Dear Mr. Thomas,

I have received your letter of September 14th.¹

I am at a loss to understand the reasons for your insistence that the Treaty and the Irish Free State's membership of the British Commonwealth must be accepted as the basis of any discussion directed to the termination of the present deadlock, since these matters have not been at issue in the financial dispute between the two Governments.

Arising out of the situation created by the Treaty, the present Government of the Irish Free State assumed office as the Government of one of the co-equal States of the British Commonwealth, and as an Administration we are bound by pledges to our people which preclude secession without an express mandate from the electors. Our views as to the injustice and unwisdom of provisions of the Treaty were indicated in my Despatch of April 5th,² but these matters are not an issue in the present dispute.

I observe with regret that the assurance that my Government is willing to deposit the moneys in dispute with the Bank for International Settlements in the event of negotiations being initiated on the basis of a truce has brought forth one more negative response from you. Your objection to the condition that the deposit should be returned to the Irish Free State if the negotiations failed, is, to my mind, wholly unreasonable. You surely do not suggest that the money should be left indefinitely on deposit after the discussions had been abandoned. Is it, then, your opinion that a mere refusal of the British Government to come to an agreement should decide the issue in favour of Great Britain? To agree to negotiations on such terms would obviously be the surrender of our claims at the outset.

I must deny your statement that I have rejected all proposals of the British Government for a solution of the deadlock without suggesting practicable alternatives. Nor can I accept your disclaimer of responsibility for the continuance of the impasse. When arbitration was suggested, I lost no time in declaring my Government's willingness, and it was not I but your Government that destroyed the hope of a solution in that direction by insisting on an artificial restriction on the selection of arbitrators. When the British Government refused to consent to an unrestricted choice of our nominees on the tribunal, I declared the readiness of the Irish Free State to seek agreement by negotiation, only to be met by a new difficulty with regard to the disposal of the moneys during the period of discussions. As a way out of this difficulty I accepted the suggestion of the third party referred to in my last letter³ that, in the event of a truce for the period of the negotiations, the Irish Free State should deposit the moneys with the Bank for International Settlements. This also has been rejected.

Your letter contains a further proposal; that negotiations be initiated on the basis of the position as it is, without any preliminary tariff truce. In the hope of securing a satisfactory termination of the dispute, and to prevent the further embitterment of feeling which the continuance of the present situation is certain to engender, the Government of the Irish Free State accepts this proposal and is prepared to appoint its representatives forthwith. At the same time, I feel bound to repeat, what I have already said frequently in public, that in my opinion the operation of the discriminatory tariffs during the period of the discussions must tend to create conditions unfavourable to a settlement. The Government of the Irish Free State must envisage the severance of all normal trading relations between the two countries as a possible development of the present situation. Anxious as we are to avoid this development, it is our duty to take steps to adjust our economic life to meet it. If the special tariffs continue, these steps may have to be taken even during the progress of the negotiations.