PRESENTATION BY THE HON. NINU ZAMMIT, MINISTER OF AGRICULTURE AND FISHERIES, ON THE OCCASION OF THE INTERNATIONAL CONFERENCE OF THE MINISTERS OF AGRICULTURE OF CENTRAL AND EASTERN EUROPEAN COUNTRIES ENTITLED "THE EU ENLARGEMENT: WHAT ARE THE BENEFITS AND

Mr Chairman,

Honourable Colleagues

Distinguished Guests

Ladies and Gentlemen

Malta, with a land area of 312 km², is by far the smallest of all the candidate countries. As such, Malta's agricultural sector is very small and, therefore, one quickly realizes that the relative small size of my country's agricultural sector suffers severe handicaps when compared to similar sectors of Central and Eastern European Countries (CEEC).

The contribution of agriculture to Malta's GDP is 2.5%. As regards direct employment, 1.8% of Malta's gainfully occupied are engaged in the agricultural sector. These figures are comparable to the EU-15 average of 2.0% and 5.0% respectively. However, these figures are considerably lower than those of the other applicant countries, especially CEECs, where the respective figures range from 3.6% to 17.3% as regards GDP contribution and between 5.2% to 41.7% as regards employment in agriculture.

Nevertheless, Malta's agricultural sector remains an important sector from a national development perspective. The farming and rural community constitutes an important component of Malta's social structure. This sector of our society contributes to the maintenance and enhancement of Malta's rural environment and typical landscape, and therefore contributes indirectly to Malta's thriving tourism sector. Furthermore, in view of Malta's island status as well as in view of its geographical location on the periphery of the production centres of Europe, agriculture affords a limited but vital source of food security. The problems associated with the provision of safe meat products because of the present Mad Cow Disease (BSE) and Foot and Mouth Disease (FMD) just serve to emphasise the importance of having a local provision of safe products.

The development of agriculture in Malta is constrained by our islands' topographical, natural and geographical characteristics. These specific features are not conducive to a higher rate of agricultural development.

The continuous pressure due urbanisation further aggravates the circumstances of the "highly less favoured conditions" in which our agriculture operates. The small size of the Maltese Islands, the physical, climatic and market constraints and the high population density indicate:

· the limited production capacity of agriculture,

· the limited range of products that can be produced

· and the poor conditions for high capital investment.

Malta also faces a number of major constraints restricting its competitiveness in agriculture and agro-industry. The first one is related to the opportunity cost of land, which factor per se results in a high economic rental value of land in Malta when compared to that in the other applicant countries where land scarcity tends to be less of a major problem. A second constraint lies in the scarcity of water, with more than half of Malta's water supply originating from costly desalinisation. Thirdly, labour costs are exceedingly high in a situation where the rate of unemployment is only about 5%.

In such a scenario, Maltese agriculture cannot attain the high productivity standards achieved elsewhere in Europe. Higher productivity and efficiency can never offset the structural constraints of land, water and labour costs.

As regards production quantums, Malta is self-sufficient in fresh vegetables, processed tomatoes, eggs, poultry, pork, fresh milk and fresh milk products. However, Malta is not a producer of cereals, sugar, hops, rice, butter, cheese, milk powder, mutton and lamb. Malta has a low self-sufficiency in wine grapes, fresh fruits and beef.

Up to the present, Malta has been operating a protectionist import levy system which is applicable to the agricultural and agri-food sectors. On accession to the EU, these import levies will have to be gradually removed and, in their stead,

· support measures contemplated by the reformed CAP will be introduced, and

· specific support measures considered necessary to ensure the livelihood of Malta's farmers and growers will need to be made available to these operators in order to ensure a sustainable and multifunctional sector for future generations.

These measures are considered as an integral part of Malta's endeavour towards the liberalisation of imports of food and imported agricultural products from the EU and the adoption of the EU Common External Tariff.

The adoption of the Intra-Community prices of several commodities could have a direct bearing on local domestic costs and may affect negatively Malta's international competitiveness in the industrial and tourism sectors. Specific supply arrangements shall be required to enable Malta to source products for local consumption at international market prices through the exemption from customs duties on products imported from third countries and/or specific supply measures for specific Community products.

Mr Chairman, in view of the above, one clearly appreciates and concludes that Malta's "current situation in the agricultural sector" calls for an ad hoc approach in the negotiations for EU accession. This approach must be quite different from the one adopted in respect of other applicant countries due to the following reasons:

1. Certain agricultural prices are today much higher in Malta than in the EU. Thus, Maltese farmers will face a price shock on accession;

2. Agricultural activity suffers from severe natural and structural constraints;

3. Without any compensation or special measures, Malta's agriculture, which is already very small, may virtually disappear. Such an outcome must be avoided since agriculture plays a crucial multifunctional role in the preservation of Malta's landscape, environment, and tourism.

4. Given the current CAP regime, Malta will not benefit from a number of CAP measures, since most of these products are not and cannot physically and economically be produced in Malta. The adoption of the CAP in Malta without special measures implies that the benefits in terms of financial flows received by Maltese farmers under the CAP market-support instruments would be negligible compared to those received by farmers of other member countries.

To compensate for these negative effects, Malta intends to make full use of the reformed EU Rural Development policies, which policies have assumed greater importance as the second pillar of the CAP. Malta intends to give greater attention:

· to policies aimed at the structural modernisation of farms,

· to policies targeted at the improvement of marketing and processing of agri-food products,

· to existing polices designed to provide direct aid measures including compensation for less favoured areas,

· to polices seeking CAP agri-environmental measures aimed at conserving the traditional characteristics of Maltese agriculture and, last but not least,

· to policies that support the production of safe and quality food.

In Malta's case, EU accession in the short term implies a high cost to our agriculture. However, in the long term, accession can be used as an opportunity for promoting a deep change in Maltese agriculture. In fact, EU accession must serve the purpose of providing a launching pad for a new modus operandi in order to ensure a sustainable agricultural sector for our islands. Needless to say, this sustainable production will be driven by a "health conscious society" that will demand good-and-safe agricultural produce for the money that it pays.

The over-all objectives of the required change in agriculture is, therefore, to switch towards a more demand-driven, more internationally-compatible market system based on agricultural policies leading to quality production, rural development and environmental protection.

In so doing we shall be ensuring the survival of Maltese agriculture together with the promotion of its multifunctional role.

My Government believes that EU accession can indeed provide a good opportunity to carry out the substantial changes required in our agricultural policy to help us move from the present out-dated and unsustainable protectionist system to a sounder role of agriculture in the Island's economy.

Thank you.