Anglo-Irish Trade War

The Anglo-Irish Trade War (also called the "Economic War") was a retaliatory trade war between the Irish Free State and the United Kingdom (UK) lasting from 1933 until 1938. It involved the refusal of the Irish Government to continue to reimburse Britain with the "land annuities" derived from financial loans granted by Britain to Irish tenant farmers to enable them purchase lands under the Irish Land Acts during the previous half century, a provision which was part of the 1921 Anglo-Irish Treaty. This resulted in the imposition of unilateral trade restrictions by both countries, which caused severe damage to the Irish economy.

The "war" had two main aspects:
* Disputes surrounding the changing constitutional status of the Irish Free State vis-a-vis Britain; and
* Changes in Irish economic and fiscal policy following the Great Depression.

Protective policy

On taking over power and coming into office in 1932 the new Fianna Fáil government under Eamon de Valera embarked upon a protective policy in economic dealings, and tariffs were introduced for a wide range of imported goods mainly from Britain. This was largely necessary to compensate for the drastic fall in demand for Irish agricultural products on international markets, due to the Great Depression which had begun in 1929. Other means had also to be found to help the disastrously undermined balance of trade and the mounting national debt. A vigorous campaign was set in motion to make Ireland - agricultural and industrial self-sufficient - by the then Minister for Industry and Commerce, Sean Lemass. Every effort was taken to add to the measures brought in by the previous government to boost farming and industry and to nationally encourage the population to only “Buy Irish Goods”.

The government sought with their programme to go even further and put an end to the repayment to Britain of land annuities originating from the government loans granted to Irish tenant farmers which had enabled them purchase lands from their former landlords, under the Irish Land Acts. In 1923 the previous W. T. Cosgrave administration had assured Britain that the Free State would honour its debts and hand over the land annuities and other financial liabilities. Under the "1925 London Agreement" the Free State was relieved from all contributions to the public debt of the United Kingdom, but was required to pay £250,000 a year for the next sixty years to cover the land annuities. In 1932 de Valera interpreted that the annuities were part of the public debt which the Free State had been exempted from and decided that the State would no longer pay this sum to Britain. His government passed the Land Act of 1933 that allowed the money to be spent on local government projects. [ [http://historical-debates.oireachtas.ie/D/0046/D.0046.193303160008.html Land Act 1933 debate and vote] ]

Treaty dismantled

However, the Irish Government did not go so far as to waive its collection of annuities that were costing its farmers over £4m. annually. £250,000 per annum still had to be paid to the government, now over 60 years. A further part of De Valera's policy to dismantle the Treaty was revoking the Oath of Allegiance and making the office of Governor General dysfunctional by appointing a close friend Domhnall Ua Buachalla who never took up office at the Viceregal Lodge nor exercised any official function, the post abolished under the External Relations Act of 1937. London had little option but to accept these circumstances, but was particularly enraged concerning the annuities ["Sovereignty and partition, 1912-1949", M. E. Collins, Edco Press (2004), The ‘Economic War’ pp. 181-184. ISBN 1-845360-40-0] . The British Prime Minister Ramsay MacDonald in order to recover the money, retaliated with the imposition of 20% import duty on Irish agricultural products into the UK, which constituted 90% of all Irish exports. UK households were unwilling to pay twenty per cent extra for Irish food products.

Ireland responded in kind by placing a similar duty on British imports and in the case of coal from the UK, with the remarkable slogan (from Jonathan Swift in the 1720s) "Burn everything English except their coal". While the UK was less affected by the ensuing Economic War, the Irish economy was virtually crippled, and the resulting capital flight reduced much of the economy to a state of barter. In the background unemployment was extremely high, the effects of the Great Depression compounded the difficulties, removing the outlet of emigration from Ireland and reducing remittances from abroad. The government urged people to support the confrontation with Britain as a national hardship to be shared by every citizen. Farmers were urged to turn to tillage in order to produce enough food for the home market.

Conflict deepens

The hardship the Economic War foisted particularly on the farming community was enormous and exacerbated class tensions in rural Ireland. In 1934 a "Coal-Cattle pact" eased the situation somewhat, whereby Britain agreed to increase its import of Irish cattle by a third in return for Ireland importing more of Britain’s coal. But the cattle industry remained in dire straits, the government forced to purchase most of the surplus beef for which it paid bounties for each calf slaughtered as they could not be exported. It introduced a ‘free beef for the poor’ scheme, the hides only finding use in the tanning and leather industry. For many farmers especially the larger cattle breeders, the agricultural depression had disastrous consequences. Similar to the eighties of the previous century, they refused to pay rates or pay the land annuities. In order to recover payments due, the government counteracted by impounding livestock which were quickly auctioned off for less than their value. Farmers campaigned to have these sales boycotted, blocked roads and railways. Police had to be called in to protect buyers of the impounded goods, violence was inevitable and fatalities were frequent ["Irish History 1851-1950", Austin Reid, Folens Press (1980), Economic War 1933-38, pp. 223-226. ISBN 0-86121-113-8] .

With the farming community having little money to spend there was a considerable decline in the demand for manufactured goods, so that industries were also affected. The introduction of new import tariffs helped some Irish industries to expand when Lemass introduced the Control of Manufacturers Act whereby the majority ownership of Irish companies was to be limited to Irish citizens. This caused dozens of larger Irish companies with foreign investors, such as Guinness, to relocate their headquarters abroad and pay their corporate taxes there. Additional sugar beet factories were opened at Mallow, Tuam and Thurles. The Economic War did not seriously affect the balance of trade between the two countries because imports from Britain were restricted, but British exporters were very critical of their government due to the loss of business they also suffered in Ireland, their third largest market,Fact|date=October 2008 by having to pay tariffs on goods they exported there. Both the pressure they exerted on the British government and the discontent of Irish farmers with the Fianna Fáil government helped to encourage both sides to seek settlement of the economic dispute.

tatus-quo regained

Finally, the resolution of the crisis came after a series of talks in London between the British Prime Minister Neville Chamberlain and de Valera, who was accompanied by Lemass and James Ryan. An agreement to reach an acceptable settlement was drawn up in 1938. Under the terms of the three year Anglo-Irish Trade Agreement all duties imposed during the previous five years were lifted. Although the period of the Economic War resulted in severe social suffering and heavy financial loss for Ireland, its outcome was publicised as favourable. The Free State was still entitled to impose tariffs on British imports to protect new Irish industries. The treaty also settled the land annuities question on payment of the amount outstanding, in a one-off payment to Britain of £10m., a compromise representing 40 years' payments, instead of 60, paid up front. It also included the return to Ireland of the Treaty Ports which had been occupied under a provision of the 1921 Treaty. This was invaluable with the outbreak of World War II in 1939 as it allowed the Free State to remain neutral.

Notes