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My dear Prime Minister,

In connection with the Chinese situation [1], I think you may be interested to hear the way in which John Burns [2] is said to have summed up the position. He said that to fight China would be like putting Dempsey [3] up to fight against a haystack but a haystack which contained large quantities of broken glass and scrap iron.

INTERNATIONAL ECONOMIC CONFERENCE

I sent you a typescript of my article for the 'Times Trade Supplement' and I now enclose a copy of the article itself. [4] Apparently among all the memoranda which have been prepared either by or for the Preparatory Committee will be documents of considerable interest and I have made arrangements through Fuhrman [5] to obtain copies. I hope to be able to send you some interesting extracts condensed in such a way as to give the meat without the padding at a later date.

'DAILY CHRONICLE'

You will remember that Lord Reading has become Chairman of the company which runs the 'Daily Chronicle'. I am enclosing two cuttings from the 'Daily Chronicle' which I hope are indicative of Reading's attitude towards Empire questions. It will be a distinct asset if we get amongst the ranks of the Liberal papers one which will maintain a consistent attitude in favour of Empire economic development.

GEOPHYSICAL SURVEYING

Since I wrote you last mail, I have had an opportunity of discussing the geophysical cooperation proposals with Sir Frank Heath [6] and also with Walter Elliot. [7] I saw them quite separately and it was interesting to find that they both had the same idea. Each felt that the matter was of very considerable importance and one which might legitimately fall within the province of the Empire Marketing Board but they both felt that as it involved a new departure for the Empire Marketing Board, it was very undesirable that the Board should come to a hasty decision.

Both Heath and Elliot separately suggested that the Board should ask the Committee of Civil Research, which is, as you know, a Committee under the Cabinet and therefore a Secret Committee, to appoint a strong technical Sub-Committee to examine the whole question.

The matter came before the Research Committee of the Empire Marketing Board yesterday afternoon. Several of the members were opposed to the Board tackling a subject of this description at all but Walter Elliot, who was in the Chair, convinced them that it would be most desirable to have an expert Technical Committee under the Committee of Civil Research to go into the whole question of geophysical prospecting.

It was therefore decided that a recommendation on these lines should be made to the full Empire Marketing Board. The Board meets this afternoon and the matter will then come before it.

BRITISH MARKETS FOR EMPIRE GOODS

The 'Times' were anxious to get an article on this subject for their Canberra Supplement which will be issued on the day that the Duke of York opens the Federal Parliament House at Canberra. I have written an article for them, a copy of which is enclosed. I should like to suggest that you read this because I have touched, probably for the first time, on the question of the limitations of the Voluntary Preference idea.

TRADE UNION REFORM

I am forwarding five copies of the 'Times' reprint of Dr.

Shadwell's article on this subject. [8]

3rd February

GEOPHYSICAL SURVEYING

The Empire Marketing Board approved the proposal of the Research Committee that a strong Technical Committee should be set up to consider all the aspects of geophysical surveying and its importance to the Empire. The names of Sir Matthew Nathan [9], as a possible Chairman, and Sir Edgeworth David [10], as a possible member of this Committee were considered.

The attitude of the Board was that, while they would be prepared to cooperate with the Development & Migration Commission in any thorough field trials of the various methods of geophysical surveying, and, on a 50-50 basis would be prepared to conduct these trials in Western Australia, they felt that the purposes of the Annual Grant would be somewhat unduly stretched if the Board undertook cooperation in a survey of Australia's mineral resources. I am cabling Gepp [11] today to this effect.

EMPIRE MARKETING BOARD

Yesterday's meeting of the full Board was the first occasion on which Mr. J. H. Thomas [12] attended as a member and I am very glad to be able to tell you that he proved a most useful member, displaying very considerable zeal coupled with sound commonsense, which was somewhat refreshing. I do not think there can be any doubt that the move to include Labour in the personnel of the Empire Marketing Board and of its two Main Committees will prove not only a very sound piece of political strategy but also of substantial practical advantage in the work of the Board.

Major Walter Elliot brought before the Board the proposal that the Board should cooperate with the Commonwealth Government in the establishment of a Tropical Research Station in Northern Australia. Mr. Amery [13] referred to the letters that had been interchanged between yourself and himself on the subject and stated that you had said that the Commonwealth Government would welcome the appointment by the Empire Marketing Board of a representative on the Governing Body of the proposed Institute and the further appointment of a Correspondent in London who would be a liaison between the Queensland Research Station and the other Research Stations of Tropical Agriculture in the various parts of the Empire.

The Board approved of this recommendation without any further discussion. I am today sending you the following cable, as I think you may like to have this confirmation before you land in Australia:

Following from McDougall-Empire Marketing Board yesterday approved proposals for Research Station Tropical Agriculture Northern Australia on terms already discussed.

CHINA

I am enclosing 'Times' report of a speech by Mr. J. H. Thomas on the Chinese situation, which I feel sure will interest you. [14] Mr. Ramsay MacDonald [15] is taking the attitude that, while he warmly approves of the line of negotiation which Chamberlain [16] has initiated, yet he roundly condemns the despatch of troops to China. There is an interesting article in today's 'Times' on the moderate portion of the Labour Party's attitude to MacDonald taking this line of country, which may also be of interest. [17]

Yours sincerely, F. L. MCDOUGALL

P.S.

IMPERIAL ECONOMIC COMMITTEE

I saw Amery last night and mentioned to him that I was very disturbed about the long delay in getting the Imperial Economic Committee to work again. He enquired whether Mackinder [18] had yet returned and I told him that he was expected back this week.

He promised to look into the matter at once.

F. L. MCD.