6th June, 1929
PERSONAL AND CONFIDENTIAL
My dear Prime Minister,
I have already written a very long letter  but there are certain matters which you mention in your letter of April 30th  dealing with the Imperial Conference which I felt it would be better to deal with in a separate letter.
I was extremely interested to read the pages which you devoted to this subject. The first point on which I should like to comment is your proposal to arouse Empire interest in the Australian point of view by means of a number of speeches at the latter part of this year.  There can be no doubt that that would be a good way but I also wonder whether there is not something to be said for interchange of preliminary documents between the various parts of the Empire. I have not explored the possibilities of this but would like to make this tentative suggestion that you should consider whether or not it would be worth while your sending a despatch to Great Britain and the various Dominions and to India pointing out the immense importance your Government attaches to the economic side of the Imperial Conference, informing them that you had requested your interested Departments to prepare information that may prove to be of value to the Imperial Conference and perhaps making the suggestion that similar action should be taken by other parts of the Empire. Then I should have thought that if Australia prepared a sort of preliminary survey of the position of industry and agriculture in Australia and the possibilities for the expansion of production, provided markets could be found for the products, this would give the various parts of the Empire something to think about and would lead to the Conference meeting in a businesslike atmosphere, fortified with a considerable volume of useful information which would be helpful.
You may feel that, as there is no precedent for such action, it would be better for a lead of that sort to come from Great Britain and that, unless some such lead were given, you would confine yourself to raising these issues by means of speeches. I would, however, particularly like to know your view and, as I shall be in constant touch with the new Government and with the interested Departments here, perhaps you would be good enough to send me a cable indicating (a) whether you think that Australia should take a lead on what I will call preparation and documentation;
(b) whether you would prefer that lead to be taken from Great Britain, if I could encourage Great Britain to give the lead; and (c) whether you would prefer to abandon the idea of preliminary documentation and rely on the educational effect of speeches.
As regards Empire standards and simplification, I received yesterday a copy of the despatch of the 29th May forwarded by Amery  to the various Governments of the Empire. I do not think that the Central Committee referred to in this despatch has done any really important work. I was invited to attend one meeting but I believe that, after that first meeting, the Committee was purely British.
The idea of an Imperial discussion on Standardization and Simplification held concurrently with the Imperial Conference is quite a good one and if the suggested meeting could be held perhaps a fortnight in advance, so that its report could be submitted to the economic side of the Conference, the Conference might itself be able to arrive at some important resolutions.
THE FORM OF THE CONFERENCE
I have not received from you any definite indication in reply to my suggestion that, in 1930, we should revert to the 1923 model and hold an Imperial Economic Conference alongside the Imperial Conference. I feel fairly sure that there will be considerable advantages in this plan provided the new President of the Board of Trade is a man with keen sympathy in Empire matters.
I have already expressed the view that the political and foreign policy matters which the Imperial Conference will have to deal with will, on this occasion, be of such a nature as to demand the least possible publicity. You will remember that, in 1923, the Imperial Economic Conference received almost the whole of the publicity while the Imperial Conference itself met and arrived at its decisions without attracting any very large amount of notice.
I shall be very glad to know whether you think that this idea is a good one or not.
AMERICAN ECONOMIC IMPERIALISM
There is no need for me to say anything further on this subject at the moment save that it now appears highly probable that the United States Tariff Bill will drive Mackenzie King  into a much more helpful attitude towards Empire economic cooperation than he has adopted in the past.
COLONIAL AND INDIAN DEVELOPMENT
I was really very pleased to read your comment that you do not think that the question of the improvement in the standard of living in India and the Colonies is quite of such long range interest to Australia as I suggested in the letter to which you are replying.  I think I have suggested to you before that, if you feel able to indicate, on an impressive public occasion when you are over here, that Australia, while unable at the present stage to give very much assistance in the matter of the development of the dependent Empire, yet regards the steps that are being taken in that direction as being of vital importance to the whole British Empire, then I feel sure that you would arouse a very great deal of interest here and thus people who are particularly interested in Empire development would be extremely grateful.
Your remarks about the development of secondary industries are intensely interesting.  I suppose that a good deal will depend on the reception which the Australian public gives to the report on the Tariff.  So far I have not gathered from the press that this report has yet been issued.
RECIPROCAL TRADE TREATY
The suggestion of a Reciprocal Trade Treaty between Great Britain and Australia is one on which I have written to you several times during the last two months. I hope you understand that I am in no sense opposed to the adoption of such a plan but I am rather anxious to know on what basis you would start the discussion of such an agreement.
I clearly understand and appreciate your point of view as regards Purchase Boards  and I expect to have some interesting indications of the way in which the new Government's mind is tending on that matter before the end of July.
WHOLESALE AND RETAIL MARGINS
As regards the very difficult and complex problem of getting the facts about wholesale and retail margins as clear as possible before the Conference, this is a matter on which I have taken certain preliminary steps in the Empire Marketing Board and which, now that there is a Labour Government in power, I shall follow up with considerable vigor. I do not think it is much use my attempting, with my extremely small staff, to make any such investigations myself but I shall try to get the E.M.B. to devote a good deal of attention to the matter and perhaps to arrange with the Economic Faculties of some of the Universities for detailed investigations to be carried out, the E.M.B. paying fees for the work done.
THE VALUE OF EMPIRE PREFERENCE TO BRITISH TRADE
I have been reading with interest the information that Simpson  has sent to me about the preliminary labours of your Committee. I am inclined to think that, in order to reach any sound appreciation of the value of preferences such as the preferences which Australia gives to Great Britain, it is essential to study not only Great Britain's trade with Australia but also the general world competitive situation which British trade in a particular commodity meets. For instance, apart from the ties of sentiment and of preference, British trade ought to be in quite as advantageous a position in the Argentine as in Australia. I am, therefore, proposing to analyse the way in which British trade in a certain number of commodities has developed in Australia as compared with the position which is obtained in the Argentine. I shall, if possible, extend this enquiry to include some other nations.
I am writing to Simpson asking him whether the Committee, of which he is Secretary , has carefully studied a document which I prepared and forwarded to you together with my letter of the 16th August 1927.  In this document I analysed the position of certain British exports to Australia for the period 1908-1926 and I also showed, in a second appendix, the way in which the Australian share of the British exports had varied. If your Committee has not studied this document, I should be very glad if Simpson could get hold of it, because it would be a great help to me to know the views of the Committee on that method of attempting to indicate the value of preferences. I am quite sure that you will agree that any strictly accurate statistical method of assessing the value of a preference will encounter almost insurmountable difficulties. It would be easier, and perhaps more profitable, to assess the comparative advantage which Great Britain enjoys over her foreign competitors by reason of the general shelter which Empire markets give to British trade through the combined influence of tariff preference and the voluntary preference which comes from sentiment, trade connections, etc.
I realise, however, that every possible effort ought to be made to get as close as we can to an assessment of the real value of preferences and I have, therefore, arranged for an informal discussion of the subject to take place next week between Sir David Chadwick , Tallents , the Secretary of the E. M. B., the Statistical Officer of the E. M. B.  and myself. I shall forward a fairly full report of what takes place at this discussion, because I believe it should prove distinctly helpful to your Committee. I hope that it will also prove illuminating to me.
I am enclosing a rather interesting analysis which I have just had completed on the extent to which Empire markets absorb the British exports in iron and steel. You will see that I have divided iron and steel exports into semi-finished and finished goods and the difference between the Empire share of these two categories is very noticeable. I have no doubt that you will pass this copy on to Simpson as he may find it useful for his Committee.
Yours sincerely, F. L. MCDOUGALL