In reply to the request for an estimate of our dollar requirements Mr. McElligott handed to Mr. Rowe-Dutton copies of the statement entitled 'Estimate of Foreign Exchange Requirements' for the nine months beginning 1st October, 1947',¹ which showed the net total requirements of all foreign currencies at £55.3 mil., including a net dollar requirement of £23.9 mil. Mr. Rowe-Dutton, having looked at the statement, indicated that he found the figures alarming. Mr. McElligott pointed out that the possibility of reduction depended on whether the British departments with whom discussions were proceeding would be able to provide necessary supplies for Ireland, and, by price adjustments and otherwise create better terms of trade. In this connection he expressed grave disappointment at the negative response by the Ministry of Fuel and Power to the request for British coal. This item alone accounted for £2.72 mill. of dollars during the nine months covered by the Estimate of Requirements. Another large item of dollar expenditure which could be averted if British supplies were made available was the purchase of textiles in the dollar area. Mr. Rowe-Dutton said that he fully realised the importance of the consideration mentioned by Mr. McElligott and that the Treasury would do all they could to help the desired objective. He went on to say, however, that it was important to recognise that saving in dollar expenditure must be achieved. The British, he said, were adopting policies which hurt them very much. They had to cut expenditure on raw materials for industry as well as on food for domestic consumption. They hoped that by adopting measures of restriction and delay in the whole field of dollar expenditure they would be able to tidy over the difficulties until some form of American aid via the Marshall Plan would be forthcoming. His remarks on this general aspect of the problem followed closely the statements which had been made by the Chancellor of the Exchequer at the initial meeting.

Mr. Rowe-Dutton enquired as to our general Balance of Payments position. He thought that we might be somewhat unhappy on that score and that the import policy reflected in the Estimate of Foreign Exchange Requirements might mean the continuance of an undesirable trend. Mr. McElligott replied that in 1946 we had in fact had a surplus of £20,000,000 on the Balance of Payments and that while there had been a fairly large excess of visible imports over visible exports in the first half of 1947 it was hoped that the increase in invisible exports which accrued mainly in the second half of the year from tourist traffic, etc. would counter-balance the movement shown in the figures for the first half of the year. In any event, even if there was a temporary disequilibrium in the Balance of Payments it would have to be viewed in relation

•  to the large surpluses that had emerged during the immediately preceding years and
• to the need for substantial imports of commodities essential to the rehabilitation of industry and agriculture.

He added that there was an important consideration which separated the circumstances of Ireland from those of Britain. The latter, in taking measures of austerity to reduce domestic consumption, were doing so not merely to save dollar expenditure but to increase exports which would be directed to building up new markets and assets abroad. Painful austerity in Ireland would not yield the same material benefits in the future.

Mr. Rowe-Dutton suggested that there might be some opportunity for reducing the total of our requirements. He did not wish to say to us that we should not spend so much on this or that but the plain fact must be recognised that unless we did restrict our dollar purchases and review programmes of imports with a view to postponement, the dollars to meet our requirements might not be there at all within a very short time. He urged us again to approach the problem from the position that only X amount of dollars could, in fact, be made available to us, so that we might cut our cloth according to our measure. Within that amount, whatever it might be, no one would seek to question our discretion as to the objects on which we saw fit to expend dollars. Mr. Rowe-Dutton said that the other countries in the sterling area had approached the problem of dollar expenditure from that angle and that the information at his disposal indicated that they would be in a position to save and earn dollars to a very striking degree. It was in relation to that hopeful and healthy sign that he found our demands alarming.

Mr. Rowe-Dutton referred to the contemplated expenditure on tobacco purchases and suggested that it might be possible to reduce this by eating into our present stocks which represented 71 weeks' supply as at 31st August last. The British were aiming at a 36 weeks' stock position. He asked the Irish delegation to consider whether they could not restrict future purchases and suggested that perhaps 20 weeks' supply out of existing stocks could be used in lieu of new purchases of the same amount.

Mr. Rowe-Dutton said that he was apprehensive lest an absence of response on the Irish side to the suggestion for retrenchment or reductions in their present estimates of dollar requirements might prejudice the possibility of fruitful results from the recent talks between Ministers which are now being followed up at the official level. He added that recently some of his Ministers had shown a disposition to look askance at the demands of the other sterling area countries on the dollar and gold reserves of the UK and had expressed doubt as to whether the sterling area arrangement was in fact a good one from the point of view of the UK. Mr. McElligott said that he was equally cognisant of the fact that the dollar programme could not be divorced from the other discussions regarding supplies and trade matters as between Ireland and the UK, but that the position should be viewed rather in the reverse way to that expressed by Mr. Rowe-Dutton, namely, that a successful outcome to the bilateral discussions would make it possible to approach the problem of retrenching on Irish dollar expenditure in a practical fashion. If the outcome of these talks proved fruitful it would be possible to have a further discussion on the estimate of dollar requirements which had been submitted that day. In connection with such a further talk on dollar expenditure, it would be important from the Irish side to have definite and detailed information as to the extent and objects of UK dollar expenditure and the extent to which they had, in fact, reduced preconceived targets of expenditure for the purpose of meeting the dollar crisis. The Irish delegation would also like to see similar particulars in relation to the other countries of the sterling area. Mr. Rowe-Dutton said that he would furnish the information asked for in relation to the UK. He was doubtful whether he could give similar information in regard to other countries just at the moment. Mr. Rowe-Dutton said that for the purposes of comparison with the Estimate of Requirements which we had submitted he would be glad if he could, without inconvenience, be furnished with a statement of foreign exchange expenditure over a past period of nine or twelve months, set out under the same headings and including foreign exchange spent on our behalf by UK merchants and firms.