My dear Prime Minister,

Yesterday I attended a lunch given by the British Empire
Producers' Organization to Jan Hofmeyr just before his departure
for South Africa. You are, of course, aware that Hofmeyr, who,
until recently, was Administrator of the Transvaal, is regarded as
one of the coming men in South Africa. He is only 36 and has had a
very brilliant career, having been a Rhodes Scholar, held a
University post and then taken on administrative work. There has
been great speculation as to whether he would support the South
African Party or the Nationalists. So far he has not made any
definite declaration and, apparently, is not standing for the
South African Parliament in the coming Election. [1]

Hofmeyr's speech was excellent and there are two points to which I
would particularly draw your attention. He stated that people in
this country were apt to stress the importance of the bonds of
sentiment which knitted the Empire together. While he would say
nothing to detract from the importance of such bonds, he pointed
out that the preponderating proportion of the whites in South
Africa were not of British race and had only of recent years
looked upon the British Empire as a symbol of conquest. Under
these circumstances it was but natural that the ties of sentiment
were not as strong in South Africa as in some of the other
Dominions. For this very reason he felt that it is of the utmost
importance to develop as rapidly as possible inter-Empire economic
cooperation in order that the ties of sentiment might be
reinforced by ties of mutual economic self-interest, especially in
those parts of the Empire where the tie of sentiment was weakest.

He went on to say that for this very reason he deplored the
clauses in the German-South African Treaty [2] which might
possibly weaken the doctrine of Imperial Preference.

At a later stage he suggested the possibility of reciprocal trade
treaties between Great Britain and the Dominions. He did not go at
all carefully into that point but merely stressed that the fact
that Imperial preference at the present time was subject to the
vicissitudes of the British political situation, lent an element
of political instability which was thoroughly undesirable.

With this view one cannot, of course, agree but when one comes to
consider reciprocal Trade Treaties, all sorts of difficulties
appear to me to arise. I have written to you about this before but
I should particularly like to know more of what is in your mind on
the subject.

I have received several interesting letters from Simpson [3] for
which I am grateful, but I very much hope that you will let me
have, as soon as possible, a full expression of what you have in
mind on this subject. I feel perfectly certain that if reciprocal
Trade Treaties between Great Britain and the Dominions come into
operation, Great Britain will instinctively desire to incorporate
an inter-Empire Most-Favoured-Nation Clause in any concessions
that she makes to any one Dominion. As far as I can see, this
would decrease bargaining power.

Another very difficult problem is to discover what would be the
basis on which a Dominion-say Australia-would start negotiations
with Great Britain for a Trade Treaty. Would she start from the
status quo and throw the whole of her existing preferences in and
then bargain on the basis of further concessions to Great Britain
in return for preferences given by the Mother Country, or would
she negotiate on the basis that, failing concessions, she would
withdraw some of the preferences which already exist. [4]

TRADE WITH RUSSIA

I have received an amusing telegram from Major Elliot [5], who is,
at the present moment, fighting his seat at Kelvingrove, Glasgow.

He wired:

I stated that the Channel Islands buy more from us than Russia,
this challenged by Sir D. M. Stevenson from Whittaker. Please wire
figures.

Elliot must have based his assertion on a conversation that he had
had with me and I experienced a little anxiety until I had looked
up the figures. Then I found that I was able to send a reply in
the following terms:

Board of Trade official figures show in 1928 British exports to
Channel Islands three and a half millions to Russia two and three
quarter millions. In 1927 Russia led by one million.

It is certainly amusing to think that it is possible to cite
British export trade to the Channel Islands as having been more
important, in 1928, than her trade to Russia.

Yours sincerely,
F. L. MCDOUGALL