Dear Mr. Bruce,

Since my arrival I have been so extremely busy that I have had to
postpone writing for the mail until the very last moment and
therefore cannot write nearly as fully as I should like to do.

I sent, through Sir Joseph Cook [1], a cable to you on the 16th
instant, which read as follows:-

Have seen Amery [2] Cunliffe-Lister. [3] They state Government
will carry preferences not involving increase of taxation but
feels unable to introduce preferences involving increase of duties
this budget. Amery hopeful of development later. I raised question
of further reduction on light wine. Amery states Government
anxious to give Dominions full value for postponed preferences
through schemes developed by Economic Committee. He sees serious
obstacles to direct subsidies and is anxious for practicable
schemes. He discussed grants to publicity. I expressed your view
that export control boards could co-operate in Imperial schemes
and tentatively suggested that British Government might guarantee
against loss long term contracts with Dominion Control Boards [4]
at payable prices. Amery welcomed suggestion and asked me to
develop idea. I strongly urged need of effective recognition by
British Government of preferential advantages given by Dominions.

I gather from all sources that, so far as this coming Budget is
concerned, the Government does not feel itself able to bring
forward the Economic Conference Preference Proposals that involve
any increase of duties.

Amery states that the bitter memories of 1923 [5] are too close
but that he anticipates that, if we continue effective propaganda,
it should be possible to re-open the matter with success possibly
for the next Budget.

With both Cunliffe-Lister and Amery I have emphasized, as strongly
as it is possible to do, the urgent need of the British Government
doing sufficiently definite things to make it obvious in the
Dominions that they intend really to build up an effective policy
of Empire development and Empire trade.

I also sounded them both on the possibilities of further
reductions of duty on Light Wine and I am preparing, at Amery's
request, a memorandum for the Chancellor of the Exchequer [6] on
Wine and on Canned Fruit. I will forward a copy of this memorandum
by the next mail. You will remember that, as Canned Fruit is taxed
on its sugar content, there might be some method whereby a more
substantial preference could be given without any fresh taxation.

Cunliffe-Lister seems to be under the impression that a large
proportion of the 1,000,000, which is to be put at the disposal
of the Economic Committee to make up for the preferences which the
British Government does not feel able to bring before Parliament,
should be used for subsidising publicity for Empire goods. I found
Amery much more doubtful as to whether grants to publicity was the
proper method. In my opinion there are certain rather grave
dangers in using any large proportion of this money for
advertising purposes. It seems to me that it would lay the British
Government open to the charge that they were sweetening the press
under the guise of Imperial development. At the moment it seems to
me that it would be very much better for this money to be used in
more direct methods of assistance to Dominion marketing and that
the Dominions should be prepared to find their own publicity
funds.

I am starting to investigate certain new methods of trade
indemnity assurance with the idea that a portion of this money be
used as some form of premium to guarantee a long term contract
made by some special body in Britain with the Dominion Control
Board against loss.

I should be very glad to have an indication of your views as to
the wisdom of grants to publicity being used to any important
extent, so far as the 1,000,000 are concerned.

I am very sorry to have to inform you that Mr. Hassan, the
representative of the Australian Meat Council in London, has made
the position in regard to Meat and an Import Licence System [7]
very difficult by what appears to have been an extremely
injudicious statement about the British Government's intention to
prohibit the importation of foreign meat until all Dominion
supplies had been taken up.

Mr. Ben Morgan, of the British Empire Producers, and Mr. Forsyth,
of the New Zealand Meat Board, have informed me that as a result
of this indiscretion, Mr. Hassan has temporarily become 'persona
non grata' with the British Government.

I have written you under separate cover on the subject of the
visit to Australia of Mr. E. D. Simon. [8] You will probably
remember that I told you about his interests in Dominion trade. I
very much hope that you will be able to see him.

I have found people here very surprised at the latest development
for the proposed 75% Preference Regulation. Last week the High
Commissioner was advised that, so far as goods not produced in
Australia are concerned, the old 25% basis will be reverted to,
but that, so far as goods manufactured in Australia are concerned,
the new regulations will be put into force. Even so good a friend
of Australia and of Imperial Preference as the Editor of the Times
Trade Supplement [9] told me that he was astonished at this
development. It appeared to him that the original intention to
prevent Anglo-Continental goods from obtaining British Preference
was being abandoned and that the primary purpose of the regulation
would now be to obtain a greater measure of protection for
Australian manufactures against British goods. [10]

I, of course, contradicted that point of view but, as the
Regulation stands at the present moment, it is certainly difficult
to explain here. I most sincerely hope that the primary purpose in
regard to Anglo-Continental goods will be adhered to and that the
regulation in its final form will not be given a strongly
protectionist basis.

[Handwritten]

I hope to write much more fully next mail. I am in daily touch
with the British people and with Sir Joseph.

Yours sincerely,
F. L. MCDOUGALL