My dear Prime Minister,

THE IMPERIAL CONFERENCE

Yesterday Sir Horace Hamilton, the permanent head of the Board of
Trade, lunched with me and we had a most interesting talk about
economic issues at the next Imperial Conference. I had sent him in
his personal capacity copies of my memoranda and he said he was
particularly interested in those upon American competition and on
advertising British goods in the overseas Empire. [1]

First we discussed the possible date, and Hamilton expressed his
strong conviction that October 1929 would prove impossible; this
led to consideration of the chances of a Labour Government.

Hamilton did not consider such a happening very probable, but
thought that if Labour obtained power or came into office by an
arrangement with the Liberals, it would certainly lead to the
abolition of the sugar and tea taxes with the consequent
elimination of the preferences on these articles. He thought the
dried fruit preferences unlikely to be touched, and the wine and
tobacco preferences he regarded as safe. I impressed upon him that
the repeal of the sugar preference without any effective
equivalent would have a most serious effect.

We then talked about documentation, and he promised to give the
idea of surveys of the competitive position in regard to
industries careful consideration. Finally I suggested the
formation of a small circle of say ten men, including Hamilton,
Chapman [2] and one more junior man from the Board of Trade,
Hacking [3] the Minister for the Department of Overseas Trade,
Elliot [4] and Ormsby-Gore [5] Whiskard [6] from the Dominions
Office, Chadwick [7] from the Imperial Economic Committee,
Tallents [8] from the Empire Marketing Board, together with Casey
[9] and myself. The idea being to meet at dinner once a month for
the next six months and to discuss in the most informal way
Imperial Economic questions, with the object of forming some ideas
which might prove useful when the Board of Trade and the Dominions
Office begin seriously to tackle conference questions. Hamilton
was quite interested and promised carefully to consider the idea.

I am now enclosing Memorandum No. 5, which deals with the
preferential systems as between Great Britain and the Dominions
and Colonies. [10] I undertook to do something on this subject at
the definite request of Amery [11], who wrote and said that he did
not think any comprehensive survey had been made, and that he
thought something of the sort would be useful. I therefore thought
it was as well to make an attempt and put it into this series. The
closer one gets to any attempt to assess the real value of
preferential rebates to the country receiving them, the more
difficult it becomes to find any sound basis, and I feel quite
sure that a much better way would be to take the more important
industries which benefit under preference and to draw up notes on
the effect of the preference on each industry. I shall try to get
out a series of notes of that character during the next three or
four months. Meantime the present memorandum may serve some useful
purpose. I should, however, particularly like to ask for your
comments on it and for any suggestions that you may feel inclined
to let me have.

I am also forwarding a leading article from last week's Times
Trade Supplement. This is really an article which I prepared and
which the Editor [12] published in a condensed form as a leader.

It brings out the idea of a priority list for British loans to
assist Empire development, based on the idea that the development
of certain parts of the Empire will benefit Great Britain much
more rapidly and more directly than the development of certain
other parts.

TARIFF COMMITTEE'S REPORT

I have not yet received a copy of Professor Brigden's [13] amended
version of your Tariff Committee's Report. If this has not been
sent by the time this letter reaches you, I should be very glad if
you would be good enough to arrange for me to receive it.

ANIMAL HEALTH RESEARCH

Last week I saw Sir Arnold Theiler [14] the day after he arrived
from South Africa. He was not very well, having some rheumatism
and a tendency to bronchitis, and he was more concerned about
getting back to Basle and placing himself in the doctor's hands
than in anything else. As, however, conversation progressed he
became more enthusiastic about the Australian scheme, but told me
that he was still quite unable to give any definite decision as to
whether he could undertake the Australian work or not. He said
that Lady Theiler was very reluctant to go to Australia for any
length of time, especially as her children were unwilling to leave
their posts in South Africa in order to take up new duties in
Australia. I gathered that Theiler himself would really very much
like to undertake the work, but is having great difficulties owing
to Lady Theiler's reluctance.

This week-end I have been up to Aberdeen where we have been
holding a series of conferences on Empire Marketing Board research
problems and other problems. Elliot and Dr. Orr [15] were present,
and also Sir Robert Greig. [16] It was impossible to get very far
with the Australian animal health question. Dr. Orr is coming to
London and is dining with me to-night in order to discuss fully
Sir Arnold Theiler's report. I found that Theiler was
extraordinarily interesting and had a prolonged discussion with
him, and also with Dr. Orr, about the Australian problems, and I
feel that a discussion lasting a couple of days with Orr might
help him a great deal towards making up his mind, as there can be
no possible doubt as to the importance of an early decision in
this matter to Australia. I shall do my utmost to try to arrange
for Orr and myself to go to Basle and see Theiler, if Theiler's
doctors refuse to let him travel back to London.

ASSISTANCE TO AUSTRALIAN PRIMARY PRODUCERS

You may perhaps remember one or two conversations that I had with
you after the conclusion of the 1923 Imperial Economic Conference
on this subject. It then appeared that the political situation in
Australia demanded that the primary producers should be made to
feel that the Commonwealth Government was intensely interested in
their welfare. From this distance it appears as though a very
similar position has arisen since the General Election, and I have
been wondering what sort of action the Commonwealth Government
could take apart from the very large measure of assistance which
it has already given. As a result of listening to the views of Dr.

Orr and Sir Arnold Theiler on the possibilities of rapid
improvements in the economic production of the various pastoral
industries, I have come to the conclusion that it would be well
worth while to put up to you an idea which has occurred to me.

In Italy during the last year Mussolini [17] has organised a very
successful campaign to increase the production. He called it the
'battle of the wheat'. Now it seems to me that the Commonwealth
Government might select one or two primary industries which are
not producing as well as they ought to and in which it is clear
that the adoption of well-proved remedies would make dramatic
changes, and then arrange for the organisation of an intensive
drive to secure more economic production and therefore better
returns to the primary producer. As an example, let me take
dairying. The yield of milk per dairy cow in Australia is woefully
low, and this low level of the efficiency of the Australian cow is
the main cause of the Australian dairyman's financial troubles. In
order to improve the whole economic standard of the dairying
industry of Australia, better feeding and better breeding are
essential, but of these two there is little doubt that better
feeding should come first, because better breeding without better
feeding is uneconomic, and may indeed be even bad from the point
of view of animal health. I gather both from Orr and from Theiler
that there is sufficient knowledge already available to provide a
solution to at least the grosser forms of unsatisfactory feeding
in the dairying industry without any further scientific research,
and that quite astonishing changes might be achieved could the
dairy farmers of Australia be induced to put the already
ascertained knowledge into practice. Suppose the Commonwealth
Government were to have a conference of the Ministers of
Agriculture of the various States to point out how necessary it
was to improve the general status of the dairying industry, to
make it clear that if great results for Australia were to be
achieved it would be necessary to carry out some campaign on a
national basis, and to point out that all that seemed necessary to
do would be to have effective educational publicity throughout the
dairying districts, and demonstrations on an economic basis
carried out.

The Commonwealth Government might perhaps feel inclined to offer
to find a sum of a few thousand pounds to provide the basis for
such a campaign of educational publicity. The Conference might
then agree to declare some definite national objective. Merely as
an illustration I might suggest that the objective should be to
increase the average milk yield of the cows of Australia by fifty
gallons each year. This idea is in a very nebulous form and I am
going to discuss it with Dr. Orr, and shall try to prepare a
memorandum and send it to you on the subject. Should anything
associated with the idea appeal to you at all, there is one man
who, I think, would prove extraordinarily valuable, namely W. S.

Kelly [18] of Giles Corner, South Australia. I have in the past
mentioned Kelly's name to you. He is a successful farmer and there
might be some difficulty in inducing him to leave his farm even
for say half his time, but I know no one who could more
effectively influence farmers in the direction of increased
production. It just seems to me that if it were possible for the
Commonwealth Government to take the initiative in a series of
campaigns of a highly practical and indeed utilitarian nature to
increase the productivity of our primary industries, such
campaigns might be of the very greatest value to Australia and of
some political significance to the Commonwealth Government. [19]

BRITISH MOTOR IMPORTS

Last week the Secretary of the Society of Motor Manufacturers and
Traders, accompanied by Mr. Lucas of the well-known firm of Lucas
& Co., called on me to discuss the methods whereby the Australian
customs authorities assess home consumption value on spare parts
for motor vehicles. After listening to what they had to say I came
to the conclusion that the matter was of very substantial
interest, and, after explaining to them that I had no official
status in regard to customs, I advised them to write to the High
Commissioner [20] asking him to forward their views to the
Commonwealth Government. In case, however, this matter should be
merely sent by your Department on to the Customs Department and
escape your notice, I am enclosing a copy of the letter to the
High Commissioner, together with an accompanying memorandum. I
would very strongly recommend that the matter should receive your
own attention, because the Motor Traders claim that if American
spare parts were assessed on the same basis as English spare
parts, the result would be, on the basis of the present volume of
American imports into Australia, an increase of revenue to the
Commonwealth Government of over 500,000 per annum. I am not in a
position to judge as to whether the statement put forward by the
Motor Manufacturers is sound, but having regard to your policy
speech and to your general anxiety at the increase of imports from
the United States of America and the very unsatisfactory balance
of trade between Australia and that country, I cannot help
thinking that you might find along the lines of this proposal a
method of securing some useful adjustment.

Yours sincerely,
F. L. MCDOUGALL