Brendan Smith (Cavan-Monaghan, Fianna Fail)

I welcome the opportunity to take part in this debate on agriculture which takes place on the eve of the European Union Agriculture Council at which we will finalise the Common Agricultural Policy, CAP, health check. Last week, Senators had the opportunity to discuss the recent budget. I thank my colleague, the Minister of State, Deputy Sargent, who took the debate in my absence in the United States on an important trade mission, as well as all Senators who contributed to that debate. I do not intend to cover the ground discussed last week other than to make some general comments about the budget and the 2009 Estimates and to refer briefly to some of the contributions to that debate.

I intend to set out the dynamic global environment within which the Irish agrifood sector is operating and the challenges and opportunities that lie ahead. There are several events on the horizon which have potentially significant consequences for Irish agriculture and the Irish agrifood sector. I will comment on those and give the House some sense of the approach we have taken to date to protect and promote Ireland's interests, reflecting the Government's support for the agrifood sector as the most important indigenous sector in the economy.

Without repeating what was said during last week's budget debate, I wish to make some general points on the budget, respond to some of the comments made by Senators and, in particular, correct some inaccuracies and misrepresentations. Despite the necessity for the Government to take decisive, corrective action in recognition of the rapidly deteriorating economic and fiscal situation, it is worth bearing in mind that we will spend €64 billion on public services in 2009. My Department will be allocated €1.8 billion of Irish taxpayers' money and €1.4 billion of European Union funding next year, bringing to €3.2 billion the Department's total expenditure in support of the agriculture, fisheries, food and forestry sectors in 2009.

However, the agriculture sector could not be exempted from the general necessity to reduce public spending. Despite persistent attempts to suggest otherwise, the reality is that my Department's budget for 2009 is 2.6% less than it was this year when account is properly taken of the exceptional Supplementary Estimate of €195 million we received this year to ensure thousands of farmers could be paid their farm waste management grants promptly. Contrary to certain suggestions, the farm waste management scheme is the most ambitious and generous on-farm capital investment scheme in the history of the State which, by 2009, will have seen well in excess of €600 million of taxpayers' money invested in thousands of Irish farms. The scheme is fully funded by the Exchequer.

I also refute suggestions that the suckler welfare scheme is being cut or, as I read in one prominent publication last week, that the commitment to the scheme is being reneged upon. This is blatantly untrue and inaccurate and a complete misrepresentation of the facts. A commitment was entered into under the social partnership process that €250 million would be provided in funding over five years. That commitment is being honoured in full. In regard to the budget, I have made clear that the decisions we took were difficult. I acknowledge the difficulties they will pose to farmers but I have made clear also that I intend to review those decisions as soon as the budgetary conditions permit. I reiterate that I will do so.

Over the next two days I will attend a meeting of EU Agriculture Ministers in Brussels during which efforts will be made to reach political conclusion on the CAP health check based on the draft legislative proposals published in May. Given that these proposals comprise a large and complex set of detailed measures, I will confine my remarks to some of the principal issues. In regard to milk quotas, which are due to end in 2015, the proposals provide for a smooth transition with a modest annual increase in quota for five years beginning in 2009-10. This proposal is somewhat conservative. As such, I have argued for a genuine soft landing with progressive quota increases which should be frontloaded to take account of our capacity to increase production.

I and my officials also have defended the need for quota increases to be matched with effective dairy market management mechanisms and have called for the continuation of such measures. We are especially anxious to retain effective measures for the support of the butter market and, in that regard, I welcome the decision taken last week to introduce private storage aid for butter with effect from 1 January 2009. This decision reflects my serious concerns regarding the current weakness in dairy product prices about which I have contacted the Commissioner for Agriculture and Rural Development, Ms Mariann Fischer Boel. The importance of retaining critical market instruments and using them effectively to respond to price volatility in the period of transition to quota abolition is a key priority for us during this week's negotiations.

Ireland has consistently opposed the proposed modulation increases on the grounds that they run counter to the expectations of Irish farmers who accepted decoupling only three years ago and who are still in the process of adapting to that fundamental change. Modulation is the process by which a proportion of each farmer's single farm payment is transferred to rural development in pillar two of the CAP. The current rate of compulsory modulation is 5%. Additional compulsory modulation is proposed to bring the rate to 13% by 2012, with further progressive rates of modulation of an additional 3% on payments in excess of €100,000, 6% on payments in excess of €200,000 and 9% on payments in excess of €300,000. We will continue to oppose the current proposals notwithstanding that, as they stand, in excess of 55,000 Irish farmers would be exempt from any modulation proposals.

I have always maintained that the issue of simplification should be a key focus of the health check and we have made several suggestions as to how this could be achieved. All Members share the desire for real and measurable simplification for farmers and the administration alike. As Ireland is fully decoupled, we would support further decoupling elsewhere, although I do not have any great difficulty with allowing member states some freedom to continue coupled schemes to support vulnerable areas or sectors provided this does not distort competition. While there are proposals to allow member states to move to a flatter rate of payment per hectare, I have consistently made clear that I have no plans to alter our system of single payments and while I am pleased that the option of moving to the flatter rate is available, I will strongly object to any move towards a mandatory change at this time.

The final issue in the context of the health check to which I will refer is the Article 68 proposals. The intention is to broaden the existing provision such that up to 10% of single payment funds may be targeted at specific measures by removing some restrictions and providing an enlarged menu of options for use of these funds. This represents a potential means of supporting regions or sectors facing particular challenges. I have sought an increase in available EU funding under this provision. As a result of the complex and restrictive rules governing the single farm payment scheme, we have been unable to utilise fully the funding allocated for it. Therefore, I am seeking greater national discretion in the use of these funds. This has been my consistent position since the proposals were published.

The CAP health check is part of the dynamic environment to which I referred at the outset and the negotiations over the coming days certainly will influence the direction of the Irish and EU agrifood sectors in the coming years. It is my firm intention to negotiate to achieve the best outcome for Irish agriculture and to achieve a deal that will secure its future growth potential.

Recent speculation, together with the G20 economic summit that took place in Washington at the weekend, have raised the possibility of a fresh World Trade Organisation, WTO, ministerial meeting being convened next month. The most recent effort at achieving agreement on the agriculture and non-agricultural market access, NAMA, modalities failed after the longest ministerial meeting in WTO history in Geneva in July.

It is evident that the WTO director general, Pascal Lamy, encouraged by various constituent members of the WTO, is enthusiastic about the prospects for agreement. We fail to see the basis for such optimism. There has been little or no progress on resolving the outstanding issues that ultimately resulted in the failure of the July negotiations. We further take the view that in the absence of any significant progress in these areas, there is little or no point in proceeding with a further ministerial meeting. We hold the view that another failed attempt at this stage could do nothing but damage the entire process.

We remain consistent in our position. We support a comprehensive, ambitious and balanced deal. The proposals on the table at the time of the collapse of the July ministerial meeting did not meet the requirements for such a deal. The Government remains committed to achieving an acceptable trade deal but does not believe that those conditions exist at the moment and, on that basis, does not accept that the conditions exist to warrant calling a ministerial meeting next month. In the event of a ministerial meeting taking place, the Irish Government team will continue to advocate and defend Irish interests and, at every opportunity, to highlight our real concerns relating to agriculture. My objective continues to be to ensure the best possible tariff protection for key Irish agricultural products — beef, dairy, sheepmeat and so forth.

I spoke recently about the issue of climate change and emphasised the Government's commitment to delivering Ireland's contribution towards the European Council target of a 20% reduction in the EU's greenhouse gas emissions by 2020. I pointed out that these targets present particular challenges for Irish agriculture. When reading last week's Seanad debate, I noted that a couple of the contributions, notably those of Senator O'Toole and Senator McFadden, referred to these challenges, but perhaps that is something for another debate on another day. However, I wish to comment on and correct something Senator McFadden said when she suggested that my colleague, the Minister for the Environment, Heritage and Local Government, Deputy John Gormley, "expects the agricultural sector to cull the dairy herd to reach these targets". At no point did the Minister, Deputy Gormley, make any such suggestion and, indeed, like me, he recognises the challenges presented to the agriculture sector.

The agriculture sector is already contributing to the reduction of carbon emissions and the Environmental Protection Agency's most recent figures on actual emission levels indicate that emissions from agriculture decreased by 3.8% in 2007 on the previous year's figures, continuing the downward trend since 1998. Through successive rural environment protection schemes, my Department is further contributing to the reduction of greenhouse gas emissions by promoting specific measures, including willow plantations, establishment of farm woodlands, the protection of the carbon storage potential of Ireland's wetlands and, in 2009, the provision of record funding of €355 million for REPS. Despite efforts to suggest that there are differences on the greenhouse emissions reduction issue, the Government, including Deputy Gormley and me, recognises the need to reduce our greenhouse gas emissions and that the scale of reductions will be very challenging for Ireland. Equally, though, we all accept that every sector will have to play its part in the national effort to reduce emissions.

This week's negotiations on the CAP health check will determine the shape of the CAP until 2013 while discussions on the post-2013 situation will take place in parallel with a wider discussion on the EU budget for the new financial perspective period 2014-20. Not only is there a continuing very strong case for an effective and well resourced EU Common Agricultural Policy, but the case is now stronger than ever. Ireland is a major food producing and exporting country, with agrifood and drink exports of approximately €8.6 billion last year. Gross agriculture output in 2007 was valued at €5.67 billion, with milk accounting for the largest share at 29% or €1.6 billion and beef accounting for 26% or €1.5 billion. Significantly, global demand for meat and milk is projected to more than double over the next 40 years and we now have a unique opportunity to play to our strengths. The future viability of the industry is heavily dependent on us growing our market share of lucrative continental outlets, given that we currently export 90% of our beef output and 80% of our dairy output.

The Irish agrifood sector is a vibrant, dynamic and resilient sector, capable of reacting and adapting quickly and positively to changing circumstances and the demands of a global market. The sector is one of the most important indigenous elements in the Irish economy, both from an employment point of view and as a major contributor to regional development. For what is sometimes referred to as a "declining" industry, the sector contributed up to 39% of net foreign earnings in the primary manufacturing sector, according to the recently published Riordan report.

Having unfortunately missed last week's debate, I am pleased to have the opportunity to partake in this debate and to set the scene, as I see it, for the Irish agrifood sector and to outline both the challenges and opportunities that confront the sector. It is true that I had to make some difficult decisions in the recent budget, but, as I said then, in making these choices my strategy was to focus available resources on the measures that allow us to maintain and grow the productive capacity of the agrifood sector and to ensure that the sector is well positioned to get through this challenging period. My overall objective is to allow the sector continue towards achieving its full potential as our most important indigenous industry.

There is every reason to be confident about the future of the agrifood sector. Last week, I was in the United States on an Enterprise Ireland trade mission and I was particularly struck by the clear and growing confidence on the part of US companies in the quality, safety and commercial potential of Irish food ingredients and the companies producing them. I also saw at first hand clear evidence of the internationalisation of Irish food companies and of their ability to compete with the best on the world markets. All this is very encouraging for Irish food processors, their employees and, equally important, for the tens of thousands of Irish producers who supply them.

The next immediate step in charting the future course of Irish agriculture is the CAP health check negotiations in Brussels, which commence tomorrow morning, at which I will defend Ireland's interests to ensure that we maximise the benefits available from the CAP between now and 2013. The reality is that agriculture is at the centre of the main global challenges, such as food, energy security and climate change. Together with all stakeholders, there is tremendous opportunity to further develop and enhance the Irish agrifood sector given its undoubted potential to meet increasing demands.

I thank the Members for the opportunity to outline the challenges and opportunities facing farming and the agrifood sector. The important meetings commence at the Council of Agriculture Ministers. I have some important preparatory meetings in advance of those discussions, which will begin in Brussels in the morning. I will not be able to stay for all the debate but I will be happy to read the comments of all Senators later.