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Dé Céadaoin, 26 Márta 2003
Wednesday, 26 March 2003


COMHCHOISTE um FHIONTRAÍOCHT agus MIONGHNÓTHAÍ

JOINT COMMITTEE on ENTERPRISE and SMALL BUSINESS


The Joint Committee met at 9.30 a.m.

MEMBERS PRESENT:

Deputy J. Callanan,

Senator J. Hanafin,

Deputy T. Dempsey,

Senator T. Leyden.

Deputy B. Howlin,

Deputy C. Lenihan,

Deputy K. Lynch,

Deputy P. McHugh,

Deputy G. Murphy,

Deputy O. Wilkinson.

DEPUTY D. CASSIDY IN THE CHAIR.

Scrutiny of EU Proposals.

Chairman: With the committee's agreement, I propose that we take the items as set out on the agenda, starting with the European Commission's proposal relating to trademarks. Members are reminded of the parliamentary practice that they should not comment on, criticise or make charges against any person outside the House or of an official either by name or in such a way as to make him or her identifiable. Members who wish to make a declaration in relation to any matter being discussed may do so now at the beginning of their contributions.

I welcome Mr. Tony McGrath and Ms Anne Coleman-Dunne from the Department of Enterprise, Trade and Employment to speak to the committee on the proposed regulation. They have ten minutes to explain the proposal and its impact on Ireland. Members may then ask questions. I draw the attention of witnesses to the fact that while members of the committee enjoy absolute privilege, the same does not apply to them. However, it is generally accepted that they enjoy qualified privilege. The committee is not in a position to guarantee any level of privilege to witnesses appearing before it.

Mr. Tony McGrath: We sent two documents to the committee. One is a background note on trademarks while the other relates to the Commission proposal. It is probably unnecessary to go into detail on the background note but I will do so, if members wish.

Chairman: I do not think that will be necessary.

Mr. McGrath: The protection of trademarks, like other elements of industrial property, is territorial. This has traditionally meant that if one wished to get protection in different countries, one had to go to the industrial office of each country and register. That is obviously costly and time consuming.

The EU trademark system came into operation in 1996. Applications are dealt with by the Office for Harmonisation in the Internal Market (Trade Marks and Designs), more commonly referred to as the OHIM. This established a unitary system of trademark registration in all member states so there would be one trademark for all states, not just for individual countries. This was a major achievement and an integral part of completing the Internal Market. It is important to recognise, however, that some trademark users will only operate in a local market and may not require a trademark that covers the entire Union. Last weekend the Welsh rugby team had a Rockport logo on its jersey, a footwear brand that is well known in Britain but not here. It is, therefore, important that the national offices continue to give trademarks for their own countries.

The EU trademark system has been in operation for some years and earlier this year the Commission tabled a proposal to amend the existing regulation. It is based on the experience of the operation of the Community trademark (CTM) and seeks to increase the effectiveness of the system without substantively changing it.

There are a number of technical amendments. The most significant and contentious is a proposal to remove the current searching requirement from the system. In line with the CTM regulation, a mark shall not be registered if it conflicts, inter alia, with an earlier national trademark. When a CTM application is received, the OHIM conducts a substantive examination of the application to ensure it meets essential requirements. If it is satisfied on this, it forwards batch applications to the national patent offices or industrial property offices which have opted into the Community search system - those in all member states except Germany, France and Italy. These offices then search their registers. The information is then given to the applicant who decides if it will attract opposition on the basis of earlier national trademarks. Only 4% of applications are withdrawn before publication, suggesting that people do not decide to change their position on receipt of this information.

The Commission reviewed this and came up with a number of reasons to abolish the search system. It was costly in terms of money and time for the OHIM and it adds four to five months to the CTM process because member states have three months to file their returns. The CTM application is not published until one month after the office transmits the search report to the applicant. The Commission says the quality of search reports varies significantly from member state to member state and because the search process occurs after the CTM application has been filed, and excludes Germany, France and Italy, it compounds the argument that the process holds little value.

It also points to the accession next year of ten new member states which will enter the search system. This will be more unwieldy and increase the costs that are already significant. Last year we got €1.1 million from the OHIM. If that is multiplied by the number of member states participating in the scheme, it is a significant sum.

We must ensure the CTM remains a competitive Internal Market measure and reduces needless bureaucracy and additional costs on industry. We have consulted a number of bodies on this subject, including industry, the Patents Office and representative organisations. It is important to remember that CTM activity in Ireland is modest - it averaged about 400 applications per annum. Many companies use the services of trade mark agents so it can be difficult to find the true industry view on the system.

We found differing views, with some industries in favour of retaining the system but prepared to drop it if it would make it cheaper and easier for companies to handle the process themselves. Other associations felt that it is of little value in its present guise and it would be better to drop it and encourage members to use commercial search companies that provide a global search facility although the rates are seen as reasonable. We need to tease that out because the rates they were suggesting would only be registration fees while the search would cost significantly more. The Patents Office pointed to the loss of revenue if the CTM search facility is abolished. The associations representing attorneys and the Licensing Executives Society argue in favour of retaining the search facility. They say it is useful and that it represents good value for money, even if it resulted in the fee being increased to absorb the new member states.

The discussions on the proposal commenced in Brussels recently. The majority of member states are opposed to abolishing the search facility in its entirety. They accept there may be inadequacies but feel it would be preferable to consider refinements and improvements. We support this approach but we are concerned that the system should operate in a cost-effective way. We will continue to consult the relevant parties, especially in regard to areas where we see a conflict between their views, to establish the real value of the search facility and alternatives that might be available.

The Commission also proposed discontinuing the CTM search carried out by the OHIM but the consideration of the issue has concentrated on the national searches to date. It also proposed a number of technical amendments to the regulation that we are now considering. We have listed the principal amendments in the annexe to the document.

The Commission has examined the search system and expressed the view that it is not working properly but, instead of seeking ways to improve it, it has jumped to get rid of it entirely. We feel that it is preferable to improve it, but not at any cost.

Chairman: Why do Germany, France and Italy see little value in this?

Mr. McGrath: Many member states want to ensure they generate income from this. I cannot say why they have not done so already, although it may be related to the income.

Chairman: In patenting, is each country a territory in itself?

Mr. McGrath: Yes. The Community is also a territory in trademarks, but not in patenting.

Chairman: The copyright Act that went through the Oireachtas was ground-breaking legislation for this area. I have much experience in the intellectual property field in music and in the United States there are seven or 11 different territories, it is divided into many areas.

Mr. McGrath: We are talking about trademarks. There was talk of how it is possible to patent in the United States but not in the EU. There have been advances in the area recently - the President's Council agreed on parameters for a European Union patent and we are now working on that because it would be of major advantage to industry.

Senator Leyden: I note that 625 people are employed in Alicante in Spain in an overall European registration office for trademarks. Does the Department provide assistance to Irish companies that would help them in arranging for trade marking of products in Europe? It can be difficult for a small company to have a trade mark and wade through the regulations.

The Irish trademarks - the shamrock or the harp - became a contentious issue in the United States some years ago and this State fought a legal case over it. The shamrock is a unique Irish trademark and is extremely beneficial when attached to our products. Is it now firmly established that no other country entering the European Union can use the shamrock symbol to promote its goods?

Chairman: The harp is also associated with a liquor product, namely, Guinness.

Mr. McGrath: I am from the Department of Enterprise, Trade and Employment, and we deal with policy issues. The Patents Office in Kilkenny provides advice to firms on the securing of trademarks.

Senator Leyden: Does the Patents Office also deal with trademarks?

Mr. McGrath: Yes, it deals with the registration of patents, designs and trademarks. It is simply called the Patents Office here, but in other countries it might be called the office of patents, trademarks and designs.

Senator Leyden: I am glad of that clarification. What is the situation regarding the shamrock?

Mr. McGrath: We have notified the shamrock and the harp under international conventions. We, therefore, have the right to oppose their registration and we have done so in the case of the shamrock. In certain cases, we may have to come to an agreement where, for example, the shamrock may be a different colour and may have been used by a company for several years. We may agree, for example, to such a company using a blue shamrock. A dairy company in Germany is an example of this.

Our standard practice in respect of the shamrock and the harp is that if someone else wished to use them, we would seek to ensure that they had a connection with Ireland or that it was an Irish product. The shamrock is used commercially. The situation with the harp is slightly different in that it is a State symbol and appears on the official stationery of the Oireachtas, etc. For that reason, we would prefer to restrict its use to entities which have a connection with the State. Obviously, there are companies that have used the harp logo for several years. The Chairman referred to one of these.

Chairman: The harp is reversed in that case.

Mr. McGrath: Yes, and Guinness would have the right to use that symbol.

Deputy Howlin: The issue of trademarks is important and I seek some information on it. I understand from the briefing notes that a 1993 directive required the establishment of a facility in the EU to oversee the uniform application throughout the EU of regulations pertaining to company applications to establish trademarks. Reading about how that was implemented, it does not seem to have been very effective. The Commission is now proposing not to have national searches or even community searches. Is there a connection between each registration authority at national level and the office in Alicante so that all registered trademarks in Ireland, for example, would be readily accessible? If so, why would it be necessary to have separate searches? The argument against extending this system to possibly ten other countries is that it would necessitate 25 individual searches in those jurisdictions as well as a Union-wide search.

The Chairman has already indicated that three other countries do not conduct national searches. In that context, is the current system effective? Is the spirit of the 1993 directive being realised by the procedures currently in place?

Chairman: We have a lengthy agenda, so I shall take questions from three members at a time.

Deputy T. Dempsey: What is the legal distinction between a trademark and a patent? Does one obviate the need for the other?

Deputy Lynch: Who polices the system?

Mr. McGrath: On the question of searches, someone considering taking out a trademark could have a search carried out by a commercial company. That would establish whether the mark already exists. If it does, the individual must then decide whether to proceed with further work on his or her trademark. On the other hand, if one discovered a mark that one had already been using, one could go to OHIM and oppose the mark that had been registered.

Deputy Howlin: Three member states of the European Union do not conduct national searches. If, therefore, one wanted to register one's own logo in this State tomorrow and make it an EU-wide logo, can that actually be done? How is it achieved if there are no domestic searches for it in certain countries? If one does register a logo in a certain country only to later discover a similar logo in use elsewhere, does it then simply depend on who registered the logo in their respective territory first?

Mr. McGrath: Yes, but it would be worthwhile carrying out a search in advance.

Deputy Howlin: How?

Mr. McGrath: By going to a commercial search company. It would then search the registers of all the national offices.

Deputy Howlin: Why is the EU paying 600 people in Alicante if there is no Union-wide database of trademarks that can be searched by any EU citizen?

Mr. McGrath: There are other issues in respect of trademarks, such as whether they are descriptive or are geographical indicators. Such factors would preclude the registration of a mark and these are the issues at which a trademark examiner would look.

Chairman: This is probably a small area to police. It is very specialised in the sense that each country has its own regulatory authority. The advent of the Internet and other outlets where searches can be carried out at the touch of a button will also be of enormous assistance.

Mr. McGrath: Let us take the example of the shamrock, to which we referred earlier. We sometimes receive notification from trademark attorneys that an application to use the shamrock has been made in another country. This generates business for the attorneys if we decide to pursue the matter. I am sure that they operate in a similar way on behalf of private companies.

Patents and trademarks are different. The trademark is a sign which shows what one's company is, while a patent relates to an invention. Many companies would not be involved in patents at all, whereas every company will have some kind of trademark.

Deputy T. Dempsey: Can a trademark not protect the integrity of an invention? Is a patent necessary?

Mr. McGrath: Yes.

Deputy T. Dempsey: Can a country or company patent use a trademark to protect a food product?

Mr. McGrath: Certainly. There was another question about who polices the system. There are a number of elements involved in that. The people who actually possess rights under the trademark system have a role in policing it, while customs and excise authorities would monitor the existence of counterfeit goods. Thus, responsibility for policing the system is divided between individuals and the State.

Chairman: Today's newspapers refer to a court case being pursued which involves a county GAA team.

Deputy Lynch: If the owners of a trademark discover the existence of counterfeit products bearing their logo and being sold at a reduced rate, is the onus on those owners to make a complaint? Do they make their complaint to the police, the Department or the Customs and Excise? When one sees the police raiding an outlet with the assistance of officers of the Customs and Excise, it is often difficult to determine why that is happening.

Chairman: That is a very good point.

Mr. McGrath: There is a combination of factors at play. Officers of the Customs and Excise have the power to seize goods and the Garda can go to the courts to obtain powers to enter a premises. The rights holder can go to the courts too and take action against someone manufacturing goods with its trademark.

Chairman: I thank the members for their questions and I thank Mr. McGrath and Ms Ann Coleman-Dunne for their presentation.

We now come to item B, which is the mid-term review of Agenda 2000 in respect of which members have an information note from the Department of Agriculture and Food and a briefing note from the Department of Enterprise, Trade and Employment. The committee received an additional briefing from the Department of Agriculture and Food this morning in respect of item 3B.

The Department of Agriculture and Food is the lead Department. I welcome Mr. Bart Brady, Mr. Tony Burke, Mr. Kevin Smyth and Ms Sinéad McPhillips from that Department. I also welcome Mr. Eamon Carey from the Department of Enterprise, Trade and Employment, who is already known to members and has briefed the committee on other matters. He is present to assist the committee, if necessary.

Witnesses have ten minutes in which to explain the proposal's impact on Ireland in so far as it pertains to matters within the remit of the committee. Members have absolute privilege, but that does not extend to witnesses appearing before the committee. While it is generally accepted that witnesses would have qualified privilege, the committee is not in a position to guarantee any level of privilege to witnesses appearing before it.

I invite our guests to make their submission.

Mr. Bart Brady: These mid-term review proposals originate in the Agenda 2000 agreement, which was reached in Berlin by the Heads of State and Government in March 1999. That agreement set out changes in the agricultural policy for the seven-year period 2000-06, together with funding arrangements. It also provided for four reviews in respect of the cereal, milk and oil seeds regimes and the budget. Those reviews were to take place in 2002 and 2003.

These mid-term review proposals are the Commission's response to the mandate given by the European Council to carry out the reviews. The Commission has gone further and has made fundamental proposals which go beyond the scope of the reviews, but it is entitled to do so. The proposals cover milk and cereals. In the case of milk, the Commission proposes a cut in the intervention price of 10% in 2007-08 and 2008-09, and an increase of 1% in the EU milk quota in each of those years, with compensation for the intervention price reductions in the form of an increase in the dairy cow premium. It also proposes bringing forward the Agenda 2000 review, which was not due to be implemented until 2005-06, to 2004-05, and splitting the agreed 15% intervention price cut as an across the board price cut between skimmed milk powder and butter - with a much larger increase for skimmed milk powder than for butter - in response to market conditions. On cereals, the Commission has proposed a 5% reduction in the cereals intervention price with an increase in the direct payments as part compensation.

The review covered other products which are not of direct concern to us such as rice, dried fodder, etc. I can talk about those if the members wish but, for now, I will skip them. The Commission put forward two fundamental proposals, one relating to decoupling and the other to modulation and digression. With regard to decoupling, it proposes that instead of direct payments to farmers in respect of production units, namely, animals and tonnes of cereals, it will make a direct payment to a farmer forever on the basis of his average production in the years 2000, 2001 and 2002, and on the basis of the average direct payments he received in those three years.

On modulation and degression, it proposes to reduce direct payments to farmers along the following lines: farmers receiving direct payments of under €5000 would not be affected; direct payments to farmers receiving €5000 to €50,000 would be reduced by 12.5% in the final year, after a six-year transition period; and direct payments to farmers receiving over €50,000 would be reduced by 19% at the end of the six-year transition period. In all cases, the first €5000 would not be affected.

The modulation part of this proposal is that the first six percentage points of those reductions would be devoted to rural development and the degression element means that the remaining percentages would be devoted to future budget needs, on the basis that the Commission anticipates deficits in the budget in the year ahead. A further part of the proposal is to enhance the rural development measures that already exist and, in the area of food quality, assist farmers in meeting environmental and food safety standards and high animal welfare standards. That is a summary of the proposals.

We have been studying the effect of the proposals on Ireland and we can give the committee some information in that regard. In the case of milk, if the producer price falls in line with the reduction in the intervention price proposed, Irish farmers would lose €28 million per annum. If the cereals producer price falls by the same amount as the proposed reduction in the intervention price, Irish farmers will lose €7.5 million per annum.

We had asked FAPRI Ireland to carry out a study on the effects of decoupling in the beef and sheepmeat sector long before the Commission proposals emerged. Its forecasts that beef production would fall by 12% by 2010 and, after an initial fall of 8%, cattle prices would increase by 8% by 2010. Sheepmeat production would also fall by 12%, with sheepmeat prices falling initially by 15% but rising by 21% by 2010. We have asked FAPRI Ireland to carry out further studies covering all the other aspects of the proposals and we expect to see its results at the end of April or the beginning of May.

On modulation and degressivity, under the combined effect of the proposals, Ireland would lose €104.5 million per annum in direct payments. However, we would receive back €40 million for additional rural development measures.

Deputy Howlin: Can we have those figures again?

Mr Brady: The figure is €104.7 million.

Deputy Howlin: We would receive €40 million back?

Mr Brady: Yes, €40 million for rural development measures. The effect on consumers of these price changes is difficult for us to come to grips with, because we are talking about what would happen to producer prices. We are not even sure about that. As is said, one may reduce the intervention price of a product, but that does not necessarily mean the producer price will fall. It depends on the state of the market. Even if there is a reduction, or an increase, of X% in the producer price, we do not know how that will translate into the retail price to the consumer because it depends on competition at all levels of the food processing chain.

Chairman: Does Mr. Brady have a copy of his presentation for members?

Mr. Brady: No, but all that I have spoken about is in written form, in some shape or other.

Chairman: This presentation has given us food for thought. Is there any special provision for the CLÁR areas in this mid-term review? We are concerned about these areas where population has declined by 50% in the past 75 years. The Minister for Community, Rural and Gaeltacht Affairs, Deputy Ó Cuív, is trying to sustain the population at present levels in these areas and assist them with €20 million at his disposal. Is there any special provision in this mid-term review for those CLÁR areas?

Mr. Brady: No, there is not.

Chairman: How long is the mid-term review - a five-year term?

Mr. Brady: The Agenda 2000 agreement was to last for seven years, 2000 to 2006, inclusive. The reviews that the agreement provided for were to take place at various stages over 2002 and 2003. That is where we are at present.

Senator Leyden: I am impressed by the turn-out from the Department of Agriculture and Food and the Department of Enterprise, Trade and Employment. They are highlighting the seriousness of this issue which will see a fundamental change in how we do business in the agricultural sector. I know the Departments are working hard in coming up with the best possible deal. However, it raises the question for farmers of whether we were sold a pup concerning the Nice treaty. Is this arising because of applicant countries joining the EU and the extent of their agricultural development? Is it expected that farmers will pay the price for the expansion and development of Europe? Furthermore, when all the figures are compiled, I am proposing that the stakeholders in the beef and sheep industries be consulted before any agreement is finalised.

I do not feel the IFA or the ICMSA speak for all farmers. I am involved in the organic farming industry. We have no representations at such a level in the Department of Agriculture and Food. The Department has not given organic farming the consideration or the investment it deserves. There is great potential for growth in that area, where we have an added value already from beef and sheep.

I want every stockholder to be told the effects of these proposals and they will make the final decision. It should not be left to the Department of Agriculture and Food, the Minister, the IFA or the ICMSA. Let the individual farmer vote on it. It is easy to control this, as we all have our own herd and flock numbers. Ultimately and democratically, this may benefit many. It may not benefit others, but it may benefit smaller farmers more than bigger ones. The effect on production and manufacturing is also serious. If there is a reduction in production, there will be reductions in employment in the processing sector.

Deputy Howlin: This is a complicated and important issue. While I claim no expertise in this area, there are other members of the joint committee who are more expert. While the issues raised concern primarily the Joint Committee on Agriculture and Food, I believe we should spend some time on it too.

I have experience in issues such as sustainability, having been involved in drafting the national sustainability strategy during my time in the Department of the Environment and Local Government. I differ from Senator Leyden's viewpoints in a number of aspects. Changing the support base of agriculture is critical for sustainable development. We simply cannot have unit-based supports with the ridiculous situation where products are being produced and distorting international markets. Last week, I moderated a discussion on the future of the African Union. There is concern in Africa about the distortion of its commodity prices by artificial supports within the EU and the US. We must have regard to this, if we have any conscience about fair trade and allowing developing countries to develop in a sustainable way.

On the issue of decoupling, the single reference period of 2001 and 2002 is to be frozen. Is there a mechanism to deal with anomalies for individuals where that period might not be typical in any sense? How is the analysis of these proposals on economic, social and environmental aspects done and by which group? Is it an interdepartmental analysis? Will those directly affected, including external bodies, be also consulted or is it an entirely domestic issue? While I am of the view that our first priority is to protect our own, I think the Irish people have always had a broader perspective in international justice. I hope as the process evolves, we will have more opportunities to make an impact on it.

Could Mr. Carey elaborate on the input of these proposals on the next trade round? I understand a European Common Position is to be arrived at by July this year.

Deputy Wilkinson: I welcome Mr. Brady and the delegation. The question of the Fischler proposals is controversial and there is a great degree of uncertainty in farming. Three of the farming organisations are against the proposals, while the ICSA is for them.

Concerning the amount of money that will cross over for rural development, I would like to get a definition for rural development? Are there any special allowances for young farmers who enter the industry in 2002 and 2003? Will special cases be considered? On modulation, there is a gap between payments of €5,000 and €50,000. The vast bulk of the various EU payments goes to a smaller percentage of farmers, and the figure of €5,000 applying in their case is far too low.

Out and about we get a mixed reaction, with many farmers in favour of this deal and some against. Whether Senator Leyden's proposal is feasible or not, I agree with it. There is much to be ironed out regarding the Fischler proposals. I would appreciate Mr. Brady's views on these questions.

Deputy Lynch: Anyone who knows anything about this issue or has followed it over the years realises that the system of continuous support payments cannot continue. The farming community is in the greatest dread of the upcoming changes, yet farmers are probably the best represented group at these negotiations. All the information we have indicates that the consumer will pay more. This is only a projection, yet speaking as someone who shops three or four times a week, as many people do, I have never seen a reduction in the price of meat, regardless of production levels or market fluctuations. While I have seen special offers given at the discretion of the shopkeeper, I have never seen a reduction in the cost of my shopping basket, no matter what the impact of over-production or direct payments. While accepting that farmers are also consumers, who represents the consumer at these talks? My fear is that with the reduction in direct payments, there will be no reduction in shop prices, and the consumer will suffer. There is no one in Government representing consumers.

Mr. Brady: To address Senator Leyden's questions, these reviews have arisen because the European Council asked for them. The Commission went beyond the reviews, but it is entitled to do so.

On the question of enlargement, I would not agree that Irish farmers are paying for it. The Commission's own estimates of the budget right up to 2012 do not show a deficit in the budget until 2009, five years after the new member states have joined. In our experience, the Commission has always estimated the budget conservatively. We do not believe there will be a deficit in 2009. On a year-by-year basis for the past few years there has been a surplus of about €2 billion in the EU budget compared with the Commission's original forecast.

On the question of farmers being given a vote on this issue, that is a political matter and I cannot comment. It would change our political system if farmers were allowed such a vote.

Deputies Howlin and Lynch mentioned consumer representation. If the talks take place at the Council of Agriculture Ministers the Irish consumer interest is accounted for by discussions at the Cabinet's committee on Europe, which normally meets fortnightly, and at which the Minister for Agriculture and Food reports on progress. Deputy Harney is normally present. That is how the consumer interest is protected - nor is the Department of Agriculture and Food unconcerned with the consumer.

Deputy Howlin mentioned the developing countries. It is true that the export subsidies under the Common Agricultural Policy affect these countries, but the effects are not all bad, as many of these countries need to import temperate zone products, which they get from the EU at subsidised prices. The EU is sensitive in this area, and where it has been shown that export subsidies cause difficulties in developing countries, the EU usually ceases those subsidies.

Deputy Howlin: There are two aspects here. Markets outside the EU are distorted and internal markets are disadvantaged as well, in terms of produce coming into the EU from developing countries.

Mr. Brady: To be fair to the EU, it has a range of concessionary regimes for imports from developing countries. The EU is the biggest importer of agricultural products from such countries, taking more from them than do the U.S., Canada, Australia and Japan combined.

Deputy Howlin mentioned anomalies in the reference periods. Where a farmer can demonstrate force majeure the draft regulations provide for special arrangements being made. Regarding the young farmer, a national reserve of direct payments will be created to which young people entering farming during the reference period can have recourse. Much of the detail relating to force majeure and young farmers is still being worked out. We have been negotiating at official level in Brussels since the proposals emerged in January and will continue these negotiations for a further few months.

There is a long way to go, but we are conscious of those anomalies and of young farmers' needs. There is already some provision and we are endeavouring to ensure it is adequate.

Chairman: Drawing from your experience, how long will it take to conclude those negotiations on young farmers? As Deputy Wilkinson made clear, it is an important point.

Mr. Brady: Everything will be done as an integral part of the whole. There will be no agreement on any part unless all aspects are agreed together, probably during a late night or early morning in Brussels. It will not be done in a piecemeal fashion.

Deputy Howlin asked who was doing the analysis. The Department does its own analysis, but we have also availed of the services of FAPRI Ireland, which is a partnership between Teagasc and the Food and Agriculture Policy Research Institute of the University of Missouri, the world-renowned agricultural forecaster which also works for the United States Congress. It is highly respected and we are confident in its work. The Commission produced six studies in January on the effects of its proposals, with a number being done by FAPRI, Missouri. There is an ongoing consultation process, with groups for milk, beef - which is affected by decoupling - and cereals, on which all the farming organisations are represented, along with food processors and academic economists.

Deputy Lynch: Who represents the consumers for those areas?

Mr. Brady: We have a consumer liaison panel in the Department, which decides independently what to examine. It was set up about two years ago.

Deputy Lynch: Is it represented at the talks?

Mr. Brady: Citizens are not directly represented at talks, other than through the political process.

Deputy Lynch: I understand that perfectly, but the groups Mr. Brady mentioned are represented at the talks through the democratic process. Are consumers in any way represented there?

Mr. Brady: As I said, we have a consumer liaison panel in the Department.

Deputy Lynch: Yes, but is there anyone at the talks to represent consumers directly?

Mr. Brady: No, and neither is there anyone at the talks to represent farmers directly. The Minister for Agriculture and Food represents the country at the talks, and he is supposed to take on board all interests, normally in accordance with instructions from the Cabinet or a Cabinet committee.

Chairman: He represents everyone.

Deputy Lynch: This is not in any way a criticism of the Department but of the lack of representation for a group. Mr. Brady and I know that the Department of Agriculture and Food cannot protect the producer and the consumer. It is not possible to represent both groups, for they have contrary needs.

Chairman: Mr. Brady has clarified that the political process is conducted through the Department of Enterprise, Trade and Employment and the Department of Agriculture and Food. The two Ministers assist and contribute in that regard, representing the political system at the talks.

Mr. Brady: The Minister of Agriculture and Food does so in accordance with a mandate from a Cabinet committee or the Government.

The Minister has said that the €5000 limit is too low, and he is negotiating for an increase.

Senator Leyden: We should keep it moving up and not leave it at €6000 or €7000. That baseline is unacceptable. If it is agreed that the sum should be more, it should be moving up rather than stuck on that figure.

Chairman: Members should allow Mr. Brady to respond. I will let them ask further questions later.

Senator Leyden: My apologies, Chairman.

Mr. Brady: The first step is to get the €5000 increased. Direct payments are not indexed to inflation, so their real value decreases each year. It would be difficult in those circumstances to make a case for increasing the exemption limit.

Deputy Wilkinson asked what rural development encompasses. The proposals which the Commission has put forward cover food quality, standards regarding the environment, food safety, animal welfare, occupational safety on the farm and a measure providing for even higher animal welfare standards than required by law. For each of those three areas the farmer would receive assistance. The modulation proposal has been made largely to fund those measures. As I said earlier, under that heading we will get €40 million a year when the proposal has been fully phased in.

If I have not covered all the questions, I will be happy to go back over them.

Deputy T. Dempsey: I thank Mr. Brady for such a professional presentation. I am a newly-elected Deputy and because I come from a rural background and live in a village, I meet different groups of farmers who all tell me different things about the impact of the Fischler report. Perhaps Mr. Brady could furnish me and other committee members with an information sheet more precise than that which we received this morning.

Mr. Brady mentioned milk losses of €28 million, but I cannot find mention of them in the document. Perhaps I misunderstood him. Sheep prices will fall, initially by 15% in 2004, and afterwards they will rise by 2010 by 21%, but then there will be a fall in consumer demand. What will be the direct impact on rural Ireland? What will happen in 2005? What percentage increase will there be in 2006-07? A fall of 15% might mean that there will be no sheep producers left by 2007.

Another matter relates to Deputy Lynch's question. I asked Dr. Egan of the Competition Authority why it was that a farmer can receive a price for half a dozen eggs, but, by the time the consumer buys them, it has increased by 400%. No one is able to educate me as a Deputy about why that happens. Perhaps Mr. Brady might do that in a briefing document some time. I need to know, as a representative of rural consumers and farmers, why there is such a difference. I have seen the figure authenticated by independent bodies.

Deputy Murphy: The whole matter puzzles me. From a purely business and economic view, if one is in an industry where the price of one's product is constantly falling, with further falls predicted, and inflation at 5% this year is constantly eating into whatever meagre profits one is making, the situation is serious, but I cannot see it being addressed. Farming is one of the few industries where, when one's inputs increase, one cannot increase the price of one's product to cover them. There is a great deal of talk about compensation in the form of indirect payments. As Mr. Brady pointed out, those payments are not index linked, so there is no guarantee they will maintain their value.

We are constantly being hit with mid-term and other reviews. As Mr. Brady said, the Commissioner is entitled to go further than the reviews originally intended in Agenda 2000 and has gone further, which can lead to a further reduction in the price of product for farmers. In addition, farmers are constantly being obliged to comply with new regulations from Europe which require further capital investment for farmers to stay in the industry. The position is costly for farmers.

It is time the Department of Agriculture and Food came clean with farmers. Young farmers are being advised to become immersed in, dedicated to and enthusiastic about farming, to increase their borrowings and to increase the size of their lands to qualify for certain levels of quota. I cannot understand the justification for that advice when one considers that by the time they have achieved these goals, the goal posts have been moved. If farmers do not have a milk quota of 100,000 gallons plus five years from now they will be wasting their time. However, young farmers are struggling to increase their quota from 40,000 to 60,000 gallons and borrowing money to upgrade their facilities. The Department should at least be honest with these farmers and tell them that, considering the way it is being developed and handled, they would be better off to get out of farming.

Deputy Callanan: I apologise for missing part of the meeting, but I had to meet a group of constituents who came to visit the Houses. I welcome the presentation, as I am a farmer, in the small farm category, from the west.

There are arguments for and against the Fischler proposals. It would be foolish to continue to produce product for which there is no market. That seems to have been the problem for the past few years. I am strongly of the view that the MacSharry proposals, under which no cap was applied, sounded the death knell for small farmers. There was enough money coming into Europe to compensate farmers for their loss of income, but it went to the big farmers because they had the numbers. A small farmer like me with ten to 15 animals received €4,000 or €5,000 in direct payments, while a big producer such as the Duke of York or another person with thousands of animals received a much larger amount in direct payments. That was crazy. If the Fischler proposals are going down that road again, we can say goodbye to the small farmers.

I understand that the €300,000 limit has been taken off the agenda. Some people therefore must be drawing more than that amount from Europe. There is no justification for giving one farmer a subsidy of more than €300,000 and a small farmer such as myself a subsidy of €5,000. I am not saying, however, my subsidy would be €5,000. Some adjustment could be made if there was a little goodwill. I hope the Government and the Department would support such an adjustment as there is a substantial number of small farmers here. However, I am aware that we have to fight this case with those countries that have a large number of big farmers. It seems big farmers - be it here or abroad - always have a strong lobby within the relevant organisations.

Mr. Brady answered a question on young farmers becoming involved in farming. I will not develop that point. He also discussed the question of the subsidy of €5,000 which we are saying is too low a figure on which to have a cutback. The latter issue could be negotiated. If a farmer was given a subsidy of, for example, €10,000 and if a provision was made that a subsidy would be cut severely once it went over €50,000, that would be more in line with my thoughts on the matter. If a producer was getting a subsidy from Europe, he or she should be able to live on that income and - if he or she so desired - produce the product at a world rate after receipt of the subsidy. I do not mind if such producers want to continue to produce in large volumes. Those are the people who are flooding the markets and causing the problem; it is not being caused by the few gallons of milk, the number of sheep or the quantity of beef produced in the west or elsewhere. That is my view on this issue

The Department employs a number of people to deal with the various schemes and to check applications in respect of them. When the Fischler proposals are implemented, in what work will those employees be engaged? Are their jobs at risk? This question must be answered because, naturally, officials will be interested in retaining their jobs. If there is a major cutback in production as a result of the implementation of the Fischler proposals, it will impact on many people who work in meat factories and marts who depend on agriculture. Those individuals are making more from agriculture than the producers. Will their jobs be on the line?

I thank Mr. Brady for his presentation and I would be delighted to talk to him at some stage.

Chairman: The Deputy's message, which is representative of the view of small farmers in rural areas, is to increase the base of the subsidy to at least €10,000 and to cap it at €50,000 to encourage as many people as possible to remain in rural areas and to ensure they have substantial incomes.

Senator Hanafin: I support Deputy Callanan. I am aware that we are dealing with the consumer effects of the proposals in Ireland, but the amount of aid distributed and the way it is distributed is an issue that should be constantly addressed, particularly as 85% of the subsidies amount to no more than €3,000 each, another 10% range between €3,000 and €25,000, and the top 5% of producers receive more than €25,000. Why should we subsidise people who are already in a position of advantage? That is a point we should highlight following this meeting.

The proposals, as outlined, involve a move away from production. We have large stocks. Why are we using the stocks we have in storage to distort world trade when we could release them on our own markets and keep consumer prices down?

Mr. Brady: I will deal first with Deputy Tony Dempsey's questions. I apologise that the paper we sent to members yesterday arrived so late. That was due to our being engaged in work in Brussels and not having the time to complete it before yesterday. The paper deals only with the consumer aspects of the proposals. We sent papers dealing with the other aspects of the proposals to the Oireachtas Joint Committee on European Affairs.

Chairman: We received those papers last week.

Mr. Brady: It is in those papers that the provision regarding €28 million for the milk sector is mentioned.

The phenomenon of a drop in prices which FAPRI has identified has been the immediate effect of decoupling. This applies to cattle as well as to sheep. It arises because once there is decoupling, a large, if not the whole, element of profit is eroded. If a farmer does not have the economic incentive to produce the animal, he will stop producing. If that were to happen, many cows and breeding ewes would be slaughtered in a year or two. That is what gives rise to the fall in producer prices, as forecast by FAPRI.

Deputy T. Dempsey: Over supply?

Mr. Brady: Yes. After a while, the market responds and there will be fewer breeding lambs, less production both of sheep and cattle, and that will give rise to the price increases forecast by FAPRI to occur by 2010.

The 400% increase in the price of eggs and other products from farm gate to supermarket checkout was raised but I do not know the answer to that. I do not know if anybody has the answer. Essentially, it is a matter for competition in the processing, distribution and retail sectors. One may argue that there must not be enough competition, but I do not know. To ascertain whether Irish consumers are being ripped off in this way, one would need to know, the mark-ups in other European countries. Sitting here, it is impossible to say that is the case.

Deputy Murphy mentioned falling prices and inflation affecting farmers even more, and the fact that direct payments are not index linked. All that is true. The European Commission has gone further than the reviews it was mandated to carry out. It has produced radical proposals and the most fundamental changes in the CAP since its establishment. Our argument, and that used by the Minister, is that the Agenda 2000 agreement was to last seven years and would give some policy stability to farmers and people in the food processing sector for that period. It should not be fundamentally altered. We obviously accept the need for reviews, but reviews do not imply fundamental change - they imply adjustments here and there in light of circumstances, not the sort of fundamental change that the Fischler proposals envisage.

The rural development proposals are meant to address the new requirements being imposed by Brussels in the form of environmental and other standards. In that way, funds would be modulated from direct payments to help farmers meet these standards. We certainly agree about the lack of certainty these proposals have generated simply because they have gone beyond what the Commission was mandated to do.

Deputy Callanan mentioned how small farmers are disadvantaged and they certainly receive a smaller amount of direct payments than larger farmers. The reason for that, however, is that direct payments are production related so, naturally, a small farmer who has a low level of production will get fewer direct payments than a larger farmer. If that was to be moved away from a production-related system of direct payments, we would be moving closer to a social welfare system which the EU would not fund. It funds 100% of production-related direct payments to farmers. The closer one moves to a social welfare system for farmers, however, the less likely it is that the EU will continue to fund those payments 100%.

There is also the point that we are not alone. We cannot get the ideal CAP for Ireland, we have to negotiate with 14 other member states and the Commission. What emerges is some sort of via media between all 16 interests, but we do not have a free hand in this.

If the Commission's proposal on decoupling is implemented there is no question but that we would have some surplus staff, but at this stage I do not know what we will do with them. At this point we are fighting the Commissioner's proposals so we have not moved on to the later stage of addressing what would happen to the staff if the proposals were to go through.

Senator Hanafin mentioned the distribution of direct payments, but I think I have answered that to a certain extent. While it may not be ideal from a social welfare or equity point of view, it is the best deal we have. There is a danger, as I said, that if one moves away from production-related direct payments, one will move closer to the social welfare type of payments.

Although I do not have the current figures, there are not a lot of stocks in storage. Once the stocks are in storage they are not ours - the EU buys them and the EU determines how they are to be disposed of. The Commission, in consultation with the member states, takes a vote in the management committee for beef or milk as to what to do with stocks in storage at any point in time. The sort of decisions taken are determined by the state of the markets at the time. If the markets are weak they will hold onto them, but if the markets are strong they will dispose of them. When one disposes of stock that is in store when markets are strong, one is obviously helping to pull down prices.

Chairman: It is now 11.15 a.m. and we have another item on the agenda.

Deputy Callanan: On a point of clarification, there seems to be an anomaly between the beef and dairy producers if the base year is 2000-01 for grants under the Fischler proposals. The base year for dairy farmers is 2004 so will a dairy farmer who has given up milk production this year end up with nothing?

Mr. Brady: I think the answer to that is that he or she ends up with nothing. I am not certain about that but I suspect that is the answer.

Deputy Howlin: We are mandated to examine the consumer aspect of the Fischler proposals. The agricultural aspect will be examined by a different committee. It is instructive that the agricultural lobby is well represented on every Oireachtas committee. In terms of the proposals for tenant farmers who are renting land, how is their income to be sustained? The submission mentioned that the entitlements may be transferred, with or without land, between farmers within the same member state. Will this payment be a tradable commodity, like a milk quota? If there is going to be a payment fixed in time on a reference date between two years, on what basis will that become a commodity that in itself is transferable? Can one inherit it? What link has it got to the land upon which it is first reckoned or worked out? Is it just hit and miss? If one happens to be renting a sizeable area of land for those reference years, will one have a payment forever? Perhaps Mr. Brady could help me to understand how the decoupling will work in practice and how it will be sustained for the future?

Chairman: A good question.

Senator Leyden: As regards Deputy Callanan's point of view, I will not infringe-----

Chairman: Does the Senator have a question because we are running out of time and other Deputies have to come in?

Senator Leyden: This is the most important issue with which this committee will have to deal.

Chairman: Do you have a question?

Senator Leyden: Yes but, first of all, I will not be shy in saying that currently the biggest recipient of grants in the European Union is the heir to the British throne, Prince Charles, who is getting a massive amount of money. Does Mr. Brady not think there is something wrong with a system whereby offices are being closed in Boyle and Manorhamilton, along with a farm in Ballinamore, while we are trying to sustain rural farming? Even though the Department is negotiating in Brussels to get a deal from the European Union, it is actually doing a great disservice to rural farmers, and furthermore-----

Chairman: That is not relevant.

Senator Leyden: It is important.

Chairman: It is most important but the Senator should not go on about it all morning.

Senator Leyden: Okay. I asked Mr. Brady what he was doing about organic farmers but he did not mention anything about them. He is doing nothing for them. What is he doing about stopping the importation of New Zealand butter? Why is that not put down as an agenda item? The deal with New Zealand and Australia is contrary-----

Chairman: I ask the Senator to return to the agenda.

Senator Leyden: This relates to the agenda. The World Trade Organisation talks will reach a conclusion shortly and we are allowing New Zealand butter and lamb to be sold in our supermarkets. It is time to get tough with the British regarding the concession given to New Zealand and Australia.

Senator Hanafin: In a similar vein, the question of direct of payments can be easily addressed by paying maximum amounts for the small amounts produced, with staggered payments once production exceeds a certain level. In other words, a small producer would get the maximum for perhaps 15 or 20 head of cattle but there would be a reduced subsidy beyond that.

Mr. Brady: I shall first answer Deputy Howlin's questions about how entitlements are established. They are established by reference to the average of what a farmer received in the years 2000 to 2002, inclusive. It is a tradable commodity in the sense that if I acquire those rights, I can sell them to somebody else, but that person must have land in order to acquire those rights. One cannot buy the right and then sit in one's armchair doing nothing, one must have land. The rights will always be attached to land. There is no checking on what people produce except that they must maintain the land in good agricultural condition, which requires a certain minimum amount of production.

Chairman: Does the land have to be in one's ownership to qualify?

Mr. Brady: No, one may inherit a direct payment also if one's parents had acquired the rights and then passed them on.

Deputy Howlin: If a person was renting land for the reference period but at some point it simply became impossible to rent land, would that person then lose his or her entitlement?

Mr. Brady: I do not know the answer to that.

Chairman: Could Mr. Brady clarify it for the Deputy at a later stage?

Mr. Brady: Yes. This sort of detail is being discussed and teased out at working group level in Brussels. We will not know many of the answers for some time.

Senator Leyden mentioned the closure of local offices. It is not the Department of Agriculture and Food's offices that are being closed, but those of Teagasc. The Teagasc board makes its own decisions.

I apologise for not answering Senator Leyden's question about organic farmers. We set up a group a few years ago to consider what should be done about organic farmers. It reported about a year ago and the report is being implemented.

Regarding New Zealand butter and lamb, such products are entering the EU in accordance with WTO agreements. We cannot tear up a WTO agreement. There is nothing we can do about that. As a major exporting country, we have an interest in not doing anything about it. This issue cuts both ways. We export 90% of our beef, 75% of our milk and 60% to 70% of our lamb. We cannot pick and choose. We cannot tell certain WTO members that they cannot export but we can.

Senator Leyden: This agreement was reached when Britain joined the EU. It was a special concession to the Commonwealth and had nothing to do with the WTO.

Mr. Brady: It has been incorporated into the WTO agreement. It is part of the Uruguay round and there is nothing we can do about it.

Senator Hanafin talked about small producers receiving maximum payments. I am not quite sure what is meant by that but, again, it is a question of what we can negotiate. We cannot negotiate the ideal CAP policy for Ireland and we must compromise with others. We are conscious of the need to do something for small farmers, but we cannot have our way on everything.

Senator Hanafin: I mean that if a producer had 100 head of cattle and another producer had 15 to 20, the same payment for 15 to 20 is made to both, but the amount paid thereafter is significantly reduced. This decouples social payments from production, but also ensures that subsidies are paid across the board. Our concern at present is for smaller producers.

Mr. Brady: One would have to get the other member states to agree to do something like that. Many of them have much larger herds than us and are not going to agree to such a system. One must be very careful in doing the sums. Ireland could lose out overall in financial take if we went down that route. We have many farmers producing more than 15 to 20 head of cattle per year. The sums have to be done to see where the balance of advantage would lie for the country.

Chairman: On behalf of members, I thank Mr. Brady and his delegation for coming before the committee. Mr. Eamon Carey got off very lightly. We look forward to working with our guests very closely on many occasions during the lifetime of the committee. Members are very exercised by these issues and asked a second or, in some cases, even a third question-----

Deputy Lynch: Some of us none at all.

Chairman: All members engaged in the debate. We come finally to item C on the agenda.

Deputy Howlin: Most of us are expected to be in the House.

Chairman: People expected that the meeting would conclude by 11.30 a.m.

Deputy Howlin: It is now 11.27 a.m. and I suggest we adjourn now. I do not know how other members feel, but I certainly wish to return to my office before the Order of Business in the House.

Chairman: We have officials here from the Department of-----

Deputy Lynch: I know that.

Deputy Howlin: We have been here for two hours.

Chairman: We have another meeting scheduled at 2.30 p.m. next Wednesday to deal with the Department of Enterprise, Trade and Employment in connection with our consideration of the European directive on consumer credit, which was postponed at our meeting on 12 March. Shall we also deal with item C at that meeting? I apologise to the officials who have been here all morning waiting for this item to be taken. I understand that we scheduled a two hour session-----

Deputy Howlin: We must be present in the House. To anybody who read the agenda of this meeting, it was clear that we would not deal with it in two hours. I ask the secretariat to ensure people are not kept waiting by placing an impossible burden on us.

Chairman: I ask the Department officials to return on Wednesday of next week. I also ask members to stay while we go back into private session. I apologise again to the officials for the inconvenience we have caused them.

The joint committee went into private session at 11.28 p.m. and adjourned 11.29 p.m. until 2.30 p.m. on Wednesday, 2 April 2003.


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