My dear Prime Minister,

DISTRIBUTION OF SECONDARY INDUSTRIES WITHIN THE EMPIRE

This week I have completed the memorandum to which I referred in
my letter to you of the 19th of January. The primary purpose of
this memorandum was to meet a request of Sir Horace Hamilton, the
permanent head of the Board of Trade, to put down on paper my
ideas about Empire secondary industries. If you have time to read
it, you will find that I have not attempted to sketch out a plan
of action in anything like the same degree as I did in my long
letter to you last week. [1] If, however, my letter introducing
this subject interested you, I should be glad if you would go
through the memorandum.

I am not sending any copies of this memorandum to anybody else in
Australia by this mail but I shall probably have it duplicated,
marked as confidential, and then send it to Gepp [2] and to two or
three other people. You will observe that it is intended for
British consumption and contains a good deal of propaganda in
favour of Empire trade. The figures in Table 11 to Appendix I are
very interesting. They are based on figures which I supplied to
you about six months ago but have been brought up to date for the
year 1927 and have also been simplified.

IMPERIAL ECONOMIC COMMITTEE

Last Friday the High Commissioner [3] received your cable
instructing him to approach Sir James Cooper [4] or-failing Sir
James Cooper-Gough [5], to see whether he would serve as a
representative of Australia during the coming Main Session. Your
cable also referred to Faraker [6] and you said that you were not
prepared to agree but would reconsider the matter if I wrote fully
my reasons for making the suggestion.

By now you will have heard that Cooper is willing to serve and I
hope that the formalities connected with your officially notifying
the British Government of his appointment will be completed in
time for him to attend the first meeting of the new Session on the
31st January.

Frankly, I am just a little disappointed that you found it
necessary to appoint Cooper rather than some distinguished
Australian who would be returning to Australia after the work of
the Session was over. From a purely personal point of view nothing
could be more satisfactory to me than Cooper's appointment. I
shall, of course, get on with him extremely well and, what is
more, he will certainly do a reasonable share of work. I had,
however, hoped that you would have been able to find each year
some person who would be really influential in Australian circles
and thus be able to create in Australia a body of opinion among
men who had had active experience of the working of Inter-Imperial
economic affairs. However, I expect that you gave this aspect of
the matter full consideration and were unable to light upon a
suitable person who happened to be coming over.

With regard to Faraker, in my letter of the 11th of January [7] I
think I explained fairly clearly my ideas as regards him. I have
several times told you of the high opinion which I have formed of
Faraker and I consider that he is somewhat handicapped in his work
as Commercial Officer by a lack of status.

On the various Sub-Committees of the Imperial Economic Committee
his availability would certainly be of great assistance. You may,
of course, reply that, under the new Standing Orders, experts may
attend and I can thus make use of Faraker's services as an expert.

This would be by no means the same as Faraker definitely being
appointed as an alternate.

I do not, however, intend to press you and, as I mentioned in my
letter of the 11th of January, if I do not hear from you in about
a month's time, I shall conclude that you prefer to have the
matter of Faraker in connection with the Imperial Economic
Committee dropped. [8]

MANCHESTER CHAMBER OF COMMERCE

The Manchester Chamber of Commerce have just issued their Annual
Report. I have not actually seen the document but the press have
quoted some sentences from the report. As usual the Free Traders
are taking a ,gird' at Australia's economic policy. The
opportunity given by the most unfortunate choice of words seemed
too good to miss and I, therefore, prepared a statement in reply
which the High Commissioner is signing and which is being issued
to the press tonight. I enclose a copy of the statement which I
hope you will regard as adequate and fairly complete. I am hoping
for a large measure of publicity for this statement because its
news value is considerable. [9]

I worked out the 1927 percentages given in the table on page 2
from the Monthly Statement of Trade, which has only been issued
two or three days and with which no one is yet familiar.

INDIAN TARIFF BOARD

Some time ago I mentioned in a letter to you Chadwick's [10]
address to the Society of Arts on the working of the Indian Tariff
Board. I am now able to send you the full printed report of his
paper and of the discussion which followed it. Chadwick has also
written to me and has been good enough to enclose some very
interesting facts about the way in which the protective duties and
the additional bounties on iron and steel goods in India have been
reduced since 1924. As you are going so closely into tariff
matters, I am forwarding three copies of Chadwick's paper, three
copies of his letter to me and three copies of the extract from
the Tariff Schedules, because I feel that you may desire to hand
this information to the people who are looking into tariff
questions with you.

It is very significant that India has been able entirely to
abolish the additional bounties on iron and steel goods and in all
cases, except one, to reduce the protective duty. The British
preference that has resulted from this successful attempt to
protect the Indian iron and steel industry is by no means the
least interesting feature of what has occurred. Of course the
difference in the standard of living between India and Australia
makes an Indian example very far from being directly applicable in
Australia but the very fact that India should, in so short a time,
have been able to dispense with so much of the assistance given to
this industry is a fact, the significance of which should not be
lost sight of in Australia.

MR. A. E. GOUGH, O.B.E.

Mr. Gough is leaving for Australia on the 4th of February. He has
had several long talks with me about marketing problems and I have
given him letters of introduction to Mr. Paterson [11], to Gepp,
to Mulvany [12] and to Clive McPherson. [13]

Gough is anxious to have an opportunity of a talk with you and I
have told him that I would let you know that he was going out. I
have suggested to him that, on his arrival in Melbourne, he should
write to you informing you of his presence in Australia and
enquiring whether you could give him an interview. He will be in
Australia for three or four months. I daresay you would find him
much more interesting to talk to after he had had an opportunity
of getting to know local men and local conditions. On the other
hand, you may find it useful to see him at an early stage as well
as towards the end of his visit. If you did this, you might use
him as a sounding board to obtain the reaction of the cooperative
people in Australia to a closer co-ordination of marketing
problems.

Although Gough is tied to the Cooperative Federations and is in
fact employed by them, he is by no means narrow on that subject
and is quite prepared to entertain large scale ideas for complete
trade cooperation without postulating, as a necessity, cooperative
predominance.

26th January

MANCHESTER CHAMBER OF COMMERCE

I am glad to say that very good publicity was achieved this
morning for the reply to the Manchester Chamber of Commerce. I
have already seen the statement printed in full in the 'Times',
the 'Manchester Guardian', the 'Financial Times' and the
'Financial News' and I expect some of the other papers will have
done the same. The 'Manchester Guardian' reacted fairly vigorously
and I am enclosing the statement as printed in that paper together
with its comments. [14] I am also sending a copy of the statement
from the 'Financial Times'.

Since writing the statement for the High Commissioner, I have
received a proof of the Manchester Chamber of Commerce Report. I
am enclosing an extract which I should like you to read. I will
try and obtain a proper copy of the report to forward to you as
soon as possible.

Yours sincerely,
F. L. MCDOUGALL