Adjournment Debate - Sugar Industry.

Tuesday, 25 October 2005

Dáil Eireann Debate
Vol. 608 No. 141

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Mr. Sherlock: Information on Joe Sherlock  Zoom on Joe Sherlock  The issue of the overhaul of the EU sugar regime is one which, if the current proposals are agreed, will signal the demise of the Irish sugar industry and with it the loss of in excess of 1,000 jobs in sugar manufacturing and associated industries. In EU terms, the Irish sugar quota is small, amounting to just over 1% of the total EU quota, but this does not give an accurate representation of the importance of the industry to Ireland. More than 3,700 farmers grow sugar beet under contract to Irish Sugar Limited and receive approximately €75 million annually for the crop. While we accept that some change to the regime is inevitable, the European Commission proposals are too radical. The price cuts proposed for sugar and sugar beet are very severe. The impact of the current reform proposals will result in the phasing out of sugar production in this country.

The European Parliament report by Mr.
Fruteau states that, under the current proposals for sugar, the current support price of €631.90 per tonne is to reduce in stages to €385.50 per tonne from 2008-09. This is a cut of 39% compared with the cut of 33% proposed in the Commission communication of last year. This is unsustainable for any Irish farmer. The minimum cut in the price of sugar beet over two years is to be from €43.63 [748]per tonne to €25.05 per tonne from 2007-08. This is a cut of 42% compared with the cut of 37% proposed in the Commission communication. This is also unsustainable. Compensation for farmers remains at 60% of the drop in the support price. This is to be paid as part of the single payment scheme. Ireland’s scope is €11 million from 2006-07 and €18 million from 2007-08. For Irish growers, this works out at €7.35 per tonne of beet in 2006-07, rising to €12.03 per tonne of beet from 2007-08.

I call on the Minister to reject these proposals and, furthermore, I insist that she call for no conclusion on an agreement in advance of the November meeting of the Council of Ministers. We must await the outcome of the World Trade Organisation meeting in Hong Kong in December. The outcome of that meeting will have a direct bearing on the price at which sugar sells in the European Union. I call for prudence in this matter. The outcome of the WTO meeting will have a direct bearing for the EU-wide sugar regime. I appreciate that negotiations are difficult but if they result in the loss of a viable industry and no Irish sugar-producing facility, they will have untold consequences and leave us to the mercy of the European sugar interests. That is a vista we do not want to contemplate.

Minister of State at the Department of Agriculture and Food (Mr. B. Smith): Information on Brendan Smith  Zoom on Brendan Smith  I thank Deputy Sherlock for raising this issue and welcome the opportunity to comment on the proposals for reform of the EU sugar regime, which were again discussed at today’s Council of Agriculture Ministers meeting in Luxembourg.

It is over a year since the Commission first outlined its thinking on the future shape of the sugar regime but formal legislative proposals only emerged at the end of June 2005. The proposals have now been formally presented to the Council and the Parliament, and the UK Presidency is striving to reach political agreement before the WTO ministerial meeting in Hong Kong in December. It should also be noted that the sugar regime in its current form will expire at the end of June 2006, and therefore there is a need for a decision on future arrangements to avoid a legal vacuum from next July.

Everybody is familiar with the reasons reform of the sugar regime is high on the EU agenda. In addition to the internal EU pressures to bring the sugar industry into line with the other agricultural sectors, there are international pressures. These fall under three main headings: the everything but arms agreement, the WTO Doha round of trade negotiations, and the ruling by a WTO panel last April against aspects of the EU regime following on a complaint by Brazil, Thailand and Australia.

From the outset, Ireland pointed out the serious repercussions the proposals would have [749]for the Irish industry. The Minister for Agriculture and Food, Deputy Coughlan, along with her colleagues from nine other EU member states, made a joint submission to the Commissioner for Agriculture and Rural Development pointing out the devastating effect the proposals would have both on producers and the industrial enterprises in the sector. While the ten Ministers acknowledged the need to modify the existing regime, they argued that the reform should aim to keep the existing pattern of sugar beet and sugar production across the entire EU territory.

The legislative proposals published last June turned out to be even more severe than anticipated and went even further than the Commission had initially envisaged, not least because of the WTO ruling in April 2005 against aspects of the EU regime. There were two key differences: the price cuts were deeper and the proposal for compulsory quota cuts along with the proposal to allow quota mobility between member states was dropped, being replaced by a voluntary restructuring scheme for factories.

The Commission’s stated objective in presenting these particular proposals is to develop a sustainable future for the EU sugar industry by enhancing competitiveness and, at the same time, to attain a sustainable market balance between domestic production levels and international commitments.

The key elements of the proposals are a 39% price cut in the institutional price for sugar, a corresponding reduction in the minimum price for sugar beet and 60% compensation to farmers for the price cut. A voluntary restructuring scheme is proposed to encourage factory closures and the renunciation of quota.

From Ireland’s perspective, the proposals are completely unacceptable in their present form. The price cuts proposed are so severe as to make sugar beet production in several member states, including Ireland, uneconomic. It is unprecedented for the Commission to make proposals that could lead to the demise of an entire sector in a number of member states.

The restructuring scheme as proposed is inequitable as the closure of a sugar factory would have major implications for sugar beet growers and this fact is not sufficiently appreciated. Apart from going against the expressed views of many member states, the proposals for price reductions have not found favour with the least developed countries either.

At Council in July, the Minister argued strenuously that the price cuts proposed are too severe, that the reforms should be based on a longer lead-in time for everything but arms agreement and that it would be preferable to await the outcome of the WTO meeting in Hong Kong in December before seeking to conclude an agreement on sugar reform. The Minister is in frequent [750]contact with like-minded ministerial colleagues in other member states who also oppose the proposals. A further letter from a group of 11 member states, including Ireland, was submitted to the Commission today in advance of the formal discussion at Council setting out the objections of the group to the proposals.

The Minister also met the Agriculture Commissioner on a number of occasions to voice her strong reservations. Meanwhile, there has been ongoing contact at official level with other member states and the Commission about the reform proposals.

The Minister maintained her firm opposition to the Commission’s proposals when she addressed today’s meeting of the Council of Ministers in Luxembourg. Negotiations will become more intensive over the coming weeks and the proposals will be considered by the Council again next month. Given their severity, it is clear the negotiations will continue to be difficult but the Minister will be resolute in pursuing her overall objective of achieving a more balanced agreement, which will take Irish interests into account.

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