My dear Prime Minister,

The sudden unexpected death of Mr. Pratten [1] must have been a
great surprise to you and to your colleagues in the Cabinet.

The vacancy thus created at the Ministry for Trade and Customs
will doubtless give you a good deal of worry and anxiety. The mere
contemplation of the factors that you will have to consider has
confirmed, in my mind, the intense undesirability of a House of
Representatives with only 75 members. With so few men, the
temptation towards intrigue must be intense. A cabal of very few
men is sufficient to endanger the safety even of a powerful
Government. I am afraid, however, that it will be a long while
before we can have a campaign to increase the number of
politicians. Even you might well hesitate before launching such a
proposal to the Australian public. Probably any such reform would
have to wait until it has become possible to reduce the number of
Houses of Parliament and the number of parliamentarians in the
State Legislatures and at the same time to diminish the powers and
functions of the State. [2]

CONSULTATIVE COMMITTEE OF THE ECONOMIC SECTION OF THE LEAGUE OF
NATIONS (C.C.E. (L. OF N.))

The first meeting of this body takes place on Monday, the 14th
May, and I shall be leaving for Geneva on Saturday, the 12th.

There have been two meetings of those members of the British
Empire Delegation who are available in London. In all there will
be eight members of the Committee connected with the British
Empire. Sir Sydney Chapman [3], nominated by the Economic
Committee of the League of Nations itself; Sir Arthur Balfour [4],
Col. the Hon. Vernon Willey [5], W. T. Layton [6] and Arthur Pugh
[7] from Great Britain; Dr. Shortt [8], from Canada; myself from
Australia and Sir Atul Chatterjee [9] from India. We have all met
with the exception of Dr. Shortt, who has not been in London.

After very carefully considering the whole position, I have come
to the conclusion that the right line of country for me to take at
Geneva is to be an interested onlooker, so far as commerce and
industry is concerned, but an active participant in discussions on
agriculture. In my view it may become necessary at some stage,
either this year or on some later occasion, to warn the Committee
of the dangers to the League of Nations of its interference in the
economic affairs of nations, and particularly the economic affairs
of the younger nations of the World, who are developing their
industrial status and may resent dictation from the older
industrialised countries. Should the necessity for such a warning
ever arise, I am quite sure it could be given much more
effectively by a member of the Committee who had participated in
the Committee's work and had not merely sat with folded arms
acting as an observer.

Having arrived at this conclusion, with which I hope you will
agree, I then considered what were the legitimate functions of the
League of Nations in the economic field and I came to the
conclusion that the one really useful function that the League can
serve is to provide us all with information and with really good
comparable statistics in regard to production, to trade, to wage
rates, etc.; to make available information about the progress of
rationalisation and of industrial agreements among countries and,
in general, quietly to use its influence to induce Government
Statisticians and other people concerned in the preparation of the
facts upon which any survey of world industry, trade or
agriculture must be based, to do it in a way which will enable
comparable surveys to be undertaken.

My feeling is that if the Economic Section of the League of
Nations really undertook work of this character, it would be
distinctly helpful to everybody and would perhaps especially
assist those countries which already maintain a high standard of
living.

As far as I understand your own point of view about the political
functions of the League of Nations, it is in many ways largely the
same as what I conceive to be the League's proper sphere in
economics. You, I think, have said that the League's duty is to
assist in the formation of world public opinion in world
economics. If anything of the sort is to be done, we must all be
provided with far more information about one another than we have
at present and it must be on a comparable basis. [10] Having
arrived at the above conclusion, I have prepared a brief speech
which, should occasion seem appropriate, I may deliver to the
Committee. I am enclosing a copy herewith.

'THE PROSPERITY OF AUSTRALIA' By F. C. BENHAM [11]

Mr. Benham, the Lecturer in Economics in Sydney, has written a
book entitled 'The Prosperity of Australia', which was published
here about five or six weeks ago. It is not very interestingly
written but contains a good number of rather striking points. You
are sure to have it brought to your notice but, knowing how
intensely busy you are, it is likely that you will not have time
to read it. I have, therefore, had a very brief summary of his
main points put together which I am forwarding herewith.

BRITISH MEAT SUPPLIES

In my recent letters I have been constantly mentioning the
position of British meat supplies and Foot and Mouth disease in
the Argentine.

A further step towards the education of the country and of the
Ministry of Agriculture towards the need of resolute action has
been taken by Lord Ernle [12] in the House of Lords. I enclose the
'Times' report of Ernle's speech, Lord Kylsant's [13] objection,
Lord Novar's [14] support and Stradbroke's [15] reply on behalf of
the Government.

In my last letter I told you that I had strongly advised the High
Commissioner [16] to refrain from any overt action and I am glad
to say that Sir Granville quite agrees with my point of view.

Yesterday the Official Secretary to the New Zealand High
Commissioner's office [17] consulted me as to what, if any, action
the Dominions could take in this matter. I told him very
emphatically that while we should do all we could to keep the
matter alive, we should not commit the error of making any public
pronouncement of any sort. He told me that he quite agreed and
that he would put that point of view before Sir James Parr. 18

BUDGET INCIDENT

In my letter of the 3rd May [19] I described, at considerable
length, the very bad 'faux pas' which Arthur Michael Samuel [20]
had made at the instigation of Amery. [21] There has been a great
deal of comment and discussion on the matter but I gather that
well informed opinion in the House has come to the conclusion that
Baldwin [22] hatred of any changes will save Samuel from the
obvious immediate consequence of his indiscretion. I gather that
Amery's reputation has been distinctly blown upon.

GENEVA DOCUMENTATION

There has been no great flood of documents for the Consultative
Committee or at least nothing comparable with the immense mass
which was produced by the Preparatory Committee before the World
Economic Conference. I have, however, been studying not only the
new material but also some of the more important documents that
were prepared for last year's conference.

Among the new documents the most interesting is a Review of
Economic Conditions in 1927 by Pirelli [23], the new President of
the International Chamber of Commerce. He estimates that 1927
showed a further increase in the volume of world trade over 1926
and that the increase was something greater than 6% or 7%. In his
speech he made the following statement which I think you may find
extremely useful:-

The tendency towards increased trade between continents, shown
ever since the war, continued to make itself felt. This tendency
is in no way affected by the progressive industrialization of new
countries-despite their decreasing exports of certain raw
materials and their decreasing imports of certain manufactured
products-for it is clear that the industrialization of a country
increases its purchasing power and creates new demands for
manufactured goods.

W. T. Layton drew my attention to the importance of the document
prepared by the Preparatory Committee last year on Tariff Level
Indices. I have only one copy which I must take to Geneva but I
will certainly obtain another copy for you and forward it. You
probably have the document in the League of Nations Section of the
Prime Minister's Department, so I will give you the reference
number which is 'C.E.I.37'. [24]

Layton told me that, at the commencement of the work of the
Preparatory Committee, when it was decided to try to get
comparable figures to show the tariff levels of various countries,
a number of the members of the Committee immediately said that the
obvious way to do it was to divide the total value of the revenue
collected from customs duties by the total value of the goods
imported. This method gives, for the year 1925, the results which
show Spain to have the highest tariff in the world, Australia the
second highest, Canada the third, Argentine the fourth and U.S.A.

the fifth but, as Layton explained, the Preparatory Committee
immediately saw that this method was hopelessly faulty, because in
so far as a tariff on a given commodity was sufficiently effective
to prevent the entry of goods, this method of estimating the level
did not show the incidence of that particular tariff. The
Committee therefore, adopted a series of methods which were
theoretically sounder and give quite different results. Knowing
how tremendously occupied your time is, I am preparing a summary
of this memorandum which I hope to be able to forward to you in
about a fortnight's time.

The net result of the various methods is to show that, for the
year 1925, if you take the tariff level on all goods, the height
of tariffs of countries occurred in the following order:-

Spain
U.S.A.

Argentine
Hungary
Poland
Yugo Slavia
Australia
Canada
Czecho-Slovakia
Italy
If, however, the level of the tariff on manufactured commodities
only is taken, a very different picture is obtained. In this case
Spain again comes first with an average tariff of 40% ad valorem;

U.S.A. second with a tariff of between 35% and 40%; Poland third
with a tariff between 30% and 35%, followed by four countries with
tariffs varying from 25% to 30% in the general instance of
manufactured goods, these countries being Argentine, Australia,
Czecho-Slovakia and Hungary.

THE EMPIRE AND THE NEW ERA

I enclose a copy of a report of a speech made by Amery at a dinner
given by the Royal Colonial Institute. On the whole it was very
good and well worth your while to read. [25]

Yours sincerely,
F. L. MCDOUGALL