Dear Paddy,
While in Paris, members of the French Government spoke to me about the difficulties they were having in regard to trade with Ireland and complained that our Department of Finance seemed to treat currency applications in regard to exports from France less favourably than applications from any other countries. They made it quite clear that this was due to pressure put on our Department of Finance by the British Treasury - in their view.

France has an adverse balance with the sterling area, of some £70 millions per year; for some reason Britain does not wish to allow her to reduce this balance.

The French Minister¹ has discussed the matter several times with me since my return, and is very worried about the position, as the trade between France and Ireland shows a steady decline. He points out that in February of this year our imports had fallen to £76,788 compared with £176,192 for the corresponding month of last year, while our imports from other countries have, generally speaking, increased very considerably.

I attach hereto copy of the note² he left with me showing the value of our imports from different countries. He complains that the Department of Finance has blocked even imports of a trifling nature and feels that there is a definite policy of discriminating against France. He made the following points in favour of permitting trade on a larger scale between ourselves and France:-

1. Since the devaluation of the Franc, France can export many of the commodities that we buy in other countries much cheaper and that, therefore, insofar as these commodities are concerned it would help a reduction in the cost of living.
2. That France can supply some of the commodities that we buy from dollar areas, for which we have to pay in dollars. He instances motor cars and points out that French motor cars could be sold here at a much lower price than either British or American cars.
3. That if French exports were facilitated we should be able to develop an export trade with France ourselves and that the French Government would facilitate us.
4. That of European countries, France is the one that is nearest to us and is the one that has the closest links with us.
5. That, under the E.R.P. Agreement we are all bound to facilitate trade among the E.R.P. countries.

Simultaneously with representations made by the French Minister, I have received representations from a firm who wish to arrange for the export of craw fish to France and have been held up because of the unsatisfactory trading position. I have taken this up with the French Minister and hope that it will be possible to arrange for the export of these on a fairly large scale.

Representations were also made to me to-day in connection with a proposal to assemble cheap French cars here which would be put on the market at about £220 each, subject to sanction from the Department of Finance. My Department has also been approached in connection with the possibility of exporting high quality handwoven tweeds to France, but again, considerable difficulties are proving an obstacle.

It is suggested by the French Minister that, while in Paris, I should have a discussion with members of the French Government concerning a Trade Treaty or at least, some temporary arrangement for the exchange of goods.

The preparation of a Trade Treaty would take some considerable time and on account of the amount of work at present in hands would not be possible for some time to come. I do feel, however, that from the political point of view, as well as from our own economic point of view, we should have some understanding with the French on trade. It is to our advantage to buy from France rather than from dollar areas and on account of the devaluation of the franc we could purchase much more cheaply than elsewhere. From a political and E.R.P. point of view, I am anxious that we should have the good will of the French, who at present feel rather sore with us on account of the matters mentioned.

Subject to your views, I would, therefore, suggest that we should enter into an informal trading agreement with France for the next twelve months, whereby we would fix a ceiling for their exports to us and determine the particular commodities in respect of which we would facilitate imports. The ceiling I would suggest would be £3￿ millions for the year. The list of commodities would be determined with the Department of Industry and Commerce. These, so far as possible, should exclude luxury goods.

I am rather anxious to know from you before I leave for Paris, at the week-end whether there is any objection in principle to such an arrangement.