Brendan Smith (Cavan-Monaghan, Fianna Fail)

I am delighted to have the opportunity to initiate the debate on this important matter, namely, the future of the Common Agricultural Policy after 2013. Senator Carty requested such a debate some time ago. This is a very important issue for Ireland, as it will set the context and many of the conditions for the development of Irish agriculture in the years ahead and we need to demonstrate a strong and unified position on the issue. I will begin by outlining the background to and context for the debate on the future of the CAP after 2013. I will then summarise the main issues arising and the developments that have taken place to date. I will also share with the House the Irish view on the matter.

Negotiations on the CAP after 2013 are taking place against the background of an EU budget review and a new EU financial perspective for the period 2014 to 2020. The budget discussions will have a major influence on the amount of funding available for the CAP and the distribution of funds between member states. There will be competing pressures for funds, including strong pressure from some sources for a smaller share of funds for the CAP, both as a share of the budget and in absolute terms. Even though formal discussions have yet to commence on the future EU budget, the pressure already is building in this regard. An early draft Commission paper from November last advocated major policy changes and lower funds for the CAP. It is an early draft but it clearly indicates at least one strand of thinking on the future.

Another new factor in the forthcoming discussions on the future of the CAP is that they will be subject to full co-decision by the Council and the European Parliament. It will make for a more open and democratic process but will be a learning experience for everyone because it is new. Already, the European Parliament is active in these negotiations and a recent draft of an own-initiative report generated approximately 782 proposals for amendments. Clearly the interest and attention of the European Parliament will be fully engaged as negotiations progress.

As to the timing of the negotiations, a formal communication from the Commission is expected towards the end of this year with legal proposals foreseen for the middle of 2011. A first round of formal negotiations will commence on the communication, leading possibly to the agreement of Council conclusions, while the more intense phase of formal negotiations will commence once the legal proposals are tabled. Parallel with this process, the negotiations on the EU budget after 2013 are expected to get into full swing later in the year, again with formal legal proposals in mid-2011.

Although formal negotiations will not commence until later this year, there has been a high level of activity on the subject of the future of the CAP over the past two years. The French, Czech, Swedish and Spanish Presidencies have organised policy debates on the general aspects of the reform and on the specific strands of the future policy on direct payments, rural development and market management measures. These policy debates have illustrated the complexity of the issues and the diversity of views among the 27 member states. It is telling that Presidency rather than Council conclusions were agreed under the French and Czech Presidencies as unanimity could not be achieved. Moreover, the Swedish and Spanish Presidencies did not attempt to obtain agreement on Council conclusions. In addition to the formal policy debates by EU agriculture ministers, there has been a large number of bilateral and other informal meetings and contacts and a substantial number of position papers have been produced by member states, stakeholder organisations and research authorities.

I am conscious that a broad orientation and direction for the future CAP will emerge during this informal phase of negotiations and with that in mind, my Department and I have been fully engaged in this informal process. I met the new Commissioner for Agriculture and Rural Development, Dacian Ciolos, shortly after his appointment and we will have further discussions later in the year. I also had meetings with my colleagues from some of the other member states. In this regard, Ireland was one of a group of 22 like-minded member states that signed up to a declaration in Paris in December last on the importance of a strong and properly resourced CAP in the future. Ireland was one of the leading member states in putting together that document. In addition, at official level we have had contacts and discussions with colleagues in other member states and with the Commission. The Department also has conducted a substantial amount of in-house analysis on issues primarily related to the single farm payment and this work is continuing.

I also have been engaging widely on the domestic front to ensure we in Ireland develop a strong and unified position with regard to these negotiations. I launched a public consultation process in July 2009 and sought stakeholders' views on the policies that would serve Ireland best in the years to come. I was pleased with the number and quality of the submissions received and I will use them to inform the Irish position on these negotiations. Almost 60 submissions were received and they contained a strong emphasis on the need for a robust and well resourced CAP in future to meet food security needs and preserve family farming in Europe. There was a marked preference for retaining direct payments but I noticed differences in emphasis that ranged from retaining the current historical model to updating reference periods and moving to flatter differentiated rates. There was some support for focusing payments more towards the delivery of public goods, including the environment, high nature-value farmland, cultural heritage and animal welfare, but this must be balanced against corresponding calls to maintain and index-link the current regime. There was almost universal opposition to modulation and to co-financing of core EU support payments and there was some support for payment ceilings and for confining payments to active farmers. A number of stakeholders called for re-coupled payments for vulnerable and strategic sectors and there was a good deal of support for the introduction of grassland payments. There also was a strong emphasis on the need to retain adequate market support mechanisms and for an additional mechanism to address increased price volatility. I believe that is an issue to which we must attach increasing importance.

Following this initial consultation process, I recently established a consultative committee to advise me on the CAP after 2013. The committee is comprised of all the major farming and agriculture-related representative organisations involved in social partnership, as well as a number of academics and it will hold its first meeting next week.

The Commissioner for Agriculture and Rural Development, Mr. Ciolos, already has launched a public consultation process providing an opportunity for all stakeholders and any interested party to give their views on the future of the CAP. The Commissioner has posed a number of high-level questions intended to focus discussion on the broad social benefits of the CAP, as well as the specifics of the reform. My Department has written to interested stakeholders in this regard, advising them how to participate in this consultation process and encouraging them to do so to ensure that Ireland's voice is heard at every opportunity. Commissioner Ciolos will host a conference in July to discuss the findings from these consultations. I take this opportunity to encourage as much participation as possible in this process. Members, through their work at constituency level and in this Chamber should encourage people to participate as much as possible when they have the opportunity to put forward their own viewpoints. The Commissioner has accepted my invitation to visit Ireland and that meeting is now scheduled to take place in September. I look forward to impressing on him the firm Irish view that there must be a strong and properly-funded EU agriculture policy after 2013. I will be involved in the all-party Oireachtas committee on agriculture and rural development for that visit and I hope the Commissioner will be in a position to meet and address it.

Having set out the context, background and recent developments in the negotiations, I wish to deal with the main issues that are emerging and to explain the Irish position regarding these issues. As regards the general orientation of future policy, there is good support among European Union agriculture ministers for a strong and properly resourced CAP after 2013. This was the main conclusion of the aforementioned meeting of the group of 22 like-minded European Union agriculture ministers in Paris in mid-December. My over-arching view is that I am conscious of the importance of ensuring security of food supply and maintaining family farming in Europe. However, particularly as Ireland is an exporting country, I also am conscious of the need for competitiveness and innovation and all these points should be reflected in the future CAP.

Full decoupling has been a success for Ireland and I remain committed to that approach. The continuation of a strong decoupled direct payments system is fundamental to stabilising farm incomes at times of market volatility. Decoupled payments remain the best way of underpinning the incomes of small family farms, while allowing them to respond to market opportunities. It is important to recognise the linkage between the income stabilisation role of direct payments and the market stabilisation role of our current market management measures. Staying with market supports, existing market support tools are appropriate and I believe there is broad agreement on this point among member states. One must retain the capacity and flexibility to react promptly and effectively to market instability and price volatility. The need for such measures was evident during 2009 in particular, when one reflects on the difficulties faced by the dairy sector. The application of intervention and aids to private and public storage in the dairy sector during 2009 illustrated the usefulness of these measures in contributing to market recovery and stabilisation, albeit at very low prices. These mechanisms should remain in place. I believe that, while they may require some adjustment, for example, in terms of periods of application and volumes, they are pitched at safety-net level at present and should remain available after 2013.

In addition to the current market supports, there is an increasing emphasis on risk management mechanisms and close examination of the possibilities offered by such measures is required. Ireland does not possess much experience of insurance systems and consequently is cautious about the benefits of establishing EU-wide insurance regimes.

Our main concern is that the diversity of production systems and range of risks across the 27 member states are too wide to accommodate a single EU-wide scheme. Therefore, I would like to see a suite of options available to member states to use at their own discretion within funding limits. There is also a need to address increased market volatility and we must have effective mechanisms to manage this. We should consider the potential usefulness of new additional tools to combat increased market volatility. In that regard, it might be worthwhile to consider in more detail the mechanisms used by other countries such as the US, particularly those concerned with underpinning farm revenue or income. I am not suggesting that we immediately adopt similar measures in the EU but we should certainly examine them to see whether they would deliver benefits on the EU market. I also want to ensure future policy continues to recognise and reward the high standards that apply to agricultural production in the European Union. Above all, this policy must be simple and not encumbered by unnecessary bureaucracy.

In summary, I want a CAP in the future that is based on the twin goals of competitiveness and sustainability, that is simple to justify to EU taxpayers, simple for farmers to understand and operate and simple for member states to implement and enforce. There is good support from the Agriculture Council for my position on the general direction of the CAP and I am encouraged by this.

With regard to the last few remarks, the agricultural community in general at Government level and at representative organisation level throughout the European Union has failed to get the clear message across to the citizens of Europe at large that the 495 million citizens of the European Union are all beneficiaries of CAP with regard to food security and the provision of public goods. We often read simplistic national media commentary that the Common Agricultural Policy is only about support for the farming community. It is not, rather it is about supporting all the citizens of the European Union. That is a message the new European Union Commissioner to anxious to get across to enable us to strengthen our case to ensure we retain our share of the budget.

The single biggest issue now emerging is the amount of funding that will be available after 2013 in view of pressures to reduce the EU budget and the share going to agriculture, specifically Irish agriculture. The key context for Ireland is food supply and sustainable management of natural resources, including climate change. We need a coherent approach to this based on the family farm structure. There is good support for the Irish position, namely, that we need a strong and properly funded CAP after 2013, and I will continue to press this point in the negotiations.

There is also pressure from the new member states for redistribution of funds in their favour. They believe that the use of the reference period 2000 to 2002 to calculate payment levels militates against them. They have called for abolition of the historic model and the application of flatter rates of payment across the European Union. They and others take the view that the further in time we move from the reference period, the less credible the historic model becomes. I am prepared to look at all options on this, but I will also require our partners in Europe to be equally realistic in their expectations. A debate which focuses solely on the distribution of direct payments without any reference to other EU funding would not be balanced.

Ultimately, the distribution mechanism must be fair and must underpin the goals of competitiveness and sustainability. However, fair does not necessarily mean equal. Any new mechanism must take into account the wide diversity of farming between member states. Pillar 1 direct payments are income supports and we must recognise that the cost of living and cost of farming vary widely throughout the 27 member states.

There is some tension between those who see a primary purpose of the CAP as being that of a guarantor of food security, income supports and EU family farming and those who see the function of the future CAP exclusively as a supplier of environmental and other public goods. It is clear there will be renewed emphasis on the delivery of public goods in the CAP of the future. There are positives for Ireland in all of this and we should not shy away from the debate. However, we must be vigilant at all times to ensure this does not come at the expense of the income support function of the direct payments system.

Many of our partners in Europe are now questioning the credibility of the historic basis of direct payments. The starting point for Ireland is that we see no compelling reason to change from the current historical model for determining single payments. We see the historical model as having a distinct advantage in linking the payment with level of farming activity, albeit activity in the 2000 to 2002 period. That having been said, it appears that Ireland is in a very small minority of member states that hold this view and we need, therefore, to be open to looking at alternative models that might command the support of a larger number of member states but would be beneficial to our country. While I am prepared to look at the alternatives, especially if other countries move from the historic camp, there is a need, however, to find a basis that is acceptable and fair to all member states and that meets our objectives of improved competitiveness and sustainability.

There are no concrete proposals as yet on this matter but it is clear that most member states, including ourselves, are carrying out analysis to determine which system might suit us best. From our analysis so far, we know that Ireland would lose out under a simple EU-wide flat rate by nearly 20%, based on current European Union single payment scheme funding levels. We also know that movement to a regional or national flat rate in this country, based on our current national envelope, would broadly have the effect of shifting funding from farmers in the east to the west and from cattle fattening and tillage farms to cattle rearing and sheep farms with little change on dairy farms. It is clear that there is a long way to go in this debate and that we will seek to have the option to maintain our current system and, failing that, to ensure there is a fair and equitable division of funds that supports family farm incomes in Ireland and allows our farmers to get on with the business of farming.

The positioning and status of rural development funding will be an issue, including whether elements should be integrated with cohesion-regional policy and whether the current structure with three axes of competitiveness, environment and diversification remains relevant. The new challenges identified in the CAP Health Check, namely, water management, bio-diversity, climate change and bio-energy, will again feature and there will be a greater emphasis on measurable outcomes. The core purpose of rural development policy is to support farmers in developing their productive capacity while securing the environment and ensuring the well-being of the wider rural society.

I support the continuation of a two-pillar structure. Our recent revised rural development programme shows a clear focus on competitiveness in the form of targeted investments and sustainability in the form of a new agri-environment scheme with clear benefits for all. This points the way forward for that pillar. Axis 1 measures, particularly those directed at investment and which promote competitiveness, perform a pivotal role in encouraging efficiency and innovation in farming for the future. These measures are critical to the future of Irish and European farming and should be maintained and enhanced.

It is very early days in these negotiations and we have a long way to go before the final outcome emerges. For me, the important issue is that we are well prepared and that we speak coherently and consistently with a unified voice. The negotiations ahead will be very difficult but I am determined to ensure the best possible outcome for Irish agriculture. I do not need to remind Members of the importance of agriculture to the Irish economy. It is our biggest indigenous industry and we have much to gain from a successful outcome.