My dear Prime Minister,

BRITISH TRADE POSITION

This morning's 'Times' contains a report of a speech made at the
Mansion House by Mr. Churchill [1] in which he states that, taking
everything into consideration, British trade is improving. This
speech was made at lunch. During the afternoon the Board of Trade
published the trade figures for June, which showed a falling off
to the extent of 7 million in British export trade and, in the
afternoon also, the Ministry of Labour published the weekly
figures for unemployment which showed an increase of 50,000
unemployed during the week. A little unfortunate, I must say, for
Mr. Churchill!
While one month's figures cannot be regarded as a very definite
criterion, at the same time I think it legitimate now to assume
that 1927 will not show any real revival, although it will
naturally be a better year for British trade than the disastrous
1926 in which all trade was heavily affected by the coal stoppage.

This view is amply confirmed by the depression which exists not
only in the coal industry but also in the iron and steel industry
and in the cotton trade.

Next month the total figures of trade with countries for the six
months ending June will be published and as soon as they are
available, I propose to write to you rather fully on this subject
of British trade. Provided the July figures, which will also then
be available, do not show any marked change in the situation, I
should like to suggest that you might take an opportunity of
making a speech in which you might refer to the British trade
situation and ask the rhetorical question of how long it is to be
before Great Britain is going to realise how greatly her future
prosperity depends upon a resolute and determined policy of Empire
Development.

EMPIRE MARKETING BOARD

I enclose a special article from the 'Times' [2] and another from
the 'Financial Times' dealing with the first report of the Board.

I am also enclosing a copy of the first report. Further copies are
not available until next mail but I will then see that you receive
a supply for distribution to members of the Government.

Last Thursday Major Walter Elliot [3], Julius [4] and myself dined
together and spent the whole evening discussing future cooperation
between the Empire Marketing Board and the Commonwealth Council
for Scientific & Industrial Research. We had a very useful talk
and it was agreed that Julius should write to Elliot a letter
setting out the main headings in which the Council would
particularly welcome cooperation. Julius and I discussed this very
fully and I am enclosing a copy of the letter which was despatched
to Elliot yesterday.

Julius did not arrive in this country with any definitely
considered schemes to put before the Empire Marketing Board for
cooperation and financial assistance. I therefore felt that it was
very desirable that we should, so to speak, stake out our claims
on a number of subjects as soon as possible. When the various
other portions of the Empire gather together in London in October
for the Imperial Agricultural Conference, I feel quite certain
there will be a tendency on the part of many Governments to press
their claims for financial assistance upon the Empire Marketing
Board.

At the present time the report of the Board shows that the bulk of
the research grants have been made to United Kingdom Organisations
but for fundamental work in research of truly Imperial
significance. Of the grants made or approved to Overseas,
Australia has, at the present moment, decidedly the largest share.

At the last meeting of the Board, tentative approval was given to
a grant of 12,000 spread over 2 years, to allow of the thorough
trial of geophysical prospecting methods in Western Australia;

this sum to be met by a 50-50 contribution from the Development &

Migration Commission.

The Empire Marketing Board has, as yet, not received the details
of the report of the Special Sub-Committee on Civil Research,
which was set up to advise on this geophysical question but I
understand that the report is of a sound and workmanlike character
and the recommendation will be that a man called Broughton Edge
[5], who is regarded as the best available expert on this subject
in the British Empire, should be sent to Western Australia for 2
years at a salary of about 3,000 a year and that the remainder of
his staff should be recruited in Australia itself.

The report will, I understand, recommend that the three accepted
methods of geophysical prospecting be tried out under the
direction of Broughton Edge both singly and in combination. This
should mean that, within 2 years, a highly qualified staff of
Australians should be available with complete knowledge of the
whole technique of geophysical prospecting and at the same time a
vast mass of information on these methods should have become
available for general Imperial purposes.

I hope that Gepp [6] will be pleased with this result.

MR. JULIUS

Shortly after Mr. Julius' arrival, he gave evidence before the
Royal Commission on Indian Agriculture, which is at present
sitting in London under the Chairmanship of Lord Linlithgow. [7]

I made some enquiries from Chadwick [8] and other people
afterwards and found that Julius' evidence had created a most
favorable impression on the minds of the Commissioners. They
regarded it as some of the most useful information they had
received on the question of organisation of agricultural research.

I find Mr. Julius anxious that, when he meets the people on the
agricultural side, I should, whenever possible, be present with
him but naturally, on the industrial side, he does not need me in
the same way. He is seeing a great deal of Mr. Tizard [9], who has
succeeded Sir Frank Heath, as head of the Department of Scientific
& Industrial Research. Tizard is a remarkably good fellow, a
firstclass scientist, an F.R.S., and a man with whom it is
possible to cooperate on the frankest and most pleasant basis.

Tomorrow Julius, Major Elliot and myself lunch with Lord Balfour
[10] and one purpose of the letter to Elliot already mentioned was
to give a basis for discussion at this lunch.

14th July

EMPIRE MARKETING BOARD REPORT

On further consideration of Appendix II of this report, I have
adopted a rough and ready method of classifying the purposes of
the research grants with the following results. I have marked with
a cross those grants that may fairly be regarded as being of
purely Imperial significance, i.e. the results to be attained may
be regarded as of general benefit to the whole Empire rather than
to any part. I have marked the other grants with the name of the
country especially benefited. If all capital sums are converted
into annual payments on a 5% basis, the following results emerge:-

Per annum
Imperial schemes 40,055
British agriculture 43,790
Colonial " 10,965
Australia 8,550
New Zealand 4,065
Canada 100
The grants to British agriculture are, as you will observe,
swollen by the large 40,000 a year grant to the Ministry of
Agriculture for the development of marketing schemes.

Today the Research Grants Committee have to decide as to what
action they are to take on the recommendations of the Colonial
Office Conference and of the Special Committee under Lord Lovat
[11], which has been set up as a result of the Conference for the
formation of an Imperial Research Service for the whole Tropical
Empire. The position is roughly as follows:-

Today the Tropical Colonies are between them spending 80,000 a
year on agricultural research. Lovat's Committee has estimated a
necessary total expenditure of 180,000 and they propose to ask
the Empire Marketing Board for 50,000 annually to be matched by
another 50,000 of new money to be derived from the Colonies
themselves.

My own feeling is that, if the Empire Marketing Board agrees to
this request, we should regard it as discharging the whole of our
obligations purely to Colonial research for a period of two or
three years.

The financial facts quoted above and this large Colonial
application gives added point to the letter which Julius has sent
to Elliot. I hope, in the course of the next year, with the
support of the C.C.S.I.R., to be able to obtain for Australia
grants which will bring the Empire Marketing Board assistance to
Australia up to the neighbourhood of 50,000 a year. It must,
however, be realised that any success along this line will depend
to a very considerable degree upon well thought out schemes for
Imperial cooperation which must originate from the C.C.S.I.R.

It is worth noting that the Empire Marketing Board's contribution
of 12,000 spread over 2 years towards the geophysical scheme,
which has already been approved in principle, would bring
Australia's benefit under these grants up to a total of 9,100 a
year.

THE IRISH MURDER [12]

I am enclosing a letter which I received this morning from Mr.

James McNeill, the High Commissioner for Ireland, as I feel sure
that you would like to see it. It is so extremely well expressed.

McNeill was, I know, a great personal friend of Kevin O'Higgins
and must have felt his loss acutely.

14th July later

RESEARCH AND THE TROPICAL EMPIRE

At this morning's meeting of the Research Grants Committee of the
Empire Marketing Board, we decided to ask the Lovat Committee to
separate their proposals into two parts:

(a) the institution of an Imperial Tropical Service
(b) the chain of Tropical Research Stations.

If this is done, the Empire Marketing Board would be prepared to
find half the new money for the Imperial Tropical Service (roughly
20,000 from the Empire Marketing Board) and then to consider each
Tropical Research Station on its merits. This decision is, I am
sure, politically wise and one which will not cause the
complications of a very large block grant to the Tropics.

Yours sincerely,
F. L. MCDOUGALL
P.S. I am enclosing one of Low's [13] cartoons from the 'Star' of
July 7th which I am sure will amuse you.