Mary Coughlan (Donegal South West, Fianna Fail)

I thank the Senators for affording me the opportunity to say a few words on this matter. I am encouraged by Senator Callanan's comment that this will be my toughest fight; I have not shirked my responsibilities thus far. I addressed the House on reform of the sugar regime last January. I am glad to have this opportunity to return to the subject in light of the Commission proposals.

The arrangements for the common organisation of the market for sugar have worked well. Since the regulation specifies, among other things, an intervention price for white sugar and a minimum price for sugar beet, it has provided a good basis for a successful and profitable enterprise for both growers and manufacturers. Industrial users have a constant supply of raw material, and the consumer has a guaranteed and secure supply of high-quality sugar.

The Irish sugar quota is 199,000 tonnes, just over 1% of the total EU quota. In almost every year since we joined the EU the sugar quota has been filled, and great credit is due to all concerned. The industry here has made an important contribution not only to the agriculture sector but also to rural development generally. We currently have approximately 3,800 sugar beet growers and one sugar manufacturing enterprise — Irish Sugar Limited. Approximately 800 people are employed in sugar manufacturing and associated industries.

As Senators are all aware, major challenges face the EU sugar regime. First, a new EU sugar regime must be negotiated and put in place by the middle of 2006. Of course, 2006 also marks the beginning of a three-year cycle of winding down the import duties for sugar from the 49 least-developed countries under the Everything But Arms agreement. Then there is the new WTO round. That will bring strong pressure on the European Union to allow increased access to our markets for all products, including sugar, to third countries. In addition, demands will be made to reduce the level of export refunds paid on Community products being exported to third countries.

Against that background the Commission outlined its broad ideas for reform of the regime in a communication to the Council and the European Parliament last July. Those initial reform ideas would have had serious repercussions for sugar beet growing and processing in this country. I made clear in discussions in the Council of Ministers at the time my opposition to the Commission's approach. Since then I have forged alliances with many like-minded member states. With nine other EU member states, I signed a letter to the EU Commissioner for Agriculture stating that the Commission proposals would have a devastating effect on farms and the industrial enterprises working in the sector.

While we accepted the necessity to reform the existing regime, we made clear that reform should aim at maintaining the existing distribution of sugar beet and sugar production in the entire EU territory. We expressed the view that reform should be based on the following principles: an import system from third countries should be put in place to ensure predictable and regular import quantities; the price reduction should be significantly less and should be implemented more gradually; the impact of the quota reductions should fall mainly on those member states that are net exporters of sugar; and the transfer of quotas among member states should not be allowed.

The situation worsened with the recent ruling by the WTO appellate body. It found that, although exports of non-quota sugar, known as "C" sugar, do not receive export refunds, those exports are cross-subsidised through the high prices paid for "A" and "B" quota sugar. The WTO ruled that exports of "C" sugar, together with the re-export of ACP sugar, must be counted against the EU WTO limits on subsidised exports. That ruling has significant implications for the export of EU sugar.

In very round figures, the EU produces 20 million tonnes of sugar annually and imports 1.9 million tonnes under preferential agreements with the African, Caribbean and Pacific countries. EU consumption is approximately 16.5 million tonnes. That means that, on current production, the EU needs to export around 5.5 million tonnes of sugar a year. The recent WTO ruling means in effect that the EU can export up to 1.27 million tonnes a year only.

In January I advised the House that the Commission's formal legislative proposals were expected in May. Those were published on 22 June 2005. While it was generally accepted that the WTO ruling on subsidised exports would mean that more radical reform proposals would be put forward by the Commission, the proposals are even more severe than anticipated. The main elements are as follows. There would be a reduction of 39% in the price of sugar and 42% in the price of sugar beet. That would bring the price of sugar to €385.5 per tonne and the price of sugar beet to €25.05 per tonne. Compensation for farmers would be set at 60% of the drop in the support price and be paid as part of the single farm payment.

While no compulsory quota cuts are proposed for four years, and the cross-border transfer of quota has been dropped, a new element in the proposals is the concept of a voluntary restructuring scheme. Under the scheme, funding is proposed for factory closures and the renunciation of quota.

The scheme is to run for four years and provides a high degressive per tonne aid for factories wishing to cease production. The scheme will be resourced from a central fund to be provided by levies on all sweetener quota, that is, all quota for sugar, isoglucose and inulin.

The proposals are totally unacceptable in their present form. It is unprecedented for the Commission to make proposals which could lead to the demise of an entire sector in a number of member states including Ireland. The level of price cuts proposed are such as to make sugar beet production uneconomic. The restructuring scheme is inequitable. It is not sufficiently recognised that the closure of a sugar factory would have huge implications for sugar beet growers. Apart from running counter to the expressed views of many member states, the proposals for price reductions have not found favour with the least developed countries.

I expressed these serious concerns about the proposals when I met Commissioner Fischer Boel on 23 June, the day following their publication, during her visit to Ireland. Negotiations will commence in earnest when the proposals are presented to the Council of Ministers later this month and will continue over the coming months. My overall objective is to ensure the achievement of a more balanced agreement which will take Irish interests into account. There is no doubt these will be difficult negotiations given the severity of the proposals and the pressures for reform.