My dear Prime Minister,

THE IMPERIAL CONFERENCE

Since my last letter I have, at Sir Horace Hamilton's [1] request,
had a further talk with him about the idea of the formation of
some circle to discuss economic issues that might arise at the
Imperial Conference.

Hamilton said that while he keenly appreciated the probable value
of such talks, he felt that there was a very considerable element
of danger. Some of the other Dominions, he thought, might become
aware that the talks were in progress and feel aggrieved at their
non-inclusion. He said that since my talk with him he understands
from Batterbee [2] of the Dominions Office that Casey [3] had made
a similar suggestion in regard to the political side of the
Imperial Conference and that both Batterbee and Whiskard [4] felt
there was considerable danger of annoying Canada, South Africa or
Ireland.

After we had discussed that aspect of the matter, we came to the
conclusion that the best thing to do would be for Hamilton, Sir
Sydney Chapman [5] and myself to keep in touch, and for me also to
keep in touch with Whiskard of the Dominions Office, and, of
course, with Sir David Chadwick [6] and Tallents [7], and that the
question of the formation of a definite circle should be left in
abeyance, but that some 3 or 4 of the proposed circle might well
meet and dine together occasionally for the purpose of a
discussion.

Hamilton said that after thinking the matter over he had come very
definitely to the conclusion that it would be best to omit all
ministers.

Whatever may happen about the joint discussions I am satisfied
that the conversations which I have had with Hamilton are likely
to set the Board of Trade machinery in motion at a much earlier
date than normally would have happened and lead to a more serious
consideration of Empire economic issues.

A NATIONAL CAMPAIGN FOR THE DAIRYING INDUSTRY

In my last letter I referred at some length to the idea of your
interesting yourself in a national campaign to improve the
economic position of the dairying industry. I now enclose 3 copies
of some notes which I have put together on the subject. I shall
not send these notes to anyone else in Australia but shall send a
copy to Dr. Orr [8] and will then forward to you his opinion.

Should you feel that the idea has some merit I would recommend you
to send for Dr. A. E. V. Richardson [9] and for W. S. Kelly [10]
and ask them jointly to prepare a sound scheme. I doubt whether
the Dairying Industry itself contains any man of sufficient
ability, and even if it did, the insensate jealousies which rend
the industry would dog and hamper his efforts. I feel that
assistance must come from outside.

I daresay you would feel that Mr. Paterson's [11] views would need
to be taken at a very early stage. You may also desire to give
Gepp [12] a copy of these notes. I have not sent them to Paterson
or Gepp because it seemed just possible that you might prefer to
think over the idea yourself before anyone else started to get
interested in it.

I shall try to obtain some information about Mussolini's [13]
'Battle of the Wheat' to forward to you. My technical assistant,
A. S. Fitzpatrick, was very interested in this when he was
attending the World Motor Transport Conference in Rome, and I have
asked him to get what information he can together.

AGRICULTURAL ECONOMICS

I enclose some notes which I have, very roughly, put together on
the importance of the study of Agricultural Economics to
Governments. I hope to stimulate my Agricultural Economics
Committee to a serious survey of the possibility of some uniform
technique on cost of production.

This matter has become of vigorous political importance here owing
to the attack just launched by the National Farmers' Union upon
the Government. The fact that the Commonwealth Government and the
States continually have to meet demands from primary producers for
assistance, makes it obvious that the evolution of some recognised
means of assessing costs of production would be extremely useful.

I recognise that the subject bristles with difficulties, but I
feel sure that we ought to see what possibilities there are of
developing a method. If it can be done it should prove of
considerable value to your new Economics Research Department.

CANADIAN PREFERENCE

The announcement of the Canadian Government's intention to insist
upon 50% United Kingdom material and/or labour in goods which are
to qualify for preference has caused a very marked flutter here.

This is due to the refusal of the Canadians to institute a list of
exemptions. Hamilton told me that as the regulation now stands it
would exclude all British cotton piece goods and the bulk of
manufactured cotton goods from preference and simply assist the
American manufacturer. It seems absurd to insist that 50% of the
value of cotton piece goods should be of British labour and/or
material when Great Britain cannot produce cotton. This whole
subject requires careful consideration and might perhaps form an
important item on the agenda of the imperial Conference.

The disadvantages of conducting a correspondence at 12,000 miles
range are very great. I have just looked through the file of my
letters to you and find that you will only just have received my
first letters and notes about the economic side of the next
Imperial Conference. I, therefore, cannot expect to receive any
general expression of your views for another month. I am most
anxious to know how your mind is tending to regard the various
problems which will have to be faced, and shall, therefore,
anxiously await your communications.

Yours sincerely,
F. L. MCDOUGALL