12th June, 1929
PERSONAL AND CONFIDENTIAL
My dear Prime Minister,
THE LABOUR CABINET
Since the list of Ministers was issued, I have been feeling depressed. MacDonald  has been ultra conservative. The only fresh idea is that of making J. H. Thomas as Lord Privy Seal Minister in charge of a Cabinet Committee on Employment. The appointments to the Dominion and Colonial Office are almost tragic. Sidney Webb , who is to go to the Lords, is, of course, no fool but he is over 70 and has always seemed extremely doctrinaire. I hear that he has intimated his willingness to work from 10 to 5 but to have no papers at home and a minimum of public engagements. Ponsonby , as Under-Secretary for the Dominions, is obviously an appointment intended to muzzle that Russophile and to keep him out of mischief If he follows his previous form, his Imperial cronies should be De Valera  and one or two of the extreme nationalist Ministers in South Africa. Willie Lunn , at the Colonies, is a nice elderly miner without any real ability. He went on a small Parliamentary Delegation to Nigeria but fled back to the boat as soon as he felt the atmosphere of Lagos. Then, as Lord President to deal with scientific research, there is Lord Parmoor.  He was regarded as doddering in 1924 and I have heard of no rejuvenation.
The one office they have staffed well both in the Senior and junior Ministers is India-Wedgwood Benn  and Drummond Shiels.
After all this depression, you will be glad to get a brighter prospect. Today Tallents , the Secretary of the Empire Marketing Board, saw Sidney Webb, who was extremely cordial, and indicated that he was prepared to be actively interested in the Empire Marketing Board and gave no hint of any change of policy.
He then discussed the Chairmanship of the two vital Committees, agreed that Ministers should hold them but suggested that Ponsonby be not asked as he did not think Ponsonby was much interested in Imperial affairs.
Webb agreed to invite Amery , Elliot  and Ormsby-Gore to join the Board and its two main Committees respectively and to ask Archibald Sinclair  to continue to serve. That much to the good. There was some Roman thanked for not despairing of the Republic, so I suppose it is up to us to make the very best of a badish looking job and to help the Labour Government in every possible way to make a good showing in Imperial affairs.
Acting on this, I got the 'Times' to bring out a leader  on Tuesday pointing out Labour's Imperial opportunities and I am following this up with an article for the 'Trade Supplement', dotting i's and crossing t's. I enclose copies of both.
I have not yet seen Webb and shall leave him alone for another week but I have made clear to him, both by letter and through the Office, that I shall be delighted to help in any Imperial direction.
I had a characteristic letter from J. H. Thomas, a copy of which I enclose as evidence of some considerable degree of self satisfaction. I regret that Tom Johnston has been given the Under- Secretaryship of State for Scotland. This will effectively muzzle him and circumstances may arise when we shall want his voice in the House. I should rather have seen him in the Cabinet or a backbencher.
I was very pleased with the attitude adopted by Ormsby-Gore. He rang me up and asked me to take an early opportunity of making clear to Labour Ministers that he would be glad to serve in any non-party way on Imperial bodies. He mentioned the Imperial Economic Committee.
THE VALUE OF EMPIRE PREFERENCE TO BRITISH TRADE
In my last letter  I told you that I had arranged for a discussion between Sir David Chadwick , Tallents and the Statistical Officer of the Empire Marketing Board  and myself on the methods of assessing the value of preference. That discussion occurred yesterday and the results were rather negative. I am making, and I hope by this mail to be able to forward an account of the discussion to Simpson  but put briefly the points that were arrived at were as follows:
After a long discussion we unanimously agreed that it was impossible to find any sound statistical method whereby the value of preferences could be assessed. We recognised that in every class of goods and in every country there were so many imponderable circumstances that to attempt any exact assessment would be impossible. We then agreed that merely to consider the course of British trade with the Dominion giving the preference could not be regarded as being in any way a satisfactory basis, because, while there might appear to be remarkably little competition for the British exports of a certain line of goods to, say, Australia, an examination of the world position might reveal very substantial competition which would be capable of operating in Australia in the event of a reduction of the preference or of other favorable circumstances.
Perhaps a good illustration of this would be from the electrical industry in cables and covered wire. Great Britain held in 1926-27 95.2% of the Australian imports under this head, the total British export to Australia being valued at 1,590,000. The contemplation of this item would suggest that Great Britain was faced with remarkably little competition and that it was possible that she did not need the preferential assistance which she was receiving.
When, however, one turns to the Argentine [one] finds that, out of the total Argentine imports of these goods valued at 1,483,000, Great Britain only supplies 600,000 or 40.5%, and turning further to the Netherlands one finds that, although Holland imports over 800,000 worth of these goods, Great Britain only supplies 29,000 or 3.6%. It is of course probable that the type of cables and covered wire that the Netherlands import is somewhat different from those imported into Australia but the consideration of foreign trade does, in this instance, show conditions of severe competition in the foreign world although, in Australia, the competition is obviously negligible at the present moment.
We therefore felt that a most useful purpose would be served if the British Government could be incited to have prepared a series of analyses of the value of Empire trade to the more important British industries and that, if we could succeed in inducing the new Government to do this as a preparatory measure for the Imperial Conference, the Government should also be urged to summon the representatives of the industry to discuss the real inwardness of the situation as shewn by the statistical evidence.
Tallents is going to take this matter up with Sidney Webb in the near future.
As an illustration of what I had in mind, I prepared for this talk an analysis of the electrical industry in three tables. The first table shows, both in percentage and in volume, the share that Great Britain holds of Australian electrical industries in contrast to her share in the Argentine, the Danish and the Netherlands markets. The second table sets out the British share in the Australian imports as compared with the weighted average of the British share in the imports of these three foreign countries taken together. The third table shows the extent to which British Empire markets absorb the exports of the British electrical industry. I enclose copies of the tables herewith.
It seems to me that table 2 does afford some indication of the relative importance of tariff preference together with all the other factors which make Australia a sheltered market for British industry and does give some gauge of the relative urgency of preferential assistance. It would seem to follow, for instance, that under Item 6 Lighting Accessories, the British position in the world is strong, whereas Great Britain has a very weak position in regard to Item 5 Accumulators.
I hope that you will glance through these details because I feel that there is a good deal of interest to be deduced from them.
Subject to what you or Simpson may say, I believe that the best contribution I can make to assist the work of your Committee  will be to carry out a series of analyses of the competition which British goods face in the world in comparison with the position in Australia.
With reference to the foregoing, it occurs to me that it might be useful if, as soon as I have got a good deal of material together on the world competitive position, I were to arrange to meet some of the more important Chambers of Commerce and to discuss with them the significance of Australian, and indeed of Empire, markets in order to get them to realise how vital it is to them to use all their influence to secure the development of Imperial markets.
Yours sincerely, F. L. MCDOUGALL