In Search of the Promised Land
Page 20
Ultimately, there was not a large enough economy to support firms who wished only to supply the home market, and a situation developed whereby industry split in two. Colm Barnes – one of the major industrialists of the time – has pointed out that ‘those manufacturers who felt that they might survive had little incentive to unite with firms that were likely to fold’.33This was a point that had been inferred by Jack Fitzpatrick of the FII: writing in the Catholic journal, Christus Rex, in 1958, he declared that one could divide industry into two broad categories, namely those that were efficient and economic, and those that were efficient but not economic. The first group, he argued, was exporting competitively and selling goods in world markets, and its concern with regard to the free trade proposal was whether a protected home market would be required to facilitate continued exporting. The second category, represented:
… industries which were set up under the post 1932 policy of protectionism, including industries which were established by sincere men and women who were willing to invest their savings in the best interests, as they saw them, of the community … It would obviously be unjust and immoral that these should be sacrificed without compensation. They must examine their position to see if they can survive, whether they could re-adapt their factories so as to make them competitive under such circumstances … The problem is vast and complex but one thing emerges clearly and that is that a free trade treaty which makes no provision for dealing with the problem of industries which are efficient but, through no fault of their own, not economic, will not have dealt fairly with all aspects of the problem.34
The FII was, on the whole, eager for Irish entry into some form of trading bloc, and its annual report for 1959 suggested that the development of the industrial economy should in the future be considered in relation to three factors: firstly, the maintenance by existing industry of the home market, with a progressive reduction in protectionism, and eventually without protection against foreign competition; secondly, the development by existing industries of export markets with the same conditions in the home market; finally, the development of new types of industries without the expectation of the same measures of protection in the home market as had been available previously.35J.C. Tonge, president of the FII, was of the opinion that any changes should be directed towards improving the overall industrial position. He declared that the Government should accept responsibility for any radical change in policy, and was confident of the Government’s attitude in this connection. The insinuation here was that the Government should grasp the nettle of free trade and consign the policy of protectionism to the dustbin of history. The FII was urging its individual member firms to make their own plans on the basis of free trade conditions in the future. Specifically, this meant urgent and constant attention to productivity in all its aspects, and particularly to the question of improving marketing policies and techniques, and to renewing efforts to find export markets:
Confidence in our own ability and energetic action now on a planned basis by all individual firms and industries with the co-operation of the Government and the trades unions and of the public generally will ensure that these changes will be changes for the better. The Federation believes that the challenge which will be presented by the new conditions is also an opportunity for great developments in industry in Ireland.36
By 1960 the FII was firm but cautious about the benefits of entering EFTA. Tonge argued that if the Government was to enter the free trade area, it would be necessary to safeguard the industries built up under the protective system. He acknowledged that industrialists would have to study ways and means of survival under what would be new conditions, but stated that ‘it will be extraordinarily difficult to adapt industry to free trade’.37He maintained that this could only be done with the co-operation of the Government and the trade unions. The FII was asking the Government to render special assistance during the transitional period, while it needed the contribution of the trade union movement as large numbers of workers were involved in industries that might be affected, and they would have to receive careful consideration in order to avoid hardship. The FII advised its members to be prepared for a progressive reduction in protective customs duties, and asked each firm to consider its own position and that of its respective industry in conditions of free trade. The FII also carried out its own pilot survey in the weaving industry, which suggested that while the concept of Europe was generally seen as fairly desirable, its consequences on Ireland could be disastrous. As Colm Barnes, who replaced Tonge as president in 1961, declared:
There was definitely a fear in the minds of the traditional industrialists in particular that a reduction in tariffs would see most of them going to the wall. While some saw the advent of EFTA as a challenge to be met head on, because after all businessmen are supposed to be free traders, most members of the FII were horrified by the prospect.38
This attitude was summed up by Tonge when he declared that ‘in general Irish industry does not want free trade, but at the same time it realises that Ireland cannot live in complete isolation from the rest of Europe’.39The FII, however, was determined that Irish industry would become more efficient and more cost-conscious, with productivity and marketing receiving prime consideration. It saw a way forward in Europe whereby its member firms would be encouraged to specialise in certain products, with less variety than had hitherto been the case. If overseas markets could be secured, the FII believed its member firms could make progress while facing an era of reduced tariffs:
We are facing a challenge which should bring out the best, but if the best is not good enough the outlook for Irish industry, to say the least, will not be satisfactory. While not blaming our Government in any way for advocating a policy of reduction in tariffs, industry feels that the Government must bear full responsibility for the effects of any such reductions. Irish industry has confidence in the Government and is confident that its interests and indeed the interests of the country generally will be safeguarded in any difficult times that lie ahead in the EFTA era. Industrialists will endeavour to manage under Free Trade to the best of their ability, opposing no section but co-operating with all in the national interest.40
A problem for the FII – as Colm Barnes has since pointed out – was that it was a comparatively weak body, and although it might call on the Government to safeguard Irish industry, it did not do so from a position of strength:
In 1960 when there was a lot of debate about EFTA the FII was dominated by the textile and clothing industries, yet the federation itself was very weak, hardly representing a third of those who were industrially employed. It lacked resources, effective membership and was on the whole a pretty feeble organisation. If one read about it at the time in the newspapers you would have got the impression that it was a strong body but that was not the case. Behind that apparent strength lay a great weakness. The consequence of this was that the Government of the day could do as it pleased within the industrial sector. It was only with the development of the CIO that they acquired more confidence and became more of an influence.41
‘Invest in Ireland indeed’
The FII – while wanting increased trade for its members – was worried that those members would go to the wall through participation in the free trade area. This problem was exacerbated by the impact that foreign industry was having on home-based manufacturers – something the FII was acutely aware of. An example of the anxiety felt by individual members of the FII can be seen in a 1960 letter to the Taoiseach from a pottery manufacturer in Wexford:
I received through the post a large coloured advertisement exhorting me, as an Irish individual, to ‘invest in Ireland’. Allow me to point out that this additional indignity has been offered to me by a Government which has recently given a free capital grant of a quarter of a million pounds to an American firm in order to subsidise that firm in the manufacture of peat moss plant potteries at Birr, in direct competition with my old established native Irish concern. It is futile for the Government to at
tempt to maintain that the Birr factory has been subsidised for the ‘export market’ because this is simply not so; the home market is already being very thoroughly canvassed in favour of Birr Potteries and what is more, the fact of the free Government grant is being used to suggest that only the new Birr factory has the confidence of the Government in the matter of peat potteries. This, of course, has every appearance of being true but for an Irish Government to allow an American firm to use such propaganda in its competition with an Irish firm is rather strange. Furthermore when I applied for some small assistance to help me meet the threat of Government subsidised foreign competition I was told by An Foras Tionscal that free capital grants are available to foreigners but not to native Irish industry. Invest in Ireland indeed.42
This is a striking example of the worries some in the FII felt in the face of the twin threats of free trade and the influx of foreign companies attempting to service the same markets.
Ultimately, the FII – though evidently worried about free trade – was willing to go along with the Government’s strategy of generally phasing out protection, and Lemass was determined to bring the representative body with him on the journey towards free trade and competitiveness. The question of possible entrance of a trading bloc, however, was still to be broached by Lemass. He told the national export conference of the FII in January 1961 that Ireland was not a member of EFTA or the EEC:
… for the very good reason that there is no overall advantage to be gained at the present time by joining either group. In the case of the seven, Britain is by far the most important market for us and there we already have, under our bilateral agreement, for practically all our industrial goods, the trade advantages which membership of that group would confer. As far as the other countries of the seven are concerned the obligations which we would have to assume in joining the European Free Trade Area including the dismantlement of industrial protection, not only against imports from the six continental members, but against Britain as well, would outweigh any trade advantages which we could hope to get from these countries.43
Whilst this speech suggested doubts about the European option and reinforced the importance of the British market for the Irish economy, the fact that there were intense discussions on possible entry into such a free-trading bloc implied that sooner or later the Government would seek to place the state within a free trade association.
The FII had recognised that fundamental changes in Irish economic policies were necessary and imminent, and would involve progressive reduction of protection for Irish industries, leading eventually to free trade conditions. Its national council issued a pamphlet entitled European Free Trade and the Prospects for Irish Industry, in which it argued that Irish industry was sufficiently strong and adaptable to meet the situation, and could develop and prosper ‘provided that action is taken in time by individual firms and by industries and that the co-operation and assistance of the Government was forthcoming’.44The document represented a sea change in the attitude of the FII to protectionism. Up to the late 1950s, it had been an ardent supporter of protectionism; it realised now that new trading conditions required new attitudes. This new attitude in the FII was crystallised by the coming to power in the organisation of a younger breed of industrialists who believed that Irish industry could survive and flourish without protectionism if it was given the vigorous support of Government. But though the FII appeared confident, there was no guarantee that individual firms would put in the effort required to make a success of free trade.
As for the Government, it initially perceived the attitudes of industry to be too relaxed. At a meeting between the Department of Industry and Commerce and the PUTUO regarding the impact of a free trade area on industries, Tom Murray, an assistant secretary at the department, bluntly affirmed that the greatest possible expansion lay with those industries that were already doing an export trade, while the most vulnerable were those with highest tariff protection. He stated, however, that there seemed to be a fairly general attitude on the part of industry that it would not be too badly off within the free trade area. This outlook, he argued, was not a pragmatic one. Those industries with experience of exporting and who saw new markets on the horizon could obviously expect to benefit. But as to any special arrangements to assist industries likely to be adversely affected, Murray conceded that the convention setting up the area was not likely to provide assistance: ‘the purpose of the Free Trade Area … was to eliminate the unfit’.45The attitude pervading both the business and trade union communities on the length of time that industries could take to meet the full rigours of competition was not shared by the Government. Both the FUE and the FII thought in terms of a period of up to twenty years. The trade unions, on the other hand, thought that a period of twelve to fifteen years was more feasible. Lemass seemed to believe that Ireland had up to ten years to effect substantial change before having to face external competition. His officials were not as optimistic.
In May 1961 the Government decided not to join EFTA, and two months later formally applied to join the EEC after it became aware of Britain’s intention to do so. In its application, the Irish Government stressed that there was no significant opposition to joining the Community, and that all the interest groups were broadly in favour of entry. For the purposes of examining the role of industry in the EEC, the Government had established the Committee on Industrial Organisation (CIO), on which the ICTU and the FII had direct representation. Originally, the ICTU was left out, and had to demand to be included. Garret FitzGerald – at this stage an advisor to the FII – argued that the FII had to work with the Government in a general review of economic policy, and approached Whitaker as to the feasibility of the study. This was truly a radical step for business to take. Whitaker readily agreed, and FitzGerald maintains that it was simply due to an oversight that the unions were left out:
They proved to be most constructive partners. Indeed, insofar as tensions existed within the committee they proved – as I had anticipated – to be between the Department of Industry and Commerce on the one hand and the rest of us, with Finance, the CII and ICTU endeavouring as a troika to nudge that department into psychological acceptance of free trade.46
In the circumstances, it might have been more logical to have had a partnership with Industry and Commerce, but that department had remained protectionist-oriented, and FitzGerald anticipated that, on its own, it was unlikely to be an adequate partner in the contemplated exercise:
Thus the committee was set up with the remit to make a critical appraisal of the measures that may have to be taken to adapt Irish industry to conditions of more intensive competition in home and export markets, to undertake an examination of the difficulties which may be created for particular industries and to formulate positive measures of adjustment and adaptation.47
The Irish Times welcomed the CIO, declaring that ‘it could become the most important single organisation in the country, and will pilot industry through the transitional period’.48When the CIO reports began to appear in the autumn of 1962, however, they showed the weakness of Irish industry, especially when it came to export potential. Not all industrialists saw entry into the EEC as the solution. Aodogan O’Rahilly, for one, was deeply worried:
While I welcomed foreign investment, I believed that if we were going to enter the EEC then our sovereignty would be lost and in a free trade environment we would quickly go under. I drew comparisons between entry to the EEC and the passing of the Act of Union at the time as I foresaw Irish industry dying, just as what happened in the early 1800s due to the operation of economic laws. In many ways I suppose I was an old style Fianna Fáil nationalist.49
More typical was the response of Jack Fitzpatrick of the FII, who told Hibernia that Ireland would join the EEC and the result would be the ‘blossoming of our economy’.50Officially, the FII had become a supporter of Whitaker’s policy of economic planning. It noted:
In the midst of the activities in preparing for entry into the EEC it is good
to see that the Government have not lost sight of their economic planning programme which will have an important bearing on our preparedness to face the challenge of the common market.51
The CIO was part of a continuing corporatist-style initiative by Lemass to involve unions and industry in developing the economy. The initiative sought to create political structures that integrated the organised socio-economic groups through a system of representation and co-operative mutual interaction at leadership level, and social control at the mass level. Moreover, Lemass’ desire to incorporate the unions found an echo in the dominant trend of corporatist thinking within the trade union movement itself.52The Employer–Labour Conference came into existence in 1962, and the National Industrial and Economic Council (NIEC) was established a year later. These new agencies exemplified the state’s commitment to economic planning, though if Ireland had succeeded in gaining entry into the EEC in 1963, it is doubtful whether subsequently they would have had much impact on policy formulation.
Not all observers were convinced by this rush of activity and the response of the economic actors. The US embassy, for instance, was none too impressed with these developments, maintaining that:
[The] Government sets much store by this conference as a means of working out agreements between labour and management on long-term policies … However the embassy has not been especially impressed by the amount of enthusiasm with which the FUE or ICTU has been approaching the conference. Both parties have been diligently preparing for it, but neither side has indicated to the embassy that it has any great prospect of success.53