Fergal Browne (Fine Gael)

I thank the Senator for raising this issue and for his offer of support to the Minister for Agriculture and Food next week in her discussions at European level.

I welcome the opportunity to inform Members of the current state of play regarding the discussions on the proposed reform of the EU sugar regime which will be the main item on the agenda of next week's meeting of the Council of Agriculture Ministers in Brussels.

While it is over a year since the Commission first outlined its thinking on the future shape of the sugar regime, the formal legislative proposals only emerged at the end of June 2005. In the meantime, the proposals have been discussed at Council and in the European Parliament and the UK Presidency is striving to achieve political agreement before the WTO ministerial meeting in Hong Kong next month. The sugar regime in its current form expires at the end of June 2006, therefore, there is a need, in any event, for a decision on future arrangements to avoid a legal vacuum from next July.

Everybody is familiar with the reason reform of the sugar regime is currently high on the EU agenda. As well as the internal EU pressures to bring the sugar sector into line with other agricultural sectors, there are also international pressures. These fall under three main headings — the Everything But Arms, EBA, agreement, the WTO Doha Round of trade negotiations and the ruling by a WTO panel last April against aspects of the EU regime, following on a complaint by Brazil, Thailand and Australia. The WTO arbitrator recently decided that the EU must implement the panel ruling by 22 May 2006, which adds to the pressure for early action.

From the outset, we have highlighted the serious repercussions that the reform proposals would have for the Irish industry. Beet growing has long been a valuable cash crop for farmers, as well as playing an important role in the tillage cycle as a break crop. Currently, we have 3,700 beet producers and there are about 1,000 people employed in the sugar processing sector and ancillary activities.

Soon after the Commission's initial ideas were published, the Minister, Deputy Coughlan, made a joint submission with ministerial colleagues from nine other EU member states to the Commissioner for Agriculture pointing out the devastating effect the proposals would have on producers and industrial enterprises in the sector. While all ten Ministers acknowledged the need to modify the existing regime, they also argued that the reform should aim at keeping the existing pattern of sugar beet and sugar production across the entire EU territory.

The legislative proposals which emerged in June of this year turned out to be even more severe than anybody had anticipated and they went even further than the Commission had initially envisaged, not least because of the WTO ruling in April 2005 against aspects of the EU regime. There were two key differences — the price cuts were deeper and the proposal for compulsory quota cuts along with the proposal to allow quota mobility between member states was dropped, being replaced by a voluntary restructuring scheme for factories. The Commission's stated objective in presenting these particular proposals is to develop a sustainable future for the EU sugar industry by enhancing competitiveness and, at the same time, to attain a sustainable market balance between domestic production levels and international commitments.

The key elements of the proposals are a 39% price cut in the institutional price for sugar, a corresponding reduction in the minimum price for sugar beet and 60% compensation to farmers for the price cut. A voluntary restructuring scheme is proposed to encourage factory closures and the renunciation of quota.

From Ireland's perspective, the proposals are completely unacceptable in their current form. The price cuts proposed are so severe as to make sugar beet production in a number of member states, including Ireland, uneconomic. As Senator Bradford pointed out, it is unprecedented for the Commission to make proposals that could lead to the demise of an entire sector in a number of member states. The restructuring scheme, as proposed, is inequitable since the closure of a sugar factory would have major implications for sugar beet growers and this is not sufficiently appreciated. Apart from going against the expressed views of many member states, the proposals for price reductions have not found favour with the least developed countries either.

During the first political debate at the July Council meeting, the Minister, Deputy Coughlan, argued strenuously that the price cuts proposed are too severe and that the reforms should be based on a longer lead-in time for the Everything But Arms agreement. She has kept in close contact with like-minded ministerial colleagues in other member states who are also opposed to the proposal. In this context, a further letter from a group of 11 member states, that is the ten who signed the initial joint ministerial letter plus Poland, was submitted to the Commission in advance of formal discussions at last month's Council meeting, setting out the objections of the group to the proposals. The Minister for Agriculture and Food, Deputy Coughlan, also met the Commissioner for Agriculture and Rural Development on a number of occasions to voice Ireland's strong reservations.

Meanwhile, there has been ongoing contact at official level with other member states and the Commission in regard to reform proposals. A high level working group of officials has been engaged in extensive discussions in Brussels in advance of next week's crucial ministerial meeting.

Given the severity of the Commission's proposals, we are under no illusions about the challenge facing us as the negotiation process moves into a critical phase next week. I assure Senator Bradford and the House that we will remain resolute in pursuing our overall objective of achieving a balanced outcome that will take Irish interests into account.