My dear Prime Minister,

RATIONALISATION OF EMPIRE INDUSTRIES

I have paid the closest attention to such cabled summaries as I
have been able to see of the speech which you made to the
Association of British manufacturers. [1] From these summaries I
gather that you made some reference, although perhaps not a very
direct one, to the idea of British and Australian manufacturers
coming together and arriving at some basis whereby the industries
might be rationalised.

I am hoping that, before very long, I shall receive a reply to my
letter of the 19th of January, in which I put this question to you
at very considerable length. [2]

SUGAR

On Monday last I received a copy of your cable to the High
Commissioner [3] of the 31st March, in which you requested him to
ask me to convey to the British Authorities certain
representations in regard to the Australian sugar industry. [4]

I immediately arranged to see Sir Francis Floud, the Chairman of
the Board of Customs, and found that the Agent-General for
Queensland [5], together with other representatives of Australian
sugar interests, had already made representations. I was informed
that the Customs could not make any recommendation to the
Chancellor [6] that the delimitation in regard to duty should be
increased from 98 to 99 polarisation, because if such an
arrangement were made, it would facilitate foreign interests
importing sugar into this country to the further handicap of the
British refining interests.

Floud explained that it would be very easy indeed for foreign
interests to add a small amount of moisture to the refined sugar
imported at the lower rate of duty, arrange for it to be dried in
this country and thus not only would the import of foreign sugar
increase but the Customs would be deprived of revenue.

Floud went on to state that the Beet Sugar Producers in this
country, and also the Cane Sugar Producers of Mauritius,
anticipated a slight detrimental effect just in the same way as
the Australian sugar interests but both the British beet sugar
people and those qualified to speak on behalf of Mauritius had
recognised the desirability of some further safeguard for the
important sugar refining industry and had stated that they were
not prepared to oppose the British Refiners' suggestions.

Floud said that the Board of Customs could not understand the
suggestion that there might be some serious deterioration of
Australian sugar if it was imported at a polarisation of 98 and
under. He pointed out that, in 1925, a very large proportion of
the Australian sugar received was under 98 polarisation. He also
pointed out that the bulk of the Java sugar which arrives in Great
Britain, after a voyage very similar in length and conditions to
that from Australia, is under 98.

Floud went on to say that, so far as the Board of Customs could
see the matter, if the Chancellor accepted the proposal of the
British Sugar Refiners, all that would be necessary for the
Australian industry to do would be to make a very slight
adjustment in the way in which they ran their centrifugal drying
machines.

Having obtained this information, I cabled to you yesterday giving
you the gist of Floud's statement. [7] I have kept Amery [8]
informed on the matter but in view of Floud's reply, I do not
think there is any prospect of the Chancellor considering it
necessary to alter his attitude to the British Refiners' proposal
in consequence of the Australian sugar representations.

Incidentally Floud told me that the British Sugar people were very
much annoyed with the Australian tariff. He said that they alleged
that Australia had been importing sugar from foreign countries in
order to release a larger quantity for export to Great Britain
where a preferential benefit was obtained-at the same time
Australia had prohibited the importation of golden syrup, thus
stopping a fair trade which had been enjoyed by British Refining
interests.

I told Floud that I would carefully look into both these questions
and I have today written him a letter which shows that there is no
real substance in either complaint. I enclose a copy of my letter
to Floud in case the information may be of use to you.

WINE

He told me that the Board of Customs would not recommend the
Chancellor to make any change in the delimitation of wines but to
leave the 25 line for foreign wines and 27 for Empire wines.

This is quite satisfactory. He also told me that he had very
carefully considered the representations cabled to Amery by the
Australian Viticultural Council.

So far as British wine was concerned, he told me that the bulk of
the British wines were under 27 in strength and therefore, even
if the Chancellor desired to put them oh the same level as Empire
wines, the duty which he would have to impose would not be 4/- as
supposed by the Australian Viticultural Council but 2/-, being the
duty on Empire wines of 27 strength and under.

I must say that this was a very surprising piece of information as
I had been under the impression that the bulk of the British wine
was of about 30 strength. I asked whether they had considered
making a different excise on British wines over and under 27
strength. Floud told me that this had been considered but they had
been forced to the conclusion that, in the event of any such
delimitation in the case of British wines, the whole of the wine
would be turned out at a strength of 27 and under.

It does not appear, therefore, that there is much probability of
any change in the excise on British wines in this Budget. [9] I
added a paragraph to my Sugar cable in order to give you
information on these two points.

FODDER CONSERVATION

Recognising the immense importance to Australia of any method
whereby a cheap, concentrated, highly transportable form of fodder
which could be expected to keep for several years, about five
months ago I arranged with the Empire Marketing Board for a really
firstclass young scientist to be given the job of collating all
the available information on the subject of the preservation of
young grass. This work has now been completed and I am enclosing a
rough proof of the memorandum which has been submitted to the
Empire Marketing Board. I do not, for a moment, suppose that you
will desire to go through this yourself but I am sure that you
will want to pass this information on to your Pastoralist
Committee. The memorandum will be printed and I shall arrange for
several hundred copies to be sent to Australia but in the event of
your Committee meeting shortly after the arrival of this letter, I
expect they will like to have early information. On the whole I
think it a remarkably good memorandum for there was very little
information for the author to work on and he has made a very
careful study of the position. [10]

In the event of your Committee considering that this memorandum
opens up possibilities which would be useful to Australia, I
should appreciate a communication which would strengthen my hand
in urging the Empire Marketing Board to follow up this subject.

I am communicating with both Gepp [11] and Rivett [12] about this
matter.

THE AUSTRALIAN TARIFF

The other day I met Captain Hacking [13], the Minister in charge
of the Department of Overseas Trade, who talked to me very
seriously about the effect of the recent tariff amendments in
regard to woollens. He pointed out that the amendment which was
made about a year ago, imposing very high duties on the cheaper
types of woollen goods, had caused a great deal of outcry in the
West Riding and that the amendment in the Senate, which had been
adopted in the House of Representatives, was causing a most
antagonistic feeling to things 'Australian' in the West Riding in
Yorkshire. He said that he found it very hard to explain to West
Riding people how it could possibly be necessary for a country
like Australia, possessing almost a monopoly of the best wool, to
impose so prohibitive a tariff in order to protect an old
established industry. He stated that he was afraid that this
amendment would nullify all the work that the Empire Marketing
Board had been doing, at least so far as the West Riding was
concerned.

I told Col. [sic] Hacking that there was no possible doubt that,
on balance, the Australian tariff substantially helped British
trade and that British industries, as a whole, would be in a very
much worse position in Australia if Australia were a free trade
country.

Hacking said that he recognised that there was a great deal of
force in this contention and would be very happy carefully to
examine any figures that I cared to put before him. He went on to
say that industries helped by preference rarely, if ever, made any
public acknowledgment of that help but that, on the other hand,
every time any industry felt itself penalised, its leaders
shrieked either in Parliament or in the press.

I immediately agreed with his statement and suggested that it was
part of the duty of the Ministers concerned with British trade to
point out to British industry how wrong headed this attitude was.

Hacking countered by referring to the speeches of Amery but I told
him that Amery's speeches, excellent as they are, are largely
discounted on the ground that everyone regards him as an Empire
enthusiast and also on the ground that he is in no sense
responsible for British trade. I suggested very strongly to
Hacking that he and Cunliffe-Lister [14] and the Parliamentary
Secretary to the Board of Trade [15] ought occasionally to make
the point that the number of industries assisted by Australian and
New Zealand preference were far in excess of those who were
handicapped by protection.

The fact, however, that one is able effectively to convince
intelligent people by a long personal conversation does not, in
the least, decrease the seriousness of what Hacking said to begin
with. There can be no doubt that in certain areas, particularly
the West Riding, Leicester, Northampton and one or two other
places in the Midlands, the whole propaganda in favor of closer
Empire relationship goes for little in face of the way in which
Australian tariffs operate on these districts.

I recognise that it is, of course, inevitable that certain British
industries must be damaged by the development of Australian
manufactures but I think you will agree that it is difficult to
convince people that if Australia's industry is reasonably
efficient, tariffs need to be so extremely high. There would, I
think, be little criticism of a tariff of 35% ad valorem. It is
when the Commonwealth Parliament pushes a tariff against British
goods to duties equivalent to 50% ad valorem and over that a howl
of indignation rises.

BRITISH MEAT SUPPLIES

I am enclosing another important letter which appeared in Monday's
'Times' on the subject of meat infected with foot and mouth
disease imported from the Argentine. [16] I think that this
subject may become of firstclass importance because it has now
been definitely ascertained by the Ministry of Agriculture
Veterinary Research Institute that the bones and marrow of animals
subjected to temperatures, such as those employed in the transport
of chilled meat, retain their virulent infected qualities up to
periods of from 45 to 50 days. This fact shows that it is highly
possible for Argentine chilled carcasses to cause outbreaks of
foot and mouth disease among English herds. The great obstacle to
any prohibition or even serious restriction of the importation of
infected supplies from the Argentine is the enormous quantity of
meat which would thus be affected.

The idea has occurred to me, however, that, as not less than 30%
of Great Britain's population live in close proximity to great
ports, a regulation might be made confining the use of meat from
countries in which foot and mouth disease is endemic to port
areas. I have not yet had time to test this idea on any people
that matter but shall do so after Easter and will let you know
what the reactions are. I would, however, suggest that you might
think it worth while to inform your Pastoral Committee that the
British Authorities are attaching great significance to the danger
of infection of British herds through Argentine chilled meat.

Yours sincerely,
F. L. MCDOUGALL