PRESENT

The Anglo-Irish economic discussions which were adjourned on Thursday, June 17th , at 5.30 p.m. in the Prime Minister's Room, House of Commons, Westminster, were resumed at 11 a.m. on Friday, 18th June, in the Cabinet Office.

Sir Stafford Cripps reopened the discussions by stating that the British Ministers had given great care to the various arguments which had been submitted by the Irish delegates at the previous meeting. He asked whether the Irish representatives had any observations to offer on the statement which had been circulated relating to the Irish balance of payments with the rest of the world.

Mr. McGilligan said that the Irish Delegation questioned the figure of £80 million in the forecast for 1948. He suggested that those who prepared the Table had in mind the 1947 figures. If this was so, it was necessary to point out that the 1947 expenditure was abnormally high for several reasons. A good deal of restocking had taken place when materials became available on the British market. Furthermore, there had been very heavy purchases of United States coal in that year. These purchases would not be recurring in 1948 as it was now possible to obtain British coal at considerably lower rates.

Mr. McGilligan pointed out that the forecast for receipts from tourists for 1948 was only £25 million, i.e., £1 million more than the estimate of actual receipts for 1947. It was necessary to emphasise that the 1947 estimate was an extremely conservative one based on expenses by tourists in hotels and on travelling; no allowance was made for the value of goods purchased by tourists and brought with them from Ireland. The amount involved under this head would be very substantial.

In reply to Sir Stafford Cripps, Mr. McGilligan said that when preparing his recent Budget he had given consideration to the whole question of tourist expenditure and had decided to avoid, for the present at any rate, imposing restrictions on tourist traffic. He was in favour of encouraging the free movement of persons throughout the world and thought, in any event, that restrictions on tourism might well be regarded as an unfriendly gesture towards foreigners. In regard to the estimate of £80 million for 1948, Mr. McGilligan said that he believed that increased tourist earnings would go a good deal to bridge this gap.

Sir Stafford Cripps observed that it would be necessary in this regard to consider the over-all balance of payments.

Mr. McGilligan said that the Table reflected the movement of prices indicating changes adverse to Ireland in the terms of trade. He hoped that in the years ahead the terms of trade would turn in favour of Ireland. In regard to the question of the over-all balance of payments, Mr. McGilligan said that Ireland seemed to be in a better position for achieving a satisfactory balance of payment than very many countries today. An official British memorandum from which Mr. McGilligan quoted suggested that unrequited exports might be justified for the purpose of building up the economic capacity of a country from which the United Kingdom might hope to benefit. From that point of view he said that Ireland's over-all balance of payments was not at present in an unduly serious position.

Sir Stafford Cripps referred to his comments of the previous evening regarding methods for readjusting Ireland's balance of payments, and repeated that if the Irish Government considered that restrictions on the importation of certain U.K. goods might redress the adverse balance, in such circumstances the British Government would have no objection to that course. In reply to Mr. McGilligan he said that the British Government would be prepared to accept the idea of an import licensing system provided that before restrictions under such a system were imposed, a list would be submitted to the British Government indicating the range of articles against which import control might be enforced.

Mr. McGilligan said that there were difficulties inherent in an import licensing system from the Irish point of view. Some imports were desirable for the taxation they produced; other goods maintained employment, and restrictions against imports generally might increase inflationary pressure.

Sir Stafford Cripps suggested that inflationary pressure might be controlled by means of absorbing surplus money in circulation. He added that there was no reason why an Irish import licensing list should be the same as the British one. In principle quantitative restrictions would not be objectionable to the British Government.

In reply to the Taoiseach Sir Stafford said that there would be no question of the British Government enforcing control on the Irish Government as to the kind of goods against which import licensing restrictions should operate. That would be a matter entirely for the Irish Government. It would merely be necessary for the Irish Government to submit to the British authorities a list of goods against which they contemplated that, if necessary, restrictions might be enforced. He thought that the Continuing Committee already established might be helpful in the preparation of such a list.

Sir Stafford Cripps then referred to the matters raised by Mr. Dillon at the previous meeting. The British Government accepted and endorsed Mr. Dillon's proposals for increasing agricultural output in Ireland and they were prepared to enter into a 4-Year Agreement with the Irish Government in regard to agricultural exports. The questions involved were two-fold:-

1. It would be necessary to submit to the British Government an indication of the volume of agricultural goods in the various ranges which Ireland would be capable of exporting. This information was required so as to enable the British Government to relate the volume of goods which they might expect from Ireland over the 4-year period to the British long term economic plan. From what Mr. Dillon had already said he expected that agreement in principle could be reached about the estimated volumes of goods at the present meeting. If so, the settlement of details could be safely left to the official representatives;
2. On the matter of prices Sir Stafford Cripps said that the British Government was prepared to meet Mr. Dillon's demand for reasonable prices. In particular, Grade A, prime and special cattle slaughtered at U.K. ports would fetch the same price as Anglo-Irish store cattle. Other Grade A cattle would fetch 1d.,¹ a lb. dead weight less than corresponding U.K. stores.

Mr. Dillon said that the existing arrangement regarding Irish store cattle needed no adjustment.

[matter omitted]

Mr. Norton referred to the fact that as the economies of the two countries were so interlocked, some modification in the British attitude in regard to export prices for raw materials would seem justified.

Sir Stafford Cripps said the British Government subsidised the prices of many of these commodities in Great Britain. Mr. Norton reminded him that as Ireland was amongst Britain's oldest customers it would not be unreasonable to expect the fixation of a special price.

Sir Stafford Cripps said that discrimination of that kind would not be possible. Mr. MacBride pointed out that the Irish Government might charge an export price for Irish cattle.

Sir Stafford Cripps regarded this as an invalid argument, as he suggested that the 'export price' which Ireland might be likely to fix would be a scarcity price related to circumstances of abnormal times and which could not reasonably be regarded as a valid export price.

Mr. MacBride asked whether the whole question was not in reality a book-keeping one, whether the British authorities did not want to appear to discriminate.

Sir Stafford replied that the British wanted money as well as appearances. Mr. Morrissey suggested to the Chancellor that these price differentials in regard to raw materials constituted a subsidy. Mr. Dillon said that as a great deal of Irish labour was used in the production of British coal, it would not be unreasonable to provide Ireland with coal at reduced prices. Sir Stafford said he could not accept this argument. Mr. McGilligan pointed out that the British attitude meant that Ireland was going to get the worst of both worlds - the post-war and the pre-war worlds. In pre-war years Ireland was regarded as a domestic market in which British goods sold for low prices and competed with the products of Irish industry, and in the present post-war years Ireland was regarded as an export market where the prices of British goods were much higher than on the British home market.

Mr. Norton pointed out that Great Britain was selling cheap in Northern Ireland.

In reply to Mr. Morrissey, Sir Stafford Cripps and Mr. Wilson said that there was little hope of Britain being able to provide the Irish requirements of steel, that full British production was required for home purposes with the exception of a small amount which had to be sold abroad in certain countries in return for essential imports. Referring to coal, Sir Stafford said that the Coal Board hoped to re-arrange the prices for various categories of coal. This would enable Ireland to secure at least some cheaper coal. Mr. Dillon asked whether it would be possible to secure 50,000 tons of sulphate and 10,000 tons of Scotch oats. Mr. Williams agreed to consider this request.

Mr. Wilson said that a joint consideration by British and Irish officials of the mutual benefits of tourism from the point of view of securing hard currencies would be very desirable.

Sir Stafford Cripps informed Mr. Dillon that he did not think it would be possible for Ireland to secure maize through Great Britain. He said he would like, however, if cheese and butter were referred to in the proposed new Agreement. Cheese would be preferable from the British point of view to chocolate crumb.

Sir Stafford Cripps said that there was one last point on his Agenda for the meeting.

The position in regard to the hard currency and gold resources of the sterling area was getting progressively worse. Inflation in the U.S.A. had reduced the value of the dollar. It would be necessary to maintain hard currency reserves of the sterling area so as to have some available when the European Recovery Programme plan came to an end. The balance of payments position in the U.S.A. would in due course constitute a most difficult problem. U.S.A. would be required to consume not only its own goods but take from abroad goods in payment of debts in foreign countries. By the time the European Recovery Plan came to an end, Britain would require to have a substantial favourable balance of trade.

Sir Stafford Cripps said that at present Great Britain had in fact no dollars. All hard currency expenditure involved transfers of gold. At the moment Britain was borrowing from the International Monetary Fund and awaiting E.R.P. payments so as to reimburse the Bank. As far as Ireland was concerned any dollars required would have to come from the European Recovery Programme or from the International Monetary Fund. During last year's negotiations with the Irish authorities the British Government had indicated the desirability of Ireland joining the International Monetary Fund for the purpose of obtaining dollars.² Sir Stafford then exhorted Ireland to develop exports to dollar countries. In short he said, Ireland would from the 30th June 1948 be required to find all its necessary dollars from three sources:

1. The European Recovery Allocation.
2. Exports.
3. The International Monetary Fund.

Mr. McGilligan said that he had not known that the International Monetary Fund would be prepared to provide funds for countries receiving aid under the European Recovery Programme. It was for this reason that Ireland was inclined to think that a contribution to the Fund would not be worth while. Sir Stafford said that there was a misunderstanding here. There was no reason known to him why Ireland could not obtain dollars from the International Monetary Fund, as well as under the Marshall Plan. (Note. Sir Stafford Cripps corrected this statement at a later discussion.) He added that the position of Great Britain was such now that there were no dollars available. In fact current British expenditure was based on the assumption that reimbursement in dollars would be possible to the International Monetary Fund.

In reply to Mr. Dillon, Sir Stafford Cripps said that he did not know how Ireland could find the hard currency necessary for the purchase of maize. Mr. Strachey suggested that Ireland should hold out for as long as possible before asking for maize in the hope that the price might fall and that sterling might possibly be accepted then.

The Taoiseach said that Sir Stafford Cripps' statement regarding the discontinuance of Ireland's participation in the sterling area hard currency resources was a bomb shell, and that he would like to have an opportunity of considering it with his Ministers before discussing it with the British representatives.

Mr. McElligott intervened to point out that dollars allocated to Ireland under the E.R.P. would not be sufficient for the country's requirements. There had, he thought, always been an understanding that as whatever funds Ireland obtained under E.R.P. would be insufficient for normal dollar expenditure, limited convertibility of sterling would operate as well. In fact the Department of Finance had correspondence with the Treasury relating to the linking up of E.R.P. allocations with the continuance of Ireland's relationship with the sterling area in connection with the supply of an allocation of dollars.

Sir Stafford Cripps said that if conditions improved limited convertibility might possibly be restored. In reply to Mr. MacBride who said that the Irish Delegation was shocked to hear that the British dollar position had reached the serious state just outlined, Sir Stafford said that the recent Economic Survey in his opinion pointed to the dangerous trend. He said that the figure of £552m. as representing British dollar resources was now out of date. The figures published at the end of April showed the dollar resources to be very much lower and that the June figures would be still more unsatisfactory.

The Taoiseach thanked the British Delegation and expressed appreciation of the sympathetic manner in which the Irish Delegation had been received.

Sir Stafford reciprocated the Taoiseach's expression of thanks and said that the discussions had been of value to both countries and promised, he hoped, more favourable and economic co-operation in the future.

The next meeting between the Irish and British Ministers was arranged for 10 p.m., Friday, 18th June, 1948, in the Taoiseach's suite at the Piccadilly Hotel, London.