My dear Prime Minister,

REPORT ON I.E.C. AND E.M.B.

In your letter of the 30th April [1] you warmly commended my
suggestion that I should prepare a report an the work of the
Imperial Economic Committee and on the Empire Marketing Board. You
also said that you would probably publish this as a Parliamentary
paper.

I have sketched out the basis and have completed part of the
report but I feel that it will be wise to wait for a week or two
before completing it. My point is that, within a very brief
period, we ought to have some official pronouncement for the new
Government here in regard to the E.M.B. I have no doubt that the
Government will support the Board. When this is announced, we
shall be in a position to say that the policy recommended by the
Imperial Economic Committee in its first report has now become the
national policy of Great Britain. I feel sure that you will agree
that the report would be much strengthened by such a conclusion
and I therefore trust you will concur in the slight delay which
seems to me to be desirable.

SIR SYDNEY CHAPMAN [2]

In my last letter I gave you some account of a conversation with
Chapman about the economic side of the Imperial Conference. Since
I wrote I have seen Chapman again and we have had further
discussions.

Chapman talked again about the Imperial Conference but he was
chiefly anxious to discuss International economic questions. He is
going to Geneva for the whole Assembly and told me that he
regarded it as a most important time. European countries are
tending to discuss getting together in the face of the American
tariff threat and he is most anxious that the Labour Government
should not be led into European economic adventures. He strongly
urged me to try and be there. I have not yet received any reaction
from you about the suggestion that I should go for a part of the
Assembly as an additional delegate.[3] I notice that no news has
yet been received in London as to the fifth Australian delegate.

You doubtless wish to fix this before deciding upon the other
question.

THERE RESIGNATION HONOURS LIST

The list of Honours recommended by Baldwin [4] on his resignation
seems about the limit in honouring the mediocre. So much was this
the case that the 'Times' in a leader, which I enclose, suggests
that honours rarely come to politicians who do not ask for them.

Rather a severe stricture from a Conservative newspaper. Peel [5],
after holding the India Office for a few months, is made an Earl
but the worst is the list of Privy Councillors: Wolmer [6],
Sassoon [7], and other incompetents of like kidney. Baldwin has, I
should imagine, in the last four years created a record by the
honours given to party hacks. The Birthday list was full of
unknown persons who were regarded as workers in the Conservative
cause.

BEAVERBROOK [8] AND THE EMPIRE

On Sunday the 'Sunday Express' published, with a great flourish of
trumpets, an article by Beaverbrook entitled 'Who is for the
Empire?' I am enclosing a copy of article which I feel sure you
will be interested to read. This publication is, I think, all to
the good at the present time, although, of course, the idea of
free trade within the Empire is hopeless.

I happen to know that R. G. Boothby [9] M.P. is in touch with
Beaverbrook and I am going to try and get Boothby to show
Beaverbrook how stupid it would be to centre his campaign on an
Imperial Fiscal Union with free trade between all its parts and to
suggest the alternatives which might attract Beaverbrook and lead
him to campaign along sounder lines.

3.7.29

EMPIRE MARKETING BOARD

Yesterday Tallents [10] sent me a note to let me know that a new
Liberal M.P. had put down the following question:

To ask the Chancellor of the Exchequer [11] whether he will
consider what economies might be secured by the abolition in whole
or in part of the Empire Marketing Board,
I saw Tallents who was rather worried because he had learnt that
the Treasury, which has always been somewhat hostile to the
E.M.B., would prepare the answer and the combination of Philip
Snowden and the Treasury might produce a stupid answer which the
Government might regret later. I arranged to see Elliot [12] in
the House of Commons and also arranged for him to see several
Labour men, including William Graham [13], and perhaps Thomas
[14], and to point out the need for a clear and unequivocal answer
approving of the Board. I also spoke to Sir Horace Hamilton [15],
of the Board of Trade, and pointed out what a very depressing
effect would result from a noncommittal answer and how any
tendency by the Treasury to economise on the E.M.B. grant would
jeopardise the increasingly happy prospects for an important
economic side of the Imperial Conference. I also saw Whiskard [16]
at the Dominions Office and satisfied myself that he was fully
seized of the position.

I do hope that a satisfactory answer will be given but it is not
unlikely that the questioner will be asked to repeat his question
later.

IMPERIAL ECONOMIC COMMITTEE

Yesterday's meeting of the Imperial Economic Committee proved
important. The subject for discussion was the first draft of the
report on Pig Products. I had given notice of an intention to
raise the larger issues, including the question of how Great
Britain could guarantee her markets to the agriculture of her own
countryside and of the overseas Empire. We had a lively discussion
and finally decided not to introduce these ideas into the Pig
Products Report but to ask leave from the Governments of the
Empire to draw up a report based upon our experience gained in
consideration of the various matters into which we have enquired.

So you will be receiving a cabled request for authority to do
this. I am doubtful whether Canada will agree unless the United
States Tariff threat has caused a saner point of view there.

The ideas which I think this proposed general report might contain
would be somewhat as follows: The I.E.C. has, in its
investigations and reports, laid down certain principles, the
outstanding ones being (a) the need for productive efficiency with
which must be associated efficiency in presentation and marketing;

(b) the mobilization of the British consumer to use his purchasing
power for his country's economic advantage, illustrated by
voluntary preference and the publicity campaign of the E. M. B.

Both these things are, and will continue to be, essential but
under certain circumstances even high productive and marketing
efficiency associated with well developed voluntary preference may
not secure the British markets for Home or Overseas Empire
agriculture.

What should be done in such cases? (The cases would be illustrated
from our previous reports.) The argument would be that a stable
and prosperous Empire agriculture is of such immense economic
importance to Great Britain as to justify a British Government in
giving a guarantee that, where such cases arise, the Government
should take such action as may be found appropriate to secure
privileged access to the British markets.

The report would go on to discuss briefly but sympathetically the
possible methods, Tariffs being mentioned only to be dismissed as
outside the I.E.C.'s terms of reference. The main discussion would
be upon bulk purchase schemes and particularly on such schemes as
did not involve State trading.

I think some such report which might also deal with capital
investment, transport problems, etc. would present a valuable
picture before the Imperial Conference.

4.7.29

BRITISH EMPIRE SOCIETIES

The Editor of the 'Morning Post' [17] recently sent one of his
staff to see me about a proposal from Canadian sources for the
creation of a new Empire Society to push the Empire buying spirit
throughout the whole of the British Empire. My immediate comment
was that there were already a superfluity of Empire Societies and
that what was required was a consultation of existing Societies
rather than the creation of any new ones. This interested Gwynne,
the Editor-in-chief, quite considerably and he arranged for the
publication of an article and a leader on the subject. [18] I
enclose both herewith. I do not know whether anyone will follow
this move up but there can be no doubt about the waste of effort
and indeed of money through the duplication of effort that occurs
in this country.

THE KING'S SPEECH

I am enclosing the 'Hansard' giving the text of the King's speech
and also the commencement of the Address in Reply. I should like
particularly to draw your attention to Snell's [19] speech in
moving the Address. It was very pleasing to find that Snell took
this opportunity for placing Empire development in the forefront.

Snell is a quiet little man with a gentle manner and I have been
told, both by Tory and Labour Members, that the effect of his
speech on the House was very marked indeed. I am also enclosing
yesterday's 'Hansard' as it includes the very important speech
made by Thomas, who seized the opportunity of the Debate in Reply
to outline his schemes for dealing with unemployment. [20]

In Thomas's schemes there is no element of socialism and in fact
had the last Government had a little energy they could have
introduced the whole of Thomas's proposals without deviating a
hair's breadth from their principle, except, perhaps, the one
underlying principle of rigid financial economy about the effect
of which upon democracy I wrote to you some time ago.

Thomas's references to Empire development were almost confined to
the Colonies but on that subject he was very sound and has already
stirred up action.

THE VALUE OF EMPIRE PREFERENCE TO BRITISH TRADE

With my letter of the 12th June [21], I forwarded to you some
statistical tables illustrating the competitive position faced by
the British electrical industry. I have now completed a further
study on tables dealing with apparel. I am sending a complete set
to Simpson [22] but am enclosing with this letter the summary
which I think you will like to look through yourself
In the case of apparel, national custom and habit obviously play a
very much greater part than is the case with industrial goods but
the importance of the Empire markets to British exports of apparel
are brought into very clear relief by these figures.

I am proposing to go on and to deal with each major industry in
turn in this way and I think I shall probably send copies of the
summary of each industry to Mr. William Graham, of the Board of
Trade, as I am sure it will prove excellent educational material.

In general I have been very much impressed during the last
fortnight by the marked revival of interest that is occurring in
Empire economic questions. The basic reason for this is probably
the American Tariff [23] and the American Farm Relief Act [24] but
your speeches and the indications of the change in the attitude of
the Canadian Government have given points in substance for
discussion. The general atmosphere strongly reinforces my feeling
that, by the time the next Imperial Conference takes place, we
shall have an infinitely better atmosphere for Inter-Imperial
economic cooperation than ever before in the history of the
British Empire. I only hope and trust that you will be available
to take the leading part which is already marked out for you at
the Conference itself.

Yours sincerely,
F. L. MCDOUGALL