My dear Prime Minister,

AUSTRALIAN TARIFF POLICY

I am enclosing the statement of my views on the Australian Tariff
Policy, which you suggested that I should prepare in your letter
of the 21st of April. [1] I have attempted to look, in a fairly
comprehensive way, at the situation and I hope that you will find
this memorandum of some service to you in considering the matter.

There is, however, one aspect which I have not dealt with in the
memorandum but [to] which I should most definitely like to direct
your attention in this letter.

Supposing Australia were prepared to undertake a revision of her
tariff policy upon a 'selective' basis-should this prove to be the
case, it would then be possible for Australia to offer to Great
Britain a considerable number of added advantages which might very
reasonably be made in some way contingent upon Great Britain being
prepared to go further than she has gone at present in assisting
Australian trade in British markets.

This seems to me to be a subject which in a very effective way you
might find it possible to discuss with the British Business
Delegation or with the leader of that Delegation should he be a
man of the calibre of Lord Weir. [2]

There is no doubt that the gesture from Australia of getting rid
of the small irritating things in the tariff as a sort of general
response to the growing Empire sense in Great Britain would be
much appreciated and, if that could be accompanied by an
indication to the people that matter that Australia would be
prepared to go further still provided Great Britain could respond
in direct and practical directions, might prove the beginning of a
new phase of Empire economic development in which today you are so
obviously the leader. Whatever you may think of this idea, I
cannot too strongly urge that steps should be taken to reduce the
irritating effect of the Australian tariff.

As Page Croft [3] put it in his letter to me, which I forwarded to
you last week, Australian tariff excrescences may enable the
doctrinaire free trader, or in other words the Liberals and such
Labour men as Philip Snowden [4] to checkmate a great deal of the
work which is being undertaken here.

POLITICAL PROSPECTS

The point reached in the last paragraph naturally brings me to the
consideration of political prospects here. I do not think that the
Government's action in regard to the Trade Unions Bill [5], or
indeed to the breaking of relations with Russia [6], has been
unpopular. One is, however, becoming aware of a growing sense that
the Government, while guilty of remarkably few sins of commission,
is becoming unpopular in the country on the ground of its sins of
omission. There has been little in the Government policy that has
been constructive and what is urgently needed, if the Tories are
to retain the reins of Government after the next General Election,
are definite constructive proposals which the country will regard
as being calculated really to deal with the unemployment problem.

I believe that I have, on several occasions, clearly expressed to
you my view that while I should not be very much afraid from an
Empire point of view of the advent of a Labour Government provided
that Labour Government had a majority in the House, yet that I
should regard a Labour Government, dependent upon Liberal support,
as being the very worst political combination from our point of
view.

The record of recent By-elections suggests that Labour is not
making the same progress in the country as it did during the first
two years of the life of this Parliament but they suggest rather
forcibly a definite revival of interest in Liberalism. Why this
should be so, one cannot understand unless it be that the country
is beginning to feel that the Tories have nothing constructive to
offer, that Labour is still unfit to govern and that, after all,
the Liberals may as well be given another opportunity.

It is, of course, far too early to dogmatise about these
tendencies but I think it is necessary now to face the
possibilities of a fairly substantial Liberal revival. As one
result of this phase, I have suggested to Major Elliot [7] that we
should get the most suitable possible Liberal on to the Empire
Marketing Board and he agrees with me that this would be
desirable.

If the Tories can be induced, during the next six months, to give
the country a really constructive programme, based on Empire
Development, the whole situation may quite possibly be altered.

WINE DUTIES

Since my last letter, I have had no further word from Hamilton [8]
about wine duties. It is possible that the Chancellor [9] has not
felt inclined to make the concession which Hamilton discussed with
me.

With reference to the Colonial Office recommendations for a joint
attack on mechanical transport problems, and particularly on
producer gas vehicles, and their suggestion that the interested
Dominions, the Colonial Office, the War Office, the Empire Cotton
Growing Association and the Empire Marketing Board should
cooperate in this proposal, although I have had two talks with
Elliot about it, there is nothing concrete to report. It is likely
that the whole subject will be discussed on Monday next at a full
meeting of the Empire Marketing Board.

MR. H. W. GEPP [10]

I am extremely sorry to receive so many reports about the state of
Gepp's health. One hears here that his nerves have been playing
tricks with him and that he is far from well.

I cannot say that I am entirely surprised that this should be the
case for I felt that Gepp was spreading himself, when he was in
London, altogether further than any one individual could safely
do. I do hope that arrangements can be made whereby he will have a
complete rest and then be able to come back to his job with a
clear mind and perhaps with a decision to exercise a selection as
to the major problems that are likely to give the maximum results
and the postponement of the interesting but perhaps minor forms of
activity which can occupy so much of his extremely valuable time.

Yours sincerely,
F. L. MCDOUGALL