My dear Prime Minister,
BRITISH LABOUR PARTY AND THE EMPIRE
Yesterday afternoon, after a meeting of the Empire Marketing Board, which was held in the Ministers' Conference Room in the House of Commons, I met Mr. Tom Johnston  M.P. and had a talk with him about the Labour Party and Empire affairs. Afterwards I got hold of Mr. Harry Snell M.P., the Secretary of the Labour Commonwealth Group, who came out and had dinner with me, in order that we might really have a full discussion about a number of points.
Johnston elaborated to me a scheme which has occurred to him. He said that Baldwin ,in two speeches, has recently drawn attention to the lack of success of State enterprises and has particularly illustrated this by reference to the Commonwealth Shipping Line  and to the Australian Railways and upon failure of the Canadian and the American shipping ventures. Johnston said that he thought that this attack on enterprises which have been carried out by Governments in the Dominions was likely to damage Dominion credit. I told Johnston that I was afraid that everything that I had noticed in Baldwin's speeches was true. Johnston however, insisted that, in the Tory election literature, a very great deal of emphasis was being given to the failure of National railways and other enterprises and that the general effect of the campaign would be detrimental to Dominion credit.
Johnston asked me whether I could get him any information which would assist him in backing the campaign. I told him that I was not very much in sympathy with his object, because I felt that, in many cases, State enterprises have not been successful but, on the other hand, State enterprise had frequently been necessary because private capital would not have undertaken the developmental work.
I promised to try and obtain for him definite information on any special point which he desired but would have to leave him to interpret the facts just as he pleased. Johnston said that what he was really anxious to do was to give the Labour Party some point which would be attractive to them in regard to Empire matters.
My conversation with Snell was much more interesting. I pointed out to Snell that if the Labour Party came back either with a majority or in a position to form a Government, they would, if they were able to carry on for twelve or eighteen months, be the Party in office when the next Imperial Conference occurs. I further pointed out that if, as now seemed very probable, the result of the Election was a stalemate involving another General Election within six or eight months, the Labour Party would, at least potentially, be the Party in power at the Imperial Conference.
Snell said that he was quite sure that no one in the Labour Party had really given any consideration to this point and he promised to take the matter up with Ramsay MacDonald  and with Thomas  and to try and arrange that a special group from within the Party should be invited by MacDonald, as the leader of the Party, to consider the questions that would be likely to arise at the Imperial Conference.
It was further agreed that I should give a very short address to the Labour Commonwealth Group on April 15th about the work of the Empire Marketing Board but that it should be arranged that the main purpose of the meeting should be for me to answer such questions as members might like to ask about Empire affairs generally. Snell thought that it would be particularly useful to have such a meeting just before the election campaign commenced.
Snell waxed quite eloquently about the effect that the Labour Commonwealth Group had on the Labour Party. He said that he thought that nothing had been more significant in the last four years than the way in which the attitude of the Party towards Empire affairs had changed. 
AMERICAN SEA POWER
This is a subject which is off my beat but obviously one of the greatest importance. I am referring to it because in this month's 'National Review' there is published a letter from an American, journalist, Mr. Frank H. Simonds , in which the objective of American Sea Power is set out with what appears to me to be the greatest clarity. I am enclosing this letter in case it does not reach you from any other source.
I gather from conversations with a good number of people, including those particularly interested in the Air Force, that there is a very considerable chance of the new type of 10,000 ton cruiser becoming somewhat obsolete within the next five or six years. If there is any basis in this suggestion, the idea of the British Empire trying to maintain parity with America in this type of vessel may be very unwise.
CONDITIONS FOR BRITISH PREFERENCE
I have, from time to time, written to you on this subject and now just want to draw your attention to some remarks made to me by Mr.
F. J. Hook, one of the Directors of Peck Frean & Co. Ltd., the biscuit manufacturers. Mr. Hook complains rather bitterly that the administration of the tariff in regard to the British preference on biscuits is-to use his own word-vexatious. He states that his Company has done its best to support the Empire Buying Campaign of the Empire Marketing Board but finds in return that it is having the greatest difficulty in obtaining British preference for its products in Australia, because of the narrow way in which the 75% Regulation  is interpreted. He points out that even the wrapping paper which covers the tins of biscuits-a type of paper which is not manufactured in England-is included in weighting the 75% Regulation against his goods.
Mr. Hook raised two questions, namely flour and eggs.
On flour, he stated that it was impossible to make firstclass biscuits without using some imported flour and that his Company was perfectly prepared to use a mixture of British and Australian flour.
In regard to eggs, he pointed out that it was essential to use eggs imported in liquid form and that supplies of this were not obtainable from Empire sources.
I told him that I did not think that he could expect to get any special consideration in the matter of eggs as the eggs which his firm used were imported from foreign countries but that, in regard to flour, he seemed to me to have a case.
I am mentioning this matter because I do feel that it would be extremely helpful if careful consideration could be given to the 75% requirement and if the Customs Department could decide that, in the place of the requirement of '75% British labour and/or material', the requirement might be '75% British labour and/or Empire material'.
REPORT OF BRITISH ECONOMIC MISSION
With my last letter I forwarded the typescript of an article commenting on this report and I now enclose two copies of the article as it appeared, illustrated by a small map which I had drawn to shew the scope of intensive agriculture south of the tropics. I am sending two copies because I think you might perhaps care to forward one to Mr. Gullett. 
Yours sincerely, F. L. MCDOUGALL