27

6th August, 1925

PERSONAL AND CONFIDENTIAL

Dear Mr. Bruce,

IMPERIAL ECONOMIC COMMITTEE

As the Economic Committee was sitting morning, afternoon and night during the whole of last week, I was unable to write you at any greater length than the two very brief notes which I sent. I am very glad, however, that I sent you a copy of the first report because it cannot be printed until tomorrow at the earliest and, as there will be no mail next week, it will be three weeks after the signing of the document before a printed copy can be posted to you.

First Report

The present position as regards the First Report (General) [1] is that no Government of the Empire has objected to publication but the Treasury has not yet signified its approval of immediate publication. This is due to the fact that Mr. Churchill [2] is at the present moment preoccupied with the Coal crisis [3] and with the gold standard controversy [4] and, in consequence, has not yet looked at either the Report or at the views which the Treasury Officials have expressed on the subject. If Mr. Churchill's approval of publication is obtained by 20'clock today, the Report will be issued tomorrow afternoon; if not, there will be some further delay.

Meat Report

As regards the Meat Report [5], the position is much more complicated. in order to give you a full idea of the matter, I must deal with it at some length. You will remember that I informed you that the British Agricultural interests were very dissatisfied at not having a representative of British Agriculture on the Imperial Economic Committee. I also in-formed you that, in my view, it was a serious mistake on the part of the Home

Government not to have appointed an Agricultural Representative.

When the farmers made a fuss, the Minister of Agriculture [6] wrote to the President of the Board of Trade [7] and received, in reply, a definite assurance that the Ministry of Agriculture would be kept informed of any developments of the Committee that involved the interests of the home producer.

About the 1st July, the Canadian Delegates [8] presented a memorandum to the Chairman [9] informing him that they intended to press the question of the differentiation between the treatment of Canada and Ireland in the Regulations affecting the importation of store cattle. [10] The Chairman on receiving this memorandum took no action and did not notify the Board of Trade or the Ministry of Agriculture. About the middle of July the question of store cattle was first raised in the Committee itself and the British Representatives [11], apart from the Chairman, expressed their approval of the Canadian attitude and the Chairman made some slight reference of possible danger of antagonising home interests.

Sir Mark [12] informs me that, on the Meat Sub-Committee, he made it clear that, while he recognised the justice of the Canadian claim, he pointed out the dangers and, on the Main Committee, I pointed out that, as the Meat Sub-Committee had not taken any evidence on this subject from the British breeders' standpoint, it was dangerous to make any definite recommendations. Sir Mark and I, however, were completely in agreement that if Canada and South Africa strongly desired to raise this issue and that if Ireland had no objection to its being raised and, further, that if the British Representatives approved, it was impossible for Australia to do anything further than the action which we took.

As a result of discussions between the Canadian and Irish Delegates [13], an agreed paragraph on this subject was inserted in the Meat Report and adopted unanimously by the Committee, the Chairman raising no question on the matter at all.

Immediately after the report was signed, copies were, of course, sent to the British Ministers concerned and the Minister of Agriculture strongly protested against this paragraph and I understand raised the matter at the end of the Cabinet Meeting which occurred on July 31st, the day after the Report was signed.

[14] Owing to the failure of the Chairman to notify either the Board of Trade or the Ministry of Agriculture as to the store cattle question, the Minister of Agriculture was placed in an unfavourable position. He had given repeated pledges to the National Farmers Union, the Agricultural Committee of the House of Commons and to the Agricultural Commission that no interest of the British producer would be in any way jeopardised by the action of the Imperial Economic Committee and he felt that he had been very badly let down.

After the Cabinet Meeting, the Chairman was asked to interview the Minister of Agriculture and the Minister indicated the amendments that he would require before he could consent to the publication of that paragraph in the Meat Report. The Minister's amendments were of so sweeping a character that they were obviously unacceptable. Most of the members of the Committee had left London but luckily the Canadian Representative principally concerned was not sailing until the next day. Sir Halford Mackinder, however, after his interview with the Minister for Agriculture left London for Cowes, instructing the Secretary [15] to try and arrange with the Canadian Representative for the necessary modification.

The Secretary felt that he had an impossibly difficult task to perform and asked me if I would help him. I discussed the matter with Sir Mark, who agreed, and the Secretary and I saw the Canadian Representative. After a very long discussion, we agreed a form of words which, while maintaining in substance the sense of the original paragraph, was calculated to be much more acceptable to the Ministry of Agriculture. The Canadian Representative sailed on the 1st August.

To-day I understand that the Minister of Agriculture has asked Sir Halford to get into wireless communication with the Canadian Representative and ask for his consent to this paragraph being temporarily deleted from the Meat Report and that the subject of Store Cattle be brought before the Imperial Economic Committee when it meets again at the beginning of October. I do not think there is any likelihood of the Canadian Representative agreeing and I am informed that even if he does agree, the South African Representative [16] will not do so. I enclose copy of the amended paragraph after amendment was accepted by all the members of the Committee and I think you will agree that, in its present form, it is one which the British Government could quite cheerfully accept and say that in reconsidering this legislation they would have to keep very carefully in mind the interests of the British breeders.

I also enclose a copy of the original paragraph as incorporated in the Report when signed. In my opinion the original paragraph went much too far, having regard to the fact that no evidence had been taken on this subject on the side of the producers. [17]

General

As regards the First General Report of the Imperial Economic Committee, I am of opinion that it is on the whole an interesting document and that if put into effect by the British Government it will represent a final attempt to give the Dominion producer a position of advantage over the foreigner in the Home market without the aid of tariffs, import licences or any other form of restriction or control of imports. I think that where we make recommendations as regards the allocation of the Million annual grant, we are somewhat weak. I do not imagine that 65% of the Million could be usefully spent on educational publicity but we were advised that unless we made some total allocation it was improbable that we should be able to get the whole of this year's Million out of the Treasury. The intention of the Committee was not to tie the hands of the Executive Commission but to leave the allotment in such a form as to make it possible for the Imperial Economic Committee from time to time to make further definite recommendations as to methods of spending this annual grant.

Sir Mark and I have throughout attached the very greatest importance to the branding of foreign goods with the word 'foreign' and I hope that you will clearly realise that the Committee's recommendation of expenditure for publicity is entirely conditioned upon the acceptance by the British Government of its recommendations as regards marking.

I should like to comment on several of the paragraphs in the First General Report.

Paragraph 8, Page 422

Sir Mark and I both attempted to strengthen the first sentence dealing with tariff preference. I am, however, satisfied that the sentence, as it stands, indicates no abandonment of any views on this subject. The third sentence starting from 'we have not yet' down to 'would suffice' was the result of a number of discussions and of a compromise. At one stage this sentence definitely referred to such questions as import licences, stabilization policy etc. Sir Mark and one or two other members of the Committee had, however, very pronounced views on this subject and when Mr.

Ramsay MacDonald [18] made a speech in which he advocated bulk purchases of Empire produce by the British Government, they were alarmed and desired to cut out all reference to these subjects.

The form of words used was, therefore, a compromise. I felt it essential that the Committee should indicate that it had not considered any of the many possible forms of stimulating Empire trade apart from tariffs, subsidies or voluntary preference.

Paragraph 20, Pages 436-438

I want to draw your attention to the statistics on Page 437. I was responsible for preparing the whole of the statistics of the General Report and after I had got them out, I submitted them to the Board of Trade's Statistical Department to check. The per capita comparison shewn on this page is I think the most striking set of figures on this subject that I have yet seen. [19]

Paragraph 30, Page 449

As indicated in my note, I think that this paragraph is, in a way, the key to the whole Report. I particularly direct your attention to the last sentence. The Chairman had drafted it to read as follows:-'In providing for a voluntary discrimination by its citizens, the Government of the United Kingdom will be achieving by methods of freedom no more than other countries seek to compass by their customs tariff'. I strongly disapproved of that form of words and obtained the alteration which, as it now stands, makes it clear that if the Government of the United Kingdom adopts our proposals, they will be attempting and not necessarily succeeding in achieving on free trade basis what other countries achieve by preference.

Paragraph 41, Page 462

I presume that some of the industries disappointed of British preference may regard this paragraph as very weak from their point of view. The Committee, however, were quite unanimous that any idea of subsidising industries disappointed of preference out of the Million grant was impracticable and worse that it would have involved the splitting up of the money into such small amounts that it would also have been futile.

The last sentence of this paragraph was inserted by the Committee with the intention that in so far as the Executive Commission directly advertised specific Empire products such as Empire dried fruit, Empire apples and Empire Canned fruits, the disappointed industries should receive special attention and special expenditure. I think it reasonable to assume that if our general scheme is adopted the Australian apple and dried fruit industries will obtain special publicity during the period their goods are on the United Kingdom market. If, as is probable, the Australian dried fruit industry has 30,000 tons to dispose of next year in Great Britain, this will probably mean that its selling season will have to extend over the greater part of the year and that it would become entitled to continuous publicity under this scheme.

If this proves to be the case, it will relieve the Commonwealth Dried Fruit Board from expenditure on general publicity and leave them free to devote such funds as they think desirable to direct propaganda among retailers arranging special window displays etc.

Paragraph 42, Page 463

The first two sentences of this paragraph should make it possible for the Executive Commission, on the recommendation of the Imperial Economic Committee, to alter the allocation as shewn in Paragraph 43, Page 464.

Paragraph 44, Page 466

This paragraph should be read as having been inserted to indicate that, while most of the Self-governing Dominions are interested in meat, fruit, dairying and other industries, such industries as Tea, in which India and Ceylon are alone interested, or certain portions of the Fish industry, which solely concern Newfoundland, will be considered by the Imperial Economic Committee and therefore such countries as India and Newfoundland will find their interests looked after at a later stage.

Paragraph 45, Page 465 (2)

Please note the significance of the last three lines of (2). [20]

Page 470-Note of the Sub-Committee on Fruit

I hope that you will not be disappointed that we have not been able to issue a Fruit Report at the present juncture. In a previous letter I explained some of the reasons [21] and on carefully considering the Meat Report I am reinforced in my opinion that the Fruit Sub-Committee acted advisedly. I should like to have seen the Meat Report make a very much fuller survey of the meat possibilities of the British Empire and I think that it is probable that the Fruit Report will do this in regard to Fruit.

I am anxious that the Imperial Economic Committee should, in every industry which they investigate, show the potentialities to each portion of the Empire and make it perfectly dear to the Government, the legislators and people of this country how in each instance the provision of markets governs development and therefore will cause possibilities of migration. [22]

Statistical Appendices

I should like to direct your attention to Table 3, Page 480, which shows the progressive importance of the Empire markets to British industry in a clearer way than anything I have yet seen and I think that you will find the Tables 5 and 6, Pages 482/483 interesting and useful [23] In each case I prepared the figures but they have all been checked by the British Board of Trade and you can, therefore, rely upon their accuracy.

I have no doubt that Sir Mark will be giving you full information as regards the Meat Report.

I have very much appreciated serving on the Committee as a Colleague of Sir Mark Sheldon, and he has been throughout extremely kind.

Future of the Imperial Economic Committee

I understand from Sir Philip Cunliffe-Lister and Sir Sydney Chapman [24] that the British Government intends to suggest to the Governments of the Empire the next series of foodstuffs which

should be investigated by the Imperial Economic Committee and they have mentioned dairy produce and tea as being questions which they are likely to bring forward.

I understand from Sir Thomas Allen, of the Wholesale Co-operative, that the world tea situation is likely to become acute, owing to the increased demand for tea in the United States, to the possibility of Russia coming back on to the market as a large purchaser and to the fact that there has been no substantial increase in tea plantings in India or Ceylon.

The arrangement of the work of the Imperial Economic Committee that would probably find most favour would be for the Full Committee to sit from March to August of each year and that perhaps a nucleus Sub-Committee should be in existence throughout the remainder of the year to act in an advisory capacity to the proposed Executive Commission and to follow up any special investigations which the Main Committee might not have completed.

As regards the completion of the reference to Fruit, I understand from Sir Halford Mackinder that he intends that, in October, this should be handled by the whole of the Committee that remains available and not simply by the Fruit Sub-Committee which was working on it during the last few months.

NATIONAL FARMERS UNION

I enclose the Toast List of a Luncheon given by the National Farmers Union to the visiting South African Farmers, because I think you will be interested in the second toast, which I have marked. [Such] a toast from such a body was only made possible by your own speech at the National Farmers Union Dinner in October 1923. [25]

'SHELTERED MARKETS'

This book continues to receive the most excellent press which, unfortunately, is not reflected in commercial sales. I enclose a leading article from the 'Daily Telegraph', a critique from the 'Times Literary Supplement', a special article in the 'Referee' and a very pleasant appreciation published in this month's 'English Review'. [26]

My letter has already grown to an inordinate length. Next mail I shall attempt to give you an appreciation of the extraordinarily serious industrial position arising in this country.

Yours sincerely, F. L. MCDOUGALL

[Handwritten]

P.S. I have just heard that the question of the date of publication of the First Report will be dealt with by the Cabinet tomorrow. [27]

1 Marketing and Preparing for Market of Foodstuffs Produced in the Overseas Parts of the Empire. First Report-General, Cmd. 2493. To

stimulate the consumption of Empire products the report recommended legislation to enforce their identification; improved publicity; and further research into production and presentation.

2 Winston Churchill, Chancellor of the Exchequer.

3 Supported by the Trades Union Congress, miners had threatened to strike from 31 July in protest against mineowners' attempts to counter falling profits by lowering wages and increasing working hours. The strike was averted by the last-minute government promise of a nine-month subsidy to support wages, and a royal commission to inquire into the organisation of the industry.

4 Great Britain had returned to the Gold Standard in May and critics argued that the move had further handicapped struggling British export industries, including coal. See in particular. J.

M. Keynes, The Economic Consequences of Mr Churchill, Hogarth Press, London, 1925.

5 Marketing and Preparing for Market of Foodstuffs Produced in the Overseas Parts of the Empire. Second Report-Meat, Cmd. 2499. The Report recommended compulsory identification of Empire meat, investigation of the feasibility of transporting chilled rather than frozen meat from Australia and New Zealand, assistance to breeding programs, reconsideration of legislation preventing the importation of live cattle into Great Britain, reduction of storage costs, and improved gradings and standardisation of Empire produce.

6 E. F. L. Wood.

7 Sir Philip Cunliffe-Lister.

8 L. C. McOuat and J. Forsyth Smith.

9 Sir Halford Mackinder.

10 The Diseases of Animals Act 1896 placed an embargo on importation of live animals except for immediate slaughter. This Act was amended by the Importation of Animals Act 1922 to permit entry of Canadian store cattle, subject to veterinary inspection, but Canadians believed that the inspection procedures were arbitrary and that many store cattle intended for fattening were slaughtered on arrival, to the detriment of the reputation of Canadian beef Irish cattle were specifically exempted from the embargo. In 1924, 500 000 store cattle were imported from the Irish Free State but only 33 coo from Canada. British breeders continued, however, to oppose importation of breeding stock.

11 Sir Algernon Firth, Sir Thomas Allen and W. S. Crawford.

12 Sir Mark Sheldon, senior Australian representative on the Imperial Economic Committee.

13 J. McNeill and F. J. Meyrick.

14 The Report was signed on 29 July. A Cabinet meeting was held on 30 July, but no discussion of this question is recorded in the minutes.

15 H. Broadley.

16 J. H. Dimond, 17 The Report as published noted that the Committee had not received evidence from British breeders, that the matter was controversial, but that existing legislation concerning importation of live cattle should be reconsidered. At a Cabinet meeting on 7 August the Minister of Agriculture and Fisheries submitted, and Cabinet agreed, that the Report of the Committee on Meat should be sent to Dominion Prime Ministers and published, with a covering letter stating that the British Government would not accept the recommendation to reconsider the legislation. See Great Britain, Cabinet Office Records, Minutes of Meetings of Cabinet, CAB 44(25), Conclusions 7 and 8.

18 Leader of the Labour Opposition.

19 The table showed a per capita comparison of purchases of British produce and manufactures in 1924 by the self-governing Dominions, Europe, the U.S.A. and countries of South America.

20 Section (2) read: '. . . so far as the State is concerned this scheme should rest on (a) legal requirements with a view to the identification of Empire goods; and (b) financial assistance for education and publicity, and ... we regard these two factors as essential the one to the other'.

21 See Letters 24 and 25.

22 Bruce commented in a letter dated 31 August, 'The report of the Economic Committee is, I think, useful, although it goes no great distance. This result, however, is really what we expected. I believe the sittings of the Committee have been valuable from an educational point of view, and I am quite certain that the Committee is going to find a permanent place in connection with the promotion of Imperial trade'. The letter is on file AA: M111, 1925.

23 Tables 5 and 6 showed the population of selected Empire and foreign countries, with the value of British exports to each and the per capita purchase of British goods in each country.

24 Permanent Secretary of the Board of Trade.

25 In the speech on 24 October 1923, Bruce advocated the stimulation of British and Dominion agriculture to create new markets and purchasing power within the Empire, thereby securing the British economy against the very problems being experienced in 1925. A copy of the speech is on file AA: A1489.

26 McDougall's book was reviewed in the Daily Telegraph, 4 August, the Times Literary Supplement, 23 July, Referee, 26 July, and the English Review, August 1925.

27 A decision to publish the First and Second Reports was taken On 7 August. See note 17.