My dear Prime Minister,

SIR JAMES COOPER [1]

I have no doubt that Sir James Cooper will be writing to you this
week about the new work which he is to undertake and the amount of
time he is able to devote to the London Agencies of the Control
Boards.

The position that has arisen is a very flattering one to Cooper
himself. The Governor of the Bank of England [2]has definitely
asked him to devote as much time as he (Cooper) can give to
special directorships on behalf of the Bank of England in such
industrial re-organisations as the Bank desires to support.

Cooper tells me that the Governor suggested that he should give
the whole of his time to this type of work on behalf of the Bank
but that Cooper had replied that he did not desire to give the
whole of his time as he would prefer to keep two directorships and
to retain his connection with Australia. He told me that he had
promised not to undertake any additional work over and above these
two directorships and the Australian jobs.

I have known for a long time that the Treasury had the highest
opinion of Cooper's qualities and I am by no means surprised that,
when the Bank of England, acting on the initiative of the
Government, decided to take a hand in assisting the re-
organisation or partial rationalisation of some of Great Britain's
industries, they should have called on Cooper to act as financial
watchdog for them.

From your point of view, it is rather satisfactory that your
judgment in regard to Cooper should have been so substantially
backed by the Governor of the Bank of England.

As regards the three London Agencies of Australian Control Boards,
of which Cooper is at present Chairman, the position seems to be
fairly simple. He has already made arrangements whereby he will be
doing a good deal less than in the past year for canned fruit. So
far as dried fruit is concerned, I shall be able largely to
deputise for him. In regard to dairy produce, neither the Board in
Australia nor his colleagues in London have ever made any
substantial call upon his time or energy. Under the circumstances
I see no reason why the present position should not be left until
you come over here for the Imperial Conference fifteen months
hence. Cooper himself, however, may be making some suggestions to
you on this subject of which I am not aware.

So far as the Imperial Economic Committee is concerned, Cooper
definitely desires to sever his connection and I am sending you a
cable today to inform you that the real activities of the Main
Session will be from the middle of March until July and to ask
whether you have given any consideration to the appointment of a
second Australian Representative.

While on this subject, I should just like to mention that if you
are appointing an Australian representative, I do not think that
it is at all necessary to distinguish between a senior and a
junior. That is not the practice with the other delegations and I
cannot think that any really useful purpose is served by so doing.

If a very distinguished visiting Australian was asked by you to
serve and consented, it would put me in a rather invidious
position if he was definitely appointed as the senior
representative; while if you appointed a less distinguished
person, I should certainly have no desire that he should be
regarded as my junior.

ECONOMIC ACTIVITIES OF THE LEAGUE OF NATIONS

On Monday last, Mr. Loveday [3], the head of the Statistical
Branch of the Economic Organization of the League of Nations,
happening to be in London on some special work, got into touch
with me and was fortunately able to have dinner in the evening. We
had a long and very interesting discussion about the League of
Nations Economic activities and especially about tariff matters.

Loveday, who is an academically trained economist, and almost of
course a free trader, expressed some rather interesting and, to
me, novel views about the way in which the League might bring
about some reduction in the very high level of tariffs,
particularly in Europe.

I was glad to find that he entirely agreed with me that any direct
approach by the League to nations with requests that they should
reduce the level of their tariffs would be tactically wrong and
might even lead to the League receiving a series of extremely
awkward rebuffs. He suggested, however, two methods which he
thought might prove efficacious. The first is, I think, of
comparatively little interest and indeed I personally doubt its
wisdom. He points out that there are a considerable number of
tariff items in the tariffs of most countries which serve
practically no useful purpose, either for the protection of local
industries or for revenue and that a suggestion might be made that
such items might be eliminated from the tariff altogether with
some nett effect on the reduction of the tariff level index.

His other suggestion was much more interesting. He said that he
thought that the really hopeful way of getting a decrease in the
number of tariff barriers in the world would be to encourage
preferential systems. He suggested, for instance, that in Europe
the Danubian countries might be encouraged to enter into customs
arrangements whereby, to begin with, they gave specially favorable
treatment to one another's products, leading perhaps to the
gradual formation of a definite customs union. His idea was that
Austria and Hungary might form the first nucleus and that later
the arrangements might be extended to include Roumania, Yugo-
Slavia and Czecho-slovakia. Such an idea is distinctly interesting
but very contrary to the traditional British policy which, of
course, is in the direction of trying to get as many countries as
possible to adopt unconditional Most-Favored-Nation clauses in
their Commercial Treaties.

It so happens that today I have seen Sir Sydney Chapman, the
Economic Adviser to the British Government, and who is the British
representative on the Economic Committee of the League. I
mentioned to him Loveday's idea about the encouragement of
preferential systems on the Continent of Europe and he immediately
exclaimed-'What damnable heresy'. He said that should any such
development take place, the result would be to provide to the
nations forming such preferential groups a weapon whereby they
might be able to make a serious gap in the British Empire
preferential system. My talk with Chapman was particularly
interesting and I shall refer to it again later in this letter.

Here I will just say that it is extremely interesting to find that
Chapman is now so profoundly impressed with the importance of the
British Empire preferences to Great Britain that he regards the
maintenance of the British Empire's right to conclude such
arrangements as being a cardinal point in British economic policy.

He told me that he was sure that Germany would do a very great
deal and might be prepared to make quite substantial temporary
sacrifices in order to make a breach in the Imperial preferential
system. He also said that at Geneva and at other Economic
Conferences he had always taken the line that this was a matter
which the British Government was not prepared to discuss as inter-
Imperial arrangements were purely domestic affairs.

NATIVE DIETETICS

I do not think that I have drawn your attention to the possible
importance of the work which has been carried out in Kenya, under
the general supervision of Dr. Orr [4], into the dietetics of the
natives.

A Sub-Committee of the Committee of Civil Research has been
considering this matter for some years and the reports have been
forwarded to the Commonwealth Government from time to time. The
last report on this subject was sent with a covering despatch from
the Dominions Office on the 18th December 1928.

It seems just worth while to mention that this work in Kenya may
have some important bearing on the health of the native
inhabitants of Papua and New Guinea.

From conversations with Dr. Orr and Walter Elliot [5], who was
Chairman of the Sub-Committee of the Committee of Civil Research,
I gather that there are two important aspects of the native
dietetic question. Firstly there is the incidence of disease and
of heavy infantile mortality among the native tribes and,
secondly, there is the question of the efficiency of native labour
and the effect of an improved diet to increase that efficiency.

So far as the labour factor is concerned, the position, as I
understand it, is that, although the natives' ordinary diet may be
sufficient in quality and quantity to keep them in health when
they are merely engaged in their normal occupations, the same diet
may prove quite unsatisfactory when they are expected to work in
plantations, on road making or any other activities foreign to
their natural life.

It would seem to me just possible that you might regard the
carrying out of some investigations in Papua to parallel the work
that has been done in Kenya which might have useful results to the
natives themselves and to the efficiency of labour. Such action
might also provide a useful object lesson in Empire team work and
scientific problems and might prove an additional feature to some
report which the Commonwealth could make to the Mandates
Commission of the League of Nations so far as New Guinea is
concerned.

MOST FAVORED NATION CLAUSES

In one or two of my recent letters I have referred to the extent
to which the Most-Favored-Nation clause in the Commercial Treaties
of foreign countries affects the possibility of a Dominion
obtaining in the market of such foreign countries specially
favored conditions for the marketing of the produce of the
Dominion. The more that I have thought about this subject, the
more important it has appeared and I have come to the conclusion
that it would be a most useful subject for a confidential
discussion at the next Imperial Conference. I have, therefore,
prepared a brief preliminary statement on the subject which I am
enclosing with this letter. You will notice that I have marked it
'Personal and confidential' as it seems to me undesirable to
circulate these notes to anyone except yourself until I have
received some reaction from you on the subject. I have sent a copy
to Casey [6] asking him to regard it as a confidential document
for the time being. In the meantime I shall try to get together
further information and build up a memorandum shewing the effect
of Most-Favored-Nation Clauses in the Trade Treaties of some of
the really important potential purchasers of Empire produce. At
the moment I have in mind an examination of the Trade Treaty
position of France, Germany, Belgium, Italy, Japan and the United
States of America.

The impression that I have gained at Geneva, and more particularly
from various conversations with Sir Sydney Chapman, is that sooner
or later the countries of the British Empire will be compelled to
defend the Imperial preferential system against the protests of
foreign nations. It may be comparatively easy to override protests
but a much more serious danger may be that foreign countries may
offer temporary advantages to various parts of the British Empire
in the hope of breaking down the system. Whatever may eventuate, I
feel sure that you will agree that it is highly desirable that we
should have a clear appreciation of the actual position and I
imagine that you will think that it is a subject particularly
suited for the Imperial Conference.

POLITICAL

I have spent the last two evenings in the House of Commons and
have had some interesting talks with members about the Election
prospects. The views I heard came from members holding London,
Lancashire and Scottish seats. I gathered that Labour hopes to
secure 300 seats, while the Liberal hopes fluctuate between a
fairly modest estimate of 60 and a more extravagant one of 80. If
these hopes were realised, the Government would be in a minority
of from 105 to 145. I found, however, that the Tories feel that
they will come back with a majority of from 50 to 70.

In order to get some basis for another estimate, I have looked
carefully at the results of the 1923 and 1924 Elections. These
results seem to indicate that the Tories hold 246 seats, which
might be regarded as safe under normal circumstances, the Labour
Party 108 safe seats and the Liberals 20. There are at least 50
seats about which one can prophesy almost certain Labour gains and
that, together with another 52 seats now held by Labour, would
make a total of 210, but it is probable that Labour will win
another 30 seats so that the total Labour gains would be 80 and
the strength of the Party roughly 246. The Liberals may win from
15 to 20 seats in the West of England and in the East of Scotland
but are almost certain to lose from 10 to 15 of their present
seats to Labour. This might give the Liberals a nett gain of 10,
making their strength in the new House 52. This estimate would
mean a House of 615 divided into 318 Conservatives and 297
Opposition or a Government majority of 21. It certainly seems as
if the prospects pointed towards something very like a deadlock.

CHAIR OF IMPERIAL ECONOMIC RELATIONS

A proposal that the Empire Marketing Board should take the initial
steps in the establishment of a Chair of Imperial Economic
Relations at the London University, or more narrowly at the London
School of Economics, has been discussed by the Research Grants
Committee and will come up to the Board at its next meeting. I am
sure you will agree that this is a very interesting idea and that
if it was possible to get hold of a really suitable man to lecture
and do research work on Imperial economic relations, a very
considerable step in advance will have been made. I also think
that it would be very much better that such a Chair should be
associated with the London School of Economics rather than that it
should be placed at Oxford or Cambridge. This for two reasons:

firstly because the present tendency of the London School of
Economics is towards economic internationalism to which the
Professor of Imperial Economic relations might prove a useful
corrective and, secondly, because I feel that, in economic
matters, the London School has a much more definite political
influence than would be achieved from Oxford or Cambridge.

The Empire Marketing Board itself is not anxious to find all the
money for the endowment of such Chair but we are willing to make
an annual grant for a maximum of five years and to make some
contribution towards the sum needed for an endowment, and I feel
that if the right man is selected and makes a good shewing during
the first two or three years, it ought to be easy to get some
wealthy man, keen on Empire matters, to find the comparatively
small sum which would be needed for an endowment. I am enclosing
the Research Grants Committee paper dealing with this matter.

Should the Chair be established before the Imperial Conference, it
might be desirable for the Conference to take a note of its
existence.

A NATIONAL CAMPAIGN FOR THE DAIRYING INDUSTRY

Last week I wrote to you about the idea of an intensive drive to
increase the productive efficiency of the Australian dairy
industry and enclosed a memorandum on the subject. In that
communication I said that I would get Mr. Fitzpatrick [7] to
prepare a note about the 'Battle of the Grain' in Italy. He has
put some notes together which I now enclose.

EMPIRE BUSINESS CONFERENCE

By last mail I sent you a short letter dealing with the
relationship between the proposed Empire Business Conference and
the Imperial Conference. I am now enclosing a letter which
appeared in today's 'Times' from Mr. Vyle [8], who was last year's
President of the Association of British Chambers of Commerce. From
this you will see that the Association has definitely in mind
holding the Business Men's Conference in advance of the Imperial
Conference but I am quite sure that no one has given any thought
to the immense difficulty of carrying through the preparatory work
and holding a Business Men's Conference before May 1930, by which
date we should be right on top of the Imperial Conference itself.

I met Sir Robert Horne [9] in the House of Commons yesterday and
had a short talk with him on the subject. it was obvious that he
had been impressed with the idea of holding the Business Men's
Conference in advance of the Imperial Conference but, after we had
had some discussion, he altered his opinion and said that he felt
that under all the circumstances it would be much better to have
the Imperial Conference first and to try to get the Imperial
Conference to remit certain questions to the Business Men's
Conference. He raised some queries as to the way in which a really
representative Business Men's Conference might be summoned and we
discussed to what extent the precedent of the World Economic
Conference might be followed. You will remember that at the World
Economic Conference there were no persons present acting as the
representatives of Governments, in fact the Governments were not
represented but, on the other hand, the representatives of each
country were selected by the Government to represent the
industrial, the commercial and the educational communities of each
nation.

In my conversation with Sir Sydney Chapman the subject of the
Empire Business Men's Conference also arose. Chapman was very
interested in the idea but was emphatically of opinion that a
great deal of preparatory work would be necessary if the
Conference was to be of real significance. He thought that the
views of Duckham [10] and Hugo Hirst [11] should be taken as soon
as they returned to London and that once the general objectives
had been visualised, arrangements would have to be made for
special Committees in each part of the Empire to prepare the
ground work for the Conference.

Chapman's view was that had there been a two years gap between the
present time and the next Imperial Conference, he would have
considered it probably best to have the Business Men's Conference
first but, as the time was now so short, he felt that it would be
impossible to get an effective Conference before the Imperial
Conference and he did not think the idea of the two Conferences
sitting concurrently would be at all happy from the point of view
of any of the Prime Ministers, a view with which I felt myself in
general agreement.

I shall closely watch the developments here in regard to the
Business Men's Conference and, if necessary, will cable in order
to ascertain your point of view, particularly on the question of
whether this proposed Conference should, if held, precede or
follow the Imperial Conference. Meanwhile I shall look forward
with great interest to hearing from you about the whole matter.

SHIPPING DELEGATION

Yesterday I lunched with Sir Archibald Hurd [12] at the Athenaeum
Club in order to meet Mr. Maurice Hill [13], of the Chamber of
Shipping, who is being leaned by the Chamber of Shipping to
accompany the Australian Shipowners on their visit to Australia.

[14]

Earlier in the week I had met Sir Alan Anderson [15] and Oscar
Thompson [16] rang me up yesterday to say that he wanted to come
in and have a talk before he leaves. Maurice Hill appears to be a
decidedly capable man who should prove of considerable use to the
Delegation. To Sir Alan Anderson I emphasized the point of view
that Australia is, on her own initiative, seriously reconsidering
her economic position and that any strong statement of the
academic free trade point of view from prominent British visitors
might have an unfortunate effect in causing a considerable
reaction. I thought it only desirable to say something of that
sort to Sir Alan Anderson because he is very apt to preach the
pure gospel of free trade both in season and out of season.

I promised to let Maurice Hill have some information about the way
in which the Empire Marketing Board is helping cold storage
research and to shew him the extent to which this research work
may be expected to assist the shipowner in regard to refrigerated
cargoes. I shall send you a copy of my notes to him on this
subject by the next mail.

The outstanding feature at the moment in London is the very heavy
incidence of fortunately a rather light form of influenza. People
seem to be down everywhere and two members of my small staff are
ill.

Yours sincerely,
F. L. MCDOUGALL