16th March, 1927
PERSONAL & CONFIDENTIAL
My dear Prime Minister,
THE AUSTRALIAN TARIFF
On Monday Mr. Amery  asked me to call on him. He explained that the President of the Board of Trade  was in a difficult position as he had promised to speak at the opening of an Empire Shopping Week at Nottingham and the local hosiery manufacturers had declined to have anything to do with the show owing to the heavy incidence of the new tariff.
Mr. Amery wanted me to prepare a statement which would enable Cunliffe-Lister to deal with the matter. I have done so, and I think it is a good and effective answer. I enclose a copy of my letter to Amery and of the schedules attached thereto. I understand, however, that the British hosiery manufacturers are under the impression that an additional tax of 24/- per doz. on imported socks and stockings is contemplated. This would be protection with a vengeance. You may remember that, in November 1924, I prepared a statement for you entitled 'Protection and the Wages Bill'. I have glanced at this statement and think it may be worth your attention although, as it is now out of date, perhaps I'd better prepare another.
In the hosiery industry the following figures appear to be of interest. In 1924-25 the Knitting Factories in Australia produced goods to the value of 3,785,168. The value added by process of manufacture was 1,973,117 and the total of salaries and wages paid was 777,296. Wages and salaries thus represented 20% of the value of the output and 43.6% of the value added in process of manufacture. The present duty on hosiery other than socks and stockings is General 60%, Preferential 45%, but these are the minimum rates and are only levied when the fixed rate of 1/- per garment plus 30% ad valorem yields a lower return. It, therefore, appears as if the tariff on these classes of hosiery is sufficiently high to cover the entire wages bill, and not merely the difference between Australian and British wages.
On woollen socks and stockings the duty is now General 60%, preferential 45%, figures which again appear to cover the entire wages bill.
I do not know whether it is contended that British hosiery is dumped but I presume not, because action under the Trade Preservation Act 1921 could then be taken. Contemplation of these figures, together with the rumour of a yet higher tariff, makes one rather question the efficiency of the Australian industry.
Mr. Amery made it clear that he hoped that the administration of the Australian tariff would bear in mind the campaign in this country for voluntary preference, which might be affected if public attention was frequently drawn by manufacturers to extreme instances of high tariffs.
ROYAL COLONIAL INSTITUTE LUNCHEON
Yesterday I addressed one of the City Lunches organized by the Royal Colonial Institute. I enclose a copy of the notes I prepared for myself as some of the figures are very interesting. I would like you to glance at the last three pages (marked).
THE BYNG-KING CONTROVERSY 
I am enclosing an article from the New Statesman (a weekly with Labour leanings) about this subject. It will, I am sure, interest you. It seems to cut the ground entirely from under Mackenzie King's feet. Its publication in such a paper is distinctly interesting.
I had a talk to E. J. Harding  about this subject on Monday. He says that the Government is now collecting names. I mentioned several which he is adding to his list. When about 20 names have been collected, the Government will, he thinks, consider them, reduce them to say 8 or 10 and then cable them to you for your comments.
HADEN GUEST  AND THE LABOUR PARTY
Mr. Tom Johnston  lunched with me yesterday and told me that Haden Guest's withdrawal from the Labour Party has, for the time being, made the job of Members of the Party who are keen on pushing Empire ideas a little difficult. He anticipates that, for a month or six weeks, it will be necessary to go very slowly.
Johnston regards Guest's action as being very stupid and I cannot but agree that the probability is Guest will lose his seat and, even if he holds it, having severed his connection from Labour, he will be a less interesting person from every point of view than he was before.
PARLIAMENTARY DEBATES AND QUESTIONS
I am enclosing a copy of the debate on the Navy Estimates in view of the references therein to the Singapore Naval Base.  I also enclose a copy of the debate on the Cinematograph Films Bill.  I feel sure that you would like to have them by you.
The Parliamentary questions that I am forwarding are not of any particular interest this week and do not require any special comment.
Yours sincerely, F. L. MCDOUGALL