50

21st January, 1926

PRIVATE & CONFIDENTIAL

Dear Mr. Bruce,

IMPERIAL CONFERENCE

Since my last letter, I have been thinking a good deal about the proposed Conference and I hope very much that if it comes off, there will be a separate Economic Conference. This precedent was established in 1923 and I feel it would be a retrograde step if the 1926 Conference did not have an Economic side quite distinct from the purely political Conference.

In 1923 you laid very special emphasis upon the primary importance of economic considerations and, since 1923, the need for Empire development has not decreased but increased especially so far as Great Britain is concerned. You were able to state a powerful case in 1923 but in 1926 your case could be made overwhelming. No longer can people here plead that the war is too close, that the world has not settled down. Each quarter's statistics show more clearly the importance of Empire markets to the very existence of Great Britain.

I am enclosing a set of figures which illustrate in a striking way the growing dependence of many British trades on Empire markets, just as an illustration of the way in which the case for Empire Development has advanced during the last three years. When the detailed 1925 figures are published in or about October 1926, the importance of Empire markets to these industries will be thrown into still clearer relief. That this is the case can be seen from the following figures illustrating the Empire share of the total import trade of Great Britain:-1923 39.2%; 1924 41.8%; 1925 (9 months) 43.3%. I would therefore urge the very great desirability of a proper Economic Conference in spite of the fact that H.M.

Government are not ready for it. In many ways all the more reason for it. If a Tory Government will concentrate its attention upon Home problems to the exclusion of Empire development, then the need for missionary effort here becomes clearer than ever. It is certain that no event can have half the educational effect on Ministers, Parliament, Press and people as an Imperial Economic Conference.

I also hope that you will be able to arrange to stay here for some months after the Conference. It would be a most splendid thing if, with all the authority of a Dominion Prime Minister, you could, in 1926 and early 1927, carry out the programme of educational speeches that the 1923 elections made impossible.

I should like to see arranged special occasions in Manchester, Liverpool, Glasgow, Bradford, Leeds, Birmingham, Sheffield, Swansea and several other towns. The case for Empire development could be made out for each district and I should like to see a pamphlet issued giving your addresses in each part of Great Britain.

This country is ripe for an educational campaign. Labour has advanced a good deal since 1923, the manufacturer, ignorant though he is of oversea markets, is being slowly brought to realize that Empire markets are his one hope. You have very special advantages for undertaking the education. Firstly, you are so far removed from the Diehard Conservative that your speeches would be of the greatest service to the left wing Conservatives of the Baldwin [1] type, who are probably the best hope of the next ten years;

secondly, your attitude on Labour questions would make it possible for you to make a very great appeal to Labour, quite apart from the organized Labour Parliamentary Party; thirdly, your influence would, I believe, be the one thing needed to get people here really to see that if an Empire is to be developed, boldness and sustained effort are required and that the vested interests, whether of International finance, of importers of foreign goods, of brokers or of shipping companies, cannot be allowed to stand in the way.

If there is any possibility of your undertaking such a programme, I hope you will let me know at an early date, so that I can gather material which will make it possible for you to have the fullest data about the economic affairs of each part of the United Kingdom.

Another point that might make such a provincial tour worthwhile would be migration. I have heard that Manchester has some vague idea of settlements of Manchester people in the Dominions. If a city with a high civic pride could take the responsibility, so far as the individual was concerned, of expense and preliminary training and then take up, by arrangement with the State Government, say 20,000 acres on the Murray, the effect might be great indeed.

Another reason why I should like to see you able to spare some months in this country after the Conference would be that you would quietly be able to urge the Government to useful action. I work every way I can. I see Ministers from time to time, I cultivate members, I write, I address Committees. I feel fairly sure that I do some good and make slow progress but as things stand at present, the government have been supine on Empire economics and what is needed is for the Prime Minister of Australia to be able to say very frankly (and I fear fairly often) to the Prime Minister of Great Britain 'What about it?'.

Since December 17th 1924 the Government as a Government have said little and, with the exception of the attenuated preferences, done little on Empire economics. Mr. Baldwin has not made a single really Imperial speech since that date. I enclose a series of extracts from speeches made by Mr. Baldwin from May to December 1924 so that you can contrast the silence of the last year with the keenness displayed before. I do not quite know to what to attribute the change but suppose firstly that the serious internal situation has preoccupied him, and, secondly, that the Churchill [2] influence has been considerable.

If you stay, you could also give personal attention to the organization of Australian marketing here and perhaps found the A.P.A.C. [3] scheme or something like it.

I'm afraid I have become almost enthusiastic but I should like just to say in conclusion on this point that I hope that if a Conference occurs, you will avail yourself, as fully as you feel inclined, of any services I may be able to render.

IMPERIAL ECONOMIC COMMITTEE

The Drafting Committee are labouring away. It consists of Mackinder [4], Gubbay [5], of the Indian Delegation (an excellent fellow) and myself. We are very much handicapped by the fact that Mackinder never reads a draft until forced to do so by the fact that the Committee is actually dealing with it. This means that a great deal of our time is wasted by Mackinder reading to us drafts which Gubbay and I have both read and annotated. However, I trust and hope that the Fruit Report will, when completed, prove a really useful document.

It is a little too soon to attempt to summarize the contents of the Report. There will be a General Report and about seven appended reports on classes of fruit, namely Apples, Citrus fruits, Dried fruits, Deciduous soft fruits, Bananas, Canned fruits including fruit pulp and jam, and a brief report on Nuts.

The General Report will deal strongly, inter alia with (a) the dominating effect of the spill over from the United States production upon the sale of Dominion products in the United Kingdom market and the need to counter this effect.

(b) the essential need for the organization of producers to carry their goods at least to the point of first effective sale in the United Kingdom.

(c) Point (b) involves financing of growers being taken out of the hands of brokers and commission salesmen in the United Kingdom;

recommendations on finance will therefore be made.

(d) the great advantage to migration and to markets for United Kingdom goods of the establishment of sheltered markets in the United Kingdom for the produce of close settlement i.e. fruit, wine, dairy produce, pig products, will be emphasised. I hope this can be done in such a way as to indicate to the British Government a path towards wider preference on all foodstuffs except wheat and meat.

The individual reports on fruits will, I think, be found to be useful, comprehensive documents, of considerable interest especially to producers.

I have confidentially seen a draft of the proposed Merchandise Marks Bill. [6] One clause I particularly dislike. It provides that no article shall be scheduled under the Act unless and until a special Committee set up by the Board of Trade has reported that it is in the public interest that this article should be scheduled. The suggested Committees could not well have oversea representation. They would probably sit publicly as on the Safeguarding Committees precedent and I suppose we should have to give evidence as to why we wanted each category of goods scheduled.

The idea of these sectional committees shows the attitude of the Department to the Imperial Economic Committee. I gather that, in the Departments, the Imperial Economic Committee is disliked. This is due to two causes: first the dislike of Government Departments here to change and to their complete failure to grasp the importance to Great Britain herself Empire Development; secondly, and of course far less importantly, to the personal unpopularity of Mackinder.

I gather that the Treasury utterly dislikes the Imperial Economic Committee on Free Trade and International finance grounds; the Board of Trade because the Committee is regarded as an interloper;

the Department of Scientific and Industrial Research because we did not recommend that the grant for research should be made directly to this Department but stipulated for an Executive Committee to supervise research work in the producer's interest. I think the Dominions Department and perhaps the Department of Overseas Trade are the most favourable. With a strong Chairman all this deadweight opposition could either be brushed aside or converted, but as it is one is forced to take other ground and try to establish in the minds of Ministers and M.P.'s the idea of the essential value of Empire economic consultation and therefore of the Committee. I am hopeful that the Fruit Report will be of such a nature as to compel recognition.

Direct publicity for the work of the Committee would do a great deal but it is hard to see how this could be achieved as the evidence taken is confidential. We ought not to have to look for any publicity.

The Government here have not given the Committee a fair spin so far-of that there is very little doubt.

H. M. GOVERNMENT AND EMPIRE TRADE

It is interesting to study the way in which the Government have, during their period of office, made Empire economic development more difficult rather than more easy. That this has been unintentional, I fully believe, but nevertheless it is true for the time being.

1. Election pledges were given not to tax food and after the Government assumed office these pledges were interpreted in the most literal sense.

2. The Government in concluding the Anglo-German Treaty [7] agreed to an absolute surrender of the right to impose any form of prohibition upon German goods. As H.M. Government has most favoured nation treaties with many other countries, including the United States of America, and as these treaties include most favoured nation clauses in regard to prohibition on imports, it follows that, during the term of the Anglo-German Treaty i.e.

until 1930, any preferential system based upon prohibitions cannot be put into force. This appears to shut out of practical politics Import licences; stabilization plans based on a control of imports; any form of embargo on special imports.

3. The effect of (2) is to make Tariff Preference or Voluntary Preference the only available means of helping Empire trade apart from subsidies, a form of help that no Dominion likes.

4. The Government appears to be very reluctant to adopt the 'Voluntary Preference scheme' put forward by the Imperial Economic Committee.

5. They do intend to adopt the Merchandise Marks (identification) recommendations but at present mean to limit its application to such commodities as may be able to convince a Committee appointed by the Board of Trade that the public interest will be served by such identification. It is at least doubtful whether the members of these Committees will understand enough about Empire economics to give satisfactory decisions.

'TIMES' ARTICLE

I enclose copy of an article on Motor Exports which I wrote for the 'Times'. [8] I hope you will find time to read it because it shows what a wonderful opportunity exists for the British

manufacturer in Empire markets if only he has the sense to seize it. In this connection I am convinced that the British manufacturer, having been bred in a tradition of trading with all the world, rarely considers where his goods are principally marketed. I saw Morris [9], of Morris Oxford fame, the other day.

He did not know that Australia was the largest import market for motor products in the world, nor had he heard of the proposed change of preference in Australia, although I have no doubt that many of his people knew all about it.

F.B.I. LETTER

I enclose copy of the letter sent by the President of the Federation of British Industries to the Prime Minister. [10] You may notice that the form used was somewhat weaker than my draft.

CABLE

After a talk with Casey [11], I came to the conclusion that it would be well to send you the following cable:-

Following from McDougall-In view your insistence on paramount importance of economic development I strongly urge need for separate Economic Conference if Imperial Conference held October.

Government here absorbed local affairs and showing little interest Empire Development though need for action even clearer than in 1923 and as country now more interested in subject Economic Conference would have greatest educational effect.

I have little doubt that you are already fully seized of these points but I feel that the position in regard to Empire economic policy is so important at the present time that it is essential to urge the British Government to action.

Yours sincerely, F. L. MCDOUGALL

1 Stanley Baldwin, Prime Minister.

2 Winston Churchill, Chancellor of the Exchequer.

3 The suggested Australian Producers' Advisory Committee. See Letter 20.

4 Sir Halford Mackinder, Chairman of the Imperial Economic Committee.

5 M. M. S. Gubbay, representative of the Government of India on the Imperial Economic Committee.

6 See note 7 to Letter 16.

7 Ratified on 8 September 1925.

8 'British Motor Cars. An Opportunity for Exports. The Empire Market', Times, 15 January.

9 William Morris (later Lord Nuffield), automobile manufacturing pioneer.

10 Not found.

11 R. G. Casey, Commonwealth Government's Liaison Officer in London.