My dear Prime Minister,
BRITISH TRADE POSITION
This morning's 'Times' contains a report of a speech made at the Mansion House by Mr. Churchill  in which he states that, taking everything into consideration, British trade is improving. This speech was made at lunch. During the afternoon the Board of Trade published the trade figures for June, which showed a falling off to the extent of 7 million in British export trade and, in the afternoon also, the Ministry of Labour published the weekly figures for unemployment which showed an increase of 50,000 unemployed during the week. A little unfortunate, I must say, for Mr. Churchill! While one month's figures cannot be regarded as a very definite criterion, at the same time I think it legitimate now to assume that 1927 will not show any real revival, although it will naturally be a better year for British trade than the disastrous 1926 in which all trade was heavily affected by the coal stoppage.
This view is amply confirmed by the depression which exists not only in the coal industry but also in the iron and steel industry and in the cotton trade.
Next month the total figures of trade with countries for the six months ending June will be published and as soon as they are available, I propose to write to you rather fully on this subject of British trade. Provided the July figures, which will also then be available, do not show any marked change in the situation, I should like to suggest that you might take an opportunity of making a speech in which you might refer to the British trade situation and ask the rhetorical question of how long it is to be before Great Britain is going to realise how greatly her future prosperity depends upon a resolute and determined policy of Empire Development.
EMPIRE MARKETING BOARD
I enclose a special article from the 'Times'  and another from the 'Financial Times' dealing with the first report of the Board.
I am also enclosing a copy of the first report. Further copies are not available until next mail but I will then see that you receive a supply for distribution to members of the Government.
Last Thursday Major Walter Elliot , Julius  and myself dined together and spent the whole evening discussing future cooperation between the Empire Marketing Board and the Commonwealth Council for Scientific & Industrial Research. We had a very useful talk and it was agreed that Julius should write to Elliot a letter setting out the main headings in which the Council would particularly welcome cooperation. Julius and I discussed this very fully and I am enclosing a copy of the letter which was despatched to Elliot yesterday.
Julius did not arrive in this country with any definitely considered schemes to put before the Empire Marketing Board for cooperation and financial assistance. I therefore felt that it was very desirable that we should, so to speak, stake out our claims on a number of subjects as soon as possible. When the various other portions of the Empire gather together in London in October for the Imperial Agricultural Conference, I feel quite certain there will be a tendency on the part of many Governments to press their claims for financial assistance upon the Empire Marketing Board.
At the present time the report of the Board shows that the bulk of the research grants have been made to United Kingdom Organisations but for fundamental work in research of truly Imperial significance. Of the grants made or approved to Overseas, Australia has, at the present moment, decidedly the largest share.
At the last meeting of the Board, tentative approval was given to a grant of 12,000 spread over 2 years, to allow of the thorough trial of geophysical prospecting methods in Western Australia;
this sum to be met by a 50-50 contribution from the Development &
The Empire Marketing Board has, as yet, not received the details of the report of the Special Sub-Committee on Civil Research, which was set up to advise on this geophysical question but I understand that the report is of a sound and workmanlike character and the recommendation will be that a man called Broughton Edge , who is regarded as the best available expert on this subject in the British Empire, should be sent to Western Australia for 2 years at a salary of about 3,000 a year and that the remainder of his staff should be recruited in Australia itself.
The report will, I understand, recommend that the three accepted methods of geophysical prospecting be tried out under the direction of Broughton Edge both singly and in combination. This should mean that, within 2 years, a highly qualified staff of Australians should be available with complete knowledge of the whole technique of geophysical prospecting and at the same time a vast mass of information on these methods should have become available for general Imperial purposes.
I hope that Gepp  will be pleased with this result.
Shortly after Mr. Julius' arrival, he gave evidence before the Royal Commission on Indian Agriculture, which is at present sitting in London under the Chairmanship of Lord Linlithgow. 
I made some enquiries from Chadwick  and other people afterwards and found that Julius' evidence had created a most favorable impression on the minds of the Commissioners. They regarded it as some of the most useful information they had received on the question of organisation of agricultural research.
I find Mr. Julius anxious that, when he meets the people on the agricultural side, I should, whenever possible, be present with him but naturally, on the industrial side, he does not need me in the same way. He is seeing a great deal of Mr. Tizard , who has succeeded Sir Frank Heath, as head of the Department of Scientific & Industrial Research. Tizard is a remarkably good fellow, a firstclass scientist, an F.R.S., and a man with whom it is possible to cooperate on the frankest and most pleasant basis.
Tomorrow Julius, Major Elliot and myself lunch with Lord Balfour  and one purpose of the letter to Elliot already mentioned was to give a basis for discussion at this lunch.
EMPIRE MARKETING BOARD REPORT
On further consideration of Appendix II of this report, I have adopted a rough and ready method of classifying the purposes of the research grants with the following results. I have marked with a cross those grants that may fairly be regarded as being of purely Imperial significance, i.e. the results to be attained may be regarded as of general benefit to the whole Empire rather than to any part. I have marked the other grants with the name of the country especially benefited. If all capital sums are converted into annual payments on a 5% basis, the following results emerge:-
Per annum Imperial schemes 40,055 British agriculture 43,790 Colonial " 10,965 Australia 8,550 New Zealand 4,065 Canada 100 The grants to British agriculture are, as you will observe, swollen by the large 40,000 a year grant to the Ministry of Agriculture for the development of marketing schemes.
Today the Research Grants Committee have to decide as to what action they are to take on the recommendations of the Colonial Office Conference and of the Special Committee under Lord Lovat , which has been set up as a result of the Conference for the formation of an Imperial Research Service for the whole Tropical Empire. The position is roughly as follows:-
Today the Tropical Colonies are between them spending 80,000 a year on agricultural research. Lovat's Committee has estimated a necessary total expenditure of 180,000 and they propose to ask the Empire Marketing Board for 50,000 annually to be matched by another 50,000 of new money to be derived from the Colonies themselves.
My own feeling is that, if the Empire Marketing Board agrees to this request, we should regard it as discharging the whole of our obligations purely to Colonial research for a period of two or three years.
The financial facts quoted above and this large Colonial application gives added point to the letter which Julius has sent to Elliot. I hope, in the course of the next year, with the support of the C.C.S.I.R., to be able to obtain for Australia grants which will bring the Empire Marketing Board assistance to Australia up to the neighbourhood of 50,000 a year. It must, however, be realised that any success along this line will depend to a very considerable degree upon well thought out schemes for Imperial cooperation which must originate from the C.C.S.I.R.
It is worth noting that the Empire Marketing Board's contribution of 12,000 spread over 2 years towards the geophysical scheme, which has already been approved in principle, would bring Australia's benefit under these grants up to a total of 9,100 a year.
THE IRISH MURDER 
I am enclosing a letter which I received this morning from Mr.
James McNeill, the High Commissioner for Ireland, as I feel sure that you would like to see it. It is so extremely well expressed.
McNeill was, I know, a great personal friend of Kevin O'Higgins and must have felt his loss acutely.
14th July later
RESEARCH AND THE TROPICAL EMPIRE
At this morning's meeting of the Research Grants Committee of the Empire Marketing Board, we decided to ask the Lovat Committee to separate their proposals into two parts:
(a) the institution of an Imperial Tropical Service (b) the chain of Tropical Research Stations.
If this is done, the Empire Marketing Board would be prepared to find half the new money for the Imperial Tropical Service (roughly 20,000 from the Empire Marketing Board) and then to consider each Tropical Research Station on its merits. This decision is, I am sure, politically wise and one which will not cause the complications of a very large block grant to the Tropics.
Yours sincerely, F. L. MCDOUGALL P.S. I am enclosing one of Low's  cartoons from the 'Star' of July 7th which I am sure will amuse you.