I move:
That a supplementary sum not exceeding £20 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of March, 1965, for the Salaries and Expenses of the Office of the Minister for Industry and Commerce, including certain Services administered by that Office, and for payment of Sundry Grants-in-Aid.
I propose to begin this statement by giving the Dáil an account of the course of events since the announcement by the British Government of measures to cope with their balance of payments problem. The account begins with the receipt by me of a message from the British Prime Minister, dated Sunday, October 25th, and which was received through the British Ambassador on the afternoon of that date. This message incorporated the text of an announcement to be made the next day by the British Government. I met the British Ambassador on the next day, October 26th, and I expressed to him the Government's immediate and adverse reaction to the application to the products of this country of the 15 per cent surcharge upon industrial imports to Britain in contravention of our trade agreements and in disregard of its exceptionally severe effect on Irish trade. On the same day I sent a personal message to the British Prime Minister reiterating these views and requesting immediate discussions. I received a reply from the British Prime Minister on Friday, October 30th, proposing a meeting in London on Thursday, November 5th.
Accompanied by the Minister for Industry and Commerce, I went to London and met the British Prime Minister, who was accompanied by a number of his colleagues and advisers. At this meeting I expressed a very strong protest at the setting aside of our trade agreement rights. I pointed out that the new British special charge affected Irish industry and Irish industrial exports much more seriously than the exports of other countries. It is probably not necessary to restate here the figures which support this assertion. The British surcharge applies to 80 per cent of all Irish exports of the goods affected by it, and to 21 per cent of Ireland's total exports. This figure falls to be compared with five per cent in the case of other West European countries, whether in the European Economic Community or the European Free Trade Area, two and a half per cent in the case of Commonwealth countries and two and a half per cent in the case of the United States of America. The only country in the world whose export business is affected in any degree comparable to ours is Norway, and about ten per cent of all Norway's total export trade is caught by the surcharge.
I pointed out, on the strength of these figures, that the apparent non-discriminatory application of the surcharge to British imports from all sources, and the expressed desire of the British Government to apply it in a non-discriminatory way, did not prevent it from having an effect on our case which, in practice, was highly discriminatory to our detriment. Having regard to the fact that trade between Ireland and Britain yields a substantial and growing balance in Britain's favour and that restrictions on Irish trade are totally irrelevant to the British problem of protecting their gold and dollar reserves, I urged that the surcharge should not apply at all to Irish products.
The British Ministers conceded that their action contravened our trade agreements and expressed their regret. They pleaded the gravity of the circumstances which forced this course on them. They said they had found on taking office after their General Election that the British trade position was much worse than they had previously thought and that, because something had to be done urgently, they had chosen the temporary surcharge as the best method immediately available to them. They pointed out they were already under considerable pressure about the surcharge from other countries as well as ourselves, including Commonwealth countries. While not contesting that it would operate with exceptional severity in our case, they professed their inability to exempt Irish trade from its operations, which they claimed would greatly increase their difficulties with other countries, particularly countries of the Commonwealth and of the European Free Trade area.
In the course of the discussions I pointed out that because of our large sterling holdings we have a keen interest in the success of their efforts to protect their reserves and to avoid any risk of the devalution of sterling. I risk of the devaluation of sterling. I said that, had we the opportunity of prior discussions, we would have been prepared to consider with them methods by which we could contribute to the easement of Britain's real problem—the problem of the strain on their gold and dollar reserves — and were still prepared to do this if the surcharge on our exports was removed. We suggested various alternatives to the import levy as it is now operated, but all these proposals encountered the difficulty of the British Government in making any breach in the general application of the surcharge.
It was clear to me that the decision of the British Government on this point could not be shaken by any arguments or counter proposals which we put forward, although there were promises given to consider our special circumstances when changes became practicable. The British Ministers reiterated the temporary nature of the charges and their intention to amend, reduce and eliminate them as soon as possible. No date for their termination was however mentioned.
I have expressed the view that any change in the incidence of the charges within the next six months does not seem likely. When deciding on our measures to meet this situation it would be useful for us to have a definite period in mind. At present we are proceeding on the assumption that we must provide for a minimum period of six months. It is possible the charges will operate for a longer time, either at their present or a reduced rate, and we do not intend therefore to put any time limit on the application of the measures which are contemplated.
We were much concerned with the longer term implications of the abrupt, unilateral termination of our trade agreement rights. We realised that the confidence of industrial firms, which are planning to expand their operations and to set up new enterprises, in their continued right of access to the British market would be damaged. This damage was, of course, done when the British announcement was made and full confidence is unlikely to be restored for some years. Nevertheless, we considered it desirable to try to minimise this damage to the greatest extent possible by seeking a commitment from the British Government to restore our full trade agreement rights immediately the special charges are ended. They gave us the assurance we sought in this regard and agreed also to set it out in the official communiqué issued after our talks. The reference in that communiqué to mutual willingness to explore the possibilities of a new trade agreement, to which I shall refer again, has the advantage of reinforcing this assurance.
Irish industrialists and those planning to set up new industrial enterprises here can, I believe, proceed to do so in the confidence that, when this temporary difficulty is terminated, their trading position in the British market will be not less favourable than it was heretofore. The Irish Government are, indeed, prepared to underwrite this assurance in any case where a firm may be hesitating about proceeding with its development plans until the British surcharge is ended. There are many new industrial projects in the pipe-line and we want to keep them moving, because, collectively, they represent a very considerable expansion of Irish industrial activities.
It was natural enough that some people in Ireland—and not only in Ireland—reacted to the British special charges by urging retaliation. In this regard, the question which must be posed is: how would retaliation benefit this country? On the reasonable assumption that, subject to the effect of the preferential rate where our tariffs operate, we buy only British goods which are obtainable cheaper or more conveniently in Britain than elsewhere, the imposition by us of special charges on British exports to Ireland as a retaliatory measure would force up the cost of industrial materials and equipment used in Ireland and cause prices here to rise generally—as I believe the special charges in Britain will cause prices to rise in that country if they are maintained for much longer than six months. Our capacity to maintain exports to Britain or to increase exports to other countries would be reduced and our position would be weakened and not strengthened.
The only circumstance in which retaliatory action of this kind would make sense would be if it could lead to the possibility of a withdrawal of the British special charge on Irish products. I do not think it would have this result. If the British Government were to exempt our products from these charges because we took retaliatory action they would be tempting all other countries to do the same. There would, in my judgement, be no prospect of forcing the hands of the British Government in this way. This situation would change, however, if Britain acted in a manner which was clearly discriminatory against us by granting any exemption from the charge to other countries and not to Ireland. I consider that I got an assurance that the special circumstances of Irish trade —the exceptional damage done to us by the surcharge—will produce an easement of the position for us, whatever form that easement may take, as soon as any change in the scope or the rate of the British charges is decided on.
Questions are being asked: what sense is there in agreements which are not kept? or, what is the point of negotiating a new agreement in view of this recent experience? There is no simple or convincing answer to these questions. Asking them does not give us any useful guidance as to our future policy. Until bilateral trade agreements can be substituted by international trading systems, world-wide or regional, they are the only foundation on which trade between states can be maintained and expanded. Durable trade agreements between states provide for mutual advantages. The only real assurance we can have that Britain can keep future trade agreements with us when her balance of payments problem has been put right is that it will be to her advantage to do so.
Calculated on the basis of per capita consumption, we are Britain's best customer in the world. Notwithstanding the small size of our home market, we are, in absolute terms, amongst the top ten of Britain's customers. These facts may not be as fully appreciated by the British public or in British Government circles as they should be. Britain cannot afford to ignore the Irish market or to continue to treat our trade interests in any cavalier fashion. In circumstances where the growth or her own exports, in a climate of expanding world trade, is the only long-term solution of her economic difficulties, Irish trade is of real importance to her. In these trade matters, we are not without some bargaining power so far as Britain is concerned.
There is not now, and never has been, a policy of dependence on the British market, as some commentators have suggested. If the bulk of our exports, whether agricultural or industrial, are consigned to Great Britain— as we know that they are—it is because it is there that they can be sold to our best advantage. This is, in part, the result of geographical proximity and in part attributable to old-established trading contacts but it is mainly a consequence of the trade agreements which gave us in Britain the only tariff-free export market in the world for our products, with some preference—admittedly, a rapidly diminishing preference — over other suppliers outside the Commonwealth and, in the case of cattle and sheep, a special position in that market.
