No. 177 NAI TSCH/3/S15077/A
Memorandum for Government by the Department of External Affairs
'Observations on the Memorandum of the 23rd February
of the Department of Finance
in regard to trading with countries under Communist rule'
Dublin, 2 March 1953
- The Minister for External Affairs has given careful thought to the views of the Minister for Finance, as expressed in the Memorandum of the 23rd February,1 concerning trade between Ireland and Communist countries. In the light of the considerations given hereunder, the Minister for External Affairs sees no good reason for imposing a ban on trading with these countries.
- The injection of ideological considerations into trading relations is liable to entail the most awkward consequences. It might, for example, have prevented the Government from seeking alternative markets before the war in Nazi Germany and might even be held to preclude trading with non-Communist countries or areas in such countries which deny fundamental human rights.
- As regards the policy of the non-Communist world as a whole, the majority of non-Communist countries, including Ireland, have taken steps, on the initiative of the United States, to prevent the export to the Soviet bloc of materials of military value; apart from this, however, it is generally recognised that an expansion of trade between the Communist and non-Communist worlds would make a contribution of the first importance to the rectification of the disequilibrium in international trade and payments from which the non-Communist world is suffering. It is a declared aim of the Organisation for European Economic Co-operation to raise intra-European trade (including trade with the Soviet bloc) to the highest possible level, and the United Nations Economic Commission for Europe, at its seventh session, in March, 1952, adopted unanimously a resolution in the following terms: ‘the expansion by means of mutually satisfactory agreements of trade between, on the one hand, countries of Eastern Europe and, on the other, countries of Western Europe, would benefit all European countries’. In pursuance of this statement of principle, the Commission has been endeavouring to arrange a conference of interested European countries with a view to promoting East/West commercial exchanges and the conference (at which it is not the intention that Ireland should be represented) will probably take place within the next few months. Shortly before his election, President Eisenhower stated that there would have to be far more trade with Eastern European Satellites ‘to convince them that they get a better bargain our way than sticking to Russia’ and there has been no indication since that he has modified this point of view.
- In fact, trade between the Communist and non-Communist worlds is substantial. For example, in 1952 Britain imported goods to the value of £84 million from the Soviet bloc countries of Eastern Europe and her exports to these countries in 1952, at £51 million, were £11 million higher than in 1951. United States imports from Eastern Europe amounted to $150 million in 1951 while exports totalled $155 million.
- Having regard to these circumstances, the Minister for External Affairs feels that the adoption by the Irish Government of a policy in respect of trade with the USSR and its satellites more restrictive than that practised by non-Communist countries generally might cause embarrassment to those Governments with which Ireland has close relations, particularly the members of OEEC. In the case of the United States, any such action on the part of the Irish Government might well be used as ammunition against the Administration by irresponsible exploiters of anti-Communist feeling. In general, an Irish initiative in this matter could give rise to the jibe that the Irish Government was seeking to obtain, at little cost in trade or cash, kudos for anti-Communist measures while refusing to take the active steps and make the heavy sacrifices referred to at paragraph 10 (iii) of the Memorandum of the Department of Finance.2
- The Minister for External Affairs is also inclined to doubt the force of the economic arguments for terminating trade with the Soviet bloc, advanced in the Department of Finance’s Memorandum. While trade with non-Communist countries may be tolerated by Communist Governments only when it is of advantage to their régimes, it is clear that such trade also confers advantages on the non-Communist parties, since international exchanges do not take place unless both parties to the transactions gain from them. If, in fact, the Soviet bloc supplies non-Communist countries with goods at less than their economic cost, then the balance of advantage should, as a general rule, lie with the purchasers. If, on the other hand, such low-priced goods compete unfairly with the products of the non-Communist world, it is always open to the countries in question to protect their workers by the ordinary devices of tariffs and quotas. In any event, the dangers to be apprehended from Communist dumping at the present time do not appear to be serious.
- While the Minister for External Affairs understands that an embargo on imports from countries of the Soviet bloc would not, apart from certain exceptional cases, operate unduly to the detriment of the Irish economy, he must assume that the economy would suffer some loss, since Irish firms which place orders in Communist countries do so, not on political, but on commercial grounds, i.e., availability of supply, lower prices, better quality, shorter delivery dates, etc. If imports from these countries are to continue, there would appear to be no logical reason why exports to the countries in question should be prohibited, particularly in view of the heavy balance of trade enjoyed by them vis-á-vis Ireland.
- As regards Irish public opinion, the Minister for External Affairs is aware that there has been some discussion in the press, but he is inclined to doubt the existence of any widespread public feeling on the subject. In any event, it is not the Irish Government (except in the case of transactions by State companies) but individual firms who trade with Communist countries and they are free to refrain from doing so if they wish. Apart from the prevention of exports of military value, the function of the Government is confined to determining whether, in the light of Ireland’s foreign exchange position, a given transaction may be permitted or not.
- In all the circumstances, the Minister for External Affairs holds strongly to the view that the course most consonant with Ireland’s political position and economic interests is that which has been traditionally followed, namely to refrain from injecting ideological considerations into trade matters and to determine trade policy solely by economic and commercial considerations. The logical consequences of this policy would, as regards imports from Communist countries, be the application by the Foreign Exchange control of the ordinary balance of payments considerations only. As regards exports, no controls would be exercised except those in general operation and those required to prevent materials of military value reaching Communist destinations.
- On the other hand, the Minister for External Affairs would not favour the conclusion of any formal trading arrangements with Communist Governments as representing a departure from the general rule of avoiding bilateral relations with such countries. The Minister would be adverse to admitting into Ireland officials or commercial representatives of any kind from the countries in question for the purpose of promoting trade with those countries. He would, however, see no objection, should the necessity arise, to the Missions abroad being availed of for informal discussions with official or commercial representatives of Communist Governments directed towards facilitating Ireland’s trading or economic interests.
- The Minister for External Affairs accordingly recommends to the Government that policy in relation to trading with Communist countries should be as set out in the two foregoing paragraphs.3
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