Oireachtas Joint and Select Committees
Thursday, 20 October 2016
Joint Oireachtas Committee on European Union Affairs
State of the Union 2016: European Commissioner for Agriculture and Rural Development
Apologies have been received from Deputy Mattie McGrath. Before we begin, I remind members of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable.
As time is particularly tight, we have only a limited period with the Commissioner for Agriculture and Rural Development, Mr. Phil Hogan, and I suggest that we move directly to our engagement with him. On behalf of the committee, I welcome him and the members of his team, Mr. Dermot Ryan and Mr. Tom Tynan, to their first meeting with the joint committee. The Commissioner is obviously well known to the Houses and we look forward to working with him and his colleagues. I also welcome Mr. Gerry Kiely, the new head of the European Commission office in Dublin. On behalf of the committee, I congratulate him on his new role. We hope to engage with him and his colleagues who are based in Dublin on an ongoing basis.
This committee has a particular role and responsibility to apply appropriate scrutiny to the strategic direction of the EU and its institutions. The state of the Union speech that the President of the European Commission, Mr. Jean-Claude Juncker, delivers to the European Parliament is a key part of that. It is a single speech but also a set of documents of intent in that it signals what the European Commission intends to prioritise. For this reason alone, it is important to us. It also starts a process that results in the publication of the Commission's annual work programme. My colleagues are interested in knowing where the Commission will lead us over the next year or so. We might begin with that discussion before opening the floor to members' questions.
Mr. Phil Hogan:
I thank the committee. It is a pleasure to be present this afternoon. I point to the appointment of Mr. Kiely as head of the EU office, which is based on Lower Mount Street. It used to be on Dawson Street at the corner of Molesworth Street.
People on this committee are welcome to use those offices at any time. As you have said, Chairman, it is an interesting time for all of us in the European Union. As a Commissioner I can say there is never a dull moment. Circumstances are changing at home and abroad. In the same way as the election this year in Ireland dramatically changed the political landscape, so too is the political landscape changing in Europe. New elections or referenda bring new challenges and it is becoming topical to claim that the European Union is in crisis, or even an existential crisis, something the EU Commission President, Mr. Juncker, acknowledged recently, at least in part. Commentators lay all the problems on top of one another, such as terrorism, refugees, the euro, poor economic performance, high unemployment and Brexit, and they look for solutions. The Prime Minister of France, Mr. Valls, did it recently when he argued for an approach to Europe by our politicians and citizens that emphasises our European identity, shared values and European patriotism. This is an opinion I share, for it is high time we stopped blaming the Union for everything that goes wrong while taking credit nationally for everything that goes right. In his state of the Union speech Mr. Juncker also spoke of the European way of life, something he said was worth preserving. What we often do not realise is that the European Union is the people of all the member states. Blaming the European Union for all of Europe's ills is a lopsided attitude which has caused disconnect with the people. It has done a great deal to erode their confidence in the European Union and fuels some wrong-headed opinions we hear today. It is also a lazy narrative that does not stand up to scrutiny.
Yet it is naive to argue that all is well with the European Union. To echo the words of Mr. Juncker, we must start with a sense of realism and with great honesty. First of all, we should admit that we have many unresolved problems in the European Union. Today I am keen to discuss some of the issues that feed the narrative, one at a time. This will help us to see that perhaps we are on the way to sorting some of them out.
Brexit is a special case. It is a headache for the Union but a full-blown crisis for the United Kingdom with the high risk of collateral damage for Ireland. I will come to that at the end of my remarks. Mr. Juncker has acknowledged that the Union has problems. He has acknowledged that the Union has work to do to improve its management of the economy and the currency, to accelerate inclusive growth and to raise employment levels. We are making progress from the darkest days of some years ago. I will outline three or four initiatives under way. These actions are intended to help improve some of the fundamentals of our economy, as well as correct some of the faults that have emerged and persisted in the course of the current economic slow-down.
Jobs, growth and investment are the Union's top priorities. There are signs that our efforts are beginning to pay off. Europe is delivering on youth employment. The performance of young people in the Union's labour market overall has surpassed expectations since 2013. There are 1.4 million fewer people under 25 years of age unemployed and 900,000 fewer young people not in employment, education or training. These trends suggest the Union's actions are beginning to make a difference with the help of member state programmes. Approximately 9 million young people took up an offer, the majority of which were offers of employment. The youth employment initiative has had an impact in Ireland. Since its entry into force in 2013, the youth employment initiative has mobilised €68 million in additional EU resources. When combined with matched European Social Fund moneys, this means we have seen €136 million in targeted EU assistance to tackle the problem of youth unemployment in Ireland. We still have a long way to go before we reach a satisfactory position on youth employment in Ireland and the Union as a whole. Similarly, we have a way to go on other issues.
The investment plan for Europe is delivering clear results. The European Fund for Strategic Investment focuses on removing obstacles to investment, providing technical assistance to investment projects and making smarter use of new and existing financial resources. It has already raised €116 billion in investments in the first year of operation.
Economic growth is picking up in the EU, investment is increasing and unemployment is down. The trends are positive, thanks in part to this new Juncker fund. Another example of the ongoing efforts to increase our economic opportunities is demonstrated by our ongoing efforts to conclude trade deals that are good for Europe. One such trade deal is the deal proposed with Canada. The deal, known as Comprehensive Economic and Trade Agreement, CETA, is a good deal. It stands to benefit European Union exporters, especially small businesses and the food sector, through new protections and new opportunities. As the most globalised open economy in the Union, Ireland will benefit. Indeed, the benefits will be more certain bearing in mind our strong historical, cultural, linguistic and economic ties with Canada. I was surprised, therefore, when the Seanad rejected CETA recently. Such an event was widely reported by media sources in Europe. Is rejection of a good trade deal a view Ireland should be conveying to the world? This is relevant not only in terms of our being open for investment but also in terms of our relationship with a country that gave an outlet for many of our young people during the recent economic crisis. It is difficult to see how rejection of this trade deal is in the interests of the citizens of Ireland.
Raising the proposed trade agreement provides a relevant bridge to Brexit. As I have said, the leaving arrangements and the future UK trade arrangements are critical to Ireland. It is no exaggeration to suggest that Brexit concerns Ireland almost as much as it concerns the UK. I will set out some examples. Since the UK Prime Minister, Ms May, announced that she will give formal notice of the UK decision to leave by the end of March things have begun to clarify. The pound has weakened. We have also seen signs of how Brexit will raise food prices in the UK. One example was the Marmite spat between Unilever and Tesco. Unilever sought to put up prices and Tesco has resisted, at least for the time being.
The land border is another question. Until 1973 the trade or economic aspect of the Border was an Ireland-UK affair. Then, when both countries joined the European Economic Community, it became an EU-affair. Now, for the first time in history, the trade or economic aspect of the Border is about to become an EU-UK affair or an EU-Ireland-UK affair. Committee members should reflect on how important the European Union aspect will become if the United Kingdom turns again to a cheap food policy as part of its drive to become more competitive in international markets. North of the Border will be cheap food and a different way of supporting farm incomes, while south of the Border will operate under the Common Agricultural Policy of the European Union.
There is not a great deal we can say about it at this stage because no one knows exactly how it is going to finish. However, we must get used to the salient facts. Last week the EU Council President, Mr. Tusk echoed the words of Commission President, Mr. Juncker, from the week before: the choice of the United Kingdom is between a hard Brexit and no Brexit, and only no Brexit can give us the Border we have now. This is something to which I, as European Union Commissioner for Agriculture and Rural Development, am giving attention, and I know that Ireland is doing the same.
These three issues justify the claim that Brexit concerns Ireland as much as the UK, but there are many others. I predict that conversations between Dublin and Brussels will be almost as significant as those between London and Brussels. The first public estimates are as high as €40 billion for the UK debt to the EU for past promises. Reflecting EU accounting rules, unpaid promises have built up in recent years and now the United Kingdom must make good its share of this backlog. How is this going to be resolved? To the extent that the UK escapes this commitment, other member states, including Ireland, will have to stump up extra contributions. This is another reason for Ireland to be wary.
I do not intend to speculate further. The position of the European Commission remains as it has been since the referendum. Until Article 50 notification is received, the negotiations cannot begin, although a great deal of preparatory work is in hand. The Commission's Article 50 task force is operational and is being led by Michel Barnier, a former French Minister for Agriculture and Fisheries and a former European Commissioner. He is preparing and conducting the negotiations. It is no coincidence that one of Mr. Barnier's first visits was to Dublin last week.
The extent of economic integration on the island of Ireland is unmatched anywhere else in the European Union. Thus, the level of potential disruption from a so-called hard Brexit will be considerable. This is already acknowledged by the Irish Government in the recent budget. Before the referendum vote, I made clear some of the mutual risks in a speech at Queen's University, Belfast in May. My position remains the same: there are serious potential negative outcomes. For example, 40% of all Northern Irish milk is processed in the South. More than 50% of Irish beef and cheese goes to the United Kingdom. A total of 40% of Ireland's exports go to the United Kingdom. Ireland's all-island energy market, cross-Border health care, fisheries and aviation will all be potentially affected by a hard Brexit.
On the other hand, a hard Brexit might bring some opportunities for Ireland. What will happen to Britain's financial sector if it loses its all-important passporting provision? Will inward investment choose Ireland rather than the United Kingdom? Although these possibilities do not, for the moment, seem to offer a consolation for the difficulties Ireland is already experiencing due to the decline of sterling, they raise unanswered questions.
There are other delicate political issues not least of which is the status of the Good Friday Agreement, which is underpinned by reference to European Union law. There are questions over the future of the common travel area and the status of Irish citizens in the United Kingdom - this is of concern given the present weight of opinion against European Union citizens working there - as well as British citizens resident in Ireland, of whom there are more than 250,000.
Ireland and the United Kingdom are joined together in many ways and that is not going to be changed by Brexit. However, the fact remains that Brexit is going to throw many old issues into a new light.
Ireland and the European Union must be quick to understand this and find ways to deal with it because it is vital for our future and for the future of the United Kingdom, UK, not least in a 21st century globalised economic system where geographic proximity still matters.
Why does Britain trade more with Ireland than with China, Japan, Russia and Brazil combined and why are we so linked together in Brexit? Time zones still matter, the ability of professionals in the services sector to travel freely and easily by short-haul air travel is still important for the professional services sector, one of the most important sectors in the UK economy. Britain and Ireland are trading nations and the UK's departure presents challenges to both. We still do not know what kind of post-Brexit relationship the UK and the EU will have, but the EU is clear that it wants the UK as a close partner and we look forward to the UK confirming its intention in this respect in March. Ireland has developed an almost disproportionate trading dependence on the UK and must now seek to increase its contacts with the rest of the EU.
What is clear above all, is that any deal, by its nature, will be inferior to the deal that the UK currently enjoys due to its membership of the EU. The UK is going to learn a hard lesson, it is not going to have its cake and eat it. The posturing and fancy talk of Brexit is already beginning to collide with reality. Brexiteers in Britain argue that strong industrial interests in France and Germany will lean on their governments to conclude a quick deal with the UK. We shall see. All I would observe in this connection is that the referendum discussion was characterised by half-truths and some outright lies. We already see some features of Brexit becoming evident, even though they were dismissed in the referendum debates as scaremongering.
In conclusion, Chairman and members, I repeat that the EU is working its way through its problems. There are positive signs. As I said, the President’s state-of-the-union address showed how the Union is prioritising jobs, growth and investment. This blueprint is bearing fruit. I want to leave committee members under no illusion but that the Union is clear-headed when it comes to dealing with the United Kingdom in its Brexit negotiations. With patience, solutions can be found to the issues that will arise, particularly in respect of the island of Ireland.
I want, however, again to underline that these negotiations are almost as much about Ireland as they are the United Kingdom. I know the Irish Government is working hard to bring this home to the EU institutions and to Michel Barnier, the chief negotiator but time is short.
Ireland must use the days from now to next March to make its case clear and heard; and ensure it is taken into account. As a member of the European Commission I want to reassure the committee and the Irish Government that the Commission understands the difficulties Ireland faces. We are in this together as we fight for the best possible outcome for Ireland and the EU as a whole.
I thank the Commissioner for the straight frank report he has given us because we like it straight. I omitted to welcome our guests in the Public Gallery and the members of the press. I call Senator Coghlan.
I reiterate the Chairman's remarks of welcome to the Commissioner and his staff. As the Chairman said he gave it to us very straight and from the shoulder.
Given the shortfall of the order of €11 billion, and the collateral damage to Ireland, that will arise from the loss of Britain to the Union, if it happens, will the Commission be able to do with less? It will be down from 28 to 27 members. How will it make up the shortfall? What advice would the Commissioner give to Ireland? He said the arrangement between Ireland and Britain will be as important as that between Britain and the EU. Is he encouraging a bilateral deal in advance of Britain's invoking Article 50 in the hope that afterwards the Commission might give it its blessing? So much is bound up here, such as the Good Friday Agreement and the tie-in with European law; as the Commissioner suggested, we may need to get busy in that regard. I will be interested in his commentary on that.
A few days ago this committee and the Oireachtas Joint Committee on the Implementation of the Good Friday Agreement met the Brexit committee from the House of Lords. It was an informal meeting but they seemed to be very concerned with a case in the High Court in Britain, which they expect will go to the Supreme Court. I got the distinct impression that while their constitution is unwritten their lordships and the House of Lords would be very concerned with the supremacy of parliament. They seemed anxious to get into the debate in parliament following the outcome of any Supreme Court hearing. They seemed to think that the Prime Minister and British Government will not get their own way in the outcome of the case.
The Commissioner mentioned comprehensive economic and trade agreement, CETA. I agree that it was unfortunate the way the Seanad vote went. Our good friends in Fianna Fáil made a very strong speech in favour of it but abstained in the vote.
It was lost by only one. Let us forget about that and Senator Leyden's interjection.
I accept what the Commissioner says about that and that it will be a very good deal. Does he think it and the Transatlantic Trade and Investment Partnership, TTIP, can now be satisfactorily concluded?
I would like to welcome the Commissioner and his team, including Dermot Ryan, who is a member of his cabinet. He has given the most comprehensive response I have heard from anyone in respect of the future after Brexit. I am delighted that he is so knowledgeable about this and have confidence in him as our Commissioner. I know he is working for the European Commission but he can never forget where he came from. He is well aware that the common travel area has existed since 1922, comprising 499 km of open border. We are entering an impossible situation. It is uncharted waters. I asked President Hollande at the European Council last week whether he felt we should have a representative on the negotiating team. There is nobody from Ireland on it. It will be holding secret negotiations, will report to the Commission and the prime ministers and presidents but we have nobody monitoring the day to day negotiations and we are the most affected. We should have an observation or participation role. We are the only country with that border with the UK. I know the Commission will be involved in the negotiations which will go on for approximately two years after Article 50 kicks in next March. This is the most significant event since the foundation of the State. I am delighted that the senior members of the media will print the Commissioner's speech today and that the diplomatic corps representatives will have it too.
I also welcome the Commissioner here this afternoon and thank him for his straight talking and for sharing his views on the many challenges facing the European Union at this time. The committee is very preoccupied with Brexit and the Commissioner dealt with that. Does he believe the Commission understands and appreciates the special and unique position of Ireland in respect of Brexit? The Government and the Parliament are trying to get that message out but I would be interested in knowing if that work is succeeding and the Commission understands our position in respect of the peace process, the Border, free trade and the common travel area. What is his view of newspaper reports that the Irish Government will seek legal protection for the special status of Northern Ireland to guard against the threat of a hard border on the island? Perhaps there is a possibility of the North remaining within the Single Market and the customs Union thus safeguarding the free movement of goods and people on the island, irrespective of Britain's future status.
It is a practical solution that is being floated and I am interested to hear the Commissioner's view on it.
We heard in the news in recent days that draft proposals are due to be published by the European Commission next week on a common consolidated corporate tax base. The latter part of these proposals represent a significant threat to Ireland's tax sovereignty. Consolidating the tax base will hand the Commission too much power and influence over the tax rates of individual member states. It is tax harmonisation through the back door. This is an issue that will be very much in the news next week. The Commissioner will appreciate from his time in public life in this State that our 12.5% corporation tax rate is very important to us and a fundamental aspect of our foreign direct investment policy. Will he comment on that?
On the migration issue and the EU-Turkey deal, there tends to be a focus here in Ireland on the humanitarian aspects of these matters. However, it seems the EU is looking at the issue more from the perspective of simply stemming the flow of migrants. The proposal was that 160,000 people would be relocated but, thus far, only 5,000 such relocations have taken place. Will Mr. Hogan give his view on whether Europe has moved away from a humanitarian response to the crisis?
I thank the Commissioner for joining us today. I appreciate that he has an excellent knowledge of matters pertaining to Ireland given his background in politics here. Although he is now a Commissioner, he is an Irishman true and proud. Setting aside Brexit, the greatest single challenge to this country is the politicisation of the Commission, as seen by its straying into the matter of tax harmonisation. In the long run, the potential damage to the economic foundations on which we have built our State is far greater from that development than from Brexit. The misguided approach taken by one of Mr. Hogan's colleagues on the Apple tax case shows there is very much a politicised way of thinking on this topic within the Commission. I am interested in how Mr. Hogan views the Commission's stance in these matters and its straying into what is a national issue, namely, the right to set taxes.
There is a concern about how representative of the directly affected member states are the various subgroups and negotiating teams within the Commission. It is very important that Ireland has the strongest possible voice in the Brexit negotiations. If this were happening on the far side of the Continent, with another member state being left as the only one with a land border with a state that was leaving the EU, I cannot envisage a situation where there would not be direct involvement by a representative of the affected state in the process of negotiations with the departing state. Reporting-back processes are all well and good but there is not yet sufficient recognition within the EU of the effect of creating this border. Mr. Hogan made a very interesting observation in his opening statement, namely, that only no Brexit can maintain the current Border situation. If that is the Commission's view, it is a very worrying one. There will be an impact on the island of Ireland in so many ways, including import-export practices, free travel and all the things we value as an island nation. That impact cannot be overstated. I am very concerned there might not be a willingness to accept the need for a special consideration in respect of Northern Ireland in the negotiations. I accept there are conflicting views among member states regarding federalism, regional autonomy and so on. However, the case regarding Northern Ireland must be heard by the Commission.
In terms of the Commission's dealings on trade, I agree with Mr. Hogan that we are an open trading country and stand to be a principal beneficiary of trade deals. However, recent events in other member states have clearly shown there is a disconnect between the way ordinary people see the European Union now and how it is seen by senior people within the institutions of the Union and by members of the Commission and the Parliament. That disconnect very often has to do with how financial and trade policies are not only developed but portrayed and the impact they have on people's everyday lives. The Commission has singularly failed to communicate the benefits to citizens of living within the European Union. We are very much at risk of putting ourselves in a situation where what is perceived as the interest of the European establishment does not correspond with the interest of its peoples.
That is one of the greatest threats to the European project and it ties into my last point. We are very much focused at this time, and rightly so, on the impact on Ireland of Brexit. However, the reality is that the negotiations conducted by the EU with the UK, if not done correctly, could ultimately lead to the dissolution of the EU. If we are left with a situation whereby the UK seems better off materially in almost every way by leaving the EU, there will most likely be a domino effect as certain other member states seek to follow its lead. I am particularly interested in Mr. Hogan's view on how the Commission can reconcile that problem with our requirement for a recognition in the negotiations of the particular impact on Ireland of the UK's departure from the Union.
I welcome the Commissioner and his colleagues. He has given a forthright assessment of the scene that is unfolding before us all in Europe and, in particular, its implications for this country and the UK. He is correct in his conclusion that the best thing that can happen in respect of Brexit is that it does not happen. Unfortunately, we all have underestimated the impact if it should take place. More details in this regard are likely to emerge in the coming months, none of them positive. I do not see how there can be a better situation for Ireland, North and South, for Ireland Inc., for the UK and for the European Union itself in the wake of the departure of the UK. There has been no reference today to the degree to which the Union may be damaged by one country jumping overboard for whatever reason. I strongly concur with the reference by my colleague, Deputy Brophy, to the politicisation of the European Commission. This goes back to the decision to have a single Commissioner for each member state, something that was very much sought by this country. I was one of those who strongly opposed that development, my view being that the 15 Commissioners should be representative of the entire Union, each directly and equally accountable to all member states. Together with the increased powers for the European Parliament, that development represents a huge threat to the position of smaller countries within the Union.
I do not like being lectured to by Members of the European Parliament on what we in this country should do about our taxation policy. We are an independent country which has always adhered to and contributed to the European project. When I see people clicking their fingers and admonishing us for allegedly departing from the script in a way that is inconsistent with the European concept, I ask myself who they are to raise these questions and whether they are qualified to do so.
Have they a record that is sufficient to convince us that they are to be taken seriously? I refer, in particular, to Members of the European Parliament who have opined that there can be only one outcome to the so-called Apple tax issue, namely, that Ireland will lose. One presumes the honourable and enlightened MEPs also have access to the judges at the European courts. I do not think so and I reject and resent being treated this way by anybody in any position of authority.
The question of common consolidated corporate tax base, CCCTB, has been referred to. I am not alone in thinking that there is a concerted effort to punish our country for having a 12.5% corporation tax. It is appalling to see representatives of this country denigrating their homeland on the international stage. There are plenty of other people willing to do so. There is no need for our own people to do it. They can make a trade of it and it is good press for them but it does not do Ireland Inc. any good. Why is there such resentment? We all know profits earned in other member states and non-EU states are included in the totality of what is levelled against Ireland. Ireland is allegedly being given the responsibility for collecting taxes on profits earned in other jurisdictions. Ireland has no function in this area and the EU does not have the authority to tell us that we do.
I completely agree with the positive points the Commissioner made. There are other negative aspects, however. Some years ago, an insurance company came to this jurisdiction. It was registered in another European country. It left in a hurry with unpaid debts which must be carried by the motoring public here. As far as I am aware, nobody admonished the company. I see no sign of it from any quarter. Some years ago, and prior to the end of the boom, certain banks introduced themselves to this jurisdiction. They traded profitably but undermined the Irish banking system. Afterwards, they walked away, back to their home jurisdictions and nobody admonished them. It is unfair and undemocratic that Ireland, as a small country which has always contributed to the European project, should be treated in this fashion.
I have spoken about migration before. The saddest emblem of the EU's response to migration was the razor wire that was seen to be the iconic response to the refugees who were swarming across the borders. They were running away from something which was not happiness, health and good fortune. While the EU, as an entity, did not do this, individual member states - by virtue of their influence and geographic position - influenced it. It is an everlasting image of the EU's attitude to something to which it should have taken a totally different attitude by virtue of its own history. I hope there is the will to change all those things. The question for the future is whether we have free trade, the Single Market, common trade over a wide area or return to the days of tariffs. If we return to trade tariffs, which some people would have us believe are the answer to our prayers and problems, the smaller countries, again, unfortunately, will suffer heavily.
I am sorry for going on for so long. I remain totally committed to everything the EU sought to achieve over the years. I have become a little cynical in recent times that we tend to lose the sight of the target and go down side roads, much to the detriment of the European project.
I join others in welcoming the Commissioner and his team from his cabinet and the Commission office here in Dublin. I will pick up where Deputies Colm Brophy and Bernard Durkan left off. Like Deputy Durkan, I am a committed Europhile, and always have been. However, it is becoming increasingly difficult to be the person who sells the European ideal and pushes the EU agenda in the member states. There is an increasing level of disconnect in Brussels, from the European Commission primarily. I am not necessarily talking about the 28 Commissioners but the officials, in one degree. There is a disconnect from what is really happening in the member states. The Commissioner is right that far too many people in member states are happy to claim responsibility for the good news and blame Brussels, or wherever else, for the bad news. There is a requirement for the EU to get back to basics and truly demonstrate, across the EU, what the EU is delivering for the people. This is very apparent in the trade deals that are being negotiated and that will negotiated.
I agree that CETA is a great deal. TTIP has the potential to be a good deal. During last week's Seanad debate, which was narrowly lost given that some people decided to abdicate their democratic responsibility, I argued at length that the way the deals were negotiated was no longer fit for purpose. Non-transparent negotiations behind closed doors do not cut the mustard anymore. We need to get the public involved and get agreement. Telling Oireachtas Members or MEPS that to view negotiation documents they must go to a secret location on Kildare Street and hand in their phones does not pass. It is very difficult for us, as pro-Europeans who believe in free trade and who are not anti-globalisation to sell the deals if we are constantly having to dispel images of conspiracy theories lurking in the corridors. Those deals are vitally important, especially in light of Brexit.
Given the Commissioner's portfolio, and the importance of trade to it, what other deals are in the pipeline? What other options are presenting themselves to Ireland and the wider EU? The Commissioner mentioned that 50% of Irish beef is exported to the UK. It is great that we have reached new deals with China and the US. Where else in the Far East can we look for deals? Last week, the Irish Government has confirmed a deal on exporting lamb to Iran. While all these are very welcome, Ireland's biggest export is pharmaceuticals. We need to see where all the deals are.
The sanctions on Russia in light of its activities in Ukraine have worked. While they have hit certain economies and producers, including pork producers in Ireland, they have been important in light of President Putin's action or inaction in Crimea, depending on which way he says it. This debate has moved on to the situation in Syria. If matters in Ukraine and Crimea were to sort themselves out, will sanctions stay in place in light of the Russian Government's activities in bombing so many innocent civilians and humanitarian workers in Syria? If not, what can the European Commission to do in order to put pressure on Russia?
Again, I thank the Commissioner for his contribution and his work in the Commission so far. Some years ago, I watched his performance before the agriculture committee of the European Parliament and it was a master-class. I belatedly congratulate the Commissioner on it. He is very deserving of the position he holds. I look forward to his responses.
I welcome the Commissioner and his team. I thank him for his very detailed and forthright presentation. One of the issues we have been discussing here in previous meetings is how aware the EU needs to be about the complexities, given the recent vote in the UK to leave the EU, particularly regarding exports. Ireland, being such an export-driven country, especially in the food industry, many of our exports go to Europe via the UK, and there are potentially issues for the future, given Britain's decision. This particularly relates to the food industry, which is a massive industry in Ireland, and the revenue that comes in from it.
It is regarded as a high end, value added product. How aware is the EU of the complexities of that and the difficulties it potentially could pose for the future? Obviously, we wish to avoid that because it is such an important factor in the Irish market and economy. With regard to being over-reliant on the UK market, I have stated previously in the Dáil that we must become more focused on getting a market in other EU countries in order to become more vibrant and viable, rather than being so dependent on the UK market. To that end, I have called on the Department of Jobs, Enterprise and Innovation to consider putting a fund in place so we can promote our products better in Europe and to make ourselves more independent and less reliant on the UK market. Perhaps the Commissioner would give his views on that.
I attended a conference last week in Brussels where Brexit was the main topic of discussion. At that conference I got the distinct impression that there was a definite desire to teach the UK a hard lesson. While 26 of our partners might wish to do that, a hard lesson for the UK will be a very hard lesson for Ireland. Does the Commissioner accept that? Does the Commission have a clear set of principles under which it will negotiate with Britain under Article 50, and does the Commission have the confidence to carry through those principles?
I will deal with the nationalism aspect shortly, but I am concerned that part of the problem that led to Brexit is the desire of governments to distance themselves from the negotiations they enter into with the European Union. When they return home, they claim they were told by Brussels to do whatever it is, so Brussels is seen as the director of the worst possible inflictions that can be put on the Irish people. Has the Commission any plans to bring the governments together and get them to accept the fact that they negotiate these issues and must take responsibility for the results? It is not a question of the Commission imposing things on us but of our governments negotiating with the Commission and bringing back whatever they manage to negotiate. If they are poor negotiators, they should admit it. That is my view.
There is one area where the Commission has failed, and I wonder if the Commissioner agrees with me on this. There has been a rise of populism across the western world and a rise of extremism to a certain degree. That is fed by half truths and distortions. Why have the Commission and the European Parliament not done more to provide empirical evidence for citizens? The Commissioner might say they already do that, but for some reason it is not getting through. It is fair to say that the European Union is probably hated and loved equally by all citizens throughout Europe. We see it as dictating our daily life. When one walks into any major building or drives on a major road, one will see a sign stating that the project was funded by the European Union, yet we hate it. I find that paradox hard to reconcile.
Some of my colleagues have spoken quite eloquently about the Commission and the Apple case. The problem is that when the report emerged it was not a little more honest that several countries have allowed that to happen with Apple, if there was a tax case to be answered. My view of Ireland's membership of the European Union is somewhat similar to what I hear being said with regard to Britain's desire to keep trade open following Brexit. One cannot be a member of the club and not participate in it. One cannot be a member of the European Union and put nationalism ahead of that. Some people in Ireland would probably shoot me for saying that, but if we are members of the European Union we must have European citizens in every European city and village in the common area. We must sign up to be a part of Europe. We do not want to be just a part of all the nice things one can get, and not a part of all the things one does not like. We must try to work away from nationalism and towards a common goal.
I constantly hear the statement that Ireland is the only country with a land border with the UK. It is not. Spain has a land border with Gibraltar. That must be taken on board. We might regard it as a tiny part of the UK, but it is nonetheless a part of it. Anybody who has ever travelled to Gibraltar and sat for an hour and a half or two hours in traffic will be aware of that. It is as much a part of the UK as Northern Ireland or any other part.
Finally, I agree with my colleague Deputy Durkan on migration. Quite frankly, the European Union has been disgraceful in how it has handled migration. I believe that when the LE Eithne, the LE William Butler Yeatsor whatever other ship it is picks up migrants in the Mediterranean they should be brought back to Ireland. They are on Irish soil the moment they are brought onto one of those ships. We should take responsibility. We talk about humanitarianism all the time, yet we sit idly by watching entire cities being bombed to extinction. Incidentally, I do not wish to see the creation of a European army to protect our borders, which I heard mentioned in Brussels last week. I would love to see the creation of a European police force to stop the thugs living in Spain sending people to Dublin to murder others. I would be quite happy with that, but certainly not a European army.
I realise the Commissioner is in a hurry. I will conclude and thank him for his attendance.
I will. Is it not a fact that the European Union is now facing an existential crisis of its own making and that the deep alienation felt by millions of citizens across Europe, which is growing, is due to the European Union's failures on a range of fronts? The most obvious one is the role the European Union played as austerity boot boy for the financial sector which was responsible, with the assistance of the European Central Bank and not without the active collusion of the political establishment and property developers here, for creating bubbles in this country. The European Central Bank, through its interest rate policy and then in its response to the crisis by essentially protecting the banks and the finance industry, inflicted cruel and unjust austerity, by any standards, on people who bore no responsibility for that crisis, be they in Greece, and the things done to the Greek people are beyond obscene, Ireland, Spain, Portugal and so forth. That is one of the primary reasons the alienation in the European Union is so intense.
One instance of that, which the Commissioner has intimate knowledge of, is the issue of water charges. I hear members of this committee yet again stating that we must stand up for Ireland's right to set its own corporation tax rates, but when the European Union wants to bully us in a particular direction on water charges and our right to decide democratically how we pay for water services, suddenly the voices for democracy from certain quarters over here go silent. I put it to the Commissioner that if Europe engages in boot boy or bully boy tactics when there is a clear democratic mandate in the House to get rid of water charges it is making a deep mistake that it will rue.
It will increase alienation. I cannot understand the Commission's view about the established practice when it comes to water charges. There is a big legalistic dispute-----
Could the Commissioner tell us how on earth the EU can construe that charging for water is supposedly "established practice" when it is clear that when the water framework directive was introduced, established practice here was to pay for water through central taxation and not through user charges? By no stretch of the imagination could anyone conclude that it has since become established practice because nobody is paying the charges and the electorate made its view very clear in the most recent election. If the Commission fails to grasp that, is it not deepening the democratic deficit that is growing between citizens and the EU?
My next question concerns fortress Europe and foreign policy generally. Again, I hear the one-sided and partial criticism from voices here and throughout the EU of what is undoubtedly the appalling behaviour of Russia in Ukraine and Syria, where its actions in Aleppo in supporting the Assad regime are beyond disgusting. However, are member states of the EU and, in the case of Ukraine, Europe itself not responsible as well for interfering in that country and, essentially, reigniting the Cold War with Russia by having ambitions in eastern bloc countries? Members such as France, the UK, Denmark and others, including its big ally, the US, are also responsible for bombing Syria and killing innocent civilians, have been involved in staggering levels of arms sales to regimes like the Saudi regime and continue to treat with the Egyptian regime, which tramples on human rights on its country, and say nothing about that.
Is it not an appalling vista for the EU, which claims to be an attempt to ensure that we do not have a return to the horrors of the 1930s, to have concentration camps with razor wire and barbed wire surrounding them penning in the most desperate and vulnerable people at Calais and on the Greek islands? There is no other word for them. They are concentration camps. When one thinks about the numbers the EU has talked about accepting - 160,000 people - in light of the millions displaced in Jordan or its attempts at outsourcing the issue to a Turkish regime the human rights record of which is beyond disgusting in terms of its treatment of its own people, one must ask whether it is developments of this type that have led to the deep and growing disillusionment with and alienation from the EU?
Mr. Phil Hogan:
I thank the members for the questions and will go through a few of the matters that arise. The budgetary situation post-Brexit is an issue. The UK is a net contributor to the EU budget to the tune of €11 billion. In the absence of member states providing another source of income to the European Commission and the institutions in order that they might deliver programmes, there will be reductions in expenditure to the value of €11 billion across all the various programmes. What will happen in the negotiations in 2019 will determine what level of funding will be given out of the smaller pot to the various programmes.
Mr. Phil Hogan:
That is what the Senator said. I do not want to adjudicate on the supremacy of the UK Parliament because it is subject to court proceedings and I do not know what will be the outcome of the case. I will defer to Senator Paul Coghlan's superior knowledge on these matters in respect of the interaction he might have with the British-Irish Interparliamentary Body. These are very important legal proceedings and have been contested by the UK Government. There is a tension between the UK Parliament and the UK Government about these issues, which will be resolved by the courts.
There are other trade agreements. Many members have mentioned this. If one were to write an agreement to satisfy the political philosophy of Deputy Boyd Barrett, the best one would be that with Canada. Human rights, environmental issues and labour and food standards are very important for people and one could not write a better deal than the CETA agreement between the EU and Canada. We have reached a stage where the Belgian Government is the only one that is not in agreement because of the regional governments' influence over the federal Government's decision-making in the institutional and constitutional arrangements in that country. It is, however, an excellent deal. The negotiations with the US in respect of TTIP are paused and will resume in the future depending on the attitude of the new US President. That is the latest state of play and I have nothing further to report on the proposed arrangement. We have opened up an enormous number of negotiations for free trade agreements and to upgrade some involving Mexico, the Philippines and Indonesia. Next year, we will look at opportunities regarding New Zealand and Australia. We attended meetings yesterday with the Chinese Government relating to an investment deal between the EU and China. A deal with Japan may be concluded by March 2017. Much work is ongoing on the trade side. In respect of whether member states want a trade deal, it is a question of whether it is an EU competence or a mixed deal between the EU and the member states. Members can see the difficulty we have in getting approval for even the one that is probably the best deal we ever did, which is the one between the EU and Canada.
The EU is its member states. People often forget that. It is not the European Commission. It is the member states and the European Parliament. This is where I agree completely with Senator Craughwell who said that we have to take responsibility for decisions. If one is fed a diet of statements that Europe is a problem and Europe is bad over a 30-year period, as the UK citizens were, one would not expect to get a positive result in a referendum when the proposal was put. The same is happening in a number of member states. Prime ministers and governments across the EU have to make up their minds about whether or not they are going to be part of the project, and there are very good reasons why they should be, working collectively to deal with common issues. They have to take responsibility for decisions they make that might be good for the country on some days while on other days, there might be difficulties in respect of citizens' engagement with a decision. Warts and all, we must look at an overall strategy for these issues. I encourage all member states to think long and hard about the collective responsibility required to deal with many difficult issues in the EU. They are economic, social, environmental, migration and foreign policy issues.
A number of members asked about the possibility of an Irish person being on the negotiating team. There will be no one from any member state on the negotiating team. The chief negotiator just happens to be from France. A task force will be established as an advisory group and there will be interaction between it and the team on a regular basis. Ireland will be represented on the group. That was always going to be the case. As to the question of Ireland having someone on the team due to Ireland's importance vis-à-visthe UK, that will not be the case. I will describe the process. The European Council, of which the Taoiseach is a member, will make the decision about the negotiators' mandate. The Commission will do the work and the European Council will make the final decision. We are an executive body that is doing the work for our politicians. The European Parliament must decide as well. As such, we must have a balanced agreement.
There is a strong view among the European institutions as well as the political institutions that will make these decisions that the four freedoms should be protected, those being, freedom of movement of people, good, services and capital. This is the starting point. It is why the European project exists. The Single Market and the single mechanism - the European Union - that we use to deal with these movements comprise the reason for the project and for member states pooling some of their sovereignty with a view to taking a collegiate and common approach to many of our issues.
Deputy Haughey and others asked whether the Commission and other institutions had an appreciation of the Irish island approach and issues arising from our history, the Good Friday Agreement and the need to protect the gains that had been made through peace and reconciliation. They have. At the highest level, the European Commission is fully informed and satisfied with the situation in Ireland, namely, that there will be a unique set of circumstances on the island. There are unique sets of circumstances on the island of Cyprus and in Spain in terms of Gibraltar. I mention these as examples of unique situations that need to be resolved. The Irish Government, which met Mr. Barnier last week, has made its views known. They are also being made known at diplomatic and ministerial levels. The special position of Northern Ireland and the North-South and Ireland-UK relationships have been, and will continue to be, well explained.
Many members stated that we should be making more progress on migration. I agree. The European Commission tabled many proposals in the past two years. A proper migration policy was one of the Juncker priorities. Member states did not agree. The Commission's proposals are being rejected by member states. The EU did not erect a wire fence anywhere, which Deputy Durkan alluded to and which is a sad reflection on the way the EU is in the collective sense. Several member states made that decision, not the Commission. It is all very well to say that Brussels did this and Brussels did that, but we have made substantial proposals to deal with the migration crisis. We did a deal with Turkey to provide the best facilities that we could to address a humanitarian problem in that country arising from the displacement of people following the war in Syria. We have had to do the same in Italy, Greece, Lebanon and Jordan. We are major financiers of these projects. We would prefer it if we did not have to make these moves and implement these policies, which are a significant cost to the European taxpayer, but these are the circumstances. Families and individuals in war-torn regions are being displaced.
Given our history, we should know better than most the importance of helping people. Over the years, we have been to the fore in providing humanitarian assistance through our missionaries and through our own emigrants to other shores in times of difficulty. Through NGOs and overseas development aid, Ireland and other countries are doing a considerable amount of good work. The European Commission has made available a significant amount of financial resources to deal with this difficult issue, which will only be resolved at a political level. We are waiting for all sides to come to the table for meaningful discussions. The committee knows how difficult it is just to keep the negotiations going. The European Council is discussing these issues in terms of Russia, Ukraine, trade, Syria, etc. It will be interesting to see the outcome.
A number of committee members mentioned taxation issues in the context of the recent high-profile Apple case. There is nothing new in the way that the Commission conducted its investigation into the tax rulings. The decision has nothing to do with tax rates or tax law in Ireland, rather Commissioner Vestager's decision has to do with the boundaries of aggressive tax planning being pushed out and constituting state aid. This is the view of the Commission. It resulted from the information supplied by Apple and the 2015 hearings in the US. In our view, the company's effective tax rate varied from 1% to 0.005% of its profits. It should not be surprised that this became an issue. Ireland has the benefit of a 12.5% corporate tax rate. The 1991 and 2007 tax rulings should have alerted authorities everywhere that this was an issue if they were being pursued to the extent of being aggressive tax planning. This is not about interfering with a member state's tax rates, rather it is about how taxation was used for the purpose of constituting state aid where the treatment of the company in question and the rules of engagement concerning its tax planning were not available in a significant way to all other companies in Ireland. The Commission has asked Ireland to collect the money because the head office was deemed to be in Ireland. That head office is acknowledged by Apple to have been in Ireland.
Issues regarding the common consolidated corporate tax base, CCCTB, will be discussed by the Commission next week. They do not concern tax rates, rather they concern establishing a CCCTB and rules around how tax is calculated in member states. The CCCTB has been in the pipeline for the past ten years and has been discussed many times. Taxation policy is not legislatively a part of the EU per se, but part of what we are considering are the rules on how one calculates tax. We are engaging with governments to ensure that there is a constructive realisation, based on a number of tax rulings in many member states in recent years, that we have to find a way to work together to simplify the rules in the Common Market. The Minister for Finance, Deputy Noonan, made a start on this in 2013. With the help of the OECD, he was able to develop a scheme around base erosion and profit shifting, BEPS, solutions and the knowledge box. I was a member of the Cabinet when those matters were discussed in 2013. Ireland is ahead in reforming its taxation laws in order to comply with some of the issues that are now on the agenda.
Many members expressed their concerns about the rise of populism in the EU. I share their concerns. Europe has come through a difficult time in terms of fiscal consolidation arising from the financial crisis. Many simplistic solutions were proposed, but we need a banking system that works and is funded. Whatever one's views are on how policy was applied and what instruments were used at European level, Ireland and other countries have come through those difficulties. I was in Greece recently. Its leader once had a different view of the world than he does today about the solutions to the problems in the financial affairs of the EU.
He is implementing with gusto some of the reforms he opposed three years ago. There is a political party in Spain which had solutions similar to Deputy Richard Boyd Barrett's. It lost ground in the recent elections in Spain. Its vote decreased significantly. There is a gradual realisation that it is not easy to fix all these fiscal, financial and economic problems. The public is becoming aware that we need stability to have a growing economy. We need stability for investment and certainty. I welcome that governments realise they need to pay their way and that the gap between income and expenditure must be bridged to ensure we have a competitive European economy and a sound and stable financial system.
I could go on for a considerable time answering questions. Deputy Richard Boyd Barrett raised the water charges issue. Mr. Brian Hayes, MEP, put a question to the Commissioner for the Environment, Maritime Affairs and Fisheries, Mr. Karmenu Vella, who is the relevant and appropriate Commissioner. He received the following reply from the Commissioner:
The Commission was informed by the Irish Authorities of the temporary suspension of water charges, pending a review by an Expert Water Commission. The Commission reiterated to the Irish authorities its view on the requirements of the Water Framework Directive (WFD)(1) and the need for Ireland to establish a robust funding system that secures the long-term quality of water and water services, especially as investment in water is clearly acknowledged as necessary by the Irish authorities themselves (2).
It is now for the Expert Water Commission to get on with its task of assessing the funding of domestic public water services in Ireland and to make recommendations to the Irish Parliament on water pricing policy which comply with WFD requirements and allow Ireland to be able to finance the necessary improvements in water quality and infrastructure.
I have nothing further to add.
I thank the Commissioner for a most comprehensive response to the questions. His opening statement is very reassuring. I thank him and his colleagues, Mr. Dermot Ryan and Mr. Tom Tynan, and I welcome Mr. Gerry Kiely, the head of the European Commission office in Ireland. We look forward to meeting them again. The Minister of State, Deputy Dara Murphy, has invited the committee to go to Brussels to meet the Commissioner, maybe early in the new year, for further discussions and an update on what is happening. The committee has a lead role in our response to Brexit. We are attending the Conference of Parliamentary Committees for European Affairs, COSAC, meeting in November to put across the message on where we stand. Everybody with influence must express where we stand in the difficult negotiations ahead. The Commissioner is doing this in the Commission, although he has responsibility for all 28 countries at the moment. We wish the Commissioner a safe journey back to Brussels and we look forward to seeing him again in the new year. We thank him for his time, patience and response.