In considering what principles are best suited to Saorstát conditions there are three principal points to be considered:-

It is submitted that taking everything into consideration it is in the interests of the Saorstát to negotiate directly with the various countries of the world on the principle of a single column autonomous tariff offering most-favoured-nation treatment to all countries alike without discrimination and seeking in return most-favoured-nation treatment, or the nearest equivalent possible under the laws of the country with which negotiations are proceeding, together with any further concessions which it might be possible for the Saorstát to take the initiative in obtaining from countries whose trading position in the Saorstát is for them exceptionally favourable.

The first argument for this course is that as we enjoy at the moment most-favoured-nation treatment in practically all countries of the world as a result of Treaties inherited from the British Government, it should not be difficult to obtain by direct negotiation confirmation of what we already enjoy. On the other hand to attempt to improve on this position by adopting a conventional tariff and carrying on bargaining negotiations with various countries on this basis would entail a risk of ending in the Saorstát being in a worse position than at present.

In practically all of the Treaties negotiated in recent years by Great Britain there is a separate clause by which Great Britain has secured that any Dominion can obtain the same terms (generally most-favoured-nation treatment) as have been secured by Great Britain on condition that the Dominion by a separate instrument signify its wish to obtain these terms on an offer of most-favoured-nation treatment. This situation makes the task of negotiating direct Treaties on a most-favoured-nation basis comparatively easy and involves little risk of failure in achieving that object, although there may be a few countries with which difficulties may arise owing to high duties in the Saorstát on certain commodities produced by these countries.

There is attached to this memorandum a summary of the present commercial treaty position of the Saorstát,¹ which sets out a list of the countries from which the Saorstát enjoys most-favoured-nation treatment as a result of Treaties made by Great Britain prior to 1921, the advantages of which we enjoy, and by which we are bound until such time as the Saorstát makes new Treaty arrangements.

There is also included a list of the countries with which Great Britain has made Treaties (since 1921) and from which the Saorstát enjoys de facto most-favoured-nation treatment although the Saorstát is not a party and has not given any formal adherence.

The greatest objection to the adoption of the conventional tariff system would be the loss of flexibility in the Saorstát tariff. Considerations of revenue and of national economy in the matter of protecting national industry would have to be subordinated at least in point of time to the question of our international treaty position. At present changes are made annually in the Budget, and more frequently during the year as a result of reports made by the Tariff Commission. It is submitted that it would not be in the national interest of a new State building up a new national economy to find its hands tied by a conventional tariff system built up as a result of commercial treaties.

If there were any great gain to be set opposite this loss of flexibility the position might be different, but it is not clear that as a result of elaborate treaty negotiations the Saorstát would find itself in the world's markets in any better position than it would enjoy by retaining its present tariff position and concluding treaties on the most-favoured-nation principle. By adopting this policy there is no disturbance to the existing power of altering the Saorstát tariff list frequently as National policy dictates. At the same time, there is almost a certainty of securing most-favoured-nation treatment or its equivalent from almost all the countries in the world by a separate instrument taking the form of a direct commercial treaty between the Saorstát and each foreign country.

It is recommended accordingly that for the present and until the occasion for reviewing the matter arises, the Department of Industry and Commerce should be empowered to proceed with the negotiation of commercial treaties with foreign countries on a most-favoured-nation basis, and with dominion countries as far as may be practicable on a most-favoured-dominion basis.² It should now be pointed out that a decision in this sense involves a decision to abandon the proposed Treaty with France, the negotiations for which proceeded on different principles. Under the text of the Franco-Saorstát Convention, negotiated on a reciprocity basis, and approved by the Executive Council on the 21st April, 1927, the Saorstát agreed to fix the duties on wines imported from France and not exceeding 30° of proof spirit at half the present duty on such wines. This meant that the Minister for Finance could not alter the duties on wines in his Annual Budget without previously denouncing this Treaty with France and entering on negotiations for a new Treaty. During the actual negotiations with France it was decided on revenue and other grounds to increase the then existing duties on wines. Such a step would have been impossible if the Treaty had been actually signed.

The Treaty also involved differentiation against other wine exporting countries, and as a first step notice of denunciation of inherited Treaties containing most-favoured-nation clauses was in fact given on behalf of the Saorstát to the Governments of Italy, Spain and Portugal. The existence of this differentiation entailed the loss of most-favoured-nation treatment from at least these three countries, and possibly others. Similarly, any Treaty made with another country on the same principle of making differentiation in certain commodity or commodities against certain other countries would shut out the possibility of most-favoured-nation arrangements with those other countries and would embark the Saorstát on a principle of negotiating Treaties on the reciprocity basis as distinct from the most-favoured-nation basis.

There were other incidental difficulties of a less striking kind involved in the Franco-Saorstát Treaty, e.g. the concession to French wines would have brought the rates of duty lower than the preferential rates at present applicable to wines of Dominion origin. The Dominions hold a prospect of a market for Saorstát products fully as good as that of most European countries. The Dominions also extend a preference to Great Britain and frequently, though not always, to each other. It would be a great advantage to the Saorstát to enjoy in the Dominions the preference extended to Great Britain. The prospects of securing such preference generally are not too bright, and would undoubtedly be seriously prejudiced by the existence here of a discriminatory tariff against Dominion wines.

There is no doubt too that the proposed concession on French wines would be liable to arouse hostile criticism from local brewing and distilling interests.

The proposed Franco-Saorstát Treaty, therefore, involved for the Saorstát a number of awkward complications and a considerable loss of revenue. It is not clear that the French in return were making any concession of substance.

The French Government, no doubt, will be incensed at the failure to conclude a Treaty which had occupied considerable time in negotiation and which was on the point of being signed. It is possible that Saorstát products may be placed on a less favourable tariff rating if the present Treaty is not concluded. It should be remembered, however, that whilst the Saorstát is an important customer of France the French imports from the Saorstát are on a small scale. The Saorstát total imports from and exports to France in each of the past three years are as follows:-

Although it is not possible to foretell with any degree of certainty what attitude the French Government may take up in the event of a decision being taken not to proceed with the proposed Treaty, it is believed that there will be hesitation on the part of France to prejudice her position in the Saorstát market in view of the figures already quoted.

On the 8th March last a conference was held by representatives of the Department of Finance, Industry and Commerce, External Affairs and Agriculture, at which it was agreed that the whole circumstances attending the proposed Franco-Saorstát Treaty should be reviewed. In the opinion of the Conference, it did not appear in the national interest to proceed with the proposed Treaty.

Finally, if the first recommendation of this memorandum be adopted, i.e. that the Department of Industry and Commerce should be empowered to negotiate Commercial Treaties on a most-favoured-nation basis, it is further recommended that the proposed Treaty with France should not be proceeded with on the present basis but that an attempt should be made at an appropriate date and in whatever way is considered suitable in view of the special circumstance of the negotiations with France, to open afresh negotiations with France, not involving the principle of a special concession on French wines. If such a situation arose as made it necessary to bring about a lowering of the duty on wines in order to be in a position to negotiate a Treaty with France, such a concession should be granted to all wine-producing countries and not confined to France.