organisations and indeed I met the four farm organisations yesterday in preparation for next week's crucial Council meeting. That is part of the social partnership which has worked well here for the past ten or 12 years where we seek the consensus of everyone involved. All these consultations have been very helpful in enabling me to gauge the strength of opposition to these proposals by Irish producers and the Irish agricultural industry.
A Chathaoirligh, I have set out for you the present state of play and indicated the type of changes which I am seeking to have incorporated in the final agreement. My main objective will be to secure an agreement that will contain lower price reductions and higher compensation for the three sectors, beef, milk and arable crops, and a non-discriminatory allocation of any increase in milk quotas, together with other changes that will be favourable to the development of extensive natural production methods in Irish agriculture. I have tried to be as frank as possible given that I am still in the course of negotiating on these reforms.
I now look forward to a constructive debate on these issues in this House and I will be happy to take on board any suggestions which would assist me in next week's crucial negotiations. I do not know if they will be concluded; the German Presidency is anxious to do so. I will not be pushed or bullied into a conclusion just because the Presidency wants it. There will be a further meeting of the Commissioner and the Council of Ministers in March. We will have to have detailed, comprehensive and bilateral negotiations with the Commission and an informal session with the Council. The outcome to these negotiations can only be acceptable if it is fair and equitable and if the unique Irish system of multi-functional, natural agriculture is supported, allowed to continue and to develop. Those involved in agriculture should have confidence, heading into the next century, in the parameters laid out for farming and the agricultural industry.
