Committee Reports > List of Committees > Joint > 1986 > Committee on the Secondary Legislation of the European Communities (4th Committee) > Report No. 26 - Perspective for the Common Agricultural Policy (The Commission Green Paper)

A. INTRODUCTION

1.The Joint Committee has examined the Commission Document-Perspectives for the Common Agricultural Policy [COM (85) 333 final] - the Commission’s “Green Paper” on the future of the Common Agricultural Policy and also the Commission Document “A future for Community Agriculture” which contains Commission guidelines following consultations in connection with the Green Paper. The Joint Committee sees the role of the CAP as central to Irish agriculture and rural development. However, the operation of the CAP has now resolved the developmental issues in Irish farming. Accordingly, the Joint Committee welcomes the opportunity provided to review the CAP in order to make it more effective, particularly in the Irish context.

2.The documents were examined for the Joint Committee by its Sub-Committee on Agriculture and Fisheries Matters under the Chairmanship of Deputy Joe Walsh. The Joint Committee is indebted to Deputy Walsh and his Sub-Committee for their work. In the course of the preparation of this Report the Sub-Committee considered written and oral submissions from the ICMSA, the IFA, ICOS and a written submission from Macra na Feirme. It also had the benefit of written and oral submissions from An Foras Taluntais, An Chomhairle Oiliuna Talmhaiochta (ACOT) and the Department of Agriculture.

The Joint Committee wishes to express its appreciation to all these bodies for their assistance in the preparation of this Report.

B. THE GREEN PAPER

3.Shortly after taking office in January, 1985, the Commission decided to initiate a general discussion on the perspectives for the Common Agricultural Policy and presented its Green Paper which it sees as setting the framework for a dialogue between the Community institutions and professional organisations.

It is accepted that the Common Agricultural Policy has been the cornerstone of the development of the European Communities over the past 23 years. However, considering the challenges that the CAP is likely to face in the coming years, the Commission present in the document a number of options for the future development of policy. The Commission maintained that it was not intended to pre-judge the conclusions it would reach and that it would take full account of all views expressed in the course of consultations on the document.

4.The CAP has undergone continual adaptations in the course of its development. In the early years technical progress in agricultural production and bouyant economics in the countries comprising the Community led to a rapid migration of workers from the land. However the unfavourable economic conditions prevailing since the mid-1970s has slowed down the outflow of labour and the high levels of unemployment within the Community are such that any reversal of this trend would create intolerable problems.

The Commission sees the basic concept of European agriculture as the family farm. The need to maintain the social tissue in the rural regions, to conserve the natural environment and to safeguard the landscape, are reasons determining this choice. A farming industry based on the USA model with vast farms and few farmers is neither possible nor desirable in European conditions. The essence of the problem therefore is how to maintain a significant number of persons working in agriculture without an unacceptable waste of economic and financial resources. The continuing accumulation of surpluses where farmers are encouraged to produce for markets that do not exist is not considered a satisfactory option for the CAP and this has led in recent years to such measures as quota-fixing and co-responsibility levies.

5.As technological advances are affecting agriculture not only in the Community but on a world-wide basis it is argued that, if the Community wishes to maintain its role in international trade, the CAP must take account of the international realities. Also, as the other sectors in the Community are experiencing difficulties and are making demands on expenditure and as budgetary resources are limited this implies that the CAP must take account of financial restraints.

6.The Commission contends that it is not in the long-term interest of European agriculture to extend the regime of quotas considering Europe’s great potential for production and the consequences for consumers in higher prices, which could result from such a policy, and thus there can be no alternative to pursuing a price policy more adapted to the realities of the internal and external markets.

7.However the CAP will not fulfil its role if it does not provide farmers with positive perspectives and a sounder framework for succeeding generations. If it fails in this regard the policy would inevitably undergo a process of renationalisation which would lead to undesirable consequences for the development of European integration. It is accepted that there is no “miracle solution” to these problems but it is argued that if the constraints of a more market-orientated policy for prices and markets were accepted it should be possible to release new resources, to diversify the instruments of the CAP and to create new outlets for agricultural production.

8.The document indicates a number of options which may be considered

- at the level of production: Although a number of markets have given rise to problems, the cereals market is identified as the sector most urgently in need of review and a considerable part of the document is devoted to this area. The possibility of alternative production and the promotion of novel crops is considered.

- At the level of outlets: The development of new uses, especially industrial and energy utilisations, offer possibilities but that potential is of limited scope under present conditions. The communities’ role in external agricultural trade is also examined.

9.Up to now the instrument of price support has been the principal feature of the CAP. This emphasis on “guarantee rather than guidance” is not what was originally intended and the limits of this approach have now been reached. The question of what complementary measures should be developed is all the more important now for the agricultural community considering

-the impact of a restrictive price policy on agricultural incomes

-the risk of a growing polarisation between the advantaged and disadvantaged areas of the Community

-the challenges of enlargement

10.It is vital that the social conditions of those working in agriculture are not prejudiced by these developments and that the depopulation of the countryside is avoided. However the Commission argue that the maintenance of a significant number of persons in agriculture is not incompatible with the development, which should be encouraged, whereby a part of their income is derived from non-agricultural sources. Accordingly the document sets out a number of options

- the role of agriculture as a protection of the environment:

society could recognise the contribution of agriculture by providing financial resources

-the better integration of agriculture in regional development:

agricultural policy to be seen in the broader perspective of overall rural policy

- the question of direct income aids to farmers in the context of a restructive price policy.

11.It is recognised that the question of income aids is a complex problem posing important political, administrative and financial questions and two points are particularly empha:

an essential element of any system of income aids would be a financial participation of the Community in accordance with the need for solidarity, particularly towards the poorer regions; this would be the logical counterpart of the burden of income support being partially shifted from the markets policy;

there would be a complementary between any system of income aids and measures for regional development designed to create other possibilities of income for agriculture; without a more dynamic regional policy the need for specific income aid for agriculture would be greater.

12.Under the application of new financial guidelines which dictate, that the rate of growth in agricultural expenditure must be less than the rate of growth in own resources means, the Commission argue, that choices will have to be made. A restrictive price policy would mean lower expenditure on market measures and would lead, firstly, to prices being reduced or rising less rapidly than they would otherwise have done and, secondly, to production of certain surplus products being reduced or rising less rapidly. The other otpions mentioned, eg measures to stimulate alternative production and outlets and income aid would obviously go in the opposite direction both in a budgetary sense and a social sense. Accordingly, the choices to be made concern striking a balance between these factors, and could mean a higher level expenditure in the short-term to tide over the transitional period leading to lower expenditure in the longer term.

13.The Commission accepts that its approach as outlined in the document requires political courage and realism.

In the face of the aspirations of Europe’s agricultural population, say the Commission, it would be equally unjust to present false perspectives as to offer no perspectives. But the Commission considers that if the task of adapting the Common Agricultural Policy is approached with rigour as regards the analysis, and prudence as regards the choices to be made, there can be hope as regards the perspectives for the future of European agriculture.

The choice between a price policy or quantitative restriction

14.The Commission feels that given the situation of an expected sizeable increase in productivity in agriculture in the coming years due to technical progress coupled with a much slower rise in demand the Community must, for economic and financial reasons, achieve a better control of the growth of production. It is agreed that a restrictive price policy together with well directed accompanying measures could solve this problem at least in the medium term perspective. This would mean that the economic function of price policy is stressed at the expense of its social function of income support. However, it is doubtful whether a price policy with its low degree of selectivity is the best instrument for this purpose given the wide diversity of agricultural situations within the Community.

15.An analysis of the development of agricultural price policy in the Community has yielded two main conclusions:

-a restrictive prices policy must be sufficiently marked and must be such as to give signals to producers (in order not to be overcompensated by technical progress) so as to have a real effect on production

-such a policy must be pursued over a number of years and there will be a time-lag before the transition to a market orientated policy will show its full impact.

Failure to fulfil these conditions would more than likely result in the policy not achieving its intended effect on production.

16.The use of a quota system on the other hand has the advantages of an immediate effect in restraining production and the possibility in principle of relieving the Community budget of the cost of disposal of excess production although in practice this has not always proved to be the case. The disadvantages of a quota system include the problems of negoitation, management, control and revision of the quotas, the freezing of production structures which inhibits the development of productivity and hinders regional specialisation, the conferring of a captial value in the sense of a “right to produce” and the risk of renationalisation.

17.While it is sometimes claimed that a quantitative limitation of the price guarantee, at the level of the individual producer, would permit a higher level of prices for production within the guaranteed quantity; and thus even a differentiation of price guarantees according to the size of the enterprise. But the argument that a quota system would allow prices to rise more rapidly and thereby improve incomes does not really hold when it is closely examined. For, if the limitation of quantity is compensated by higher prices for producers, that in turn reduces demand on the home markets, sets incentives for substitution, makes Community production less competitive, and diminishes the opportunities agricultural products could have as raw materials for industrial purposes. As a result, further reductions of quotas become necessary, with a negative impact on incomes.

18. Given these considerations the Commission feels that quotas can be no more than a palliative and that the only sound approach is to give market prices a much greater role in guiding supply and demand. Such an approach would apply toproducts where market imbalances existed or threatened to develop and would take account of the severity of the imbalance and the role of the product in the formation of agricultural incomes.

19. Whichever approach is chosen, it will obviously have an effect on incomes and employment which leads to the important question of how to maintain the rural fabric, and supply alternative or supplementary income and employment possibilities which leads the Commission to examine a number of options for action.

The cereals markets

20.As already stated, the Commission devotes particular attention to the cereals market. The spectacular increases in yields in the cereals market has posed a real dilemma for the Community. The prospect is for the supply of cereals to grow significantly faster than demand and the surplus would become impossible for the Community to manage or finance.

Apart from the price mechanism which the Commission obviously favours to bring the market under control it also considers other measures which could be applied:

(i)The price instrument: It is accepted that a rigorous price policy with significant reductions in prices is needed but could not be envisaged without some form of income aid for vulnerable producers.

(ii)The guarantee threshold systems: An option would be to apply the price reduction immediately in the season the threshold is exceeded rather than in the following season.

(iii)Intervention mechanisms: The intervention period for cereals could be confined to the end of the season (April, May): this would avoid the competition between intervention purchases and export sales.

(iv)A coresponsibility levy: To be charged preferably at the first point of sale: it could be differentiated according to farm size.

(v)A cereals board: Includes representatives of the economic interests concerned and merits examination. It would exercise a development role in the export field and a coordinating role in supply management.

(vi)Quotas: While a system of quantitative restrictions could be implemented, the objections to quota systems have been mentioned, ie higher prices, lower demand and the prospect that incomes would not improve.

(vii)Diversion of land to other uses (“Set Aside”): Farmers would be paid to leave land fallow or use it for other crops or non-agricultural purposes. Such a system would, however, be expensive and pose considerable administrative problems.

The Commission observes that these different options could be applied in combination but states that unless the rigorous price policy outlined in (i) above is pursued it will be obliged to introduce one or more of the other measures for management of the supply of cereals.

Alternative Production

21.The use of alternative crops is also considered. The following are considered the most likely alternatives:

(a)For extensive types of farming - oilseeds and protein crops offer natural replacements for cereals, while areas under permanent grass could be replaced partly or wholly by wood crops and so relieve the burden in milk production.

(b)Fruit growing- almonds, hazelnuts, carobs, pistachio nuts and jojobs instead of traditional citrus fruit crops.

(c)Specialised crops - which require a plentiful supply of water, such as medicinal plants instead of tomatoes for processing and in some regions cotton-growing could be a valid alternative.

All these suggestions offer possibilities to a greater or lesser extent and it must be accepted that any changeover to alternative crops will be a slow process. However, should the Community decide to review the general direction of its agricultural production, the action to be taken would depend on the products to be encouraged.

22.In this regard one or more of the following measures could be envisaged:

(1)adaptation of the EEC market organisations for the products having such organisations;

(2)aids to encourage farmers to switch to other products (within firm limits, and restricted in time);

(3)incentives for the creation of the processing and marketing facilities needed;

(4)creation of the legal framework needed for the harmonisation of the quality standards for these products, to facilitate their marketing and consumer information (eg labelling);

(5)incentives to applied research and to technical and economic counselling on ways and means of switching products.

New uses for agricultural products

23.The development of new uses for agricultural products gained growing importance in the debate about future prospects, particularly as a source of organic chemical products and as raw materials for energy production such as bio-ethanol and starch.

Bio-ethanol: It is obtained by fermentation of products, such as beet, molasses, wheat and potatoes, and can be used as an additive in petrol, where it can raise its octane level and partially replace lead. However, bio-ethanol has a number of cheaper competitors and any programme for the incorporation of bio-ethanol in gasoline would require the financing of the gap between the cost of it and its competitors. Also, setting up a bio-ethanol production industry would be an additional cost as few refineries have that capability at present. Budgetary options could be to defray in full, the price difference between bio-ethanol and its competitors which would have the advantage that thecost would be partly borne by the farmers and would on the whole be lower.

Sugar and starch: Industries in the non-food section are already major users of sugar and starch, especially in respect of starch where 50% of total produce is utilised in this way. The Community at present pays a production refund of 30/40 ECU/tonne in respect of community-produced sugar and starch supplied to processors. These refunds, however, only offset part of the difference between the Community and world market prices (50% in the case of wheat and 10% for sugar). Those industries offer great potential for the future and the highest growth in non-food use would be in the chemical industry with the manufacture of biodegradable plastics. The Community must ensure that these industries can obtain competitively priced carbohydrates of agricultural origin or much of the investment in this area will go to non-member countries, and a number of problems in this regard, concerning the continuity of sugar supplies, the rules for the refund, the relationship between sugar, starch and potato starch prices and the various circumstances in which a production refund is or is not payable, is at present being considered.

External trade

24.The document deals at some length with the need to have a greater balance in international trade and addressed itself to two major questions:

-what adjustments must be made to the Community’s present export arrangements if it is to go on supplying the world market with its exports of food and other agricultural products, and

-would it be possible to adjust existing import arrangements so that they were better balanced commercially and caused less of a strain on the budget.

25.In regard to export arrangements, it is argued that the present mechanisms were introduced in circumstances when the Community was less than self-sufficient for most agricultural products and an increasing share of the export risk, which hitherto has remained entirely a charge on the Community budget, will have to be borne by producers themselves. Arrangements which would allow this to happen could be incorporated into the market organisations through the following approaches:

(a)by restricting to specified quantities the price and disposal guarantees granted by the Community at levels above world prices. Beyond these quantities disposal would be the responsibility of the producers themselves at world market prices:

(b)perhaps in the longer term, support prices could be fixed at a level close to those of our exporting countries, especially wherever, for a given product, the world market accounted for a significant share of Community production;

(c)for products for which there was little or no external protection, support for production would be only in the form of production aid.

The options to be chosen with regard to export arrangements would differ from product to product and be developed in proper relationship with measures taken with regard to the fixing of prices, guarantee thresholds, coresponsibility or intervention.

26.As regards imports, when the Community set up its import system years ago it paid for the right to protect staple Community farm products through the variable levy system by agreeing low or zero rates and thus gave little or no protection for other products in which it was then far from self-sufficient, eg vegetables fats and substitute foods. The two main consequences of this situation have been that

-firstly, the Community has had to introduce aid schemes for the particular commodities, and

-secondly, imports of products at the low rates, especially feedingstuffs have expanded considerably because their price advantage has resulted, on the one hand, in a discouragement of the use of Community cereals in animal feed and, on the other hand, have contributed to a growing surplus of livestock products and ultimately to increasing the Community’s exports of these products.

A logical approach would be to agree a trade-off by lowering the higher rates and raising the zero and low rates without increasing the general average level of protection.

Apart from the fundamental options concerning external trade arrangements there are other possibilitites for the adjustment, improvement or diversification of external trade arrangements, such as the use of tenderers procedures which would make it easier to control the management of refunds under more competitive conditions and adjustments to the way refunds are calculated.

Agriculture in society

27.In the broader context of agriculture’s role in society the document addresses itself to three aspects:

-the need for agricultural policy to take more account of environmental policy

-the fuller integration of agriculture into the general economy, particularly by means of regional development plans

-new forms of incomes aids which would allow the price and market regulations to perform the function of regulating supply and demand more efficiently without causing unacceptable social problems for the farming community.

28.As regards the first aspect, while environmental considerations have already been taken into account by the CAP in recent years, further measures are considered both in respect of the regulation and control of practices harmful to the environment and the promotion of practices friendly to the environment. Buying or renting out of land by public authorities for environmental purposes (protection of nature and wildlife, creation of ecological refuges or corridors, provision of recreational amenities). In many cases farmers could even be asked to stay on the land and to manage it according to its new functions. In cases where farmers definitely want to leave their land, this function could be taken over by neighbours and allow them to diversify their incomes.

29.As regards the second aspect, given projected economic and employment trends it is likely that job creation outside agriculture will become a key issue for many agricultural problem regions. The Commission feels it desirable that these jobs should correspond as closely as possible to thethe needs of the agricultural population in order to maintain and reinforce the social tissue of the rural regions. The emphasis then would be on regional policy with preference given to financing development programmes rather than individual projects.

30.Programmes of regional development would have the character of medium-and long-term oriented investment. Measures to launch such programmes would have to be taken now and would require a fair amount of additional public expenditure during the take-off phase (creation of economic incentives and advisory networks, training and reconversion schemes, infrastructure investments), but their full effect in income and employment terms would only be felt in a number of years. However, if they were successful they would certainly represent the most rational solution in the long run.

31.As regards the final aspect, on the question of income aids, the Commission suggests four possibilities of direct income aids where these are thought necessary as follows:

(a)Pre-pension for farmers of 55 years and older: pensions would be paid to farmers between 55 and 65 (when national pension schemes would take over) who would abandon their agricultural activity. Based on the experience gained from the operation of Directive 72/160⁽¹⁾ any new scheme would need to offer considerably more than 1000 ECU per person per year and should not be linked to conditions too difficult to fulfil, especially in agricultural problem regions. However, such a scheme would have to be limited to farmers whose main occupation is agriculture;

(b) A structural approach: this approach would apply to farmers whose farms are becoming viable under the Community’s new structural policy and who could be made bankrupt under the consistent application of a restrictive price policy. The Community addresses itself to this question of indebtedness providing financial relief during the transitional period. At the same time farmers who would not be able to adjust their business would have sufficient time to “opt out” for an alternative employment or, if it exists, a pre-pension scheme (if they are 55 to 64 years old).

The aid would be limited to farmers deriving 50% of their total incomes from agriculture and would be temporary, eg limited to 5 years;

(c)Social approach: this system, which is regarded as a “last resort” aid scheme, would give aid to farmers whose income is less than a limit to be determined and where no alternative income and employment possibilities are available. The scheme could be limited to the present generation of farm-holders and thus self-eliminating;

(d)A buying out approach: aid would be granted on the basis that a farmer would sell his right to produce agricultural produce. This would constitute a form of set-aside of land which could be bought or rented on a long-term basis for such uses as wild-life reserves, leisure parks or afforestation. Aid would be fixed in proportion to the volume of production abandoned and would obviously need to be high enough to constitute a real incentive.

C. THE COMMISSION GUIDELINES FOLLOWING CONSULTATIONS ON THE GREEN PAPER

32.The Commission has produced tentative guidelines⁽¹⁾ worked out on the basis of the opinions expressed in the course of the consultations and study of the Green Paper over the last few months.

As regards certain particularly important aspects, the Commission guidelines have been supplemented by the proposal for a Regulation fixing compensation for the definitive discontinuation of milk production,⁽²⁾ the Memorandum on the adjustment of the market organisation for cereals ⁽³⁾ and the Memorandum on the market organisation of beef/veal.⁽⁴⁾

The consultations

33.Very intensive consultations were held in the last few months, which enabled the Community’s institutions and the other parties involved to express their views on the analysis of the problems and the various options set out in the Green Paper. While the views expressed sometimes diverge, in particular on the practical aspects of action to be taken, there is very broad agreement with regard to the analysis of the situation. All parties agreed that farming in Europe has a special character, the key features being the centralimportance of family farms and the very wide range of structures and production conditions. The consultations have shown that both the farmers and the other parties involved reject any unduly static approach to farming. Farmers in particular are fearful of being forced out of the mainstream of society, and they are anxious to take part in current developments in the technical, economic and social fields; they are ready to make their contribution to this process, and, while emphasising certain specific aspects peculiar to farming, look forward to growing integration into the rest of the economy:

Objectives to be attained

34.In the light of the analysis performed and the opinions expressed by the various bodies in the course of the consultations, the Commission, in the framework of and with due regard for Article 39 of the Treaty of Rome, has identified the following priorities:

-gradually to reduce production in the sectors which are in surplus and to alleviate the resulting burden on the taxpayer;

-to increase the diversity and improve the quality of production by reference to the internal and external markets and the desires of consumers;

-to deal more effectively and systmatically with the income problems of small family farms;

-to support agriculture in areas where it is essential for land use planning, maintenance of the social balance and protection of the environment and the landscape;

-to make farmers more aware of environmental issues;

-to contribute to the development in the Community of industries which process agricultural produce, and thus involve agriculture in the profound technological changes which are taking place.

Price and markets policy

35.In the course of the consultations, farmers declared their opposition to quotas and increased bureaucratic control of agriculture; they also expressed their distrust of a generalised system of direct aids to incomes. They believe that in agriculture, as in all other sectors, it is the market, and therefore prices, which should provide the yardstick of the profitability of the farm, and they cannot accept an arrangement which would leave many of them “on welfare”.

Prices

36.In the present market situation, and in view of the outlook for the next few years, the Commission takes the view that a restrictive price policy is necessary. This policy will have to work within certain limits.

The Commission believes that the policy on prices must be supplemented by other machinery enhancing the effectiveness and sharpening the selectivity of the action taken. An important consideration in this connection is the need to allow more fully for the special income problem arising for small farms and, by this approach, also to allow for the problems of the regions in which there are heavy concentrations of farms handicapped by weak structures.

Production quotas

37.In the Green Paper, the Commission has already pointed out the many disadvantages of production quotas. Farmers share its reservations and prefer responsibility to constraint.

Producer co-responsibility

38.In budgetary terms and as means of controlling production, the various forms of co-responsibility have been found to be all the more effective if they are managed in association, and co-ordinated, with the policy on prices and if there is a direct link between the level of co-responsibility and changes in production or the expenditure occasioned by disposal.

Intervention

39.The Commission is aware of the gravity of the problem and of the resulting consequences; it has therefore taken initiatives with regard to reducing stocks which should help to ensure that the situation is gradually restored to normal. It has also proposed the allocation of funds to reduce the price of perishable intervention products, when taken into storage, which would help to improve budget “transparency” and facilitate disposal of products in store.

Assisting the process of change

40.In the first place this means helping farmers to adjust to the new realities of the market:

-by rationalisation of the means of production, with the emphasis on better organisation rather than on ill-considered increases in production;

-by diversification or qualitative improvement of production;

-by actively seeking new outlets and by taking more systematic account of medium-term and long-term trends on the market.

Protection of the environment and maintenance of the countryside

41.Consultations have confirmed that there is a growing interest in all matters relating to the environment and the protection thereof.

The Commission intends to look into this matter and to take the necessary steps, in particular to promote research and experimentation on the production techniques best suited to achieve the desired objective along economically satisfactory lines.

External Relations

42.The Commission can, at this stage, only confirm the value of the ideas set out in the Green Paper relating to the rules governing imports and exports, which it is now considering in greater depth.

If the Community has demonstrated the necessary determination, we may perhaps be able to convince our partners of the need for a better organisation of the world market. This is a long-standing Community aim.

The Commission intends to confirm what it stated in the Green Paper also as regards the need to pursue an active export policy.

Conclusions

43.The imbalance between supply and demand lies at the root of the present problems of the CAP. The return to a sound situation will therefore have to be achieved mainly through the policy on prices and markets.

Intervention must gradually revert to its original role as a safety net designed to contain short-term price fluctuations within certain limits. It cannot take the place of a structurally congested market.

The Commission itself will deploy all the instruments and resources available to ensure that the action it takes is as fair and as effective as possible, relying, for this, on more open consultation with all those working in the agricultural sector.

The guidelines result from the search for a balanced path among the numerous constraints. Their aim is gradually to encourage the farmer to return to his role as enterpreneur. This entails what for some farmers may be a difficult process of adaptation. However, it should be realised that if these adaptations are not accepted and undertaken on the initiative or with the support of the parties concerned, they will inexorably be imposed upon them by circumstances. The Commission believes that its duty is to offer the farming community prospects rather than illusions and it believes that it is proposing a way ahead which is both realistic and fair.

D. CONSIDERATION OF VIEWPOINTS OF INTERESTED BODIES

General Analysis

44.The ICMSA acknowledges the importance of the CAP to Ireland, and in their submission to the Joint Committee state that it is necessary to be vigilant and determined that its basic principles are not further eroded or undermined. The ICMSA accepts that the objectives as laid down in Article 39 of the Treaty of Rome are wide-ranging but this Article does direct the Community to take account of the social structure of agriculture and the disparities between the various regions. The much quoted three basic principles of CAP, namely, market unity, community preference and financial solidarity are the practical expressions of Articles 38 and 39. The ICMSA are concerned that, while the Commission suggest that major modifications of the CAP outlined in the Green Paper should now be made, albeit in “conformity with the basic principles” of CAP, little or no concrete assurances are given that there will not be a fundamental change in the operation of CAP. The ICMSA agrees with the Commission that there are no “miracle solutions” to the problems arising from the Common Agricultural Policy.

The ICMSA argues that the CAP is fundamentally sound and is the proper policy structure to implement desirable objectives, although some adjustments are required to restore proper emphases to the preservation of the family farm structures, Community preferences and the provision of a fair income to farmers.

45.There is sufficient analysis in the Green Paper, according to Macra na Feirme of the different scales of farming, ranging from the family farm operation to factory farm type of operation. It believes that the creation of imbalances within agricultural production in the community is mainly due to factory farm type operations which often depend on huge imports into the Community of feed-stuffs.

46.ACOT welcomes the thrust of the Green Paper as putting Community agricultural policy in the broader context of having to adapt to a number of important emerging social concerns, such as the level of unemployment, the need to maintain economic activity in the less favoured areas of the Community and the necessity of protecting the environment. ACOT acknowledge that a policy which will respond effectively to this challenge will have to be adaptable and have a greater diversity of policy instruments at its disposal to achieve its objectives. However, ACOT stresses that there are certain political realities and principles that cannot be compromised if the best interests of this country are to be safeguarded. ACOT acknowledges the document as a further important stage in the thinking about the evolution of the CAP but does not under-rate the severe difficulties facing it.

ACOT contends that the document does not take sufficient account of CAP budgetary measures already put in place. It instances the milk super-levy which has controlled the growth in milk production and which will in time put a major constraint on the supply of beef.

47.Nevertheless, ACOT leans towards the belief that the Commission may be taking an unduly pessimistic view of the prospects for the CAP. ACOT contends that “should some of the more optimistic scenarios emerge, then the starkness of choices in terms of market management, eg, rigid supply control or severe price cuts may not be as relevant as the Commission suggest”. It must also be recognised, state ACOT, that if excessively rigid financial control guidelines are applied they may have severe consequences for other major objectives of the CAP. ACOT feels that the CAP can evolve in such a way as to contribute to Ireland’s national economic development and provide, in particular a favourable market climate for quality Irish produce.

Cost of CAP

48.In their submission to the Joint Committee An Foras Talunta stress the significance of the price support systems to Irish agriculture, and the contribution of Irish agriculture to GDP (as high as 20% when value-added effects are taken into account). An Foras feels that there is a public misconception about the size of the agricultural budget (less than 1% of Community GDP), that it is falling and that levies paid by farmers now account for a significant percentage of FEOGA expenditure.

49.In this regard the ICMSA makes the point that, although the total agriculture budget accounts for approximately two-thirds of the Community Budget, expenditure on the Guarantee Section of EAGGF, as a percentage of Community GDP and consumer expenditure, is small and constant, eg, it was 0.55% of GDP in 1984. Also, the operation of the CAP has meant that the financial responsibility for the agricultural sectors has shifted from Member State Governments to the Community. In Ireland, exchequer spending as a percentage of total expenditure, declined from 15.3% in 1971 to 4.4% in 1984. On a per capita basis, EAGGF Guarantee Section spending amounts to only £48. The ICMSA maintain that this is “a small insurance premium on consumers” so that an adequate supply of high quality food is provided at reasonable prices and points out that prices are higher in countries with similar agriculture and economic structures as the EEC.

50.Macra also challenges the Commission’s approach to its analysis of the CAP from the standpoint of its “excessive” cost and argues that expenditure on CAP, compares favourably with expenditure on agriculture in non-Community countries. It contends that much of the expenditure attributable to the CAP fails to percolate to Europe’s farmers. Macra maintains that the original basic concepts of the CAP should be defended and applied in the development of Irish agriculture. The CAP principles Macra submit, should be mobilised to achieve equality between Irish agriculture and the more advanced and developed regions of the Community.

Price and Markets Policy

51.In their submission the IFA states that prices should generally be fixed according to the agricultural production costs on modern family farms and according to the normal level of incomes in the non-agricultural sector within the Community.

The IFA rejects any generalised policy of income aids as a substitute for price policy which is seen as the central element of the CAP and the means of ensuring an adequate income for farmers. Such a policy would lead to a breach of one of the basic principles of the CAP, ie financial solidarity as it would require an element of national financing. However, the IFA accepts that some supplementary measures, eg permanent aid to farmers in disadvantaged areas are necessary.

52.The ICMSA disagrees that there is a feasible choice betweena price policy and quantitative restrictions. A prices policy even remotely fixed on the very unstable world prices would result in none of the objectives of the CAP being achieved. Such a policy would also have a devastating effect on farm incomes. Direct market support payments amounted to £441.7m and £644.6m in 1983 and 1984 respectively. In fact the 1984 figure amounted to 60% of total farm incomes. When one also considers the benefit derived from trade with other Member States at prices above world prices the ICMSA estimates that the total contribution of the price support system to farm incomes is in the order of 80%.

Accordingly, any shift towards a restricted price policy would demand a massive transfer of income in the form of income aids.

53.In regard to the point that the CAP results in surpluses, the ICMSA feels that the introduction of production thresholds has now effectively solved the structural problem that may have existed in some products. The proportion of world food commodities traded on the world market is usually less than 20%, eg 9% for butter and 4% for beef. Therefore any relatively slight reduction in production can consequently change the quantities and prices on the world markets. A 12% reduction in butter production would have the quantities traded on the world market. Thus say the ICMSA there is no such thing in practice as a world price

-world markets are dependent on EEC production levels and offer no sure security of supplies, and

-production in excess of internal demand is essential not only for security of supply but to meet the Community obligations to food aid.

The ICMSA would accept a production threshold or quotas with certain conditions and qualifications as the most appropriate means of correcting any real market imbalance for a return to the objective method of fixing farm prices.

54.The ICMSA states that greater income aid provisions will be required regardless of whatever price policy or quantitative restriction policy is allowed. The Community clearly agrees that a restrictive price policy would demand an income aid policy. However, the type of aid schemes suggested are quite inadequate and are of a temporary nature. Moreover, the imposition of a quota system prevents even small scale farmers, with grossly inadequate incomes, from expanding. The ICMSA, therefore, proposes that, given the predominance of the small family farm units, that a co-ordinated and integrated income aids scheme, either linked to output or under the structural section, should be an internal package of the current review of CAP. The main objective of price policies should be to ensure an adequate income for family farms. Prices should generally be fixed according to the agricultural production costs on modern family farms and in accordance with the normal level of incomes in the non-agricultural sector within the Community. Abnormal costs which accure to the Community budget due to factory farm type operations should, of course, be tackled.

55.Macra na Feirme warns about the danger to the CAP support system from critics who wish to see Community prices dictated by world prices. A core objective of the Common Agricultural Policy is to achieve stability in price throughout the Community at a level which will give a fair standard of living to people engaged in agriculture.

Macra are glad to note the Green Paper’s rejection of “an agriculture on the model of the USA with vast spaces of land and few farmers”. The price policy needs to be supported by permanent aids to farmers in disadvantaged areas, by transitional income aids such as retirement for certain categories of farmers and by direct income aids for the establishment of young farmers.

Macra draws particular attention to the experience of Irish farmers with prices. Between 1978 and 1984 real prices received by farmers in Ireland fell by more than double the average fall for the EEC. If Ireland’s price experience had been that of the average, real prices would now be 24% higher than they are and real farming income would be some 50% bigger as a consequence. Macra also point to the effect on the national economy, as an exporter of 60% of agricultural output, of a reduction in price levels and states that the “Green Paper” ignores this crucial aspect, eg each 10% cut in prices at current levels of output would cost the economy through the balance of payments about £150 million directly with a multiplier effect almost as great again on top of that.

External Trade

56.Agricultural trade is expected to play an important role in the new round of GATT talks scheduled for this year. ACOT urges that the Government as a major exporter of agricultural produce, should indicate its support for the Commission’s proposals to improve Community export arrangements, particularly in the area of the financial service infrastructure where the Community’s major trading partners already have such advantages. ACOT however, acknowledges that there will be pressure on the Community in the forthcoming GATT talks to reduce the overall level of protection which is afforded to European farmers through import levy arrangements and urges that a strategy be devised which will represent the best option for Ireland which should then be included in the Commission’s negotiating mandate for the GATT talks. ACOT would like to see a detailed study undertaken into the costs and benefits to Ireland of different sets of Community import arrangements. The outcome of this study should strengthen our negotiators’ hands.

Cereals

57.The Commission devote particular attention to the cereals market in the Green Paper. In fact since the publication of the Green Paper the Commission has produced a memorandum on the Market organisation for cereals ⁽¹⁾ and the Joint Committee hopes to look at this document in a later report. The Commissioner states that this sector is envisaged as playing a major role in the whole reform package and price reductions towards world levels are regarded as the most sensible approach. The spectacular increases in yields in the cereals market has posed a real dilemma for the Community. The prospect is for the supply of cereals to grow significantly faster than demand and the surplus would become impossible for the Community to manage or finance.

The following are the measures which the Commission have proposed to bring the market under control:

-price reduction

-co-responsibility levies

-quotas

-limitation on intervention

-payments to farmers to reduce acreage

-a Cereals Board to regulate the market and assist exports

-a diversion of land to other uses (“Set Aside”)

Price Reduction

58.This is the option favoured by the Commission. In their submission to the Joint Committee ICOS states in relation to grain and feedstuffs that it is convinced that a policy of price cuts would totally erode cereal farmers nett margins and lead to similar harrowing scenes to those currently to be seen in the US. ICOS would argue that we are already faced with real price constraint. Nominal price increases and delays in intervention payments have already led to real price decreases.

The ICMSA considers the Commission’s latest proposals on cereals for a restrictive price policy plus a modulated co-responsibility to be in effect an unmodified market orientated price policy. It would have the effect of eventually forcing all CAP prices downwards.

According to An Foras Taluntais severe price reductions would have serious implications for Irish cereals growers because production costs are higher than in other Member States. Only a minority could avoid an unacceptably low income and they cannot now switch to milk or beef production.

Co-Responsibility Levies

59.According to ICOS the singular purpose of EEC cereals policy must be to establish greater market balance. COGECA, the European Committee for Agricultural Co-operatives, has accepted to examine a number of measures including the application of financial co-responsibility as a means of contributing to this end. However, the purpose of such a levy and its means of application must be such as to increase the market outlets both existing and new ones. The weight of opinion within the Commission according to ICOS seems to favour a co-responsibility levy at point of sale. ICOS are fundamentally opposed to such a levy for a number of reasons: -

(i)It will lead to distortion and inequities between farmers. Some with the ability to dry, store and use their own cereals on farm will avoid the levy. On the whole it is reasonable to assume that these will be the large cereal producers with sufficient economy of scale.

(ii)Over 30 million tonnes of cereals are used in this manner in the EEC and this will further increase. Irish co-operatives have invested heavily in drying, storage and milling. A development of this nature would jeopardise such undertakings.

(iii)There is distinct danger that such a levy may be only in name ‘co-responsibility’ and may end up as a tax on feedstuffs. A levy at point of sale could also be incorporated under Articles II (2) and III (2) of the GATT Trade Treaty, as an equivalent levy on cereal substitutes. If this is done then the incidence of this tax could be at the level of the livestock producer rather than a cereal farmer’s co-responsibility levy.

Given these serious reservations ICOS believes that a co-responsibility levy would be far better administered on a surface area basis. The policing of such a system could be ensured by fines on such a scale as to make abuse prohibitive. This system could be modulated vis-a-vis yield factors to ensure greater equity and a certain threshold should be incorporated below which no levy should apply, eg 5 ha. This would ensure greater ease of administration.

On the other hand the IFA would support a co-responsibility levy provided the cereals market continued to be funded from the Community Budget and provided prices were fixed to ensure no reduction to producers after including the effects of the levy. The funds generated from the levy could help finance the new uses, outlets and alternative crops referred to.

ACOT envisages that the growth in cereal output is likely continue and favours the application of a co-responsibility levy, allied to changing intervention standards for grain, as the most appropriate market management measures in preference to quota and price cuts.

According to An Foras Taluntais if the Community decided to introduce restrictions, a co-responsibility levy would be a realistic proposition but, if ultimately the only choice available were between a quota and a significant price drop, then a quota would be preferable.

Quota System

60.The third option of a quota system in cereals is not a practical option according to ICOS. There is no base data available as yet and if such a system were to operate, this would be indispensable. It should not be assumed that because quotas in the dairy sector have been moderately successful that a quota regime would work with a relatively non-perishable product, such as grain.

Community production and market situations need to be reviewed regularly and in some instances co-responsibility levies may need to be supplemented by quantitative controls. The IFA would prefer a quota system which would maintain prices at a reasonable level to price reductions towards world levels as advocated by the Commission. As the Green Paper states that quantitative controls are not unworkable the IFA feels that the Commission should come forward with proposals as to how they could best operate.

Intervention

61.ICOS feels that intervention standards should be based on normal commercial requirements. The Commission should choose its means of control and not a set of measures, such as restricting intervention to certain months of the year, increasing quality standards as this leads to a complete undermining of the price agreements reached by the Council of Ministers each year. It also places a disproportionate burden on high interest rate countries. Furthermore, increasing humidity standards also hits at countries with comparatively high air humidity, such as Ireland. Such measures could lead to a nett price cut in intervention prices of 6 to 10%.

Also, according to ICOS, as regards hectolitre weight standards, any increase in the present barley standard would practically rule out barley intervention in Ireland.

Other Options

62.As for alternative crops, given the European Community deficit in protein and oil seeds, ICOS feels that the levy revenue should be spent on encouraging the more widespread use of such crops so as to increase self-sufficiency.

The development of new industrial outlets for cereals, such as the production of bio-ethanol and bio-degradable plastics, is welcomed by ICOS. From an environmental point of view it is obviously beneficial. Any move todecrease the Community’s reliance on non renewable fuel resources would obviously help the agricultural processing sector of which co-operatives form a major part.

Any additional outlets for the current surplus of cereals will help to reduce the imbalance on the world grain market. ICOS is committed to exploring the economic viability of such outlets in the Irish context. It feels that Community funds should be specifically earmarked for pilot projects in these areas.

63.Macra na Feirme takes issue with the analysis in the Green Paper of the trends in agricultural production. It is open to question and ignores what has been achieved with the Super-Levy and Macra feels that the projections on cereals are certainly not convincing enough for a drastic attack on the incomes of cereal growers such as we have in Ireland.

64.The IFA believesthat the Commission’s conclusions on cereals are very much based on the exceptionally good harvest (150 million tonnes) of 1984 and optimistic projections of production over the next five years. According to the latest COPA estimates production is expected to be down by 12 million tonnes to 138 million tonnes in 1985. The promotion of new outlets and new uses for grain and other crops in the industrial and energy sectors should be the immediate priority. In this regard the Commission should examine the savings to the budget of expanding the internal bio-industrial sector and reducing the level of imports of expensive proteins and refined products as measured against the cost of export refunds. Also the use of deficiency payments or other forms of subsidy to promote alternative crops should be continued and expanded.

65.A Set-Aside System is not favoured by An Foras Taluntais and neither is a Cereals Board.

REORIENTATION OF PRODUCTS

Alternative Crops

66.The use of alternative crops is considered in the Green Paper. The following are suggested as the most likely alternatives:

(a)For extensive types of farming - oilseeds and protein crops offer natural replacements for cereals, while areas under permanent grass could be replaced partly or wholly by wood crops and so relieve the burden in milk production.

(b)Fruit growing - almonds, hazelnuts, carobs, pistachio nuts and jojobs instead of traditional citrus fruit crops.

(c)Specialised Crops - which require a plentiful supply of water, such as medicinal plants instead of tomatoes for processing and in some regions cotton-growing could be a valid alternative.

On the subject of alternative types of production An Foras submit the following views:

Forestry: Ireland has an extensive area (up to 1½ million ha) of soils with a high forestry potential. If tree crops are to be developed, a commencement should be made on marginal soils/land with this potential. Compensation for income loss would have to be adequate.

Ireland has a natural advantage for growing of spruce and most of the huge timber imports to the EEC are of coniferous timber. The possibilities for the development of forestry by both the public and private sector are appreciable.

Specialised Crops: Possibilities do not exist for switching significant areas of Irish land to fruit and other specialised crops mentioned in the Green Paper.

Oilseed and Protein Crops: Research to solve problems affecting the production of oilseed and protein crops is very promising.

New uses for agricultural products

67.The development of new uses for agricultural products has gained growing importance in the debate about future prospects, particularly as a source of organic chemical products and as raw materials for energy production such as bio-ethanol and starch.

Bio-ethanol is obtained by fermentation of products, such as beet, molasses, wheat and potatoes, and can be used as an additive in petrol, where it can raise its octane level and partially replace lead. However, bio-ethanol has a number of cheaper competitors and any programme for the incorporation of bio-ethanol is gasoline would require the financing of the gap between the cost of it and its competitors. Also, setting up a bio-ethanol production industry would be an additional cost as few refineries have that capability at present.

In their submission An Foras states that there is no technical problem with ethanol production but it warns it must be economically competitive. It could afford attractive opportunities and at present sugar beet would appear to have an advantage as a feedstock since it supplies twice as much energy as cereals per unit area. Under present conditions, bio-ethanol is more costly than petrol and would be likely to remain so for some time. Tax relief would probably be necessary to encourage an ethanol/ petrol blend.

Research in New Zealand and the UK has shown that grass can also be used to produce ethanol.

Sugar and Starch

68.Industries in the non-food section are already major users of sugar and starch, especially in respect of starch where 50% of the total produce is utilised in this way. The Community at present pays a production refund of 30/40 ECU/tonne in respect of community-produced sugar and starch supplied to processors. These refunds, however, only offset part of the difference between the Community and world market prices (50% in the case of wheat and 10% for sugar). Those industries offer great potential for the future and the highest growth in non-food use would be in the chemical industry with the manufacture of biodegradable plastics.

An Foras believes that the European Chemical and Pharmaceutical Industries could absorb large increases in intake of sugar and starch but non-Member States have access to the raw materials at lower prices.

An Foras also states that there is urgent need for a European programme of research and development in food science and technology.

New Outlets

69.The development of new industrial outlets for cereals, such as the production of bio-ethanol and bio-degradable plastics, is welcomed by ICOS. From an environmental point of view it is obviously beneficial. Any move to decrease the Community’s reliance on non-renewable fuel resources would obviously help the agricultural processing sector of which co-operatives form a major part.

The promotion of new outlets and new uses for grain and other crops in the industrial and energy sectors should be the immediate priority. In this regard the Commission should examine the savings to the budget of expanding the internal bio-industrial sector and reducing the level of imports of expensive proteins and refined products as measured against the cost of export refunds. Also the use of deficiency payments or other forms of subsidy to promote alternative crops should be continued and expanded.

DAIRY SECTOR

Milk Cessation Scheme

70.As regards milk and dairy products, ICOS notes that a community financed cessation scheme is the only policy option revealed in the Green Paper. The subsequent proposal published by the Commission on compensation for definitive discontinuation of milk production ⁽¹⁾ will be considered by the Joint Committee in the near future. ICOS is against any reductions in Ireland’s hard won derogation and is opposed to the milk cessation scheme as it would have the effect of reducing this country’s production quota.

ICOS believes that any restructuring of the dairy industry in Ireland should be on a planned and well thought out basis, not as a reaction to a fall off in throughput as a result of such schemes. It is in favour of the development of the structure of dairy farming within co-op catchment areas and it also feels that there is a need for further measures for young dairy farmers.

ICMSA states that Ireland must demand a derogation from the Milk Cessation Scheme in view of the assurance given that quota quantities would not be reduced during the first five years of the quota system.

In addition the ICMSA argues that the following amendments to the milk regulations should be sought:-

(i)The continuation of a national quota type arrangement for a further three years.

(ii)Provision to allow co-operatives to implement milk production restructuring programmes, including cessation schemes, in their own areas in accordance with national rules.

(iii)Abolition of the co-responsibility levy.

(iv)A return to the objective method of milk price fixing.

BEEF SECTOR

71.Since the publication of the Green Paper the Commission has produced a Memorandum on the market organisation of the beef sector. ⁽¹⁾ The Joint Committee hopes to look at this document in a separate Report.

ICOS points out that, since Ireland joined the EEC in January, 1973, public intervention and private storage have provided the sole internal support for beef operated in this country, with the exception of the 1975/75 crisis period, when slaughter premia were introduced as a temporary support measure.

The Society also draws attention in its submission to the advantages of the Variable Premium System over the intervention system in terms of support to beef producers, good marketing, and beef consumption. In view of the rising cost of the present CAP support system for beef, ICOS calls for urgent reconsideration of the introduction of the Variable Premia System as a possible Community-wide support system for beef.

ICOS feels the effects the extra slaughterings would have on an already depressed beef market. The Commission estimate 500,000 to 700,000 head of extra slaughterings in 1987.

Finally ICOS makes the following general points in relation to the beef sector:

(i)Any modifications to the CAP for beef should be in conformity with the Treaty of Rome, eg income aids to farmers in less favoured areas.

(ii)The CAP Intervention System for beef has in recent years militated against Winter finishing of beef in the Irish situation, with the effect of seriously worsening the seasonality problem for employment in the meat industry.

(iii)The development of the beef suckler herd, and quality beef production, requires urgent attention on a national scale.

(iv)The implementation of the Variable Premium System as an internal support mechanism would be complementary to the continuation of export refunds for third country exports.

AGRICULTURE IN SOCIETY

72.In the broader context of agriculture’s role in society the Green Paper addresses itself to three aspects:-

-the need for agricultural policy to take more account of environmental policy

-the fuller integration of agriculture into the general economy, particularly by means of regional development plans

-new forms of income aids which would allow the price and market regulations to perform the function of regulating supply and demand more efficiently without causing unacceptable social problems for the farming community.

Environmental Protection

73.As regards the first aspect, while environmental consideration have already been taken into account in the CAP in recent years, further measures are considered both in respect of the regulation and control of practices harmful to the environment and the promotion of practices friendly to the environment. Buying out or renting out of land by public authorities for environmental purposes (protection of nature and wildlife, creation of ecological refuges or corridors, provision of recreational amenities). In many cases farmers could even be asked to stay on the land and to manage it according to its new functions. In cases where farmers definitely want to leave their land, this function could be taken over by neighbours and allow them to diversify their incomes.

The ICMSA notes that no single Community institution is mandated to research, study and formulate draft policies on the interaction of the environment and agriculture and suggests that a Community foundation should be established for this purpose.

An Foras gives a general welcome to the measures in the Green Paper for the protection of the environment, and agrees with the proposal that research to develop new and less harmful products or methods should be supported.

Development in this area would complement the comprehensive research programme of An Foras. It advocates the provision of a European research and development strategy to stay up front with technological developments in the U.S. and Japan.

Employment

74.Given projected economic and employment trends it is likely that job creation outside agriculture will become a key issue for many agricultural problem regions. The Commission feels it desirable that these jobs should correspond as closely as possible to the needs of the agricultural population in order to maintain and reinforce the social tissue of the rural regions.

An Foras feels that if young members of small farm families are to secure off-farm jobs, a considerable expansion in industrial development through the Regional and Social Funds will be necessary.

ACOT welcomes the emphasis in the document on the maintenance of the maximum number of viable jobs within farming and states that it complements its own policy of consolidating the maximum number of viable farm families within the sector. It states, however, that the Commission must take cognisance of the fact that a prolonged application of a restrictive price policy is not consistent with the achievement or maintenance of maximum employment levels. ACOT is in full agreement with the proposals in the documents, and with the new structures Regulation in the area of secondary on-farm employment (eg, cheese making) and off-farm employment (eg craft work, agri-tourism and forestry).

Income Aids

75. Within the farming sector itself An Foras sees the principal problem as one of income. Even with existing policies farm income over the next five years will scarcely keep pace with inflation. Therefore, a decline in real prices would present serious income problems. In the Green Paper the Commission suggests four possibilities of direct income aids:-

(1)Pre-pension for farmers of 55 years and older.

(2)Structural approach.

(3) Social approach.

(4)A buying out approach.

Pre-Pension Schemes

76.Pensions would be paid to farmers between 55 and 65 (when national pension schemes would take over) who would abandon their agricultural activity. Based on the experience gained from the operation of Directive 72/160⁽¹⁾ any new scheme would need to offer considerably more than 1000 ECU per person per year and should not be linked to conditions too difficult to fulfil, especially in agricultural problem regions. However, such a scheme would have to be limitedto farmers whose main occupation is agriculture.

According to An Foras if the pre-pension is to be attractive the incentives will have to be substantial.

Macra feels that the “pre-pension” scheme must have a land mobility purpose. There are 35,000 farmers aged between 55-64 years in the Republic and releasing a proportion of their holdings for land re-allocation and development by trained young farm managers, is a key goal in Irish agricultural development. This is not recognised in the Green Paper suggestion.

Structural Approach

77. This approach would apply to farmers whose farms are becoming viable under the Community’s new structural policy and who could be made bankrupt under the consistent application of a restrictive price policy. The Community would address itself to this question of indebtedness by providing financial relief during the transitional period. At the same time farmers who would not be able to adjust their business would have sufficient time to “opt out” for an alternative employment or, if it exists, a pre-pension scheme (if they are 55 to 64 years old).

The aid would be limited to farmers deriving 50% of their total incomes from agriculture and would be temporary, eg limited to 5 years.

Macra are critical of the low level of funds allocated from the CAP budget to structural activities. They believe that reform of the CAP must ensure an adequate structural orientation of the policy. The Common Agricultural Policy must facilitate, must instigate and must support an effective land use reform policy. It must also improve the access of trained young farmers to sufficient land to ensure the maximum number of farm families on our land and also to ensure the maximum productivity. If the Commission are serious about the concept of the family farm Macra believes that it must ensure that its policy instruments actually support the establishment and maintenance of families in farming.

Social Approach

78.This system, which is regarded as a “last resort” aid scheme, would give aid to farmers whose income is less than a limit to be determined and where no alternative income and employment possibilities are available. The scheme could be limited to the present generation of farm-holders and thus self-eliminating.

A Buying out approach

79.Aid would be granted on the basis that a farmer would sell his right to produce agricultural produce. This would constitute a form of set-aside of land which could be bought or rented on a long-term basis for such uses as wild-life reserves, leisure parks or afforestation. Aid would be fixed in proportion to the volume of production abandoned but would obviously need to be high enough to constitute a real incentive.

Regional Development

80.The Green Paper states that programmes of regional development would have the character of medium - and long-term oriented investment. Measures to launch such programmes would have to be taken now and would require a fair amount of additional public expenditure during the take-off phase (creation of economic incentives and advisory networks, training and reconversion schemes, infrastructure investments), but their full effect in income and employment terms would only be felt in a number of years. However, if they were successful they would certainly represent the most rational solution in the long run.

To provide an appropriate framework for agricultural and rural development in Ireland according to Macra will require an integrated programme for Irish agriculture. The basic purpose of this integrated programme for Irish agriculture would be to ensure the development of Irish agriculture to the point where it was as developed as the most advanced regions in the Community.

Macra advocates the submission to the Commission by the Government, after consultation with farming organisations, of a detailed analysis of the development needs of Irish agriculture and its place in rural development and in the total economy of Ireland.

The integrated programme would combine Regional and Social Fund spending as well as CAP spending into a Rural Fund which would have the purpose of improving incomes, creating a sound social structure and preventing any further deterioration in rural areas.

E. VIEWS OF THE JOINT COMMITTEE

Introduction

81.The Joint Committee sees the Commission’s Green Paper as a valuable vehicle on which to mobilise a searching review of the CAP. However, the Commission’s thesis does not go unchallenged. It has been represented to the Joint Committee that, while the Commission wishes to give the impression that the Green Paper is purely a discussion document, it is clear that it has already decided to pursue a policy of price reductions and that the document is, in fact, a lobbying exercise in an attempt to get support for this policy. ⁽¹⁾ In fact since the publication of the Green Paper the Commission has issued proposals on milk, ⁽²⁾ and a memorandum on cereals ⁽³⁾ and beef.⁽⁴⁾ The Joint Committee hopes in later reports to return to these important topics and deal with them in greater depth.

82.The Agriculture Ministers had a first exchange of views on the document at an informal Council meeting in Luxembourg on 23/24 September, 1985. On 18 December 1985 the Commission issued guidelines following consultations on the Green Paper. ⁽⁵⁾ Until conclusions are reached and options have been decided on it is very difficult to assess the implications for Ireland. Any assessment must, of course, have regard to the fact that in the document the Commission lays emphasis on many positive elements, such as the fundamental importance of the CAP; the need to maintain employment in agriculture as a major element in the economy; the importance of the family farm and farm income; the emphasis on new outlets for agricultural production and the better integration of agriculture in regional development. In the debate to follow it may be possible to build on these elements. It must also be borne in mind that previous exercises of this kind undertaken by the Commission have not been very fruitful. This may again be the result. But even if that is the case it does not change the fact that the CAP will still be left facing the fundamental problems of overproduction and its associated budgetary cost. The only difference would be that instead of these problems being dealt with as part of some longer term coherent strategy they would be dealt with by a series of annual ad hoc decisions.

83.The CAP has now been in existence for 23 years and in this time European agriculture has undergone enormous transformation. The most obvious manifestation of this change is the development of and application of farm technology. This has led to a substitution of capital for labour with a consequent significant decline in agricultural employment. The prospect for the future is an acceleration in the application of new technology with an exacerbation of the problems that now beset European, and particularly Irish, agriculture. Structural surpluses of many farm products are likely to keep on growing.

84.It could be concluded, paradoxically, that the difficulties now facing the CAP have been induced by its own success in creating a favourable climate for technological development.

The principal areas where, in the opinion of the Joint Committee, the CAP has failed to resolve key issues in Irish farming, and where structural improvement policies have failed to make any appreciable impact are -

(a)a huge extent of underutilised and inefficiently farmed land

(b)the rigidity of our land tenure system and the distorted age structure of our farming population

(c)the extreme variability in economic performances of farm incomes among the different categories of farmers in Ireland as compared with farmers in other parts of the Community.

85.The CAP can claim some very significant achievements. Agricultural production has substantially increased far more than it would have at the level of separate national economies. Based on gross value - added at market prices, the volume of agricultural output has risen, on average, by between 1.5 and 2 per cent annually over the past twenty years. Security of supply has been attained for most products. In contrast to a large area of the world, the Community now has no difficulty in the availability of foodstuff for its people. CAP now covers more than 90 per cent of Europe’s agricultural produce. EEC exports of food and agricultural produce has greatly increased and is contributing to the overall balance of EEC trade.

Proposals in the Green Paper

86.The Joint Committee is encouraged by the lively response and the keen interest shown by Irish farming bodies, agricultural research and advisory bodies to the invitation for written submissions and attendance of officials before it. The Joint Committee, after careful consideration of these views, would like to set out in the following paragraphs the broad outline of how it feels the CAP should evolve to meet the challenge of the future and how best Irish interests could be protected and advanced.

87.The main focus of the debate on the CAP is the budgetary cost and the question of overproduction. On the question of cost, the Joint Committee believes that the perception held by the critics of the CAP is out of proportion as the CAP’s share of Community GDP is, in fact, well below 1 per cent. It has in fact been estimated to be as low as 0.4 per cent. ⁽¹⁾ This level of expenditure cannot be regarded as abnormal particularly when viewed in the context of the cost per head of those employed on the land as well as in the processing, input and related service industries. It represents less than one-third of the outlay on supporting the Community’s unemployed. Also, it is not out of proportion with similar expenditure in non-Community countries. In addition, agriculture’s share of the total Community budget has been decreasing and recent measures are having a stabilising effect on the financial position.

88.While Community resources must clearly be allocated in the most effective manner possible, this should not, in the Joint Committee’s view, involve calling into question the only integrated policy in operation in the Community, the Common Agricultural Policy. However desirable the implementation of new policies to promote economic activity and employment may be, such steps to strengthen economic integration in the Community should not be taken at the expense of the CAP.

89.The Joint Committee feels that it must be accepted that the CAP, as a means of organising the agricultural markets, should take up a substantial part of Community appropriations.

The share of the Community budget devoted to the CAP would decrease if other common policies were implemented. Regional policy represents only a small part of the Community budget, although there are so many regional disparities in the Community; energy policy represents only a tiny part, despite the fact that Europe depends on imported energy for more than half its needs.

Neither is it generally appreciated, in the Joint Committee’s view, that farmers are directly contributing to the Budget. For example, the co-responsibility levy on milk yielded over 527m ECU in 1983. Ireland’s contribution to this figure was 25.7m ECU.

Again, significant expenditure included in the publicised cost of the CAP is attributable to policies other than agriculture - particularly trade and development policies. A large percentage of expenditure under the farm policy has nothing to do with Europe’s traditional producers. Expenditure arising from bilateral, multilateral agreements and from political considerations generally must be divorced from agricultural spending.

90.The Joint Committee urges in the strongest terms that the basic principle of the CAP be preserved intact as their abandonment could threaten the future of the Community itself. In this connection the Joint Committee draws particular attention to the following:-

-unity of the market, Community preference, and financial solidarity must be retained,

-the renationalisation of the CAP through a proliferation of national aids must be avoided,

-the continued central role of the prices system must be maintained and must not yield to income support which could make the CAP more costly to operate.

91.The Joint Committee attaches top priority to the preservation of the farm family and to ensuring a decent standard of living for its members. It urges that the close relationship between the family farm and social and economic stability be safeguarded. If rural depopulation is allowed continue unchecked it may well, within a relatively short space of time, reach a point where this process cannot be overtaken. The most striking manifestation of this tragic development in Europe is the serpentine dole queues through the Community.

92.The contribution of agriculture to gainful employment in the Community is not fully appreciated. Agriculture underpins the food industry which is the largest Community industry employing more than 3 million Europeans. Agriculture co-operatives have also expanded under the CAP and employ a significant number of people.

Farming in Ireland employs directly 17 per cent of the workforce while at the same time the production sector generates further production and wealth in the economy through backward and forward linkage, both in terms of value added to primary products by the agricultural processing sector and in those sectors which supply raw materials and services to farmers and their families. When the manufacturing and related activities and the marketing sector are taken into account, overall agriculture accounts for up to 40 per cent of the total workforce.

93.The Joint Committee regards the Community’s external trade policy as vital to the operation of the CAP and would resist any significant change in trade policy that might seriously damage the interests of the farm family. It calls for an urgent review of the imports of cheap feedstuffs with a view to their reduction as they have disrupted the CAP to the detriment of the farm family. In trade policy, Community preference must be respected.

The Joint Committee would like to see a more vigorous export policy on the part of the Community and pursued on a coordinated basis.

94.The Joint Committee is concerned at the widening gap between Europe’s scientific and technological capacity and that of Japan and the U.S. It therefore proposes an appreciable increase in the Community’s funding of agricultural research and development and the immediate introduction of such a programme on food.

95.The Joint Committee would like to emphasise the Community’s duty to alleviating hunger and famine in Third World countries. While the Community is already working to ensure the long term food security of these countries it could take a more active role by

-supplying developing countries, at preferential rates and on a regular basis, with the agricultural products available in the EEC, as currently requested by the ACP States in particular;

-increasing the amount of food given and extending it to new products (sugar, new milk-based products for direct use);

-helping developing countries to establish a diversified agriculture of their own to meet their own needs.

The Joint Committee will return in a later Report to the subject of the Community’s duty in relation to food aid to Third World Countries.

96.The Joint Committee is satisfied that reducing protection would not favour overall developing countries because at this point they are nett importers of food. For those countries who are nett exporters the Community already has favourable trading arrangements under the Lome Convention, which allows them preference. Reducing protection would lower prices to EEC farmers and this would push EEC production downwards. With lower EEC production and exports, world prices would increase. The size of the increase would vary depending on the EEC share of the world market. In general, the impact on world prices is relatively small, in the range of 1 to 6 per cent for most commodities. However, for butter, because the EEC represents about 60 per cent of world trade, world prices would be expected to rise by 11 per cent.⁽¹⁾

F. CONCLUSION

97.The Joint Committee in acknowledging the opportunity provided by the Green Paper to subject the performance of the CAP to detailed analysis asserts that a coherent and viable policy for agriculture is indispensable to the economic, social and political stability of Europe. This is particularly relevant to the Irish situation. The Joint Committee sees the CAP as the cornerstone of European integration and must be equipped with effective policy instruments to enable it to achieve equality between the different regions of the Community. It is concerned at the extent to which regional disparities have widened and calls for an integrated approach to regional development as a matter of urgency. There must be more effective coordination of the CAP, the regional and social policies.

98.The basic fabric of the CAP is sound. It has made a unique contribution to the economic and social wellbeing of Europe. The Joint Committee is satisfied that the CAP can be revised and re-equipped with policy instruments, to ensure its survival in the turbulent conditions obtaining in the world economy at present without vitiating its basic underlying principles. National aids must not be allowed to impair the operation of the CAP as the vehicle for agricultural development.

99.The real cost of the CAP expenditure is not excessive and is not out of proportion with similar expenditure in non-Community countries. This point, unfortunately, has not been conveyed in a convincing manner to consumers.

100.The Joint Committee accepts that the Community’s resources must be allocated in the most effective manner but contends that any revision of the CAP must only result from measures designed to ensure its survival as the main instrument of agricultural development in Europe.

101.The Joint Committee welcomes the concern expressed in the Green Paper for the protection of the environment. The Community has now adopted well formulated programmes for environmental conservation. The Joint Committee sees no reason why the interests of agricultural development and the environment should be in conflict. Sensibly managed, they both can be valuable sources of job creation.

The Joint Committee hopes in a later report to return to this topic and deal with it in greater depth.

102.The review of the CAP has an economic and social orientation. These two concepts must be given expression through the political process. For that reason especially the Joint Committee hopes that an early debate will take place in the Dail and Seanad where the elected representatives of the farming community and the consumer can record their views.

Mr. Gerard Collins TD

Chairman of the Joint Committee

(5 February, 1986).

(1) 72/160/EEC: Council Directive of 17 April 1972 concerning measures to encourage the cessation of farming and the reallocation of utilized agricultural area for the purposes of structural improvement.

(1) COM (85) 750 final

(2) COM (85) 583 final

(3) COM (85) 700 final

(4) COM (85) 834 final

(1) COM (85) 700 final

(1) Proposal for a Council Regulation (EEC fixing compensation for the definitive discontinuation of milk production COM (85) 583 final.

(1) COM (85) 834 final

(1) 72/160/EEC: Council Directive of 17 April 1972 concerning measures to encourage the cessation of farming and the reallocation of utilized agricultural area for the purposes of structural improvement.

(1) Submission by IFA.

(2) COM (85) 583 final

(3) COM (85) 700 final

(4) COM (85) 834 final

(5) COM (85) 750 final

(1) Macra na Feirme submission.

(1) The Common Agricultural Policy and the Less Developed Countries (Mathews, 1985).