Minutes of the conference between representatives of the United Kingdom and Ireland
(Secret) (I.N. (38) 7th Meeting) (Copy)

CONFERENCE between REPRESENTATIVES OF THE UNITED KINGDOM AND ÉIRE

Secretary's Notes of the Seventh Meeting of the Conference held in the Prime Minister's Room, House of Commons,
on Thursday, 3rd March, 1938 at 5.00 p.m.

PRESENT
UNITED KINGDOM	ÉIRE
The Rt. Hon Neville Chamberlain, M.P., Prime Minister.	Mr. Eamon de Valera, Prime Minister and Minister for External Affairs.
The Rt. Hon. Sir John Simon, G.C.S.I., G.C.V.O., O.B.E., K.C., M.P., Chancellor of the Commerce. Exchequer.	Mr. Sean F. Lemass, Minister for Industry and Commerce
The Rt. Hon. Sir Samuel Hoare, Bt., G.C.S.I., G.B.E., C.M.G., M.P., Secretary of State for the Home Department.	Mr. Sean MacEntee, Minister for Finance.
The Rt. Hon. Malcolm MacDonald, M.P., Secretary of State for Dominion Affairs.	Dr. James Ryan, Minister for Agriculture.
THE FOLLOWING WERE ALSO PRESENT
The Rt. Hon. Sir Thomas Inskip, C.B.E., K.C., M.P., Minister for Co-ordination of Defence.	Mr. J. W. Dulanty, C.B., C.B.E., High Commissioner for Éire.

Secretaries

Sir R.B. Howorth, K.C.M.G., C.B. Mr. W.D. Wilkinson, D.S.O., M.C.

 

THE DRAFT TRADE AGREEMENT

THE DIFFERENTIAL TARIFF PROPOSAL

MR. CHAMBERLAIN thought that it might be useful if some discussion could take place on a proposal which had been considered at the previous meeting on February 23rd, namely that some special arrangement in regard to the tariff treatment of Northern Ireland by Éire might be found practicable.

MR. DE VALERA said that he had understood from Mr. MacDonald that the proposal was that Éire should grant to Northern Ireland free entry for products and manufactures of Northern Ireland origin. He had replied that it was quite impossible for the Government of Éire to entertain any such proposal. Public opinion in Éire would be very strongly opposed to a suggestion of this kind and would point out that Northern Ireland had failed to respond in any way to the overtures made by Éire which had had as their object, the improvement of relations between the two countries. Reference would be made to the large numbers of persons in Northern Ireland, and particularly to those of them living on the Northern Ireland side of the border, who were in effect deprived of their civil rights, and in this connection he could, if necessary, give a long list of localities where, owing to the gerrymandering of the constituencies, the Unionists were able to secure a much larger number of representatives on the local Councils than the Nationalists, even in places where the voting strength of the two sides was approximately equal. If he was to agree to this particular proposal, his public opinion, which was bitterly disappointed at the failure to make any progress in regard to Partition would regard the proposal as an important step towards stabilising the present position in regard to Partition and as giving to Northern Ireland the best of both worlds - namely the continuance of Partition and a most favourable opportunity of expanding her trade in Éire. As the United Kingdom Ministers were aware, great efforts had been made in Éire to establish industries of various kinds, and the people of Éire had put much money into these industries. It would be said that by agreeing to this proposal he was opening the floodgates to most intensive competition on the part of Northern Ireland in the Éire market, the results of which were bound to be highly prejudicial, and in some cases, disastrous to Éire's industries. There could, in his considered opinion, be no more unpopular proposition in Éire than that the products and manufactures of Northern Ireland should be given free entry into the Éire market. He was, however, prepared to examine whether there might not be some other way of meeting Northern Ireland as, for example, by Éire and Northern Ireland negotiating system¹ under which each country gave preferences to the goods of the other. Moreover, it might be possible to consider some special arrangements in the case of those manufactures and products of Northern Ireland which were not produced in Éire. Arrangements of the kind he had in mind were, of course, of an entirely different character from an arrangement based on the principle of free entry. Quite frankly the people of Éire were genuinely afraid of the industrial competition of Northern Ireland. They appreciated, of course, that if Ireland could be united the industrial supremacy of Northern Ireland would have to be faced and acquiesced in, but so long as Partition persisted Éire could not compete industrially with Northern Ireland on an 'open door' basis, owing to factors such as the greater experience and longer traditions of industry in Northern Ireland, and the more onerous labour conditions which prevailed in Éire.

MR. LEMASS fully confirmed what Mr. de Valera had said as to the great difficulties which industry in Éire would find if it was faced with the free and unrestricted competition of the industry of Northern Ireland. In particular he referred to the fact that in Éire labour was in a more advantageous position than in Northern Ireland in matters such as hours of work and other working conditions. This, of course, would be a serious handicap to the Éire industrialists if faced with unrestricted competition from Northern Ireland.

MR. DE VALERA said that, for his part, he attached as much importance to arguments based on the greater experience and longer traditions of Northern Ireland industry.

MR. CHAMBERLAIN observed that there could, he assumed, be no question of competition between the two countries in shipbuilding.

MR. LEMASS agreed and thought that the linen industry was also one in which there would be no competition with Northern Ireland. Éire was not only afraid of the existing industries in Northern Ireland, but was apprehensive that undertakings might come to, and establish themselves in Northern Ireland, in order to take advantage of the Éire market, if the principle of free entry was accepted.

MR. CHAMBERLAIN observed that Northern Ireland was, not unnaturally, very apprehensive of any arrangement under which Éire products and manufactures would come into Northern Ireland free, while Northern Irish products and manufactures entering Éire would be subject to duty.

SIR SAMUEL HOARE said that any such arrangement as this would be quite impossible to defend. He was very sorry to hear the conclusions which Mr. de Valera had reached in regard to the proposal for a differential tariff in favour of Northern Ireland, particularly as, at the previous meeting, Mr. de Valera had said that the proposal had considerable attractions, and that, while it was essential that the industries of Éire should be adequately protected against the powerful and organised industry of Great Britain, the position was different vis-á-vis the industry of Northern Ireland.

MR. DE VALERA said that he had been thinking over the suggestion that the unification of Ireland might be brought nearer if Éire and Northern Ireland had some special tariff arrangements between themselves, but the proposal for a differential tariff in favour of Northern Ireland went very much further than anything he had contemplated. He had recently spoken to a prominent Éire industrialist, who had made it clear to him that, while Éire industry would face up to and acquiesce in the situation which would result from the abolition of partition, the strongest possible objections would be raised to the adoption of the principle of the free entry of Northern Ireland goods, if partition was to be continued. He (Mr. de Valera) was satisfied that public opinion in Éire would take the view, if he accepted the proposal, that he was conferring very great advantages on Northern Ireland to break down the partition barrier. Éire public opinion very strongly resented the whole attitude which the Government of Northern Ireland had taken up towards the ill-treatment of the Nationalist minority in Northern Ireland.

SIR SAMUEL HOARE said that he was ready to discuss this particular matter with Mr. de Valera. He had made very careful investigations, but had been unable to find any justification at all for general charges of ill-treatment and oppression of the minority in Northern Ireland. If Mr. de Valera had in mind any specific cases of ill-treatment, he (Sir Samuel Hoare) would be only too glad to make special efforts to get any genuine grievances remedied, but he must repeat that the careful and impartial investigations which had been made had satisfied him that there was no justification for charges of general ill-usage and oppression of the Northern Ireland minority.

MR. DE VALERA said that he would be very glad to discuss the matter with Sir Samuel Hoare. He could, if necessary, supply a long list of localities in which there could be no question that the minority were being improperly deprived of their civil rights.

As an example the Parliamentary representation of the county of Fermanagh might be quoted. In this county the arrangement of the constituencies were such that, while 32,000 electors returned one Nationalist Member, 25,000 electors returned two Unionist Members.

SIR SAMUEL HOARE pointed out that, in Northern Ireland, there were today, and had always been, eleven seats in the Parliament of Northern Ireland available for Nationalist representatives.

MR. DE VALERA said that, on the basis of proportional representation, the Nationalists in Northern Ireland should have seventeen out of the fifty-four seats in the Northern Ireland Parliament.

He would be very glad to discuss the question with Sir Samuel Hoare at any time.

MR. MACDONALD said that Mr. de Valera had spoken of the barrier between Northern Ireland and Éire and of his intense desire to remove the suspicions and ill-will which were at the root of the whole partition question. United Kingdom Ministers entirely shared Mr. de Valera's desire that all suspicions and ill-will should pass away, and in their view the best method of securing this objective would be to make a start by inspiring confidence and good feeling in Northern Ireland and by the Government of Éire making some gesture which would prove to Northern Ireland that her suspicions were not well founded.

It was true that the new Éire Constitution contained certain provisions which, in Mr. de Valera's view, were intended to meet the susceptibilities of Northern Ireland, but Northern Ireland had taken an entirely different view of these provisions which had produced in Northern Ireland not a good but a bad effect. United Kingdom Ministers had made very great efforts to find some means to improve goodwill and inaugurate better relations between Éire and Northern Ireland. Their first suggestion had been that a defence agreement should be made between Éire and the United Kingdom, which they firmly believed would, when published, have had a very good effect in Northern Ireland, because, under the defence agreement contemplated by the Éire and United Kingdom representatives in January, it would have been clear that Éire was not, as Northern Ireland feared, moving away from the Commonwealth, but that she was closely cooperating with the United Kingdom in a vital matter of common concern, namely, various defence questions of interest to the two countries. Mr. de Valera had stated that, owing to the strong feelings in regard to partition of public opinion in Éire it was not possible for him to make a defence agreement with the United Kingdom, so long as partition remained, and the United Kingdom representatives recognised that in these circumstances a defence agreement, of the character which they had hoped to make with Éire, could not be entered into. The United Kingdom representatives had then considered this proposal for a differential tariff arrangement between Éire and Northern Ireland, and had welcomed the prospect of an arrangement of this kind, even though they recognised that it must inevitably prejudice to some extent manufacturers and traders of Great Britain. Because, however, they regarded the arrangement as a step towards the removal of suspicions and the creation of goodwill they were prepared to do everything in their power to bring it about. If this proposal was to be rejected there was very little indeed left which the United Kingdom could do to bring about what Mr. de Valera had continually emphasised as most important, namely, the breaking down of that cloud of ill-will and suspicion which went to the very root of the problem.

MR. DE VALERA pointed out that he had made it quite clear in previous discussions that he could in no circumstances agree to the free entry into Éire of the products and manufactures of Great Britain. While the proposal to restrict the free entry to goods of Northern Irish origin was not, from Éire's point of view, open to the same fundamental objections, public opinion in Éire would certainly have nothing to do with it. Moreover, if such a proposal was accepted by him Northern Ireland would laugh at the simplicity and lack of foresight which the Éire Representatives had shown in agreeing to a proposal so detrimental to Éire's true interests and would not regard it as a gesture but as an act of almost incredible stupidity and weakness. He thought that it might be possible to consider some plan for an exchange of preferences. Éire desired nothing better than to persuade Northern Ireland to co-operate with her but the worst possible way of approach would be on the lines of the present suggestion.

MR. CHAMBERLAIN said that what Mr. de Valera appeared to have in mind was an arrangement that the free entry which Éire got into Great Britain's market should not extend to the Northern Ireland Market.

MR. DE VALERA said that as yet he had reached no definite conclusion, the whole matter would have to be very carefully examined.

SIR JOHN SIMON pointed out that a proposal to allow a part of the United Kingdom to have some special preferential arrangement with Éire was open to the gravest difficulties and objections. If Northern Ireland was to have special treatment the way to give it was by means of the differential tariff proposal.

SIR SAMUEL HOARE agreed. The trade of Northern Ireland was part and parcel of the trade of the United Kingdom. Great Britain was proposing to give Éire most valuable benefits in her market and had hoped that in return Éire would compensate Northern Ireland which was suffering much more than Great Britain from the consequences of the trade dispute between the United Kingdom and Éire.

MR. DE VALERA observed that he had always thought that the desire of the industries of Northern Ireland to obtain free access to the valuable Éire market would be an important factor in bringing partition to an end. He could not too strongly emphasise the opposition which would be raised in Éire to the proposal that, in the present circumstances, Northern Ireland should be given free access for her products and manufactures to the Éire market. He could not possibly hope to carry such a proposal in the Dáil as the various parties would certainly unite to defeat it. Northern Ireland was not apparently prepared to make a gesture of any sort or kind to Éire.

MR. CHAMBERLAIN said that Northern Ireland made precisely the same complaint against Éire, and had represented that under the draft trade agreement the protection which Northern Ireland now enjoyed was to be taken away from her, and at the same time Éire refused to make any favourable gesture towards her.

MR. DE VALERA said that if the matter could be put on a 'give and take' basis Éire might say to Northern Ireland that, in future she could send her products and manufactures to Great Britain, but that she should not send them into Éire. Northern Ireland might answer to the same effect and discussions for some arrangement might then take place between Éire and Northern Ireland.

MR. MACDONALD asked whether it was quite impossible for Mr. de Valera to discuss differential tariff arrangements in favour of Northern Ireland.

MR. DE VALERA answered in the affirmative. He was, however, prepared to discuss some arrangement based on giving of preferences by Éire to Northern Ireland and vice versa.

MR. MACDONALD pointed out that, while no doubt there were certain matters in the draft Trade Agreement beneficial to Northern Ireland, they were not comparable in importance and value to the very great advantages which Éire would get under the Agreement in the United Kingdom market.

MR. DE VALERA observed that the main advantages, so far as Éire was concerned, were the cessation of the Special Duties which had arisen out of the financial dispute which had been a quarrel between Great Britain and Éire and not between Éire and Northern Ireland.

SIR THOMAS INSKIP pointed out that Northern Ireland was, of course, part of the United Kingdom.

MR. DE VALERA said that he and his colleagues could not assent to this proposition.

SIR THOMAS INSKIP said that, when he reflected on how far the United Kingdom representatives were prepared to go in making concessions in order to establish real friendship and goodwill between the United Kingdom and Éire, he felt very deep regret that Éire was unable to assent to the differential tariff proposal.

MR. CHAMBERLAIN said that, before the present meeting had taken place, he had invited Mr. de Valera to have a private talk with him, and had been bitterly disappointed when Mr. de Valera told him that it was impossible for the Éire Government to entertain the proposal for a differential tariff in favour of Northern Ireland. He (Mr. Chamberlain) was deeply disappointed, because he had hoped that, as a result of the discussion which had taken place between the United Kingdom and the Éire representatives on the 23rd February a way had been found to make a real beginning towards the dissipation of the heavy cloud of suspicion and ill-will which hung over Éire and Northern Ireland. If Mr. de Valera had been able to make this gesture it would have gone a very long way towards enabling the United Kingdom Government to justify making the very important and valuable concessions which were in contemplation, and the making of which would undoubtedly be subjected to very strong and acute criticism from many quarters in the United Kingdom. He (Mr. Chamberlain) had told Mr. de Valera that on the question of defence the United Kingdom Government would have to face powerful criticism and disapproval, which he would have to answer by pointing out that, in return for the handing over to Éire by the United Kingdom of the defended ports, the United Kingdom were going to receive various undertakings and assurances regarding the use of the ports and the co-operation and collaboration of Éire in times of emergency. He (Mr. Chamberlain) had been very disappointed when Mr. de Valera had informed him that it was politically impossible for him to make a defence agreement of the kind which had been contemplated. The conversation had then turned to the present proposal, namely that Éire should give differential tariff treatment favourable to Northern Ireland. The adoption of this proposal would have gone far to justify the United Kingdom Government in concluding the kind of agreement that they had in mind, and, had Mr. de Valera been able to accept it, the United Kingdom Government would have been prepared to hand over to Éire the defended ports without attaching any conditions to the transfer, but relying on what Mr. de Valera had himself said as to what the policy of Éire would be in an emergency. The United Kingdom Government hoped that, by making this gesture towards meeting Nationalist aspirations in Éire, they would be taking the first step towards the establishment of confidence and improved relations between the two countries.

In view of what Mr. de Valera had now said, the situation had, of course, very much altered. While he (Mr. Chamberlain) did not, in any way, blame the Éire representatives, he felt bound to inform them that, in view of the not altogether unfavourable reception which the proposal had had at the meeting on 23rd February, the United Kingdom had approached the Government of Northern Ireland, recognizing that, in so doing, there was some risk that that Government might have resented the proposition being made to the Éire representatives before the Northern Ireland Government had had any opportunity of examining all its implications. In particular the Northern Ireland Government might have thought that the proposal was open, from their point of view, to the grave political objection that it might appear to be the thin end of the wedge so far as partition was concerned. In point of view, the Northern Ireland Government had informed the Government of the United Kingdom that they welcomed the proposal and were fully prepared to see it adopted. It would now be necessary for the United Kingdom Government to notify the Government of Northern Ireland that the proposal must be abandoned, owing to the refusal of the Government of Éire to entertain it. In the circumstances the position was now very much worse than if the proposal had never been formulated at all. If Mr. de Valera still said that the proposal could not be entertained, clearly that concluded the matter, but he (Mr. Chamberlain) hoped that it might still be found possible to have some further discussion of the proposal.

MR. DE VALERA said that he was quite prepared to consider an arrangement for an exchange of preferences between Éire and Northern Ireland and, in his view, the best course would be if the discussions could take place between representatives of Éire and of Northern Ireland meeting by themselves and working out an arrangement mutually satisfactory to Éire and Northern Ireland. The much larger proposal, namely that Éire should grant freedom of entry to the products and manufactures of Northern Ireland origin, was of an entirely different character and was one which, as he had said, the Government of Éire were not prepared to entertain.

MR. CHAMBERLAIN said that it seemed as if the whole situation would have to be discussed de novo.

MR. DE VALERA said that the position about the Treaty ports might be defined as follows. The United Kingdom Ministers had spoken of handing them over unconditionally to Éire. It was not at all certain that the people of Éire would welcome the gift. They would probably take the view that they did not want the ports if it meant undertaking a heavy financial burden. In his view the people of Éire would be right if they took that line. The burden would be a grievous one. His inquiries showed that it would be far heavier than was indicated by the document with which the United Kingdom Government had furnished him. The figures in that document only represented a fraction of the total cost of modernising the defence of Éire.

MR. CHAMBERLAIN observed that Mr. de Valera was referring to the cost of putting the whole country into a state of defence, not to the cost of modernising the Treaty ports.

MR. DE VALERA replied that, according to the advice which he had received, the United Kingdom estimate of the cost of modernising those ports also fell far short of the actual figure.

The United Kingdom estimate had been something like the following:

Capital expenditure ........................................................	£1,400,000.
Annual maintenance costs - something well in excess of ......	£500,000.

The United Kingdom Government were mistaken in thinking that Éire could carry out what was necessary more cheaply than would have been possible for them (the United Kingdom). It would not, for example, be practicable for Éire to garrison the defended ports with voluntary personnel. It appeared rather that Éire would have to add some mobile mechanised units to their Army. In addition they would have to provide some small Naval forces - something on a bigger scale than the minesweepers which the United Kingdom authorities had suggested might be purchased at the outbreak of hostilities.

MR. MacENTEE thought that it was extremely doubtful whether it would be possible to purchase vessels suitable for conversion to minesweeping, after the outbreak of war.

SIR THOMAS INSKIP said that he would have thought that the existing regular army in Éire could have undertaken an appreciable part of the new task.

MR. MACDONALD said that it seemed as if Éire Ministers were determined to look on the black side of the picture. It was true that they would need to spend money on the ports, but it was commonly regarded as the privilege of a Sovereign Power to make provision for the defence of its territory. Would not the people of Éire be pleased at the prospect of recovering these ports in their territory which had been withheld, and of seeing their own flag waving over them? Mr. de Valera's own public speeches had pointed to this as the next national objective. He was now in a position to attain it.

MR. DE VALERA said that his people would form their view of the transaction in the light of existing circumstances. They would certainly not feel any enthusiasm over recovering the defended ports. They would see that war was in the offing and that there was a distinct prospect of social services being cut down in order to find money for armaments. They would blame their Government for entering into such commitments.

The estimate which his advisers had made of the capital cost of putting Éire into a state of defence far exceeded the figures he had mentioned a few minutes before. The Éire estimate was something of the order of £7 million. The annual maintenance costs also were larger in proportion. Was it conceivable that the Éire Minister of Defence should lay estimates before the Dáil to the tune of several million pounds?

SIR THOMAS INSKIP said that this was not putting the matter fairly. The estimate which we had given Mr. de Valera of the cost of modernising the treaty ports allowed of that process being spread over nine years.

MR. DE VALERA did not believe that it would be possible to spread the capital cost in this way. It would have to be found immediately if it was to be of any use. It would be nearer the truth to speak of the new equipment depreciating over a period of nine years.

MR. CHAMBERLAIN asked if Mr. de Valera was trying to make it appear that we were thrusting a burden upon Éire in making her take over the defended ports. He was lost in admiration of Mr. de Valera's skill in dialectics.

MR. DE VALERA retorted that the view which he had been expressing was not his own but that of the people of Éire. He might be able to sway his followers if he had anything like a case to put before them. If, for example, there was some prospect of partition being modified, matters would be very different.

As it was, there was the prospect of a war in which the majority of his people would not be sympathetic towards the United Kingdom.

MR. CHAMBERLAIN said that circumstances had now changed. It appeared that Mr. de Valera had no use for the differential tariff proposal. Possibly United Kingdom Ministers might decide to spare Mr. de Valera the embarrassment of having the treaty ports offered to him.

SIR THOMAS INSKIP observed that Éire Ministers had discovered that sovereignty meant financial sacrifice.

MR. DE VALERA said that if Éire stood alone she would have no fear of international complications. The only reason for any prospect there might be of her becoming involved in war was her propinquity to Great Britain.

Could United Kingdom Ministers indicate which aspect of the situation they would wish to discuss the following morning? Would it be desirable for the Trade Agreement to be considered in full conference?

MR. MACDONALD said that trade could have been discussed the same evening if things had gone better. The situation now was altered. It would be necessary to look once more at the general picture before thinking of continuing the trade discussions.

MR. CHAMBERLAIN thought that the United Kingdom Delegation would have to meet separately to discuss the new situation, with a view to seeing what were the prospects of making progress with the various outstanding issues.

MR. DE VALERA said that the Éire Delegation would welcome the opportunity of a private meeting. It was unfortunate that their Departmental advisers were not at hand.

MR. LEMASS said that there was no lack of subjects for discussion. For example, he would like to see a discussion on the Northern Ireland boundary, which appeared to have been drawn without any regard to the exigencies of the transport system. He had also in mind certain other matters affecting Northern Ireland.

The Meeting adjourned at this point.

It was arranged to hold the next Meeting between the two Delegations in the Prime Minister's Room at the House of Commons at 11.00 a.m. the following day, Friday, March 4th.