That is the only effect that is measurable—where a product previously had a tariff on it and the tariff was removed.
There is a possible indirect effect which we would not yet have benefited from to any significant degree, for obvious reasons. You could visualise some foreign industry thinking of coming to Ireland which, erroneously, was misled by the agreement into thinking that conditions had changed in some way and that it would be better if they came to Ireland, and coming where they would not previously have come. If so, it is a confidence trick, because the agreement removed tariffs from synthetic fibres, and any increases in these exports to Britain are certainly due to the agreement, but not other tariffs. In regard to the exports of industrial goods, the agreement almost undermined people's confidence, when, as we know, the import levy was not being removed and was not removed. If I had been a foreign industrialist I would have been suspicious of claims by the Government that there could be no longer restrictions of Irish imports to Britain, bearing in mind the import levy still in force. But I might have been persuaded by the Government that we had this written into the agreement and that this meant that it could never happen again. Maybe some industrialist was persuaded by the Government that it could never happen again, that Irish exports to Britain could not ever again be limited by non-quantitative measures of restriction imposed by the British and perhaps we have some industry which came here because the Government misled it to that effect.
Apart fom that, I cannot see any indirect effects from the agreement other than ones based on a misconception of the degree of access that these goods—I am talking about industrial goods—would have. If the Minister likes to suggest that there are some other exports which would not have been there or would not have been of this magnitude but for the agreement, I should like him to expand in detail when he is replying because maybe I have overlooked something. If the Minister does not expand and does not pinpoint the cases in question, as I am prepared to pinpoint the amounts which have accrued due to the removal of the synthetic fibre duty, I think we can take it that the claims that the agreement has been responsible for anything more than five per cent of the increase in exports are spurious. The synthetic fibre duty removal seems to have accounted for something like £2 million—it may be a bit more than that—of exports. I last calculated this in February of this year—nine months ago. At that time I got a figure of about £1¼ to £1½ million increase in exports in the first 12 months due to the removal of the duty and a figure of over £2 million for the latest period for which I could get figures. I am sure that has expanded since. I am quite clear that the removal of the synthetic fibre duty is, in its own narrow field, extremely important. My own assessment at the time the agreement was signed, which has been validated by subsequent events, is that it would benefit us to the tune of £1½ million of extra exports in the first year, by £3 million in the second year, and so on. As far as I can see, it is working out something like that. There are now between, perhaps, £2 million and £3 million of exports from this country of goods containing synthetic fibres that would not have been exported previously. The articles involved are textiles, mainly yarn and woven fabrics, with some synthetic fibres and knitted fabrics, women's knitwear and women's underwear, and nylons mainly — not significantly women's outerwear or men's outerwear, the increase in the exports of which does not seem to have been significantly affected by the agreement; they are increasing but only at the same rate as, for example, in the case of women's outerwear, as women's outerwear containing woollen fabrics. So, there is no indication of an acceleration in the growth of exports of women's outerwear of fabrics containing synthetics.
That is the position as I see it. If the Minister has anything to add we shall hear him with great interest. The gains in the agreement appear to be £4 million for agriculture—that is the sum total beyond which we can look forward to no further increase. These are of limited amounts, limited to a specific volume of exports plus whatever indirect benefits these may have on agricultural output because of the extra security of access afforded and there is no evidence that this has had any affect so far, plus the effects on industry which seem to consist of a growth of £1½ million a year, continuing, certainly, in the indefinite future, giving a picture after ten years of perhaps £10 million to £15 million in synthetic fibres, perhaps £4 million of agricultural exports, perhaps £20 million altogether. If the agreement did have some effect on the Irish farmers of encouraging them to produce more, that would of course be greater, although we have no evidence that it had that effect.
What are the losses under the agreement? Here I employed, in a very conservative manner, the Government's own Second Programme figures to establish what the losses would be. I examined the share of the Irish market absorbed by imports in 1960 and in 1964 and then, projecting forward to 1975, I made some assessment of what the import share of the Irish market would be if the ordinary natural process of increasing import content continued up to 1975 on the same basis as between 1960 and 1964, a period during which there were no tariff reductions, or no significant tariff reductions, as the first two ten per cent unilateral cuts had no effect on imports. Comparing the import share one would be likely to have in 1975 on the basis of no freeing of trade, with the import share forecast in the Second Programme projection for 1970, one got a picture of what the increased import share would be due to the freeing of trade, and applying that to the total size of the Irish market in the main products in 1975, projected forward from 1970 at the same rate of growth as forecast in the Second Programme, one got a figure which gave a picture for the five main categories of goods (excluding those where there was no sign that the freeing of trade would have a significant impact), a figure of £55 million British gain, that is, £55 million of Irish goods displaced by British goods in the Irish market. That figure is conservative because of the method of calculation. I confined myself to the five main categories of goods, omitting others where the effect of freeing of trade would be fairly small and not wanting, therefore, to press the calculation. This is a cautious and conservative calculation which is, however, subject to one qualification, that the Government have the power in 1970 to reimpose tariffs on three per cent of British imports at that time.
Such a re-imposition could affect seven or eight per cent of Irish industry if the more sensitive goods were chosen so that I suggested that the figure of £55 million should be written down to —I actually suggested a figure of £45 million—but I think £50 million would really probably be about right. Therefore, using information from the Second Programme, using the results of the consultations with industry, the figures the Government itself uses for the purpose of planning, and using them in the most conservative and cautious way, and rounding down-wards, and taking account of any factor that might benefit the Government, and leaving out the sectors where free trade effects would be negligible, one gets a picture of the order of £50 million worth of Irish goods displaced by British goods under this agreement, in addition to which the British Government can look forward to further gains at the expense of foreign imports to Ireland because, as the preferential margin is increased, as tariffs on British goods disappear while we retain the tariffs on the goods of other countries at some reduced level, Britain will gain at the expense of other suppliers to Ireland.
I assess that crudely, and I say "crudely" advisedly, at £25 million, using our experience of the effect on trade with Britain of the imposition of import levies in 1956, which increased Britain's preferential margin in the Irish market, at the same time as imposing a duty on British goods. That gives us something to go on. I crudely assess the benefit to Britain through the diversion of trade at £25 million. That figure is very much an estimate unlike the other which is pretty firmly based. I do not attach very precise importance to it. But there is an addition to Britain's gain of £50 million at the expense of Irish industrialists, a gain for Britain at the expense of importers to this country from other countries, a gain of some significant magnitude. That is what is to be set against the £15 million to £20 million gain by this country.
Those are the figures. They are on the record. Those are figures that have been on record since January, 1966 and they have never been controverted or refuted. No Fianna Fáil spokesman or Minister and no Fianna Fáil publicity agent, or economist, if such there be, has written or spoken anywhere to my knowledge in contradiction of these figures or has criticised them in any way or has done anything other than say that they are only "estimates" as if estimates were things that the Government did not make and did not rely on for the purpose of planning. That is the case in regard to this agreement.
That is why I hope that what the Government is doing at the moment is seeking, not a full-scale review but a revision of the agreement, not because the £50 million losses to Irish industry would be fatal to industry as a whole —they would be fatal to many firms and fatal to many jobs but that would have to be accepted if there were compensating gains elsewhere. If we had gained for Irish agriculture the kind of gains that could be secured within the institutional structure of EEC that price would have had to be paid and will have to be paid at some point in time; but it is wrong that Irish industry should suffer those losses not for the sake of any compensating gains but for the purpose of expanding one industry only, the synthetic fibre industry, and for £4 million for Irish agriculture. We are subsidising Irish agriculture to the tune of £75 million at the moment and for an extra £4 million, that industry should suffer in this way is intolerable. This agreement is intolerable and should never have been signed. A Government which knew its business would never in fact have signed it and a Government which knew its business now would get out of this agreement and would use this breach as a means of getting out of it as soon as possible.
One wonders why such an agreement was signed. People have said this to me. They have read my articles and said to me that they had seen my figures and that they seemed to make sense but they asked: "How could the Government have signed such an agreement?" This is a fair question and requires and answer. It is not easy to answer but I shall give my reconstruction of the events leading up to it. This may be wrong but one has to try to find some—I nearly said excuse—some explanation of the Government's action.
I have some experience of negotiation with the British, not with the British Government but with British people in my capacity as an official of a State company many years ago. I was impressed with the British method of negotiation which is exactly opposite to the Irish method and consequently tends to confuse us. The British method is to offer twice as much as they intend to give in the first instance, thereby trapping you into negotiations, knowing that if those negotiations have to be broken off subsequently such a breach will have a profound effect in Ireland, where it will be regarded as a serious setback for the Government or the State company concerned, as we were in Aer Lingus at that time, and knowing that this would be unacceptable to public opinion which is something that the Government or the State company would wish to avoid. Therefore, as the original offer is watered down and eroded by the British negotiators, the Irish negotiators are kept on the hook and at no stage can they feel that they can break off the negotiations, whereas if the negotiations were broken off public opinion in Britain would never even hear about it. It would be just three lines at the bottom of a page, saying that negotiations with Ireland on such-and-such had been broken off. There is an inherent imbalance in negotiation between these two countries. It makes any friendly negotiation very difficult but it is rendered difficult to the point of danger by the use of this technique by the British, if any Irish Government or body falls for it.
It seems to me that what happened in 1964 was that the British imposed the levy and the Taoiseach, Deputy Lemass at that time, dashed over to London— he got there rather more quickly than did the present Taoiseach on this occasion—and called on the British to drop this import levy so far as Ireland is concerned. But Mr. Wilson is a clever gentleman, even if not always trustworthy, and Mr. Wilson said: "We cannot do that but we will fix you up. We will not impose anti-dumping duties if you like to subsidise your exports at your expense." A wonderful concession. The Taoiseach came back to Ireland saying that all would be well on that front. Then Mr. Wilson said: "Were you not talking to us about some kind of free trade arrangement? You raised it last year with the Tories. We have not got round to it yet. The Tories were rather difficult, but of course we are very much attached to Ireland and I think we could look into this agreement for you."
And so we were launched on this negotiation in the expectation that it would be a genuine free-trade area between Ireland and Britain under which our industries would, of course, be affected and would suffer and would be opened up to free trade, but under which—and this was the great aim of Irish policy and had been since Deputy Lemass initiated his proposal in 1960—we would fully share in the British deficiency payments system and no longer be exploited by Britain through the mechanism of our agricultural policy. This was the great aim and one for which strong arguments could be made. Many people would be against it on the grounds that it would tie us too closely to England or increase our dependence on Britain too much. Such arguments have great merit and are ones about which I feel very strongly myself but at least one could have argued for such an agreement because the balance of advantage would have been reasonably even. We would have gained perhaps £50 million for our farmers and Britain would have gained £50 million for her industrialists and it would have been a balanced agreement.
But what happened? As the negotiations proceeded clearly this idea of our participating in the British agricultural policy, and in the benefits of it, was eroded and eroded, until at the end of it all we got only £4 million out of it. That is the size of it. Our negotiators did not break off the negotiations when that happened. They were kept on the hook until eventually they signed an agreement which gave to Britain three times as much as we got out of it, an agreement which condemns our industry to face the severity of free trade without ensuring for them or for Irish agriculture any compensating benefits.
We were fooled, gentlemen, and the Government had not the courage to come back and tell the Irish people at some point that these negotiations were not succeeding. Neither had they the courage nor the ability—I do not know which—to get the negotiations on an equal footing again and say to the British: "If you are going to erode these benefits of Irish participation in British agricultural policy in this way we cannot commit ourselves to the complete free trade area. It will have to be an incomplete or partial agreement." No doubt that may have been hinted at, at some point in the negotiations but the British had only to say: "In that case, of course, we are precluded under GATT from giving you the benefit of the elimination of duty on synthetic fibres. That requires a complete free trade area." Was this card played? Did our people fall for it?
It is important for us, very important, to have free access for our synthetic fibre products to Britain but is it important enough that one industry should secure this advantage? Is it important enough for the whole—I should not say whole, but four-fifths of Irish industry, because food processing industries remain protected—would that gain be enough to justify that damage to Irish industry? Of course it is not. I have already said there were no proportionate compensating benefits for Irish agriculture. I think that is how this agreement came to be signed. It is necessary to construct some such picture of the negotiations to explain the intolerable results of these negotiations.
We on this side of the House have been challenged to say what alternative was there. We keep on being challenged. The fact that we put forward alternatives at the time seems to be completely ignored. There are several possible alternatives, some of them blind alleys, but the alternative which we should have proceeded towards would have been an agreement under which we would have reduced our tariffs on British goods though not the whole way in return for securing participation in British agricultural policy to a degree which would compensate for the reduction in our tariffs. Such an agreement not involving a sufficient freeing of trade to be technically a free trade area under GATT would not have been sufficient I suspect to permit the British to eliminate the synthetic fibre duty. That, I think, we would have had to give up, but in return we would have, and should have, got far greater benefits for agriculture than we got, far greater than this £4 million, which is all we secured and in return we should have conceded far less on the industrial front and had an incomplete free trade area with the reduction in tariffs rather than a complete one.
We had room for bargaining here because we would be entitled under GATT, as the White Paper on the agreement mentions, to reduce our tariffs on British and other goods by the same absolute amount, keeping the margin between them the same which, of course, would have increased the preference for British goods. Our tariffs could have been reduced. For example, if you had a tariff of 60 per cent, 40 per cent, that could have been reduced 30 per cent, 10 per cent, half. That would be in accordance with GATT but would have given Britain a far more effective preferential margin because a 10 per cent tariff on many goods is really not a very effective protection but allows a significant volume of imports, whereas a 30 per cent tariff would continue to keep out completely, or virtually completely, imports from the Continent. Such an arrangement could, therefore, have given Britain very substantial gains in the Irish market and would still have, however, given Irish industry a measure of protection and something which we could have given to Britain because we were not members of GATT and in return Britain should have given us benefits for Irish agriculture, compensating for the gains Britain was securing in our market but we did not secure that. We did not secure it partly for negotiating reasons I have mentioned, partly because we were fooled in negotiations, and partly also, perhaps, because of an excessive preoccupation of some of our Ministers and civil servants with preparing Irish industry for free trade.
Nobody has been more concerned about that than I. I have, indeed, for the last 10 years been involved in one way or another with this process. One of the main reasons why I left my former employment with Aer Lingus was because I hoped to help in this process of preparing Irish industry for free trade as that is a specific objective. We must not allow ourselves to be completely dominated by this. It is not preparing Irish industry for free trade with EEC to eliminate tariffs on goods from Britain which would of course hit the British supplier to this country even if we were members of the EEC. You do not prepare for something by in fact doing something which incurs all the disadvantages or virtually all the disadvantages, leaving virtually nothing else to follow.
Indeed, Irish industry takes the view, as was clear from the review by the Federation of Irish Industries of the effect of the free trade area, that the complete freeing of trade with Britain over a range of products is more damaging to Irish industry than the complete freeing of trade with the EEC because a number of Irish industries believed—in fact the greater proportion of Irish industries believed—as far as we can judge from the survey, if you have trade with Britain then British industry, not having any alternative market open to it at that point, would concentrate all its efforts on this country; whereas if we had free trade with the EEC as a whole the attention of British industries would be largely diverted to the Continent, its competitive effort in the Irish market would be less and that lesser competitive effort in the Irish market would more than compensate for the small extra margin of competition from the Continent. For that reason it was the view of Irish industry that the freeing of trade with Britain alone would be more damaging, to the tune of about seven per cent, than the freeing of trade with the whole of the EEC.
You do not prepare for something by doing something which is more damaging even than the thing you are preparing for. That is not a preparation. This idea of preparing Irish industry for free trade, of imposing some kind of pressures on it, is a good idea in itself, one which the Government has probably been pursuing for the past 10 years; but it is one which we could have a little too much of, and in the desire to achieve this, in the weakness of our negotiating position with Britain and in the ineffective way we bargained with Britain, we have landed ourselves with an agreement which is intolerably burdensome on this country.
I come, finally, to the general issue of dependence on Britain. As I said, you can make a case for an agreement with Britain, giving equal benefits to both sides, even if this intensifies trade relations and increases our dependence. Many would question if that is desirable, but you can make a respectable case for it, a case which becomes the more respectable the more convinced you are that EEC membership is a reality or will become a reality. One cannot, however, make the same case for an agreement which not only increases dependence on Britain but which imposes far greater burdens on this country than we secured in the way of advantages. But, speaking broadly about our relations with Britain, it must be seen that we have not handled them well. Looking back over the record in the 1920's and 1930's, despite the mistakes we made we handled our relations with Britain extremely well, very well I may say so, and without being partisan, in the 1920's and on the whole, taking the long view, also in the 1930's, although one can make many criticisms of the way the economic war was initiated, one must be fair in saying the way it was terminated was very satisfactory, whatever about the way it was initiated and carried on.
In the 1920s this country led the Commonwealth in seeking an evolution of the constitutional position of Commonwealth countries. We had quite a job in bringing some of the other countries with us on this path to the Statute of Westminister which gave us true sovereignty which we had not got.
