209

5th February, 1929

PERSONAL AND CONFIDENTIAL

My dear Prime Minister,

MR. AMERY [1]

On Saturday last I saw Amery for about an hour at the Dominions Office and we talked about several subjects, including the economic issues at the Imperial Conference, the suggested Empire Business Men's Conference, Trade Treaties between a Dominion and Great Britain, and publicity for Empire goods in the Dominions.

Amery did not have anything very interesting to say about the Imperial Conference. It was quite obvious that he had not given any dear thought to the matter. He talked about methods whereby British preference to Dominion goods could be increased but emphasized the impossibilities of the Cabinet giving any consideration to the subject before the General Election.

The idea of the Empire Business Men's Conference had also received little thought. He inclined to the idea that it should be summoned to meet just before the Imperial Conference, that during the Conference each delegation should act as advisers to their own delegations and that, after the Imperial Conference concluded, the Business Men should continue their sittings to reach conclusions upon certain subjects. After some discussion, he agreed that if the Business Conference was to be held, it would require much work and preparation if it was to be made an effective show.

On the subject of Trade Treaties between a Dominion and Great Britain Amery was much more interesting. I started by asking him what he would regard as the starting point in negotiations between Australia and Great Britain. I pointed out that Australia was giving some form of preference to over 90% of British imports and that, although in several directions an increased preference might be possible, Australia could hardly be expected to regard the whole of her nominal 8,000,000 of preference as set off against Great Britain's preferences to her and to start negotiations on the basis of fresh concessions from each side.

Amery said that he thought the main difficulty would be in obtaining tariff concessions from Great Britain but that the Trade Treaty way seemed the most promising as faced with a bargain of undoubted value to Great Britain it would be difficult for Britain to refuse a highly reasonable offer. He went on to suggest that Australia could offer the stabilization of certain preferences for a term of years as her new offers in such negotiations. He added that if the idea of the rationalization of industries upon an Empire basis developed, some such stabilization of preference upon a reciprocal basis might prove a politically useful method from the Commonwealth Government's point of view.

I instanced the Cotton industry in which today over 95% of British cotton piece goods are admitted duty free into Australia with a duty of 15% against foreign, and mentioned that there could be little doubt of the value of the preference to Lancashire since Australia bought over 85% of her cotton piece goods from Great Britain whereas Argentina only bought 40% of her requirements in the British market.

Amery agreed that cotton would be an excellent instance of what he had tentatively in mind. The British manufacturer was very nervous about the future trend of Australian Tariff policy. If Australia were to offer say a five years stabilization of the present cotton piece goods position, he thought the advantages to Great Britain could be made so clear as to render a refusal of some substantial concession to Australia difficult.

Amery expressed himself pretty strongly in favour of what he described as M.F.N. treatment within the Empire but agreed that if Great Britain adhered to such a policy, it was by no means necessary for each Dominion to do the same. I pointed out that an Inter-Imperial M.F.N. extended by Australia to, say, India upon cotton piece goods would sadly diminish the value of the preference to Lancashire except perhaps upon the more expensive cotton cloths.

The general upshot of this part of the discussion was that Amery made two things clear: firstly that he hoped Australia would come to the next Imperial Conference ready for at least initial negotiations with Great Britain for a direct trade treaty and, secondly, that no formal move by Australia in that direction would be wise before the Conference.

On the question of official publicity for Empire goods in the Dominions, Amery started with a very wise remark. He pointed out that the Empire was so far away from a bargaining spirit that no one was mentally inclined to set off one set of advantages given or received against another set. For instance the fact that Australia was spending a considerable sum on imperial Defence was welcomed by those who realised how far Australia outdid Great Britain in tariff preference. The fact that New Zealand gave far more preference than she received did not decrease the instinctive desire that she should do a little more in defence. He deduced from this that a small expenditure in the Dominions to match the publicity expenditure of Great Britain through the Empire Marketing Board would have remarkable results. Amery obviously thought that some action by the Australian and New Zealand Governments in the publicity for Empire goods direction would be extraordinarily welcome here.

LIBERAL PARTY AND THE ELECTIONS

On Friday last I had Sir Archibald Sinclair M.P., the representative of the Liberal Party on the Empire Marketing Board, to lunch. We had a most interesting and at times amusing talk.

Sinclair is a very charming individual and, in spite of being a Liberal, is considerably interested in Empire affairs.

The first subject we discussed was the position of the Liberals at and after the elections. You will, of course, be aware that Sir Herbert Samuel [2] speaking on behalf of the Liberal Party, has recently made a definite declaration that, in the event of the Liberals holding a balance of power, they will not repeat their action of 1924 and put the Labour Party into office. I was rather astonished when Sinclair told me that one should regard this statement made by Samuel as being intended to be taken literally.

He said that the Liberals expected to come back with a minimum strength of 80, and they had hopes of securing 100 seats.

I told him that such an estimate was very different from anything that I had heard from the other Parties and I asked him whether the Liberals did not expect to lose a certain number of seats to Labour.

Sinclair agreed that some seats would be lost but thought that they would win a certain number from Labour as well as from the Tories. I told him that I was a little sceptical as to whether their gains from Labour would be sufficiently numerous to have any effect. He expects to see the Liberals gain seats in the West of England and in the Eastern Counties of both England and Scotland.

He said that if the Liberals had a balance of power and only say 80 seats, it was quite probable that they would decide to offer to support a Baldwin [3] Government on terms. Such terms would, of course, include no further development of safeguarding or of other forms of increased duties. He then mentioned the interesting possibility that if the Liberals came back with 100 or more seats, it was quite possible that Baldwin might prefer to put them into office and to support them on terms for 18 months to 2 years until there could be another General Election.

LIBERAL PARTY AND THE EMPIRE

The main portion of my talk with Sinclair was in regard to the attitude of the Liberal Party to the Empire. I told him that I thought that one of the reasons why the Liberals' chances at the Election remain slender was the fact that the Liberals were less interested in Empire matters than either of the other two Parties.

Sinclair rather agreed that this was the case but pointed out that they had only 40-odd members in the House and that it was but natural that the whole of their time should be taken up in critically attacking the Government and the Labour Party.

I pointed out, however, that for quite a number of years the Liberals had been very unsatisfactory from an Empire point of view. He said that his realisation of this had been one of the reasons which had led him to accept the seat on the Empire Marketing Board when it was offered.

After a good deal more talk, he said that he would try to arrange for me to meet a small group, the constitution of which he would think over but at the moment he would only suggest three names-his own, Sir Herbert Samuel and Philip Kerr. [4] He said that he thought it was unnecessary to arrange for a discussion with Lloyd George [5] for two reasons: first of all because Lloyd George was not interested in questions unless they were of immediate political importance and, secondly, because he assured me that Lloyd George's heart was in the right place so far as the Empire was concerned and that, given an opportunity, he would be only too glad to develop some form of effective Empire policy.

I of course pointed out to Sinclair that if the Liberals regarded their hands as completely tied in the matter of free trade, the evolution of an effective Empire Development Policy would require a great deal of thought, care and preparation. He agreed that anything of that sort had yet to be done and that it was highly desirable that it should be thought about.

6.2.29

IMPERIAL SHIPPING COMMITTEE

Yesterday at the conclusion of a meeting of the Imperial Economic Committee Sir Halford Mackinder [6] had a talk to me about the position of the Australian representative on the Imperial Shipping Committee. He told me that, although Mr. Larkin [7] had now joined the staff of the P. & O. Co., you had agreed to his continuing temporarily to represent Australia. Mackinder was anxious about the future representation. He pointed out that there was a substantial difference between the work on the Imperial Economic Committee and the work on the Imperial Shipping Committee. In his view the work of the Imperial Economic Committee was much heavier and the representation by persons of constructive ability was particularly useful. On the Shipping Committee, however, a very large number of the subjects dealt with were of a quasi judicial character. Owing to strong representation of the British Shipowners on the Shipping Committee, Mackinder felt that, since it now appeared improbable that Australia could be represented by experts, such as Mr. Larkin or Mr. Eva [8], it would be of great importance to have a representative whose name would carry weight with Shippers, Producers Organizations, etc. in Australia.

I find it very difficult to think of anyone in London who would prove particularly suited, with the possible exception of John Sanderson. [9]

NATIONAL CAMPAIGN FOR THE DAIRYING INDUSTRY

In my letter of the 24th January [10] I wrote to you about the idea of a national campaign to improve the economic conditions of the Australian Dairying industry and I also enclosed a memorandum which I told you I was going to keep quite confidential but would send a copy to Dr. Orr [10] for his comments. I am now enclosing a copy of Orr's reply.

I should point out that Orr did not have the opportunity of meeting W. S. Kelly [12], whose name I mentioned as being perhaps suitable, should you consider this idea worth developing. The difficulty would, however, be to induce Kelly to give more than a small amount of time.

SHIPPING DELEGATION

In my letter of 30th January [13] I mentioned certain discussions with Sir Alan Anderson [14] and Mr. Maurice Hill [15] of the Shipping Delegation. I am now enclosing copy of a letter which I sent to Hill drawing his attention to the very substantial sums which the Empire Marketing Board is making available for research into improved methods of refrigeration and suggesting that the combination of this work undertaken by the Low Temperature Research Station at Cambridge on behalf of the Empire Marketing Board and the great work that is being done in Australia by the C.S.I.R. towards the improvement of production in agriculture should, in the course of time, greatly improve the economic position of the shipowner, so far as Australian home cargoes are concerned.

I think you may consider it useful to have this idea before you in your discussions with the Shipping Delegation.

Oscar Thompson [16] called to see me on Friday last and told me that the point of view that he hoped to be able to stress in Australia was that if peace in industry really meant anything, it also meant peace between industries. He recognised that the Australian producers and shippers had a horror of the Inchcape combine [17] but he felt that it was quite essential that the Australian industries should appreciate the position of the shipowners and vice versa. He seemed very hopeful of a satisfactory outcome of the discussions. [18]

AUSTRALIAN AND 'BRITISH' WINES

In the 'Times' of February 5th there appeared a letter by Mr.

Campbell Johnston, the Chairman of Vine Products Ltd., the principal manufacturers of the so-called 'British' wines, attacking the Australian wine trade. It was perfectly obvious that the intention of the letter was to counter any tendency which might have been created in favor of further preferential assistance to Australian wines. I regarded the letter as being distinctly offensive in tone but the Australian wine industry has made such a mess of its affairs lately that, at first sight, Campbell Johnston's letter did not appear particularly easy to answer. After some thought, however, I came to the conclusion that it was most desirable that it should be answered and that, on this occasion, attack was the best means of defence. I therefore wrote a vigorous reply but which, after careful consideration, I thought it was hardly desirable to sign. Casey [19] happened to come into my office just after the letter had been completed and he suggested the nom-de-plume of 'in vino veritas'. I thought this was a happy idea and one which could be improved upon, so adopted the signature of 'Vinum et veritas'.

My letter was published in the 'Times' of February 6th. I enclose copies of both letters and would particularly draw your attention to the points raised in my letter in regard to British wines. You will notice that in effect I raised two questions: first of all asking whether it was wine and answering that question in the negative, and then asking whether it was British and reaching a similar conclusion.

EMPIRE BUSINESS CONFERENCE

On January 24th I sent you a short letter about the idea of an Empire Business Conference. In that letter I referred to the proposed conference as a Melchett [20] idea. This has been denied vigorously by the Association of British Chambers of Commerce and also by that other rather nebulous body the Federation of British Empire Chambers of Commerce. Both these bodies claim to have initiated the idea and it is certain that the proposal of a meeting of the Business interests of the Empire was made a year before Melchett's speech.

Since I wrote to you, I have met several people who are interested in the idea and I have also given the subject a good deal of thought. I find that the Federation of British Industries is not keen upon the idea at all as they feared that the proposal would only result in a sort of glorified Rotary Club meeting, with pious resolutions, criticism of Governments and nothing constructive or even tangible achieved. After further talk they agreed that if the conference was carefully prepared for, and had a selective agenda, and if above all means could be found whereby it could be really representative, the results might be useful. They were extremely emphatic that to attempt to rush such a conference would be to court disaster and they therefore felt that whatever else was obscure, it was clear that it would be impossible to arrange for the conference before the Imperial Conference.

I met Sir Robert Horne [21] in the House of Commons and he told me he wanted to have a talk because the Canadian press were asking him for his views about the Empire Business Men's Conference. He started by saying that he had not thought much about it but that such a conference preceding the Imperial Conference might have a very good educational effect and give some useful leads to the Prime Minister. We discussed the possibilities of getting such a Conference held this year and he agreed that it would be difficult if not impossible. He then started to discuss the question of representation and said that the difficulties there seemed great, for the Conference would be of little use unless it was truly representative. I mentioned the precedent of the World Economic Conference. [22] There the whole of the representatives were unofficial, no one represented any Government but the Governments nominated the delegations which were supposed to be representative of the whole of each country's industry, trade and agriculture and in many cases of organized labour.

Horne thought that such a precedent might be valuable. He suggested a delegation of ten from each Dominion, India and from Great Britain and that the Colonies might be grouped into 4 groups with a smaller delegation from each group. We agreed that if the British Delegation included Lord Weir [23], Sir Robert Horne, Sir Arthur Balfour [24] and Sir Arthur Duckham [25], a very effective leadership of discussions might be anticipated.

Horne finally said that all he would give the Canadian press would be that the Conference was a good idea provided it was thoroughly and adequately prepared for.

I have had further talks about the proposed Conference with Pooley [26], the Director of the British Empire Producers Organization, and with Sheldrake [27], the Editor of the 'Times Trade Supplement', who both feel very strongly the need for the greatest care in preparation for such a conference and in the formation of an agenda.

SOUTH AFRICAN-GERMANTREATY [28]

In the 'Telegraph' of February 2nd there appeared a most interesting comment on the South African-German Treaty by Colonel Creswell [29], the Minister for Defence in the Hertzog [30] Government. I enclose the cutting and would particularly draw your attention to the marked paragraph. It seems pretty obvious that if a member of the Government which has negotiated a treaty says that the treaty will not affect trade to the extent of one pennyworth, the object of the Minister who negotiates the treaty must have been a political demonstration of South Africa's 'independent status'. You may find it useful to quote, or to have circulated, the underlined portion of Creswell's statement.

Yours sincerely, F. L. MCDOUGALL

1 Leopold Amery, Secretary for the Colonies and for Dominion Affairs.

2 Chairman of the Liberal Party Organisation; Minister, holding various portfolios, 1905-16.

3 Stanley Baldwin, Prime Minister.

4 Editor of the Round Table 191o-16; Private Secretary to Lloyd George 1916-21.

5 David Lloyd George, Prime Minister 1916-22.

6 Chairman of the Imperial Economic Committee.

7 H. B. G. Larkin, Chairman of the Commonwealth Shipping Board 1923-28. The Commonwealth ships were sold to a combine headed by Lord Kylsant in 1928 and resumed service to Australia as the Aberdeen and Commonwealth Line.

8 E. A. Eva, Manager for Australia, Aberdeen and Commonwealth Line.

9 Director of Australian Agricultural Co. Ltd, Bank of Australasia, and Australian Mercantile Land and Finance Co. Ltd.

10 Letter 206.

11 J. B. Orr, Director of the Rowett Institute for Research in Animal Nutrition, Aberdeen.

12 South Australian pastoralist; former Chairman of the Advisory Board of Agriculture in South Australia.

13 Letter 208.

14 Of Anderson, Green & Co., managers of the Orient Line.

15 P. Maurice Hill, Assistant General Manager of the Chamber of Shipping in the United Kingdom.

16 Of the Aberdeen and Commonwealth Line.

17 A group of shipping companies, including the P & 0 Line, of which the Chairman was Lord Inchcape.

18 See note 14 to Letter 208.

19 R. G. Casey, Commonwealth Government's Liaison Officer in London.

20 Lord Melchett, Chairman of Imperial Chemical Industries Ltd.

21 Philosopher, barrister and Conservative politician; President of the Board of Trade 1920-21; Chancellor of the Exchequer 1921- 22; chairman and director of major firms.

22 International Economic Conference, Geneva, 1927.

23 Scottish industrialist.

24 Industrialist; Chairman of the Committee on Industry and Trade.

25 Chemical engineer prominent in the coal industry; leader of the British Economic Mission to Australia 1928.

26 H. T. Pooley.

27 T. S. Sheldrake.

28 See note 1 to Letter 200.

29 F. H. P. Creswell.

30 J. B. M. Hertzog, Nationalist Prime Minister of South Africa.