Dear Mr. Bruce,

MR. AMERY [1]

On Friday last I had an hour with Mr. Amery at Downing Street. He
asked me to submit to him, for his personal consideration, my
views on the possibility of certain increases of preference in the
forthcoming budget. He outlined the limitations, i.e. no further
tax on foodstuffs nor on any important raw material.

I promised to do what I could and I enclose a copy of my letter to
Mr. Amery on this subject. He intends to submit a memorandum on
the subject to the Chancellor of the Exchequer [2], more I imagine
to keep the flag of preference flying in the Cabinet than in the
expectation of results in the budget.

Mr. Amery told me that he had received from you a most helpful
'hurry up' cable and that you had expressed the view that Home
Agriculture should have first place. [3]

He asked me for my views about British Agricultural produce and
the �1,000,000 and I expressed them as set out in my last letter
to you.

Mr. Amery gave me, in confidence, a rough outline of the
Government's intentions in regard to the First Report of the
Imperial Economic Committee but did not go into details.

H.M. GOVERNMENT AND THE IMPERIAL ECONOMIC COMMITTEE

On Tuesday afternoon Mr. Amery attended a meeting of the Imperial
Economic Committee and gave the Committee a detailed account of
the Government's intentions in regard to our First Report. He then
invited questions and an expression of views.

I find that his statement to us was in very close harmony with the
cable sent by H. M. Government to the Governments of the Empire.

[4] On two points Mr. Amery went into much more detail with the
Imperial Economic Committee than in his cable.

The first was the constitution of the Spending Committee, or
Executive Body. Mr. Amery expressed a desire that members of the
Imperial Economic Committee should consent to serve on this
Executive. He explained that it was proposed to use the parallel
of the Board of Admiralty where only one vote ever counts i.e. the
vote of the First Lord. On the proposed Body all the members,
except either the Secretary of State or the Under-Secretary of
State, would be there in a consultation capacity. This, in Mr.

Amery's opinion, avoided the difficulty of making overseas
representatives responsible for spending British taxpayers' money.

As regards placing two representatives of British and Scottish
Agriculture on the Spending Committee, Mr. Amery stated that the
Government felt that it was most undesirable to allow a position

to arise which would lead British agriculturalists to feel that
they were being placed at a disadvantage. He told the Committee
that he had received a cable from you on this subject.

He then explained that only �500,000 would be voted this year, and
�1,000,000 in 1926-27, justifying this on the ground that it would
be difficult to spend the whole million judiciously in the first
year of operation.

He further explained that H.M. Government was proposing to the
Oversea Governments that British agriculture should be included in
the expenditure under the annual grant and he invited our
considered views as to what extent this should be done.

Finally he told us, with not a little satisfaction, that the vote
was to be non-returnable and that this would free the grant from
strict Treasury supervision.

After Amery finished, Mackinder [5] occupied a long period with
vague generalities and although other members asked a few
questions, little in the way of discussion with the Secretary of
State occurred.

On Wednesday morning the Committee met to discuss Amery's
announcement. The Canadian Delegation [6] were frankly hostile on
two grounds:

(1) that the proposals envisaged the permanency of the Imperial
Economic Committee.

(2) that overseas representatives would be placed in executive
capacities.

There followed a long and dreary argument between Mackinder and
the Canadians which finally resulted in the Canadians announcing
that they would merely occupy the position of observers during
further discussions. However by this time the greater part of the
sitting had been taken up. I then proposed that:

(a) we should recognise that the question of the attitude of the
oversea Governments to the Home Government's proposals would be
settled by cable in the course of the next week, and that we
therefore need not discuss that point.

(b) the whole question of the Imperial Economic Committee would be
discussed in October at the Imperial Conference, and that the
constitution of the Executive could also be fully discussed.

(c) we should discuss and settle what we had to recommend to the
Secretary of State on the assumption that the Governments of the
Empire did not raise fundamental objections.

These propositions were accepted by all the Committee, except
Canada. We then started to discuss a draft prepared by Mackinder.

After a few minutes Mackinder proposed to redraft the document,
and this ended the meeting. I am enclosing a copy of the amended
draft which reached me this morning (this is for your private
information). I have ticked in blue pencil the clauses of the
draft with which I feel in agreement at the present moment and
have left unmarked those which I think need considerable
alteration.

Since Wednesday's meeting, I have been asked by a number of
members of the Committee to discuss the situation with them. I had
a long talk with Sir Sydney Henn [7] on Wednesday evening in the
House of Commons and he raised the point that he thought that the
Spending Committee would be sure to come in for serious criticism
sooner or later and that it would, therefore, be undesirable for
the oversea parts of the Empire to be represented on it, even with
the safeguard that the Secretary of State was personally
responsible for all expenditure. He felt, however, that there was
no danger of any such criticism arising between now and October
and therefore he agreed with me that members of the Imperial
Economic Committee should consent to serve between now and
October.

Today at lunchtime I met the South African representative [8], who
is quite an excellent fellow but, being a Britisher, is somewhat
nervous of the attitude of his own Government to himself. He tells
me that Smit [9], the South African High Commissioner, is anxious
to cable his Government strongly condemning the British
Government's plan and suggesting holding up all action until the
Imperial Conference. He told me that he hopes to be able to
prevent this cable being sent.

The two Indian delegates [10] have just asked me to dine with them
tonight in order to discuss the matter fully.

We are having another meeting of the Committee tomorrow morning at
11 o'clock, at which I hope to be able to get a decision taken on
the following lines: that, as a temporary expedient, the Imperial
Economic Committee is willing to nominate from its own members
five constant representatives on the Executive Body and suggests
that two further seats be reserved to be filled by members having
special knowledge of subjects that may be under discussion.

I think that if this suggestion is accepted, my colleagues will
prefer that we should not nominate members as from Great Britain,
the Dominions, Crown Colonies or India, but that we should
nominate members from the Committee as a whole.

In my letter of February 17th I gave you an outline of the type of
body that was then proposed, and I feel that this would be a much
better form than what the Government has proposed.

I see rather serious objection to the representation of Producers'
interests as such upon the Spending Body, therefore while I warmly
welcome the proposal to put a British Agriculture representative
upon the Imperial Economic Committee, I dislike the nomination of
the two Home Agriculturalists as such on the Spending Body. The
appointment of, say, three oversea representatives as members of
the Imperial Economic Committee does not appear to me to be open
to the same objections.

FRUIT REPORT

The facts recorded above have resulted in delaying consideration
of this report. On Monday, the Drafting Committee sat from 2.30
till 11 p.m. but Mackinder wastes such oceans of time that we have
to spend much too long on that Sub-Committee. I now fear that the
report will not be ready much before the end of this month.

FUTURE WORK OF IMPERIAL ECONOMIC COMMITTEE

When I saw Amery on Friday last, I impressed on him the need to
settle with the Oversea Governments the series of subjects to be
dealt with in the summer months. Amery promised to consult the
Governments and to have the question settled before Easter.

CONSERVATIVE PARTY

The meeting with the Imperial Affairs Committee went off quite
well. There was an important debate in the House and therefore
only about 40 members were present. I was asked if I would prepare
a summary of my address for private circulation to members of the
Committee. I have had this done and enclose a copy herewith. [11]

TRADE UNIONS

I enclose a copy of a letter and memorandum which I have sent to
Mr. Appleton [12], the General Secretary of the Federation of
Trade Unions.

'NATIONAL REVIEW'

The article I sent you with my letter of February 3rd appeared in
the March issue of the 'National Review', of which I know you
receive copies. This article has attracted some attention from the
press and I enclose a copy of the notice in the 'Morning Post'.

[13]

POLITICAL ECONOMY CLUB

At Mr. Amery's suggestion, this Club invited a Canadian and myself
as guests last night. The Club is 120 years old, and includes Lord
Hunsdon [14], Sir Hugh Bell [15], Harold Cox [16], Philip Snowden
[17], J. M. Keynes [18], and other stalwart Free Trade economists.

The subject was a paper by Harold Cox on 'Can migration solve the
problem of over-population'. Cox's address was provocative,
especially to Australia, and I had a pleasant ten minutes
answering him. Snowden spoke later and, after the meeting, I had
ten minutes talk with Snowden. He asked me if I really meant that
Australia admitted British cotton piece goods free while taxing
foreign. I told him that this fact applied to over 99% of British
cotton piece goods.

This fact about the tariff has been stated by me publicly at least
twenty times and once at a Parliamentary Association meeting with
Snowden in the Chair, so you can see how necessary is continuous
educational effort.

Cox stated that the percentage of British goods taken by the
overseas Empire had not materially increased during the last fifty
years and Snowden supported this view. I had not got the figures
at my finger ends, but I propose to get out a detailed return and
will send a copy to Snowden.

I have to-day had the following data collected:

Empire share of the export of the produce and manufactures of the
United Kingdom
1870-25.5%; 1880-34.5%; 1892-33.0%; 1904-1913 (average)34-75%;

1924-41.8% or excluding the Irish Free State 38.6%; 1925-43.2% or
excluding the Irish Free State 40.2%.

MERCHANDISE MARKS BILL [19]

I enclose copy of the draft of the Merchandise Marks Bill which
Cunliffe-Lister [20] has submitted. I would draw your attention to
the marked portions on Pages 7 and 8.

In my opinion it is a mistake to give an alternative method of

marking goods and it would be very much better if it was made
obligatory that the words 'foreign' or 'Empire' should be used and
optional that the name of the country of origin should be added.

To illustrate the reasons of my objection I would take the
instance of dairy produce. Under the present Bill, retailers would
label Danish butter as 'Danish', which is already an asset. I
should like to see it made obligatory to mark Danish butter as
'foreign' and optional to add the word underneath in smaller
letters 'Danish'. This was the sense of the recommendations of the
First Report of the Imperial Economic Committee.

I enclose a cutting from the 'Daily News' reproducing a cartoon
from the Australian Manufacturer. This cutting needs no comment
from me.

Yours sincerely,
F. L. MCDOUGALL

[Handwritten postscript]

I enclose further Parliamentary questions.