213

20th February, 1929

PERSONAL AND CONFIDENTIAL

My dear Prime Minister,

In recent letters I have referred to the way in which the existing trade treaties of foreign countries affect the possibility of Australia obtaining specially favorable treatment for her goods through the medium of trade treaties with selected foreign countries.

I have now received an illuminating statement, prepared at my request by Mr. Fountain [1], the head of the Commercial Relations Section of the Board of Trade. The nett effect of the information contained in this memorandum appears to be as follows:-

United States of America

The present tariff system of the United States of America does not admit of the granting of special terms to the goods of any foreign country (save Cuba). Australian goods are not penalized above those of other countries, although many of the duties are very high.

Japan

Japan has granted Most-Favoured-Nation treatment to all Australia's main competitors. Australian goods are penalized as Australia has not adhered to the United Kingdom-Japan treaty.

Apparently Australia can adhere but would be required to promise MostFavoured-Nation treatment to Japanese goods.

Germany

The situation in Germany is similar to that in Japan. Australian goods are penalized but Australia can remove this disability by adhering to the Anglo-German Treaty and giving M.F.N. treatment to German goods. It should be noted that Germany has the right to denounce the clause whereby the Dominions can adhere to the Treaty by giving three months' notice. It has been suggested that, if Australia or Canada decided to adhere, Germany might denounce this clause as Germany is credited with a desire to break through the preferential system favoring British goods in the Dominions.

France

The position in France is far more complex than is the case with Germany or Japan. As there is no Anglo-French treaty according M.F.N. treatment but a Decree, it does not appear open to Australia to obtain M.F.N. from France save by direct treaty negotiations in which France would demand concessions. The handicaps upon Australian meat, butter, apples and dried fruits are severe.

Belgium

There is no discrimination against Australian goods as such in Belgium but the tariff clause giving barrelled apples preference over those in boxes is a handicap.

Netherlands, Norway, Sweden and Denmark

There is no discrimination in Tariffs of these countries.

Italy

Here again the position is somewhat complex but all Australian goods, save those from South Australia, receive M.F.N. treatment.

In Italy all Australia's chief competitors have M.F.N. treatment under Treaty.

It appears from the foregoing that Australia cannot hope to obtain specially favorable treatment for her produce through trade treaties with any important foreign country. It further appears that she can remove disabilities with Japan and (at the moment) Germany by adhering to British treaties with these countries, provided she gives them M.F.N. treatment in return. To remove disabilities in France, a special treaty would be required.

The present situation in regard to Italy does not appear to warrant negotiations, as the only legal disability is on South Australian goods and it is doubtful if this disability is enforced.

I am enclosing the Board of Trade Statement which you may find of value.

Yours sincerely, F. L. MCDOUGALL

1 Henry Fountain, Principal Assistant Secretary, Commercial Relations and Treaties Department, Board of Trade.