Economic Relations between North and South since 1922

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Economic Relations between North and South since 1922

The political partition of Ireland, effected by the Government of Ireland Act of 1920, had a grave impact on economic life across the island of Ireland, particularly in border areas. A cold war began in 1920 between the Dublin and Belfast governments that ensured that cross-border trade was slow to develop. Partition was never meant to be economic, but it led to towns such as Derry, Enniskillen, Sligo, Clones, Dundalk, and Newry losing important sections of their economic hinterlands. Dublin's policy of a "Belfast Boycott" between 1920 and 1922 did little to help this situation, and economic partition became a reality on 1 April 1923 when the Irish Free State government imposed a customs barrier around Northern Ireland. Though the economic protectionism of successive southern governments enhanced economic partition, limited cross-border trade continued. The balance of trade between North and South remained in the South's favor from 1924, except between 1944 and 1946, when southern exports dried up during the Second World War.

While trade relations between North and South remained poor in the postwar years, economic contact in other areas developed. During and immediately after the Second World War North and South cooperated to construct a hydroelectric power station on the River Erne, though the supply went solely to the South. In the early 1950s Dublin and Belfast combined forces to prop up the ailing Great Northern Railway, which linked Dublin with Belfast and Derry. Though the joint operation agreement ended in 1958, close cooperation between transport companies on both sides of the border continued over the Dublin-to-Belfast railway. The most successful form of cross-border economic cooperation came with the 1952 establishment of the Foyle Fisheries Commission, which, following protracted legal wrangling over fishing rights in the lough situated between Derry and Donegal, put fish stocks and their development in the Lough Foyle catchment area under the control of an independent cross-border body.

In the late 1950s calls were made for North-South economic cooperation through the relaxation of cross-border tariffs. From 1954 to 1958 northern imports from the South had increased from £16.3 million to £20.4 million, and northern exports to the South increased from £2.9 million to £8.4 million (Kennedy 1997). Northern manufacturers, finding southern imports eroding their home markets, were interested in improving their exports across the border. They did not receive support from the Stormont government, which felt that supporting cross-border free trade would have dangerous political consequences. By the time that Seán Lemass became taoiseach of the Republic in June 1959, northern manufacturers had begun to lobby Dublin to develop cross-border trade. Lemass sought to remove duties on northern exports to the Republic in order to create a level playing field for exporters on both sides of the border. He had two agendas: in the shorter term he hoped that the removal of tariffs would prepare the way for the Republic's entry into the European Economic Community (EEC); in the longer term he hoped that an improvement in cross-border trade could lead to Irish unity. Dublin began to remove the tariffs on selected imports from Northern Ireland in September 1962. The Northern Ireland government refused to take part in the process, though the British government welcomed the move. Further concessions followed in 1962 and 1963. Northern Irish manufacturers traveled to Dublin in increasing numbers to seek further concessions; secretly, the Northern Ireland government supported them.

Following France's veto of Britain and Ireland's application for EEC membership in January 1963, Dublin and London began talks that would lead to an Anglo-Irish free-trade area. Northern Irish ministers were worried that these developments would swamp northern agricultural exports to Britain with southern Irish produce. Belfast followed the Anglo-Irish trade negotiations in London, always seeking to protect Northern Ireland's agricultural base, but had little influence over British negotiators.

North-South economic contact gained real meaning after the meetings in January and February 1965 between Sean Lemass and Northern Ireland Prime Minister Terence O'Neill. Further ministerial-level meetings set the agenda for a fruitful period of North-South cooperation from 1965 to the outbreak of the Troubles in 1969. In January 1966 the northern and southern Irish tourist boards joined forces to promote Ireland to Britain and North America. Following an agreement signed in 1967, a cross-border electricity interconnector came into operation in 1969, but it never lived up to its full potential in the energy-starved 1970s and was destroyed in a terrorist attack in 1975.

After the Lemass-O'Neill meetings, the trading relationship between North and South became enmeshed in the Anglo-Irish free-trade area talks. Northern Ireland was covered in a side-document to the Anglo-Irish Trade Agreement of December 1965, which allowed accelerated tariff reduction in favor of Northern Ireland goods exported to the Republic. Commentaries on the agreement predicted the gradual re-opening of markets closed in the 1920s, and it was expected that this agreement would benefit mainly Northern Ireland industries. In a remarkable turnaround by the Northern Ireland government, Brian Faulkner, the Northern Ireland minister of commerce, welcomed the agreement. By the late 1960s the volume of trade across the border had increased significantly, though it was still a small percentage of the overall international trade of both Northern Ireland and the Republic of Ireland. In 1960 the Irish Republic's imports from Northern Ireland were valued at £7.4 million, and exports were valued at £20.3 million. By 1970 the respective figures were £29.9 million and £57.2 million (Kennedy 1997). The Troubles ended much of the direct intergovernmental cooperation between North and South, but civil-service-level contacts continued. North-South tourism also declined because of the Troubles, a sign that many of the spinoff contacts arising from intergovernmental cooperation had ended.

Cross-border trade continued to develop as part of the overall increase in international trade of North and South. In 1983 annual exports from the South to the North were reaching £500 million, and imports from the North £312 million. By 1995 the relevant figures were £789 million and £645 million respectively as cross-border trade edged towards parity, but by the late 1990s they were again turning in favor of the South (Kennedy 1997). The terrorist cease-fires of the mid-1990s and the Good Friday Agreement of 1998 led to greater North-South economic contact, though fluctuations between the British sterling pound and the Irish punt were a restraining force.

The Good Friday Agreement contains cross-border implementation bodies that have a direct impact on North-South economic relations. They cover inland waterways, food safety, trade and business, special European Union programs, language promotion (Ulster Scots and Irish), and mariculture and aquaculture in a body known as the Foyle, Carlingford, and Irish Lights Commission, which includes the work of the Foyle Fisheries Commission. All-Ireland tourism is also promoted. Electricity interconnection has existed since the 1990s, and in the autumn of 2001, agreement was reached on a cross-border gas link. The climate created by the "peace process" and the Good Friday Agreement has significantly improved North-South economic relations; at the very least, they have contributed to a situation where the populations on both sides of the border come into greater contact in everyday life.

Bibliography

Kennedy, Dennis. The Widening Gulf. 1988.

Kennedy, Michael. "Towards Co-operation: Seán Lemass and North-South Economic Relations, 1956–1965." Irish Economic and Social History 24 (1997): 42–61.

Kennedy, Michael. Division and Consensus: The Politics of Cross-Border Relations in Ireland, 1925 to 1969. 2000.

O'Halloran, Clare. Partition and the Limits of Irish Nationalism. 1987.

Michael Kennedy

Encyclopedia of Irish History and Culture