Brendan Smith (Cavan-Monaghan, Fianna Fail)

I thank the House for affording me the opportunity to address it regarding the future of the Common Agricultural Policy. The agri-food sector is very important to the Irish economy and to our rural society. It will play a vital role in our national economic recovery. The Government has recently published Food Harvest 2020 which is an ambitious but realistic strategy for smart, green growth in the Irish agri-food sector over the next ten years. The CAP will be a key instrument underpinning this ambition. The negotiations on the future CAP are therefore of significant importance for this country because the policy decisions taken on foot of these negotiations will set the context and many of the conditions for the development of Irish agriculture in the years to come. For this reason I appreciate the time allowed for this debate in the House as I believe there is a significant benefit in having widespread consultation and advice. I am looking forward to the input from Members and I am anxious to hear their views. I hope that, collectively, we can come to conclusions on the best and most appropriate policies for agriculture in our country for the years ahead and advocate for policies at EU level.

When I addressed the House some five months ago, I outlined the background to and developments in the CAP discussions up to that point. I would now like to bring Members up to date on the developments that have taken place since then and to share with them the views of the Irish Government.

The basic context for these negotiations has not changed in that they are taking place against the background of an EU budget review and a new EU financial framework for 2014 to 2020. There are clear pressures from some quarters for a reduction in the amount of funding to be set aside for the CAP, both as a share of the budget and in absolute terms. While the overall EU budget and the share going to CAP are matters for decision by Heads of State and Government in the context of the negotiations on the next EU financial framework, it is inevitable that the distribution of CAP funds between member states will inform that process and that both sets of negotiations will become inextricably linked.

As regards the timing of negotiations, a formal communication from the Commission is due to be issued on 17 November. It is expected this will set out the general principles and policy direction for the future CAP. This will be followed by full legislative proposals in mid-2011 and the plan is to secure agreement on an overall package in the first half of 2012. The process will run in parallel with the negotiations on the EU budget. These are issues of major importance to our country and indeed to the entire European Union.

When I spoke to the House last May, I mentioned the high level of activity and debate even though formal negotiations had yet to commence. This high level of activity has continued over the summer months, with formal policy debates taking place in the EU Council of Agriculture Ministers as well as informal contacts and meetings at bilateral level, the production of position papers by stakeholder organisations and a full-scale consultation process initiated by the Commission.

My Department and I have participated actively in all of these discussions with a view to building up alliances and pressing the Irish viewpoint. In addition to representing the Irish view at formal and informal meetings of EU Agriculture Ministers, I have had bilateral meetings with the Commissioner and with colleagues from a number of other member states. Indeed, I travelled to Poland and Hungary last July to meet my ministerial counterparts. I have come to the House this afternoon following a meeting with Minister Ilse Aigner, the German Minister for Food, Agriculture and Consumer Protection. My French colleague, Minister Bruno Lemaire, will come to Ireland at my invitation at the end of the month.

These contacts are proving very productive in deepening our understanding of each other's positions and in establishing support for the Irish position in the negotiations. My meeting today with Minister Aigner was a case in point. We had a comprehensive discussion ranging over all the main elements of the dossier and I am pleased to report that we share a lot of common ground on the importance of a strong and well-resourced CAP in the future.

I had the pleasure of welcoming Commissioner Ciolos to Ireland two weeks' ago. It was an opportune time for such a visit just as the Commission was finalising its thinking on its formal communication. We had very useful discussions and the Commissioner went on to address the Joint Committee on Agriculture, Fisheries and Food and to meet stakeholder organisations at a specially organised event in my Department's offices in Backweston, County Kildare. In addition, the Commissioner was able to see at first hand the realities of Irish farming at a beef and sheep farm in north Kildare. I would like to think that his Irish visit will bring a distinct Irish influence to the content of that communication and to the future direction of CAP policy after 2013.

At official level we have continued our engagement with our colleagues in other member states, the Commission and the European Parliament. This is the first time the European Parliament will have a co-decision role in this process. There has been a number of bilateral meetings and contacts and we have shared information and analysis, discussed policy positions and explained the Irish context and viewpoint. This work has also proved very effective in gaining understanding and acceptance of the Irish position.

I am also continuing to consult widely on the domestic front. I had the opportunity of addressing the Joint Committee on Agriculture, Fisheries and Food on the occasion of the EU Commissioner's visit and of hearing the views of committee members. Earlier in the year I established a consultative committee to advise me on the CAP after 2013. That committee is comprised of all the major farming organisations and agriculture-related representative organisations involved in social partnership as well as a number of academics. The committee had its inaugural meeting last May and went on to participate in the stakeholder event I organised during the visit of Commissioner Ciolos.

Having brought the House up to date with recent developments, I would like to turn to the main issues emerging and to explain the Irish position on these issues. In this connection I should mention that many Senators may have already seen a media report of a draft of the communication that is due to be released by the EU Commission next month. As interesting as it may be, it is still a media report of a draft and subject to change when it is discussed within the Commission College. Consequently, I do not intend to go into any detail on the contents of that draft nor to make specific comments on its substance. Instead I will focus on the issues as they have emerged from the informal negotiating process over the last several months.

As regards the general orientation of future policy, there is good support among EU Agriculture Ministers for Ireland's view that we need a strong and properly resourced CAP after 2013. This was reflected in discussions held at the informal meeting of EU Agriculture Ministers held last May. There was general agreement at that meeting that the agriculture and food sectors could make an important contribution to the EU 2020 strategy. In addition, the need for a strong and well resourced CAP was emphasised by a majority of member states. I welcome this endorsement. This near consensus was repeated at our September Council meeting. The key context for Ireland is sustainable and competitive food supply, and the sustainable management of natural resources, including mitigation and adaptation to climate change. We want a coherent approach based on the family farm structure. As an exporting country, it is particularly important for Ireland to focus on competitiveness.

There is also an emerging consensus in favour of a two-pillar structure. In our view a major purpose of pillar one is the support of farm income and the core function of rural development is to support farmers in developing their productive capacity while securing the environment and ensuring the well-being of the wider rural society. In my view, pillar one should be financed fully from EU funds and there should be no requirement for co-financing from member states. The introduction of national co-financing would have the effect, in my view, of fragmenting and re-nationalising the Common Agricultural Policy. I also believe that the budgets for pillar one and pillar two should be fixed from the start of the next financial framework and there should be no question of modulation from one pillar to another. There is much support for these views among other member states.

One of the biggest challenges ahead in these negotiations will be to reconcile the competing demands from the different Member States for their fair share of the funds available, both in pillar one and in pillar two. Indeed one of my priorities will be to preserve Ireland's entitlements. Regarding the distribution of funds in pillar one, the two issues of the distribution of funds between member states and the distribution of funds within member states are often confused. To clarify matters in the negotiations, we should look at the two issues separately. There have been calls for some redistribution of pillar one funds between member states by flattening out average payment levels between member states. It is my strong view, which I have repeated, that the starting point for our negotiations must be the current distribution keys for pillar one. We must start any debate by looking at current national envelopes. In any deliberations on this matter, it is essential we use the correct and most accurate measurement to determine average payment levels based on the eligible areas that we have invested great effort in measuring. This is a critical point of detail and is fundamental to the eventual success of the negotiations.

Our partners in Europe need to be realistic in their expectations. Focusing solely on the distribution of direct payments without any reference to other EU funding is not balanced. Fair does not necessarily mean equal. To be fair, any new mechanism must take into account the wide diversity of farming between member states. Pillar one direct payments are income supports and we must recognise that the cost of living and cost of farming vary widely throughout the EU. Once the share-out of funds between member states is agreed, it will be necessary to agree on the criteria for distribution of these funds within member states. Regarding the type of direct payment we should be aiming for and the criteria for distribution, a primary role of pillar one payments in the future should be the support and stabilisation of farm income. Direct payments are fully justified on the grounds of support for farm income in a high cost environment, in recognition of the costs of meeting the EU's high standards and of the environmental and other benefits from cross-compliance. There may be a need to sell these benefits more actively to those who are not farmers and to explain that the EU is supporting family-based farms engaged in sustainable production and meeting high safety and quality standards. While public opinion in this country takes a broadly supportive view of the Common Agricultural Policy, the same can not be said for all of the other 26 member states.

Decoupled payments are the most appropriate mechanism to underpin sustainable farming activity while allowing EU farmers to respond to market signals and achieve competitiveness. Ireland has fully decoupled since 2005 and is ahead of most member states in this respect. While I can accept that there may be a need to continue coupled payments in certain regions of the EU to counter severe disadvantages or natural handicaps, I do not support any large-scale reversal of the policy of decoupling.

I favour allowing member states considerable flexibility in respect of the distribution of funds within member states, as is currently the case. The agro-ecological and social conditions of farming vary hugely within the Union and we need to have the flexibility to apply the payment model that best suits our conditions. I am not seeking to impose this model on other member states but I would like flexibility for each member state to decide on the payment model that best meets its needs.

Ireland's current payment system has the major virtue of focusing funding on active farmers. As we are fully decoupled and apply cross-compliance, this has the effect of supporting sustainable production while not distorting competition or interfering with the farmers' response to market signals. The focus on active farmers is becoming a big issue in the discussions and there have been calls to limit payments to active farmers only. While I fully endorse the principle, I will reserve judgment until I see concrete proposals from the Commission.

Other ideas on the table for direct payments are the possibility of establishing upper ceilings or caps on individual payments and fixing minimum payment levels for small-scale farms. I am open to looking at these ideas but I need to see more detail before taking a firm position. There have been some suggestions that less favoured area payments should be moved to pillar one because they are annual payments primarily directed at supporting farm income. I have a strong preference for retaining these payments in pillar two where they can be targeted at those most in need. Not all member states utilise the option to pay less favoured area payments and it is difficult to understand in those circumstances the move from discretionary payments in pillar two to obligatory payments in pillar one. Moreover, it would preclude the flexibility currently allowed to member states to respond to the specific local characteristics of their individual agricultural production systems and it would have the effect of neutralising the value of such payments on areas of natural handicap most in need of funding.

As for market supports, there is an emerging consensus, with which I agree, that existing market support tools are appropriate and should continue. There may also be a need for adaptation of these measures to address particular difficulties in the market as they arise and there is general support for this view among my colleagues in the Agriculture Council. For the future, we need new tools to address increased market volatility. Given the diversity of production systems and risks across the EU, I am cautious about establishing EU-wide insurance regimes. My preference is to look at a suite of options for member states.

As for rural development, the principles I outlined regarding the distribution of funds between member states apply equally in respect of pillar two. The current distribution of funds should be the starting point for our examination of any request for redistribution of funds between member states. The current distribution of rural development funds among member states reflects the actual record of countries in pursuing successful rural development programmes with co-funding from their national exchequers. Even under the current severe constraints on the Irish Exchequer, Ireland continues to meet its co-funding responsibilities fully and to undertake additional national actions, for example, on forestry. This should be fully recognised in the distribution of funds in the next programming period.

Ireland's share of these funds also reflects the fact that we account for a significant share of the EU's rural land area and modulation. As to the policy itself, there is considerable acknowledgment among the Commission and member states of the importance of encouraging competitiveness. I am pleased about this. It should be a high priority within pillar two of the CAP. Ireland's view is that 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.

Measures 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. Investment measures that support competitiveness should be seen as a key Community priority in the new rural development regulation. The other key priority for me in our future rural development policy is to have effective support for agri-environmental measures that contribute to the sustainable management of our resources. In essence, competitiveness and sustainability should be the twin goals of our rural development policy of the future.

We have a long way to go before we arrive at a conclusion to these negotiations. The negotiations will not be easy but I am determined to fight for the best possible outcome for Irish agriculture. Agriculture is our largest indigenous industry and we have much to gain from a successful outcome. I value the input from Members of this House and members of the Joint Committee on Agriculture, Fisheries and Food. Over the next two years we will have the opportunity to exchange views on an ongoing basis on this critical issue for our country.