Anglo-Irish Trade War
Encyclopedia
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 1932 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:
government under Éamon de Valera
embarked upon a protectionist
policy in economic dealings, and tariffs were introduced for a wide range of imported goods mainly from Britain. This was thought 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 agriculturally and industrially 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 tillage
farming and industry and to encourage the population to avoid British imports and “Buy Irish Goods”.
The government sought to go further and end the repayment to Britain of land annuities. These originated from the government loans granted to Irish tenant farmers by the Land Commission, 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 other contributions to the public debt of the United Kingdom on payment of £150,000 down and £250,000 p.a. for sixty years. The question of land annuities was still outstanding
. In 1932, de Valera interpreted that the annuities were part of the public debt from which the Free State had been exempted and decided that the State would no longer pay them to Britain. His government passed the Land Act of 1933 that allowed the money to be spent on local government projects.
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
or exercised any official function, and the post was abolished under the External Relations Act of 1937. London had little option but to accept these circumstances but was particularly enraged concerning the annuities. 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.
and leather industries. For many farmers, especially the larger cattle breeders, the agricultural depression had disastrous consequences. Similar to the "Land War
" of the previous century, they refused to pay property rates
or pay their land annuities. In order to recover payments due, the government counteracted by impounding livestock which were quickly auctioned off for less than its value. Farmers campaigned to have these sales boycotted, and blocked roads and railways. Police had to be called in to protect buyers of the impounded goods, violence was inevitable and fatalities were frequent.
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 Manufactures 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, 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.
within a year of taking office, before the worst effects had been felt. The July 1937 election
saw a drop in support for him, but also for his main rival, the Fine Gael
party, and he continued in office with the tacit support of the Labour Party
. The number of Dáil seats contested in 1937 had been reduced from 153 to 138 seats, leaving less chance for smaller parties to win seats.
On the same day as the 1937 election the Constitution of Ireland
was adopted by a plebiscite, moving the State further away from the constitutional position envisaged by the 1921 Anglo-Irish Treaty
. The new Constitution was approved by 56.5% of voters who, because of the high numbers abstaining or spoiling votes, comprised just 38.6% of the whole electorate.
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. Ireland was still entitled to impose tariffs on British imports to protect new Irish industries. The treaty also settled the land annuities question by a one-off payment to Britain of £10m., a compromise representing 40 years' payments paid up front, instead of being paid annually over the next 47 years. It also included the return to Ireland of the Treaty Ports
which had been retained by Britain under a provision of the 1921 Treaty. With the outbreak of World War II
in 1939 the return of the ports allowed Ireland to remain neutral
.
Protectionism
remained a key element of Irish economic policy into the 1950s, stifling trade and prolonging emigration
. Ironically its architect, Sean Lemass, is now best remembered for dismantling and reversing the policy from 1960, advised by T. K. Whitaker
's 1958 report "First Programme for Economic Expansion". This then became an important part of Ireland's entry into the European Economic Community
in 1973. The Republic's population rose in the late 1960s for the first time since independence in 1922.
Trade war
A trade war refers to two or more states raising or creating tariffs or other trade barriers on each other in retaliation for other trade barriers...
between the Irish Free State
Irish Free State
The Irish Free State was the state established as a Dominion on 6 December 1922 under the Anglo-Irish Treaty, signed by the British government and Irish representatives exactly twelve months beforehand...
and the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
(UK) lasting from 1932 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
Irish Land Acts
The Land Acts were a series of measures to deal with the question of peasant proprietorship of land in Ireland in the nineteenth and twentieth centuries. Five such acts were introduced by the government of the United Kingdom between 1870 and 1909...
during the previous half century, a provision which was part of the 1921 Anglo-Irish Treaty
Anglo-Irish Treaty
The Anglo-Irish Treaty , officially called the Articles of Agreement for a Treaty Between Great Britain and Ireland, was a treaty between the Government of the United Kingdom of Great Britain and Ireland and representatives of the secessionist Irish Republic that concluded the Irish War of...
. 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 DepressionGreat DepressionThe Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
.
Protective policy
On taking over power and coming into office in 1932 the new Fianna FáilFianna Fáil
Fianna Fáil – The Republican Party , more commonly known as Fianna Fáil is a centrist political party in the Republic of Ireland, founded on 23 March 1926. Fianna Fáil's name is traditionally translated into English as Soldiers of Destiny, although a more accurate rendition would be Warriors of Fál...
government under Éamon de Valera
Éamon de Valera
Éamon de Valera was one of the dominant political figures in twentieth century Ireland, serving as head of government of the Irish Free State and head of government and head of state of Ireland...
embarked upon a protectionist
Protectionism
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
policy in economic dealings, and tariffs were introduced for a wide range of imported goods mainly from Britain. This was thought 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 agriculturally and industrially self-sufficient by the then Minister for Industry and Commerce, Sean Lemass
Seán Lemass
Seán Francis Lemass was one of the most prominent Irish politicians of the 20th century. He served as Taoiseach from 1959 until 1966....
. Every effort was taken to add to the measures brought in by the previous government to boost tillage
Tillage
Tillage is the agricultural preparation of the soil by mechanical agitation of various types, such as digging, stirring, and overturning. Examples of human-powered tilling methods using hand tools include shovelling, picking, mattock work, hoeing, and raking...
farming and industry and to encourage the population to avoid British imports and “Buy Irish Goods”.
The government sought to go further and end the repayment to Britain of land annuities. These originated from the government loans granted to Irish tenant farmers by the Land Commission, which had enabled them purchase lands from their former landlords, under the Irish Land Acts
Irish Land Acts
The Land Acts were a series of measures to deal with the question of peasant proprietorship of land in Ireland in the nineteenth and twentieth centuries. Five such acts were introduced by the government of the United Kingdom between 1870 and 1909...
. 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 other contributions to the public debt of the United Kingdom on payment of £150,000 down and £250,000 p.a. for sixty years. The question of land annuities was still outstanding
. In 1932, de Valera interpreted that the annuities were part of the public debt from which the Free State had been exempted and decided that the State would no longer pay them to Britain. His government passed the Land Act of 1933 that allowed the money to be spent on local government projects.
Treaty dismantled
However, the Irish Government did not go so far as to waive its own collection of annuities that were costing its farmers over £4 million annually. A further part of de Valera's policy to dismantle the Treaty was revoking the Oath of AllegianceOath of allegiance
An oath of allegiance is an oath whereby a subject or citizen acknowledges a duty of allegiance and swears loyalty to monarch or country. In republics, modern oaths specify allegiance to the country's constitution. For example, officials in the United States, a republic, take an oath of office that...
and making the office of Governor General
Governor-General of the Irish Free State
The Governor-General was the representative of the King in the 1922–1937 Irish Free State. Until 1927 he was also the agent of the British government in the Irish state. By convention the office of Governor-General was largely ceremonial...
dysfunctional by appointing a close friend Domhnall Ua Buachalla, who never took up office at the Viceregal Lodge
Viceregal Lodge
Viceregal Lodge may refer to:Residences of the Lord Lieutenant of Ireland:* Áras an Uachtaráin, Dublin * Chapelizod House, County Dublin Residences of the Viceroy of India:* Rashtrapati Niwas, Simla...
or exercised any official function, and the post was abolished under the External Relations Act of 1937. London had little option but to accept these circumstances but was particularly enraged concerning the annuities. The British Prime Minister Ramsay MacDonald
Ramsay MacDonald
James Ramsay MacDonald, PC, FRS was a British politician who was the first ever Labour Prime Minister, leading a minority government for two terms....
, 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
Jonathan Swift
Jonathan Swift was an Irish satirist, essayist, political pamphleteer , poet and cleric who became Dean of St...
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
Capital flight
Capital flight, in economics, occurs when assets and/or money rapidly flow out of a country, due to an economic event and that disturbs investors and causes them to lower their valuation of the assets in that country, or otherwise to lose confidence in its economic...
reduced much of the economy to a state of barter
Barter
Barter is a method of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money. It is usually bilateral, but may be multilateral, and usually exists parallel to monetary systems in most developed countries, though to a...
. 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 1935, 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 finding use only in the tanningTanning
Tanning is the making of leather from the skins of animals which does not easily decompose. Traditionally, tanning used tannin, an acidic chemical compound from which the tanning process draws its name . Coloring may occur during tanning...
and leather industries. For many farmers, especially the larger cattle breeders, the agricultural depression had disastrous consequences. Similar to the "Land War
Land War
The Land War in Irish history was a period of agrarian agitation in rural Ireland in the 1870s, 1880s and 1890s. The agitation was led by the Irish National Land League and was dedicated to bettering the position of tenant farmers and ultimately to a redistribution of land to tenants from...
" of the previous century, they refused to pay property rates
Rates (tax)
Rates are a type of property tax system in the United Kingdom, and in places with systems deriving from the British one, the proceeds of which are used to fund local government...
or pay their land annuities. In order to recover payments due, the government counteracted by impounding livestock which were quickly auctioned off for less than its value. Farmers campaigned to have these sales boycotted, and blocked roads and railways. Police had to be called in to protect buyers of the impounded goods, violence was inevitable and fatalities were frequent.
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 Manufactures 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
Guinness
Guinness is a popular Irish dry stout that originated in the brewery of Arthur Guinness at St. James's Gate, Dublin. Guinness is directly descended from the porter style that originated in London in the early 18th century and is one of the most successful beer brands worldwide, brewed in almost...
, to relocate their headquarters abroad and pay their corporate taxes there. Additional sugar beet
Sugar beet
Sugar beet, a cultivated plant of Beta vulgaris, is a plant whose tuber contains a high concentration of sucrose. It is grown commercially for sugar production. Sugar beets and other B...
factories were opened at Mallow
Mallow, County Cork
Mallow is the "Crossroads of Munster" and the administrative capital of north County Cork, in Ireland. The Northern Divisional Offices of Cork County Council are located in the town....
, Tuam
Tuam
Tuam is a town in County Galway, Ireland. The name is pronounced choo-um . It is situated west of the midlands of Ireland, and north of Galway city.-History:...
and Thurles
Thurles
Thurles is a town situated in North Tipperary, Ireland. It is a civil parish in the historical barony of Eliogarty and is also an ecclesiastical parish in the Roman Catholic Archdiocese of Cashel and Emly...
. 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, 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.
Coal-Cattle Pact
In 1935 tensions began to ease off between Britain and Ireland. With the 20% tax duties on imports coal and cattle were becoming increasingly harder to buy because of the prices. There was such a surplus of cattle in Ireland that farmers had to begin to slaughter their cattle because they could not be sold to the British. Britain and Ireland then signed the Coal-Cattle pact which meant that buying these commodities would be cheaper and easier to get. The coal-cattle pact indicated a willingness to end the "Economic War" and 3 years later it ended.Effect on Irish elections
Remarkably, despite the general hardship the government vote held up in 1932-38. Firstly de Valera had called the 1933 electionIrish general election, 1933
The Irish general election of 1933 was held on 24 January 1933. The newly elected members of the 8th Dáil assembled at Leinster House on 8 February when the new President of the Executive Council and Executive Council of the Irish Free State were appointed....
within a year of taking office, before the worst effects had been felt. The July 1937 election
Irish general election, 1937
The Irish general election of 1937 was held on 1 July 1937, just over two weeks after the dissolution of the Dáil on 14 June. A plebiscite to ratify the Constitution of Ireland was held on the same day...
saw a drop in support for him, but also for his main rival, the Fine Gael
Fine Gael
Fine Gael is a centre-right to centrist political party in the Republic of Ireland. It is the single largest party in Ireland in the Oireachtas, in local government, and in terms of Members of the European Parliament. The party has a membership of over 35,000...
party, and he continued in office with the tacit support of the Labour Party
Labour Party (Ireland)
The Labour Party is a social-democratic political party in the Republic of Ireland. The Labour Party was founded in 1912 in Clonmel, County Tipperary, by James Connolly, James Larkin and William X. O'Brien as the political wing of the Irish Trade Union Congress. Unlike the other main Irish...
. The number of Dáil seats contested in 1937 had been reduced from 153 to 138 seats, leaving less chance for smaller parties to win seats.
On the same day as the 1937 election the Constitution of Ireland
Constitution of Ireland
The Constitution of Ireland is the fundamental law of the Irish state. The constitution falls broadly within the liberal democratic tradition. It establishes an independent state based on a system of representative democracy and guarantees certain fundamental rights, along with a popularly elected...
was adopted by a plebiscite, moving the State further away from the constitutional position envisaged by the 1921 Anglo-Irish Treaty
Anglo-Irish Treaty
The Anglo-Irish Treaty , officially called the Articles of Agreement for a Treaty Between Great Britain and Ireland, was a treaty between the Government of the United Kingdom of Great Britain and Ireland and representatives of the secessionist Irish Republic that concluded the Irish War of...
. The new Constitution was approved by 56.5% of voters who, because of the high numbers abstaining or spoiling votes, comprised just 38.6% of the whole electorate.
Resolution
Finally, the resolution of the crisis came after a series of talks in London between the British Prime Minister Neville ChamberlainNeville Chamberlain
Arthur Neville Chamberlain FRS was a British Conservative politician who served as Prime Minister of the United Kingdom from May 1937 to May 1940. Chamberlain is best known for his appeasement foreign policy, and in particular for his signing of the Munich Agreement in 1938, conceding the...
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
Anglo-Irish Trade Agreement
The Anglo-Irish Trade Agreement was signed on 25 April 1938 by Ireland and the United Kingdom. It aimed to resolve the Anglo-Irish Trade War which had been on-going from 1933....
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. Ireland was still entitled to impose tariffs on British imports to protect new Irish industries. The treaty also settled the land annuities question by a one-off payment to Britain of £10m., a compromise representing 40 years' payments paid up front, instead of being paid annually over the next 47 years. It also included the return to Ireland of the Treaty Ports
Treaty Ports (Ireland)
Following the establishment of the Irish Free State, three deep water Treaty Ports at Berehaven, Queenstown and Lough Swilly were retained by the United Kingdom as sovereign bases in accordance with the Anglo-Irish Treaty of 6 December 1921...
which had been retained by Britain under a provision of the 1921 Treaty. With the outbreak of World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
in 1939 the return of the ports allowed Ireland to remain neutral
Irish neutrality during World War II
The policy of Irish neutrality during World War II was adopted by Dáil Éireann at the instigation of Éamon de Valera, its Taoiseach upon the outbreak of hostilities in Europe and maintained throughout the conflict. De Valera refrained from joining either the Allies or Axis powers...
.
Long-term effects
Protectionism
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
remained a key element of Irish economic policy into the 1950s, stifling trade and prolonging emigration
Emigration
Emigration is the act of leaving one's country or region to settle in another. It is the same as immigration but from the perspective of the country of origin. Human movement before the establishment of political boundaries or within one state is termed migration. There are many reasons why people...
. Ironically its architect, Sean Lemass, is now best remembered for dismantling and reversing the policy from 1960, advised by T. K. Whitaker
T. K. Whitaker
T.K. "Ken" Whitaker is an Irish economist and former public servant, credited with a pivotal role in the economic development of Ireland...
's 1958 report "First Programme for Economic Expansion". This then became an important part of Ireland's entry into the European Economic Community
European Economic Community
The European Economic Community The European Economic Community (EEC) The European Economic Community (EEC) (also known as the Common Market in the English-speaking world, renamed the European Community (EC) in 1993The information in this article primarily covers the EEC's time as an independent...
in 1973. The Republic's population rose in the late 1960s for the first time since independence in 1922.