Letter from Seán Lemass to Eamon de Valera (Dublin)

A Uachtaráin a chara,

We received by wireless the news of the 20% ad valorem duties to be imposed on Free State produce exported to Britain, and also of your announcement that emergency legislation is to be introduced in the Dáil. I discussed it with Seán T.¹ and Dr. Ryan,² and they agreed that I should write to you giving you some of our ideas on the situation. Probably these ideas have already been examined by the Executive Council, but it will do no harm to set them out.

In the first place, it appears to us that the imposition of special duties on British goods cannot be of much value. Apart from the probability of our people paying the full amount of such duties, they would be too slow in operation on British public opinion. I suppose coal has occurred to you. You know the British coal trade is highly organised and controls the importing firms in the Saorstát. There would be no possibility of the price being reduced by the imposition of a duty. The coal ring would and could make certain that our people would pay, and it is equally certain, I think, that a duty imposed by us (which could not be a large one without doing substantial industrial damage) would not induce imports from Germany, as the control of the English coal ring over our importing firms would prevent this. The alternative which we suggest is that the Government should take over the business of importing coal.³ Buy British coal if we get 10% off prevailing prices, and sell it at full price. Buy German, U.S.A. or French coal if the British stand out. These remarks apply also to any other class of goods exported by the British.

We feel, however, that there is much greater advantage to be gained by tackling exports instead of imports. We suggest that the Government should prohibit export of any of the goods subject to the British duty except through an organisation to be established by the Government. The aim would be to hold back cattle except the British were prepared to pay the ruling price plus their own duty. This applies also to live pigs. The stoppage of export of these goods would cause a considerable upset in Britain and produce pressure on the Government there to ease the situation. On the other hand, butter, bacon, etc., could be cold-stored in so far as an alternative market could not be found. The bacon position could be eased by putting up the duty against Canadian bacon. All this implies some arrangement for paying the producers for their produce now - I mean that the State should buy and store or buy and export, utilising for this purpose the money withheld from Britain (which would require an Act of the Oireachtas). Alternatively, some system of temporary credit to farmers would need to be devised.

The great danger, of course, is the effect of the British action on public opinion. I suppose you have considered bringing the constitutional special powers clause into operation. If there is any deliberate attempt to produce a panic, it should be done, but consider first whether it would not appear a sign of weakness on our own part.

I think that the present situation, if rightly handled, can prove of permanent benefit to the Free State if our people are prepared to stick out the transition stage. We can alleviate hardship by the Relief expenditure already provided for plus any additional expenditure which can be made possible by a rearrangement of the Budget or, if necessary, by borrowing. If the latter course is decided on, it may be necessary to deal with the Banks. The situation calls for wide powers of action and freedom of movement in the hands of the Government, and, in this connection, you should consider whether any special action is necessary to secure that decisions will not be delayed by keeping to the usual formal procedure in the Department of Finance.

If you are considering the withdrawal of British tariff preference, I suggest that, in view of the Ottawa Conference, the preferential rates should not be cancelled, but merely that British goods, or goods consigned through Britain, should not be entitled to them. This may mean little in reality, but it will help here. I wish, however, to point out that in the case of a number of duties the withdrawal of preference should be effected by the reduction of the present full rate to the preferential rate. These duties are those now in force on

boots and shoes

cordage, cables, ropes and twine

floor coverings

lead, brass and tin manufactures

metal door and window frames

builders' woodwork

printed matter

stationery

cutlery.

In the case of compound manures, special provision will be necessary to deal with circumstances in Donegal, which draws supplies from Derry. Donegal will need to be remembered in all cases. The above list is not intended to be exhaustive. In the case of other duties, the withdrawal of preference, making the full rate the general one, will not have any detrimental effects.

I do not know what situation we are likely to be faced with at Ottawa, but I have a strong feeling that we will waste a lot of time and achieve nothing. If this appears to be the case after the first meetings, the Executive Council will have to consider whether all or some of us should be recalled. Personally, I would much prefer to be at home in the present circumstances.

The voyage was very pleasant, and we are all in good form.