'Anglo-Irish Economic Discussions. Minutes by Secretary to the Irish Delegation of a Meeting held in the Taoiseach's Suite, Piccadilly Hotel, London, Sunday, 20th June, 1948, at 9.30pm.'

PRESENT

At 9.30 p.m. on Sunday, 20^th June, 1948, the Anglo-Irish trade discussions were resumed in the Taoiseach's suite at the Piccadilly Hotel, London.

Sir Stafford Cripps circulated draft Heads of Agreement (attached)¹ on food and agricultural products. In reply to Mr. Dillon, Sir Stafford said that in suggesting a limitation of 50,000 in the number of Irish cattle to be sent to the Continent, the importance of directing Irish cattle to hard currency areas had been taken into account.

In regard to the details of these draft Heads Sir Stafford said that he considered these were necessary so as to put a complete picture of the Agreement before the British farmers. He added that the Agreement would, in due course, be registered at the United Nations Organisation.

Mr. Dillon saw no objections to the draft Heads in the form presented and he, Mr. Williams, British Minister of Agriculture, and officials of the Department of Agriculture, the Ministries of Agriculture and Food, retired to consider details of the draft.

Sir Stafford then referred to the industrial aspects of the proposed Agreement. He circulated draft Appendix A (attached)² prepared after Friday night's discussion. He suggested, however, that acceptance of this formula might suggest greater relaxations of the restrictions at present in force under Article 1 of the Anglo-Irish Trade Agreement, 1938, than were likely to take place.

Sir Stafford said that his Government, having considered a list of the goods which Ireland wanted to have imported into the United Kingdom, but which were at present restricted under the terms of Article IX of the U.S. Loan Agreement had found that in nearly every case the terms of Article IX of the Agreement would apply. The formula which he had circulated in Appendix A might, he thought, give an impression of a greater relaxation than would, in fact, be the case. The British Delegation would be quite prepared to accept the formula but personally he did not consider it would be wise on the part of the Irish Government to do so. He thought its acceptance would result in disappointment.

In reply to the Taoiseach, he said that under the new formula the large bulk of Irish industrial exports would remain excluded due to Article IX of the Loan Agreement and to other gold and dollar considerations. Sir Stafford said that the only categories of goods which would be admitted under the new formula would be goods in those categories which were at present subject to the 100 per cent export condition in Great Britain.

In reply to Mr. MacBride, Sir Stafford said that it would be unwise to have specific reference in the formula to the restrictions enforced under Article IX of the U.S. Loan Agreement. Any such specific mention would merely arouse the criticism of U.S. Congress. In reply to Mr MacBride, Sir Stafford said that any modifications of (i) or (ii) of Appendix A for the purpose of facilitating the entry of Irish goods into Great Britain vis-à-vis goods from other countries would not be possible. Any one country could not be allowed import as much as it liked into the U.K. as this would involve discrimination. In reply to Mr. Morrissey he said that the actual 'let out' provided by the new formula as against Article 1 of the 1938 Agreement would, he thought, be comparatively small. He agreed with Mr. Morrissey that in practice the new formula would be little improvement on Article 1 of the 1938 Agreement.

The Taoiseach expressed disappointment that the position would be that the new formula (Appendix A) would be of little benefit to Ireland.

Sir Stafford replied that the hard facts of the position were that no matter how good Britain's intentions might be to accommodate Ireland in this matter discrimination in favour of Ireland would be absolutely discountenanced and impossible under the terms of Article IX of the U.S. Loan Agreement.

The Tánaiste reminded Sir Stafford of the extremely limited volume of Irish industrial exports compared with the volume of British production. Sir Stafford said he fully appreciated this point but if Great Britain were to allow in even a small amount of Irish goods of a kind which, say, the U.S. or Canada produced [in] much greater volumes the position might be that in order to take the small volume of goods from Ireland costing sterling, Great Britain would be forced to pay gold or dollars for a huge volume of similar goods from hard currency areas.

Mr. Noel-Baker pointed out that the hands of Great Britain were tied in this matter. To accommodate Ireland to the utmost the British Government had gone as far as they possibly could go; they were prepared to allow into the U.K. goods of a kind which, if manufactured in Britain, would be subject to the 100% export proviso. This was a considerable concession in principle and further than this it would be impossible to go. Sir Stafford Cripps referred to the necessity for examining the list of goods which Ireland would like to import into Britain. An examination of this list would reveal the nature of these goods and the possible commitments to hard currency areas involved if goods of this nature generally were to be admitted into Great Britain. Although the list might be small in quantity it would, he thought, cover a very wide range. An investigation of this range would be necessary.

Mr. McGilligan pointed out that in view of the position as stated by the Chancellor he would prefer to retain Article I of the 1938 Agreement and have it modified by an understanding rather than accept the new formula which, as Sir Stafford Cripps had pointed out, would not materially alter the present position but would convey an altogether mis- leading impression. 'For us to re-write Article 1 of the 1938 Agreement' said Mr. McGilligan, 'and in doing so to accept an interpretation of that Article which we have always rejected would be most difficult politically.' Sir Stafford Cripps agreed with Mr. McGilligan that this attitude was quite reasonable.

Mr. Noel-Baker suggested that Article 1 of the 1938 Agreement might be retained, but that a communiqué agreed by the two Governments might be issued explaining that the U.K. Government contemplated a relaxation of the existing interpretation of Article 1. Sir Stafford Cripps added that this communiqué could not be issued until they had adequate time to investigate the list of articles which the Irish Government would like to have exported to Britain.

Mr. MacBride suggested that the communiqué might state that Great Britain had agreed to review the provisions of Article 1 of the 1938 Agreement with a view to facilitating the importation into Great Britain of certain industrial commodities at present restricted. He thought furthermore that the communiqué might contain a statement that the Irish Government did not accept the U.K. interpretation of Article 1.

Mr. McGilligan said that Article 1 of the 1938 Agreement should be retained in preference to the formula (Appendix A) circulated by Sir Stafford Cripps.

It was agreed that a statement on these lines and the retention of Article 1 of the 1938 Agreement after a review of the list of commodities at present excluded from Great Britain would probably lead to satisfactory results.

Sir Stafford Cripps said that the Irish Delegation could consider the advisability of publishing such an announcement or whether some other procedure for recording the understanding suggested should be adopted. In any event the British Government would act on the principles enunciated in the formula which he had circulated.

Sir Stafford Cripps then circulated Appendix B³ relating to the imposition by the Irish Government of quantitive restrictions on U.K. imports.

Mr. MacBride circulated an Irish draft covering this question (Appendix C).⁴

Sir Stafford Cripps saw objection to the terms of the Irish draft in so far as it adopted a unilateral approach by the Irish Government. The British Government required provision for consultation before any quantitative restrictions were imposed. He reminded the Conference that this Article would appear in an agreement which would be registered with U.N.O. He thought that while the list of goods involved was being considered that steps could be taken at the same time to provide machinery for enforcing an import licensing system. He reminded the Conference that it was only in respect of goods covered by this Article that prior consultation with the British Government would be necessary before imposing restrictions. The restrictions which can already be imposed under other Articles of the 1938 Agreement would continue and no necessity for prior consultation would exist.

The Taoiseach suggested the addition of a formula from Article 40 of the Havana Charter, which was accepted.

Sir Stafford Cripps agreed with Mr. McGilligan that the draft Article referred only to goods in the free list covered by Article 5 of the 1938 Agreement; all other goods might be restricted without prior consultation.

Mr. McGilligan raised the question of achieving import restrictions by means of duties.

Sir Stafford Cripps said that the British Government did not like this approach. Once duties were imposed they had a tendency to remain in existence. Great Britain was most anxious to exclude tariffs from the machinery necessary to correct the balance of payments. In reply to Mr. MacBride Sir Stafford Cripps said that only £3m. worth of goods or so were in the category which Great Britain wanted to have controlled by quantitative restrictions. It would be open to the Irish Government to exclude any or all other imports by means of tariffs. Mr MacBride suggested that it might be better to omit this Article out of any published agreement and Sir Stafford Cripps agreed that this could be done by putting the Article in the form of an 'expression of intention'. He saw no objection to Mr MacBride's suggestion that the Article might contain a definition of 'quantitive restrictions'.

Sir Stafford Cripps circulated a draft 'Appendix D' regarding action by the Irish Government to control dumping.

The Taoiseach considered that the opening words of this article might be taken from Article 40 of the Havana Charter for an International Trade Organisation. Mr. Holmes suggested that there were objections to extracting a part of specific articles of the Havana Charter. He thought that if the Charter was to be quoted at all it should be quoted in full. Furthermore, he said that Article 34 would be more suitable as Article 40 was designed to meet conditions somewhat different from dumping. It referred not to unfairness in regard to low prices but to unforeseen circumstances such as mistakes in the selection of tariffs etc.

The Tánaiste said that the desire of the Irish Government was to have power to act as rapidly as possible against dumping.

Sir Stafford Cripps pointed out that under the 1938 Agreement a great range of goods could be restricted immediately. The area in which some delay might occur was comparatively small. He agreed with Mr. McGilligan that the Irish Government would be entitled to restrict by quantitative restriction all commodities except those on the free list, under Article 5 of the 1938 Agreement, and that the scope of the Irish Government under that Article was now being extended.

The Tánaiste thought that such commodities as boots and shoes would not be covered by the Irish freedom to restrict under Article 5.

Sir Stafford pointed out that dumping could be dealt with without the necessity for Article C (Appendix C). In reply to Mr. MacBride he said that the principle of giving Ireland unilateral powers for dealing with dumping could not be accepted. It would be a dangerous precedent and might get Great Britain into difficulties with certain foreign countries which might use unilateral powers unscrupulously.

Mr. Morrissey pointed out that Article 14 of the 1938 Agreement was quite satisfactory from the Irish point of view if a means for adopting speedier action under it could be devised.

In connection with the distinction between dumping and flooding Sir Stafford Cripps said that flooding could be prevented under Article 5 in the case of all goods except those on the 'free list'. In addition a new Article gave power to impose quantitative restrictions on certain articles at present on the 'free list'; that the only commodities now outside Ireland's right to restrict would be those on the 'free list' in respect of which Ireland might wish to impose quantitative restrictions but in the case of which prior consultation with Great Britain would be necessary. In these circumstances the Chancellor thought that the new Article C (Appendix C) was not really required. It was agreed that the matter should be further considered and that the possibility of adopting Article 34 of the Havana Charter instead of Article C should be considered.

Mr. McGilligan said that in return for Article 1 of the 1938 Agreement the Irish Government had made certain concessions under Article 5 and 10, particularly in regard to protective duties in which a ceiling was imposed. It was undertaken that these restrictions would be, in due course, substituted by customs duties. When this was done the customs duties would be subject to review by the Prices Commission. The Irish Delegation felt that this involved some hardship to Irish manufacturers. There had been correspondence with the Board of Trade regarding a ceiling imposed by Article 10, said Mr. McGilligan and the Irish Government was anxious that the Article should be modified to enable higher duties to be imposed. This had already, he said, been accepted in principle. It had been proposed that the Irish Government's discretion in regard to duties should be limited by relating to the value of imports from Britain in 1938 of all the goods on which duties were to be imposed the aggregate value of the imports from Britain in the same year of the goods enumerated in Part I of Schedule II of the 1938 Agreement, although, he said, agreement had not already been reached as to what this percentage should be. The Irish Government would like the percentage to be 50%. They were anxious that a decision should be reached and embodied in the Agreement on the lines of Appendix E (attached).⁵

Mr. Holmes referred to the necessity for careful consideration of this proposal.

Mr. McGilligan replied that the principle of raising the ceiling imposed by Article 10 had already been accepted by the Board of Trade and that negotiations with manufacturers had already opened in the matter. Sir Stafford said that the principle was accepted subject to settlement of the percentage question. This would be examined as a matter of urgency by the British Government.

Mr. Holmes recalled that this point was not on the Agenda for the Trade Discussions which had already been circulated.

Mr. McGilligan referred to the question of raising the duties on biscuits. Sir Stafford Cripps reminded Mr. McGilligan that the British Government were not in favour, as a general rule, of increasing tariffs.

Mr. McGilligan said that the Irish Government was not very happy about Article 12 of the 1938 Agreement which gave the British Government the right to suggest the order of priority for classes of goods to be reviewed under Article 8. He suggested that the contents of Article 12 might be transferred to Article 8.

Mr. Noel-Baker said that there were precedents for this Article in Agreements between Great Britain and Australia and New Zealand and that the suggestion would be examined.

Mr. Dillon having returned from his discussion with Mr. Williams, the British Minister for Agriculture, said that before the war Ireland enjoyed the preferential rate for exports to Great Britain. He would not, of course, suggest that Britain should in present circumstances impose a 10% tariff against agricultural produce from Denmark or elsewhere. The Irish Government had no intention of pressing for the granting of the 10% preference in view of Britain's economic circumstances at the moment, but they were anxious that if preferential treatment should be revived at any time in the future Ireland should enjoy the 10% preference.

waiving of preference. Mr. Holmes said that the British Government were most anxious to retain all existing preferences that could be retained.

Sir Stafford Cripps agreed with this and said that the British Government would consider whether the preference to which Mr. Dillon referred might be regarded as a suspended preference which could be revived when circumstances permitted without infringing the terms of the Havana Charter.

Mr. Morrissey asked Sir Stafford Cripps about the 'forward' position regarding coal supplies. The Irish Government wanted an assurance that they could obtain in future years the same quantity of coal as they had been promised for this year. In addition, Mr. Morrissey said, he would like a promise of 250 tons a week of foundry coal. He would like an Article added to the Agreement, on the lines of Appendix F attached, relating to coal supplies.

It was agreed that arrangements should be made with Mr. Morrissey to discuss this with the Minister of Fuel and Power.

The Taoiseach raised the question of Article 17 (3) and said that he would like to have the figure of £1,300 already accepted in correspondence substituted in the new Agreement for the existing figure of £750. This was agreed.

It was also agreed that the new Agreement should contain an Article on the lines of that set out in Appendix G.

At midnight, when the other British Ministers had left, Mr. MacBride asked Sir Stafford Cripps for some general information about the Sterling Area pool. He would like to feel that all members of the sterling area group were receiving similar treatment. Sir Stafford made a statement reviewing the hard currency position of Great Britain and the sterling area. He said that Australia and New Zealand had not yet been given the information which he had communicated to the Irish Delegation and that the survey which he proposed to make of the hard currency reserves of Great Britain and of the other members of the sterling area should be regarded as very strictly confidential.

On the 31^st March, 1948, the hard currency reserves of Great Britain stood at a figure of £552m. These reserves for the most part consisted of gold. By the end of the quarter ending 30 th June, 1948, it was expected that the figure for reserves would be £450m. It was hoped that some reimbursement of this decline in the reserves would be met from E.R.P. funds; this reimbursement might be $300m. An additional sum might be in the form of a loan rather than a grant. The present attitude of the British Government was that dollar loans under E.R.P. should be used only for capital purposes. The net result would be that at the end of the present quarter Great Britain would have depleted the March figure for reserves by about £20-£40 m.

To conserve reserves the British Government had cut out all purchases involving dollar expenditure except essential raw materials and machinery required for economic reconstruction during the past eight or nine months. There was no dollar expenditure on food.

The oil supply created special difficulties. The Irish Delegation would no doubt be familiar with the present problems in regard to world oil supplies. The British Government could not contemplate with equanimity the purchase of oil for dollars and its sale for soft currencies. The British Government had cut down to a minimum the use of oil in so far as that was possible.

During the past six or nine months allocations of hard currency had been made available to other sterling area countries and this agreement had worked satisfactorily so long as there was some hard currency available for allocation from the sterling area pool. The British Government had hoped to maintain the present standards of living and the limited convertibility of sterling if this could have been reconciled with maintaining reserves in the sterling pool at their level of six months ago. Unfortunately these hopes had not been realised. The price factor had worsened and the present position could not be held without further economies.

Sir Stafford gave figures for the deficit in the Irish dollar balance of payments. He mentioned a deficit of £2m. a month including Canada. It was subsequently pointed out by Mr. McElligott that this figure referred to a particular month and was excessive as an average for the past nine months.

Sir Stafford gave a figure of a deficit with Belgium of £¼m. a month.

Mr. McElligott explained that this deficit was also related to a particular month and that the average deficit was much lower.

Sir Stafford said that hitherto these deficits had been met by transfer of gold.

India and Pakistan were granted, he said, allocations of hard currency for the first six months of the year but would have to be denied further drawings from the Pool. India had drawn from the I.M.F. $28m. and paid it into the Pool.

Australia had been running a small hard currency deficit but had, at the same time, been selling to Great Britain all the gold Australia produced.

New Zealand had also been running a small hard currency deficit, but expected to correct it in the near future.

Ceylon had been showing a surplus on dollar balance of payments.

The Colonies had shown an over-all surplus.

South Africa had been paying Great Britain in gold for its dollar requirements and in addition had made a loan in gold of £80m.

Sir Stafford said that the position so far as Ireland was concerned was that an application for admission to E.R.P. had been submitted. The U.S. had refused to allow Great Britain to take any part of the sterling area into account when making its application for admission to E.R.P. with the exception of the Colonial Empire – the only part of the sterling area which is in credit on dollar account. The U.S.A. had refused to allow the countries which were debtors on dollar account to be taken into consideration.

Another factor of difficulty was that Britain is now obliged to pay Canada in U.S. dollars because Canada has run out of U.S. dollars. Otherwise Canada would not be able to pay for its imports from the U.S. In this connection he said that the U.S.A. had now agreed to allow off-shore purchases in Canada to be made under E.R.P. The problems regarding Canada were aggravated by the facts that the other sterling area countries had a considerable deficit with Canada and that drawings on the Canadian loan to Britain had been suspended

Sir Stafford said that 'We rather felt that as Éire is in a position to draw dollars under E.R.P. she should so obtain them from the U.S.' so far as possible even if that meant taking a loan. He expected that dollars would be required by Ireland only for expenditure which could not reasonably be cut down.

He said he felt that the future servicing of any loan Ireland might obtain under E.R.P. would be a charge which might reasonably be made against the sterling area dollar pool. 'If the E.R.P. loan is not enough for Éire's essential requirements obviously we would have to stand behind Éire and try and help her out just as we stand behind ourselves.'

Continuing, he said that in regard to Britain's position he felt it would be necessary to impose a cut on dollar raw materials. No more cuts in food from the U.S. were possible and it would be necessary, he thought, to turn to Canada. This raised difficulties because the present price trend suggested that it might be necessary to pay more dollars for less food. A cut in raw materials could not but have an effect on Britain's dollar earning capacity. Such a cut would involve very difficult calculations. There was a limit beyond which it would not be possible to cut imports without adversely affecting home production. The policy has been laid down that nothing must be done which would draw on the existing reserves of the sterling area. These would have to be maintained so that their present volume would be available for expenditure to meet the conditions which would exist in world trade when the Marshall Plan came to an end. It would be very difficult to get a satisfactory balance between the Eastern and Western Hemispheres, and after the end of the Marshall Plan a most grave period of economic re-adjustment would exist in America. A 'gift market' would then be cut off from American manufacturers. He emphasised that the maintenance of the stability of sterling, which he regarded as essential, would depend on the retention of suitable reserves for the difficult days which would follow the end of the Marshall Plan.

Mr. MacBride said that Ireland felt as Great Britain did that a loan under E.R.P. was in many ways objectionable particularly when applied to consumption goods.

Sir Stafford did not think we should refuse a loan. The British position was different. They had grant aid and moreover they already owed U.S.A. £3¾m. on foot of the 1945-46 loan.

He went on to say that the idea of America offering a loan was sheer lunacy. He referred to the vast amount of dollar lending since the end of the war – about ten billion dollars. The provision of new loans under E.R.P. was merely adding to the lunacy.

Mr. MacBride said that the Irish Government had been advised that Ireland's allocation for the coming quarter under E.R.P. might be cut down as low as £10m.

Sir Stafford said that Great Britain was considering having no imports of dollar tobacco next year. As much as possible was being obtained from Rhodesia where the current year's crop had been purchased.

Mr. MacBride said that apart from tourism, emigrants' remittances and the small volume of export trade to America Ireland had no dollar earning assets, but had a much better chance of earning hard currencies other than dollars.

Sir Stafford stated that Great Britain wanted to retain at all costs the multi-lateral nature of the sterling area. He added that in 1951 Great Britain would have to start making repayments to the U.S.A. on the original dollar loan.

Mr. Noel-Baker said that if Great Britain had received no grant under E.R.P. it would have been necessary to look for a loan.

Sir Stafford said that Britain's relation with Ireland was difficult as far as dollars were concerned. India, which is unable to get any E.R.P. allocation, would be jealous of a country which got such an allocation, and in addition got dollars from the sterling area pool. In this connection he emphasised the fact that Ireland was the only sterling area country a party to the European Recovery Programme.

The Americans, he said, had stated very strongly that Marshall Aid must not be used for the benefit of the sterling area as such. Both the U.S.A. and the present British Government's political opponents had complained that the rest of the sterling area had been allowed to use so much of the 1945-46 loan. He said that Britain did not propose to build up the hard currency reserves of the sterling area during the operation of E.R.P. to more than £500m. in dollars. Any fortuitous earnings of dollars above this figure would help Britain vis- à-vis the convertibility of sterling.

Mr. MacBride asked whether Ireland could rely on the support of Great Britain in making its demands for Marshall Aid.

Sir Stafford said that Britain would be glad to help but doubted whether she could usefully do anything in this regard at Washington. Whatever could be done would be done through the O.E.E.C. He said that Britain had already suggested that Belgium should get a larger allocation than was being offered. This step had been taken in the interests of Western Union.

In reply to Mr. Dillon Sir Stafford said he had no idea why the Americans decided to cut the E.R.P. allocation which had been recommended for Ireland. In reply to an observation by Mr. MacBride, he said that Britain was most anxious that the sum total of Marshall Aid should be so used as to develop to the utmost the flow of international trade in Western Europe. There would be no point in Britain having dollars if no one else had them.

Mr. MacBride said that it was essential for Ireland to secure the maximum amount of dollars to enable it to increase agricultural and industrial production. A cut in Ireland's allocation under E.R.P. would inevitably mean a cut in production.

Sir Stafford said that Britain had made great strides during the past year in redirecting import trade. He remarked that the recent Irish Agreement with France was supplying the French with sterling which they very much desired.

Mr. Dillon asked whether this was helpful from the British point of view.

Sir Stafford said 'yes, provided you get useful imports'; if France had been unable to secure the necessary amount of sterling Britain might have had to lend some sterling.

After discussion between Mr. McElligott, Mr. Rowe-Dutton and Sir Stafford Cripps, Mr. McElligott said that the average Irish dollar expenditure was only £9m. a month dollars for U.S. and £.22m. a month dollars for Canada.

Mr. McGilligan said that the Irish Government would probably be questioned in Parliament regarding their arrangements with the British Government for dollar currency after the 30^th June, 1948, and he asked whether the information communicated by Sir Stafford could be submitted to the House.

Sir Stafford said that it could not, that the information he had given was most confidential.

Mr. McGilligan recalled Sir Stafford's statement at a previous discussion relating to Ireland's position vis-à-vis the International Monetary Fund.

Sir Stafford said that he would have to modify what he had said on that occasion as it might convey a misleading impression. He thought a correct statement of the position would be this: If Ireland was not taking Marshall Aid then an application for membership of the International Monetary Fund might be made. A sum of £15m. in dollars might be expected from the Fund over a period of four years. If Ireland desired to secure admission to the International Monetary Fund Great Britain would put up the subscription. As a choice between the membership of the International Monetary Fund and adherence to E.R.P. the Chancellor said that there was no question but that the choice should be in favour of E.R.P. If Marshall Aid were taken Ireland would have difficulty in getting anything from the International Monetary Fund. Sir Stafford admitted that he had given a somewhat different impression in a recent statement to the Irish Delegation.

Mr. McElligott said that Ireland would require about £20m. in dollars over a period of twelve months. In regard to alternative markets to which Sir Stafford had referred Mr. McElligott enquired the sources which he would recommend for such essentials as maize and wheat. Mr. McElligott said that up to £9m. in dollars could be saved if maize and wheat could be obtained from non-dollar sources. He did not think that the dollar estimate of £20m. – reduced to £11m. by obtaining maize and wheat from a non-dollar area – could not be further reduced. For revenue purposes existing imports of tobacco were essential for Ireland.

Mr. McElligott then read the remaining terms on the list, apart from tobacco.

Mr. Dillon asked whether there was any chance of getting maize for sterling. Sir Stafford Cripps said that Britain had got maize from the Argentine for sterling but that this sterling had been the proceeds of British Railways. Argentine maize was however very expensive. In addition Britain had secured Danubian maize and barley and other coarse grains for sterling. He did not know whether Eastern European countries would be prepared to accept sterling from Ireland for these cereals.

Mr. Dillon said that if Ireland got sufficient quantities of wheat it would be possible to grow a very large amount of barley for beer which should be of considerable interest to Britain.

Mr. Dillon asked whether it might be possible for Britain to lend Ireland some Maize. Sir Stafford said that Britain had very considerable stocks of Russian and Argentine maize and that he would consider the possibility of a loan.

In reply to Mr. MacBride he said that the figure given of £500m. as the lowest level for hard currency reserves, was more a psychological level than a danger level. At any lower figure confidence in sterling would be endangered although technically they might carry on with £400m. He informed Mr. MacBride that if Ireland informed Great Britain what it hoped to obtain in any quarter from E.R.P. Great Britain would finance Ireland up to that limit subject, of course, to an understanding regarding repayment.

Mr. McGilligan remarked that the Irish allocation had been cut to one-third.

Sir Stafford explained that if a loan were accepted under E.R.P. it would not be necessary to explain to the Americans the specific purpose for which the loan might be used.

Mr. McElligott asked whether Ireland would be credited with the unexpended balance of £3.5m. in dollars remaining from the allocation which had been ear-marked for the nine month period ending the 30^th June, 1948.

Mr. Rowe-Dutton said that while Britain would compliment Ireland on having economised on its dollar expenditure, the fact that savings to the extent of £3.5m. had been possible showed that the original estimate for the nine months had been on the high side. He did not think that any crediting of this unexpended balance would be possible.

Mr. McElligott asked would it not be bad to penalise Ireland for its parsimony, and Mr. Norton referred to the fact that Ireland could have bought dollars 'forward'.

Sir Stafford Cripps said that Britain would advance dollars to Ireland up to the limit of what Ireland was likely to get from E.R.P. If Ireland could not keep within that limit Britain would do its best to help. It would, he emphasised, be impossible to say to India for instance that Britain had given dollars to Ireland in addition to E.R.P. funds.

Mr. McElligott said that surely the basis of a formula might be found in the fact that Ireland was not asking fresh dollars but the unexpended balance for the period ending 30 th June, 1948, to which he had already referred.

Sir Stafford said that as far as this unexpended balance was concerned the virtue achieved of economy would have to be its own reward. 'It pays to be economical', he said. He added that in the first instance if Ireland estimated that it was going to get £x m. under E.R.P. then Great Britain would back Ireland to that extent.

Mr. MacBride said that the position revealed certain difficulties. Ireland looked on the sterling pool as its banker and did not like to find that there was nothing to be had from the bank. Ireland would like a declaration that the bank accepted its liability.

Sir Stafford replied that Britain would pay to the sterling area whatever dollars accrued above the level of the reserves.

Mr. Norton asked whether in the event of the amount of dollars accruing under E.R.P. falling short of Ireland's essential requirements Ireland would receive sympathetic consideration. Sir Stafford said 'yes, provided you do everything possible to economise.'

Mr. McGilligan referred to the difficulty which the Delegation had in committing absent Ministers to accept the position stated by the Chancellor. It had already been recognised by the British that if we claimed E.R.P. aid from the Americans on the basis of no draw from the Pool, we would not later be told we had lost access to the Pool.

Sir Stafford said that the Pool would advance dollars in anticipation of E.R.P. aid to be received by Ireland, on the understanding that she would do her utmost to get the maximum aid. 'If despite your efforts, you fail to get adequate aid for essential requirements, we will still stand behind you.' He repeated the difficulty as regards India, whose delegation was already in London and who were bound to ask 'Have you promised Ireland any dollars?' Consequently the assurance he gave could not be publicised.

Mr. MacBride summed up the position by saying that it would be necessary:

1. to agree on a ceiling for expenditure;
2. to agree on economies;
3. to get as much as possible from E.R.P. and other sources.

Mr. Noel-Baker suggested that consultation with the British authorities regarding alternative sources for raw materials and feeding stuffs might be helpful, and it was arranged that such consultation would take place on the 21^st instant.

Mr. Rowe-Dutton stated that reference throughout the discussion to hard currencies referred specifically to gold and dollars. In effect this involved U.S.A., Canada, Argentine and Belgium. It was decided that the form of the agreement should be considered from the point of view of publicising the fact that Great Britain was advancing dollars, which would be reimbursed from E.R.P.

The Taoiseach expressed the appreciation of the Irish Delegation for the kindness and consideration that Sir Stafford Cripps had extended to them at a time when he was so occupied with other heavy business.

In thanking the Taoiseach for his remarks Sir Stafford said that Britain was most anxious to secure every improvement in its relations with Ireland.

The discussion ended at 1.30 a.m.