My dear Prime Minister,

BRITISH LABOUR PARTY AND THE EMPIRE

Yesterday afternoon, after a meeting of the Empire Marketing
Board, which was held in the Ministers' Conference Room in the
House of Commons, I met Mr. Tom Johnston [1] M.P. and had a talk
with him about the Labour Party and Empire affairs. Afterwards I
got hold of Mr. Harry Snell M.P., the Secretary of the Labour
Commonwealth Group, who came out and had dinner with me, in order
that we might really have a full discussion about a number of
points.

Johnston elaborated to me a scheme which has occurred to him. He
said that Baldwin [2],in two speeches, has recently drawn
attention to the lack of success of State enterprises and has
particularly illustrated this by reference to the Commonwealth
Shipping Line [3] and to the Australian Railways and upon failure
of the Canadian and the American shipping ventures. Johnston said
that he thought that this attack on enterprises which have been
carried out by Governments in the Dominions was likely to damage
Dominion credit. I told Johnston that I was afraid that everything
that I had noticed in Baldwin's speeches was true. Johnston
however, insisted that, in the Tory election literature, a very
great deal of emphasis was being given to the failure of National
railways and other enterprises and that the general effect of the
campaign would be detrimental to Dominion credit.

Johnston asked me whether I could get him any information which
would assist him in backing the campaign. I told him that I was
not very much in sympathy with his object, because I felt that, in
many cases, State enterprises have not been successful but, on the
other hand, State enterprise had frequently been necessary because
private capital would not have undertaken the developmental work.

I promised to try and obtain for him definite information on any
special point which he desired but would have to leave him to
interpret the facts just as he pleased. Johnston said that what he
was really anxious to do was to give the Labour Party some point
which would be attractive to them in regard to Empire matters.

My conversation with Snell was much more interesting. I pointed
out to Snell that if the Labour Party came back either with a
majority or in a position to form a Government, they would, if
they were able to carry on for twelve or eighteen months, be the
Party in office when the next Imperial Conference occurs. I
further pointed out that if, as now seemed very probable, the
result of the Election was a stalemate involving another General
Election within six or eight months, the Labour Party would, at
least potentially, be the Party in power at the Imperial
Conference.

Snell said that he was quite sure that no one in the Labour Party
had really given any consideration to this point and he promised
to take the matter up with Ramsay MacDonald [4] and with Thomas
[5] and to try and arrange that a special group from within the
Party should be invited by MacDonald, as the leader of the Party,
to consider the questions that would be likely to arise at the
Imperial Conference.

It was further agreed that I should give a very short address to
the Labour Commonwealth Group on April 15th about the work of the
Empire Marketing Board but that it should be arranged that the
main purpose of the meeting should be for me to answer such
questions as members might like to ask about Empire affairs
generally. Snell thought that it would be particularly useful to
have such a meeting just before the election campaign commenced.

Snell waxed quite eloquently about the effect that the Labour
Commonwealth Group had on the Labour Party. He said that he
thought that nothing had been more significant in the last four
years than the way in which the attitude of the Party towards
Empire affairs had changed. [6]

AMERICAN SEA POWER

This is a subject which is off my beat but obviously one of the
greatest importance. I am referring to it because in this month's
'National Review' there is published a letter from an American,
journalist, Mr. Frank H. Simonds [7], in which the objective of
American Sea Power is set out with what appears to me to be the
greatest clarity. I am enclosing this letter in case it does not
reach you from any other source.

I gather from conversations with a good number of people,
including those particularly interested in the Air Force, that
there is a very considerable chance of the new type of 10,000 ton
cruiser becoming somewhat obsolete within the next five or six
years. If there is any basis in this suggestion, the idea of the
British Empire trying to maintain parity with America in this type
of vessel may be very unwise.

CONDITIONS FOR BRITISH PREFERENCE

I have, from time to time, written to you on this subject and now
just want to draw your attention to some remarks made to me by Mr.

F. J. Hook, one of the Directors of Peck Frean & Co. Ltd., the
biscuit manufacturers. Mr. Hook complains rather bitterly that the
administration of the tariff in regard to the British preference
on biscuits is-to use his own word-vexatious. He states that his
Company has done its best to support the Empire Buying Campaign of
the Empire Marketing Board but finds in return that it is having
the greatest difficulty in obtaining British preference for its
products in Australia, because of the narrow way in which the 75%
Regulation [8] is interpreted. He points out that even the
wrapping paper which covers the tins of biscuits-a type of paper
which is not manufactured in England-is included in weighting the
75% Regulation against his goods.

Mr. Hook raised two questions, namely flour and eggs.

On flour, he stated that it was impossible to make firstclass
biscuits without using some imported flour and that his Company
was perfectly prepared to use a mixture of British and Australian
flour.

In regard to eggs, he pointed out that it was essential to use
eggs imported in liquid form and that supplies of this were not
obtainable from Empire sources.

I told him that I did not think that he could expect to get any
special consideration in the matter of eggs as the eggs which his
firm used were imported from foreign countries but that, in regard
to flour, he seemed to me to have a case.

I am mentioning this matter because I do feel that it would be
extremely helpful if careful consideration could be given to the
75% requirement and if the Customs Department could decide that,
in the place of the requirement of '75% British labour and/or
material', the requirement might be '75% British labour and/or
Empire material'.

REPORT OF BRITISH ECONOMIC MISSION

With my last letter I forwarded the typescript of an article
commenting on this report and I now enclose two copies of the
article as it appeared, illustrated by a small map which I had
drawn to shew the scope of intensive agriculture south of the
tropics. I am sending two copies because I think you might perhaps
care to forward one to Mr. Gullett. [9]

Yours sincerely,
F. L. MCDOUGALL