Position on Foundation
The United Kingdom had been long committed to free trade until the first World War. During the war and thereafter, protective duties were imposed on a range of goods. After the establishment of the Irish Free State, Irish exports to Britain on certain commodities became subject to import duties.
Agriculture remained predominant and was the focus of much economic policy. A fiscal inquiry committee was established in 1923 to report on the effect of the existing fiscal system on industry and agriculture and to recommend changes to promote industry and agriculture. It recommended free trade, much against the trend of the time and the recommendation of witnesses. There were strong lobbies for protection in various industries. The government sought a middle ground.
The early 1920s was a period of severe deflation. Agricultural prices fell by 30 percent to 40 percent in the years between the war and independence, and by a further 20 to 30 percent by the early 1930s. The Department of Finance favoured a reduction in wages rather than protectionism in industrial policy. It expressed the fear that tariffs once given, would be very hard to remove and would be subject to abuse.
Tariffs in the 1920s
The 1924 budget introduced tariffs on a range of goods including motor bodies, boots and shoes, confectionery and bottles at relatively low levels. The 1925 budget introduced tariffs on a wider range of items including clothing and blankets and furniture applications.
Applications for tariffs were lobbied for to the Department of Industry and Commerce. They were considered by interdepartmental committees. In 1926 a tariff Commission was established in an attempt to depoliticise the process of the consideration of arguments for tariffs by various ndustrial sectors.
In 1927, Fianna Fáil entered the Dail and Cumann na nGaedheal won in what was in effect a tight election. Fianna Fáil more strongly favoured industrial development behind more comprehensive protective tariffs.
Through the late 1920s, the tariff Commission continued to consider applications for tariffs. The commission granted certain claims and rejected other claims for tariff protection. On the whole, the tariff Commission was relatively reluctant to grant tariffs.
The commission acted in a quasi-judicial manner. It formally investigated on the basis of evidence and submissions. It looked at information on the industry, comparative costs and productivity as well as the prospective impact of tariffs.
By the end of the 1920s, almost 60 percent of non-agricultural imports were subject to tariffs which was estimated to create approximately 15,000 extra jobs. Some tariffs were shown by reports to be successful, while others were less so. The tobacco tariff proved successful and increased employment in the sector significantly.
The early 1930s saw the onset of a deep recession and a significant increase in protectionism internationally. The United Kingdom introduced the Abnormal Importation (Customs Duties) Act which allowed the imposition of duties by Ministerial order. Almost identical legislation was passed in Ireland in 1931, the Customs Duties (Provisional Imposition) Act, directly aimed at antidumping measures.
The Irish Trust Company was established with funds raised from Irish American investors. It was not a state body but was intended to provide for special credit facilities for new and struggling industries which could not succeed in obtaining a firm basis of operations.
Ford and Guinness which had been well established in Ireland opened plants in Britain to serve the British market. In broader terms, the Irish policy was broadly supportive of free trade but became ncreasingly protectionist much in line with Britain’s policies.
Fianna Fail in Power 1932
The Fianna Fail government that came into power in 1932 adopted a significantly different economic policy. The incoming government was expressly isolationist and sought to follow a self-sufficiency policy. This, combined with the depression and the international trend of the time, made the increase of tariffs and control over industries inevitable.
Government spending increased from 24 percent of output to 30 percent from 1931 to 1933. There was a very significant increase in agricultural subsidies. A significant amount of the increase represented land distribution with increases in old age pensions, unemployment relief, housing and sanitation. By that stage, the costs of repayments arising from the treaty and other ongoing obligations amounted to 12 percent of the government budget. The spending was financed by raising taxes, tariffs, and withholding of land annuities.
The Department of Industry and Commerce moved centre stage in economic policy. An industrial development branch was developed to develop new and existing industries. This was established in 1932 just before the change of government. It had power to grant trade loan guarantees. Discretionary licences for duty-free imports, rights to hire foreign workers and trade guarantees where discretionary and were given on a case-by-case basis.
State owned companies were established by the new government in relation to sugar beet, industrial alcohol, industrial credit and peat. The reasoning was that social goals predominated over economics. Most industries still remained private, being supported by increasing powers, quotas and credit facilities.
The so-called economic war reflected the overall deterioration of relationships between Britain and Ireland after assumption of power by Fianna Fáil. Substantial annuities were still paid to the British government arising from Irish land purchase.
The Fianna Fáil election manifesto had expressed the intention to maintain close economic relations with the United Kingdom while building up protected industry by giving Britain preference in purchase of capital goods and machinery in return for preferential treatment of Irish agricultural exports.
This occurred in the context of Britain’s relationship with the dominions, where it had been seeking closer trading relations with them within the ambit of protection. The Imperial Trade Conference at Ottawa took place in the context of an Irish budget, imposing substantial tariffs. This effectively marked the outbreak of the economic war. No agreement was signed at the Imperial trade conference at Ottawa.
In 1932 Britain imposed special duties on Irish exports in retaliation for default on land annuity payments. The Irish government imposed emergency duties on coal, cement, silver, electrical, machinery, iron and steel; almost one third UK exports to Ireland. Irish goods became liable to further duties under the Import Duties act, 1932.
The economic war fell most heavily on agricultural exports, they being the principal exports from Ireland. Irish agriculture prices plummeted by nearly 40 percent relative to 1929 levels. There was a pronounced fall in the volume of exports from Ireland, particularly in relation to live cattle.
By 1934 Irish cattle were subject to both high specific duties and quotas. This were claimed to be part of British agricultural policy rather than the economic war.
A 1938 trade agreement with the United Kingdom ended economic war.
Tariffs in the 1930s
By the mid-1930s, almost 2,000 tariffs were in existence. This was partly a response to the depression and the increase in tariffs internationally. By that stage, the role of the tariff Commission was reduced, and the Department of Industry and Commerce largely determined applications.
The incoming Fianna Fáil government used the Customs Duties (Provisional Imposition) Act 1931 to impose duties by Ministerial order. Protection was extended to a range of agricultural and industrial products. The Emergency Imposition of Duties Act 1932 extended the 1931 legislation until 1938. The tariffs were to be ratified by the Dail.
The Control of Imports Act 1934 gave the government power to further quotas in addition to tariffs or without tariffs. Tariffs continued to be afforded and extended to protect industries on a case-by-case basis.
By 1937, Irish tariffs were significantly higher than those in Britain, although they were not the highest internationally. This was partly due to the economic war, and partly due to a range of special duties on a range of imports. At the end of the economic war in 1938, tariff levels reduced marginally.
In some cases, native industries specifically lobbied and obtained tariffs. In other cases, international industries were incentivised to establish plants in Ireland. Licenses were granted by way of exception. Undertakings were given in relation to employment and prices. However, they were not capable of being policed. It appears that laterally many tariffs were imposed, with poor employment return, proving to be a very blunt instrument for industrial policy.
The Fianna Fáil government sought to domesticate industry by the Control of Manufactures Acts 1932. The Act affected companies without majority Irish national shareholding. They were required to obtain a licence, which could be made subject to conditions in relation to the size of their operation, output, location and employees.
The Control of Manufactures Act 1934 required that a majority of all shares and two-thirds of ordinary shares be held by Irish nationals and that a majority of directors including in particular the managing director be Irish.
The Act allowed the Minister to declare commodities to be reserved, which would require any prospective manufacturer including domestic or foreign manufacturers, to obtain a licence. Certain industries commenced with an undertaking, effectively giving them exclusivity in a sector or area. The effect was to give the government substantial control through licensing and licence conditions on industry.
In effect, the legislation made it difficult for international firms to be licensed in areas where Irish manufacturers could claim to supply. The legislation was dissuasive , but in part, because of the depression, a certain number of international firms did seek to expand into Ireland albeit subject to the restrictions of the legislation.
The Control of Prices Act 1932 established a Prices Commission and controller of prices. It had authority to regulate the price of certain household items including food, clothing and drink. It could investigate price of any protected item. Some key tariff beneficiaries gave price undertakings in respect of the protected products.
The Control of Prices Act 1937 established full-time price commissioners and expended their investigative powers. They could fix prices and report on unreasonable prices. On the whole, its powers were not extensively used. There is little evidence of tight price control having been exercised.
The Conditions of Employment Act sought to create an industrial code on a par with international standards. It was influenced by the emerging ILO standards. The Minister for Industry and Commerce, Sean Lemass became President of the ILO in 1937.
Wage agreements between representative bodies and workers could be registered and became legally enforceable.
The adult working week was set at 48 hours with a working day to end at 8pm, by the latest. Limited exemptions were granted. There were controls on overtime, which was to be paid in excess of normal remuneration rates. Employees were granted a one week’s holiday with pay in addition to six public holidays. There were protections against wage reductions and reduced working hours.
It was prohibited to employ persons under 14. Those under 18 were restricted to 40 hours a week. They could be restricted entirely following consultation with employee-employer representative.
The employment of women was subject to similar restrictions. Women and young people were barred from night work limited exceptions. Outworking and home manufacture could be controlled. The Act was used to promote male employment over female employment in certain industries.
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