99

28th Match, 1927

PERSONAL & CONFIDENTIAL

My dear Prime Minister,

In my letter of March 16th I reported Mr. Amery's [1] remarks on the Australian Tariff and forwarded some particulars I had prepared for him on the Hosiery Trades.

Since that date I received from Mr. Amery a request that I should address a private meeting of the Unionist Imperial Affairs Committee in the House of Commons in order to answer criticisms of the effect of the tariff on British trade.

Your example of 'stunning' criticism by presenting the full case in the frankest way seemed to me the proper line of country to adopt. I therefore prepared a very full statement on the 'Australian Tariff and British Trade', of which I enclose two copies, and also a single page statement showing the value of Australia as a market as compared with certain large groups of foreign countries (also enclosed). These memoranda were distributed to members and I merely talked for twenty minutes in explanation. Amery took the chair and there were about 30 members present.

After my innings there were a number of questions which divided themselves into two classes:

(a) Questions about the effect of the new tariff on cheap woollens and on Hosiery.

(b) Questions as to how far the high tariff handicapped the primary industries.

I dealt with these questions as effectively as I was able and at the end Mr. Amery summed up the following effect:-

That although it was inevitable that the development of secondary industries in Australia sheltered by very high duties should have a detrimental effect upon certain branches or sections of British industry, an overwhelming case had been presented to show that on the whole volume of trade, the advantages obtained by Great Britain in Australia, due to tariff preference, were of such a nature as to make it abundantly clear that British trade was better off under the Australian Tariff than it would be if Australia were a free trade market open to the free competition of all countries. The members present apparently warmly agreed with this conclusion.

It seems to me possible that you may find some of the points that I used on that occasion (in addition to those in the memoranda) of use on some occasion. I have, therefore, prepared,a note of these for your information only. I enclose a copy which is marked 'For the Prime Minister'. I am sending copies of the general memoranda to Mr. Paterson [2] and to Mr. Latham [3] but the notes just referred to above to you only.

PARLIAMENTARY DEBATE ON EMPIRE SETTLEMENT

I am enclosing the Hansard report of the debate which occurred on March 23rd. [4] The Motion had been carefully drawn and read as follows:-

That this House observes that over a period of widespread depression in trade the proportion of our trade with the Empire has increased and continues to increase; and is of opinion that, in order to benefit the people of this country by developing our best and most productive markets, and in order to assist those Dominions which so desire it further to increase the British population within their territories, no effort should be spared, in co-operation with the Governments of the Dominions, to initiate new proposals and to increase the existing facilities for settlement in the Empire overseas. [5]

Eden [6] made a goodish speech followed by Roger Lumley, one of the young Tories. He acted as Salisbury's [7] P.P.S. on the Australian tour. His speech was listened to with marked attention by Baldwin. [8] I was glad to notice this as Lumley had spent an hour in my office preparing it. Mackinder [9] from the Labour Benches, another member of the Parliamentary Delegation to Australia, made a very good contribution to which I should like to draw your attention.

TROPICAL RESEARCH STATION

I have been somewhat surprised that no cable has yet reached either the Empire Marketing Board or myself about the proposed Tropical Agricultural Research Station in Northern Australia. I can quite understand that questions of staff and other general considerations will require much study by the Commonwealth Council for Scientific and Industrial Research, but I should have imagined that, by this time, that body would have been able to have come to a decision, it being over seven weeks since your return to Australia. [10]

LIAISON WORK FOR DEVELOPMENT & MIGRATION COMMISSION AND COMMONWEALTH COUNCIL FOR SCIENTIFIC & INDUSTRIAL RESEARCH

Up to the present time I have not received any reactions from either of these bodies on the information which I am forwarding each mail. There would hardly have been time for this to happen. I think we are doing useful work, however, and I trust that Gepp [11] and Julius [12] will be of the same opinion. I do not propose to worry you with any of the detail but one point of very substantial interest to Australia has been under consideration and I feel sure you would like to have a brief note thereon.

FUEL RESEARCH

The importance of supplies of fuel oil to Australia are well recognised. Mineral oil may yet be found but the possibilities of treating brown coal for oil require the closest study. Two general methods have aroused widespread interest, namely:

(a) Low Temperature Carbonisation which may yield from 20 to 35 gallons of a rather doubtful oil per ton of coal and a high calorific coke for ordinary burning purposes.

(b) Hydrogenation by a modified Bergius process which yields from 110 to 120 gallons of good oil fuel with no coke residue.

Up to the last few weeks the position was that while neither process had been completely proven, the economics of Low Temperature Carbonization seemed sounder for the special circumstances of Great Britain than Hydrogenation. In Great Britain a smokeless coke is of very considerable importance but in Australia the importance of supplies of fuel oil outweigh the value of smokeless fuel.

Quite recently two developments have occurred:

(i) Low Temperature Carbonisation.

A firm of which Col. Moore-Brabazon [13] M.P. is Chairman (he resigned from the Ministry to join it) claims complete success in Low Temperature Carbonization. The process is known as the L. and N. process (Laing and Neilson). This firm possesses rights at Maryvale near Morwell Victoria and is proposing to exploit the deposits. Their representative for Australia, a journalist called Bradstreet, is going to Australia very shortly. They hope to receive special facilities and that the Commonwealth Government will make the bounty on fuel oil recovered from shale apply to fuel oil distilled from coal. The L. and N. people express the greatest confidence in their process and Moore-Brabazon's personal reputation is a great asset to the firm. At the same time the Fuel Research Board is not quite satisfied as to the process and Sir Arthur Duckham [14], who is probably the soundest technical and commercial man on Fuel problems in this country, does not consider the L. and N. process as better than a number of other forms of Low Temperature Carbonization.

(ii) Hydrogenation (i.e. the liquefaction of coal by treatment with hydrogen under high pressure).

In Germany the I.G. Farbenindustrie, after years of experiment with the Bergius process, have decided to erect a works at a cost variously estimated at 2,000,000 to 4000,000 to treat brown coal.

This decision has surprised the Fuel Authorities here because they have been in close touch with German developments. It is felt that Germany may have discovered some additional point which increases the efficiency of the Hydrogen process.

In Germany the brown coal is said to be available at 3/- per ton whereas here the cheapest hard coal would be 15/- at the pit's mouth.

About a fortnight ago Imperial Chemical Industries (Alfred Mond's [15] new merger) acquired all the German patents for the British Empire.

The advice which the Fuel Research Board officers and Duckham give in regard to Australia is that we should not specially tie up with anyone, but let any Low Temperature Carbonization Co., such as L.

and N., go ahead with all normal facilities, and that we should establish relations with Mond's people in case the great German venture proves a success. Meantime they suggest that 100 tons of Morwell coal should be sent here for treatment at the East Greenwich Government Fuel Research station where a small Bergius plant is in operation. They point out the great variability of Brown coal and insist that German results would not necessarily apply to Morwell coal.

All this information in much fuller detail has been sent to Gepp and Julius but I feel that the subject is one on which you would appreciate a resume. If you would like occasional brief summaries such as the above on important Research problems, please let me know.

HADEN GUEST [16]

The result of the Southwark Election was made known last night, Haden Guest being well at the bottom of the poll, and the Liberals having gained a seat.

I must say I regret this result and especially regret the Liberal victory as it will undoubtedly harden the Liberals. The defeat of Haden Guest was almost certain and I feel sure that it was quite unnecessary for him to resign from the Labour Party and that his protest on the China question in the House would have been sufficient without his resigning.

LONDON WEEKLY

I enclose 4 copies of the 'London Weekly' and in doing so I would like to mention that the Australian advertisement that occurs on the back page was a free advertisement and not paid for but inserted by the Advertising Agents who were keen on supporting the paper.

I have grave doubts as to whether the paper will be able to continue or not. Lord Apsley [17], who is a director, came to see me the other day to ask my views about it. I told him that he should try to interest some of the large British manufacturing Associations, such as the Motor Traders, electrical people, etc., with the idea of the journal being used as a vehicle to counter the anti-British goods American propaganda in the Dominions.

AUSTRALIAN DELEGATION

The situation in regard to the Delegation is that E. J. Harding [18] together with Sir William Clark [19] of the Department of Overseas Trade, have made a list of about ten names which I believe are now being submitted to the Cabinet and as soon as the Cabinet have approved the list, a cable will be sent to you asking your views on the persons proposed before they are officially approached on behalf of the Government.

'INDUSTRY AND THE STATE'

I am forwarding a copy of a book just published and written jointly by four members of one of the young Tory Groups in the House of Commons, namely Robert Boothby, John Loder, Harold Macmillan and Oliver Stanley. I have not yet had time to read the book myself but I have read the 'Times' criticism, of which I attach a copy. [20] I am told that the book is interesting but represents a large number of ill-digested ideas. At the same time I feel sure that you would like to have it.

PARLIAMENTARY DEBATES AND QUESTIONS

In addition to the Hansard report of the debate on Overseas Settlement, I am enclosing copies of the debates on the Cinematograph Films Bill and on Naval Estimates. [21]

I am also enclosing 3 Parliamentary questions which you may be interested to glance at, as well as two newspaper cuttings, and an article from the 'Sunday Times' by Alec Waugh, which is well worth reading.

LABOUR ADVERTISEMENT

I enclose a copy of an advertisement from today's 'Daily Herald' which strikes a new note. [22] The Advertising Agents rather spoilt the copy as I gave it to them by adding the words which I have placed in brackets.

I am very keen on the Empire Marketing Board issuing a steady flow of advertisements rather along this sort of line in order that the Labour movement may come to realise what the Empire means to it.

Yours sincerely, F. L. MCDOUGALL

1 Leopold Amery, Secretary for the Colonies and for Dominion Affairs; Chairman of the Empire Marketing Board.

2 Thomas Paterson, Minister for Markets and Migration in the Bruce-Page Government.

3 J. G. Latham, Attorney-General.

4 House of Commons, Parliamentary Debates, fifth series, vol 204, cols 482-530.

5 In a letter dated 21 May, Bruce commented, '...the wording of the motion is quite admirable, and sets out the position in the way that we would wish to have it considered'. The letter is on file AA:M111, 1927.

6 Anthony Eden, Conservative M.P.; Parliamentary Private Secretary to the Foreign Secretary, Sir Austen Chamberlain. Eden had moved the resolution.

7 The Marquess of Salisbury, Lord Privy Seal and Leader of the House of Lords.

8 Stanley Baldwin, Prime Minister.

9 William Mackinder.

10 See note 13 to Letter 91. Bruce had referred the proposal to the Commonwealth Council for Scientific and Industrial Research.

It was endorsed on 27 March, following approval at an Agricultural Conference convened by the Council on 23 and 24 March. A cable informing McDougall of this approval was not sent until 14 April.

A copy is on file AA:A461, E302/1/1. 11 H. W. Gepp, Chairman of the Commonwealth Development and Migration Commission. 12 George Julius, Chairman of the Commonwealth Council for Scientific and Industrial Research.

13 J. T. C. Moore-Brabazon resigned as Parliamentary Secretary to the Minister of Transport, W. W. Ashley, to become Chairman and Managing Director of L. and N. Coal Distillation, Ltd.

14 Chemical engineer, prominent in the coal industry; former member of the Council of the Ministry of Munitions and Director- General of Aircraft Production.

15 Industrialist and Conservative M.P.; Chairman of Imperial Chemical Industries Ltd.

16 Writer and former Labour M.P. See Letter 95. Guest stood as an independent candidate for Southwark.

17 Conservative M.P.

18 Assistant Under-Secretary at the Dominions Office.

19 Comptroller-General of the Department of Overseas Trade.

20 Industry and the State: A Conservative View, Macmillan, London, 1927; reviewed in the Times, 22 March. The authors' recommendations included an extension of Imperial preference and organisation to control wheat prices, as well as a National Wages Board and employee shares in industrial undertakings, a centralised rating system and 'something in the nature of an Economic General Staff.

21 See notes 7 and 8 to Letter 98. A continuation of the debate on the Cinematographic Films Bill is in House of Commons, Parliamentary Debates, fifth series, vol. 204, cols 237-310.

22 Under the heading 'Good Labour conditions in Australia' it read, in part: 'The Australian Dried Fruit industry was the first agricultural industry in the world to work an eight-hour day. To- day, both in the vineyards and packing houses, fair wages are paid and trade union conditions are observed. Thus the Australian fruit growers and other workers in the industry are assisted to buy British goods freely...Every penny you spend on Australian products comes back to buy British goods and to help keep British workmen employed'.