PERSONAL & CONFIDENTIAL

My dear Prime Minister,

You will probably like to receive some brief account of the way in
which the Consultative Committee of the Economic Section of the
League of Nations is commencing to function.

In previous letters I have told you about the discussions that
occurred in London among the British Empire Delegations. [1] On
our arrival at Geneva we held a long meeting in Sir Arthur
Balfour's [2] room, which was attended by all the British
representatives, together with their Experts, by Mr. Lindsay [3],
the Trade Commissioner for India, who is assisting Sir Atul
Chatterjee [4], and by myself, together with Major Fuhrman. [5]

At this talk Sir Arthur Balfour and Mr. W. T. Layton [6] were able
to give a pretty clear account of the way in which members of the
Consultative Committee had notified their views to Sir Arthur
Salter, the Director of the Economic Section of the League of
Nations. It became clear that a considerable number of members of
the Committee, including among others Mr. Layton, were very keen
on proposing direct methods to induce countries to lower their
tariffs, and that the method that was favoured was for the
Economic Section of the League of Nations to be asked to prepare
some set of formulae which should be submitted to the respective
Governments, with a request that they should consider the formulae
and notify the League of Nations as to whether they found it
possible to make progressive reductions in their tariffs along the
lines suggested.

As an alternative to this radical attitude, the Economic Committee
of the League itself was in favour of the League of Nations
summoning a series of conferences of particular industries, in
order that those engaged in them should discuss the possibility of
lowering tariff barriers in those industries. After a talk with
Sir Sydney Chapman [7], I came to the conclusion that this second
alternative was quite a harmless one, especially as I urged on Sir
Sydney Chapman the view that such industrial conferences, if
called, should not be for the specific purpose of lowering tariff
barriers in an industry, but for the positive purpose of
discussing how the volume of international trade in the industry
in question might be increased. I found Chapman quite
sympathetically inclined to this suggestion. [8]

The other important matter which I discovered was likely to come
before the Consultative Committee was the question of the status
and function of the International Agricultural Institute at Rome.

[9] The Italian Government has communicated with the various
Governments supporting the International Institute, and has
suggested that means should be found whereby the activities of the
Institute might be more closely associated with the economic
activities of the League of Nations. I understand that this move
from Rome has been due to difficulties of a financial character,
as some of the Governments supporting the Rome Institute have been
by no means satisfied with its work, and the United States in
particular has been raising a number of difficulties.

There can be no doubt that the work of the Rome Institute is very
far from satisfactory. For some years now I have had frequent
recourse to the statistics and other information published from
Rome, and have found them of comparatively little value. I also
understand that the Italian dominance is a very undesirable
feature of the present way in which the Institute is run. It is
fairly clear that a good number of members of the Consultative
Committee, including Dr. Hermes [10], the German exMinister, who
is also a member of the International Commission on Agriculture,
and M. Gautier [11], President of the National Confederation of
Agricultural Associations, are all for scrapping the Rome
Institute and creating an Agricultural Section functioning
directly under the League of Nations and working at Geneva. It has
been suggested to me that both Hermes and Gautier would not be
unwilling to be associated with the work of such a new Institute.

On the other hand, there is the suggestion which is strongly
favoured by Sir Arthur Salter and by the British Government that
the League should obtain an effective voice on the governing body
of the Rome Institute, with the object of radically improving the
whole of its work and making the Rome Institute in some sense an
organ of the League of Nations.

On the Monday following this meeting, I had an opportunity of
further talks with Sir Sydney Chapman and Sir Atul Chatterjee, and
also with Sir Arthur Salter, and I came to the conclusion that it
would be a good thing to send you a cable briefly outlining the
situation, and also informing you that I anticipated it would be
possible, by working through the various members from the British
Empire, to squash the dangerous idea of the League directly
approaching Governments with proposals for tariff reductions on
some set scale. I thought, however, that it was desirable to let
you know that, should any such proposal be brought forward and
should it appear likely that the Consultative Committee would
agree to it, I might feel it desirable to oppose such a
suggestion, on the ground that it would be dangerous to the
prestige of the League of Nations. I did this because I felt that
you might desire to cable me that you would rather I did not
intervene on any such question. There now appears less probability
of the direct action method being pressed. I have convinced
Colonel Vernon Willey [12], I think Mr. Arthur Pugh [13], and
certainly Sir Atul Chatterjee and Sir Sydney Chapman that any such
move would be extremely ill-advised, and the only member of the
Empire Delegations who is still keen on the idea is Mr. W. T.

Layton.

Sir Arthur Balfour is tremendously in his element at these
conferences and is, I think, much more interested in the
international point of view than in the imperial. At the same time
he is a realist and is not likely to be led away by the academic
economic ideas of Layton, although he and Layton do work very
closely together.

In regard to the conferences of particular industries, I was able
to arrange with Sir Atul Chatterjee that in a speech which he made
to-day at the conference he should bring forward the view that
such conferences, if summoned, should not be summoned for the
purpose of reducing tariffs but for the purpose of stimulating
trade, and it was interesting to note that his speech was well
received by the Consultative Committee.

We have just completed the second day's session, and one has spent
the time listening to a very large number of speeches, most of
which have been couched in a language of vague economic idealism
and with very little practical significance. I am happy to say
that, with the exception of a long rambling and on the whole
ineffective speech of Dr. Shortt [14] from Canada, all the members
from the British Empire who have spoken have been both brief and
effective.

From my point of view I think the chief advantage of my presence
on the Consultative Committee will be the number of useful
contacts that I shall be able to make and the personal relations
that I shall be able to establish with the heads of the Economic
Section of the League of Nations. There is no doubt that Sir
Arthur Salter carries a very considerable number of guns among
political people in England, and it will be to the advantage of
the cause of Empire trade to effect a happy personal relationship
with him. In a somewhat different way Loveday [15], the chief
Statistical Officer of the League, is a man very well worth
knowing, for there is no doubt that the statistical matter issued
by the League of Nations compares more than favourably with any
that I have seen.

I think I indicated in my last letter that I might feel it
desirable to make a brief statement. I was very strongly urged to
do so by Sir Sydney Chapman and Sir Arthur Balfour, and I
therefore made a very brief speech, of which I enclose a copy. My
purpose in doing so was to make a small gesture of co-operation
towards the Consultative Committee itself, and at the same time to
suggest fairly definitely that the function of the League of
Nations in the economic sphere was the provision of information.

Even as the result of two or three days, I have realised what a
very great advantage it must be to all the Australian
Representatives who come to Geneva to have Major Fuhrman
associated with them. He is proving a great help to me, and on the
subjects with which he is more directly concerned he must be
extraordinarily useful.

With Fuhrman's assistance I shall, of course, send you an official
report on the work of the Consultative Committee, and by next mail
I hope to send you a fuller account of what has taken place. At
the present moment I am very doubtful whether anything at all
substantial will come out of this meeting, but perhaps we shall
arrive at some sound basis for improving the collection and
dissemination of industrial and agricultural statistics and
information. If that was the sole result it would be well worth
while, for I am perfectly sure that there is a very great deal to
be gained from the careful study of really well prepared
statistics and general information about agriculture and industry.

Yours sincerely,
F. L. MCDOUGALL