15th March, 1928
PERSONAL & CONFIDENTIAL
My dear Prime Minister,
By last mail I sent you a rather long letter on the subject of Australian wine.  The day after the despatch of this letter, I received a cable from the Prime Minister's Department asking for information on a number of points. Fortunately I was able immediately to reply to all the points except one, which was a question as to whether any foreign Government had made representations on the delimitation of spirit strength for duty purposes. I have now been able to reply to that point also to the effect that no such representations have been made. 
I assumed that the cable from the Prime Minister's Department was sent at the request of the Department of Markets and I have, therefore, by this mail written fully to Mr. Paterson  on the subject.
I must, however, tell you that the announcement that the Commonwealth Government had introduced a Bill further to reduce the export bounty came as a very great shock to everyone concerned with the wine trade here and also caused very considerable surprise in official quarters.  I had Sir Horace Hamilton, the Permanent Head of the Board of Trade, to lunch yesterday, in order to make sure that he had a proper grasp of the Australian point of view on wine. He said that the announcement of the Commonwealth Government's intention to reduce the export bounty would certainly make any immediate further concessions extremely difficult to extract from the Chancellor of the Exchequer. 
My own strong view about the bounty has, I think, been made clear to you on several occasions. I feel that the Commonwealth Government would have been wise to have offered to stabilise the bounty for a period of years at 1/9d plus the 1/3d drawback on excise, provided the industry would so organise its marketing as to satisfy the Commonwealth Government that an orderly system would replace the present chaos.
D. & M. COMMISSION
I was pleased to see in yesterday's 'Times' the announcement that Mulvany  had been appointed as fourth member of the Commission.
He should prove of very considerable assistance to Gepp  for he is an extremely hard worker and prepared to soak himself in detail to an extent that not many men are either willing or capable of doing. I have felt that, as the permanent head of a Department, Mulvany's tendency to undertake a tremendous mass of detail himself was probably a handicap but as one of a board of four, and especially a board presided over by a man of Gepp's peculiar genius, this resolute attention to detail may well prove extremely valuable.
In connection with Mulvany's appointment, Faraker  informs me that he is applying for the post of Secretary to the Department of Markets. I have made very clear to you the very high opinion which I hold of Faraker and I feel confident that, should he be given an opportunity of this sort, he would fill the position admirably.
AUSTRALIAN TARIFF ON WOOLLENS
Since I last wrote, the 'Times' has reported an amendment in the Senate, moved I think by Senator Kingsmill, to apply the high rates of duty of 1/- per square yard Plus 30% ad valorem to practically all varieties of British woollens.  This proposal, if accepted by the Commonwealth Government, will cause consternation in Yorkshire and from the Press I gather that the Yorkshire Chambers of Commerce are already in a state of turmoil.
There are two ways in which I should regret such a sweeping addition to the tariff. First of all I think it quite clear that this amendment, if adopted, would result in a further definite increase in the cost of living in Australia, with all the consequent increase in the cost of production which any such rise must mean. Secondly, such a sweeping further alteration would result in very considerable resentment in Yorkshire which would further complicate the task of the Empire Marketing Board in its campaign to popularise the Empire idea in this country.
I was tempted to cable to you stressing both these points of view but, on second thoughts, I felt that this would be merely a waste of money for you know my views so clearly that no really useful purpose would be served.
While on the subject of the Tariff, I might mention that I received a pleasant note from Mr. Pratten  by last mail. I feel sure that I have to thank you for this. He was good enough to express himself very kindly on the way in which I had explained the recent amendments of the Australian tariff. There can be no doubt of the value and importance of early explanation on this side of the world.
You will be interested to hear that the seed which Julius  sowed at the Board of Trade is beginning to grow into a sturdy plant. A large meeting of traders was held under the Chairmanship of Cunliffe-Lister  last week and Sir Horace Hamilton told me that it was a very satisfactory meeting in which everybody showed a marked enthusiasm for a definite forward move on an Empire basis. I am enclosing a report from the 'Times' on this subject.
EMPIRE RATIONALIZATION OF SECONDARY INDUSTRIES
Sir Horace Hamilton further told me that the Board of Trade was very interested in the memorandum which I sent to him. While marking it as confidential, he had it duplicated and sent to all the officers in the Board of Trade concerned and also to Cunliffe- Lister and the Parliamentary Secretary. He told me that their feeling was strongly in favor of encouraging industries to get together and to commence discussions on this subject and that the Broken Hill Proprietary Co. and the British Iron and Steel Federation were at the present moment in cable communication.
I am looking forward to hearing from you on this very important subject in the course of the next three or four weeks. 
TROPICAL AGRICULTURAL RSEARCH
You will probably have heard from Sir George Pearce  or from RIVETT  that the Commonwealth Council has proposed to the Empire Marketing Board that, instead of establishing a single large scale Tropical Agricultural Research Station in Northern Australia, the joint fund of 50,000 capital and 10,000 a year should be used to establish two or three Sub-stations in the Australian tropics where younger men would work under the direction of the brilliant headquarter staff which the C.C.S.I.R.
is getting together at Canberra.
This proposal from Australia set me thinking about the whole question of the establishment of Tropical Agricultural Research Stations. My own impression is that the one station already established, namely the Imperial College of Tropical Agriculture at Trinidad, is useful but not a very firstclass show. In the same way I feel convinced, from my knowledge of the Director who has been appointed to Amani in East Africa, that, although good plodding work will be done there, no very brilliant original scientific work is probable. Under these circumstances it seems to me quite likely that we ought to recast the whole of our ideas on Tropical Agricultural Research and instead of attempting to create a series of large full scale research stations in the tropics, better work would result for the same, or for very modest expenditure, if certain existing research stations in the temperate zones, such as, for instance, Rothamsted and East Malling in England, the Rowett in Scotland, Onderstepoort in the Transvaal and the Waite in Adelaide, were asked to undertake the fundamental consideration of certain tropical problems and were given the means to establish out-stations in the tropics.
I have written fairly fully by this mail to Rivett on this subject but think you would just like to have it brought directly to your attention.
Yesterday in the House of Commons there occured a Debate on Empire Trade and I am enclosing the Hansard.  On the whole the level of the Debate was distinctly good and I think you would find it quite worth your while to skim through it.
It so happens that the Mover and Seconder of the Debate both consulted me regarding the line which they should take. In addition one Tory and one Labour Member, who actually intervened in the Debate, came to me for some suggestions and three other Tories, who desired to intervene in the Debate but were not successful, also asked for suggestions.
In the copy of the Hansard which I am forwarding to you, I have marked those sections of the various speeches which were directly and immediately obtained from myself.
You will be very interested in the speech made by Cunningham Reid , who has just returned from Australia and who very strongly expressed the view that unless the British motor industry was prepared to face amalgamation in order to deal with the Empire market, American combinations were almost certain to take complete control of the situation. I have no doubt that Reid's statements were inspired by his conversations in Australia both with yourself and with Gepp.
Perhaps the most outstanding feature of the Debate was the insistence on the importance of the work of the Empire Marketing Board.
BRITISH TRADE IN THE FOREIGN WORLD
As a result of my appointment to the Consultative Committee of the League of Nations, I have spent some time at the weekends going through League of Nations economic publications. As one result I have discovered a most useful mine of information in some of their statistical statements. From these statistics, I have extracted three statements which I am now enclosing. Each shows the relative progress of Great Britain and the United States of America in the export trade, in the first case to South and Central America, the second to Europe and the third to the Far East. The general effect of these statements is very alarming, because it shows what a tremendous competitor the U.S.A. has become to Britain during the post-war years.
I would draw your particular attention to the figures in regard to the various countries marked in blue pencil in these statements.
The surprising thing about these figures is that they are not known among people who are particularly concerned in trade matters in this country. I showed them to the Permanent Head of the Board of Trade and to the Editor of the 'Times Trade Supplement'  and they were both astonished and utterly surprised.
Yours sincerely, F. L. MCDOUGALL