Dear Mr. Bruce,

IMPERIAL ECONOMIC COMMITTEE

The meetings of the General Purposes, Meat and Fruit Panels have
continued this week. Sir Halford Mackinder [1] returned on Monday
and presided at the Fruit Panel on Tuesday and the General
Purposes Panel yesterday.

At the General Purposes Committee Sir Halford made a statement
that he thought that it was now time for the Committee to commence
to formulate ideas. Up to the present he had thought it desirable
to rather avoid any attempt at the consideration of schemes. He
said that the Committee was faced with two possibilities (1)
making a series of small practicable suggestions which, although
of value, could not possibly stir the imagination of the
democracies of Great Britain and the Dominions, or (2) to attempt
the very much more difficult task of preparing a really
comprehensive scheme for placing Empire trade on a better basis.

He himself had no doubt that the second and more difficult task
was the most necessary one and that small practicable schemes
might become a fitting adjunct to some larger ideas. In view of
this statement of the Chairman, I hope that, in the next few
weeks, I may be able to give you some rather more interesting
matter on the subject of the Imperial Economic Committee.

PREFERENCE

So far the British Government has arrived at no decision in regard
to the alteration in the date on which the new preference is to
come into operation. Last Friday I had an interview with Amery [2]
on the subject and found that he had been told by the Customs
Authorities that, although large quantities of South African and
Australian dried fruits were imported during May, June and July,
the chief sales took place after August and that, therefore, no
hardship would attach if the date of July 1st was adhered to.

At his request, I submitted a letter to him on this subject, a
copy of which is enclosed. Mr. Amery forwarded this letter to the
Chancellor of the Exchequer. [3]

In conversation with Mr. Amery, I drew his attention to the fact
that Australian sugar interests were also jeopardized if the date
of July 1st was adhered to for the date of the application of the
sugar preference.

CONDITIONS IN THE LEVANT

In my letter of May 7th I referred to Dr. Haden Guest's [4]
articles in the 'Daily Mail' on the hygienic and labour conditions
in Smyrna and Greece and I sent you copies of his first two
articles. I enclose a copy of the further articles that have been
published and also a copy of a report which I asked Dr. Haden
Guest to furnish me with. I am proposing to send copies of this
report to the Chairman of the Dried Fruit Export Control Board [5]
but I think that it is desirable that the report should be
regarded as CONFIDENTIAL
at the present time. [6] My reasons for
this are that the British dried fruit traders, especially those
sections particularly interested in Smyrna and Greece, are in a

state of badly suppressed fury. They know that the conditions, as
described by Dr. Haden Guest, exist and would find it extremely
difficult to controvert them. They have asserted that these
articles are the result of Australian propaganda and have

privately threatened reprisals with the idea of drawing attention
to the way in which Australian fruit is liable to become infested
with grubs. I believe that this idea will not be proceeded with
because the wiser heads in the trade have pointed out what evil
consequences would occur if different sections of the industry
started to attack the quality of one another's fruit with the
probable result of destroying the public confidence in dried fruit
as a whole.

The Australian representatives on the London Dried Fruit
Association have been able to assure the Association that
Australian interests had nothing to do with the initiative of Dr.

Haden Guest's visit to Smyrna, nor of the 'Daily Mail' articles
and under these circumstances I think that it is much better to
let Dr. Haden Guest's articles do their own work and that, anyhow
for the present, we should make no attempt to reinforce the effect
that they are having.

DRIED FRUITS

We commenced selling operations of the new season's fruit on
Monday and up to the present have sold somewhere about 120 tons at
prices from 15 to 20 a ton better than Australian old season's
fruit was fetching in April. This is, so far, very satisfactory
and if we can get the preference conditions brought into operation
at an early date it will lead to very much stronger buying. I am
hoping that we shall be able to avoid a falling market which has
been the result of such disaster to Australian dried fruit
interests during the last two years.

REPORT OF THE ROYAL COMMISSION ON FOOD PRICES [7]

The first report of the Royal Commission on Food Prices was issued
on May 8th and has received a very cool reception from the press
and from the Members of Parliament that I have met since its
publication. At the same time it is a mine of information and a
number of very important points are made by the Commissioners,
perhaps the most important being that the high prices of wheat
experienced by this country during the last six months have been
directly due to the low average returns obtained by the producers
in Britain, the Dominions and foreign countries during the last
three or four years because low prices have caused a decrease in
production.

So far as meat is concerned, the Commission draw attention to the
unremunerative prices obtained for beef since the war and
anticipate a considerable period of rising prices for beef and
again state that these rising prices are due to the unremunerative
returns to producers in the past.

The attitude of the Commission, as shewn in this report, to the
Export Control Boards in the Dominions is interesting. I was
informed about six weeks ago that the Commission was likely to
take a rather hostile attitude to the Export Control Board system.

I therefore made an opportunity of discussing this question fully
with Sir Halford Mackinder (who was then acting as Chairman of the
Commission in the absence of Sir Auckland Geddes) and the attitude
of the Commission in their report is one to which I can see no
possible objection.

Discussing in particular the New Zealand Export Control Board, the
Commission states that 'the existing statutory powers of the Board
are so great that it is considered essential that the operations
of the Board should be the subject of continuous and sympathetic
observation by a body representing all interests in this country,
such as the Food Council which we are recommending your Majesty's
Government to set up'.

The Commission goes on to suggest that a body such as the Food
Council would be in a position to cooperate with the New Zealand
Meat Board and to intervene with friendly counsel if the Board
appeared to be likely to take any action which might be construed
as detrimental to British interests. This, I think, is the type of
attitude we should like taken up by the British Government.

I have ascertained that a copy of the Royal Commission's report is
being forwarded to you from Australia House by this mail and I
would draw your attention in the first instance to Sections 182,
273, 274, 275, 294, 295, 304, 305, 306, 307, 308, 309-314 and 333.

STABILIZATION OF PRICES

On May 11th I had a very interesting interview with the Rt. Hon.

E. F. L. Wood, M.P., the Minister of Agriculture, on this subject.

Mr. Wood explained that he personally considered a policy of
stabilization of prices, if feasible, the most important thing
that could be undertaken in the interests of British agriculture,
of Empire development and in the interests of the British
consumer. He told me that he had discussed the matter with Sir
Philip Cunliffe-Lister [8] who still regarded any such ideas with
grave misgivings. Mr. Wood was, however, anxious fully to explore
the possibilities of stabilization plans and therefore intended to
ask the small Departmental Committee, to which I made reference in
my last letter, to continue their research on this subject.

He asked me what would be the attitude of Australia. I told him
that there could be no doubt but that we should be extremely
interested in any plans that could be evolved upon an Imperial
basis for getting more stable payable prices for agricultural
produce.

Mr. Wood asked me whether I would give any assistance I could to
his Committee. This I undertook to do and I further undertook to
informally and privately discuss with certain Conservative Members
representing agricultural constituencies, the possibilities of
Imperial plans aiming at the avoidance of extreme fluctuations.

Yours sincerely,
F. L. MCDOUGALL