My dear Prime Minister,

In connection with the Chinese situation [1], I think you may be
interested to hear the way in which John Burns [2] is said to have
summed up the position. He said that to fight China would be like
putting Dempsey [3] up to fight against a haystack but a haystack
which contained large quantities of broken glass and scrap iron.

INTERNATIONAL ECONOMIC CONFERENCE

I sent you a typescript of my article for the 'Times Trade
Supplement' and I now enclose a copy of the article itself. [4]
Apparently among all the memoranda which have been prepared either
by or for the Preparatory Committee will be documents of
considerable interest and I have made arrangements through Fuhrman
[5] to obtain copies. I hope to be able to send you some
interesting extracts condensed in such a way as to give the meat
without the padding at a later date.

'DAILY CHRONICLE'

You will remember that Lord Reading has become Chairman of the
company which runs the 'Daily Chronicle'. I am enclosing two
cuttings from the 'Daily Chronicle' which I hope are indicative of
Reading's attitude towards Empire questions. It will be a distinct
asset if we get amongst the ranks of the Liberal papers one which
will maintain a consistent attitude in favour of Empire economic
development.

GEOPHYSICAL SURVEYING

Since I wrote you last mail, I have had an opportunity of
discussing the geophysical cooperation proposals with Sir Frank
Heath [6] and also with Walter Elliot. [7] I saw them quite
separately and it was interesting to find that they both had the
same idea. Each felt that the matter was of very considerable
importance and one which might legitimately fall within the
province of the Empire Marketing Board but they both felt that as
it involved a new departure for the Empire Marketing Board, it was
very undesirable that the Board should come to a hasty decision.

Both Heath and Elliot separately suggested that the Board should
ask the Committee of Civil Research, which is, as you know, a
Committee under the Cabinet and therefore a Secret Committee, to
appoint a strong technical Sub-Committee to examine the whole
question.

The matter came before the Research Committee of the Empire
Marketing Board yesterday afternoon. Several of the members were
opposed to the Board tackling a subject of this description at all
but Walter Elliot, who was in the Chair, convinced them that it
would be most desirable to have an expert Technical Committee
under the Committee of Civil Research to go into the whole
question of geophysical prospecting.

It was therefore decided that a recommendation on these lines
should be made to the full Empire Marketing Board. The Board meets
this afternoon and the matter will then come before it.

BRITISH MARKETS FOR EMPIRE GOODS

The 'Times' were anxious to get an article on this subject for
their Canberra Supplement which will be issued on the day that the
Duke of York opens the Federal Parliament House at Canberra. I
have written an article for them, a copy of which is enclosed. I
should like to suggest that you read this because I have touched,
probably for the first time, on the question of the limitations of
the Voluntary Preference idea.

TRADE UNION REFORM

I am forwarding five copies of the 'Times' reprint of Dr.

Shadwell's article on this subject. [8]

3rd February

GEOPHYSICAL SURVEYING

The Empire Marketing Board approved the proposal of the Research
Committee that a strong Technical Committee should be set up to
consider all the aspects of geophysical surveying and its
importance to the Empire. The names of Sir Matthew Nathan [9], as
a possible Chairman, and Sir Edgeworth David [10], as a possible
member of this Committee were considered.

The attitude of the Board was that, while they would be prepared
to cooperate with the Development & Migration Commission in any
thorough field trials of the various methods of geophysical
surveying, and, on a 50-50 basis would be prepared to conduct
these trials in Western Australia, they felt that the purposes of
the Annual Grant would be somewhat unduly stretched if the Board
undertook cooperation in a survey of Australia's mineral
resources. I am cabling Gepp [11] today to this effect.

EMPIRE MARKETING BOARD

Yesterday's meeting of the full Board was the first occasion on
which Mr. J. H. Thomas [12] attended as a member and I am very
glad to be able to tell you that he proved a most useful member,
displaying very considerable zeal coupled with sound commonsense,
which was somewhat refreshing. I do not think there can be any
doubt that the move to include Labour in the personnel of the
Empire Marketing Board and of its two Main Committees will prove
not only a very sound piece of political strategy but also of
substantial practical advantage in the work of the Board.

Major Walter Elliot brought before the Board the proposal that the
Board should cooperate with the Commonwealth Government in the
establishment of a Tropical Research Station in Northern
Australia. Mr. Amery [13] referred to the letters that had been
interchanged between yourself and himself on the subject and
stated that you had said that the Commonwealth Government would
welcome the appointment by the Empire Marketing Board of a
representative on the Governing Body of the proposed Institute and
the further appointment of a Correspondent in London who would be
a liaison between the Queensland Research Station and the other
Research Stations of Tropical Agriculture in the various parts of
the Empire.

The Board approved of this recommendation without any further
discussion. I am today sending you the following cable, as I think
you may like to have this confirmation before you land in
Australia:

Following from McDougall-Empire Marketing Board yesterday approved
proposals for Research Station Tropical Agriculture Northern
Australia on terms already discussed.

CHINA

I am enclosing 'Times' report of a speech by Mr. J. H. Thomas on
the
Chinese situation, which I feel sure will interest you. [14]
Mr. Ramsay MacDonald [15] is taking the attitude that, while he
warmly approves of the line of negotiation which Chamberlain [16]
has initiated, yet he roundly condemns the despatch of troops to
China. There is an interesting article in today's 'Times' on the
moderate portion of the Labour Party's attitude to MacDonald
taking this line of country, which may also be of interest. [17]

Yours sincerely,
F. L. MCDOUGALL

P.S.

IMPERIAL ECONOMIC COMMITTEE

I saw Amery last night and mentioned to him that I was very
disturbed about the long delay in getting the Imperial Economic
Committee to work again. He enquired whether Mackinder [18] had
yet returned and I told him that he was expected back this week.

He promised to look into the matter at once.

F. L. MCD.