Analysis: as Brexit comes down to the wire, a look at a previous costly trade dispute between the two countries
By John Gibney, Royal Irish Academy
The 'Economic War' is the name given to the acrimonious trade conflict between Ireland and Britain that lasted for much of the 1930s. It originally began as a dispute over the continued repayment of land annuities, which were repayments for loans granted to Irish farmers by the British exchequer under the land acts of the late 19th and early 20th centuries. Grassroots opposition to repaying these emerged in the 1920s and the cause was taken up as an election issue by Éamon de Valera's Fianna Fáil.
When the party came to power in 1932, they promptly refused to pay them. The British response (which was primarily an attempt to get the money somehow) was to impose tariffs on a wide range of Irish agricultural produce, most especially live cattle and beef. Ireland retaliated with tariffs on imports of British manufactured goods and raw material. Jonathan Swift's call to burn everything British except their coal was dusted down, the Economic War began and it went on until 1938.
The trade war was of a piece with the more aggressive stance taken by Fianna Fáil to the British after 1932, as they sought to roll back the provisions of the 1921 treaty that had created the Irish Free State as a Dominion within the Commonwealth. On taking office, Fianna Fáil successfully embarked on a sustained attempt to undo Ireland's remaining connections to the British Empire, and this was the context that framed the Economic War.
But it was not just an economic weapon in a political armoury: Fianna Fáil genuinely believed that economic independence had to be the basis of future prosperity (and that the annuities were better spent in Ireland than in Britain). Their Cumann na nGaedheal predecessors had broadly favoured free trade but, after the Wall Street Crash of 1929, many countries shifted towards protectionism. Ultimately a small economy like Ireland’s was not suited to this, so Irish officials unsuccessfully sought new markets in continental Europe and North America. The historic alignment of the Irish economy with that of Britain was shaped by geography as much as imperialism.
It is hard not to look back at the Economic War and think that barriers can inflict hardship
Land annuities were worth millions every year, but the severe stance of the British was prompted by a desire to undermine Fianna Fáil in the hope that a squeezed electorate would dispense with their services. In this, they were mistaken as Fianna Fáil solidified their vote. Larger farmers bore the brunt of the restrictions in the livestock trade, but many small farmers were insulated by new social welfare schemes. Large numbers of additional jobs were created in new industries by the end of the 1930s - ironically, many of these depended on British raw material.
In 1934, there had been a small improvement in British-Irish relations with the 'coal-cattle pact', which ensured increases in both British imports of Irish livestock and Irish imports of British coal. But the dismantling of the recently imposed tariffs and quotas between the two islands had to wait until the tripartite agreement of April 1938, which gave preferential access for Irish goods into the British market and vice versa.
While symbolically important as a marker of independence, the Economic War inevitably affected Irish farming producers more then the British consumers of their products: after all, the UK was the market for 90% of Ireland's exports. But the British government of Neville Chamberlain negotiated with one eye on the looming European war that was widely assumed to be on the horizon by the late 1930s. It was quite likely that Britain would need to depend upon Ireland as a traditional supplier of food once more. The agreement also covered the return of the naval facilities at the 'Treaty Ports' of Cobh, Berehaven, and Lough Swilly, which enabled Ireland to declare meaningful neutrality when war broke out the following year.
The Economic War ended before World War II began, and part of the settlement was a final resolution of the issue that had prompted it. The government of 'Éire' (as it was called on the final text) agreed to pay a £10 million lump sum as a final settlement of the annuities issue. Considering that the overall liability of the annuities could have been as high as £100 million – a sum that almost certainly outweighed the economic ‘hit’ suffered by the Irish economy – it was not, to use the parlance of our times, a bad deal.
Parallels, as someone once said, may well be pointless. But with issues such as sovereignty and trade relations in the ether at the end of 2020, it is hard not to look back at the Economic War and think that barriers can inflict hardship. International relations are a fact of geography as much as of wishful thinking, and everyone in their right mind comes to the table eventually as reality intrudes.
Dr John Gibney is Assistant Editor with the Royal Irish Academy's Documents on Irish Foreign Policy series. The documents published in the DIFP series for the years 1919-1948 are freely accessible here. He is a former Irish Research Council awardee.
The views expressed here are those of the author and do not represent or reflect the views of RTÉ
