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Statement by Brendan Smith TD, Minister for Agriculture, Fisheries And Food To The Dail On The ECA Report on Sugar Reform

The European Court of Auditors Report on the Sugar Reform package of 2006 published yesterday was addressed directly to the European Commission. The Report also contains a comprehensive (17 pages) response from the European Commission to the Court's findings.

As the Commission itself explains in that response, the sugar reform was concluded against the background of the EU's 'Everything but Arms Initiative' (EBA) in 2001 and the 2005 World Trade Organisation (WTO) ruling on the EU Sugar Regime.  The EBA granted the least developed countries free access to the EU market including Sugar. The WTO necessitated a reduction of subsidised EU Sugar exports.  In response the EU had to cut its sugar production to maintain the appropriate market balance. The combination of these factors led the Commission to bring forward proposals for the reform of the EU sugar regime.

As the Commission's own reply to the Report points out, the reform was based on a voluntary system of quota renunciation underpinned in particular by a temporary restructuring fund as well as support price reductions. The choice of abandoning or keeping production was to be made by every sugar producing company bearing in mind that in future they would have to secure their long-term profitability in a situation of substantially lower institutional prices.

During the reform negotiations, my colleague the Tánaiste and then Minister for Agriculture and Food Mary Coughlan, strongly opposed the Commission's reform proposals and sought to have them modified in such a way that an efficient sugar industry might have been retained in Ireland. She, in fact, led a group of fourteen Member States that opposed the proposals. In the end, there was insufficient political support for the Irish position and our efforts, towards the close of the negotiations, had to be redirected at achieving the best possible compensation package.

There have been some suggestions that out of date information may have impacted on the negotiations. Nothing could be further from the truth. The Commission itself explains the relevance of its impact assessment.  I quote "this model does not require an analysis of the current profitability and prospects of every individual sugar producer in the EU. Therefore the Commission did not consider it necessary to collect such data on productivity for the model chosen" end quote. However the Commission rightly points out it opted for a reform model where final decisions would be taken by individual sugar companies.

Of course at all stages during the negotiations we brought to the table the most up to date information about the position in Ireland including the fact that there was only one sugar processing plant operating in Ireland. The Commission was well aware of the fact that the Carlow plant had closed prior to the publication of the Commission proposals.

Greencore plc, the sole Irish sugar processor and holder of the entire Irish quota allocation, decided to avail of the restructuring scheme. Accordingly the company renounced the quota and dismantled the last remaining Irish sugar factory at Mallow in compliance with the conditions of the scheme. This brought the Irish sugar industry to an end. Ireland negotiated the best possible deal in the event of quota holder - Greencore taking the commercial decision to exit the industry.

While it is not appropriate for me to say why Greencore plc took the decision it did, I would refer Deputies to the Commission response in relation to what is obviously a reference to the plant in Mallow at point 30 of the Audit Report. The Commission point out that sugar production can only remain competitive if both beet production and beet processing are carried out competitively.  To quote directly from the Commission response "it is also possible that performing industrial facilities were forced to close down due to the limited competitiveness of the beet grown in the surroundings. This appears to be the case described by the Court".

Compensation Package

The sugar reform package that Ireland secured was, as a whole (i.e. restructuring aid, diversification aids and single payment) worth €353m - of which €220m went to beet growers, €127m to Greencore and €6m to machinery contractors. The beet growers' share was made up of diversification aid (€44m), compensation via the single payment (€123m over 7 years) and restructuring aid (€41m). The restructuring and diversification aids were paid out in 2007 and 2008.

Restructuring plan (including social plan)

To draw down the restructuring aid, Greencore plc, had to submit a restructuring plan, incorporating a social plan and an environmental plan the plan did not apply to the Carlow factory, which had already closed prior to the reform of the EU sugar regime. The social plan provided for early retirement and redundancy packages as well as support services for the departing Mallow workers such as career counselling, financial advice including pension advice, pre-retirement programmes for those aged over 50 years, job-seeking support and 'Start your own business' programmes. The social plan was implemented in the first year of restructuring. The environmental plan will be finished in 2010.

EU sugar production post-reform

As a result of the restructuring scheme the overall EU sugar quota was reduced by almost 6 million tonnes, of which the Irish quota contributed some 200,000 tonnes.

Any proposal to re-establish a sugar factory in Ireland would, subject to the availability of quota, be a matter for commercial decision by interested parties. Any proposal to review the EU sugar quota would be a matter for the EU Commission.

A quantity of sugar beet has always been grown in Ireland for fodder purposes and this continues. It is not affected by the EU sugar regime.

Special Share

In conclusion a Cheann Comhairle, a lot has been said in this house in relation to issue of the Special Share held by the Minister.  I wish to make clear, and this has been confirmed by legal advice at the time, that this Special Share does not empower the Minister to get involved in operational matters or business decisions made by the Company.

 

Date Released: 11 November 2010