I extend my congratulations to the Cathaoirleach on his appointment and all the new Members elected to Seanad Éireann since my last visit here. The Seanad is a fine forum for discussing and promoting legislation and I like to initiate legislation here whenever I get the opportunity. It is a way of getting valuable contributions from Members and allows public debate on measures in order that the legislation is well refined by the time it gets to the Dáil. The Seanad input and public debate are a helpful influence on the legislation. My grá for Seanad Éireann probably emanates from the fact that I was a Member of this House at one time. To reassure those on the agricultural panel, it is not my intention to seek to return here in the near future.
This debate on agriculture and food is timely. We have considerable challenges before us with the mid-term review of the Common Agricultural Policy, enlargement of the European Union and the next world trade round. Senators contributions are awaited with interest.
When considering the issues facing our agriculture sector, it is worth recalling that agriculture remains more important to Ireland than to most other EU member states. The agri-food sector as a whole accounts for around 9% of GDP and employment and 7% of Irish exports. Because of its very low import content, agri-food contributes about one quarter of our total net foreign earnings.
The Government is committed to the long-term development of agriculture, food and rural development. The core of this policy is to maintain the greatest possible number of family farms, preserve the rural environment as the basis of a thriving rural community and have a competitive agri-business sector that serves the needs of national and international consumers.
Farm incomes are an important barometer of progress and, in that context, the subject of ongoing monitoring and analysis by the CSO, Teagasc, the European Commission and the Department. It is estimated that average income per person employed in agriculture increased by 15% in 2001 and 12% in 2000. The national farm survey published recently by Teagasc shows average family farm income increased by 17% in 2001 to over €15,800. This was in addition to a 22% increase in 2000. In considering the income situation it has also to be borne in mind that 64% of all farm households also have a source of off-farm income.
The increased availability of off-farm employment opportunities in rural areas has contributed to the future viability of many farm families. Because of the increasing importance of non-farm income to farm households, I have established a steering group on farm household income to assess up-to-date and comprehensive data in this area. The Department of Agriculture and Food chairs this group with participation from the CSO, Teagasc and the ESRI.
Public expenditure by the Department in support of the agri-food sector amounted to €2.7 billion in 2001, of which over 56% comes from the European Union. A record €1,382 million of this was in the form of direct payments to farmers, in the form of cheques in the post, which accounted for 53% of aggregate farm income. Expenditure also includes export refunds. Having produced the products there are export refunds to help exports to third countries. Intervention is available into which an amount of dairy products were put this year because of the difficulties in world dairying. There are also internal aids to support sectoral market prices at critical times. This very high level of public expenditure underlines the continuing commitment of the Government to the agri-food sector.
This year I have taken a series of special actions for the benefit of the farming and agriculture sector in recognition of particularly difficult market and weather conditions. These actions included obtaining EU agreement on a number of occasions to significantly strengthen market supports for dairy products when the price of milk and dairy products became difficult during the summer. Because most milk is produced during the summer it was important to get that support up to September. We also secured EU agreement to allow the use of set-aside land for grazing-fodder. Early this summer we had considerable rainfall and wet weather and this measure was important. We negotiated the removal of the Russian county ban on beef exports – six counties had been precluded from exporting beef to Russia and we obtained EU agreement to allow an increase by up to 30% in beef export refunds to assist the beef industry in agreeing contracts for exports to Egypt.
The actions also included obtaining EU agreement to allow an increase of up to 30% in beef export refunds to assist the beef industry in agreeing contracts for exports to Egypt, securing EU approval to have the advance payments under the bovine premium schemes increased from 60% to 80% this year, obtaining EU agreement to make an advance payment of 50% under the arable aid scheme on 16 October, which is one month ahead of the normal payment date, making administrative changes to simplify the rural environment protection scheme, making changes to reduce the paper work for farmers in applying for the 2003 extensification premia, and introducing improvements to the farm assist scheme.
Direct payments to farmers will bring total payments for the calendar year 2002 to considerably more than €1.4 billion. Ambitious targets for payment delivery in the protocol on direct payments to farmers are being met and Ireland's record for timely delivery of payments ranks us ahead of almost all other member states. Our system for delivering payments is one of the most efficient in the EU. We have considerably fewer disallowances in our payments system than other member states. All the data regarding meeting targets and deadlines and the efficiency of payments are available on the European Commission website.
These measures represent a concerted and proactive response on my part to the difficulties confronting farmers and the agriculture sector this year. I will continue this approach, especially as regards simplification of procedures in line with the commitments in my Department's customer service action plan.
On the beef sector, there have been protests in recent weeks concerning the price of beef. I was concerned that the disagreement between suppliers and factories could have given rise to a situation where the sector as a whole might suffer as a result of interruption of supplies of beef to our main markets. Fortunately, this has been avoided and I welcome the fact that slaughterings are continuing as normal.
Regardless of the rights and wrongs of the situation, any sector that is subject to ongoing disputes between producers and processors needs to re-examine itself seriously. The time has surely come when producers and processors or farmers and factories should work together in a concerted effort to ensure what is produced is what the market needs and that they avail of every possible outlet.
The day of producing and processing beef without an eye to the eventual market destination is gone. If the market demands a certain quality or age of animal, that is what must be produced. We are 100% self-sufficient in beef with 7.2 million cattle. We have outlets in the United Kingdom and will sell more than 200,000 tonnes there this year. Regrettably, only 25% of that will be on retail outlet shelves, the rest being in the lower end of the market in bulk and catering. That is not where it should go. Cattle more than 30 months old are not needed anymore for different reasons, yet we continue to keep them for longer than that.
We must accept the signals from the marketplace and produce what customers and consumers want. In this regard, I am pleased that producers have responded to the additional opportunities in different markets, especially the British market, by moving to finishing cattle earlier. This means those between 24 to 30 months. Anything older than that is not wanted anymore.
The most effective means of transmitting the needs of the market back to farmers is by means of price. If they obtain a better price for their product, they will continue to produce that product. Not only should the pricing system reflect the needs of the market, especially in terms of quality, it should also include a level of transparency and clarity which engenders the full confidence of the suppliers of the primary product.
Some 18 months ago I put a great deal of effort into putting this transparency in place which means every week the prices from different factories are published. That is a degree of transparency and clarity but I want this extended to include the returns from the marketplace. There is no point in factories saying they cannot pay any more than a certain price because farmers do not trust that system. They want transparency and clarity regarding the returns from the marketplace. Whatever business people are in, they need a margin to operate. If farmers receive an improved margin, they will respond to it.
The beef sector has come through difficult times in recent years and has shown itself to be resilient. The industry should work to ensure that no further risks are taken with valuable markets by interrupting supplies and that markets which have been reopened are not left to be supplied by competitors. If we open markets and they are not availed of, someone else will move in to supply it.
A classic example is the Egyptian market. Considerable political and diplomatic efforts were made to lift the ban on Irish beef to Egypt. The industry said it needed extra subsidies to get beef to that market and Commissioner Fischler allowed a 30% increase specifically focused on Egypt. Even with that, the industry has not availed of the opportunity and is not supplying the market. Only one consignment has been sent so far. That is regrettable because, if a market is opened up, a medium and long-term view should be taken and product should be supplied to it while ensuring greater competitiveness than others. There is not much point in making political and diplomatic efforts to open markets if it is left to competitors to supply them.
The agriculture sector or the environment in which it operates never remains static. We need to be continually aware of emerging challenges. In this regard, the Government is guided by the agri-food 2010 action plan, which is a comprehensive, long-term strategy for the sector. I had eminent people study the sector for the first decade of the millennium and they produced the plan in 1999 outlining the trends and likely development of agriculture and the agri-food sector for the first decade of this century. This is important because we do not operate in an ad hoc system. We have a medium and long-term strategy, namely, the 2010 action plan.
The mid-term review of Agenda 2000, enlargement and the World Trade Organisation negotiations loom large. Following the decision by the European Union Heads of Government at the European Council in Brussels on 24 and 25 October on the budgetary allocations in the enlarged Union, some of the major questions about the future of the common agricultural policy have been resolved satisfactorily. The European Council decided that in the short term, funding for the CAP in existing member states in the period to the end of 2006 will remain as agreed in Berlin under Agenda 2000. The costs of implementing the CAP in the new member states, including the costs of the phasing in of direct payments, will be provided separately as was also envisaged in Agenda 2000.
In the longer term beyond 2006, the Council agreed that the total annual outlay on market related expenditure and direct payments should not exceed the amount in real terms of the ceiling set for these expenditures for the existing Union for 2006 by the Berlin European Council plus expenditure for the ten new member states. This amounts to a total of €45.3 billion which constitutes the baseline for future years. The Council decided that expenditure in nominal terms over the years 2007 to 2013 should be kept within the baseline, increasing by 1% per annum. This will provide funding of €48.6 billion in 2013. I am confident that, based on current best estimates of expenditure for the years ahead, this level of funding will be sufficient to provide for the costs of the market-related expenditure and direct payments in a Union of 25 member states.
In arriving at its conclusions, the European Council achieved a balance between the need to contain expenditure on agriculture with the need to make a fair offer to the new member states. The agreement provides assurances to the net contributor member states that the extension of the CAP to a Union of 25 will not place intolerable burdens on their exchequers and, in the process, provides safeguards for the farmers of the existing member states.
In so far as it can be foreseen, budgetary provision for the CAP is now in place until 2013. This gives a great deal of stability, security and confidence for farmers moving forward in that they know the budgetary position and the financial support for farming and agriculture in an enlarged Union are secure. There were concerns about this during the referendum on the Nice treaty. What would pay for enlargement and how could farmers in Poland, Hungary and the Baltic states be brought up to the level of member states? We now have a financial framework up to 2013, which should give security to our farming community in that regard.
The decisions of the European Council are stated to be without prejudice to the future decisions on the CAP and the financing of the European Union after 2006; any result following the implementation of the reviews of the Agenda 2000 agreement provided for by the Berlin European Council, and the international commitments which the Union has undertaken, inter alia, in launching the Doha round of WTO negotiations.
As I stated, the European Council decisions on the EU budget were taken without prejudice to the outcome of the mid-term review of Agenda 2000, which is under way. Commissioner Fischler will be presenting detailed proposals in the coming months, as a follow-on to the outline proposals published last July, and seeking decisions on them in the Council in the new year. However, there is now little likelihood that a qualified majority can be obtained for the implementation of any significant change in the CAP before 2007.
A positive feature of the Brussels summit is that no upper limits have been placed after 2006 on rural development expenditure, which includes agri-environmental programmes such as the rural environment protection scheme, REPS, forestry and farmer retirement. The Council also emphasised that the needs of farmers living in disadvantaged areas should be safeguarded and multifunctional agriculture maintained in all areas of Europe. This represents a significant commitment by the European Council to protect and enhance the economic and social fabric of Europe's rural areas.
I repeat my commitment to the agriculture and food industry that I will not agree to changes to the Agenda 2000 agreement which will impact negatively on them. I have already stated my position clearly to the Council of Ministers.
The negotiations on EU enlargement are in their final stages and due to conclude at the EU summit in Copenhagen next month. It has now been agreed that ten new member states will join the European Union in 2004. As this coincides with Ireland's Presidency of the European Union in the first six months of 2004, this will be the first country to hold the Presidency of the enlarged European Union.
Direct payments will be phased in in the new member states over a ten year period. The first 25% of the level applicable in the Union of 15 will apply in 2004 followed by three increments of 5% in the next three years and, from 2008, by an annual increment of 10%, reaching 100% in 2013. This approach is designed to minimise the economic distortion that would in many cases result from sudden huge increases in income and avoid discouraging the restructuring of agriculture which will be necessary in many of the new member states.
Decisions remain to be taken on the sensitive issues of quotas and reference periods for the applicant countries. I expect these decisions to be finalised at the Copenhagen summit in December. It is clear that the conclusion of the enlargement negotiations will not create the conditions which will force further CAP reform on the Union.
As I indicated during the course of the campaign for the ratification of the Nice treaty, funding was provided separately for the costs of enlargement up to 2006. That position has been confirmed by the Heads of Government in Brussels. The decision on the budget post-2006 does not in itself require that further reform be undertaken in relation to market supports or direct payments. On the other hand, the integration of the new member states into a single market of approximately 480 million consumers without tariff or other trade barriers will create a new impetus for growth in the market and provide opportunities for all member states, old and new. Most of the new member states are more dependent on agriculture than we are and I expect will be most useful allies in defending the interests of agriculture within the European Union.
A new round of multilateral trade negotiations, including agriculture, was launched at the WTO Doha ministerial conference last November. The outcome of the new round, which will be of immense significance for EU and Irish agriculture, will pose a major challenge. The next WTO round will determine the conditions under which we can continue to export to third countries, the level of market access for our competitors to the EU market and the levels of EU support that can be provided for agriculture. We have particular concerns in relation to the retention of the European Union's system of direct payments and export subsidies. As I have already indicated, direct payments make a substantial contribution to farm incomes in Ireland and, under the current GATT Uruguay Round agreement, are exempt from reductions. My aim will be to ensure the continuation of this exemption into the future. I spoke of direct payments to farmers of €1.4 billion this year. If that is challenged by the WTO, it will have serious implications for Irish farmers and I want to continue the exemption.
As a major exporter of agricultural produce, we are heavily dependent on export subsidies to remain competitive on world markets. With my French colleague, I managed to ensure the terms of reference for the next round did not prejudge the outcome of the negotiations in terms of the elimination of export refunds as was sought by other WTO member countries. However, I am under no illusion that there is a strong hostility towards the CAP among certain trading groups and that the European Union's position will come under pressure in the difficult negotiations in the new round. While we can take considerable comfort from the outcome of the European Council in Brussels, the challenges to the CAP will continue. I remain determined to protect the gains from Agenda 2000 which represented a very good outcome for Ireland.
The agri-food sector is a major indigenous industry. I am committed to ensuring a favourable framework for the development of the sector and rural communities into the future and ensuring favourable conditions for the continued presence of high quality Irish produce, both for Irish consumers and on world export markets.