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

I will try to respond to as many as possible of the numerous questions posed. In particular, I will try to address the points raised by those who have remained in the Chamber.

In respect of what Senator Ó Domhnaill said, it is important that people get the context right. The idea that anybody would be disappointed that there will be a 3.3% cut in direct payments when six months ago a 30% cut was being discussed just does not stand up to scrutiny. Anyone who thought the CAP budget would remain untouched while the overall EU budget is being cut to quite a significant degree does not live in the real world. I agree with the Senator that farmers will see reductions in their direct payments. That is regrettable but I am of the view that we obtained an extraordinarily good deal in terms of the overall MFF and the priorities relating to agriculture. Ireland, through the Taoiseach's office, lobbied very hard in order to obtain the result that was eventually achieved. We supported other countries that were working with us in this regard, most notably France.

To limit the reduction in Pillar 1 direct payments to 3.3% was way beyond the expectations of most people. From the point of view of the farmers, who do not care about the politics of it and just see a reduction in the direct payment, it is a cut, but people need to understand that limiting the cut to that extent was a significant achievement and should be noted. Anyone in the sector, including farm organisations, can recognise that.

With regard to co-funding, it is important to understand that we have been living for the past number of years under the terms of a bailout agreement. We have set expenditure ceilings year-on-year as required in the agreement. At the end of this year, and not before time, we will be leaving the straitjacket approach to the management of our economy, but we will still have to have financial discipline in terms of how we spend money and where we spend it. Expenditure ceilings will still be applied to every Department by the Department of Public Expenditure and Reform. I will have to negotiate, on behalf of the sector, a rural development programme that draws down full EU money and creates as big a fund as we can afford to spend on the rural economy. I will do so, as opposed to designing a rural development scheme that targets the maximum co-funding at EU level. We are required to have up to 30%, in terms of expenditure, of our rural development schemes as environmental schemes. All environmental schemes have 85% co-funding. The idea that we can have 50:50 co-funding without a significant extra contribution from the Exchequer, which is not required to draw down EU funding, is a question of the willingness of the Government to add significantly to what it needs to spend to draw down EU funds. It is a lot to ask in these times but I will make the case forcefully at the Cabinet table because rural economies are performing extraordinarily well. This is particularly true of the agrifood and fisheries sector in the past number of years. The figures prove it.

People talk about the Irish agrifood industry not being able to perform because of subsidies. I totally reject that concept. In the past three years, we have seen growth of more than 30% in the value of food and drink exports out of the country. It is partly driven by more efficiency at farm level, which we must continue. We must use the funds. Direct payments to farmers are about income stability, and we have attached those payments in the past to productivity. This is not about income distribution; it is about supporting sustainable, efficient and safe food production. There is a deal between European taxpayers and European food producers that we pay them for producing sustainable, safe, high-quality food because they must do that under conditions more stringent than in other parts of the world. They must also do so on family farms that are much smaller than in other parts of the world and we want to keep that structure intact. In return for direct payments, farmers must comply with restrictions that do not exist in other parts of the world.

In dairy production, Ireland has a natural competitive advantage against any other country in the world, including New Zealand, in terms of our climate and our ability to grow grass. The industry has not been allowed to expand since 1983 because of quotas. Farmers are not getting money for nothing; they are getting money to comply with a production system that is politically designed in the European Union for all sorts of objectives including food safety, food quality and a certain amount of rural social engineering in terms of family farm ownership, the structure of rural communities and keeping farms on hillsides and mountainsides. This is the kind of farming that does not exist in much of the rest of the developed world in similar areas.

It is important to understand that it is not a simple question of farmers pursuing subsidies for the sake of it. We are trying to provide income stability for farmers in good times and bad but also to incentivise them to become more efficient at what they do. This is why we introduced the beef genomic scheme in the budget. We will spend some €40 million on the beef sector but we will receive a significant dividend from beef farmers, which will allow us to be the first country in the world to set up a national beef DNA database, matching it to the information we already have from our beef farmers in terms of performance indicators in the herd, such as ease of calving, performance, feed conversion efficiency, fertility and other measures. We will be the first country in the world to be able to tell a farmer, on the basis of a DNA sample from the calf, how the calf is likely to perform later in life.

The idea that farmers cannot become more efficient at how they produce food if they are getting subsidies does not match what is happening on farms in Ireland. Both can be done together. If we had a lazy approach from the Government, giving money to farmers without asking for anything in return, and if the CAP policy was sloppy and lazy, we would be paying people to remain on the land regardless of how they produce food. However, that is not how the deal works. Most farmers drawing down direct payments who are getting support from schemes in the rural development programmes understand that.

I want to deal with the EU-Canada trade agreement because I was involved in it. In response to some of the questions, Deputy Martin Ferris proposed that we advocate for a cap of €100,000. At the time, I agreed with him. We had to move heaven and earth to get agreement on €150,000, and it is not a cap. Countries such as Britain and Germany just want a 5% degressivity above payments of €150,000 for farmers. There are just slight reductions on payments above €150,000, but we have agreed that countries can apply a degressivity figure of 100% above €150,000. In other words, we can set a cap at €150,000 for any farmer. From my comments today and previously, Members may have picked up that I am quite sympathetic to it. I must look at the submissions from all organisations before we finalise an agreement.

We also have the capacity to examine capping payments per hectare. There is a major misunderstanding among many people who have examined the CAP debate but not the detail. People talk about higher earners versus low earners and big farmers versus small farmers. The only calculation that matters is the payment per hectare. Of course, a farmer with a lot of land will receive a higher payment than a part-time farmer with a small amount of land. To make the case that both farmers are in the same category, as if they are both full-time farmers with the same sized herds and land, with one receiving €3,000 and the other €140,000, is incorrect. The payments farmers currently enjoy have been brought about on the back of entitlements in the past that were linked to headage payments and integrated administration and control system, IACS, payments that depended on the number of animals on the land or the crops they were growing. They did not get payments out of thin air. In the past, farmers who could work the system most efficiently in terms of maximising throughput and getting payments linked to throughput were the farmers with the highest payments. There is a correlation between productivity on farms and the level of payment per hectare in general. The percentages are not as wide as the payments suggest. The highest-paid farmers, in terms of payment per hectare, are those with the highest stocking rates but there is not a ten-fold gap in stocking rates, as suggested by one farmer getting €80 per hectare and the other getting €800 per hectare. That is why convergence was necessary.

We are moving towards average payments and a guarantee of a minimum payment of approximately €146 to €150 per hectare. The more one earns per hectare the more one loses and the closer one is to the average payment, one will either gain or lose. The vast majority of farmers are somewhere between €200 per hectare and €500 per hectare. That group of farmers is not massively gaining or losing but they are all moving slightly towards the average payment over a gradual period of six or seven years. The agriculture sector does not want shocks to the system. The internal convergence model which has been agreed as an option and which Ireland intends to adopt, is a good result. I am unable to provide exact answers to some of the questions because we have not completed our consideration of them. If any Member wishes to contact me directly I am happy to speak to him or her afterwards.

I will speak briefly about the EU-Canada trade agreement. It is important to understand a number of factors. The reason this deal was not done eight months ago is because of countries like Ireland and maybe one or two others, but Ireland in particular. We are very sensitive on the issue of beef. There is really no other significant beef exporter in the European Union. We export nearly 90% of the beef we produce and the vast majority of that product goes to the UK and to the rest of the European Union. Any dramatic increase in tariff-free imports of beef into the EU will be a concern for our sector. Canada was looking for significantly more than 50,000 tonnes carcass weight which is about 37,000 tonnes of beef; it was looking for twice that amount under this deal. Canada was also looking for a fraction of the 15,000 tonnes of tariff-free dairy exports which we can now send into Canada. Anyone who understands the Canadian agri-food industry will know that it is an incredibly rigid, strong and protectionist dairy industry. It is almost impossible to get any dairy product into Canada. The agri-media in Canada are extremely concerned about the impact of this deal on the Canadian dairy industry. This deal is not one-way traffic. I think we have limited the damage of Canadian beef imports to the EU to the greatest extent possible. We have maximised the opportunities to the greatest extent possible for increased dairy access into Canada. However, some in the European Union would like to use beef as a form of Trojan horse to get these things across the line. We have made repeated strong representations, including by the Taoiseach, to the President of the EU Commission, on this issue, declaring that Ireland would not be steamrolled just because it was the only country in the European Union that was vulnerable to beef imports into the European Union. On the question of whether this agreement will set a precedent for the EU-US trade agreement, I hope not but I suggest it will certainly be part of the discussion because that is unavoidable. Likewise, this will be the case in any deal with Mercosur countries where beef is again the stumbling block and Ireland needs to be very firm.

We also need to be consistent with our own principles of trying to get Irish beef into other countries. I am going to Qatar next Saturday and on to the UAE and Saudi Arabia. We will be announcing partnerships between Irish food and drinks companies with partners in these countries to build up markets and to ensure consistent exports over the next ten to 15 years. It is hoped that before the end of this year we will get Irish beef into the very lucrative and exciting Japanese market which has a high consumer spend. As we try to break into new markets it is not reasonable to suggest that there will be no new supplier of beef into the European Union, that we can have some kind of protected market for Irish beef while we have uninhibited entry into new markets. We should not fear competition. The Canadian beef imports will be hormone-free which Canada does not have the capacity to produce in large volumes at the moment but over the next five or six years it may build its output to fulfil the potential of the agreement from Canada's point of view. However, our beef industry needs to become more competitive during that period. We produce a different type of product to the Canadian product. We produce grass-fed beef which attracts a premium price.

I was also in Germany recently. Irish beef exports to Germany this year will increase by approximately 20%. The reason for the collapse in the Irish beef export trade to Germany some years ago was because of the BSE crisis here and that gap was filled by Argentinian beef. German consumers became used to big Argentinian steaks. Many of the steak houses opened during that period were Argentinian steak houses. Irish beef is replacing it in many cases. There is more Irish beef on menus in high-end German restaurants, with a premium price of 10% on top of what is paid for German or Argentinian beef, than has been the case for many years. The Senator is correct that we are competing with countries such as Argentina and we will compete with Canada in the future but we need to carve out a premium niche for our own product across the world. That is the way to guarantee the best price for our farmers, rather than trying to have this false policy of keeping everybody else out, creating an artificial market and an artificial scarcity for product which, let us face it, was the strategy of the CAP in the past. Our food industry is expansionist. We are looking for new markets at home, within the European Union and outside it. Our approach needs to be consistent while at the same time ensuring that we do not operate at a disadvantage whereby we allow food into the European Union which is not produced to the same standards and does not have the same rules about the use of hormones and GMO as pertain here. I hope I have answered some of the questions. I am conscious that I have run out of time.