My dear Prime Minister,

IMPERIAL CONFERENCE

I have already written a very long letter [1] but there are
certain matters which you mention in your letter of April 30th [2]
dealing with the Imperial Conference which I felt it would be
better to deal with in a separate letter.

I was extremely interested to read the pages which you devoted to
this subject. The first point on which I should like to comment is
your proposal to arouse Empire interest in the Australian point of
view by means of a number of speeches at the latter part of this
year. [3] There can be no doubt that that would be a good way but
I also wonder whether there is not something to be said for
interchange of preliminary documents between the various parts of
the Empire. I have not explored the possibilities of this but
would like to make this tentative suggestion that you should
consider whether or not it would be worth while your sending a
despatch to Great Britain and the various Dominions and to India
pointing out the immense importance your Government attaches to
the economic side of the Imperial Conference, informing them that
you had requested your interested Departments to prepare
information that may prove to be of value to the Imperial
Conference and perhaps making the suggestion that similar action
should be taken by other parts of the Empire. Then I should have
thought that if Australia prepared a sort of preliminary survey of
the position of industry and agriculture in Australia and the
possibilities for the expansion of production, provided markets
could be found for the products, this would give the various parts
of the Empire something to think about and would lead to the
Conference meeting in a businesslike atmosphere, fortified with a
considerable volume of useful information which would be helpful.

You may feel that, as there is no precedent for such action, it
would be better for a lead of that sort to come from Great Britain
and that, unless some such lead were given, you would confine
yourself to raising these issues by means of speeches. I would,
however, particularly like to know your view and, as I shall be in
constant touch with the new Government and with the interested
Departments here, perhaps you would be good enough to send me a
cable indicating
(a) whether you think that Australia should take a lead on what I
will call preparation and documentation;

(b) whether you would prefer that lead to be taken from Great
Britain, if I could encourage Great Britain to give the lead; and
(c) whether you would prefer to abandon the idea of preliminary
documentation and rely on the educational effect of speeches.

As regards Empire standards and simplification, I received
yesterday a copy of the despatch of the 29th May forwarded by
Amery [4] to the various Governments of the Empire. I do not think
that the Central Committee referred to in this despatch has done
any really important work. I was invited to attend one meeting but
I believe that, after that first meeting, the Committee was purely
British.

The idea of an Imperial discussion on Standardization and
Simplification held concurrently with the Imperial Conference is
quite a good one and if the suggested meeting could be held
perhaps a fortnight in advance, so that its report could be
submitted to the economic side of the Conference, the Conference
might itself be able to arrive at some important resolutions.

THE FORM OF THE CONFERENCE

I have not received from you any definite indication in reply to
my suggestion that, in 1930, we should revert to the 1923 model
and hold an Imperial Economic Conference alongside the Imperial
Conference. I feel fairly sure that there will be considerable
advantages in this plan provided the new President of the Board of
Trade is a man with keen sympathy in Empire matters.

I have already expressed the view that the political and foreign
policy matters which the Imperial Conference will have to deal
with will, on this occasion, be of such a nature as to demand the
least possible publicity. You will remember that, in 1923, the
Imperial Economic Conference received almost the whole of the
publicity while the Imperial Conference itself met and arrived at
its decisions without attracting any very large amount of notice.

I shall be very glad to know whether you think that this idea is a
good one or not.

AMERICAN ECONOMIC IMPERIALISM

There is no need for me to say anything further on this subject at
the moment save that it now appears highly probable that the
United States Tariff Bill will drive Mackenzie King [5] into a
much more helpful attitude towards Empire economic cooperation
than he has adopted in the past.

COLONIAL AND INDIAN DEVELOPMENT

I was really very pleased to read your comment that you do not
think that the question of the improvement in the standard of
living in India and the Colonies is quite of such long range
interest to Australia as I suggested in the letter to which you
are replying. [6] I think I have suggested to you before that, if
you feel able to indicate, on an impressive public occasion when
you are over here, that Australia, while unable at the present
stage to give very much assistance in the matter of the
development of the dependent Empire, yet regards the steps that
are being taken in that direction as being of vital importance to
the whole British Empire, then I feel sure that you would arouse a
very great deal of interest here and thus people who are
particularly interested in Empire development would be extremely
grateful.

Your remarks about the development of secondary industries are
intensely interesting. [7] I suppose that a good deal will depend
on the reception which the Australian public gives to the report
on the Tariff. [8] So far I have not gathered from the press that
this report has yet been issued.

RECIPROCAL TRADE TREATY

The suggestion of a Reciprocal Trade Treaty between Great Britain
and Australia is one on which I have written to you several times
during the last two months. I hope you understand that I am in no
sense opposed to the adoption of such a plan but I am rather
anxious to know on what basis you would start the discussion of
such an agreement.

PURCHASE BOARDS

I clearly understand and appreciate your point of view as regards
Purchase Boards [9] and I expect to have some interesting
indications of the way in which the new Government's mind is
tending on that matter before the end of July.

WHOLESALE AND RETAIL MARGINS

As regards the very difficult and complex problem of getting the
facts about wholesale and retail margins as clear as possible
before the Conference, this is a matter on which I have taken
certain preliminary steps in the Empire Marketing Board and which,
now that there is a Labour Government in power, I shall follow up
with considerable vigor. I do not think it is much use my
attempting, with my extremely small staff, to make any such
investigations myself but I shall try to get the E.M.B. to devote
a good deal of attention to the matter and perhaps to arrange with
the Economic Faculties of some of the Universities for detailed
investigations to be carried out, the E.M.B. paying fees for the
work done.

THE VALUE OF EMPIRE PREFERENCE TO BRITISH TRADE

I have been reading with interest the information that Simpson
[10] has sent to me about the preliminary labours of your
Committee. I am inclined to think that, in order to reach any
sound appreciation of the value of preferences such as the
preferences which Australia gives to Great Britain, it is
essential to study not only Great Britain's trade with Australia
but also the general world competitive situation which British
trade in a particular commodity meets. For instance, apart from
the ties of sentiment and of preference, British trade ought to be
in quite as advantageous a position in the Argentine as in
Australia. I am, therefore, proposing to analyse the way in which
British trade in a certain number of commodities has developed in
Australia as compared with the position which is obtained in the
Argentine. I shall, if possible, extend this enquiry to include
some other nations.

I am writing to Simpson asking him whether the Committee, of which
he is Secretary [11], has carefully studied a document which I
prepared and forwarded to you together with my letter of the 16th
August 1927. [12] In this document I analysed the position of
certain British exports to Australia for the period 1908-1926 and
I also showed, in a second appendix, the way in which the
Australian share of the British exports had varied. If your
Committee has not studied this document, I should be very glad if
Simpson could get hold of it, because it would be a great help to
me to know the views of the Committee on that method of attempting
to indicate the value of preferences. I am quite sure that you
will agree that any strictly accurate statistical method of
assessing the value of a preference will encounter almost
insurmountable difficulties. It would be easier, and perhaps more
profitable, to assess the comparative advantage which Great
Britain enjoys over her foreign competitors by reason of the
general shelter which Empire markets give to British trade through
the combined influence of tariff preference and the voluntary
preference which comes from sentiment, trade connections, etc.

I realise, however, that every possible effort ought to be made to
get as close as we can to an assessment of the real value of
preferences and I have, therefore, arranged for an informal
discussion of the subject to take place next week between Sir
David Chadwick [13], Tallents [14], the Secretary of the E. M. B.,
the Statistical Officer of the E. M. B. [15] and myself. I shall
forward a fairly full report of what takes place at this
discussion, because I believe it should prove distinctly helpful
to your Committee. I hope that it will also prove illuminating to
me.

I am enclosing a rather interesting analysis which I have just had
completed on the extent to which Empire markets absorb the British
exports in iron and steel. You will see that I have divided iron
and steel exports into semi-finished and finished goods and the
difference between the Empire share of these two categories is
very noticeable. I have no doubt that you will pass this copy on
to Simpson as he may find it useful for his Committee.

Yours sincerely,
F. L. MCDOUGALL