In 1932, the Irish Free State and Britain began what became known as the Economic War which was to have far-reaching consequences for them and for Northern Ireland.

90% of all Irish agricultural exports went to Britain and Ireland was dependent on British coal.

Before 1932 the Irish Free State and Britain were close trading partners.

The economic war between Britain and the Irish Free State escalated quickly

Why was there an Economic War?

There were a number of factors behind the emergence of the trade war.

Land annuities

An important reason for the dispute was the refusal by de Valera to send land annuities to Britain.

In the past, Britain had made loans to Irish tenant farmers to help them buy their land.

Land annuities were repayments of those loans.

De Valera stopped the payments because they were a drain on the Irish Free State's limited resources and he wanted to use them to revive the weak economy.

They were worth £5 million per year.

Northern Ireland had been allowed to retain its annuities, and de Valera felt that the Irish Free State should be treated equally and allowed to retain its annuities too.

Non-payment meant de Valera’s party, Fianna Fáil , was fulfilling its 1932 election promise to cancel the payment of annuities if it got into power.

In addition, de Valera's government refused to pay the pensions of retired Royal Irish Constabulary (RIC) officers and former British civil servants.

Import duties imposed

The British government was angry that de Valera had broken previous financial agreements between the two countries so it took steps to recover the money.

It imposed a 20% import duty on all goods from the Irish Free State and later instigated quotas for livestock.

The Irish Free State retaliated by putting import duties on goods from Britain and Northern Ireland, including coal, cement, electrical goods, machinery, iron and steel.

De Valera also held an election in 1933 to show the British that the people of the Irish Free State supported his action and he launched a propaganda campaign against the British throughout the Irish Free State.