Dear Mr. Bruce,

H. M. GOVERNMENT AND IMPERIAL ECONOMIC COMMITTEE

Although I am not able to send you any definite news on this
subject (were I able to do so, I should of course cable), I
believe that there has been a wholesome change for the better
during the past week.

The following account is gathered from several confidential but I
believe reliable sources-the Cabinet, after giving cursory
attention to the First Report of the Imperial Economic Committee
on one or two occasions, came to grips with the subject early last
week. There was a majority opposed to any endorsement of the plan
of Voluntary Preference. Mr. Amery [1], however, put up a most
spirited plea for the proposals and expressed the very greatest
concern if the annual grant should be withheld. The recalcitrant
members remained opposed but then the Prime Minister [2]
interposed and stated that the undertaking must be carried out and
that the report of the Imperial Economic Committee was the basis
upon which action should be taken.

The Prime Minister's attitude decided the issue and the Cabinet
decided in principle to utilize the annual grant but with the
proviso that only 500,000 to 600,000 should be budgeted for in
the coming financial year (March 31st); the remainder, if
required, to be put through on supplementary estimates.

The Cabinet then decided to appoint a Cabinet Committee under Sir
Austen Chamberlain [3] to report on how to give effect to the
Imperial Economic Committee's proposals. This Committee has, I am
told, come down on our side and is prepared to recommend the
setting up of an Executive Commission acting under the Secretary
of State for the Dominions and Colonies.

All the foregoing is unconfirmed but I shall be surprised if this
is not a substantially accurate account of what has transpired.

Whether the Cabinet will accept the Executive Commission in view
of the known hostility of the Treasury to all our ideas I cannot
say but I should suppose that the chances are favourable.

I enclose some further Parliamentary answers which bear on the
subject.

If the Cabinet gives a favourable decision, I shall feel a load
off my mind, for I was getting very worried from an Imperial point
of view over the attitude of certain members of the Government.

I shall also feel that my educational work is not being carried on
in vain.

I do not know whether you decided to send a further cable on this
subject to the Prime Minister or not.

THE EXECUTIVE COMMISSION

If the Government accepts the implication of our Report in full,
an Executive body will be set up, probably responsible to the
Secretary of State for the Dominions and Colonies, to carry out
the following functions:

1. to institute a campaign of educational publicity for Empire
products.

2. to see that such a campaign is coordinated with supplies of
good quality produce from Empire sources.

3. to supervise the administration of the funds devoted to
research and to see that there is no wasting of effort on side
lines of scientific work. I regard this as a most important point
for, if the Dominion producer is to realise the benefits of the
scheme, he must be kept in touch with the research work (both on
the laboratory and commercial scale) which is being done on his
behalf.

4. to maintain connection with the organized producers of the
Empire and to encourage further organization particularly in the
Crown Colonies.

In addition to these points many others will naturally occur,
including Intelligence service, etc.

I understand that Amery's idea at the moment is to set up a body
of four men with a small Secretariat, these four men to be drawn
from Great Britain and to be the Body responsible, through
himself, to Parliament. His idea is that these four men should be
the four (now three) British representatives on the Imperial
Economic Committee but that, as the present British
representatives on the Committee are ineffective (with one
exception), the personnel should be changed. The name of Commander
Hilton Young [4] is mentioned as a possible Chairman of the
Executive. The idea of a purely British responsible body is on
constitutional grounds. Amery, I gather, wants to add three
oversea members with full rights of discussion but not actually
responsible, probably one for the Dominion view, one for India and
one for Crown Colonies.

I gathered from Mackinder [5] that he was not keen on the
Dominions being represented in an advisory capacity on this body
but I cannot conceive why. I understand that it is not intended to
put Mackinder on the Executive. Frankly if any such body is set
up, I should like to act as the Dominion Advisory Member. No one
here has a wider knowledge of the point of view of the various
sections of producers' opinion in all the Dominions for I have
made that question a special study for the last three years. The
work would also dovetail into the work on the Imperial Economic
Committee. However it is early to discuss this point for the
Cabinet may not approve the plan and anyhow the germ that I have
indicated above may be altered in many ways.

THE FRUIT REPORTS

So far as the Main Fruit Report goes, it is still in the hands of
the Drafting Committee. The stand taken by Gubbay [6] and myself,
as reported in my last letter, produced its results and on Monday
the Chairman produced the completed rough draft, very largely the
work of the Secretary [7] however. We have now spent two sittings
on this draft. We meet tomorrow at 8 p.m. for a night sitting,
again for the whole of Friday, when I trust we shall get it into
shape for circulation to the Committee.

Roughly the whole report (main and the subsidiary reports on
specific fruits) will run into about 200 printed pages. So far as
the subsidiary reports go, I am working at night with the
Secretary to get them into shape for the full Committee, as
Mackinder does not put in enough time to do them at all properly.

On the Banana Sub-Committee we signed our report last Friday night
at 11.30 p.m. It is an interesting document which will, I fear,
not altogether please Jamaica but will, I hope, prove a most
useful basis for the foundation of an Empire banana trade.

FUTURE WORK OF THE IMPERIAL ECONOMIC COMMITTEE

I have heard that Mackinder is not anxious for any further work
for the Imperial Economic Committee as he has large leeway to make
up on the Shipping Committee. This Committee only meets once a
week and I entirely fail to understand his reluctance, except on
the grounds of personal inclination. I feel that a most useful
purpose would be served if, during the period Easter to August,
the Imperial Economic Committee tackled Dairy product problems. I
have, I believe, already expressed this view to you.

Dairying is the most widespread industry in Australia and New
Zealand, it is very important to Canada and there are quite large
possibilities in South Africa. Again the New Zealand Dairy Produce
Control Board's policy is likely to raise considerable adverse
comment here inspired by interested parties. Under all these
circumstances I feel the Imperial Economic Committee should be
busy on this subject. May I suggest that if, by the time this
letter reaches you, you have had no definite advice of the next
subject for the Imperial Economic Committee, you should cable the
Prime Minister strongly urging immediate work on Dairy problems.

In order to get another subject of not too large a nature which
would be of interest to the Tropical dependencies, Tea might well
be added. If it is true that the world is faced with a tea
shortage, Australia, as a very large consumer, is decidedly
interested.

CONSERVATIVE PARTY

I have received an invitation to speak to the Conservative
Imperial Affairs Committee in the House of Commons on 'Empire
trade and the Imperial Economic Committee' on February 25th.

Naturally I have accepted. The meeting will be private but as the
Committee has a membership of 200 M.P'S, the opportunity for
educational work is excellent. I have just had a letter from the
Secretary, Major Strang Steel, M.P., asking me to prepare the
speech in advance so that copies may be circulated to members for
use as material when speaking in their own constituencies.

'TIMES' ARTICLE

Two very interesting articles on 'The Political Australian'
appeared in the 'Times' of February 12th and 13th-copies are being
sent to you from Australia House. They were written, I think, by
Capt. Shaw, who accompanied Major Astor [8] on the Empire Press
Conference. May I suggest that you should read them.

TRADE UNIONS

At the request of Mr. Appleton [9], the General Secretary of the
Trade Union Conference, I am preparing for him a memorandum on the
Australian Tariff and British Trade. He told me Australia always
wanted ninepence for fourpence and I told him that the remark was
nonsense, so he asked me for facts and figures. He is a good
potential Empire man and may prove useful if one can get over his
presuppositions. I hope to complete this over the weekend and to
be able to send you a copy by next mail.

MR. GORDON BROWN [10]

I referred to this gentleman in my last letter. Today I had Casey
[11] to meet him at lunch. He is carrying a letter to you from Sir
G. Buchanan [12] and has asked me for a letter, which I am giving
him, He has sent me some particulars about his work in Mozambique,
which I enclose, in case you thought him interesting in regard to
the Northern Territory.

THE EMPIRE SHARP OF BRITISH EXPORTS

In the January statement on the Trade and Navigation of the United
Kingdom, the total figures for 1925 are shown. I have abstracted
the following to show you the increasing importance of the Empire:

EXPORTS OF BRITISH PRODUCE
To: 1923 1924 1925
Foreign 466,655,000 463,363,000 438,165,000

Empire 300,602,000 337,603,000 334,920,000

Total 767,257,000 800,966,000 773,086,000 [13]

Empire Share 39% 42% 43.2%

The slight decrease in total exports to the Empire in 1925 is
accounted for by a 7 million decrease to the Irish Free State,
and a fall of 3 millions to Hong Kong.

So far as foreign trade goes, the only group of countries showing
increased imports from Great Britain are the South American
Republics. There was a fall of 10 million to France and 4
million to Belgium, due largely to coal, but the Far East shows
more sinister figures.

In 1924 British exports to China were valued at 20,346,000, in
1925 14,555,000. This decrease can perhaps be attributed in part
to the unsettled state of China. Turn, however, to Japan. British
exports to Japan:-

1923 26,318,000
1924 26,704,000
1925 16,355,000
Australia remains Great Britain's second most important market in
1925; India being first. Australia and New Zealand together bought
83,200,000 from Great Britain, more than the 110,000,000 people
in France, Belgium, Spain, Portugal and Italy, who bought
82,000,000 including about 22 millions worth of coal.

You may or may not be surprised to learn that not one of the
Chairmen of the Big Five Banks [14] referred to the rising value
of Empire trade in their annual reviews of the trade and finance
of Great Britain.

BRITISH TRADE

Everyone here is (as usual at this time of year) talking
optimistically about the prospects of British trade. I hope they
are right but the January returns make a sorry showing.

Imports were, it is true, down by 11 million but exports, already
fearfully below their proper level, were down 8,6000,000 and in
contradistinction to the general trend of 1925, the fall was more
marked in manufactured goods than in coal.

It is quite impossible to draw conclusions from one month's trade
figures but 1926 has begun very badly for British export trade.

IMPERIAL ECONOMIC CONFERENCE

I enclose a cutting from the 'Times Trade Supplement' which is an
interesting comment upon the Prime Minister's answer to the
supplementary question put to him by Wardlaw-Milne, as reported in
my last letter. [15]

THE BRITISH FARMER AND THE IMPERIAL ECONOMIC COMMITTEE

As you are fully aware, the greatest embarrassment which the
Government have to face on the subject of the Imperial Economic
Committee and the annual grant is the fact that there are 200
members of the Conservative Party in the House elected by the
Agricultural vote. I have felt all along that the Government
should have put a representative of British Agriculture on the
Imperial Economic Committee.

As regards publicity, the problem is very difficult and my view is
this. The annual grant is intended as a substitute for tariff
preference but you have maintained that the British farmer should
come first in the British market.

I therefore feel that our attitude should be that whenever a
foodstuff is being advertised out of the Annual grant, if that
foodstuff is produced in significant quantities by the British
farmer, the consumer should be urged to buy Home or Empire
supplies, and due preference given to the Home producer. On the
other hand I do not think that any part of the grant should be
used to advertise a British agricultural product as such. In other
words the initiative for advertising should be an Empire product
but when that product overlaps British supply, the British should
be placed first. I feel fairly sure of your agreement with this
view but should appreciate confirmation.

Yours sincerely,
F. L. MCDOUGALL