Oireachtas Joint and Select Committees
Thursday, 20 October 2016
Joint Oireachtas Committee on Agriculture, Food and the Marine
Agriculture Sector: European Commissioner for Agriculture and Rural Development
Apologies have been received from Senator Mulherin. Before beginning, I remind members, witnesses and persons in the Gallery to turn off their mobile phones as they affect the broadcasting system.
The European Commissioner for Agriculture and Rural Development, Mr. Phil Hogan, is appearing before us today. I am pleased to welcome him on my behalf and that of the committee and I thank him for taking time out of his busy schedule to address us on developments in the agriculture sector. I also welcome his officials, Mr. Dermot Ryan, Mr. Tom Tynan and Mr. Gerry Kiely, head of the European Commission representation in Ireland. I wish Mr. Kiely well in his new post and thank Ms Barbara Nolan, who served in that post, for her assistance to previous committees.
I am conscious of the time constraints and I understand that the meeting is to conclude at 11.45 a.m. in order for Mr. Hogan to address the Joint Committee on European Union Affairs. There will be a ten or 15-minute break for the changeover between this and the next meeting. During that changeover, both committees will have an opportunity for a photo-call outside the room.
The Commissioner is well aware of the privilege position through previous experience. Witnesses are protected by absolute privilege in respect of the evidence they are to give to the committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence.
They are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against any person outside the House or an official, either by name or in such a way as to make him or her identifiable.
As the Commissioner is aware, this committee is only in its infancy. As part of our work schedule, we have prioritised a number of issues. Obviously since the general election and the formation of this committee, Brexit has become the biggest issue and is a key element of our work programme. The second issue we have prioritised is the volatility in all agricultural sectors and the third is the mid-term review of the Common Agricultural Policy, CAP. We look forward to hearing the Commissioner's views on these issues.
Before I call on the Commissioner to speak, I must ask members to be focused with their questions. We have a limited timeframe so I will be giving each member the opportunity to ask one particular question and in that way we will get value for money from the Commissioner today. I ask members to put one question to the Commissioner initially and if we have time, we can go back around a second time.
I now invite the Commissioner to make his opening statement.
Mr. Phil Hogan:
I thank the Chairman and members of the committee for their invitation. I am pleased to be here again. Since my appointment as Commissioner, this is the second occasion on which I have been in the Irish Parliament. I have visited 20 national parliaments on the instructions of the President of the European Commission. Commissioners have been told to engage with public representatives and national parliaments and I am very pleased to do so.
This visit takes place at a time when trust in the institutions of the European Union is falling and criticism, some of it unfair, is being heaped on the EU. We need a debate about how the EU can better communicate with the citizens in a way that emphasises the positive contribution that the European Union can make to their lives. The Common Agriculture Policy, CAP, is one of those policies that makes an immense contribution to the lives of millions of farmers and other beneficiaries in every country in the EU. Without it, what kind of food policy or agricultural production system would we have in Europe? What kind of rural environment would we have and what kind of vitality would our rural communities enjoy? How would we guarantee the food security of our 500 million citizens?
Agriculture and the broader agrifood sector continues to be a very important economic mainstay for this country, particularly in rural areas where employment prospects are not always plentiful. Recently, I made a visit to Greece where I met the Prime Minister to discuss how agriculture and rural development can make a telling contribution to the economic recovery of his country and how it can be managed and supported. As an Irishman, I was pleased to be able to use this country as an example of how this can be achieved.
In his recent state of the Union address, President Juncker spoke of a Europe that preserves our way of life. He identified a number of characteristics that epitomise this way of life, one of which is our agricultural sector. He specifically committed the Commission to standing by our farmers, particularly when they are going through difficult times. The European Commission's solidarity with farmers in every country in the EU is illustrated by the fact that we have mobilised €1.5 billion to support our farmers during the recent period of market difficulty. We did so without invoking the crisis reserve of €433 million per annum. Producers were hit with an unjustified trade ban imposed by Russia and many farmers, including in this country, were hit by falling milk prices resulting from many factors. Pigmeat producers have also been through a very difficult time but the European Union has provided almost €130 million in additional support for the sector. This, of course, is in addition to the existing CAP budget of €56 billion per annum that is spent every year to help farmers in every country of the EU.
I know that for some the level of support provided by the Commission will never be enough. However, when viewed against the backdrop of the enormous pressure on any budget, particularly the budget of the European Union, in terms of dealing with the migration crisis, I believe that any reasonable observer would have to acknowledge that the Commission has honoured President Juncker's pledge to stand in solidarity with our farmers. To put it in context, €10 billion is being provided to help to address the migrant crisis in 2015 and 2016 while an additional €3 billion has been provided to Turkey to provide shelter for 2.5 million migrants.
The CAP has been the mainstay of agricultural production in Europe for more than half a century and has ensured that the Continent has not had to experience the stress of food insecurity that it went through in the earlier part of the twentieth century. The CAP has evolved into a much more market oriented policy than was the case in its earlier years.
This evolution has been embraced by Irish farmers who are outward-looking and export-focused. The CAP is not perfect, however. A new CAP came into effect in 2015 and even before it began to be implemented I was facing calls to simplify it. Some of those calls came from the very same Ministers and Members of the European Parliament who had just negotiated it. To date I have implemented over 20 simplification measures which have been widely welcomed by European farmers. I can go into the detail on those simplifications with the committee later if members wish. More simplifications are on the way. Changes to market rules will substantially reduce 250 Commission regulations to around 40. These simplifications make life a bit easier for business operators and help them to deliver on jobs and growth for rural areas.
A further series of important actions and simplifications are being discussed at the moment in the context of the mid-term review of the multi-annual financial framework, the so-called omnibus regulation. These measures were welcomed by the European Parliament last week. They are aimed at further simplifying the policy and increasing its efficiency and ability to deliver results without compromising the policy orientation. In particular, changes are proposed to the Rural Development Programme, RDP, to provide a sector-specific income stabilisation tool. This will give member states the opportunity to design a tool that is tailored for a specific sector which, it is intended, will make it more attractive for farmers and member states. The proposal provides better means to support farmers in times of market crisis and reflects recent difficult experiences in a number of sectors. A further substantial change is being proposed to the rural development regulations to introduce simpler rules for accessing loans and financial instruments. These changes are intended to give a necessary boost, to make better use of financial instruments in the agricultural sector and to provide farmers with greater access to capital, particularly young farmers for whom access to credit is a very big problem. The proposals will require full co-decision of the Council of Ministers and the European Parliament. I have urged the legislators, in whose hands the proposal now rests, to ensure that these meaningful changes can be enforced by the start of 2018.
I am also in the course of proposing a package of measures relating to the simplification of greening and I welcome the support shown by member states for the majority of the measures. While I have offered a number of compromises which I believe address many of the concerns expressed, it is important to restate that the CAP is an economic, environmental and social policy. The CAP has a strong environmental dimension and that is as it should be. The simple facts are that the environmental dimension is here to stay and we will not lower our level of environmental ambition. I would also point out that the greening and environment measures are worth €14 billion a year to European farmers.
Given the market orientation of the Irish agriculture and food sector and the importance of agrifood exports to this country, I would like to provide this committee with a short outline on the state of play in the markets at home and abroad. When I addressed this committee in June last year, the focus was still very much on the sectors in crisis, namely, dairy, pigmeat and fruit and vegetables. Today I am pleased to say that we are seeing something of a recovery in those hardest hit markets though we have yet to see this fragile recovery translating itself into money in farmers' pockets.
The milk market has been the primary focus over the last year and a half. The most recent information available suggests there is a now a general consensus on the improvement of market conditions once the adjustment in supply started to materialise. That adjustment has begun and its effect in Ireland is beginning to show through a welcome price recovery in the last few months. The milk reduction scheme, which is voluntary and which came into effect a few weeks ago, will help this trend. I note the participation of one in four Irish farmers. The scheme has proven to be very attractive and the high level of participation is a clear indication of the appetite for such a scheme. It is particularly noteworthy and important for the success of the scheme that all of the main milk-producing countries are significant participants, including the 4,400 applicants in Ireland. Indeed, in percentage terms, Ireland is the member state with the highest participation rate among milk producers, at 24%. This new and innovative scheme has seen participation by dairy farmers across the EU, with the exception of Greece.
The beef sector is of significant strategic importance to Ireland. The sector is facing difficulties, some arising from developments in the dairy sector which have resulted in the culling of a lot of cows and slaughtering of heifers. EU production also increased by over 3% this year. This is affecting the supply-demand balance. Exports remain dynamic, with an increase of 16.8% between January and July of this year. New emerging markets, such as the Philippines and Israel, are contributing to keeping our trade balance very positive. In addition, reasonable prices for raw materials and positive forecasts are keeping production costs within certain boundaries. I am convinced that one way to ensure development and an improvement in price is to help livestock farmers to find new markets.
I will be travelling to Turkey in early December in an effort to increase access to the market there for live as well as fresh-meat exports. I have already been to Mexico, Colombia, China and Japan to try to open new market opportunities for European farmers, while I will visit Vietnam, Hong Kong and Indonesia in two weeks. As regards third-country markets, I will be proposing that we look at promotion. In addition to dairy and pigmeat, I wish to have beef included as part of our external promotion programme in 2017. We also must raise awareness of the high quality and sustainability of European agriculture, including the unique extensive livestock sector in Europe. For that reason, I intend to include a targeted promotion programme for beef, with a budget of €15 million in 2017, aimed at increasing awareness among members of the general public in the EU of the value of sustainable agriculture and the role of agriculture in respect of climate action, from which livestock will also stand to benefit.
I will offer a few comments on Brexit, on which I will elaborate further during my appearance at the Joint Committee on European Affairs after this meeting. I am fully aware of the huge strategic importance this issue has for the agrifood sector in Ireland. Trade flows of food produce between the UK and Ireland are larger than the bilateral flows that either jurisdiction has with any other country in the world and account for almost £4 billion annually. In the agrifood trade, half of all Irish beef goes to the UK consumer market. Ireland is the UK's largest market and its second biggest supplier. A total of 52% of Northern Ireland's food exports travel south to the Republic of Ireland. I made these points in great detail to the European Commission's Brexit negotiator, Mr. Michel Barnier, a Frenchman. I met him two weeks ago and I am aware that he has been in Dublin since then to discuss these issues with the Government. Mr. Barnier is a former Commissioner and former French Minister for Agriculture, so he comes to the job with some experience and understanding of the issues, not least in the agriculture sector. I am also satisfied that as a result of his role as Commissioner with responsibility for Structural Funds in the past, he understands the North-South dimension as well.
I have no new insight into what will happen arising from the consequences of Brexit. The UK has yet to make up its mind on its negotiating position. Cross-border relationships and the UK's future relationship with the EU will be very difficult issues with which to deal. The truth is that nobody knows what the future holds, be it the conditions under which the UK will leave or the post-Brexit environment in which the UK and Ireland and the UK and the EU will be able to co-exist. There will have to be a relationship of some type. The most immediate impact of Brexit is on the exchange rate, with sterling weakening against the euro and the dollar since the UK's decision to leave the European Union. The impact of a weaker sterling currency is already being felt by Irish farmers and specific sectors.
I will conclude on a more positive note by recalling the words of the Commission President, Jean-Claude Juncker, when he described our agriculture sector as a strong part of our European way of life that he wishes to preserve. In his letter of intent for last week's work programme, he committed the Commission to the modernisation and simplification of the CAP to maximise its contribution not only to the Commission's political priorities but also to the sustainable development goals. We should not ignore these political signals from the President of the Commission. Aligning the CAP closely to the Juncker priorities in the context of the post-2020 discussions will provide policy options to ensure that we maintain a viable farming community and strong, sustainable rural communities in the years to come. This process is already under way. Last month I had the pleasure of holding a European Commission conference in Cork, which was attended by over 335 people representing all of the stakeholders. It was a very successful meeting and a document entitled A Better Life in Rural Areas was agreed at it. The latter contains a ten-point plan which advocates for investing in the potential of rural areas, not only in terms of jobs and growth but also for better integration into other policies. I look forward to doing my part to build a stronger and simpler CAP and one that is able to respond to market difficulties in the future.
I join the Chairman in welcoming the Commissioner, Mr. Hogan, and his team to the meeting. I thank the Commissioner for taking the time to meet this committee and the Joint Committee on European Affairs.
The Commissioner quite correctly mentioned Brexit. The position of agriculture will be crucial in the context of our engagement with Europe and the Commission in terms of how the agreement between Britain and Europe is completed.
I ask the Commissioner to update the committee on a specific issue. Since he was appointed Commissioner he has been making efforts to achieve progress on structural and policy measures which would help to improve the position of farmers in the retail chain. I know that an agricultural markets task force was established and I ask for an update on that. National legislation was published to introduce a national food ombudsman but this really is an issue that needs to be dealt with at European level. I ask the Commissioner to outline how things are progressing and how he sees this evolving in the period ahead.
I welcome the Commissioner, who brings a wealth of experience to his role. He touched on the conference that was held in Cork three weeks ago, which I was privileged to attend along with the Commissioner, the Minister for Agriculture, Food and the Marine, Deputy Michael Creed, and Irish MEPs, Deirdre Clune and Seán Kelly. It was a very important conference and what came out of it needs to be progressed. Bringing the proposals forward will be the key issue. The ten point plan and the other recommendations are key for rural communities across the EU and will enable the EU to engage effectively with those communities again. The work programme from that conference is a key issue.
The Commissioner referred to commodity prices and the situation today. However, he did not make any reference to grain prices and the cereal industry. That industry, in Ireland in particular, has taken a battering. Weather has been a major issue, as has pricing and questions now arise about the sustainability of the Irish grain industry. Unfortunately, grain farmers have had four terrible years and the outlook for next year is not good either. The grain industry is at the cliff edge in terms of its future sustainability. I ask the Commissioner to give his views on this matter.
I welcome the Commissioner. My question is also related to grain. Most of what I wanted to say has been covered by Senator Lombard but I would add that on the west coast, along an imaginary line from Kinsale to Letterkenny in Donegal, a large quantity of the crop has been lost. Irrespective of margins and prices, a lot of farmers in that particular area have no product to sell this year. I ask the Commissioner to outline what may be available or what could be done in the short term to support those farmers who have lost the totality of their crop, or certainly 75% to 80% of it. Some are still trying to salvage useless grain at less than one tonne per acre. The grain harvest is essentially a write-off along the west coast and I would like to hear the Commissioner's views on what could be done in the short-term in what are exceptional circumstances.
Mr. Phil Hogan:
Deputy McConalogue mentioned the very important issues of unfair trading practices, the position of farmers, processors and retailers in the food chain and specifically, the reducing margin of profitability for producers vis-à-visthe other actors in the food chain. In that context, 20 members states have decided to take individual action themselves, which signifies very clearly that this is a real problem. We must see if, at European level, we can harmonise the rules in this area. We do not want to have unintended consequences of distortions of competition, particularly as they would affect border areas. The UK model is quite interesting. We have had a number of hearings in the European Parliament on what is the best model to use. These ideas are feeding into the agri-market task force which is chaired by the former Dutch Minister for Agriculture, Professor Cees Veerman. That task force will report in the middle of November and will make recommendations. Those recommendations will be both interesting and important in terms of whether we will have an EU-wide legislative framework. There may be recommendations with regard to changes in contract law and with regard to transparency issues. I look forward to that report and this area is one that will be high on my political list for 2017.
The Cork 2.0 declaration on rural areas was a successful conference. Out of the conference will come an action plan from the Commission and this will feed in to the next reform proposals post 2020. The work will start in 2017. It was a timely conference and was well attended too. It is not every day that we get farmers, people in the environment area and politicians going into a room and coming out with an agreement. It was an interesting development in that respect as well.
Senator Lombard and Senator Paul Daly referred to the tillage crisis. I note that €4 million has been provided by the Minister for Agriculture, Food and the Marine to leverage part of the money for the €150 million loan scheme he is introducing. The proposal has now been submitted to the Commission for approval under the rural development programme. We are analysing the information we have received from the Irish Government at the moment. I hope to have an early conclusion of the discussions with a view to having some money provided from this fund for the hard-pressed tillage sector as soon as possible. There is no other proposal on the table - this is the proposal we are working with.
I welcome the Commissioner to the committee. I will concentrate my questions on the UK decision to leave the EU and the implications for this country. There is significant internal trade in this country with beef and milk in Northern Ireland coming down to the Twenty-six Counties. Weaker sterling will have an impact on all sectors. In recent weeks we have seen our mushroom sector come under extraordinary pressure. What is the Commissioner's view? When the Russian ban was introduced, the fruit and vegetable sector in Europe got an exceptional temporary measure put in place and producers in 20 countries were able to avail of it. A total of €400 million was drawn down under that temporary exceptional measure. If our mushroom sector is to survive until the renewal of contracts in six months or nine months, it will need such a measure from the Commission to keep the businesses operating. They have been caught offside with a political event that is completely outside their control. No one envisaged this would arise. They are trying to get better conditions from the major retailers in the UK, but it is not happening. Their circumstances are very much like those at the time of the Russian ban. I call on the Commission to look favourably on a temporary measure to try to help this sector to survive.
I welcome the Commissioner and thank him for his contribution. I am keen to know more about one issue. The Government is undertaking a review of the areas of natural constraint scheme and what will happen in this regard in the coming period. Many areas of natural constraint in Ireland correspond to the old disadvantaged areas. Over many years the areas have spread and grown. People in my part of the world in the north west are of the view that we are in a very disadvantaged area. We have marginal land and higher rainfall. Every disadvantage that can be put in our way is put in our way. I am interested in the views of the Commissioner with regard to how to address this in a way to ensure that farmers working in these areas can get a fairer and better slice of the cake. How do we ensure they will be supported better in future?
Deputy McConalogue raised another issue. It has always struck me that the Common Agricultural Policy is in place to support farmers. In effect, it is the real hand interfering in the market. At the same time, there are others who profiteer the most from food production. However, no one is taking control or putting in any hand to deal with that. Will that happen in future CAP reforms? What about the big multiples and processors? Will some hand be put in to deal with them as well?
I welcome the Commissioner to the committee. The Commissioner will be aware that 4,500 hectares of spring cereals have not been harvested due to poor weather. The Commissioner is aware of the crisis in the mushroom sector as well. Representatives of that sector were before the committee recently. They have been particularly impacted by the devaluation of sterling. There is another issue for dairy farmers in Ireland as well as farmers in other sectors. The common denominator is price. This has been going on for years. Primary producers in our country are not getting a fair price for their produce. Recently, when the farm organisation representatives were before the committee prior to the budget I asked for their views on how to address this. I assume that collectively all the members of this committee as well as farming organisations want to ensure a fair price for our primary producers.
They feel the solution rests with the Commission in terms of regulation and oversight of the industry and ensuring this matter is addressed. The Commissioner referred to this but I would like a robust assurance from him that he is determined to address the issue once and for all because that is at the heart of the crisis our farming communities face.
Mr. Phil Hogan:
Deputy Cahill mentioned the impact of Brexit and I agree with him. He has seen how the mushroom growers in his constituency have been affected by the impact on the currency already. We did have exceptional measures for the Russian embargo when €5.3 billion of exports were eliminated from the EU's agricultural trade at the stroke of a pen in 2014. It was a Europe-wide problem. All we can do is propose to the Minister, the sector and this committee that we will facilitate support for the de minimusarrangement we have in terms of giving up to €15,000 per farmer or €500,000 for a particular company over a three-year period. If any member state makes a submission to us on those grounds, we will consider it on the basis of not having to conflict with state-aid rules. This is the only way in which we can help the sector. There are other ways to deal with this by negotiating with the Irish Bankers' Federation to see if the financial institutions involved can provide better terms. The loan facilities being leveraged through the rural development programme are, perhaps, another way to deal with this. A series of measures can be taken but there will no special aid directly from the EU in the sense of a fund being created for one sector over another. It must have a Europe-wide dimension. That is the difficulty. It needs the support of all member states.
I do not have to tell this committee about the implications of Brexit for agriculture. The trading relationships are very problematic and there will have to be some study of the North-South dimension because 50% of the processed beef in the country and 3 million litres of milk go from Northern Ireland to the South each day for processing. All of these issues will be complicated but important to resolve, if we are to have a satisfactory outcome for the island of Ireland.
In response to Deputy Martin Kenny there has been no submission from the Irish Government regarding areas of natural constraint, ANCs, or areas with other specific constraints. However, we are examining the criteria relating to how we might adjudicate on this. I have been in politics long enough to know that delineating boundaries is always difficult. A total of €1.35 billion is being paid into ANCs in Ireland over the programme period 2014 to 2020, of which an additional amount goes to the Border, midlands and western, BMW, region. The BMW region has done a bit better than the rest of the country but, nevertheless, it will want to know what is going to happen in the future. This will be discussed in the context of the 2018 decisions that we have to make about budget in the EU and the criteria for ANCs. We have to see the submission from the Irish Government first.
Deputy Kenny and Senator Mac Lochlainn mentioned the food chain. They will understand that there are significant differences of opinion between northern European and southern European countries. By and large, northern European countries, with the exception of the UK which was surprising, are against an interventionist approach to these issues while southern European countries are for it. Nevertheless, I am of the view that we can work out an improvement on the current situation. What is happening in respect of the producers vis-à-visthe processors and retailers is not sustainable. We will be studying the outcome of the agricultural markets task force in November for the recommendations that we can implement in 2017. I know that I have the support of President Juncker in this because he mentioned it twice in his state of the union address to the European Parliament.
In response to Senator Lombard, the tillage sector is part of the package now seeking approval from Brussels for the €150 million loan facility. We will not delay too long more in giving that approval to the Minister to help him discharge whatever he can to help these sectors, such as the tillage and the mushroom sectors.
There is always volatility, with the last crisis in the dairy sector occurring in 2008. Farmers were getting 42 cent per litre of milk in 2013 and 2014 and everyone compares the price being achieved today with that benchmark. Farmers are seeing reasonable pricing levels which, if they were more stable, would make them very happy. However, the reality is that we are in a market-orientated situation, dictated to by unintended consequences such as Brexit, the Russian embargo and global overproduction. The scheme we devised to seek to balance demand and supply came into effect on 1 October and is already oversubscribed. At 14 cent a litre, farmers are voting with their feet to participate in that scheme. It will take 1.2 billion tonnes of milk out of the marketplace and, as a consequence, we are now seeing competition for milk between the co-operatives participating in the scheme and prices starting to go up for the farmer.
The laws of supply and demand come into play in all sectors. We must seek to drive up demand in countries outside the European Union and, at the same time, manage the market in such a way that we do not have overproduction to the extent we had in the past. Farmers were told in 2014 to drive on and produce as much as they could but the market circumstances changed in 2014, with the Russian embargo, and again in 2015. We have invested €1.5 billion across all sectors, including the dairy sector, pigmeat sector and fruit and vegetable sector, to mitigate some of the financial damage to farmers. I acknowledge it will never be enough but we are working to do all we can. We have also put additional moneys into promotion measures to help us find new markets in the Far East and around the world. That has resulted in a 6% increase in exports of food and drink products in 2016 to date, which is a major achievement for our agriculture and food sector in a context where we must find new markets to replace the €5.3 billion we lost arising from the ban on exports by Russia. We will continue to monitor the situation but I am glad to see the trend is in a better direction. We have a long way to go to ensure that trend favours the pocket of the farmers who lost money in 2015 and 2016 to date.
I welcome the Commissioner. I notice several former colleagues of mine sitting beside him, one of whom I have not seen since 1979. In regard to voluntary regulation pertaining to the various links in the food chain, the unavoidable fact is that the major multiples will continue to run riot leaving a cohort of producers in their wake. They will continue to embark upon various below-cost selling measures and implement a range of loss leaders. Producers will be wiped out as a consequence of those practices. There has been a fair attempt at doing precisely that in this country over the years, as the Commissioner knows. A statutory regulatory framework must be put in place to deal with this issue. I hope the report to which the Commissioner referred will recommend something like that. It is vital that any such scheme such operate at EU level.
In regard to Brexit, the whole situation is gripped by uncertainty. Everybody is pontificating but nobody has a handle on what exactly will happen. It is not possible to have any meaningful discussions in the vacuum that pertains in advance of real negotiations. I am sure Mr. Hogan has had discussions on the issues with his colleagues. It is easy to be patronising and many of the politically-based people in the EU institutions are experts at displaying empathy, but do they really get how important the North-South trade relationship is to us and how a hard Brexit could unfurl damage equivalent to the recession from which we have just emerged? For the agricultural sector specifically, there are issues like biosecurity and veterinary practices to consider, as well as the volatility associated with the currency exchange rate and its impact on our agricultural exports. We have already had casualties in the mushroom industry, as alluded to by Deputy Cahill. A major part of our concern is the fact the sector is so heavily export-orientated, with a particular reliance on the UK market.
Has the Commissioner looked at the impact of Brexit on his renegotiation of the overall Common Agricultural Policy, CAP, budget, which could potentially see a reduction of 37% or so, and on our allocation of €1.2 billion? There are a lot of ingredients in the melting point and when they are all put together we are left with a sobering scenario. I hope the Commissioner is taking all those matters into account.
I thank the Commissioner for coming here today.
Most of the questions on the CAP, Brexit and so on have been addressed by my colleagues on the committee so I will change tack slightly. Agrifood trade between the European Union and Africa has become a deficit situation for the African countries, with potentially serious consequences. The migrant crisis continues to rage and the imbalance in trade can lead to unemployment on African farmlands, food security risks, rural flight and migration, all of which are being experienced. Will the Commission consider carrying out a human rights assessment of trade matters with Africa in terms of agrifood? If we can support African countries to create jobs and make farming sustainable in the agrifood sector in their own countries, it will reduce the flow of migration towards Europe. One of the Danish agriculture groups, Arla, has carried out a human rights assessment of its trade in terms of the impacts of that. At a European level, is that something the Commissioner would consider?
I welcome also Mr. Dermot Ryan and his colleagues. As Vice Chairman of the Joint Committee on European Affairs, I have questions relating to Brexit that I will pose at the meeting following this one.
There are 3,000 farmers currently awaiting payments thanks to the eye in the sky. There is no question that the Commission's surveillance, through the Department of Agriculture, Food and the Marine, is far better than that of the CIA. People are coming to me asking when they will get their money. Is every other department of agriculture in Europe as overly diligent as the Department of Agriculture, Food and the Marine? In terms of who is blamed for this, it is the Commissioner, Phil Hogan, with the eye-in-the-sky satellite checking the position. The Commissioner gets little credit for all the good work being done but that issue is causing a problem. A number of farmers in Northern Ireland voted to leave the European Union because of what they perceived to be the overbearance of the Commission. I ask the Commissioner to give a direction down the line for people to lay off the farmers. We are in enough trouble at present and we cannot afford what is happening. I recently met a farmer at the races in Roscommon who has 1,000 sheep. He told me that without the grant from the European Union, he would not be in business. Sometimes we get the negative response from Irish farmers instead of the positive response, to which I believe the Commissioner is entitled.
Before calling the Commissioner, I want to ask him a brief question on the voluntary scheme recently introduced in the dairy sector. It is more than likely we are facing a period of uncertainty and that there will be ups and downs. As the Commissioner mentioned, we had a downward spiral in 2008 followed by an upturn. We are down again now. Nine times out of ten we are guaranteed that will happen again. Can we be certain that the voluntary scheme introduced recently will remain voluntary, rather than mandatory, in the future?
Mr. Phil Hogan:
I can answer that question immediately. There will be no return to quotas. The latest experience on the voluntary scheme, which was to manage supply, was very successful because it was led by farmers,. not co-operatives or member states. If it was left to co-operatives or member states, it might not be as successful because they want a cheaper product and cheaper raw materials. However, the price does not increase if there is not supply and demand in some form of equilibrium.
It is good to see Deputy Penrose again. The issues he raised about the food chain are very much on our radar.
When 20 member states are doing their own thing, he rightly points out that harmonisation of these rules is required or there will be distortions of competition, particularly in border areas. If somebody on each side of the border is doing something different, it will play hell.
There is a huge vacuum in Brexit negotiations. It is because the British Government has not decided what it wants. We will not know until next March when it triggers Article 50 so we are not in any position to know what to say or do until we hear what are the proposals from the other side. As I said earlier at another meeting, when the trigger mechanism from the British Government happens in March, the attention will turn to the 27 other member states and what they will do. They will be the ones that will decide the outcome. The Commission does not decide. It proposes and it is then up to the Council of Ministers and the European Parliament to reject, accept or modify and that is it. Sometimes, everyone thinks the Commission decides. It does not. It is the legislature which decides in the same way as it decides in these Houses. I agree that the uncertainty and instability this is causing is not helping Ireland, particularly in the agrifood sector where currency movements have been very unhelpful. I assure members that, since 23 June, I have been talking quite frequently to all Commissioners, including the president, and have met with Michel Barnier, the European Commission's negotiator on Brexit. They fully understand all the implications of any deal and the particular circumstances of the island of Ireland. It is important that they do understand and I am glad the Deputy asked that question. I am happy to say that they now understand it very much. At every diplomatic level, I assure the Deputy that the Irish diplomatic service is very much out there making sure every department in Brussels understands the implications of this.
In respect of the absence of additional funding mechanisms from member states, of course, there will be implications for all budgets. We will be expected to fight our corner in any multiannual financial framework negotiations in 2018 and 2019. As the largest part of the budget at 38%, agriculture comes into the firing line as it always does in respect of what are the other priorities. There are plenty of other priorities, sectors and policy issues that are looking for money. We will do our best but if you have €11 billion less in terms of the net contribution from the UK to the European budget, that is not a good starting place. If member states want to propose ways in which the European budget will be able to fill that €11 billion gap, that is open to discussion. At the end of the day, we must operate on the basis that we will have €11 billion less in the overall budget.
In response to Deputy Pringle, the EU imports more from Africa and developing countries than the US, Australia and Japan together. We have tariff-free access for many commodities from the African Continent in particular. The Deputy will see that in the Valletta summit last November, the role of agriculture was recognised for the first time as making an important contribution to dealing with the issue of irregular migration. Last December, I attended the World Trade Organization talks in Nairobi where we agreed that all export-distorting mechanisms for developing countries into the EU in terms of their products and the least developed countries are being eliminated. They started on 1 January for EU countries. Many positive things are happening that will help deal with the migration issue by helping farmers in Africa and elsewhere to be able to help themselves. Otherwise, as the Deputy rightly says, we will have a bigger migration issue in the future if we do not help farmers and trade with them in the preferential way we do now. They can impose tariffs on EU products going to Africa but we accept tariff-free imports and import large quantities of food tariff free from Africa. We have a good story to tell here. The recent agreement with six south African countries has certainly accentuated that. It was approved by the European Parliament three weeks ago. An increase of 335% in exports to those countries has been achieved in the past five years but there has been substantial trade in the other direction as well.
I realise that some in the non-governmental organisation, NGO, community get confused about these issues but the figures and agreements speak for themselves. They also do not wish to acknowledge that we have eliminated the trade distorting measures. I have regular conversations-----
Mr. Phil Hogan:
A total of 99% of them are paid. The Department of Agriculture, Food and the Marine is doing an excellent job, through its payment systems, in ensuring that farmers are paid. A sum of €1 billion will be paid out to farmers in October under the 70% advance payments which I authorised some months ago. I believe Ireland is top of the league in making payments in the European Union. French farmers are obliged to wait for considerably longer than their Irish counterparts to get their money. At a time when farmers need cash flow and support during market difficulties I am delighted that the Irish authorities and the Department of Agriculture, Food and the Marine are top of the league. They have a great record. In fact, 100% of the farm applications are coming into the Department online. That is one of the bright spots. Of course, there will always be some difficulties with the 1% - that will always be the way. However, the Department has made substantial progress with its systems to pay people quickly and on time, and I am very happy with the situation.
Mr. Phil Hogan:
They have. Every state has the same level of surveillance and controls. Some countries are not able to implement their controls properly, including the French Government, so we regularly have to give them time extensions to help them put their systems in place. If a state does not invest in the IT systems, it will not get the payments out to farmers on time. Ireland has made that investment over a number of years under successive Governments.
I referred to the question about volatility and to the fact that we do not wish to return to quotas. It is interesting that farmers responded magnificently to the recent €150 million scheme, with 4,500 farmers in Ireland deciding that they wished to participate in the dairy sector. We are looking at the lessons we can learn from the crises of the last two years to ascertain what new market tools we will need in the future reform of the CAP.
I thank the Commissioner and his officials for appearing before the committee today and giving us a detailed outline of our current position in the different commodity areas. I also thank the members for their obedience and co-operation with the one question rule today. Usually we give a little more flexibility in that regard.
The Secretary General of the Department of Agriculture, Food and the Marine will appear before the committee at our next meeting.