My dear Prime Minister,

I have your letters of the 4th and 24th of October. [1]

With reference to the first, I shall hope to receive from you, in
the near future, some word about your talk with Amery [2]
especially on the subject of the Empire Marketing Board.

AUSTRALIANTARIFF CHANGES

Last Friday's newspapers contained a report of Mr. Pratten's [3]
speech in introducing the new tariff changes in Australia. Very
considerable publicity was given to the speech, the best reports
being in the 'Financial Times' and the 'Times'.

I was, naturally, very anxious to find out exactly what the tariff
changes amounted to, especially as the reports of Mr. Pratten's
speech indicated that, although there were a number of substantial
increases in duty, yet the preferential advantages falling to
Great Britain were also substantial. You will readily appreciate
my disappointment when I found that the Customs Department at
Australia House had only received a cable giving information of
the increases in duties. The Customs Department were proposing
immediately to issue this statement to the press, which would have
resulted in the whole of the free trade press seizing on the
increased duties on iron and steel and hosiery and making their
usual song about the myth of preference. It was, however, arranged
that an immediate cable should be sent to Australia asking for
fuller particulars as regards the tariff alterations. These were
received on Monday and issued to the press but have caused very
little comment. It is, as you must be aware, quite impossible for
the press to make any intelligent observations on a mere schedule
of tariff changes unless they are also provided with the previous
rates of duty and with information as to the actual volume of
trade in the various items affected. You may remember that, in
1925 when the last large tariff amendment was presented to
Parliament, I was able to give the 'Times' a reasoned article
which had a very satisfactory effect. I have made a similar
arrangement this time and am giving the 'Times' about 1,500 words
for their Saturday morning issue. I have already given the 'Times
Trade Supplement' a short article, a copy of which I enclose. This
article is to be printed below the list of tariff changes and it
will, of course, be issued unsigned simply as 'By a
Correspondent'. So far as I am able to judge at the present
moment, the new proposals will, if they pass through Parliament
substantially unamended, result in doing rather more to benefit
British trade than to damage it. The basis of this faith, as you
will see, is contained in the enclosed 'Times Trade Supplement'
article.

I have suggested to the High Commissioner [4] that he should
communicate with you to the effect that it is highly desirable
that when important tariff changes are made, the cabled
information received in the first instance by Australia House
should be full and complete and should at the very least contain
as much information about the changes which are beneficial to
preference as to the changes which are purely protectionist. Once
a wrong atmosphere gets into the press, it is quite impossible to
overtake it with the truth because so many of the free traders are
only too anxious to attack us. [5]

COMPLEMENTARY TRADE

I am enclosing copy of an article which I wrote on the subject of
the special value of complementary trade to Great Britain. I think
you will find this of some interest, particularly the two graphs
which illustrate it. I am proposing to return to this subject at
an early date because it seems to me a very valuable line of
country to rub into the people here that an export trade in fully
manufactured goods is far more advantageous to them than their
export trade to Europe in coal and in such semi-manufactures as
yarns, wool tops, etc.

POLITICAL

Yesterday I had a long talk with J. H. Thomas [6] in which he was
very expansive on the political situation. He was talking about
the effect of the Liberals' determination to run 500 candidates at
the next election, and I told him that I was prepared to bet him
1 that the Liberals did not secure more than 80 seats. He refused
to bet on the ground that his own estimate was too close to mine.

He thought the Liberals would have a total of 95 seats.

I then asked him what he anticipated would be the Labour strength
and he replied that he thought that Labour would hold from 260 to
280 seats, thus returning to Parliament as the strongest of the
three Parties. This estimate would mean a Tory loss of no less
than 150 to 160 seats. Thomas went on to suggest the possibility
of a General Election in the coming Spring.

I do not attach any very great weight to these remarks. As you
know I think Thomas is apt to talk rather wildly. Nevertheless I
feel sure that you will be interested to hear these views.

My own feeling at the present moment is that the Tories will
probably lose about 100 seats, leaving the Party in a position of
practically no majority in the House but making the position of
the Liberal-Labour Coalition equally impossible. The old proverb,
however, that 'prophecy is a most gratuitous form of folly'
applies with probably greater truth to political forecasts than
most other forms of prophecy.

There was rather an interesting leading article in the 'Evening
Standard' last night stating that the Government at last was
giving serious attention to the idea of a Cabinet reconstruction
and that it was generally anticipated that the New Year's Honours
List would contain several interesting political elevations to the
Peerage which would make way for a reshuffle in Cabinet. There can
be little doubt as to the desirability of such a reshuffle but I
am somewhat sceptical as to whether Baldwin [7] has any such
intention.

Yours sincerely,
F. L. MCDOUGALL