Simon Coveney (Cork South Central, Fine Gael) | Oireachtas source

I thank the Seanad for having this debate. We need an equally comprehensive debate on this issue in the Dáil in the not too distant future. Perhaps, too, we should have another debate on the CAP as the negotiations develop during the Irish Presidency or before it. I wish to focus on the CAP rather than respond to the budgetary issues on AEOS and so on. We can deal with them on another day.

I will try to provide the context for this debate and Senator Quinn's contribution raises some questions to which I would like to respond. If we compare Ireland to New Zealand and ask why it has seen such success, innovation and expansion and why we have had limited success in some measurement of our industry, there are some clear answers. Back in 1983, before quotas were introduced into the European Union, Ireland and New Zealand had similar sized dairy industries. Both countries produced 5 billion litres of milk per year. We had approximately the same number of farmers, the same amount of land available for grass and similar climates. Since then, because Ireland had to operate under a quota system, we still produce just 5 billion litres per year in terms of volume production from dairy farms. New Zealand has made a transition and now produces 18 billion litres of milk per year. That transition has not been smooth, however. There have been problems in farming communities in New Zealand. There are debt problems and many dairy farmers are working for the bank. Many Irish people are aware of what that feels like.

It is true we have a lot to learn from New Zealand, but we have a lot to teach it also. Consider what the Irish dairy industry has achieved since the mid-1980s, when it has been restricted from expansion and growth and achieving economies of scale and all of the other efficiencies Fonterra has managed to deliver in New Zealand. Because we have not been able to increase volume, we have focused on adding value. That is the reason companies, like Carbery Group in Cork, are now producing some of the top sports nutrition drinks in the world.

That is why Kerry Group had to leave Ireland to grow and expand. It is now the largest company on the Irish Stock Exchange, employing 24,000 people in 70 countries, with a turnover of $5 billion per year. In Ireland our dairy system has been operating in the straitjacket of a quota system in Europe, which now looks like a totally flawed policy. However, at the time, we had to create an artificial market for milk in Europe, limiting supply to drive demand and drive prices up because it was more expensive to produce milk in Europe and we could not compete with world prices. We created a false, protectionist, artificial market. That made political sense at the time, even though I had some difficulty with that thinking. That was the reasoning at the time and I can understand it. The reasoning now needs to be totally different. We have agreed that in April 2015 quotas will go. They will be replaced by contractual relationships between farmers and their co-operatives or processors and we will see quite dramatic growth over a relatively short space of time.

The notion that Ireland has not driven innovation in the food industry because of subsidies at a European level is flawed. Kerry Group, to take an example, is probably the No. 1 food ingredients company on the planet, in terms of its customer base. Glanbia is rapidly moving down the added-value track. Big multinational food companies like Nestlé, Danone and Abbott have chosen to come to Ireland to produce and manufacture infant formula, which is the most sensitive product there is in terms of safety and quality control. They have chosen Ireland and approximately 10% of all infant formula is exported from here.

We have done a lot in terms of innovation but Senators are right that we need to do more. The food industry in Ireland is moving from being a commodity producer of cheese, skimmed and semi-skimmed milk, beef, sheep meat and so on, to being an added-value, high-end food producer. Instead of just producing skimmed and semi-skimmed milk we are producing infant formula. Instead of just producing milk powder, we are producing sports nutrition drinks. Instead of just simply selling milk in either liquid or powder form, we are taking content from milk, like whey, and putting it into new products such as muscle-building formula and so forth. All of these things are happening. That is why so many young people are choosing courses in human nutrition, sports nutrition, dairy science, food science and agricultural science and going to agricultural colleges. It is not because they all want to be farmers but because they see a really dynamic, innovative industry in the agrifood and drinks sector.

I have not even mentioned the drinks sector yet, which is also changing. The fastest growing whiskey on the planet is Jameson, which has seen double digit growth in 35 countries recently. Other well known and successful brands include Baileys and Guinness. We have a dynamic sector in Ireland, although we do need to do more. If Senators examine my list of priorities for last year in the budget, where I had to make significant cutbacks, they will see the areas I tried to protect in the context of that reduced expenditure. I urge Senators to look at what we did in terms of research and innovation funding coming from my Department. That funding went to universities like UCD and UCC, as well as to Teagasc, Bord Bia and BIM, which are all arms of the State that are trying to promote innovation, new thinking and new research. They are trying to add science to food production so that rather than Irish food producers going to other parts of the world and claiming that they produce the most sustainable and safe food in the world and asking others to simply believe it because they come from this green island, they are making that claim but also providing the data to back it up.

By the end of this year we will have 32,000 beef farms in Ireland carbon foot-printed. We will be able to say to buyers, whether they be in Boston, Berlin or Bangkok, that when they buy Irish beef, not only will they know it is traceable, safe and of high quality but they will also know what greenhouse gas emissions came from the source of that beef. Bord Bia is rolling that out. We are about to do the same for the dairy industry. In the next two years all 18,000 dairy farms in Ireland will be audited in relation to sustainability. We are the first country to do it. Most countries are not even thinking about how they might do that. People are thinking about it within companies but there is no country that has a national plan for added value, sustainability and innovation for a sector. In New Zealand they are really good at doing it because they have one big dominant company, Fonterra, and they do it as a company. In fact, they drive a sector as a company. We have decided to go down a different route, with multiple co-operatives. While there must be some consolidation in the dairy sector as we move towards an absence of quotas, there is enormous value in having different types of co-operatives and processors in that sector. Each has gone down slightly different routes in terms of how to add value and how to innovate. They have all taken different avenues in order to find ways to add value to products that they had not been able to add to, in terms of volume, because of quotas.

I am strong defender of the agrifood industry in Ireland in terms of its intent. It is finding money, even where it is scarce, to invest in research and development. There is no comparison between the food science courses available in universities in Ireland now and what was on offer ten years ago. Furthermore, the quality of the students taking those courses, in terms of the points required to gain access, is immeasurably higher. We have mature companies that are making their mark globally. We have a new type of student entering the food industry who is driven, bright and wants to make a mark in that industry. These are students who might have chosen IT, biotechnology or pharmaceutical courses a number of years ago.

We also have an extraordinary opportunity right now because it just so happens that the products that Ireland is one of the best in the world at producing, along with New Zealand and one or two other countries, namely, dairy products and meat, will be in short supply globally over the next 50 years. Between now and 2030 the world must produce 50% more food, in volume terms, just to feed itself. Where will that food come from? Ireland is already a food exporting country and we have the capacity to produce much more food, from the same resources, and we can do it sustainably, in terms of greenhouse gas emissions, water management, protecting biodiversity and so forth. All of which brings me to the CAP.

The CAP is important in the context of the challenge and opportunity for Ireland, in terms of wealth and job creation, as well as growth. In the last 12 months, employment in the food and agrifood sector has increased by 4%, while almost all other sectors are under constant pressure. That is not happening by accident. In terms of the CAP, a deal is required between the producers and consumers of food in Europe. Consumers in Europe demand high safety standards, good animal husbandry standards, in terms of animal welfare, animal transport and so forth, restrictions on hormone use in animals and on the use of genetically modified organisms, as well as decent working conditions and the protection of labour. Given all of that, consumers must accept that food produced under those conditions will be more expensive than is the case in those countries that do not have similar consumer demands to meet. If European consumers want that type of food, they will have to pay for it and they can pay for it in two ways. They can either support farming through the CAP or they can pay more for food. The problem with the second option is that food production in Europe becomes relatively more expensive than in other parts of the world and producers cannot compete. That is why the way to support sustainable food production, in a way that ensures it is competitive vis-à-visthe rest of the world, is by supporting the income of food producers and that is what the CAP is about. It is not about subsidies linked directly to production - we cannot do that anyway under the world trade rules - but about a recognition that if high production standards are imposed then some form of payment must be provided to producers through the CAP.

However, it is about a recognition. Given that standards are being imposed in terms of production there must be some form of recognition, that is to say, a payment provided for through the CAP. We have a major job to do since we are a country that relies more on the food industry than any other country in Europe. In fact, 85% of the European Union funds that come to Ireland are CAP funds.

We are discussing the multi-annual financial framework, MFF, a seven-year budget that the European Union will, I hope, agree before the end of the year. For Ireland the CAP element of that framework is more important in comparison with most other countries which have perhaps between 10% and 40% of their overall income from the European Union in the form of CAP.

This sector is singularly important to Ireland. We need to ensure that the ambition of the Food Harvest 2020 plan, put together by the previous Government, can be realised and CAP is central to supporting this in terms of allowing farmers to invest, expand, grow and modernise and to do all of that within the restrictions imposed on them by EU directives and national legislation relating to the quality control and traceability which they must buy into.

There is a series of technical discussions going on in respect of the CAP. By the way, I am pleased to accept the Fianna Fáil amendment. It adds to the discussion. It is unfortunate that Fianna Fáil has decided to refer to the suckler cow welfare scheme at the end and I am unsure why this was done because that is a different debate. Fianna Fáil believes it is a national scheme. It is not part of the CAP reform negotiations and not for debate today, so why is it in the motion? Anyway, that is for Fianna Fáil to decide. The other issues outlined are helpful and they are all very relevant. It is a shame that Fianna Fáil went into such detail, yet said nothing about the strategy that the Government and I are adopting in respect of providing an alternative to the Commission's proposal, which is a flat rate payment for everyone. We have an alternative proposal under consideration which has got some traction now. It has signed-up support from five other member states, some of which are significant in size. It would be helpful to get strong support on this proposal on a cross-party basis, if possible. I understood I had such support. Certainly in the Dáil debates in the past I have received support and farming organisations support our stance as well.

There is a process in respect of how and when we make a decision on the final negotiations on the CAP. Essentially there are two negotiations going on in tandem. The first relates to the budget negotiations, the MFF, and these should be decided by Heads of State at the end of November. There will be a special three or four day Heads of State meeting, being organised by the Council, to try to get the multi-annual financial framework agreed by the end of the year. This is important because the CAP is very much a part of the negotiating box for the budget discussions. During the negotiations the Heads of State will decide the total CAP budget for pillar 1 and pillar 2. More than ¤1.25 billion comes to Ireland through CAP in direct payments. A further ¤300 million comes in pillar 2 rural development funding. At the moment there is considerable pressure coming from countries such as the United Kingdom, Sweden, Germany and others to reduce the overall budget for the EU. They are seeking reductions in all lines of spending, including the CAP. We will be strongly resisting it.

I was pleased to hear the President of the European Parliament strongly resisting this as well when he made his statement today. He specifically referred to the importance of CAP for Ireland, its importance for food security in the context of what is happening globally and the need for Europe to produce more food. I offer this figure to reflect on in respect of seafood. Some 70% of seafood consumed in the European Union is being imported from outside the EU, despite all our technology and resources. Unfortunately the figures are similar for other agri-foodstuffs. Even in Ireland, in the case of grain and feedstuffs used for animal feed, we have to import 50%. We are exposed in that sense.

This country must protect the CAP budget in the context of any reductions in the overall budget allocation and the Government will do so as best it can. However, these will be difficult discussions. I assure the House that my Department will be central to these discussions because of the centrality of the CAP budget in respect of Ireland's interests in the overall budget. It will be a considerable political challenge to get that job done by November or December but if we can do that it will make the Irish Presidency of the EU somewhat more straightforward in respect of the CAP. We will be able to focus on finalising the Common Agricultural Policy and the Common Fisheries Policy, both of which must be finalised. All countries hope these discussions can be finalised during the Irish Presidency because we have credibility in both of these areas. This is our seventh Presidency of the EU and we have shown real form in previous Presidencies and an ability to get big things done; this is a big job. Never before has the CAP been subject to such complex political negotiations. A total of 27 countries and three institutions, the European Parliament, the Commission and the Council, are all centrally involved in finding a compromise. In the past there were far fewer countries and it was essentially between the Commission and the Council. I will spend a good deal of time working with the European Parliament as well as with my colleagues in the Council. I am lucky to be working with high quality MEPs, including Mairead McGuinness, Liam Aylward and others, who are also involved in the CAP discussions.

That is the process. Once the MFF is finalised and agreed it will take between three and four months to finalise the details of CAP expenditure in terms of how we allocate and spend the money between and within countries. If the MFF carries over into the Irish Presidency and is not completed until March then we will be under pressure. This is the reason I am hopeful that we can get an agreement on the MFF and I hope the money will be decided upon before Christmas.

I have spend a good deal of time travelling in the past six months. I have been to London, Berlin, Rome, Budapest, Madrid, Paris, Riga, Limassol, Vilnius, Tallinn, Brussels, Luxembourg and Amsterdam. I have probably omitted several others. I have been setting up bilateral meetings with other Ministers to try to understand their red-line issues. We will not get everything we want. That is one sure thing we know about these negotiations but no country will get everything it seeks and the Commission will not get everything it wants either. This will be a compromise and it is my job between now and the end of the year to ensure that everyone understands the Irish red-line issues in order that we can get principled agreement on them before we take the Presidency. This would mean that by the time I sit in the chair I can focus on trying to pull together all the other concerns into compromises, rather than having to dig my heels in on key Irish issues. I will do that if I have to and if we have to delay the process then so be it. However, I am hopeful that we will be able to deal with the key Irish issues in consultation and in robust discussions with the Commission between now and the end of December.

I will not discuss all the issues in detail but I will offer a flavour of the main issues. There will be a distribution between member states and this is a big issue for many member states. We broadly support the Commission's proposals which involve what is termed the approximation model. In simple terms this means that the Commission will calculate the average payment per hectare throughout the European Union and then they relate different countries to that average payment. If one country is below the average payment the Commission will move it towards the average and if a country is above the average payment then it makes a contribution towards those who need to increase their payments. Ireland is more or less on the average and regardless of the levels of redistribution among member states Ireland will be affected but not affected to the extent other countries will be. That is a safe place to be and that is no accident either in terms of the approximation model. Ireland pushed the approximation model as the method of calculating how countries will do from the CAP. The Department is lucky to have really good technocrats working on the CAP and its detailed management.

An issue of extreme importance to Ireland - I regard it as a red-line issue - revolves around the requirements on member states with regard to how to distribute direct payments, pillar 1 or single farm payments, within their jurisdictions. The Commission wants member states to move to a flat-rate, area-based payment that would be based on the average payments which apply in their jurisdictions. If a national flat rate were introduced in Ireland, approximately 76,000 farmers would gain an average of 86% on their current payments while in the region of 57,000 would lose an average of 33%. Given that these are averages, some farmers would either stand to gain or lose a great deal more. Members might say that I, as a politician, should support the proposal in this regard because far more people stand to gain than will lose. That may be the case but I want to build a bigger, stronger and more profitable industry in this country. Taking a large amount of money from a relatively small number of people and spreading it out among all of those involved - some of whom may be less productive either through no fault of their own or because they are hobby farmers - would not be a good way to proceed.

Redistribution is needed. Those who earn the largest amounts from single farm payments need to lose some money and this must be given to the lower earners to ensure that we can move towards an average payment. However, we must manage this process in a way that will not dramatically undermine the commercial heart of farming. We must also use rural development funds in order to ensure that we can continue to supplement the incomes of farmers who do not have the capacity to make large amounts of money from the marketplace, either as a result of where their farms are located or the size of their properties.

There is a need to get the balance right and we have put forward an alternative proposal in respect of this matter. Ironically, the latter incorporates the Commission's proposal regarding the redistribution of money between member states and gives countries which want to use the alternative model the option of redistributing such money within their own jurisdictions. In other words, there would be an average payment per farmer per hectare. What would happen then would be that we would identify what would be 90% of that payment and we would move everybody up towards it by 30%. This would be paid for by everyone above the average. I accept that this sounds complex but essentially it means that all of those involved would be moved towards the average. The highest earners will contribute most and the lowest will gain the most.

As I informed the Commissioner, we have discovered a political solution to redistributing funds between member states. In that context, everyone accepts that, for all sorts of reasons, member states cannot be on the same payments per hectare. We would like to be in a position to adopt the same approach in respect of solving a difficult problem within member states. In other words, we suggest that member states would have the option of redistributing funds within their own jurisdictions. Portugal, Spain, Italy, Denmark and Luxembourg have given us their written support in this regard. In addition, we have received principled support from France. Countries such as Belgium and Austria have problems which are similar to ours and have suggested a slightly different solution in the context of how these can be resolved.

I am trying to negotiate a compromise with the Commissioner. The ultimate solution probably rests somewhere between his proposals and ours. We want to achieve an understanding in respect of granting flexibility to countries which simply cannot move to a flat-rate, area-based payment without destroying productive agriculture in their jurisdictions. If what is proposed were to happen in the timescale envisaged, then productive agriculture in this country would certainly be destroyed. The Commissioner has put forward clear arguments as to why he wants the structures he is proposing to be accepted and I have made clear arguments as to why I am seeking something different. As a result, we are engaging in a mature political discussion with regard to how we might resolve our differences. For the reasons I outlined earlier, I would certainly like to be able to have those differences resolved before the end of the year.

We are much more in sync with the Commission in respect of greening. It is important that consumers be aware of the fact that there is a measurable and real greening element to direct payments. At the same time, we must ensure that what we do in this area is implemented in a way which will not cost either farmers or member states a great deal of money and time. The European Court of Auditors assessed the Commission's proposals in respect of the overall reform of the CAP and predicted that it would cost member states approximately 15% more to implement the new policy than it had to implement the existing one. That is completely unacceptable. What is required here is simplification. Greening measures that are easy for farmers to understand and easy for member states to implement must be brought forward. At the same time, those measures must provide real value in the context of sustainability, protecting the environment, etc.

The current proposals from the Commission in respect of the greening measures need to be amended. However, the principle behind them is acceptable. The Commission is proposing that in order to qualify for 30% of one's single farm payment, one will be obliged to fulfil three criteria as follows: to protect permanent pasture rather than ploughing it up; to have at least three crops in one's fields if one has more than four ha of arable land; and to devote at least 7% of one's farm holding to what is termed an "ecological area". The position with regard to such ecological areas will be somewhat different to that which applies in respect of set-aside because one will be in able to include forestry, hedgerows, wetlands and so forth. Many farmers already qualify in respect of these three criteria but we are seeking to have them amended. It is farcical that one would be obliged to grow three crops in a parcel of land measuring four ha. For arable farmers, this would make no sense. As a result, I am of the view that the threshold in respect of the amount of land involved will have to be dramatically increased. The Commission has already stated that ten ha would be more appropriate, we are seeking that it be increased to 15 ha and the European Parliament is of the view that it should be 20 ha. The debate in this regard is moving in the right direction but work remains to be done.

Steps are being taken to protect permanent pasture because very small percentages of most countries overall agricultural land is devoted to such pasture. In Ireland, 85% of our land is in permanent pasture. There are specific issues which we would like to discuss with the Commission in respect of permanent pasture but we agree with the principle involved.

The most important point in the context of greening relates to the concept of something being "green by definition". A farmer who is operating within an AEO or a REP scheme is already being paid for farming in a sustainable and environmentally acceptable way. As a result, his or her activities should be green by definition and he or she should automatically receive his or her green payment rather than being obliged to comply with a lesser set of rules, complete additional forms, etc. The latter would be a waste of time and money. If what a farmer is doing is clearly sustainable and if his or her activities are being measured to that effect through pillar 2 payments - as is the case with the environmental schemes that are in place - then we would make the case, and we are supported by many other countries in this regard, that what he or she is doing is green by definition and that he or she should get his or her payments. This is one of the reasons I was so anxious to launch another AEO scheme. In light of the amount of money available, I placed a limit of ¤4,000 on the amount of money individual farmers can access in order to maximise the number of farmers who can avail of that scheme. I could have put in place a limit of ¤5,000 but fewer farmers would have been involved as a result. We are trying to encourage as many farmers as possible to consider sustainable farming and to help them to qualify for what may in the future be a green-by-definition compromise. However, the eventual position in this regard remains to be agreed.

We strongly support the Commission's proposal to the effect that member states should be mandated to set aside 2% of single farm payment funds for the purposes of issuing top-up payments to young farmers in order that they might be encouraged to farm, invest, expand and grow. Before the Commission drew up its proposal, Ireland and Hungary pushed really hard in respect of this matter. The Commission eventually agreed with us. Organisations such as Macra na Feirme and others have exerted pressure with regard to this matter and they were right to do so.

Pillar 2 funds apply in respect of rural development. There are many supports in place in this regard, including disadvantaged area payments - which were hugely important to Ireland in the past and still have a role to play - REPS payments, targeted agricultural modernisation schemes, TAMS, suckler cow welfare schemes and Leader programmes. We really have no idea with regard to the proposals that are going to be put forward in the multiannual financial framework, MFF, discussions in respect of the way in which pillar 2 funds should be distributed.

It is very concerning and it is very deliberate. We have a pretty clear picture of what direct payments will look like in terms of the new budget but pillar 2 moneys have been left to be decided on the basis of what are called objective criteria, which means different things to different countries. Essentially, what has been left is a political bargaining chip because member states will have to come up with an overall compromise on the budget between structural funds, which are regional funds, CAP pillar 1 and pillar 2 and research and development funds. That will be part of the mix in terms of the budget individual countries get. We must box clever on that.

What would be totally unacceptable for this country would be for us to lose on both pillars 1 and 2. We are probably going to lose a little bit on pillar 1 money, but not as much as some other countries. We cannot accept losing on both pillars. If we were to measure how countries are doing on pillar 2 allocations, based on the same criteria used for pillar 1, we are well below the average. That is because we are a more developed country than many of the newer member states. That said, countries that are well below the average should not lose even further on pillar 2. We will fight hard to retain those budgets because they are hugely important for a lot of the farmers the Senator expressed concern about. Other Senators have expressed concern, in particular about farmers in disadvantaged areas and in severely disadvantaged parts of disadvantaged areas who also need to exist.

I could also go through market support measures. In general, this country should adopt an approach whereby there should only be intervention if there is a crisis rather than trying to have intervention too early in which case the Commission essentially sets prices. Anyway, it will not do it because it will not be allowed to do it. Essentially, what we are talking about are such issues as intervention, export refunds and aids to private storage, in particular on the dairy side from a butter point of view which works very well for us because it balances out the seasonality of milk production. What we need is a safety net in Europe because if we have a repeat of 2009 which saw a collapse in milk price, it can trigger a mechanism to stop the collapse in price and allow the industry to recover over time.

There are also other market support measures that have existed in the past which need to go such as sugar quotas, for example. We are a strong supporter of the Commission?s proposal to do away with sugar quotas in 2015, but that is unlikely to happen because the politics of sugar is that countries that have quotas at the moment are making a lot of money from them and they are going to try to hang onto them for as long as they can. It is my job in the context of a post-2015 compromise or arrangement to make sure that this country does try to carve out for itself an opportunity to get back into the sugar industry if it wants to and if it makes commercial sense to do so. What I mean by that is trying to access quota should the quota system be extended.

I hope I have given Members some food for thought. I invite and encourage anyone who wants to know the detail of any one of the sectors that are being discussed and debated at the moment to contact my office. We have high quality people involved in the CAP negotiations. I have not come across a country, regardless of size, that has better people working on CAP than I have. If anyone wants a briefing on why we have taken the position we have taken, he or she should just ask for it and we will give it.

I am also organising public meetings around the country, one in each province, in the next few weeks. We are doing it in conjunction with the Irish Farmers? Journaland the IFA. I would encourage Members to come along if they want to. It is important to get an open discussion going because if we do not have a national discussion on an issue of such importance that impacts on the everyday income of 130,000 farm families, then rumours take hold and I do not want to allow that to happen. I would rather have a frank, open and transparent negotiating period until we come to a final compromise at the end of the day, which I hope will be something people can live with and welcome.