'Anglo-Irish Economic Discussions. Minutes by Secretary to the Irish Delegation of a Meeting held in the Prime Minister's Room, House of Commons, Westminster, S.W.1. on Thursday, 17th June, 1948, at 2.30p.m.'

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

SECRETARIAT
Mr. S.E. V. Luke ) Great Britain
Mr. J.D. Peek )
Mr. P. Lynch ) Ireland

The Prime Minister, Mr. Attlee, welcomed the Irish Delegation on his own behalf, and on behalf of the other Members of the British Government, and expressed the hope that the discussions would lead to a satisfactory outcome. He referred briefly to the growing tendency towards closer economic relations between the Western European Powers and to the establishment of European Economic Co-operation. He expected that the discussions which were about to begun would underline these developments.

Mr. Attlee said that the most important economic question for Great Britain and Ireland at present was the balance of payments position between Ireland and the Sterling Area on the one hand and between Ireland and the rest of the world, excluding the Sterling Area, on the other. He stated that the value of Irish exports had remained stationary at about £36,000,000 for each of the past two years, that British exports to Ireland were progressively increasing in value, and that a record increase to £80m. was expected in 1948. For Great Britain unrequited exports constituted a serious problem. He thought that the discussions would be of great importance if both Ireland and Britain could see how best they could help each other in regard to unrequited exports.

Mr. Attlee referred briefly to the trading difficulties with ‘hard currency’ countries and particularly to drawings by Sterling Area countries for hard currency on the Sterling Area pool. He said that Great Britain had made arrangements with certain countries for restricting their drawings on the Sterling Area pool. He noticed that Ireland’s drawings on the Pool were fairly large. He thought that it would be useful to have a statement from the Irish Delegation on the position regarding E.R.P.

The Taoiseach thanked the British Prime Minister for the expressions of goodwill which the Irish Delegation have received from the British Government and for the practical manifestations they had already made of their good feeling. At no time in the past, he said, has there been such good feeling between Ireland and Great Britain, and what was more important, at no time was there potentially such good feeling. This potential would, he thought, be realized if the outcome of the present discussions were satisfactory.

The Taoiseach stressed the fact that the present Irish Government represented a cross section of the Irish people. Never before he said had an Irish Government been so representative of the vast majority of the people. The Government had derived strength and support from the great mass of the people which it represented. Certain fears had been expressed when the Government was first formed. The British Government, no doubt, was fully aware of the circumstances leading to the formation of the Government. But these fears have now been fully allayed and it was completely true to assert that the Government was now a strong and stable one, representing and deriving support from the mass of the Irish people.

The Taoiseach said that the Irish Delegation was most anxious that the Conference should take decisions in principle on all matters coming within their purview before these matters were referred for consideration by officials. The experience of Irish Delegations to previous Conferences suggested that this course was eminently desirable. The Irish Delegation would like decisions taken at the Conference to be express directions on which officials could work. The Irish Delegation was extremely hopeful of progress if an agreement could be obtained from the British representatives that decisions should be reached on principles and on matters of policy before the details were considered by the British and Irish officials. This was accepted by the Prime Minister, Mr. Attlee.

Referring to Mr. Attlee’s opening statement the Taoiseach said that the Statement had dealt with some of the questions to which the Irish Delegation proposed to address itself. The Prime Minister had dealt with the Irish balance of payments with Great Britain and with the rest of the world. The Taoiseach recalled that the Chancellor of the Exchequer had recently stated that 45 countries were closed to British exports, and he would like to remind the Chancellor that Ireland was one of the few countries which remained completely open to British exports. If the present Conference reached a solution of the problems which the Irish Delegation came to discuss the Taoiseach had no doubt that the Conference would contribute materially towards redressing the existing unfavourable balance of trade between Ireland and Great Britain.

The Taoiseach recalled that Ireland was primarily an agricultural country. It was necessary nevertheless for any Irish Government to develop the small industrial arm which had been growing since our State secured economic freedom. The Irish Government wished to develop Irish industries, primarily to secure employment for Irish workers.

It would be possible the Taoiseach said to secure a great increase in Irish agricultural production. The Irish Government was most anxious to secure this increase, but to secure it, it was necessary to fact certain problems. The fertility of our soil had been considerably impaired through lack of fertilisers during the war years. Irish farmers were anxious to develop their land, and a satisfactory outcome of the present discussions would provide them with the best incentive necessary to encourage that development. The Taoiseach recalled that the Minister for Agriculture, Mr. Dillon, had secured the services of the distinguished Australian Expert, Mr. Holmes,¹ to advise him on questions relating to grass cultivation. The lack of fertilisers had had a very serious effect on Irish agricultural output. Very many countries from whom Ireland could get, and was getting, fertilizers were prepared to buy Irish cattle at a far higher price than was being obtained at present from Great Britain. The Irish Government was being pressed to make trade agreements with these countries. A trade agreement had already been made with France, but the Government was postponing the completion of negotiations with the other European countries until the result was known of the Conference which was being opened today. The Irish Government was prepared to sell fat cattle to Britain at lower prices than could be obtained from the Continent. They regarded Britain as an old and valued customer and were anxious to continue business with Great Britain. So apart from other considerations the Government regarded this desire as being good business from the Irish long-term point of view. They were asking for a fair price for Irish cattle, not a scarcity price – the outcome of present difficult economic conditions. In the absence of a satisfactory long-term agreement with the British Government on cattle prices the Irish Government would have no alternative but to accept the scarcity prices which were being offered by Continental markets. Any other course would involve the Government in very considerable difficulties with the Irish farmers. The Taoiseach said that the Irish Government was prepared 'to put all their eggs in the British basket', but they would 'watch that basket very carefully'. The large volume of British exports to Ireland during 1947 had, the Taoiseach assured the Conference, given the Irish Government cause for some very anxious consideration. There had been a good deal of 'dumping' in Ireland of British manufactured goods, but the Irish Government was most reluctant to use quotas or quantitative restrictions. Disemployment, however, in Irish Manufacturing Industries had, in fact, taken place and the Government was frequently in difficulties with Irish manufacturers complaining about the great volume of English manufactured goods that was being imported. The Prime Minister had chided the Irish Delegation for purchasing these goods and so unbalancing the trade balance between the two countries. The Taoiseach, however, wished to assure the British representatives that Ireland could do without a good deal of these products. The attitude of the Irish Government was, he said, that while they were determined that agricultural output must be increased, they were bound, not only from conviction, but from the circumstances which they found on coming into Office to cultivate Irish manufacturing industries and give every protection and security to the workers employed in them.

The British Government regarded Ireland as an export market, the Taoiseach said. While there were certain goods that Ireland would have to take from the U.S.A. the Irish Government was determined that the greatest part of Irish industrial imports should come from Great Britain.

Another aspect of the balance of payments position which the Taoiseach stressed was that Irish importers were being charged up to 50% higher by British manufacturers for goods than were British purchasers for goods of a similar kind. The price of raw materials which Ireland purchased from Great Britain was frequently as high as that of the finished product manufactured in Great Britain. It would be obvious that if Irish manufacturers used English raw materials it would be extremely difficult for them to compete in regard to finished products with British finished products. This was largely the position for a good part of Irish raw materials came from Britain. The Taoiseach emphasised the very serious factor that this created in disturbing the balance of payments. Furthermore, Irish importers were being charged 25/- a ton more for British coal than were British consumers. Ireland had not taken up as much British coal as the British Government was prepared to offer. This was very helpful from the balance of payments point of view and it assisted in conserving sterling area resources insofar as Ireland was developing the production of machine-won turf for the generation of electricity and other purposes. This substantial saving in coal would clearly be helpful to Britain and at the same time would help to redress the unfavourable balance of payments. In passing, the Taoiseach said that the Irish Electricity Supply Board was seriously disturbed by the excessive price it was required to pay for British coal. In the present year it would have to pay £400,000 more than would a British consumer of a similar quantity of coal. The Taoiseach thought it was unnecessary to stress the impact of this, not only on the balance of payments, but on the Irish cost of living.

The Taoiseach then indicated the proposals of the Irish Delegation.

(1) A Long Term Agreement was required. Ireland had a very substantial amount to offer Britain. The Irish Government were anxious that an agreement should be made under which Ireland would provide Britain with agricultural products over a long period. Unless the Irish Government was satisfied that Britain was prepared to take the Irish agricultural surplus at a fair price, it would be quite impossible to encourage Irish farmers to increase output in the manner the Government desired, and dissuade them from taking the scarcity prices which could now be obtained from Continental countries, even though these scarcity prices might continue for only a few years.

(2) The Irish Government considered it essential that the existing differential which applied to fat cattle prices should be completely abolished. This differential existed at present between the prices of cattle finished in Ireland and cattle finished in the United Kingdom. The abolition of this differential of five shillings a cwt. was vital. If the differential was not abolished the Irish Government would be constrained to allow the cattle subject to the differential to be sold at very much greater profit to the European countries from whom the fertilisers necessary to restore Irish land could be obtained. The Taoiseach stressed that the Irish Government did not want the abolition of the difference between the price of British- bred cattle and the price of corresponding Irish-bred cattle. In the Irish view, the bonus paid to producers of British fat cattle was a matter of British domestic policy, into which the Irish Government had no intention of interfering. The Taoiseach then explained the basis of the differential, and added that the Irish Government wanted a long term agreement with the British Government to secure that the prices for Irish fat cattle were pegged rigidly to the prices of British fat cattle.

The Taoiseach then referred to the Trade Agreement between the Government of Ireland and the Government of the United Kingdom signed at London on the 25th April, 1938.² He recalled briefly the background of that Agreement which was entered into at a time when Irish relations with Great Britain were strained by an economic war. He referred to the fact that under that Agreement the Irish Government gave very substantially more undertakings than the British Government.

The Taoiseach then quoted Article 1 (1) of that Trade Agreement: ‘The Government of the United Kingdom undertake that goods grown, produced, or manufactured in and consigned from Éire ... shall enjoy entry free of customs duty into the United Kingdom’. He said that it was true that Irish agricultural products had been allowed into Britain at all times but that for some years manufactured goods were restricted. This was in his opinion contrary to law and to the intention of those who made the 1938 Agreement. Manufactured goods had been admitted for a number of years but were now stopped. The Taoiseach recalled Mr. Attlee’s mild rebuke regarding the necessity for redressing the adverse Anglo-Irish balance of payments. The Taoiseach suggested that redress was being made difficult when, despite the best efforts of the Irish Government, the British Government refused to admit into Britain the goods which would help to redress the balance. An immediate reconsideration of Article 1 of the Agreement was, said the Taoiseach, the urgent demand of the Irish Delegates. He added that Irish manufacturers and industrialists generally were so anxious about this that it had become a matter of major concern to the Government.

The Taoiseach said that if the prohibitions now enforced were to be extended to agricultural products, no basis of agreement would be possible between the Irish Government and the British Government in regard to trade. Already the British interpretation of the Article had resulted in the crippling of Irish industry. He recalled what he had already said that in the developing and fostering of Irish industry, his Government was particularly concerned with the welfare of the workers employed. He said that it would have a most unfortunate effect on many people in Ireland if they realised that a British Labour Government was by this interpretation of the Trade Agreement acting in a manner which would result in large scale unemployment in Irish factories. He explained that the Irish Attorney General had given his opinion that the correct interpretation of the Article was that Irish products shall enjoy entry into the United Kingdom and that the entry shall be duty free. The Taoiseach declared that his Government’s predecessors would certainly never have signed the Agreement if they realised the construction which the British Government had put upon it. The Taoiseach then referred to the small scale of Irish manufacturing industry and that Irish industrial exports constituted a mere drop in the ocean compared with the volume of British manufacturing production and compared with the volume of British manufactures imported into Ireland. He recalled that Ireland imports more British goods than Canada and New Zealand together.

The Taoiseach then summarised his arguments and emphasised the necessity for the Conference achieving agreement on principles before referring the matters under discussion to officials.

Sir Stafford Cripps opened by saying that the British Ministerial Representatives would be unable to go into the details arising from the discussions but that they were quite prepared to reach decision on principles before the officials should be called in.

Sir Stafford said that Britain was in the position of having to secure the best possible use of its resources in order to rectify its balance of payments as rapidly as possible. At the moment the terms of trade were moving against Great Britain. The unfortunate position was arising that the more Britain exported, the bigger the adverse balance was becoming, because the price of imports was increasing much more rapidly than the price of exports. The balance of advantage was now with primary producers of the world as against manufacturing producers. This indicated the necessity for using exports where they could best be used for securing essential imports. In recent trade agreements between Britain and other countries, the necessity for rectifying the balance of payments position had been a first consideration. In these negotiations Britain sought first to redress the British balance of payments with the individual countries concerned and then to secure redress between these countries and the rest of the world. Sir Stafford said that while it was necessary to regard the balance of payments position as a basis of any agreement with Ireland, that redress of the Anglo-Irish balance of payments could not be achieved rapidly. It was necessary, however, to take decisive steps to improve the present position. As a basis for agreement, the British Government would want an agreed list of goods which Ireland could give Britain and an agreed list of goods which Britain could give Ireland. The Chancellor referred to the 1947 Irish deficit of payments of £39,000,000 in regard to the recent Trade Agreement between Ireland and France. The British Government was glad that this Agreement had been made but it was necessary for Britain to ensure that Anglo-Irish trading deficits were not the result of putting an excessive amount of sterling at the disposal of France or other countries. The continued Anglo-Irish trading deficit was something which the British Government could not contemplate with equanimity.

Sir Stafford Cripps then distributed a British statement (attached: Appendix A)³ of the Irish balance of payments with the rest of the world. He thought that if a careful study could be made of that statement, it might be possible for the Irish Delegation to decide on means by which both Britain and Ireland could increase their exports to each other. He fully agreed with the Taoiseach’s statement regarding the desirability of increasing Irish agricultural production, but that was a long term matter. If a long term agreement were to be achieved, it would be necessary from a British point of view to have a long term plan covering the volume of British imports from Ireland. The British Government were anxious to work in this matter towards a clearly defined goal. He would like to see it approached from the viewpoint of the balance of payments. The question in short was: what volume of exports to Britain could Ireland guarantee over a long period? He realised that the problem of the cattle prices was a serious problem for Ireland but a matter of detail for the British Government, and he would prefer if it were discussed by the British Minister of Food and the British Minister of Agriculture. He knew they had been considerably impressed by the arguments advanced some time ago by Mr. Dillon, the Irish Minister for Agriculture.

Sir Stafford said that the British Government would not mind if, by putting certain restrictions on imports from Great Britain, the Irish Government helped to redress the present adverse balance of payments position. In regard to the dumping of British goods in Ireland, he thought that might be true of some manufacturers, but it was not part of British Government policy. That policy directed British production but did not control it. Advice was given to manufacturers to export to the Western Hemisphere. He thought that all things considered, from the balance of payments aspect, it might be wise for an Irish Government to limit imports from Great Britain.

Sir Stafford referred to the Taoiseach’s claim that Ireland was charged higher prices for British goods than British consumers. He explained that Ireland was an export country from the British point of view and it was reasonable that export prices should be paid. These prices, he said, were related to world prices. He could not see how Britain could discriminate in favour of Ireland without causing disaster to the Sterling Area. As long as Ireland was dealt with as an export country, he saw no possibility of discrimination.

Sir Stafford said that a long-term agreement might cover the case of fertilisers mentioned by the Taoiseach. It was well to remember, however, that Britain at present required all the fertilisers it could get in connexion with its own agricultural programme.

Sir Stafford referred to the restrictions on imports of Irish manufactured goods and said that under the terms of the U.S. Loan Agreement, 1946, Britain was prohibited against discrimination. If discrimination were to be exercised in favour of one country it would have to be extended to all countries. He said that if the parties to the 1938 Agreement had foreseen the economic difficulties in which Britain was subsequently placed the terms of the Agreement would probably have been different.

The Taoiseach and the Minister for External Affairs asked whether the non- discrimination condition of the American Loan was the only objection to Irish industrial imports into Great Britain. Mr. Holmes said the matter had been raised at the Havana Conference and that in his opinion Section 9 of the Loan Agreement remained intact. When the Havana Charter came into operation Britain might agree to the substitution of the non- discriminatory clauses of the Charter for those imposed by Article 9 of the U.S. Loan Agreement.

Sir Stafford Cripps emphasised that Britain would never have contemplated the present restrictions against the small volume of imports from Ireland but for the non- discrimination provision of the U.S. Loan. It was part of a general necessity. The great bulk of British imports came from Canada and the U.S.A. The volume of manufactured imports from France was comparatively small yet it was necessary to restrict imports of these in the same way as the imports of periodicals and printed matter from Ireland.

Mr. Dillon asked why it was necessary to insert Articles 3 and 4 in the Anglo-Irish Trade Agreement if full powers were contained in Article 1.

Sir Stafford said that he was not clear about the tariff position in 1938 when the Agreement was made.

Mr. Holmes added that in the British view conditions had changed since the Agreement had been made. Sir Stafford Cripps said that the position was that Britain could not vary the discrimination and that the American Loan Agreement must be maintained. The Taoiseach asked whether conditions in regard to this Agreement had not also changed. Sir Stafford said that Britain was attempting to change the conditions. He denied that Britain was repudiating unilaterally the 1938 Agreement. The Taoiseach asked whether Britain would remove the restrictions on Irish products if the Americans raised no objection, in view of the fact that the Anglo-Irish Trade Agreement was in existence the time the American Loan Agreement was signed. Sir Stafford said that Britain would then remove the restrictions if the Americans raised no objections. The Taoiseach then asked whether Britain would contemplate at any time discriminating against Irish agricultural imports. Sir Stafford Cripps said that there were special Articles in the 1938 Agreement about agricultural products, and that, in any event, any new trade agreement would clarify the position in regard to Irish Agricultural exports to Britain. He added that Britain was more interested in a new agreement than in returning to the 1938 Agreement.

The Taoiseach recalled that there were special reasons in regard to the retention of Commonwealth preference which might be in favour of retaining parts of the 1938 Agreement.

Sir Stafford said that he understood this point of view.

Mr. Dillon said that primarily the Irish Delegation wanted an assurance that no quantitative restriction against Irish agricultural produce would be imposed. Ireland wanted to produce for sale to Britain an export surplus. Quantitative restrictions would drive producers from activity in their particular lines of operation. No producer wanted to produce a surplus which might perhaps be unsold.

Sir Stafford Cripps explained that there were certain products, such as potatoes, for which an unlimited British demand might not arise, but there were other products – cattle, eggs, etc. – for which Britain would be prepared to take a large surplus.

Mr. Dillon said that Ireland lacked fertilisers, - sulphate, basic slag, superphosphates – certain agricultural machinery relating to egg production, seed wheat, seed oats and spraying materials.

Sir Stafford asked whether the Irish Government could give a guarantee as to the future volume of agricultural exports which Britain might expect from Ireland so as to enable Britain to relate its expectations from Ireland to the British plan. It was minimal figures that Britain wanted – guaranteed minima.

Mr. Dillon said that in regard to flax, it seemed that the British Government was now leaving the matter to individual manufacturers. From the Irish point of view the existing arrangements regarding poultry were satisfactory. The production of sheep and mutton would soon increase if fair and reasonable prices were available. In regard to canned meat Ireland could sell this elsewhere if Britain thought it was too expensive. Mr. Dillon then referred to the Taoiseach’s argument regarding the differential in cattle prices and the bonus paid by the British Government for British cattle. He asked whether the British Government would help to provide Kelvin engines for boats.⁴

The Taoiseach drew Sir Stafford Cripps’ attention to the damage that British restrictions had caused to the Donegal home spun industry.

Sir Stafford said he would look into this matter.

Mr. Morrissey said that he was certain that the signatories of the 1938 Agreement clearly intended that there should be completely free entry into the British market for Irish exports. He emphasised that the volume of Irish manufactured goods was so small as to make little difference to Britain. It was, however, a matter of great importance from the employment point of view in Ireland.

Mr. Morrissey stressed the fact that Britain was refraining from providing Ireland with raw materials at reasonable prices and that such raw materials as were purchased cost as much as the finished article. He agreed with Sir Stafford Cripps in exemplifying cotton yarn in respect of this grievance. He referred to the position regarding foundry coke and said that one Irish firm manufacturing agricultural machinery for export was in difficulties because of the shortage of foundry coke. He emphasised that the cardinal point was, however, the necessity for amending Article 1 of the 1938 Trade Agreement. He doubted whether Irish industrialists and workers would accept any agreement unless Article 1 were clarified.

Sir Stafford Cripps again referred to the difficulties of discrimination.

The Taoiseach said that the Irish Delegation understood this position but asked that the British representatives should realise the impossibility of an Irish Government securing an agreement which would give advantages to farmers but retain sources of grievance for the manufacturing community. He asked whether the British representatives would consider the question with the American authorities with a view to getting their agreement in favour of Ireland, and Sir Stafford Cripps and Mr. Holmes said they would consider bringing the matter to the attention of the U.S. authorities. Mr. Holmes mentioned the question of proper timing in this matter.

The Taoiseach emphasised that it was necessary to take immediate action. He then asked whether when agreement was reached in principle between the British and Irish representatives it would be possible for British officials to come to Dublin to work out the details.

Sir Stafford Cripps agreed that this would be possible.

The Tánaiste, Mr. Norton, said that as Irish industry was in its early stages of development, the British restrictions constituted a particularly grave hardship.

Sir Stafford Cripps repeated his arguments about the American Loan provisions. He said that it would be necessary to know the result which any trade agreement was likely to achieve before it would be possible to start work on such an agreement. He could not agree to a detailed approach. The necessary result which should be aimed at was the achievement of a satisfactory trade balance. It would be impossible to arrange this until the British representatives knew the volumes of exports which they might expect from Ireland.

Mr. Dillon said that if the differential on cattle prices were abolished his officials would be able to give a good idea of the amount of cattle likely to be exported to Britain. Except for a small number which would be sent to Europe, the balance would go to Britain. If the Chancellor were satisfied with this approach, Mr. Dillon’s problem would be settled. He could also give an idea of the volume of eggs which could be exported, but he emphasised that rationing of eggs would be quite impossible in Ireland. Mr. Dillon could give a much clearer idea of possible export volumes if Sir Stafford Cripps could say that quantitative restrictions against Irish agricultural products would not be enforced.

Mr. Norton asked Sir Stafford Cripps whether he could accept the principle that there would be no discrimination against Irish fat cattle.

Sir Stafford Cripps said he could not accept that principle without further consideration. He could not accept the principle that Irish and English products should fetch the same price. Costs of production were lower in Ireland than in Britain. Mr. MacBride said that Ireland could not increase production unless Irish producers could afford to pay higher prices and wages.

Mr. Williams referred to the large volume of money that British farmers were presently investing in livestock production over the next four years and of the controls which the Government exercises over British firms.

Mr. Dillon said that the fact was that the Irish livestock population was going down and if the price differential continued it would go down further. The number of calves slaughtered last year was vast but if the differential were abolished livestock production would in two years time be back to normal. The cost of the differential was small, £100,000 a year or so.

The Chancellor said that this seemed a small amount to discourage increased output.

Mr. Dillon said that £100,000 might be a small amount in the Palace of Westminster but that it would be very considerable to small farmers in Co. Mayo.

Mr. MacBride said that if Ireland sold cattle on the Continent at prices 40% higher than British prices this would go far to redress the unfavourable balance of trade. Furthermore, the Irish Government might charge the British Government export prices if it were to regard Britain as an export market in the same way as Britain presently regarded Ireland. It seemed to him to be a denial of good business methods that one party should charge export prices and the other should not.

Mr. McGilligan said that it was not true to say as far as Ireland was concerned that the terms of trade were becoming more favourable for primary producers. He pointed out that through the war years Ireland sent a vast volume of unrequited exports to Britain, hence the accumulation through those years of our sterling assets. It would not be unreasonable for Ireland to eat into those accumulated assets for a temporary period now. The Irish sterling balances were not comparable with those of India.

Sir Stafford Cripps referred to the results of the British tourist trade to Ireland.

Mr. Noel-Baker said that if Ireland had taken Britain to the International Courts of Justice regarding the interpretation of Articles 1, 3 and 4 of the 1938 Agreement Britain would have claimed that circumstances had changed since the Agreement was signed and that he thought Britain’s claim would be upheld.

Mr. McGilligan challenged the legal principles upon which Mr. Noel-Baker’s argument was based.

The Conference then adjourned until 11 a.m., June 18th , in Conference Room B, Cabinet Office, Great George St., London.