My dear Prime Minister,

In recent letters I have referred to the way in which the existing
trade treaties of foreign countries affect the possibility of
Australia obtaining specially favorable treatment for her goods
through the medium of trade treaties with selected foreign
countries.

I have now received an illuminating statement, prepared at my
request by Mr. Fountain [1], the head of the Commercial Relations
Section of the Board of Trade. The nett effect of the information
contained in this memorandum appears to be as follows:-

United States of America

The present tariff system of the United States of America does not
admit of the granting of special terms to the goods of any foreign
country (save Cuba). Australian goods are not penalized above
those of other countries, although many of the duties are very
high.

Japan

Japan has granted Most-Favoured-Nation treatment to all
Australia's main competitors. Australian goods are penalized as
Australia has not adhered to the United Kingdom-Japan treaty.

Apparently Australia can adhere but would be required to promise
MostFavoured-Nation treatment to Japanese goods.

Germany

The situation in Germany is similar to that in Japan. Australian
goods are penalized but Australia can remove this disability by
adhering to the Anglo-German Treaty and giving M.F.N. treatment to
German goods. It should be noted that Germany has the right to
denounce the clause whereby the Dominions can adhere to the Treaty
by giving three months' notice. It has been suggested that, if
Australia or Canada decided to adhere, Germany might denounce this
clause as Germany is credited with a desire to break through the
preferential system favoring British goods in the Dominions.

France

The position in France is far more complex than is the case with
Germany or Japan. As there is no Anglo-French treaty according
M.F.N. treatment but a Decree, it does not appear open to
Australia to obtain M.F.N. from France save by direct treaty
negotiations in which France would demand concessions. The
handicaps upon Australian meat, butter, apples and dried fruits
are severe.

Belgium

There is no discrimination against Australian goods as such in
Belgium but the tariff clause giving barrelled apples preference
over those in boxes is a handicap.

Netherlands, Norway, Sweden and Denmark

There is no discrimination in Tariffs of these countries.

Italy

Here again the position is somewhat complex but all Australian
goods, save those from South Australia, receive M.F.N. treatment.

In Italy all Australia's chief competitors have M.F.N. treatment
under Treaty.

It appears from the foregoing that Australia cannot hope to obtain
specially favorable treatment for her produce through trade
treaties with any important foreign country. It further appears
that she can remove disabilities with Japan and (at the moment)
Germany by adhering to British treaties with these countries,
provided she gives them M.F.N. treatment in return. To remove
disabilities in France, a special treaty would be required.

The present situation in regard to Italy does not appear to
warrant negotiations, as the only legal disability is on South
Australian goods and it is doubtful if this disability is
enforced.

I am enclosing the Board of Trade Statement which you may find of
value.

Yours sincerely,
F. L. MCDOUGALL