My dear Prime Minister,

THE AUSTRALIAN TARIFF

On Monday Mr. Amery [1] asked me to call on him. He explained that
the President of the Board of Trade [2] was in a difficult
position as he had promised to speak at the opening of an Empire
Shopping Week at Nottingham and the local hosiery manufacturers
had declined to have anything to do with the show owing to the
heavy incidence of the new tariff.

Mr. Amery wanted me to prepare a statement which would enable
Cunliffe-Lister to deal with the matter. I have done so, and I
think it is a good and effective answer. I enclose a copy of my
letter to Amery and of the schedules attached thereto. I
understand, however, that the British hosiery manufacturers are
under the impression that an additional tax of 24/- per doz. on
imported socks and stockings is contemplated. This would be
protection with a vengeance. You may remember that, in November
1924, I prepared a statement for you entitled 'Protection and the
Wages Bill'. I have glanced at this statement and think it may be
worth your attention although, as it is now out of date, perhaps
I'd better prepare another.

In the hosiery industry the following figures appear to be of
interest. In 1924-25 the Knitting Factories in Australia produced
goods to the value of 3,785,168. The value added by process of
manufacture was 1,973,117 and the total of salaries and wages
paid was 777,296. Wages and salaries thus represented 20% of the
value of the output and 43.6% of the value added in process of
manufacture. The present duty on hosiery other than socks and
stockings is General 60%, Preferential 45%, but these are the
minimum rates and are only levied when the fixed rate of 1/- per
garment plus 30% ad valorem yields a lower return. It, therefore,
appears as if the tariff on these classes of hosiery is
sufficiently high to cover the entire wages bill, and not merely
the difference between Australian and British wages.

On woollen socks and stockings the duty is now General 60%,
preferential 45%, figures which again appear to cover the entire
wages bill.

I do not know whether it is contended that British hosiery is
dumped but I presume not, because action under the Trade
Preservation Act 1921 could then be taken. Contemplation of these
figures, together with the rumour of a yet higher tariff, makes
one rather question the efficiency of the Australian industry.

Mr. Amery made it clear that he hoped that the administration of
the Australian tariff would bear in mind the campaign in this
country for voluntary preference, which might be affected if
public attention was frequently drawn by manufacturers to extreme
instances of high tariffs.

ROYAL COLONIAL INSTITUTE LUNCHEON

Yesterday I addressed one of the City Lunches organized by the
Royal Colonial Institute. I enclose a copy of the notes I prepared
for myself as some of the figures are very interesting. I would
like you to glance at the last three pages (marked).

THE BYNG-KING CONTROVERSY [3]

I am enclosing an article from the New Statesman (a weekly with
Labour leanings) about this subject. It will, I am sure, interest
you. It seems to cut the ground entirely from under Mackenzie
King's feet. Its publication in such a paper is distinctly
interesting.

AUSTRALIAN DELEGATION

I had a talk to E. J. Harding [4] about this subject on Monday. He
says that the Government is now collecting names. I mentioned
several which he is adding to his list. When about 20 names have
been collected, the Government will, he thinks, consider them,
reduce them to say 8 or 10 and then cable them to you for your
comments.

HADEN GUEST [5] AND THE LABOUR PARTY

Mr. Tom Johnston [6] lunched with me yesterday and told me that
Haden Guest's withdrawal from the Labour Party has, for the time
being, made the job of Members of the Party who are keen on
pushing Empire ideas a little difficult. He anticipates that, for
a month or six weeks, it will be necessary to go very slowly.

Johnston regards Guest's action as being very stupid and I cannot
but agree that the probability is Guest will lose his seat and,
even if he holds it, having severed his connection from Labour, he
will be a less interesting person from every point of view than he
was before.

PARLIAMENTARY DEBATES AND QUESTIONS

I am enclosing a copy of the debate on the Navy Estimates in view
of the references therein to the Singapore Naval Base. [7] I also
enclose a copy of the debate on the Cinematograph Films Bill. [8]
I feel sure that you would like to have them by you.

The Parliamentary questions that I am forwarding are not of any
particular interest this week and do not require any special
comment.

Yours sincerely,
F. L. MCDOUGALL