My dear Prime Minister,

WINE

By last mail I sent you a rather long letter on the subject of
Australian wine. [1] The day after the despatch of this letter, I
received a cable from the Prime Minister's Department asking for
information on a number of points. Fortunately I was able
immediately to reply to all the points except one, which was a
question as to whether any foreign Government had made
representations on the delimitation of spirit strength for duty
purposes. I have now been able to reply to that point also to the
effect that no such representations have been made. [2]

I assumed that the cable from the Prime Minister's Department was
sent at the request of the Department of Markets and I have,
therefore, by this mail written fully to Mr. Paterson [3] on the
subject.

I must, however, tell you that the announcement that the
Commonwealth Government had introduced a Bill further to reduce
the export bounty came as a very great shock to everyone concerned
with the wine trade here and also caused very considerable
surprise in official quarters. [4] I had Sir Horace Hamilton, the
Permanent Head of the Board of Trade, to lunch yesterday, in order
to make sure that he had a proper grasp of the Australian point of
view on wine. He said that the announcement of the Commonwealth
Government's intention to reduce the export bounty would certainly
make any immediate further concessions extremely difficult to
extract from the Chancellor of the Exchequer. [5]

My own strong view about the bounty has, I think, been made clear
to you on several occasions. I feel that the Commonwealth
Government would have been wise to have offered to stabilise the
bounty for a period of years at 1/9d plus the 1/3d drawback on
excise, provided the industry would so organise its marketing as
to satisfy the Commonwealth Government that an orderly system
would replace the present chaos.

D. & M. COMMISSION

I was pleased to see in yesterday's 'Times' the announcement that
Mulvany [6] had been appointed as fourth member of the Commission.

He should prove of very considerable assistance to Gepp [7] for he
is an extremely hard worker and prepared to soak himself in detail
to an extent that not many men are either willing or capable of
doing. I have felt that, as the permanent head of a Department,
Mulvany's tendency to undertake a tremendous mass of detail
himself was probably a handicap but as one of a board of four, and
especially a board presided over by a man of Gepp's peculiar
genius, this resolute attention to detail may well prove extremely
valuable.

In connection with Mulvany's appointment, Faraker [8] informs me
that he is applying for the post of Secretary to the Department of
Markets. I have made very clear to you the very high opinion which
I hold of Faraker and I feel confident that, should he be given an
opportunity of this sort, he would fill the position admirably.

AUSTRALIAN TARIFF ON WOOLLENS

Since I last wrote, the 'Times' has reported an amendment in the
Senate, moved I think by Senator Kingsmill, to apply the high
rates of duty of 1/- per square yard Plus 30% ad valorem to
practically all varieties of British woollens. [9] This proposal,
if accepted by the Commonwealth Government, will cause
consternation in Yorkshire and from the Press I gather that the
Yorkshire Chambers of Commerce are already in a state of turmoil.

There are two ways in which I should regret such a sweeping
addition to the tariff. First of all I think it quite clear that
this amendment, if adopted, would result in a further definite
increase in the cost of living in Australia, with all the
consequent increase in the cost of production which any such rise
must mean. Secondly, such a sweeping further alteration would
result in very considerable resentment in Yorkshire which would
further complicate the task of the Empire Marketing Board in its
campaign to popularise the Empire idea in this country.

I was tempted to cable to you stressing both these points of view
but, on second thoughts, I felt that this would be merely a waste
of money for you know my views so clearly that no really useful
purpose would be served.

While on the subject of the Tariff, I might mention that I
received a pleasant note from Mr. Pratten [10] by last mail. I
feel sure that I have to thank you for this. He was good enough to
express himself very kindly on the way in which I had explained
the recent amendments of the Australian tariff. There can be no
doubt of the value and importance of early explanation on this
side of the world.

EMPIRE STANDARDIZATION

You will be interested to hear that the seed which Julius [11]
sowed at the Board of Trade is beginning to grow into a sturdy
plant. A large meeting of traders was held under the Chairmanship
of Cunliffe-Lister [12] last week and Sir Horace Hamilton told me
that it was a very satisfactory meeting in which everybody showed
a marked enthusiasm for a definite forward move on an Empire
basis. I am enclosing a report from the 'Times' on this subject.

[13]

EMPIRE RATIONALIZATION OF SECONDARY INDUSTRIES

Sir Horace Hamilton further told me that the Board of Trade was
very interested in the memorandum which I sent to him. While
marking it as confidential, he had it duplicated and sent to all
the officers in the Board of Trade concerned and also to Cunliffe-
Lister and the Parliamentary Secretary. He told me that their
feeling was strongly in favor of encouraging industries to get
together and to commence discussions on this subject and that the
Broken Hill Proprietary Co. and the British Iron and Steel
Federation were at the present moment in cable communication.

I am looking forward to hearing from you on this very important
subject in the course of the next three or four weeks. [14]

TROPICAL AGRICULTURAL RSEARCH

You will probably have heard from Sir George Pearce [15] or from
RIVETT [16] that the Commonwealth Council has proposed to the
Empire Marketing Board that, instead of establishing a single
large scale Tropical Agricultural Research Station in Northern
Australia, the joint fund of 50,000 capital and 10,000 a year
should be used to establish two or three Sub-stations in the
Australian tropics where younger men would work under the
direction of the brilliant headquarter staff which the C.C.S.I.R.

is getting together at Canberra.

This proposal from Australia set me thinking about the whole
question of the establishment of Tropical Agricultural Research
Stations. My own impression is that the one station already
established, namely the Imperial College of Tropical Agriculture
at Trinidad, is useful but not a very firstclass show. In the same
way I feel convinced, from my knowledge of the Director who has
been appointed to Amani in East Africa, that, although good
plodding work will be done there, no very brilliant original
scientific work is probable. Under these circumstances it seems to
me quite likely that we ought to recast the whole of our ideas on
Tropical Agricultural Research and instead of attempting to create
a series of large full scale research stations in the tropics,
better work would result for the same, or for very modest
expenditure, if certain existing research stations in the
temperate zones, such as, for instance, Rothamsted and East
Malling in England, the Rowett in Scotland, Onderstepoort in the
Transvaal and the Waite in Adelaide, were asked to undertake the
fundamental consideration of certain tropical problems and were
given the means to establish out-stations in the tropics.

I have written fairly fully by this mail to Rivett on this subject
but think you would just like to have it brought directly to your
attention.

EMPIRE TRADE

Yesterday in the House of Commons there occured a Debate on Empire
Trade and I am enclosing the Hansard. [17] On the whole the level
of the Debate was distinctly good and I think you would find it
quite worth your while to skim through it.

It so happens that the Mover and Seconder of the Debate both
consulted me regarding the line which they should take. In
addition one Tory and one Labour Member, who actually intervened
in the Debate, came to me for some suggestions and three other
Tories, who desired to intervene in the Debate but were not
successful, also asked for suggestions.

In the copy of the Hansard which I am forwarding to you, I have
marked those sections of the various speeches which were directly
and immediately obtained from myself.

You will be very interested in the speech made by Cunningham Reid
[18], who has just returned from Australia and who very strongly
expressed the view that unless the British motor industry was
prepared to face amalgamation in order to deal with the Empire
market, American combinations were almost certain to take complete
control of the situation. I have no doubt that Reid's statements
were inspired by his conversations in Australia both with yourself
and with Gepp.

Perhaps the most outstanding feature of the Debate was the
insistence on the importance of the work of the Empire Marketing
Board.

BRITISH TRADE IN THE FOREIGN WORLD

As a result of my appointment to the Consultative Committee of the
League of Nations, I have spent some time at the weekends going
through League of Nations economic publications. As one result I
have discovered a most useful mine of information in some of their
statistical statements. From these statistics, I have extracted
three statements which I am now enclosing. Each shows the relative
progress of Great Britain and the United States of America in the
export trade, in the first case to South and Central America, the
second to Europe and the third to the Far East. The general effect
of these statements is very alarming, because it shows what a
tremendous competitor the U.S.A. has become to Britain during the
post-war years.

I would draw your particular attention to the figures in regard to
the various countries marked in blue pencil in these statements.

The surprising thing about these figures is that they are not
known among people who are particularly concerned in trade matters
in this country. I showed them to the Permanent Head of the Board
of Trade and to the Editor of the 'Times Trade Supplement' [19]
and they were both astonished and utterly surprised.

Yours sincerely,
F. L. MCDOUGALL