My dear Prime Minister,
Yesterday evening I met Neville Chamberlain  in the House of Commons and we went on the Terrace and had about an hour and a quarter's conversation, which proved extremely interesting.
I first of all emphasised to Chamberlain the extraordinary opportunity that existed at the present moment in regard to the development of the idea of Inter-Imperial economic cooperation. He immediately agreed and said that he thought that at no time since his father's  great campaign had the opportunity been so great.
I then went on to say that I was really anxious lest stupid speeches, such as the one made by Snowden  in the House of Commons, or the ill-considered advocacy of free trade within the Empire based on food taxes on wheat and meat in this country and the abolition of tariffs against British manufactures in the Dominions, might spoil the opportunity which existed. To my very great relief, I found that Chamberlain agreed completely on both points. He told me that he made his speech , which aroused so much interest, without any knowledge that Beaverbrook  had started a campaign for free trade within the Empire. He reminded me of his use of the phrase that 'the Tory Party were now relieved of all their pledges and could start again with a clean slate' but he went on to say that he thought that the question of what was to be written on the slate was a matter of the greatest importance but also one that required the most careful thought.
We then discussed the general position. I suggested to Chamberlain that the proper line of country was to definitely claim that Inter-Imperial economic cooperation was an agreed policy of Great Britain and that it had now become the national policy. The important thing to do was to get down to practical methods whereby the national objective could be put into operation. I said that I thought if he, with his position and authority, were to make or statement that, although he believed that the tariff method was the best, he and his friends refused to insist that Empire economic cooperation could only be achieved through protection and preference and would be prepared to examine every feasible alternative, it would be a gesture which would have a profound effect and would materially help towards a really satisfactory and improved Imperial Economic Conference.
Chamberlain said that he would certainly consider that idea and discuss it with his friends. He then went on to say something that I thought was profoundly true. He said that he had become convinced that the fiscal controversy had gone on so long in England that people were fundamentally bored with it. A protectionist would make a definite statement supported by facts and figures; he would immediately be followed by some free trader with an equally defined statement also supported by facts and figures and the general attitude of the country was a 'plague on both your houses'. The same attitude of mind affected a very large number of the members of the House of Commons. As a result, he could not but regard the prospect of the success of a whole- hogging protectionist campaign as being very dubious and at the least a very difficult and tedious job. He further felt that not only as regards Empire Development but also as regards British industry, it was essential to examine the position afresh and see to what extent the question could be restated. He felt that the future of British industry and British agriculture all depended upon their problems being envisaged and stated in Imperial terms.
He then went on to tell me that he had been discussing these questions during the last week with Baldwin  and that they both saw eye to eye on the subject, so much so that Baldwin had asked him to assume the leadership of a Committee of the Party to frame the new policy in regard to Imperial trade and also industrial matters. This I regarded as being very interesting news because it definitely marks the cleavage between Amery  and the rest of the members of the ex-Government. Personally I very much hope that Amery will come round and see how much better it is to cooperate along lines that afford a reasonable prospect of success rather than to attempt to rush the country once again with a whole- hogging protectionist programme.
Chamberlain then talked about bulk purchase and said that, for his part, he was perfectly prepared to examine the matter thoroughly.
I then said that I felt pretty certain that, if the Tory Party really intended, next time they were in power, to carry out a real policy of Empire cooperation, it was essential that they should place at the Exchequer a Chancellor who would be fundamentally sympathetic with Empire economic cooperation and Empire development. I pointed out that the Treasury was profoundly indifferent to Empire considerations. To this Chamberlain agreed and went on to say that, while he realised the force and significance of the point that I had just made, I should also recognise the political difficulties.
Chamberlain then raised the question of the possibility of Commercial Treaties between Great Britain and the Dominions. I told him that you were also very interested in the idea.  He said that he thought it was quite possible that Great Britain could be induced to agree to certain fiscal preferences as a part of a Commercial Treaty which we would not agree to unless the matter was dearly stated in treaty form. He went on to say that he did not, of course, include any idea of taxes on wheat or meat. I pointed out the misleading effect of lumping large categories of commodities together by illustrating the position in regard to meat. I said that, at the present time, the export of mutton and lamb from New Zealand required no assistance from Great Britain but that New Zealand, Australia and South Africa would all be greatly benefited if some action could be taken to assist the marketing of beef. I then pointed out that if any bulk purchase schemes were to be really brought forward, some form of guarantee from the Treasury would be essential. I also made the suggestion that Great Britain in order to find a method of reciprocity (to be incorporated in a Trade Treaty) might, in so far as she was politically unable to put up tariff preferences, promise a money contribution to the marketing of the Dominion's goods in question;
the money to be used in such a way as might be deemed most expedient to assure to the Dominion goods privileged access to the British market.
Chamberlain thought this was a happy idea but I went on to say that its feasibility and importance would depend to, a very great extent upon whether Great Britain felt it necessary to apply Most- Favoured-Nation terms to all parts of the Empire.
Chamberlain said that he thought that that would be essential on any new tariff preferences that might become possible but that, if the idea of a money contribution was established, it would be well worth considering whether that could be made with one Dominion as the result of a Trade Treaty rather than with the whole of the overseas Empire.
Finally Chamberlain assured me that he was going to devote himself to a very considerable extent in the autumn to the consideration of these problems. He hoped to form a really sound Committee and I suggested that on that Committee he should get Hilton Young , Walter Elliot  and Ormsby-Gore.  He agreed but said that he was not aware that Hilton Young was particularly interested in the Empire. I assured him that he was and he said that he was very glad to know it. He said that he hoped to ask me to meet his Committee once or twice during the autumn and that, when the Imperial Conference did take place, his Committee could unofficially meet you and other Dominion Prime Ministers.
Yours sincerely, F. L. MCDOUGALL