My dear Prime Minister,

THE LABOUR CABINET

Since the list of Ministers was issued, I have been feeling
depressed. MacDonald [1] has been ultra conservative. The only
fresh idea is that of making J. H. Thomas as Lord Privy Seal
Minister in charge of a Cabinet Committee on Employment. The
appointments to the Dominion and Colonial Office are almost
tragic. Sidney Webb [2], who is to go to the Lords, is, of course,
no fool but he is over 70 and has always seemed extremely
doctrinaire. I hear that he has intimated his willingness to work
from 10 to 5 but to have no papers at home and a minimum of public
engagements. Ponsonby [3], as Under-Secretary for the Dominions,
is obviously an appointment intended to muzzle that Russophile and
to keep him out of mischief If he follows his previous form, his
Imperial cronies should be De Valera [4] and one or two of the
extreme nationalist Ministers in South Africa. Willie Lunn [5], at
the Colonies, is a nice elderly miner without any real ability. He
went on a small Parliamentary Delegation to Nigeria but fled back
to the boat as soon as he felt the atmosphere of Lagos. Then, as
Lord President to deal with scientific research, there is Lord
Parmoor. [6] He was regarded as doddering in 1924 and I have heard
of no rejuvenation.

The one office they have staffed well both in the Senior and
junior Ministers is India-Wedgwood Benn [7] and Drummond Shiels.

[8]

After all this depression, you will be glad to get a brighter
prospect. Today Tallents [9], the Secretary of the Empire
Marketing Board, saw Sidney Webb, who was extremely cordial, and
indicated that he was prepared to be actively interested in the
Empire Marketing Board and gave no hint of any change of policy.

He then discussed the Chairmanship of the two vital Committees,
agreed that Ministers should hold them but suggested that Ponsonby
be not asked as he did not think Ponsonby was much interested in
Imperial affairs.

Webb agreed to invite Amery [10], Elliot [11] and Ormsby-Gore
[12]to join the Board and its two main Committees respectively and
to ask Archibald Sinclair [13] to continue to serve. That much to
the good. There was some Roman thanked for not despairing of the
Republic, so I suppose it is up to us to make the very best of a
badish looking job and to help the Labour Government in every
possible way to make a good showing in Imperial affairs.

Acting on this, I got the 'Times' to bring out a leader [14] on
Tuesday pointing out Labour's Imperial opportunities and I am
following this up with an article for the 'Trade Supplement',
dotting i's and crossing t's. I enclose copies of both.

I have not yet seen Webb and shall leave him alone for another
week but I have made clear to him, both by letter and through the
Office, that I shall be delighted to help in any Imperial
direction.

I had a characteristic letter from J. H. Thomas, a copy of which I
enclose as evidence of some considerable degree of self
satisfaction. I regret that Tom Johnston has been given the Under-
Secretaryship of State for Scotland. This will effectively muzzle
him and circumstances may arise when we shall want his voice in
the House. I should rather have seen him in the Cabinet or a
backbencher.

ORMSBY-GORE

I was very pleased with the attitude adopted by Ormsby-Gore. He
rang me up and asked me to take an early opportunity of making
clear to Labour Ministers that he would be glad to serve in any
non-party way on Imperial bodies. He mentioned the Imperial
Economic Committee.

13.6.29

THE VALUE OF EMPIRE PREFERENCE TO BRITISH TRADE

In my last letter [15] I told you that I had arranged for a
discussion between Sir David Chadwick [16], Tallents and the
Statistical Officer of the Empire Marketing Board [17] and myself
on the methods of assessing the value of preference. That
discussion occurred yesterday and the results were rather
negative. I am making, and I hope by this mail to be able to
forward an account of the discussion to Simpson [18] but put
briefly the points that were arrived at were as follows:

After a long discussion we unanimously agreed that it was
impossible to find any sound statistical method whereby the value
of preferences could be assessed. We recognised that in every
class of goods and in every country there were so many
imponderable circumstances that to attempt any exact assessment
would be impossible. We then agreed that merely to consider the
course of British trade with the Dominion giving the preference
could not be regarded as being in any way a satisfactory basis,
because, while there might appear to be remarkably little
competition for the British exports of a certain line of goods to,
say, Australia, an examination of the world position might reveal
very substantial competition which would be capable of operating
in Australia in the event of a reduction of the preference or of
other favorable circumstances.

Perhaps a good illustration of this would be from the electrical
industry in cables and covered wire. Great Britain held in 1926-27
95.2% of the Australian imports under this head, the total British
export to Australia being valued at 1,590,000. The contemplation
of this item would suggest that Great Britain was faced with
remarkably little competition and that it was possible that she
did not need the preferential assistance which she was receiving.

When, however, one turns to the Argentine [one] finds that, out of
the total Argentine imports of these goods valued at 1,483,000,
Great Britain only supplies 600,000 or 40.5%, and turning further
to the Netherlands one finds that, although Holland imports over
800,000 worth of these goods, Great Britain only supplies 29,000
or 3.6%. It is of course probable that the type of cables and
covered wire that the Netherlands import is somewhat different
from those imported into Australia but the consideration of
foreign trade does, in this instance, show conditions of severe
competition in the foreign world although, in Australia, the
competition is obviously negligible at the present moment.

We therefore felt that a most useful purpose would be served if
the British Government could be incited to have prepared a series
of analyses of the value of Empire trade to the more important
British industries and that, if we could succeed in inducing the
new Government to do this as a preparatory measure for the
Imperial Conference, the Government should also be urged to summon
the representatives of the industry to discuss the real inwardness
of the situation as shewn by the statistical evidence.

Tallents is going to take this matter up with Sidney Webb in the
near future.

As an illustration of what I had in mind, I prepared for this talk
an analysis of the electrical industry in three tables. The first
table shows, both in percentage and in volume, the share that
Great Britain holds of Australian electrical industries in
contrast to her share in the Argentine, the Danish and the
Netherlands markets. The second table sets out the British share
in the Australian imports as compared with the weighted average of
the British share in the imports of these three foreign countries
taken together. The third table shows the extent to which British
Empire markets absorb the exports of the British electrical
industry. I enclose copies of the tables herewith.

It seems to me that table 2 does afford some indication of the
relative importance of tariff preference together with all the
other factors which make Australia a sheltered market for British
industry and does give some gauge of the relative urgency of
preferential assistance. It would seem to follow, for instance,
that under Item 6 Lighting Accessories, the British position in
the world is strong, whereas Great Britain has a very weak
position in regard to Item 5 Accumulators.

I hope that you will glance through these details because I feel
that there is a good deal of interest to be deduced from them.

Subject to what you or Simpson may say, I believe that the best
contribution I can make to assist the work of your Committee [19]
will be to carry out a series of analyses of the competition which
British goods face in the world in comparison with the position in
Australia.

PROPAGANDA WORK

With reference to the foregoing, it occurs to me that it might be
useful if, as soon as I have got a good deal of material together
on the world competitive position, I were to arrange to meet some
of the more important Chambers of Commerce and to discuss with
them the significance of Australian, and indeed of Empire, markets
in order to get them to realise how vital it is to them to use all
their influence to secure the development of Imperial markets.

Yours sincerely,
F. L. MCDOUGALL