15th May, 1928
PERSONAL & CONFIDENTIAL
My dear Prime Minister,
You will probably like to receive some brief account of the way in which the Consultative Committee of the Economic Section of the League of Nations is commencing to function.
In previous letters I have told you about the discussions that occurred in London among the British Empire Delegations.  On our arrival at Geneva we held a long meeting in Sir Arthur Balfour's  room, which was attended by all the British representatives, together with their Experts, by Mr. Lindsay , the Trade Commissioner for India, who is assisting Sir Atul Chatterjee , and by myself, together with Major Fuhrman. 
At this talk Sir Arthur Balfour and Mr. W. T. Layton  were able to give a pretty clear account of the way in which members of the Consultative Committee had notified their views to Sir Arthur Salter, the Director of the Economic Section of the League of Nations. It became clear that a considerable number of members of the Committee, including among others Mr. Layton, were very keen on proposing direct methods to induce countries to lower their tariffs, and that the method that was favoured was for the Economic Section of the League of Nations to be asked to prepare some set of formulae which should be submitted to the respective Governments, with a request that they should consider the formulae and notify the League of Nations as to whether they found it possible to make progressive reductions in their tariffs along the lines suggested.
As an alternative to this radical attitude, the Economic Committee of the League itself was in favour of the League of Nations summoning a series of conferences of particular industries, in order that those engaged in them should discuss the possibility of lowering tariff barriers in those industries. After a talk with Sir Sydney Chapman , I came to the conclusion that this second alternative was quite a harmless one, especially as I urged on Sir Sydney Chapman the view that such industrial conferences, if called, should not be for the specific purpose of lowering tariff barriers in an industry, but for the positive purpose of discussing how the volume of international trade in the industry in question might be increased. I found Chapman quite sympathetically inclined to this suggestion. 
The other important matter which I discovered was likely to come before the Consultative Committee was the question of the status and function of the International Agricultural Institute at Rome.
 The Italian Government has communicated with the various Governments supporting the International Institute, and has suggested that means should be found whereby the activities of the Institute might be more closely associated with the economic activities of the League of Nations. I understand that this move from Rome has been due to difficulties of a financial character, as some of the Governments supporting the Rome Institute have been by no means satisfied with its work, and the United States in particular has been raising a number of difficulties.
There can be no doubt that the work of the Rome Institute is very far from satisfactory. For some years now I have had frequent recourse to the statistics and other information published from Rome, and have found them of comparatively little value. I also understand that the Italian dominance is a very undesirable feature of the present way in which the Institute is run. It is fairly clear that a good number of members of the Consultative Committee, including Dr. Hermes , the German exMinister, who is also a member of the International Commission on Agriculture, and M. Gautier , President of the National Confederation of Agricultural Associations, are all for scrapping the Rome Institute and creating an Agricultural Section functioning directly under the League of Nations and working at Geneva. It has been suggested to me that both Hermes and Gautier would not be unwilling to be associated with the work of such a new Institute.
On the other hand, there is the suggestion which is strongly favoured by Sir Arthur Salter and by the British Government that the League should obtain an effective voice on the governing body of the Rome Institute, with the object of radically improving the whole of its work and making the Rome Institute in some sense an organ of the League of Nations.
On the Monday following this meeting, I had an opportunity of further talks with Sir Sydney Chapman and Sir Atul Chatterjee, and also with Sir Arthur Salter, and I came to the conclusion that it would be a good thing to send you a cable briefly outlining the situation, and also informing you that I anticipated it would be possible, by working through the various members from the British Empire, to squash the dangerous idea of the League directly approaching Governments with proposals for tariff reductions on some set scale. I thought, however, that it was desirable to let you know that, should any such proposal be brought forward and should it appear likely that the Consultative Committee would agree to it, I might feel it desirable to oppose such a suggestion, on the ground that it would be dangerous to the prestige of the League of Nations. I did this because I felt that you might desire to cable me that you would rather I did not intervene on any such question. There now appears less probability of the direct action method being pressed. I have convinced Colonel Vernon Willey , I think Mr. Arthur Pugh , and certainly Sir Atul Chatterjee and Sir Sydney Chapman that any such move would be extremely ill-advised, and the only member of the Empire Delegations who is still keen on the idea is Mr. W. T.
Sir Arthur Balfour is tremendously in his element at these conferences and is, I think, much more interested in the international point of view than in the imperial. At the same time he is a realist and is not likely to be led away by the academic economic ideas of Layton, although he and Layton do work very closely together.
In regard to the conferences of particular industries, I was able to arrange with Sir Atul Chatterjee that in a speech which he made to-day at the conference he should bring forward the view that such conferences, if summoned, should not be summoned for the purpose of reducing tariffs but for the purpose of stimulating trade, and it was interesting to note that his speech was well received by the Consultative Committee.
We have just completed the second day's session, and one has spent the time listening to a very large number of speeches, most of which have been couched in a language of vague economic idealism and with very little practical significance. I am happy to say that, with the exception of a long rambling and on the whole ineffective speech of Dr. Shortt  from Canada, all the members from the British Empire who have spoken have been both brief and effective.
From my point of view I think the chief advantage of my presence on the Consultative Committee will be the number of useful contacts that I shall be able to make and the personal relations that I shall be able to establish with the heads of the Economic Section of the League of Nations. There is no doubt that Sir Arthur Salter carries a very considerable number of guns among political people in England, and it will be to the advantage of the cause of Empire trade to effect a happy personal relationship with him. In a somewhat different way Loveday , the chief Statistical Officer of the League, is a man very well worth knowing, for there is no doubt that the statistical matter issued by the League of Nations compares more than favourably with any that I have seen.
I think I indicated in my last letter that I might feel it desirable to make a brief statement. I was very strongly urged to do so by Sir Sydney Chapman and Sir Arthur Balfour, and I therefore made a very brief speech, of which I enclose a copy. My purpose in doing so was to make a small gesture of co-operation towards the Consultative Committee itself, and at the same time to suggest fairly definitely that the function of the League of Nations in the economic sphere was the provision of information.
Even as the result of two or three days, I have realised what a very great advantage it must be to all the Australian Representatives who come to Geneva to have Major Fuhrman associated with them. He is proving a great help to me, and on the subjects with which he is more directly concerned he must be extraordinarily useful.
With Fuhrman's assistance I shall, of course, send you an official report on the work of the Consultative Committee, and by next mail I hope to send you a fuller account of what has taken place. At the present moment I am very doubtful whether anything at all substantial will come out of this meeting, but perhaps we shall arrive at some sound basis for improving the collection and dissemination of industrial and agricultural statistics and information. If that was the sole result it would be well worth while, for I am perfectly sure that there is a very great deal to be gained from the careful study of really well prepared statistics and general information about agriculture and industry.
Yours sincerely, F. L. MCDOUGALL