145

25th January, 1928

PERSONAL & CONFIDENTIAL

My dear Prime Minister,

DISTRIBUTION OF SECONDARY INDUSTRIES WITHIN THE EMPIRE

This week I have completed the memorandum to which I referred in my letter to you of the 19th of January. The primary purpose of this memorandum was to meet a request of Sir Horace Hamilton, the permanent head of the Board of Trade, to put down on paper my ideas about Empire secondary industries. If you have time to read it, you will find that I have not attempted to sketch out a plan of action in anything like the same degree as I did in my long letter to you last week. [1] If, however, my letter introducing this subject interested you, I should be glad if you would go through the memorandum.

I am not sending any copies of this memorandum to anybody else in Australia by this mail but I shall probably have it duplicated, marked as confidential, and then send it to Gepp [2] and to two or three other people. You will observe that it is intended for British consumption and contains a good deal of propaganda in favour of Empire trade. The figures in Table 11 to Appendix I are very interesting. They are based on figures which I supplied to you about six months ago but have been brought up to date for the year 1927 and have also been simplified.

IMPERIAL ECONOMIC COMMITTEE

Last Friday the High Commissioner [3] received your cable instructing him to approach Sir James Cooper [4] or-failing Sir James Cooper-Gough [5], to see whether he would serve as a representative of Australia during the coming Main Session. Your cable also referred to Faraker [6] and you said that you were not prepared to agree but would reconsider the matter if I wrote fully my reasons for making the suggestion.

By now you will have heard that Cooper is willing to serve and I hope that the formalities connected with your officially notifying the British Government of his appointment will be completed in time for him to attend the first meeting of the new Session on the 31st January.

Frankly, I am just a little disappointed that you found it necessary to appoint Cooper rather than some distinguished Australian who would be returning to Australia after the work of the Session was over. From a purely personal point of view nothing could be more satisfactory to me than Cooper's appointment. I shall, of course, get on with him extremely well and, what is more, he will certainly do a reasonable share of work. I had, however, hoped that you would have been able to find each year some person who would be really influential in Australian circles and thus be able to create in Australia a body of opinion among men who had had active experience of the working of Inter-Imperial economic affairs. However, I expect that you gave this aspect of the matter full consideration and were unable to light upon a suitable person who happened to be coming over.

With regard to Faraker, in my letter of the 11th of January [7] I think I explained fairly clearly my ideas as regards him. I have several times told you of the high opinion which I have formed of Faraker and I consider that he is somewhat handicapped in his work as Commercial Officer by a lack of status.

On the various Sub-Committees of the Imperial Economic Committee his availability would certainly be of great assistance. You may, of course, reply that, under the new Standing Orders, experts may attend and I can thus make use of Faraker's services as an expert.

This would be by no means the same as Faraker definitely being appointed as an alternate.

I do not, however, intend to press you and, as I mentioned in my letter of the 11th of January, if I do not hear from you in about a month's time, I shall conclude that you prefer to have the matter of Faraker in connection with the Imperial Economic Committee dropped. [8]

MANCHESTER CHAMBER OF COMMERCE

The Manchester Chamber of Commerce have just issued their Annual Report. I have not actually seen the document but the press have quoted some sentences from the report. As usual the Free Traders are taking a ,gird' at Australia's economic policy. The opportunity given by the most unfortunate choice of words seemed too good to miss and I, therefore, prepared a statement in reply which the High Commissioner is signing and which is being issued to the press tonight. I enclose a copy of the statement which I hope you will regard as adequate and fairly complete. I am hoping for a large measure of publicity for this statement because its news value is considerable. [9]

I worked out the 1927 percentages given in the table on page 2 from the Monthly Statement of Trade, which has only been issued two or three days and with which no one is yet familiar.

INDIAN TARIFF BOARD

Some time ago I mentioned in a letter to you Chadwick's [10] address to the Society of Arts on the working of the Indian Tariff Board. I am now able to send you the full printed report of his paper and of the discussion which followed it. Chadwick has also written to me and has been good enough to enclose some very interesting facts about the way in which the protective duties and the additional bounties on iron and steel goods in India have been reduced since 1924. As you are going so closely into tariff matters, I am forwarding three copies of Chadwick's paper, three copies of his letter to me and three copies of the extract from the Tariff Schedules, because I feel that you may desire to hand this information to the people who are looking into tariff questions with you.

It is very significant that India has been able entirely to abolish the additional bounties on iron and steel goods and in all cases, except one, to reduce the protective duty. The British preference that has resulted from this successful attempt to protect the Indian iron and steel industry is by no means the least interesting feature of what has occurred. Of course the difference in the standard of living between India and Australia makes an Indian example very far from being directly applicable in Australia but the very fact that India should, in so short a time, have been able to dispense with so much of the assistance given to this industry is a fact, the significance of which should not be lost sight of in Australia.

MR. A. E. GOUGH, O.B.E.

Mr. Gough is leaving for Australia on the 4th of February. He has had several long talks with me about marketing problems and I have given him letters of introduction to Mr. Paterson [11], to Gepp, to Mulvany [12] and to Clive McPherson. [13]

Gough is anxious to have an opportunity of a talk with you and I have told him that I would let you know that he was going out. I have suggested to him that, on his arrival in Melbourne, he should write to you informing you of his presence in Australia and enquiring whether you could give him an interview. He will be in Australia for three or four months. I daresay you would find him much more interesting to talk to after he had had an opportunity of getting to know local men and local conditions. On the other hand, you may find it useful to see him at an early stage as well as towards the end of his visit. If you did this, you might use him as a sounding board to obtain the reaction of the cooperative people in Australia to a closer co-ordination of marketing problems.

Although Gough is tied to the Cooperative Federations and is in fact employed by them, he is by no means narrow on that subject and is quite prepared to entertain large scale ideas for complete trade cooperation without postulating, as a necessity, cooperative predominance.

26th January

MANCHESTER CHAMBER OF COMMERCE

I am glad to say that very good publicity was achieved this morning for the reply to the Manchester Chamber of Commerce. I have already seen the statement printed in full in the 'Times', the 'Manchester Guardian', the 'Financial Times' and the 'Financial News' and I expect some of the other papers will have done the same. The 'Manchester Guardian' reacted fairly vigorously and I am enclosing the statement as printed in that paper together with its comments. [14] I am also sending a copy of the statement from the 'Financial Times'.

Since writing the statement for the High Commissioner, I have received a proof of the Manchester Chamber of Commerce Report. I am enclosing an extract which I should like you to read. I will try and obtain a proper copy of the report to forward to you as soon as possible.

Yours sincerely, F. L. MCDOUGALL

1 The long letter on this subject has not been found.

2 H. W. Gepp, Chairman of the Commonwealth Development and Migration Commission.

3 Sir Granville Ryrie.

4 Company director; Chairman of the London Agencies of the Commonwealth Dried Fruits, Canned Fruits and Dairy Produce Control Boards.

5 A. E. Gough, General Manager of the Overseas Farmers' Co- operative Federation Ltd; member of the London Agency of the Commonwealth Dried Fruits Control Board.

6 F. C. Faraker, Commercial Officer at the Australian High Commission.

7 Letter 143.

8 See note 3 to Letter 143.

9 Ryrie's reply began by quoting the report: '... with some of the Dominions there appears to be little of true reciprocity in the policies now being followed. Australia, for example, is determined to foster her industries and although she continues to give a tariff preference to British goods, it is found with increasing and ominous frequency that even the preferential rate is too high to permit of trade flowing at all'. He then showed, with abundant statistics, that Australia's share of British exports of many commodities was increasing. See the Times, 26 January.

10 Sir David Chadwick, Secretary to the Imperial Economic Committee; see Letter 1 38.

11 Thomas Paterson, Minister for Markets (until 19 January, Markets and Migration) in the Bruce-Page Government.

12 E. J. Mulvany, Secretary of the Department of Markets.

13 Melbourne businessman; Australian Commissioner to the Phosphate Commission.

14 Manchester Guardian, 26 January. An editorial admitted that, despite the protective tariffs, Australia's share of British exports had increased since 1913. The possibility of the imposition of prohibitive duties on any goods which might be manufactured in Australia, however, justified the expression of concern by the Chamber of Commerce.