My dear Prime Minister,

EMPIRE MARKFTING BOARD

The first piece of news to chronicle under this head is the final
decision taken today in regard to Geophysical Prospecting. The
Sub-Committee of the Committee of Civil Research had recommended
the complete trial of geophysical methods in Australia on a 50-50
basis between the Commonwealth Government and the Empire Marketing
Board and has assessed the cost at 27,000 spread over two years.

Negotiations with Broughton Edge [1], the geophysicist recommended
by the Sub-Committee, showed that a slight increase in that sum
would be required. Today the Empire Marketing Board agreed to
participate and authorized expenditure not to exceed 10,000 in
the first year and 6,000 in the second, as the Board's share of
the costs.

This should prove more than adequate and I am glad that a subject
which has taken up a lot of time and energy has at last reached
what I hope will be a satisfactory solution. The minimum result
for Australia will be her possession of a trained team of highly
qualified geophysical surveyors. It may, however, happen that
valuable discoveries may result during the trials. In order to
emphasize the Imperial character of the proposal, I today stated
that if any interested Government, such as Canada or South Africa,
desired to study the methods, there would be no objection to the
sending of a qualified worker to Australia to participate in the
work once it had been properly established. I indicated the second
year as the earliest period. I hope you will, if necessary,
support my attitude on this point.

Another small decision of considerable interest to Australia was
one which I brought up concerning Viticultural research. It was
decided to arrange for a survey of all the available knowledge on
(a) the production of better vines (b) the improvements in the
technology of wine making. This is to be done during the next
three months and is intended to form a basis from which decisions
can be reached on larger scale research on this subject. The
improvement of Australian vintages and wines is a subject which is
worth a good deal of work.

Julius [2] is very glad that this move is being made.

MR. AMERY'S [3] DEPARTURE

On Friday I went to Waterloo to say goodbye to Amery and his
party. There was quite a crowd-Lord Mayor, Ministers, etc. Amery
took me into his saloon and, after throwing some unnecessary
bouquets, asked me to be careful not to cause any jealousy among
my colleagues on the Empire Marketing Board.

I naturally asked if he had any grounds for such a suggestion. He
said only his instinctive fear of Canadian susceptibilities.

Naturally I promised to be careful as indeed I have always been,
but I told Amery that if Canada hung back that was no reason for
Australia to do so.

Rather curiously Bell [4], after reading the Empire Marketing
Board's Report, suggested that I should 'barrack' for South Africa
and Canada occasionally.

Actually the position of course is this. Australia is keen and
willing to cooperate and to do team work on any Imperial problem.

The other Dominions are less interested and inevitably the willing
partner comes more to the centre of things.

I really think the Empire Marketing Board's work is going well and
I hope that impression may be held in Australia. You are the
Board's spiritual Godfather as a consequence of the Imperial
Conference of 1923 and I do not forget that the success of the
Board should have an indirect effect upon the situation in
Australia.

MR. JULIUS

I have already told you that Julius and I are collaborating very
heartily indeed. I have formed a high opinion of his judgment and
his zeal is undoubted. His presence has, however, resulted in
great inroads on my time and, as a result, July has been a month
of extremely intense work. In fact every night I have been working
until late.

Julius appears likely to have a success with his 'tote'. [5] He
leaves for a six weeks' motor tour early next week. I shall pick
him up for a day at the Aberystwyth and the Aberdeen Research
Stations.

IMPERIAL ECONOMIC COMMITTEE

The Fish Report will be signed on Friday and will constitute I
believe a really valuable piece of work. It is naturally not much
concerned with Australia but the main lines of argument and
recommendations should prove valuable to the Development and
Migration Commission in tackling Australian fishery problems.

BRITISH AGRICULTURE

Last Thursday Mr. Baldwin [6] made a very important speech on the
state of Agriculture at Louth in Lincolnshire. I am enclosing the
'Times' report of this speech which is practically verbatim. The
National Farmers' Union are engaging in a fierce attack on the
Government as a result of this speech but I do not think they are
doing themselves very much good, because their statements are far
too extreme. It may interest you just to glance at a cutting from
the 'Manchester Guardian' giving the gist of the National Farmers'
Union's attitude. [7]

Hilton Young [8] has written to me asking whether I will cast my
memorandum on 'Agriculture and the Empire' into three articles for
the Financial News. I have not yet decided what action to take in
this matter.

ECONOMIC POLICY

I enclose a decidedly interesting article from the 'Times Trade
Supplement' entitled 'Safeguarding and Protection' by J. S. Hecht,
which I think is worth while your reading. [9]

ADVERTISING CONVENTION

The Advertising Exhibition is supposed to have been a great
success. I only had time to spend half an hour there. I am,
however, enclosing a 'Times' report of speeches made at the
Advertising Convention which was held simultaneously and would in
particular draw your attention to the speech made by Thomas. [10]
According to the 'Times' report, he stated that whatever were the
changes, the work of the Empire Marketing Board would go on. I
understand from those who were present that he was even more
emphatic and without equivocation pledged any Labour Government to
maintain the Empire Marketing Board. I shall try to obtain a
verbatim account of his speech if one was taken.

HOUSE OF COMMONS

On Monday last a most interesting debate occurred on the Board of
Trade vote. Cunliffe-Lister [11] at last acknowledged that the
trade position is unsatisfactory and gave official figures which
amply confirmed the views expressed by you at the Imperial
Conference. I want particularly to draw your attention to the
suggestion made by A. V. Alexander. [12] He was one of the
delegates to Australia, Parliamentary Secretary to the Board of
Trade in the Labour Government, and is pretty sure of Cabinet rank
in any future Labour Government. His veiled reference to Mr.

Pratten [13] is also worth noting.

I am enclosing the Hansard with marks against the portions of the
debate worthy of your attention. I think you will care to read the
whole of Tom Johnston's [14] speech.

With regard to Alexander's suggestion, I will write more fully
later.

THE AUSTRALIAN TARIFF

I have received from the Empire Marketing Board a copy of a letter
sent by a large Leicester Hosiery Manufacturer to Sir Philip
Cunliffe-Lister, on the subject of the Australian Tariff on
hosiery. It is an interesting example of the irritation which very
extreme tariffs in the Dominions cause in the minds of British
manufacturers. I am enclosing herewith copy of the letter referred
to.

I know the Empire Marketing Board were able to reply by sending a
memorandum which I prepared on the 'British Hosiery Trade and the
Australian Market' to show that, in spite of the tariff changes,
Australia is probably still the largest market in the world for
British knitted goods, although, the final figures for 1926 not
being available, it is impossible completely to prove the point.

AUSTRALIAN WINE TRADE

T. C. Angove, a large wine maker in South Australia, has been over
here for some time studying the market. He has arrived at certain
conclusions which are worth your notice. I do not suggest that
they are necessarily right but Angove has gone to a lot of trouble
and I feel pretty sure he gives them to me honestly, although he
is a little of a pessimist. He thinks that foreign wine makers by
exporting 2 parts of N.E.25 wine (duty 3/- per gallon) and 1 part
of N.E.40 (duty 8/- per gallon), blending in London can achieve
the following prices in comparison to Australian, based upon an
Australian price of 3/3d per gallon f.o.b. Australian port, less
wood and less bounty:

Angove's estimate of wine prices duty paid London

strength per gal.

Australian 34 9/1d.

Lisbon blended:

2 parts N.E.25) 30 8/6d.

1 " N.E.40)
Tarragona blended as above 30 8/1d.

*British made excise paid 30 5/-

*The British excise is only 1/- per gallon.

If these figures are approximately correct, it remains to be seen
what sort of quality the foreign blended wines will produce. The
British wine is distinctly bad and Angove himself declares the
Australian wine to be much superior to any of the above blends.

The new preferences have driven the foreign makers to try this
blending. I feel that the lesson from these figures is that
Australia must not be too anxious for the highest possible price
but must build up a strong trade position based on quality and
regular supplies.

Yours sincerely,
F. L. MCDOUGALL