My dear Prime Minister,
I concluded my letter of the 1st July by saying that I had been very much impressed with the marked revival of interest that is occurring in Empire economic questions. In the past week this revival has been greatly intensified, with the result that all the newspapers are devoting a great deal of attention to the subject.
Beaverbrook  continues his wild campaign for Empire free trade and in all sorts of directions the subject is being canvassed.
Neville Chamberlain  made an important general declaration on the immense importance of an Empire Policy and I was so interested to find him coming out so definitely in that direction that I wrote him a rather long letter, of which I enclose a copy.  Chamberlain has replied to the effect that he finds himself in agreement with practically everything I wrote and has suggested that we should lunch together next week to further discuss the points.
Of course the outstanding feature of the week has been the debate in Parliament on the Conservative amendment dealing with safeguarding and preference. I am enclosing the Hansard of the Debate with the more important portions marked. 
Amery's  speech was quite good but, as usual, he insisted on tying up local protection with Empire developments policy which I regard as being extremely unhelpful and indeed unsound.
Philip Snowden's  reply is well worth your careful study. In effect what he said on Empire questions was, firstly, that he pledged himself not to abolish preferences as such but expressed the hope that, before he left Office, he would have been able to sweep away all taxes on food, including the taxes on sugar and upon dried fruits, with the natural consequence of sweeping the preferences away also. At the present moment most people regard this as a rather far off and pious hope.
To abolish the sugar duty would involve a very considerable loss of revenue. I will let you have the actual figure later. I do not think it at all likely that the Government would feel in a position to force a measure for additional direct taxation to compensate for the loss of revenue on sugar.
The dried fruit duties do not constitute so valuable a return to the revenue but they must bring in some half-a-million pounds. I am also quite sure that, during the eight months that would have to elapse before the Budget, one would be able to create a very considerable feeling in the Labour Party against the abolition of the dried fruit duties. I am, therefore, not at the moment inclined to be seriously alarmed by Snowden's statement but, of course, entirely agree with the view that you have apparently already expressed that this was a very unwise move, just at a time when the Governments of the Empire are trying to get closer together on Imperial economic development. 
Snowden went on to accept the Empire Marketing Board without qualifications, but very properly stated that the Government would require to be satisfied that its administration was being economically conducted and also to consider whether the fund was being spent in the most useful way. He then went on to refer to your speeches  and to the statements made by Ministers in Canada and he said that the Government had noted these opinions with very great pleasure. He concluded by saying that the Government was in communication with the Overseas Government[s] with a view to the holding of an Imperial Economic Conference.
If you cast your mind back and compare this attitude with the attitude adopted by the Labour Government in 1924, you will realise what a tremendous change has occurred-a change to which, incidentally, the President of the Board of Trade, Graham', drew attention in his speech in the House on Monday last, the Hansard of which I enclose herewith.
TOM JOHNSTON 
On Monday last I had Johnston to lunch to meet Gibson , of the Melbourne Trades Hall. Johnston was in extremely good form but I was most amused to find that three weeks' experience of office has reduced him to a state of fury with the Treasury. He already finds that Philip Snowden, with the Treasury backing, opposes a resolute and determined front to all the schemes about which he is keenest for improving employment in Scotland. I imagine that there will be a series of hectic passages between Thomas's Unemployment Organisation, which consists of a Committee of Thomas , Lansbury , as First Commissioner of Works, Sir Oswald Mosley, as Lord Chancellor of the Duchy, Tom Johnston, as representing Scotland, and Philip Snowden, backed by the Treasury. On the whole I expect Snowden to win most of the exchanges but the result to the political fortunes of the Labour Party is likely to be serious.
I was very interested in a suggestion that Johnston made, namely that the Government should insist on all Institutions who are in receipt of Government grants having an Empire Buying Clause in all their purchases of foodstuffs and materials. If he could succeed in doing this, he will have achieved something of real value.
IMPERIAL ECONOMIC CONFERENCE
I have naturally been extremely interested in Snowden's announcement as to the consultations on the desirability of an Imperial Economic Conference. I find, however, that there is the utmost confusion of thought on the subject.
Yesterday I had a short discussion with Sir Sydney Chapman  and he said that he thought that an Imperial Economic Conference on the 1923 model would be definitely advantageous and that he hoped to see that arranged. He was, however, not at all clear what the various Governments or the various Trading Organisations had in mind when they discussed the Empire Business Men's Conference.
He could see very great advantages from a series of Conferences between the Iron and Steel people of Great Britain and those of Australia, or of Canada, or of South Africa, but he was less convinced that a general Business Men's Conference would be useful. He was also exercising his mind whether, if such a Business Men's Conference was held, it should be held before or after the proposed Imperial Economic Conference. He was a little afraid of the Business Men getting out of hand and spoiling the position for the Prime Ministers and he was most emphatically of opinion that an Empire Business Men's Conference ought not to be held unless the Governments would take responsibility for the selection of delegates on the same lines as was practised at the World Economic Conference at Geneva in 1927. He also felt that very great care would be needed in drawing up an Agenda for a Business Men's Conference and, as we both agreed that to do this properly would require a great deal of thought and much consultation, we both arrived at the conclusion that if the suggested Imperial Economic Conference was held in May or June as you suggest, it did not appear probable that an Empire Business Men's Conference could precede it.
I think I had probably better send you a cable making it clear that people are rather confused at this end and asking for an indication of the way in which your mind is shaping on the subject. 
IMPERIAL ECONOMIC COOPERATION
As Philip Snowden can undoubtedly be regarded as about the least sympathetic member of the present Government in Empire matters, and as in spite of this he has now made a definite declaration in favour of Imperial economic cooperation, I think the time has arrived when we can safely claim that this subject has become the national policy of Great Britain.
As I have already said, I am seeing Neville Chamberlain next week and since I wrote that, Amery has rung up and said that he wanted to talk to me also. I shall, of course, also be in as close touch as possible with Labour people.
The line of country that I propose to take is as follows: I am going to suggest that everyone should agree to definitely state that Imperial economic cooperation is the national policy and that the question as to how best to carry out that policy, particularly in regard to the solution of marketing problems, should be regarded as a matter in which we all ought to be prepared to be frankly empirical. I am going to suggest that there is no simple royal road to the solution of all marketing problems by one and the same method. It is, for instance, obvious that the political obstacles to a general food tax in this country are too great to be overcome and even if they were overcome, a tax and preference on wheat would not be a very great advantage to Canada, seeing that Canada already exports far more wheat than the United Kingdom can buy. I shall follow this up by stating that Great Britain ought, at the Imperial Economic Conference, to discover from the Dominions just which are their really pressing marketing problems and to be prepared to consider what may prove to be the most effective way of dealing with each individual marketing problem on its own merits. I should hope that on some a tariff method might be politically possible, and that on others bulk purchases through the organisation of some amalgamation of existing trading concerns, backed by a Government guarantee against contingent trading loss, might prove feasible.
What I am really anxious to do is to get both sides away from their horrible tendency towards thinking of Empire economic cooperation in terms of the 1904-6 fiscal controversy.  So long as people insist on thinking in these terms, just so long shall we make remarkably little progress in Great Britain, but if we can get an empirical spirit backed by a real determination to find appropriate solutions, the whole subject will be raised on to a higher plane.
UNITED STATES AND EMPIRE TRADE
I was asked by the 'Financial News' if I would write something for them about this subject and I thought this was a good opportunity.
I therefore produced a short article, of which I enclose a copy.
I am also enclosing a question and answer from 'Hansard' on the Empire Marketing Board.  The Government answer has, of course, been amply supplemented by the Chancellor of the Exchequer's speech last Tuesday.
I regret to say that the 'Hansard' for the first part of the Safeguarding and Preference speech is out of print and I shall not be able to obtain it until next mail.
Yours sincerely, F. L. MCDOUGALL