17th February, 1926
PRIVATE & CONFIDENTIAL
Dear Mr. Bruce,
H. M. GOVERNMENT AND IMPERIAL ECONOMIC COMMITTEE
Although I am not able to send you any definite news on this subject (were I able to do so, I should of course cable), I believe that there has been a wholesome change for the better during the past week.
The following account is gathered from several confidential but I believe reliable sources-the Cabinet, after giving cursory attention to the First Report of the Imperial Economic Committee on one or two occasions, came to grips with the subject early last week. There was a majority opposed to any endorsement of the plan of Voluntary Preference. Mr. Amery , however, put up a most spirited plea for the proposals and expressed the very greatest concern if the annual grant should be withheld. The recalcitrant members remained opposed but then the Prime Minister  interposed and stated that the undertaking must be carried out and that the report of the Imperial Economic Committee was the basis upon which action should be taken.
The Prime Minister's attitude decided the issue and the Cabinet decided in principle to utilize the annual grant but with the proviso that only 500,000 to 600,000 should be budgeted for in the coming financial year (March 31st); the remainder, if required, to be put through on supplementary estimates.
The Cabinet then decided to appoint a Cabinet Committee under Sir Austen Chamberlain  to report on how to give effect to the Imperial Economic Committee's proposals. This Committee has, I am told, come down on our side and is prepared to recommend the setting up of an Executive Commission acting under the Secretary of State for the Dominions and Colonies.
All the foregoing is unconfirmed but I shall be surprised if this is not a substantially accurate account of what has transpired.
Whether the Cabinet will accept the Executive Commission in view of the known hostility of the Treasury to all our ideas I cannot say but I should suppose that the chances are favourable.
I enclose some further Parliamentary answers which bear on the subject.
If the Cabinet gives a favourable decision, I shall feel a load off my mind, for I was getting very worried from an Imperial point of view over the attitude of certain members of the Government.
I shall also feel that my educational work is not being carried on in vain.
I do not know whether you decided to send a further cable on this subject to the Prime Minister or not.
THE EXECUTIVE COMMISSION
If the Government accepts the implication of our Report in full, an Executive body will be set up, probably responsible to the Secretary of State for the Dominions and Colonies, to carry out the following functions:
1. to institute a campaign of educational publicity for Empire products.
2. to see that such a campaign is coordinated with supplies of good quality produce from Empire sources.
3. to supervise the administration of the funds devoted to research and to see that there is no wasting of effort on side lines of scientific work. I regard this as a most important point for, if the Dominion producer is to realise the benefits of the scheme, he must be kept in touch with the research work (both on the laboratory and commercial scale) which is being done on his behalf.
4. to maintain connection with the organized producers of the Empire and to encourage further organization particularly in the Crown Colonies.
In addition to these points many others will naturally occur, including Intelligence service, etc.
I understand that Amery's idea at the moment is to set up a body of four men with a small Secretariat, these four men to be drawn from Great Britain and to be the Body responsible, through himself, to Parliament. His idea is that these four men should be the four (now three) British representatives on the Imperial Economic Committee but that, as the present British representatives on the Committee are ineffective (with one exception), the personnel should be changed. The name of Commander Hilton Young  is mentioned as a possible Chairman of the Executive. The idea of a purely British responsible body is on constitutional grounds. Amery, I gather, wants to add three oversea members with full rights of discussion but not actually responsible, probably one for the Dominion view, one for India and one for Crown Colonies.
I gathered from Mackinder  that he was not keen on the Dominions being represented in an advisory capacity on this body but I cannot conceive why. I understand that it is not intended to put Mackinder on the Executive. Frankly if any such body is set up, I should like to act as the Dominion Advisory Member. No one here has a wider knowledge of the point of view of the various sections of producers' opinion in all the Dominions for I have made that question a special study for the last three years. The work would also dovetail into the work on the Imperial Economic Committee. However it is early to discuss this point for the Cabinet may not approve the plan and anyhow the germ that I have indicated above may be altered in many ways.
THE FRUIT REPORTS
So far as the Main Fruit Report goes, it is still in the hands of the Drafting Committee. The stand taken by Gubbay  and myself, as reported in my last letter, produced its results and on Monday the Chairman produced the completed rough draft, very largely the work of the Secretary  however. We have now spent two sittings on this draft. We meet tomorrow at 8 p.m. for a night sitting, again for the whole of Friday, when I trust we shall get it into shape for circulation to the Committee.
Roughly the whole report (main and the subsidiary reports on specific fruits) will run into about 200 printed pages. So far as the subsidiary reports go, I am working at night with the Secretary to get them into shape for the full Committee, as Mackinder does not put in enough time to do them at all properly.
On the Banana Sub-Committee we signed our report last Friday night at 11.30 p.m. It is an interesting document which will, I fear, not altogether please Jamaica but will, I hope, prove a most useful basis for the foundation of an Empire banana trade.
FUTURE WORK OF THE IMPERIAL ECONOMIC COMMITTEE
I have heard that Mackinder is not anxious for any further work for the Imperial Economic Committee as he has large leeway to make up on the Shipping Committee. This Committee only meets once a week and I entirely fail to understand his reluctance, except on the grounds of personal inclination. I feel that a most useful purpose would be served if, during the period Easter to August, the Imperial Economic Committee tackled Dairy product problems. I have, I believe, already expressed this view to you.
Dairying is the most widespread industry in Australia and New Zealand, it is very important to Canada and there are quite large possibilities in South Africa. Again the New Zealand Dairy Produce Control Board's policy is likely to raise considerable adverse comment here inspired by interested parties. Under all these circumstances I feel the Imperial Economic Committee should be busy on this subject. May I suggest that if, by the time this letter reaches you, you have had no definite advice of the next subject for the Imperial Economic Committee, you should cable the Prime Minister strongly urging immediate work on Dairy problems.
In order to get another subject of not too large a nature which would be of interest to the Tropical dependencies, Tea might well be added. If it is true that the world is faced with a tea shortage, Australia, as a very large consumer, is decidedly interested.
I have received an invitation to speak to the Conservative Imperial Affairs Committee in the House of Commons on 'Empire trade and the Imperial Economic Committee' on February 25th.
Naturally I have accepted. The meeting will be private but as the Committee has a membership of 200 M.P'S, the opportunity for educational work is excellent. I have just had a letter from the Secretary, Major Strang Steel, M.P., asking me to prepare the speech in advance so that copies may be circulated to members for use as material when speaking in their own constituencies.
Two very interesting articles on 'The Political Australian' appeared in the 'Times' of February 12th and 13th-copies are being sent to you from Australia House. They were written, I think, by Capt. Shaw, who accompanied Major Astor  on the Empire Press Conference. May I suggest that you should read them.
At the request of Mr. Appleton , the General Secretary of the Trade Union Conference, I am preparing for him a memorandum on the Australian Tariff and British Trade. He told me Australia always wanted ninepence for fourpence and I told him that the remark was nonsense, so he asked me for facts and figures. He is a good potential Empire man and may prove useful if one can get over his presuppositions. I hope to complete this over the weekend and to be able to send you a copy by next mail.
MR. GORDON BROWN 
I referred to this gentleman in my last letter. Today I had Casey  to meet him at lunch. He is carrying a letter to you from Sir G. Buchanan  and has asked me for a letter, which I am giving him, He has sent me some particulars about his work in Mozambique, which I enclose, in case you thought him interesting in regard to the Northern Territory.
THE EMPIRE SHARP OF BRITISH EXPORTS
In the January statement on the Trade and Navigation of the United Kingdom, the total figures for 1925 are shown. I have abstracted the following to show you the increasing importance of the Empire:
EXPORTS OF BRITISH PRODUCE To: 1923 1924 1925 Foreign 466,655,000 463,363,000 438,165,000
Empire 300,602,000 337,603,000 334,920,000
Total 767,257,000 800,966,000 773,086,000 
Empire Share 39% 42% 43.2%
The slight decrease in total exports to the Empire in 1925 is accounted for by a 7 million decrease to the Irish Free State, and a fall of 3 millions to Hong Kong.
So far as foreign trade goes, the only group of countries showing increased imports from Great Britain are the South American Republics. There was a fall of 10 million to France and 4 million to Belgium, due largely to coal, but the Far East shows more sinister figures.
In 1924 British exports to China were valued at 20,346,000, in 1925 14,555,000. This decrease can perhaps be attributed in part to the unsettled state of China. Turn, however, to Japan. British exports to Japan:-
1923 26,318,000 1924 26,704,000 1925 16,355,000 Australia remains Great Britain's second most important market in 1925; India being first. Australia and New Zealand together bought 83,200,000 from Great Britain, more than the 110,000,000 people in France, Belgium, Spain, Portugal and Italy, who bought 82,000,000 including about 22 millions worth of coal.
You may or may not be surprised to learn that not one of the Chairmen of the Big Five Banks  referred to the rising value of Empire trade in their annual reviews of the trade and finance of Great Britain.
Everyone here is (as usual at this time of year) talking optimistically about the prospects of British trade. I hope they are right but the January returns make a sorry showing.
Imports were, it is true, down by 11 million but exports, already fearfully below their proper level, were down 8,6000,000 and in contradistinction to the general trend of 1925, the fall was more marked in manufactured goods than in coal.
It is quite impossible to draw conclusions from one month's trade figures but 1926 has begun very badly for British export trade.
IMPERIAL ECONOMIC CONFERENCE
I enclose a cutting from the 'Times Trade Supplement' which is an interesting comment upon the Prime Minister's answer to the supplementary question put to him by Wardlaw-Milne, as reported in my last letter. 
THE BRITISH FARMER AND THE IMPERIAL ECONOMIC COMMITTEE
As you are fully aware, the greatest embarrassment which the Government have to face on the subject of the Imperial Economic Committee and the annual grant is the fact that there are 200 members of the Conservative Party in the House elected by the Agricultural vote. I have felt all along that the Government should have put a representative of British Agriculture on the Imperial Economic Committee.
As regards publicity, the problem is very difficult and my view is this. The annual grant is intended as a substitute for tariff preference but you have maintained that the British farmer should come first in the British market.
I therefore feel that our attitude should be that whenever a foodstuff is being advertised out of the Annual grant, if that foodstuff is produced in significant quantities by the British farmer, the consumer should be urged to buy Home or Empire supplies, and due preference given to the Home producer. On the other hand I do not think that any part of the grant should be used to advertise a British agricultural product as such. In other words the initiative for advertising should be an Empire product but when that product overlaps British supply, the British should be placed first. I feel fairly sure of your agreement with this view but should appreciate confirmation.
Yours sincerely, F. L. MCDOUGALL