The 1938 Anglo-Irish Trade Agreement

A New Equilibrium

THE 1938 TRADE AGREEMENT marks the end of the economic war with Britain and of the attempt to bring about a self-sufficient Ireland. The economic war that began in 1932 is often regarded as the driving force behind the self-sufficiency policy. The dispute over financial payments was part of a broader constitutional disagreement, and the deterioration in Anglo-Irish relations owed more to De Valera’s wish to dismantle the 1921 treaty than to a failure to repay monies owed. Britain realized that the annuities issue was the weakest part of its case against Ireland (Canning 1987, 132). Both countries sacrificed economic interests for political ends, with constitutional issues taking precedence over a trade and financial settlement (McMahon 1984, 197).

While the economic war exerted a major influence on Irish economic policy, it was not the determining factor. The self-sufficiency program predated the dispute, and the Irish government had imposed numerous duties prior to the outbreak of the economic war, though British imports were subject to a preferential rate. Ireland was not the first dominion to embark on a program of protection. The Australian state of Victoria introduced tariffs as early as 1866; Canada followed suit in 1878 (Butlin 1959; Aitken 1959), as did South Africa and New Zealand in later years. However, these countries had never been an integral part of the U.K. economy, and by the 1930s their protection had the sanction of tradition. The Irish shift occurred within a context of hostile political relations at a time when Britain had begun to support domestic agriculture.

Anglo-Irish trading relations would have been strained in the absence of a political dispute. The Fianna Fail election manifesto expressed the intention of retaining close economic relations with Britain while building up protected industry by giving Britain preference in purchases of capital goods and machinery in return for preferential treatment for Irish agricultural exports (Moynihan 1980, 190). This state of affairs would not have satisfied Britain, which was trying to accommodate closer trading relations with the dominions within the ambit of protection and had embarked on negotiations leading to the Imperial Trade Conference at Ottawa in the summer of 1932. The response to the tariffs imposed in the Irish budget was a statement that there was “no point in the planned trade discussions in preparation for Ottawa” (Canning 1987, 132).

While the Irish delegation was en route to Ottawa in July 1932, the economic war broke out when Britain imposed special duties on Irish exports in retaliation for Ireland’s default on annuity payments. In response the Irish government imposed emergency duties on imports of British coal, cement, sugar, electrical machinery, and iron and steel: one-third of imports from Britain (Kennedy, Giblin, and McHugh 1988, 42). These remained the only Irish duties imposed because of the economic war, though British imports lost their preferential rates. Britain and Ireland failed to sign a trade agreement at Ottawa though discussions took place that may have been halted by De Valera’s opposition (McMahon 1984, 50–79). In consequence Irish goods became liable for duties imposed under the 1932 Import Duties Act in addition to special duties (McG Papers P35/b/44).

While the major burden of the economic war fell on agriculture, the crisis did not aid industry. With the exception of sugar, emergency duties hit imports that were essential to industrial development. De Valera’s persistence in the dispute in the teeth of opposition from MacEntee and Lemass, the key economics ministers, belies the belief that he engineered the economic war in order to realize his “drastic experiment in economic nationalism” (Hancock 1937, 350). Agricultural self-sufficiency would have been better realized if the government had not been burdened with export subsidies consequent on British duties. De Valera made repeated references to the economic war in an effort to encourage a sense of national solidarity; whether this was essential to the support of protection we cannot say. Kennedy, Giblin, and McHugh, like Hancock, doubt whether De Valera could have persisted with his policy, particularly “material frugality,” in the absence of the economic war (1988, 41). Yet without it there would have been less frugality. Appeals to patriotism did little to curb imports. One Cork radio manufacturer claimed that “to talk of patriotism to the local wireless dealer or wireless user is to fool oneself. The price in most cases is what matters and it is immaterial if the battery is made in Timbuctoo” (TID 1207/107).

Agricultural prices showed a severe decline, attributable in part to international depression, but the widening gap between store cattle prices in the Irish Free State and those in Northern Ireland (they had been virtually identical prior to 1932) shows that other factors were at work.1 Before 1932 British and Irish wholesale agricultural prices moved in unison; by 1936 Irish prices were 37% below 1929 levels compared to 24% for British prices (S9420). However, Britain’s switch to agricultural protection would have denied Irish farmers British price levels in the absence of the economic war. The volume of British agricultural imports fell during the thirties, with the most pronounced fall occurring in live cattle, Ireland’s major export. British cattle prices fell sharply during the years 1932–1933 when many animals could not be sold (Whetham 1976, 44–45). By 1934 Irish cattle imports were subject to heavy specific duties and stringent quotas, which Britain claimed were a result of agricultural policy rather than of the economic war (Kennedy, Giblin, and McHugh 1988, 210–11, 42).

Britain failed to reach agreement over meat with “friendly” dominions, and Australia was forced to observe “voluntary” restrictions on meat exports to Britain (Drummond 1974, 307). Access for agricultural imports was directly related to concessions for British exports. Denmark negotiated a trade agreement in 1933 permitting duty-free pigmeat exports in return for importing British coal. Despite this agreement, Danish agricultural output was virtually stationery throughout the thirties; agricultural prices fell more sharply than in Ireland, and the government was forced to introduce similar support schemes (Jorberg and Kuntz, 1976, 400–402; Johansen 1987, 47–52). The price for free access for Irish agricultural produce would have been no extension of tariffs, though even this step might not have been sufficient to deter British farmers from pressing for restrictions on Irish farm imports.

Walter Layton, editor of the Economist, claimed that the British tariff war against Ireland had been undertaken either to foment a coup against Fianna Fail or “more probably, in order to satisfy the insistent clamour of English agriculture” (Canning 1987, 154). Lemass countered claims that all farmers’ woes could be attributed to the economic war by referring to the protests from British farmers when a settlement appeared to be in sight, while the Northern Ireland government voiced vigorous protests against the 1935 coal-cattle pact, which marked the first thaw in the dispute (McMahon 1984, 152). A memorandum by the Irish Department of Agriculture in 1947 noted that the economic war had facilitated British measures to increase cattle output but did not cause them (S9420).

Ireland’s share of British imports declined for all agricultural commodities (Kennedy, Giblin, and McHugh 1988, 212) because of the economic war, and most of the cost of British special duties was borne by Irish agriculture (Neary and O’Grada 1986, 14). Bilateral trade agreements with countries such as Germany brought little benefit, though they galvanized Britain into the first coal-cattle pact. In 1936 exports to other countries amounted to £1.8 million compared with £19.8 million to Britain and Northern Ireland; farm exports to non-British markets amounted to half the additional trade secured by the coal-cattle agreement (S9420).

While Irish protectionism did not cause the dispute, Britain came to regard a modification of Irish tariffs and quotas as essential to any settlement, just as the country sought similar concessions from other dominions. British economic interests were propelled towards conciliation by the depressed state of the coal industry and by the consequences of Irish industrialization. In January 1933 a British interdepartmental committee emphasized that Britain would require abolition of Irish emergency duties, restoration of U.K. preference, modification of duties, and an end to import licenses and other controls as part of any settlement. It urged linking financial and trade agreements on the grounds that “if any concessions are made on the land annuities question we should be in a better position to secure compensatory benefits in the trade sphere” (McMahon 1984, 107). In 1935, the Treasury’s chief economic advisor, Horace Wilson, urged the need for a trade and financial agreement “if the growing movement in the Irish Free State to set up more factories is to be countered before it is too late” (T160/744; F14026/1). Irish priorities lay in achieving optimum access for agricultural exports, for which Britain would require a quid pro quo.

Initial negotiations concentrated on areas that did not conflict with Irish protectionism. The coal-cattle pacts from 1935, where Ireland contracted to buy more British coal in return for increased cattle exports, are a case in point. In 1936 Leydon offered to channel to Britain orders for cement factory equipment and capital equipment for the Electricity Supply Board (ESB) and hinted that Ireland could impose tariffs on certain foreign imports, giving a market advantage to Britain. British officials viewed such concessions as of limited value because, as a result of the secrecy surrounding Irish import licenses, they could not be “put in front of the shop window.” They pressed for concessions on the package tax, minimum customs duties, and imports of cotton thread and cloths (T160/744; F14026/2), items at the heart of the Irish protectionist program, though these were rejected. The 1936 agreement provided for increased imports of Irish fat cattle and reduced duties on other agricultural produce. In return Ireland granted concessions on coal and cement imports, reduced emergency duties by 10%, and agreed to refrain from influencing importers against the purchase of British goods, though they requested that this final concession not be mentioned because of political sensitivity (T160/744; F14026/3).

The ratification of Ireland’s 1937 Constitution, the accession of Neville Chamberlain as prime minister, and worsening international relations all improved the prospects for settlement. By 1938 revenue from British special duties was expected to equal the sum owed in annuities, and the inability to find alternative markets for Irish agriculture was generally accepted. Much of the gloss was fading off the Fianna Fail economic program. It had failed to halt the drift of population to Dublin and Britain, and small farmers were not deriving the anticipated benefits from agricultural schemes. A return to more traditional policies was gaining favor.

A report on trade relations with Britain dated December 1936, signed by the secretaries of the Departments of Agriculture, Industry and Commerce, Finance, and External Affairs, harked back to Cumann na nGaedheal economic policy. It asserted that a settlement and a healthier agriculture would raise farm incomes, employ more farm laborers, halt the drift to the towns, and lead to increased industrial employment, while the “restoration of public confidence” would reduce interest rates, permitting cheaper funding of housing and public works, and would attract the return of wealthy tax-paying residents. This analysis, which represented the reinvigoration of the “Finance mind,” was similar to that being carried out by the Banking Commission. Both pointed towards an end to the dispute and towards concessions on protection. However, while the report was signed by all four secretaries, twelve months later MacEntee, the finance minister, informed De Valera that “a marked difference of opinion” existed between them on the merits of seeking major trading concessions from Britain or minor modifications and sought De Valera’s advice (S9420).

The ensuing trade talks suggest that both strategies were attempted: Ireland began by offering minor alterations but moved to more fundamental concessions. From the outset of the 1938 negotiations, which included talks on British naval bases in Ireland, Britain set out to link a financial agreement with concessions on trade. The opening statements from De Valera and Lemass offered Britain little more than the prospect of supplying capital equipment to Irish industry and a possibility of preferential duties that would enable her to capture a greater share of (static) Irish imports.

When British and Irish officials reviewed progress on 31 January after two weeks of negotiations, British officials protested that the only concessions offered by Ireland applied to cellulose wrapping and iron and steel goods, imports amounting to a mere £22,000, plus an offer of duty-free access for Britain, with tariffs imposed on competitors, for a range of imports then worth £8 million (£3 million of this coal), which Britain saw as purely temporary pending the extension of Irish industry. While Leydon admitted that the concessions were “not of any great magnitude,” he emphasized that his aim was to restore Britain’s percentage share of Irish imports to its pre-1932 level. He reiterated Ireland’s need for protection because her industry was “in the cradle,” and prices in consequence were high.

This statement caused T. G. Jenkins, who led the Board of Trade delegation, to suggest that there was “a very great difference between duties to equalise prices (even considering the high Cost of Production) and the prohibitive duties which were so common in the Eire tariff.” He suggested that the Irish government reduce duties to a level that would permit British manufactures to compete “on level terms having regard to differences in costs of production,” a concession identical to that given by other dominions at Ottawa. Jenkins proposed that Ireland establish a tariff board on the Australian or Canadian model to review or conventionalize duties.

Leydon appears to have responded positively to these suggestions. In the course of informal discussions after the meeting, he informed British officials of his plans to fly to Dublin and claimed that his intention was “to press his minister to agree to a drastic reconstruction of the Eire protective system, so that the present high protection, either by quota or duty, should be replaced by a protection only sufficient to offset the higher cost of production in Eire as against the United Kingdom and consequently to give United Kingdom goods a chance of competition in the market.” He sought reassurance that such concessions on Ireland’s part would be matched by dominion-type trading conditions for Irish imports, and this was given informally some hours later (BT11/2832). On 3 February the Irish cabinet agreed that discussions might proceed on this basis (G.C.1/7a). Britain was informed of Ireland’s offer to establish a Prices Commission similar to those in Australia and Canada in return for dominion-style status for Irish imports (BT11/2832), and this formed the core of the 1938 agreement.

The Irish concession gave rise to mixed responses from British officials. Its main author, T. G. Jenkins, stated that it “virtually amounted to a complete reversal of the original basis of negotiations laid down by Eire ministers”; a Treasury official believed that the agreement would arouse considerable alarm in Northern Ireland and feared that the prospect of increased Irish food imports would force a reduction in British farm prices and consequent pressure for subsidies. Some weeks later he announced that “the Settlement amounted to an unfavourable agreement on Defence; an unfavourable agreement on Finance and an unfavourable agreement on Trade.” Another official noted the “wholly illogical” fact that while Britain gave immediate concessions to Irish trade, Britain received in return a promise to submit Irish duties to examination by a Prices Commission—a model that had “unfortunately worked very badly” from the British point of view in the Australian and Canadian cases. However, he concluded that the merits of the agreement “must be judged largely on general political and economic grounds” (T160/746; F4026/03/3).

Negotiations moved to matters of detail with the greatest controversy relating to requests for special treatment for imports from Northern Ireland and the composition of the free list, a list of goods that the Irish undertook not to protect. De Valera used the negotiations to present partition as a central issue in Anglo-Irish relations, while the possibility of an agreement led to protests from Northern Ireland politicians. Britain urged the Irish Free State to accord special trading concessions to Northern Ireland both as a gesture of conciliation and to stem protests. However, De Valera argued that such a concession would give Northern Ireland the “best of both worlds”—partition plus a favorable opportunity of expanding its trade in Eire, opening the floodgates to intensive competition that would be highly prejudicial, if not disastrous to Eire’s industries. Lemass expressed the fear that such concessions would mean the closure of twenty or more subsidiaries of Northern Ireland plants, the end of self-sufficiency, and the repeal of controls on foreign industries, and that industries would migrate to Northern Ireland, which had less onerous legislation on working conditions and hours of labor.

However, Chamberlain believed that if the only objections to a differential tariff were of an economic character, they would not have presented insuperable difficulties (Cab. 27/642). A subsequent proposal for progressive reductions in duties on Northern Ireland imports and free trade within five years was dismissed by Lemass on the grounds that it would be difficult to justify a provision giving duty free entry to Northern Ireland goods “no matter what political provocation the northern state might be guilty of at that time” (BT11/2833). No concessions were made for Northern Ireland imports, and this proposal does not appear to have surfaced in postwar negotiations.

The Anglo-Irish Trade Agreement was signed on 25 April 1938, one of three agreements signed on that day. One removed the remaining British naval bases in Ireland. The financial agreement resolved the dispute over annuities with a lump-sum payment of £10 million and removed the emergency duties imposed by both states. Under the trade agreement, which was to run for three years and to continue thereafter subject to six months’ notice of termination, all goods produced or manufactured in Ireland that were free of duty on that date or were liable to either the 1932 Import Duties Act or Ottawa duties would be admitted free of duty into Britain. Products that had been subject to both Ottawa and Industrial Development Act imposts—game, poultry, and dairy products—were only guaranteed duty-free entry until August 1940.

In common with other commonwealth countries, Irish dairy and poultry produce were guaranteed a specified margin of preference over the produce of noncommonwealth countries; however, whereas countries with Ottawa agreements were guaranteed this in perpetuity, Ireland’s preference lasted only as long as Irish poultry and dairy produce were permitted duty-free access. These clauses reflected British reluctance to permit unrestricted access of Irish poultry and dairy produce. British poultry producers were highly agitated about the proposed agreement and Northern Ireland farmers appeared vulnerable to increased competition. The British Ministry of Agriculture sought quotas on Irish poultry imports; however, the Board of Trade felt that it would be “dangerous” to single out imports from one empire country in this manner. James Ryan, Irish minister for agriculture, was insistent on free entry for poultry on the grounds that it would prove “politically impossible to return with an Agreement which did not give them concessions of free entry while free entry obtained for more substantial cattle raising” (BT11/2833; T160/746; F14026/03/5).

Britain agreed to only regulate Irish poultry and dairy imports in the event of a failure by both sides to assure “orderly marketing.” In return Ireland granted Britain preferential terms on existing and future tariffs—coal, motor parts, and motor cars were singled out for special concessions—and undertook to tax silk and artificial silk imports from other countries while British goods would be admitted duty-free. Britain was granted modest concessions on the package tax, and the level of minimum customs duty was reduced for British goods.

The above clauses proved relatively uncontentious from the Irish point of view, though Lemass informed the Dail that the provisions for importing motor parts would be welcomed by everybody except him (PDDE 28 Apr. 1938). The remaining clauses proved more controversial. Article 5 provided that imports from Britain of items on the free list were guaranteed entry free of duties (other than package tax) and quotas, while article 8 provided for the establishment of a Prices Commission to review protection and to substitute tariffs for quotas (McG Papers P35/b/44). Initially the free list proved less contentious than the Prices Commission though Lemass opposed the concept during negotiations on the grounds that it would prove difficult to remove an industry from the list. The question of whether to include iron and steel goods was highly contentious with Lemass arguing that pending the establishment of the Hawbowline plant they should be omitted and the British Iron and Steel Federation demanding an assurance of no new duties and preferential status (BT11/2833). The free list amounted to more than six pages of items covering 16.5% of Irish imports.

The clause that aroused most interest was the requirement to establish a tariff review procedure to which British industrial interests would have access via the Irish Prices Commission. In February 1938, Malcolm McDonald, the dominions secretary, informed an Irish delegation that “the undertaking regarding the Prices Commission was the crux of the agreement so far as the U.K. was concerned” (BTl1/2833). In November 1938, W. B. Spender, Northern Ireland finance minister, claimed that since the agreement was signed imports to the Irish Free State from Britain had fallen by 9.6% and those from Northern Ireland by 14%, while Irish exports to Britain had risen by 12% and to Northern Ireland by 24%, ending, “So much for your Trade agreement. I hope we have done a little better with the U.S.A.” However, the Board of Trade argued that it was impossible to reach any definite conclusion until the Prices Commission had issued a substantial number of reports (T160/746; F14026/03/5).

The 1938 trade agreement looked significantly more threatening to Irish protection than it proved in practice. The lengthy negotiations led to a substantial reduction in factory orders in anticipation of tariff reductions (FIM annual report 1938). News of the signing led to what Lemass described as “the almost complete cessation of trading” (PDDE 28 Apr. 1938). Reports that tariffs on shoes would fall to 20% led to threatened shutdowns and plant layoffs. The reaction was excessive, as quotas would continue until the Prices Commission ruled to the contrary, and higher tariffs could be substituted for abolished quotas.

The industrial clauses aroused widespread opposition. Patrick McGilligan claimed that the agreement had restored Irish trade to the 1932 situation with the important qualification that trade was now “hampered by an Agreement, the full extent of which has not yet been interpreted.” The prospect of a strengthened Prices Commission was described by Labour T.D. W. Norton as “brimful of dangerous possibilities,” and other opposition members regarded it as limiting Irish freedom to promote industrial development (PDDE 27–29 Apr. 1938).

Lemass pointed out that similar clauses had been imposed on Canada and New Zealand in the course of the Ottawa agreements, and that the Canadian conditions were more onerous in that the review procedure covered both new and existing tariffs whereas the Anglo-Irish agreement only covered existing duties. Lemass claimed, perhaps disingenuously, to welcome the review, arguing that it had never been the intention to continue the high level of duties indefinitely, though the only speech he could cite in support of this position was one made on 31 January 1938, following the inception of the Anglo-Irish talks (PDDE 28 Apr. 1938).

The second reading of the Prices Commission (extension of functions) bill came before the Dail on 4 May, less than one week after the debate on the Anglo-Irish agreements, and the commission issued the first statutory notices that it was undertaking reviews on 10 June 1938. Between June 1938 and December 1940, fifty references were made to the Prices Commission at the request of the U. K. trade commissioner, covering 74 customs duties out of a total of approximately 350—a figure that includes purely revenue duties.

The need to make submissions raised the question of whether they would be made on behalf of an individual firm or the industrial sector as a whole. The president of the Federation of Irish Manufacturers (FIM) felt that the federation should represent all cases and proposed the establishment of an Industrial Bureau. However, this initiative collapsed in the face of conflicting interests between individual industries and because of a refusal to amend the federation’s constitution to permit the admission of all foreign firms (FIM minutes 10 June 1938, 6 Jan. 1939).

The federation’s self-confidence was shattered by the announcement in June 1938 that prices would also be examined in four cases. FIM viewed this as an attack on Irish manufacturers “both by British interests and also by wholesalers and retailers and other manufacturers” (FIM minutes 17 June 1938). A deputation to the Prices Commission was allegedly placated with the information that its first finding would deal with an article for which a tariff could be justified, in order to reassure the public; however, by January 1939 the federation complained that the first announcement concerned an article with an excessive duty (FIM minutes 6 Jan. 1939), perhaps to placate British public opinion.

In practice the Prices Commission proved less threatening than it initially appeared, and this would have been evident from its inception to anyone with a knowledge of the Australian or Canadian equivalents (Drummond 1974, 390–420). The majority of reviews requested by the British authorities were never carried out. A mere fifteen reports were made between December 1938 and April 1941 when reviews were suspended owing to wartime concern with profiteering. The commission discharged thirteen references completely and two partially; seven were withdrawn at the request of the U.K. trade commissioner, as were parts of six further references. Thus the practical outcome of the Prices Commission amounted to quota and tariff modifications for soap and candles (McG Papers P35/b/44) and the introduction of a 75% tariff (50% preference for U.K. and Canada) in place of a 50% duty on manuscript books (ITJ Dec. 1939).

Unfortunately we know little of the workings of the commission. Irish files were destroyed in 1950,2 while it appears that the relevant British records were victims of wartime “floods and destruction.” This makes it difficult to assess British reactions, though two contradictory comments survive. One Board of Trade official in 1951 noted that “judging from what few papers remain” the reviews carried out in 1939–1940 were “satisfactory”; however, in 1950 another official noted a reluctance on the part of the U.K. Trade Association to engage in a new round of Irish tariff reviews, this time under the auspices of the Industrial Development Authority. “As far as we are concerned the dog won’t fight. They were so harassed by the Prices Commission before the War that they are more than reluctant to go through a similar experience again with the I.D.A.” The nature of the harassment remains unspecified, though later references to “the type of exhaustive inquisition” (BT11/4410) suggest that Irish officials may have resorted to excessive bureaucratic demands on those petitioning for tariff reductions, a practice well established in the Tariff Commission of the twenties.

Excessive bureaucracy or an appreciation of common interests led British and Irish manufacturers to reach mutual agreements outside the ambit of the Prices Commission, something that neither government had contemplated. The Federation of Irish Manufacturers (FIM) Annual Report in 1940 noted that “it was found in some cases far more profitable to negotiate directly with the English Group concerned than to go through the lengthy and expensive procedure involved in a Prices Commission Examination.” The implications of such collusion require further study.

The absence of records makes it impossible to gauge whether the Irish government was sincere in its intentions of using the commission to establish a more competitive industrial system, but there are grounds for scepticism. In March 1939 the FIM proposed to Industry and Commerce that a Dumping Commission be established, consisting of three representatives of each industry group, appointed by the federation, to guarantee against dumping by comparing prices of imported goods with those in the country of origin. Tariffs would be based on prices in country of origin rather than at point of import. They argued that the proposal offered the prospect of apparently lower tariffs and more effective protection. The proposal must be seen as a means of averting the potential threat posed by the Prices Commission.

Industry and Commerce welcomed it and suggested establishing an informal committee, which may indicate less than total sympathy with the Prices Commission, or alternatively a wish to soothe the ruffled feathers of Irish manufacturers. Finance showed outright hostility. McElligott viewed it as another example of the “scant courtesy” that Industry and Commerce showed Finance in submitting proposals for tariffs and suggested that they first establish that dumping had occurred. Efforts to persuade Finance to reconsider its objections proved futile, and the idea died with the outbreak of war (F200/4/39). However, the support shown by Industry and Commerce, together with the Prices Commissions dismissal of the overwhelming majority of cases and the apparent collusion between British and Irish industrialists suggests that there would not have been a surge of competition in the absence of war.

Despite the apparent negating of the immediate practical effects, Irish industry retained a bitter hostility towards the 1938 agreement. In 1948 a memorandum prepared by Kevin McCourt, secretary of the Federation of Irish Manufacturers, argued that the free list constituted “a hazard the industrialist cannot ignore,” one that placed “a definite restriction” on the establishment of new industries. McCourt was equally vocal on the difficulties of reconciling the continuance of “adequate protection” for Irish industry while affording “full opportunities of reasonable competition” to British manufacturers, as the Prices Commission required. He objected to the requirement that reviews would result in the removal of quotas “irrespective of the conditions obtaining in this country and in the industry concerned and without regard to the capacity of British manufacturers to flood the Irish market with surplus goods” and expressed fears that comparisons of British and Irish costs would fail to take account of comparative taxes and markets (McG Papers P35/b/44).

In the long run, the Irish government was less exercised by tariff reviews than by the restrictions imposed by the free list. A memorandum from Industry and Commerce in 1947 prepared for the Anglo-Irish trade talks sought an end to the free list on the grounds that it caused major difficulties for officials attempting to negotiate the establishment of new industries. No criticism was voiced about tariff reviews; the memorandum quoted the policy of the minister for industry and commerce that protection would not be given to support an inefficient plant or management but only to offset labor costs higher than those prevailing elsewhere—wording almost identical to the 1938 agreement. This stance is in line with Lemass’s abortive 1947 industrial efficiency bill, but it also reflects the negligible impact of tariff reviews. A further memorandum in February 1948 from Industry and Commerce noted that the possibility of price and tariff reviews at Britain’s behest “helped to ensure that the Irish consumer would not be exploited by Irish manufacturers” (TID 555/12).

Postwar hostility to the 1938 agreement reflected the widening trade gap between Britain and Ireland. By 1948 a British Board of Trade official saw the agreement as resulting in £80 million of U.K. exports to Ireland and £30 million in Irish exports to Britain (BT11/8821); however, this imbalance reflects postwar trading patterns. Figures for the period from the agreement to the outbreak of war show that Irish imports from Britain and Northern Ireland increased from £22 million or 50% of total imports in 1937 to £24 million or 55.6% in 1939; imports stood at £44 million in 1937 and £43.4 million in 1939. Irish exports to Britain and Northern Ireland increased from £20 million or 90.6% of total exports in 1937 to £24.8 million or 93.6% in 1939, with exports rising from £22.2 million to £26.5 million in 1939 (McG Papers P35/b/44).

Contrary to the assertion of F. S. L. Lyons, “the basic principle” of the 1938 agreement was not “that of a return to the pre-1932 position” (Lyons 1973, 614). While the 1938 agreement reasserted the primacy of the export-oriented cattle sector at the expense of the commitment towards self-sufficiency and extensive farming, it proved less critical for Irish industrial interests, despite the initial panic. Assuming that suspicions of Irish efforts to negate the Prices Commission are correct, the free list provided a greater threat to extending protection. However the agreement was initially intended to last three years; we cannot know what form it might have taken in the absence of war.


What emerged in 1938 was the accommodation of two superficially contradictory sets of vested interests: export-oriented Irish farmers, especially cattle farmers, and protected industrialists. The former recovered their traditional access to the British market on the best terms available given Britain’s policy of promoting domestic agriculture, while the latter were not forced to cede industrial protection. Irish agriculture retained the price support systems instituted during the thirties for pork, grain, and dairy products. This new alignment of agricultural and industrial interests survived from 1938, with inevitable wartime disruptions, until the mid-fifties. It marks a synthesis or compromise with the previous economic history of the new state: the commitment of Cumann na nGaedheal to export-oriented agriculture and industry with minimal government assistance; the 1932 reversal of this stance with protection and self-sufficiency dominating both sectors. It is no coincidence that 1938 marked the end of serious ideological divisions between Ireland’s major political parties on economic issues and on questions of national status; both Fianna Fail and Fine Gael broadly endorsed the 1938 compromise and continued it, with modifications, in the postwar period.

The 1938 agreement should therefore be deemed an Irish victory: concrete gains in terms of ports and an annuities settlement were not wiped out by the trade agreement, and the overall package brought consensus among the dominant forces in Irish politics and society. This consensus marked the end of Fianna Fail economic radicalism, demonstrated by the 1938 founding of Clann na Talmhan, a party representing small farmers of the west. Although token gestures continued to be made to small farmers, in 1938 the dominance of cattle farming was restored. Changes in industrial policy proved less fundamental: ideals of self-sufficiency, native control, female employment, and decentralization of industry remained dominant despite the evident shortcomings in achievement, though they now served to bolster entrenched interests rather than to spearhead a potentially radical agenda.

1. In 1932 Irish store prices avraged £12.39m, those in Northern Ireland £12.15; by 1933 the Irish figure was £8.96, Northern Ireland’s £11.02; by 1934, Ireland was at £6.86, Northern Ireland, £10.58 (Neary and O’Grada 1986, 17).

2. Information from the then Department of Trade, Commerce, and Tourism in 1983.

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