My dear Prime Minister,
THE IMPERIAL CONFERENCE
Yesterday Sir Horace Hamilton, the permanent head of the Board of Trade, lunched with me and we had a most interesting talk about economic issues at the next Imperial Conference. I had sent him in his personal capacity copies of my memoranda and he said he was particularly interested in those upon American competition and on advertising British goods in the overseas Empire. 
First we discussed the possible date, and Hamilton expressed his strong conviction that October 1929 would prove impossible; this led to consideration of the chances of a Labour Government.
Hamilton did not consider such a happening very probable, but thought that if Labour obtained power or came into office by an arrangement with the Liberals, it would certainly lead to the abolition of the sugar and tea taxes with the consequent elimination of the preferences on these articles. He thought the dried fruit preferences unlikely to be touched, and the wine and tobacco preferences he regarded as safe. I impressed upon him that the repeal of the sugar preference without any effective equivalent would have a most serious effect.
We then talked about documentation, and he promised to give the idea of surveys of the competitive position in regard to industries careful consideration. Finally I suggested the formation of a small circle of say ten men, including Hamilton, Chapman  and one more junior man from the Board of Trade, Hacking  the Minister for the Department of Overseas Trade, Elliot  and Ormsby-Gore  Whiskard  from the Dominions Office, Chadwick  from the Imperial Economic Committee, Tallents  from the Empire Marketing Board, together with Casey  and myself. The idea being to meet at dinner once a month for the next six months and to discuss in the most informal way Imperial Economic questions, with the object of forming some ideas which might prove useful when the Board of Trade and the Dominions Office begin seriously to tackle conference questions. Hamilton was quite interested and promised carefully to consider the idea.
I am now enclosing Memorandum No. 5, which deals with the preferential systems as between Great Britain and the Dominions and Colonies.  I undertook to do something on this subject at the definite request of Amery , who wrote and said that he did not think any comprehensive survey had been made, and that he thought something of the sort would be useful. I therefore thought it was as well to make an attempt and put it into this series. The closer one gets to any attempt to assess the real value of preferential rebates to the country receiving them, the more difficult it becomes to find any sound basis, and I feel quite sure that a much better way would be to take the more important industries which benefit under preference and to draw up notes on the effect of the preference on each industry. I shall try to get out a series of notes of that character during the next three or four months. Meantime the present memorandum may serve some useful purpose. I should, however, particularly like to ask for your comments on it and for any suggestions that you may feel inclined to let me have.
I am also forwarding a leading article from last week's Times Trade Supplement. This is really an article which I prepared and which the Editor  published in a condensed form as a leader.
It brings out the idea of a priority list for British loans to assist Empire development, based on the idea that the development of certain parts of the Empire will benefit Great Britain much more rapidly and more directly than the development of certain other parts.
TARIFF COMMITTEE'S REPORT
I have not yet received a copy of Professor Brigden's  amended version of your Tariff Committee's Report. If this has not been sent by the time this letter reaches you, I should be very glad if you would be good enough to arrange for me to receive it.
ANIMAL HEALTH RESEARCH
Last week I saw Sir Arnold Theiler  the day after he arrived from South Africa. He was not very well, having some rheumatism and a tendency to bronchitis, and he was more concerned about getting back to Basle and placing himself in the doctor's hands than in anything else. As, however, conversation progressed he became more enthusiastic about the Australian scheme, but told me that he was still quite unable to give any definite decision as to whether he could undertake the Australian work or not. He said that Lady Theiler was very reluctant to go to Australia for any length of time, especially as her children were unwilling to leave their posts in South Africa in order to take up new duties in Australia. I gathered that Theiler himself would really very much like to undertake the work, but is having great difficulties owing to Lady Theiler's reluctance.
This week-end I have been up to Aberdeen where we have been holding a series of conferences on Empire Marketing Board research problems and other problems. Elliot and Dr. Orr  were present, and also Sir Robert Greig.  It was impossible to get very far with the Australian animal health question. Dr. Orr is coming to London and is dining with me to-night in order to discuss fully Sir Arnold Theiler's report. I found that Theiler was extraordinarily interesting and had a prolonged discussion with him, and also with Dr. Orr, about the Australian problems, and I feel that a discussion lasting a couple of days with Orr might help him a great deal towards making up his mind, as there can be no possible doubt as to the importance of an early decision in this matter to Australia. I shall do my utmost to try to arrange for Orr and myself to go to Basle and see Theiler, if Theiler's doctors refuse to let him travel back to London.
ASSISTANCE TO AUSTRALIAN PRIMARY PRODUCERS
You may perhaps remember one or two conversations that I had with you after the conclusion of the 1923 Imperial Economic Conference on this subject. It then appeared that the political situation in Australia demanded that the primary producers should be made to feel that the Commonwealth Government was intensely interested in their welfare. From this distance it appears as though a very similar position has arisen since the General Election, and I have been wondering what sort of action the Commonwealth Government could take apart from the very large measure of assistance which it has already given. As a result of listening to the views of Dr.
Orr and Sir Arnold Theiler on the possibilities of rapid improvements in the economic production of the various pastoral industries, I have come to the conclusion that it would be well worth while to put up to you an idea which has occurred to me.
In Italy during the last year Mussolini  has organised a very successful campaign to increase the production. He called it the 'battle of the wheat'. Now it seems to me that the Commonwealth Government might select one or two primary industries which are not producing as well as they ought to and in which it is clear that the adoption of well-proved remedies would make dramatic changes, and then arrange for the organisation of an intensive drive to secure more economic production and therefore better returns to the primary producer. As an example, let me take dairying. The yield of milk per dairy cow in Australia is woefully low, and this low level of the efficiency of the Australian cow is the main cause of the Australian dairyman's financial troubles. In order to improve the whole economic standard of the dairying industry of Australia, better feeding and better breeding are essential, but of these two there is little doubt that better feeding should come first, because better breeding without better feeding is uneconomic, and may indeed be even bad from the point of view of animal health. I gather both from Orr and from Theiler that there is sufficient knowledge already available to provide a solution to at least the grosser forms of unsatisfactory feeding in the dairying industry without any further scientific research, and that quite astonishing changes might be achieved could the dairy farmers of Australia be induced to put the already ascertained knowledge into practice. Suppose the Commonwealth Government were to have a conference of the Ministers of Agriculture of the various States to point out how necessary it was to improve the general status of the dairying industry, to make it clear that if great results for Australia were to be achieved it would be necessary to carry out some campaign on a national basis, and to point out that all that seemed necessary to do would be to have effective educational publicity throughout the dairying districts, and demonstrations on an economic basis carried out.
The Commonwealth Government might perhaps feel inclined to offer to find a sum of a few thousand pounds to provide the basis for such a campaign of educational publicity. The Conference might then agree to declare some definite national objective. Merely as an illustration I might suggest that the objective should be to increase the average milk yield of the cows of Australia by fifty gallons each year. This idea is in a very nebulous form and I am going to discuss it with Dr. Orr, and shall try to prepare a memorandum and send it to you on the subject. Should anything associated with the idea appeal to you at all, there is one man who, I think, would prove extraordinarily valuable, namely W. S.
Kelly  of Giles Corner, South Australia. I have in the past mentioned Kelly's name to you. He is a successful farmer and there might be some difficulty in inducing him to leave his farm even for say half his time, but I know no one who could more effectively influence farmers in the direction of increased production. It just seems to me that if it were possible for the Commonwealth Government to take the initiative in a series of campaigns of a highly practical and indeed utilitarian nature to increase the productivity of our primary industries, such campaigns might be of the very greatest value to Australia and of some political significance to the Commonwealth Government. 
BRITISH MOTOR IMPORTS
Last week the Secretary of the Society of Motor Manufacturers and Traders, accompanied by Mr. Lucas of the well-known firm of Lucas & Co., called on me to discuss the methods whereby the Australian customs authorities assess home consumption value on spare parts for motor vehicles. After listening to what they had to say I came to the conclusion that the matter was of very substantial interest, and, after explaining to them that I had no official status in regard to customs, I advised them to write to the High Commissioner  asking him to forward their views to the Commonwealth Government. In case, however, this matter should be merely sent by your Department on to the Customs Department and escape your notice, I am enclosing a copy of the letter to the High Commissioner, together with an accompanying memorandum. I would very strongly recommend that the matter should receive your own attention, because the Motor Traders claim that if American spare parts were assessed on the same basis as English spare parts, the result would be, on the basis of the present volume of American imports into Australia, an increase of revenue to the Commonwealth Government of over 500,000 per annum. I am not in a position to judge as to whether the statement put forward by the Motor Manufacturers is sound, but having regard to your policy speech and to your general anxiety at the increase of imports from the United States of America and the very unsatisfactory balance of trade between Australia and that country, I cannot help thinking that you might find along the lines of this proposal a method of securing some useful adjustment.
Yours sincerely, F. L. MCDOUGALL