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§ Mr. Mark Todd (South Derbyshire)Mr. Deputy Speaker, I sense that this subject will strike a chord with you, bearing in mind matters that you raise in the House from time to time.
The United Kingdom's turkey industry is large, but it does not often attract a great deal of attention. One would not necessarily guess that more turkey is produced in the UK than sheep meat, but it is true. The industry receives no subsidy. Like all poultry producers in the UK, it is a free enterprise section of agriculture that relies on the wits and investment of those who choose to manage it and produce the turkey meat that we consume. Indeed, it is disadvantaged by operating within the common agricultural policy, because the cost of cereals to feed the birds represents a substantial part of its costs. Under CAP, those costs are higher than they are in an unregulated sector in which feed can be procured on the open market.
The industry has a steadily improving food safety record, and has invested in safety consistently over the years. Some 90 per cent. of the turkeys produced in the UK are produced under the British quality turkey scheme, an industry-driven regulatory framework with independent inspections of the quality of production. That is consistent with the self-reliant approach that the industry has adopted. It is not an industry that comes round with a begging bowl at regular intervals when it runs into trouble. It has sought to solve its own problems and to operate as any other free enterprise producer would in this country. However, it has faced considerable problems over the last two or three years. Imports have increased in the past 10 years, driven by the same factors that have increased the flow of imports in other sectors; not least the relatively high value, during much of that time, of the pound against other currencies. Most turkey producers, like most other manufacturers, accept those disadvantages as being part of their business.
I should like to draw attention to some issues that most regard as being outwith the normal concern of the exchange rate. One example puts it into stark focus. Most of our constituents have a turkey at Christmas. It is a traditional British choice, one that I normally make. The difficulty this year has been a concerted campaign by Brazilian turkey producers to achieve substantial penetration of our traditional marketplace. They were assisted by some of the supermarket chains, which were happy to try to source turkey meat at the cheapest possible rate.
I congratulate the National Farmers Union and representatives of the British poultry sector. It was only because of their strong campaigns that Brazil was prevented from supplying a significant proportion of supermarket frozen turkeys last Christmas. I congratulate all the organisations that were involved in that campaign, which dissuaded, for example, Asda from continuing with a contract that would have allowed Brazil to supply a substantial proportion of frozen turkeys for the expected Christmas market.
However, the campaign did not wholly succeed. Two supermarket chains eventually let a contract to the Brazilians at a rate of €1.34 per kg. The industry has 24WH worked out the actual cost of producing turkeys. Taking a reasonable perspective of the costs of producing a bird in Brazil, which has much lower labour costs and other advantages—I shall return to those advantages, some of which are unfair—the cost after landing in this country is €2.21 per kg.
How does one explain the ability to support a substantial contract at what appears to be a below-cost price? The only explanation that the turkey industry has come up with is that it is, effectively, dumping. The Brazilians produced heavily for an expected Christmas market but found themselves short of contracts. They had a substantial number of surplus birds that they wished to get rid of, and they wished to persist with their strategy of breaking into our market. That meant that they were happy to sell substantially below cost price.
A presentation has already been made to the European Union on behalf of the turkey industry, which has argued that that was a case of dumping. If true, it was an illegal act and should be taken to the World Trade Organisation. I hope that the Minister will give an update on the British Government's approach to that invasion of our marketplace. What steps have they taken with EU authorities to reinforce the points that have been made by the British turkey industry?
It is important to understand the dynamics of the turkey sector. Many of the birds that we consume at Christmas are fresh birds. However, if turkey producers in this country are to be economic, they cannot simply produce fresh birds for the Christmas market. They must maintain a capacity all the year round, which means that they must provide turkeys for the frozen market for a substantial part of the year. We all recognise that demand for turkey meat is not consistent throughout the year, in spite of the efforts to market the meat for use at other times.
The aim of the Brazilian campaign—which is supported by Cargill, one of the major commodity brokers in the agriculture sector—is to take away a substantial proportion of the frozen market. If that campaign were to succeed, it would not merely take away a significant chunk of the frozen meat market, but would substantially damage the market for fresh British birds, because it simply would not be economic for British producers to maintain a supply for the much narrower portion of the year about which we would be talking.
Let me turn to the second breach that requires attention. We must understand the way in which the EU imposes tariffs on imports. There is a recognition that tariffs should differentiate according to the added value of the imported product. In this case, a seasoned bird bears a tariff of 8.5 per cent. of the value of the product, but a standard frozen bird bears a tariff of €340 per tonne. Therefore, simply pumping the bird with a small amount of basting material that makes no substantial difference to the meat or to the keepability of the product will enable one to avoid a substantial proportion of the tariff that one would bear at our borders. It is important to recognise that we are talking about EU borders. It is perfectly possible for an import to come into an EU port on the continent and to be shipped on to this country without further intervention or additional tariff.
25WH The same scam—it is essentially a scam—was identified with lightly salted chicken some time ago. Imports were coming into this country with a little sprinkling of salt that added virtually no cost to the process but which made a substantial difference to the tariff levied at the border. I expect the UK Government to have made representations to the EU on this obvious evasion of controls at our borders.
Let me turn to perhaps the worst example. The EU has rightly set high standards on the use of drugs and other additives to meat imports into this country. It does so partly for animal welfare concerns, but mostly to protect the health of our citizens. It is recognised that pumping animals full of drugs that enhance growth as well as prevent disease may be harmful to the humans who eat them.
Nitrofurans are antibiotics that are banned in the EU. In the past three months, nitrofurans have been positively identified in 33 cases in Brazilian poultry at EU borders. I say "poultry" because I recognise that it applies to chickens and to turkeys. That report came about only because we had already put in place a control based on a visit of the EU food and veterinary office to Brazil. As a result of that visit, a control is in place on the borders, requiring consignment checking for such products. That was absolutely the right step to take. The food and veterinary office's visit identified several alarming aspects, and I wish to quote from its report:
The Brazilian legislation on veterinary drugs, which allows for their therapeutic use or as feed additives, does not offer the same degree of control as in EU legislation. A number of drugs prohibited in Europe are still available on the Brazilian market place and some substances, although prohibited in Brazil are still in use by the Brazilian livestock industry. Results from the national sampling plan for 2001 reinforce concerns over the use of potentially hazardous veterinary drugs in all sectors of the livestock industry in Brazil.">I should qualify that by saying that the original purpose of the visit was to look at the livestock sector. However, only when it became clear to the food and veterinary office that it was unearthing substantial abuse of drugs in all forms of meat production in Brazil did the office recommend the border consignment checks. We have identified the problem at the border, and I should like the Minister in his response to tell us how it has been dealt with.
What representations have the British authorities made about the consistent—the examples I have quoted are not isolated—import of products into this country in breach of European Union controls? Further to that, what steps has the Food Standards Agency taken? Although we are taking our checks seriously, it is not unreasonable to suppose that some of the production is creeping into the country. What suggestions has the agency made to control the risk to human health from the consumption of meat containing nitrofurans?
I conclude by saying that Brazil has demonstrated general failures to conform to EU veterinary medicine residue testing and meat certification obligations. Again, I quote the food and veterinary office's report on its visit to Brazil. That report notes that
certificates containing false information are issued by the … competent authority. Virtually all recent missions to Brazil have detected deficiencies in the certification system and have made appropriate recommendations for improvements to the system. As a consequence, the Brazilian system for certification of meat must be considered to be unreliable.26WH A critical part of the mechanism for deciding whether a product should be imported into this country is whether we trust the certification arrangements of the exporting country. In the case of Brazil, we do not. What steps are we taking to ensure that Brazilian standards are raised? I have presented evidence of dumping, failure to comply with reasonable expectations on certification and controls on the use of drugs, and the naked abuse—as far as I can tell—of loopholes in the tariff system to import scarcely touched meat under a framework that effectively results in the avoidance of a substantial tariff.Given all that, I argue that there is a strong case for the Government to seek action through the EU to restrict the access of Brazilian turkey products to the UK and European markets. Our industry is affected. Brandons in Scropton, an employer in my constituency, is considering closing one of its major plants in the UK to deal with the threat of imports from that source; that is why I have raised the matter at all. It cannot be right that British jobs are being sacrificed when Brazilian product is brought into the country in flagrant breach of a number of controls that we should expect any exporter to comply with.
§ The Minister for Rural Affairs and Urban Quality of Life (Alun Michael)I thank my hon. Friend the Member for South Derbyshire (Mr. Todd) for the manner in which he has introduced the debate. He touched on a number of important issues. I certainly agree with his introductory remark that poultry meat is an important product on the international commodity market, as well as on the EU and UK wholesale and retail market. UK poultry producers do not receive any direct support from the common agricultural policy, and prices therefore closely reflect market supply and demand. The poultry sector is a success story.
Nitrofurans are an issue for the Food Standards Agency. We shall relay the concerns that my hon. Friend has raised in this debate to that body. I assure my hon. Friend that action is being taken at the EU level. All poultry imported from third countries must enter the EU through designated border inspection posts, where it is subject to veterinary inspection. All consignments are subject to documentary and identity checks, and at least 20 per cent. of consignments undergo physical checks in the normal course of events. The purpose is to ensure that import conditions are met and that the products remain in a satisfactory condition during transport. That is the context in which nitrofurans have been identified.
Nitrofurans are unauthorised veterinary medicines and were found in poultry meat from Brazil. They are not permitted in the EU for use in food-producing animals because of public health concerns. Those residues should not be present in food, and I share my hon. Friend's concerns about them.
Recently introduced Community rules require all consignments of poultry meat from Brazil to be subjected to a chemical test to ensure that they do not present a danger to human health. The test must be carried out with a view to detecting the presence of antimicrobial substances and in particular nitrofurans and their metabolites. The consignment must remain at the border inspection post while testing takes place and 27WH it is allowed entry into the Community only after favourable test results. If nitrofuran residues are detected, the consignment is destroyed, which is a stringent measure that sends a strong message on the commercial impact of nitrofurans being detected.
My hon. Friend referred to the basting scam. We will make representations to the Commission—along with Customs and Excise, which is responsible for duties—if the industry gives us the details. We need evidence in order to make the case to the Commission. We suspected that there was a problem in that area but the industry has not confirmed it, and I hope that my hon. Friend will reinforce that message. The Department for Environment, Food and Rural Affairs is willing to represent the industry to the Commission, provided there is evidence on which we can make a strong argument. We need such evidence in order to be taken seriously.
My hon. Friend referred to the question of dumping. We are aware that the UK poultry product market can be threatened by low-price imports from a third country. In those circumstances, safeguard actions may be taken. When it is reasonable to do so, the Government are prepared to argue for those measures to be taken.
There is also the issue of the unfair application of WTO rules. For instance, concerted pressure from a number of member states, including the UK, recently led to the amendment of the classification of frozen, salted poultry meat imports to close a loophole, which some importers were exploiting to pay less tariff on lightly salted frozen products; my hon. Friend referred to that situation. That loophole has been closed but, as I have indicated, we need evidence o go further. There has been direct representation by turkey producers, rather than the UK Government, to the EC. Given the evidence, we are happy to represent the industry.
WTO rules allow for temporary special restrictions to be imposed on imports to offset a sudden significant drop in market prices or a surge in the volume of imports. Under WTO rules, however, those additional duties can be applied only to a limited number of chicken and turkey products. In general, it is fair to say that there is little obvious prospect of reducing the level of imports. Indeed, the Government's wider policy is to open up trade and it would be inconsistent to exclude poultry. In the longer term, import volumes are likely to grow further, particularly following further tariff reductions as part of a WTO settlement. Consequently, UK producers are unlikely to be able to compete on price alone, which means that they will have to rely increasingly on producing quality assured products for which they will obtain a premium price. My hon. Friend has rightly indicated the steps that the industry has taken effectively to compete in that market. It is fair to say that local and regional marketing can also assist the industry, which is something that DEFRA and the Government seek to promote.
There are other issues of concern, such as the additional costs faced by UK producers for higher welfare standards. A positive note is our success in ensuring that animal welfare issues a re recognised in the Doha ministerial declaration. There is obviously a long way to go before a final settlement, but we will work 28WH hard to ensure that the issue remains part of the negotiations. In other words, we will balance the need to pursue animal welfare considerations with the need to achieve a level playing field for home producers and those who produce imported products.
§ Mr. ToddMy right hon. Friend will accept the distinction between long-term planning of trade policy—I entirely agree with what he has said about that—and the short-term issue of dealing with apparent naked abuse of existing trade rules. Will he focus more on the steps he can take in such cases? He has referred to the need for better evidence; I have some on the dumping issue. Will he agree to meet representatives of the poultry sector to build up a portfolio of knowledge on such abuses so that action can be taken by the UK?
§ Alun MichaelI should be very happy to take up that sort of issue. It may be better for my noble friend Lord Whitty to undertake such a meeting. I shall draw my hon. Friend's concern and his earlier correspondence to Lord Whitty's attention, and I am sure that a meeting can be arranged.
I am sure that my hon. Friend will accept that the issue is to identify where there are breaches of WTO regulations or the controls appropriate in the UK and Europe and to take action in those cases, rather than taking action when there is no strong evidence. Evidence is at the heart of what actions can be taken. There are also issues relating to the burden of the large numbers of regulations to which the poultry industry needs to conform. There is always a delicate balance to be struck between the need for regulation, and the need not to overburden industry. Although there is still much more to be done in that area, I hope that the efforts that we take not to over-regulate the industry are recognised.
It is true to say that, in recent years, the EU turkey market has been over-supplied. The UK industry has taken significant steps by reducing production and placings to compensate for problems of oversupply in import penetration. The industry is to be congratulated on its past voluntary efforts to improve the market situation. As my hon. Friend will agree, we must ensure that dumping does not take place and that rules are not breached to ensure that the competitive situation allows the UK industry to retain as much market share as it can fairly do.
§ Mr. ToddI would not wish to set aside the reputation for self-reliance that the industry has established, but it would be helpful if the Government participated in a review of the trade environment of the sector, so that it can be assisted in planning further ahead. The Minister has rightly focused on the added-value, high-quality elements of the potential product range for British turkey in the future, but that has not had much assistance from Government. Perhaps he can consider research that may assist them in future planning.
§ Alun MichaelI am glad that my hon. Friend does not want the self-reliance of the industry to be undermined, and I share that view. The British quality turkey standard and the farm fresh turkey assurance schemes help to promote UK-produced turkey. There is a market, and a response from the public to home-produced product of high quality. I am sure that that is 29WH the way to go. The scheme has set turkey production standards from the sourcing of breeding stock, to all aspects of rearing, right up to final processing. Traditional farm-fresh turkey producers also set a code of practice for the production of traditional free-range turkeys for the Christmas market. Those schemes will help to ensure quality products that are likely to receive premium prices, which is the way to compete in the market, alongside taking measures to ensure that advantage is not taken of the ability to breach regulations.
My hon. Friend rightly referred to the poultry sector as one of the success stories of UK agriculture. Sustained growth has been achieved through investment, innovation, skilful marketing of products and offering value for money, of which it can be justly proud. The Government recognise the benefits that that has brought to the poultry industry. Our role is to act on evidence to maintain the level playing field.
I understand the industry's concerns about the competition it faces due to imports. As a result, it is not surprising that poultry producers see the Government's main role as ensuring that the field upon which they work and trade is level. That role is comprised of our work on international negotiations, our overall approach to regulation and a range of specific environmental, animal health, welfare and food-related concerns, which we shall be able to go into in more depth if my noble friend and I meet my hon. Friend and representatives of the producers, as he suggested.
I am happy to explore those issues to ensure that all imported meat from third countries complies with EU animal and public health standards, and we have the appropriate checks in place.
§ Sitting suspended until Two o'clock.