'Discussion with Éire Ministers'
Minutes of a meeting held in No. 10 Downing Street, S.W. 1
on Friday, 19th September 1947 at 2.30pm
(Top Secret)

PRESENT
The Rt. Hon. C.R. Attlee, MP,
Prime Minister (In the Chair)

THE FOLLOWING WERE ALSO PRESENT:

SECRETARIAT:
Mr. W.S. Murrie
Mr. T.A.G. Charlton

THE PRIME MINISTER welcomed Mr. de Valera and the other members of the Éire Delegation and invited Mr. de Valera to indicate the main points on which he was anxious for an exchange of views.

MR. DE VALERA thanked the Prime Minister for arranging the meeting at short notice. He felt that it was highly desirable to decide, within the limits left by the approved policies of their respective countries, the extent to which a mutually advantageous economic agreement could be reached. There were a number of undesirable elements in the present situation which, in his opinion, should be remedied without delay. In particular, it was obviously to the disadvantage of both countries that Éire should have had to spend nearly 20 million dollars on the purchase of coal from the United States when their total requirements represented only a small fraction of the annual output of the United Kingdom. He observed that the United Kingdom Government had recently made an important announcement with regard to their agricultural policy. Any change in their agricultural policy was liable to have considerable repercussions on Éire agriculture and he would be interested to have further information about the ultimate aims which the United Kingdom Government had in mind.

He suggested that early discussion should take place between officials of both Governments. These talks would fall broadly into two parts, namely:-

• questions connected with the expansion of agricultural production;
• questions connected with the development of industry.

As regards agriculture, the Government of Éire was mainly interested in increased supplies of fertilisers, farming equipment, machinery, seeds and animal feeding stuffs, together with an alteration in the present level of prices paid for Éire produce.

As regards industry, he stressed that it was the fixed policy of the Éire Government to develop their own industries in so far as they were capable of doing so. Éire did not wish to remain a predominantly agricultural country whose economy would be based on the export of agricultural products in return for the import of fully manufactured goods. It therefore seemed clear that there was little likelihood of the United Kingdom's regaining its pre-war market in Éire for manufactured goods. On the other hand, there were many commodities that could not be produced economically in Éire and there would accordingly still be considerable scope for exports from the United Kingdom to Éire. He also pointed out that Éire industries, when developed, could make a marked contribution towards the total exports from the sterling area to the dollar countries.

One of the main questions at issue was the best method of dovetailing the agricultural policies of the United Kingdom and Éire in order that they might be pursued to their mutual advantage. He realised that difficult questions regarding subsidies and prices would arise, but if these were approached in a spirit of realism, he felt that it should be possible to reach a satisfactory agreement.

MR. LEMASS emphasised that if the Éire Government were compelled to curtail the supply of consumer goods to the Irish people, they would run into considerable political difficulties, unless they were in a position to indicate that this curtailment of supplies was part of an overall plan designed to overcome current difficulties and to lead to greater prosperity and full employment. Éire industries were not yet fully developed. They were designed to use semi-manufactured or processed materials which had, in the past, been obtained mainly from the United Kingdom. There was, however, great difficulty in obtaining adequate supplies of these materials, and this had led both to unemployment in Éire and to the purchase of the materials from dollar countries. He quoted the example of cotton yarn, supplies of which from the United Kingdom were at present negligible. As a result, factories in Éire were under-worked. Yet at the same time Éire was receiving a larger quantity of made up cotton goods from the United Kingdom than before the war. As regards coal, Éire had, before the war, drawn the bulk of her supplies from the United Kingdom and was bound by agreement to impose a tariff on coal from all sources other than the United Kingdom. It was true that the United Kingdom Government had agreed last year to suspend the operation of this tariff, but coal from the United States was expensive, and its purchase added to the dollar expenditure of the sterling group. He therefore hoped that it would soon be possible to resume coal exports from the United Kingdom. Similar considerations applied to coke, the shortage of which was so acute that most Éire foundries, which were largely engaged in the manufacture of agricultural machinery, had been forced to close down. A further difficulty had been caused by the delay in the supply of capital equipment for factories from the United Kingdom, which had led to the purchase of such equipment from the United States. The Éire Government would much prefer that British plant should be installed in Éire factories on account of better availability of spare parts and the ease in obtaining skilled personnel for maintenance and repairs. He also enquired why it was necessary for the United Kingdom Government to ban the import of certain Éire home-produced products, such as footwear and homespuns.

MR. SMITH stressed that in Éire, as in other countries, it was necessary to tell the farmers in advance precisely what was expected of them. For this reason, he was anxious to obtain full details of the United Kingdom agricultural policy in order that he could work out, in the light of this, on what specific products it would be best for the agricultural interests in Éire to concentrate.

MR. AIKEN said that the Éire Government was not in a position to adopt a firm financial and economic policy until they knew the precise intentions of the United Kingdom. In his view, the present financial crisis in the sterling area was a production crisis and if the production of the sterling area as a whole could be increased, its purchasing power would increase pro tanto. It would be helpful if the United Kingdom Government would agree to import manufactured goods from Éire and to utilise the man-power saved thereby to increase the production of goods for export to the dollar countries; and it would also be of assistance if the United Kingdom Government were to refrain from exporting to Éire manufactured goods which Éire herself was in a position to produce. Generally, he suggested that the United Kingdom should, for the time being, concentrate on selling consumer goods to countries outside the sterling area, while restricting the export of capital equipment and semi-finished goods to countries within the sterling area. This would have the effect of increasing the productive capacity of the sterling area group as a whole and relieving the strain on the dollar resources of the group.

He endorsed the remarks of Mr. Lemass regarding the cotton industry in Éire. Éire had the machines and the labour, but was short of materials. The United Kingdom had the yarn and the machinery, but was short of operatives. The simple solution would appear to be for the United Kingdom to export the yarn to Éire where it could be turned into manufactured goods. Similar considerations applied to materials required for tyre making. He was advised that an increase of 12½ per cent in tyre production would result if small quantities of wire and cotton fabric were made available from the United Kingdom and that production could be raised by 50 per cent if certain additional capital equipment were provided. In the agricultural field, an increased supply of fertilisers, machinery and seeds would enable Éire to increase her exports of foodstuffs to the United Kingdom with a consequent reduction in the sterling area's demands for dollar food.

THE PRIME MINISTER said that he and his colleagues were grateful to the Éire Ministers for the clear and succinct way in which they had put forward their views. The immediate problem confronting the United Kingdom was how to achieve a satisfactory balance of payments, and it seemed clear that in present conditions this could not be done without a substantial increase in home food production. At the same time, he and his colleagues would welcome any proposals for co-operation in the economic and financial field which would be of mutual advantage to the two countries.

THE PRESIDENT OF THE BOARD OF TRADE said that until recently it had been the aim of the United Kingdom Government to promote multilateral trade to the maximum extent. The latest developments, however, made it necessary that for the time being at any rate the United Kingdom Government should undertake negotiations for bilateral agreements which would enable this country in the present shortage of dollars to obtain the imports which were essential to it. In carrying out these negotiations it would be necessary to consider the question which had been raised by the remarks made by Mr. Lemass and Mr. Aiken, namely, whether special considerations should apply to trade between the United Kingdom and countries which were members of the sterling group. It should, however, be realised that a considerable percentage of the trade of the United Kingdom was with countries which were outside both the dollar area and the sterling area, and it did not follow that any purchases made outside the sterling area represented a drain on our dollar resources. Nevertheless, he agreed that it was most desirable to consider how far the resources of the United Kingdom and of Éire could be used in the best interests of both countries. With regard to the desire of the Éire Government to secure additional imports of cotton yarn and of materials for the manufacture of rubber tyres, he assured the Éire Ministers that the failure to export additional supplies of these materials was not due to any desire to impede the development of manufactures in Éire, but arose from the fact that it had not yet proved possible to restore their output to anything like the pre-war level.

THE MINISTER OF FOOD said that, though he realised that any possible increase in exports of food from Éire would not meet more than a relatively small part of the total needs of the United Kingdom, he believed that with careful planning it would be possible to obtain a valuable contribution from Éire. During the war and in the immediate post-war years the expansion of the production of such commodities as meat, eggs and bacon had been hampered by the difficulty of obtaining supplies of feeding stuffs, but the Éire Government had recently been able to purchase through the Ministry of Food 250,000 tons of maize, which should be of great assistance to Éire farmers. He welcomed the opportunity of discussing what supplies of food could be obtained from Éire and what inducements it would be necessary to offer the Éire producers in the way of prices and long-term contracts for the supply of particular products.

THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE AND FISHERIES, said that the general aim of the agricultural policy of the United Kingdom Government was by means of stable prices and a guaranteed market to induce the United Kingdom farmer to make a substantial increase in home food production. In many respects, however, the agricultural industries of the United Kingdom and of Éire were complementary. Thus, the United Kingdom Government would welcome a substantial increase in the export of store cattle from Éire. While it might not be easy to meet all the demands of the Éire Government for supplies of fertilisers, seeds and agricultural machinery, every effort would be made to help them.

THE CHANCELLOR OF THE EXCHEQUER said that at the opening of the Sterling Area Conference earlier in the day he had drawn attention to the urgent need to conserve the common pool of gold and dollars on which the countries which were members of the sterling group depended. The fact that it had been found necessary to sell £20 million of gold in the previous week and to draw on the International Monetary Fund to the extent of $60 million showed the urgency of taking action to reduce dollar expenditure and increase dollar earnings by members of the sterling group, and he would warmly welcome any plans which would further these objects.

THE PRIME MINISTER said that there appeared to be broad general agreement on the desirability of increased trade between the United Kingdom and Éire and suggested that the next step should be discussions between officials of both countries with a view to working out detailed proposals on this basis.

MR. DE VALERA said that he felt that it would be desirable to define more clearly for the officials the objectives which were to be attained in the proposed discussions. Unless, for example, it were laid down that, conditions being broadly the same in the two countries, the same prices should be paid for Éire produce as for United Kingdom produce, the official discussions might prove abortive. There had been occasions in the past when negotiations for the export of produce from Éire to the United Kingdom had broken down over the question of price.

MR. AIKEN suggested that a directive with regard to exports of capital equipment from the United Kingdom to Éire would also be desirable.

THE MINISTER OF FOOD said that in fixing prices for agricultural produce from Éire it would, of course, be necessary to make allowances for differences in conditions between the two countries and that the prices offered would have to be determined on merits. There would, however, be no attempt to discriminate against the Éire farmer as such, and due allowance would be made for any offer to provide supplies on a long-term contract.

THE FOREIGN SECRETARY said that he attached the greatest possible importance to increased co-operation between the countries of Western Europe and that he was satisfied that an increase of trade between the United Kingdom and Éire would be a most valuable contribution towards this. He hoped that the pre-war exchange of cattle, agricultural produce, coal and other commodities would be restored and developed so that the dependence of both countries on imports of these commodities from elsewhere would be reduced. So far as agricultural produce was concerned, he was personally of the opinion that the United Kingdom would have to aim at producing something like 60 per cent of its food supplies. Moreover, in order to make it possible to return to the 1938 standard of consumption and to improve on that standard to the extent which the people of the United Kingdom had been led to expect, it would be necessary to harness all the available resources, including those of Éire. He was convinced that trade between the two countries could be developed on mutually advantageous lines if they supplied each other with those products which would enable their dollar expenditure to be reduced. He suggested that it might be desirable to appoint a body on the lines of the Joint Anglo-French Economic Committee which would be able from time to time to review the situation and consider further measures for co-operation.

THE PRIME MINISTER said that, though it would at this stage be inadvisable to give any specific directions to the officials who were to carry out the talks on such matters as the level of prices or the supply of capital goods and semi-manufactured products, the discussions should proceed on the basis that it was the desire of Ministers to promote the maximum degree of economic and financial co-operation between the two countries in their common interest and, in particular, to secure the greatest possible degree of dollar saving and dollar earning. He understood that, in connection with the Sterling Area Conference, a meeting attended by officials of the Éire Government would take place on the following day, and he suggested that at this meeting the opportunity should be taken of formulating plans for the further discussions. If any question of policy arose in the course of the official meetings which could not be resolved by official discussion they should be referred to Ministers forthwith so that there might be no delay in reaching agreement. It would also be for consideration whether, after detailed proposals had been drawn up as a result of the official discussions, there should be a further general meeting between himself and his colleagues and the Éire Ministers. He proposed that a Press Notice reporting briefly what had happened at the meeting should be issued. (A copy of this Notice is annexed.)

MR. DE VALERA said that he was agreeable that the discussions should proceed on the basis outlined by the Prime Minister and that he and his colleagues approved the terms of the proposed Press Notice. He thanked the Prime Minister for the courteous and helpful way in which the Éire Delegation had been received and expressed the hope that the further discussions which would take place would lead to a successful result.

ANNEX
AGREED PRESS NOTICE

A meeting was held at No. 10, Downing Street today between the Prime Minister, who was accompanied by the Foreign Secretary, the Chancellor of the Exchequer, the President of the Board of Trade, the Minister of Food, the Minister of State for Commonwealth Relations and Mr. Percy Collick, Parliamentary Secretary to the Ministry of Agriculture, and Mr. de Valera, who was accompanied by Mr. S. Lemass, Minister for Industry and Commerce, Mr. F. Aiken, Minister for Finance, Mr. P. Smith, Minister for Agriculture and Mr. J. Dulanty, High Commissioner for Éire in the United Kingdom.

The representatives of the two countries explored in general terms the possibilities of dovetailing, to their mutual advantage, plans for increasing supplies from each country to the other. Agreement was reached on the desirability of organising discussions, at the official level, with a view to submitting proposals giving practical expression, in the common interest, to the ideas developed at the inter-Ministerial discussions.

Arrangements for the discussions at the official level are being put in hand at once.