Mr. Paul Kelly:

I will begin and ask Mr. Barry to answer the questions on the infant formula and food safety issues, after which Mr. Healy will speak about beef processing. With regard to import substitution, in many respects it goes back to my earlier point that one must be cost competitive to get or stay on retail shelves. Import substitution can be positive if one gets one's cost base right, aside from getting the product right and innovation. This would provide an opportunity to make a pitch. Retailers have been working with many companies on private labels and the brands themselves and much development work has been done.

Senator Quinn spoke about Denmark and taxation. Denmark had a huge issue with people travelling from Denmark to Germany. We had a similar issue a few years ago with people heading north of the Border where costs were very much out of line and we also had VAT, duty and cost differentials. Opportunities exist, but they can only be realised if the cost base is right. Part of this will have to do with how companies make themselves more efficient. Companies have support from Enterprise Ireland with regard to lean manufacturing and this, combined with an appropriate tax regime in the country, is the way to go in this regard.

I will make some general points on job development. In the report we produced last year our analysis suggested the creation of up to 30,000 jobs. We also examined issues regarding employment and our findings are all based on CSO numbers. The total payroll for the sector is approximately €1.8 billion, which is the largest of any manufacturing sector. The average reckonable pay declined in 2009 and 2010, and this was symptomatic of most sectors, be they industry, manufacturing or services, as a result of the economic downturn. We were hit by sterling depreciation also and the need to regain lost competitiveness. Having said this, the average pay for the sector remains above the average for the entire economy. It is slightly lower than the average industrial pay but slightly above the average for the entire economy. More importantly, the CSO produced a job turn report which is the rate of turnover in the sector. The job turn for food and drink is 0.25%, which is lower than the average for the entire economy. In other words the rate of employee attrition is lower than average, which suggests something positive is happening in terms of the quality and attractiveness of working in the sector.

With regard to how IBEC deals with the grocery code, the Irish Business and Employers Confederation is an umbrella of many interest groups and on this issue distinct sectoral views are held. One view is represented by Retail Ireland and the other represented by Food and Drink Industry Ireland, which is the approach taken on this issue. A Bill to merge the Competition Authority and the National Consumer Agency is in the current legislative programme. It is intended this will have an enabling provision to allow the Minister for Jobs, Enterprise and Innovation enact a statutory grocery code of practice. The Minister made this announcement quite some time ago. We came before an Oireachtas joint committee to discuss the issue in 2009, and in 2006 when the groceries order was abolished. The view of the food industry is that the code is an appropriate remedy to put in place, and what is important is the speed with which it is enacted and put in place.

I acknowledge the Senator's point on the European context.

Since 2010, the UK has had the statutorily based groceries supply code of practice, GSCOP. The 42% of food exports to the UK worth about €3.5 billion are covered by the code when they are sold into the UK marketplace. If a company is based in Düsseldorf or Dublin but operates here, then they are bound by Irish legislation. Therefore, a German company operating in Ireland must comply with the terms and conditions of Irish competition law. It is expected that when the legislation and its associated statutory code are introduced, they will be operated on the same basis.

The legislation is being examined at European level. When I attended the Oireachtas Joint Committee on Agriculture, Food and the Marine two weeks ago, I outlined the matter in great detail. The European Commission has a framework and it hopes to decide by the end of the year whether to go down the legislative route, and it will do so on three bases. First, there is a voluntary code of practice that is being introduced around Europe. Second, during the earlier part of the year, the Commission completed a consultation on a Green Paper on unfair trading practices, and it will review the inputs to the paper. Third, the Commission will undertake an assessment exercise to determine the implications for a legislative approach or a softer approach over the coming months.

It is recognised that we have a Single Market. For many aspects of what my organisation deals with, either trade or food safety, we have a Single Market and there has been major harmonisation. There is also recognition that various initiatives in the sector are taking place around Europe, some of which veer more towards legislation while others veer towards voluntary initiatives. Therefore, there will be a need to examine whether the appropriate measure is to harmonise at European level. Having said that, contract law varies around Europe so it may be a little more difficult to harmonise legislation at a European level than for, say, food safety. The matter is being explored at European level but not in isolation by the Commission services. All the players along the food chain, including the food and retailer associations, are working together to compile a voluntary initiative. They are in weekly communication with the Commission on the matter.