Throughout the negotiations I was mindful of the need to consult as widely as possible at home about the implications of the Commission's proposals and on alternatives to them. That was why I set up four consultative groups early last year to which farmers, processors, academics and other interested persons were appointed. Of course I was also conscious of the value of direct consultations with the farming organisations which I met both at home and during the Council of Ministers meetings in Brussels.
All these contacts and meetings were in addition to the regular series of meetings which took place in Brussels of official representatives of all the member states and the Commission over the past 12 months since the detailed proposals were published, before proceeding to the political discussions. Three successive weeks of meetings and intensive political negotiations in the Council of Agriculture Ministers during February and March culminated in agreement being reached on the reforms in the early hours of the morning of 11 March.
When I spoke to the House in February, I indicated that my main objective in these negotiations would be to secure an agreement that would 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 would be favourable to the development of Irish agriculture. In the CAP reform agreement that has now been finally approved by the European Council, I believe that all these major negotiating objectives have been met.
For example, on beef, the reduction in prices agreed was 20 per cent instead of the 30 per cent cut proposed by the Commission. The national suckler cow quota, which the Commission had proposed to reduce by 8 per cent has been preserved intact at 1.1 million cows. The regional ceiling for the special beef premium has also been increased by 7.5 per cent, which brings it back to the level we are utilising of 1.07 million premium rights. Therefore, the production base which had been built up since 1992 has been protected. It is absolutely vital that our milk, beef and suckler cow quotas have been protected. The industry at all levels can strategically plan for the future based on that production base. In addition, major improvements have been secured in the extensification premium with the result that all existing beneficiaries of this premium should retain eligibility. Overall, the level of compensation proposed has been substantially increased in the course of the negotiations to the extent that beef producers are more than fully compensated for the reduction in prices.
The smaller reduction in beef prices up to 20 per cent and the accompanying compensation will ensure that the economics of beef production in Ireland will be preserved; it should also result in an increase in consumption, thereby creating marketing opportunities for Irish beef exporters on the EU market. The retention of our suckler cow quota at close to its current level will help to ensure the ready availability of high quality beef to supply these market outlets. The retention of these rights and the 7.5 per cent increase in our national quota for the special beef premium will be worth in the order of £30 million a year to Irish beef farmers. I am also pleased that the proposal to pay 50 per cent of the increase in compensation through a national envelope which had considerable potential for distortion between member states, has been substantially modified and, accordingly, the risk of distortion has been minimised.
On compensation generally, I have succeeded in maintaining a premium structure suitable to Irish conditions and, as already mentioned, have converted the estimated substantial losses on beef arising from the Commission proposals, to an average gain over the seven years of £46.5 million to beef producers. This gain was not easily achieved and our beef industry has the challenge of breeding, feeding and producing the right animal to produce the right product for the right market. The marketplace will be all important – I mentioned earlier the benefit to consumers. I hope, expect and will seek to achieve that the reduction in prices will be carried through to benefit consumers and that the middlemen will not gobble up the price reductions.
I am pleased with the major adjustments I have secured in the proposals on the extensification premium. As I informed this House, I have been concerned that the more stringent eligibility conditions would have excluded about one third of existing beneficiaries from the premium. In addition, they would have placed considerable pressure on producers to reduce stock numbers, particularly sheep in mixed cattle-sheep enterprises. I am satisfied that the increase in the maximum stocking density limit of two livestock units up to 2002 and 1.8 livestock units afterwards will ensure that neither outcome will now materialise.
I should mention that intervention purchasing, which the Commission had proposed to abolished, will be retained. It will be retained, of course, at a lower level. In Berlin, we succeeded in getting additional wording on intervention that there would be ad hoc buying of beef in times of difficult marketing. In the difficult situation last autumn we succeeded in getting the Commission not only to introduce intervention buying but also to change the condition for heavier cattle. I want to send a signal to the industry that intervention and artificial crops in the marketplace are not what we should be looking forward to or seeking to depend on. Getting out to the market will be the name of this game for the future.
On milk, Ireland was granted a specific quota allocation significantly higher than the increase of 1.5 per cent granted to 11 other member states. I achieved this special recognition in the face of strong opposition. The concession was sought on the basis of a Council commitment in 1984 when the milk quota regime was being introduced. It was then agreed by the Council that Ireland would have priority in the allocation of additional quota in the future. I can assure the House that it was not easy to get that commitment honoured a full 15 years later.
The problem was that the commitment stated that we would get priority for any additions to the reserve and, of course, it has been obsolete for many years. In addition to the concession, we have the added bonus that while the milk reform will begin to take effect only from 1 April 2005, the specific quota allocation will become available in two phases starting next year when we will obtain 20.5 million gallons additional quota, together with a further addition of 11.5 million gallons in 2001, giving us an extra quota of 32 million gallons in all from 2001.
The benefit of the increased milk allocations specifically to Ireland of 32 million gallons is that that clicks in next year 20 million gallons and 11 million the following year and the reduction in prices will not take effect until the year 2005 whereas in the other 11 member states the increase for the same quota, which is only 1.5 per cent, will not click in until the year 2005. We gain very handsomely in that area.
This represents a substantial improvement on the Commission's original proposals which would have given Ireland only a 1 per cent quota increase – about 11 million gallons – while some other member states were being allocated increases ranging from 1.3 per cent up to 8.4 per cent. In the final agreement 11 member states have received increases of just 1.5 per cent which will be phased in from 2005 and one of these, the UK, received an additional increase of 4.2 million gallons for Northern Ireland. On the other hand, Ireland is among just four member states which will receive significantly higher allocations starting next year.
A further benefit is that it was also agreed to extend the quota regime until 2006 which had been an important objective for me and for the dairy sector generally. There is provision for a review of the regime in 2003. People can plan knowing that quotas will be in existence until at least 2006. It was stated at the Berlin meeting that the reduction in prices will take place in 2005 for three years up to 2008. Some experts say our quota will remain in position for the next ten years which, again for planning purposes, is vitally important. As Members will be aware, a number of member states, particularly those which call themselves the London Club wanted to abolish quotas entirely and, of course, that would produce a great deal of uncertainty for Ireland. The retention of the quotas has been an important measure for the industry.
The reduction of 15 per cent in intervention prices for butter and skim milk powder will not now begin to take effect until 1 April 2005 and will be phased in over three stages. Compensation will be payable based on the quota held by a producer. The compensation for the full 15 per cent reduction will be approximately 9p per gallon. Certain provisions were also agreed in the matter of quota management. These were introduced to address particular problems in certain countries and are intended to help active milk producers. They are optional provisions and I will implement them in Ireland to the appropriate extent.
As I said to this House in February my view on reforms in the milk sector is that I would have been happier to see no changes for the time being. The market for dairy products is operating well. There is no budgetary pressure, intervention stocks are relatively low and incomes of dairy farmers have been generally well maintained over the years. The postponement of the cuts in prices until 2005 is very much in line with this viewpoint and completely contrary to the views of those member states which favoured more severe price cuts and the end of the quota regime. In the implementation of the quota regime and the allocation of the increased milk quota I will be consulting closely with representatives of farming and the dairy industry in particular to have an equitable distribution of that quota. The main principle underlining it will be the allocation to active milk producers. The regime cannot continue where people who take a nap after lunch make an income from milk quotas and expect somebody else to milk the cows for them while they make another income from it; it is not equitable. It is enough for one person to make an income from a milk quota, in other words, a person gets up in the morning and milks the cows and does the same in the evening; there is a commitment for 365 days of the year for those involved in milk production. I will issue instructions to officials in the Department and to the various consultative meetings that active milk producers are those who are most deserving of those allocations.
The main features in relation to arable crops include a reduction in two stages of 15 per cent in the intervention price for cereals instead of the proposed 20 per cent cut with partial compensation in the form of a non-crop specific rate of direct payment which will also apply to set-aside. The standard rate of compulsory set-aside will be applied at 10 per cent up to the year 2006.
I sought and obtained a provision allowing member states to define specific sub-base areas for maize which means that Ireland's base area for maize will continue to be ring-fenced. This will ensure that traditional cereal growers will not be exposed to overshoot penalties arising from an expansion in the area under maize. The alignment of the rate of compensatory payment for oilseeds and linseed to that of other cereal crops will be made in three annual steps commencing in 2000.
I also succeeded in having the payment period for arable compensation, which was to be deferred by three months, altered so that payments may now commence on 16 November – a change of one month. That will be important for tax purposes and is of particular benefit to Irish growers who traditionally settle their accounts at harvest time. I am also pleased that the monthly increments are to be restored.
One of the major changes in rural development is the switch from compensatory allowances on an individual animal basis to a payment per hectare. This change is necessary for environmental reasons and also to pave the way for the upcoming WTO negotiations when the emphasis will be on subsidies not linked to production. I made a specific request to the effect that there should be an orderly transition in this process and the Commission has conceded that transitional arrangements will be made to ensure a smooth and gradual changeover.
Another important change for which I had been pressing for some time was the removal of the enlargement clause requirements in the early retirement scheme. Early retirement is becoming popular and allows for the taking over of farm management by younger people. Many farm retirement schemes have been tried over the years with no success. However, this one works because it allows family members to take over management of the farm. There were two specific constraints involved: additionality which made no sense because people bought land in an effort to qualify under that part of the regulation, and part-time farmers – a practice which is becoming more commonplace in rural areas – who had problems qualifying for the farm retirement scheme. That has been improved significantly and it will now be up to member states to define the new economic viability requirement which replaces it.
During the negotiations on rural development I stressed the need to have as broad a coverage as possible for aid for rural development activities on and off the farm. The final compromise gives ample scope to provide for a wide variety of innovative measures when drawing up our national development plan.
I have concentrated up to now on the details of the measures included in the final agreement. However, almost as important from an Irish point of view are the number of adverse proposals which came up during the course of the negotiations and which have been excluded from the final package.
Senators will recall that I referred earlier to the future funding arrangements for the CAP being a complicating factor in these negotiations. A number of options were suggested to ease the problems of the net contributors to the budget, such as Germany and the Netherlands, and to reduce expenditure. While I had some sympathy for the budgetary difficulties of those member states, I was completely opposed to some of the solutions being proposed.
One of the options put forward to redress the balance of the budget was the co-financing of direct payments to farmers. On this my position was unequivocal. I pointed out that we could not dismantle the CAP that had been built up over 40 years on three central principles – market unity, Community preference and common financial responsibility – in order to provide a partial answer to a problem that goes far beyond the CAP. If the proposal for member states to pay 25 per cent of these direct payments had been agreed it would have resulted in a cost to the Irish Exchequer of £160 million per annum by the year 2006. As a result of the strong opposition mainly from the French Minister and myself this proposal turned out to be a non-runner.
A second option proposed was degressivity – reducing direct payments by a certain percentage annually. Income tax was introduced many years ago as a temporary measure but we all know that once these percentages are introduced they increase every year. That idea, introduced by France, was a live contender right up to the last 15 minutes of negotiations in Berlin. The Taoiseach and I mounted a sustained attack on the application of this concept to direct payments and it was finally eliminated from the package. If the precise proposal which had been on the table at Berlin right up to the end had gone ahead, it would have cost Irish farmers £175 million over the next seven years.
All in all, I believe this was the best possible deal that could have been achieved. Under the original Commission proposals serious and unacceptable losses would have accrued to the central sectors of Irish agriculture and many family farms would have been placed at risk. I approached these negotiations with a clear focus and with the full support of the Government and the agriculture sector. I believe this approach has borne results and that the Irish family farm can now look forward to the future with much greater confidence. I appreciate the support I received from Members of this House, the Lower House, farming organisations, industry and the blessings and prayerful assistance of the Church which was very helpful at the end of the day.
I have already mentioned that the gains to Irish agriculture from this agreement will amount to £395 million over a seven year period. This gain assumes that prices will fall fully in line with the reductions in support prices. To the extent that this does not happen, the gains will be even greater. It is my intention that everything the State can do by way of marketing and promotion will be done to secure higher prices than the basic support prices for our products on the export markets. There is no reason our industry should depend on support prices because the return from the market will be much greater than any of those support prices. We will be establishing a medium and long-term plan for the agriculture sector to ensure that our output gets into the most remunerative market and gets the best return for farmers. That is vital if we are to turn this agreement into the most profitable return for the industry.
This agreement has turned around what was a depressing outlook for Irish agriculture to one in which substantial gains have been made, even if no change of approach is adopted, but it also offers an enormous opportunity if all concerned – farmers, food processors and the State – play their part in raising the quality of our products, improving competitiveness of those products and increasing in both quality and quantity our marketing efforts.
Finally, I would like to place on the record my thanks to all the officials in my Department who assisted me in these negotiations. They have worked, as a team, tirelessly and with tremendous dedication and I would like to pay tribute to their efforts which have been a major factor in achieving such a successful outcome.
On a personal note, it is my belief that my official support team in Brussels was the best, it was the top team at official level of any member state by a long shot. The effectiveness of their negotiating skills was outstanding. The agriculture industry and the national economy owe a debt of gratitude to them because their professionalism, dedication and negotiating skills brought about a tremendous achievement.
I look forward to hearing the full range of Senators' opinions on the matter. With regard to the implementation of aspects of the agreement, I will liaise with those in the industry and others on how the best structures can be put in place to give those aspects effect. The final details and regulations will be forthcoming in the next few weeks.
