23rd February, 1927
PERSONAL & CONFIDENTIAL
My dear Prime Minister,
DELEGATION TO AUSTRALIA
Since my last letter, I have seen Sir Maurice Hankey  and E. J.
Harding  on this subject. Hankey told me that he was extremely keen on the whole idea and would do everything in his power to back it and to help towards a strong and effective delegation.
Harding lunched with me on Tuesday and, on Amery's  instructions, showed me your last cable on the suggested terms of reference.  Harding's attitude was rather curious. He was quite prepared to help the idea and to further the delegation on the ground that Australia desired it but he was not impressed with the value of the step from a British point of view.
Further talk showed that he was very much seized with what may be described as the Treasury point of view. He stated that the main purpose of Cabinet policy today is to secure such conditions as shall enable very large scale conversion transactions to be carried through in two or three years' time. These conversions, if successful, would result in lowering taxation by say 40,000 000 and this would help British industry more than any other possible step. He, therefore, subscribed to the Treasury idea of discouraging oversea loans and curtailing expenditure. This made him sceptical as to how far Great Britain could cooperate with Australia on speeding up development. He was in general agreement with the terms of reference tentatively put forward in your cable (Feb. 18th or 19th) but considered that it would be easier to arrange for the delegates to continue to act as an advisory body on Australian development after their return if they were not asked to do so before they started.
I had a long talk with Mr. Ormsby-Gore  on Wednesday evening.
He told me that Mr. Amery was not feeling very happy at the present time and that this was probably due to his increasing difficulty in obtaining Cabinet approval of many of his plans. I gathered that Amery was not pleased at the inclusion of Labour on the Empire Marketing Board, a step for which I was largely responsible. It is rather a tragic business that a man of Amery's ability and knowledge should be so ineffective and, being ineffective, should be tending to suffer from our friend 'the inferiority complex'.
MAJOR WALTER ELLIOT 
Elliot told me that he was keen on an idea of trying to get a Cabinet change to enable a Minister without Departmental responsibilities to devote his whole time to the work of Empire Development. He suggested as the line of least resistance, the retirement of Lord Salisbury , who could become a Governor- General when a vacancy occurred, Lord Robert Cecil  to take his place, and Ormsby-Gore to become Chancellor of the Duchy of Lancaster and Chairman of the Imperial Economic Committee; the idea being to give Ormsby-Gore scope to devote his whole time to Empire questions. I think this is a Utopian scheme although one which, if practicable, should have many advantages. I should very much appreciate your views on this one point. Supposing the Government made a man such as Ormsby-Gore Chancellor of the Duchy and directed him to concentrate his whole energies upon Empire Development, would there be, in your view, any objection to his becoming Chairman of the Imperial Economic Committee?
'TIMES TRADE SUPPLEMENT' ARTICLE
I enclose a copy of an article on British trade and the Empire from the 'Times Trade Supplement'.  You will observe that I have used the graphs I showed you but, having brought them right up to date, rendered them even more effective. I sent copies to about 80 Members of Parliament, who I know personally, and to about eight Ministers. I have already received replies from about 40 of them. This sort of work seems to me one of the most effective methods of quiet propaganda.
THE LABOUR PARTY
I had Tom Johnston  to dinner last night and we had a long talk about the Labour Party and the Empire. He wants to use every means of educating Labour during the next two years. If a Labour Government comes into office after the next General Election, he says that means an additional 150 Labour Members. These men, who may be anywhere, must, in his view, be made to see what the Empire means before they reach the House and not after. He therefore wants the Empire Marketing Board to advertise largely in Labour papers and to use the facts about trade and about Labour conditions which will appeal to Labour people. I have drafted a suggested advertisement for a Labour paper (Cooperative News perhaps) which I enclose.
When speaking on the China debate, Johnston made one really very sound point of very wide application. He asked whether it was sound policy from a British point of view to invest money for factories in such places as China where horribly sweated conditions prevail. I append the quotation:
What I do not regard as disputable is that the continuance of cheap sweated labour and the export of British capital, British brains, British management and intelligence for the exploitation of that cheap sweated labour in the Far East or anywhere else is a British interest. I believe it is an anti-British interest. It is opposed by our Australian cousins. They will not have it. They will not assist in bolstering up this sort of thing. I do not believe it is in the interests of Lancashire or of our foreign trade; I do not believe it is in the interest of sane British capital as a whole. For the life of me, I cannot understand why any industrialist in this country continues to support or to allow his name to be used in support of a policy which, if developed, must end by beating us in the markets and trailing us down to the coolie level of civilisation.
You will be glad to hear that the Labour Members of the Parliamentary Delegation to Australia came back very much impressed with all they saw. I fancy the impression made on them was better than on the Tories who were rather scared by the Tariff and Labour combination to raise the cost of production.
Johnston and other members of the party have assured me that your speech at the Labour Commonwealth Meeting made the happiest impression on your audience.
THE 'TIMES' AND AUSTRALIA
The pages of the 'Times' have, for at least two years, shown a curious inconsistency in regard to Australia and indeed to the Empire.
The news service has been good, the general tenor of the leading articles has been helpful, the 'Times Trade Supplement' has been most friendly and helpful and yet the City columns of the 'Daily' have been cold, frosty, critical and discouraging. This attitude was clearly evidenced in the recent Annual Supplement on 'Finance and Commerce in 1926' for which the City Editor is responsible.
Last night I saw J. J. Astor  and strongly expressed my sense of the inconsistency of the City columns to the general helpful attitude of the paper. I made it dear that I was in no way commenting upon the occasional publication of an article severely criticising Australian finance but was referring to the general tone of the City columns.
Astor was very surprised and suggested that the City columns did not deal with policy. I replied that they were often full of defence of such policies as free trade, deflation, gold standard, the need to restore European stability or to uphold the policies of the shipowner but never of the value of concerted Empire Development. I think Astor quite appreciated the way I put the case and he promised to watch the points raised.
I feel that the complete friendship of the 'Times' is a most
essential asset to Australia. We have it everywhere save in the financially important City columns.
Astor told me that the 'Times' Correspondents in Canada had reported that your speeches had been very well received and that Mackenzie King's  rejoinder had not damaged the prestige you created there.
IMPERIAL ECONOMIC COMMITTEE
The notifications have at last been sent out summoning the Imperial Economic Committee to meet on the 8th and 9th of March and to continue its meetings up to Easter. Six full months have elapsed since the last full meeting of the Committee.
I have not been informed as to what replies have been received from Canada about the immediate terms of reference. As soon as Chadwick  takes up his duties, I will obtain full information.
TRADE AGREEMENT WITH IRELAND
You will remember that while you were in London the subject of some trade agreement between the Irish Free State and Australia was discussed by you and President Cosgrave  and later by an official of their Customs Department and myself.
I have had a further discussion with Mr. Dulanty , who is acting in the capacity of Trade Commissioner for the Irish Free State in London and he tells me that, with a General Election expected in June, the Irish Government is not anxious to pursue the matter at the moment and that he hopes that you will leave matters in abeyance until about that date.
I told him that I could in no way indicate whether or not you would agree to this but that I would inform you of what he said.
In view of the extremely small direct trade between the Irish Free State and Australia, it may, however, be as well to let the subject stand over until June. On paper Ireland enjoys the full British preference at the present time but as their total direct exports to Australia are less than 100,000, it is of little or no practical importance. After June I would recommend that the Commonwealth should notify Ireland that she cannot continue to enjoy full British preference rates but that provided a basis for trade agreement can be found, the Commonwealth would have no objection in giving British preference rates to such articles as may be of substantial interest to the Irish Free State.
PARLIAMENTARY QUESTIONS AND ANSWERS
I enclose copies of such Parliamentary questions and answers as appeared likely to be of interest to you. I am aware that you receive Hansard regularly but think it extremely probable that under the pressure of work you do not find it possible to look at the records and I think that by forwarding points to you in this way, you are more likely to be able to keep in touch with what occurs here than by any other method.
I enclose copy of the 'London Weekly' dated 19.2.27.
I also enclose letter to the 'Times' from Major Walter Elliot which is of interest. 
I am not worrying you with many of the details I used to report.
For instance the question of lodging applications under the Merchandise Marks Act is taking up some time. On such a matter I am writing to Mr. Paterson. 
Yours sincerely, F. L. MCDOUGALL