My dear Prime Minister,

In my letter of March 16th I reported Mr. Amery's [1] remarks on
the Australian Tariff and forwarded some particulars I had
prepared for him on the Hosiery Trades.

Since that date I received from Mr. Amery a request that I should
address a private meeting of the Unionist Imperial Affairs
Committee in the House of Commons in order to answer criticisms of
the effect of the tariff on British trade.

Your example of 'stunning' criticism by presenting the full case
in the frankest way seemed to me the proper line of country to
adopt. I therefore prepared a very full statement on the
'Australian Tariff and British Trade', of which I enclose two
copies, and also a single page statement showing the value of
Australia as a market as compared with certain large groups of
foreign countries (also enclosed). These memoranda were
distributed to members and I merely talked for twenty minutes in
explanation. Amery took the chair and there were about 30 members
present.

After my innings there were a number of questions which divided
themselves into two classes:

(a) Questions about the effect of the new tariff on cheap woollens
and on Hosiery.

(b) Questions as to how far the high tariff handicapped the
primary industries.

I dealt with these questions as effectively as I was able and at
the end Mr. Amery summed up the following effect:-

That although it was inevitable that the development of secondary
industries in Australia sheltered by very high duties should have
a detrimental effect upon certain branches or sections of British
industry, an overwhelming case had been presented to show that on
the whole volume of trade, the advantages obtained by Great
Britain in Australia, due to tariff preference, were of such a
nature as to make it abundantly clear that British trade was
better off under the Australian Tariff than it would be if
Australia were a free trade market open to the free competition of
all countries. The members present apparently warmly agreed with
this conclusion.

It seems to me possible that you may find some of the points that
I used on that occasion (in addition to those in the memoranda) of
use on some occasion. I have, therefore, prepared,a note of these
for your information only. I enclose a copy which is marked 'For
the Prime Minister'. I am sending copies of the general memoranda
to Mr. Paterson [2] and to Mr. Latham [3] but the notes just
referred to above to you only.

PARLIAMENTARY DEBATE ON EMPIRE SETTLEMENT

I am enclosing the Hansard report of the debate which occurred on
March 23rd. [4] The Motion had been carefully drawn and read as
follows:-

That this House observes that over a period of widespread
depression in trade the proportion of our trade with the Empire
has increased and continues to increase; and is of opinion that,
in order to benefit the people of this country by developing our
best and most productive markets, and in order to assist those
Dominions which so desire it further to increase the British
population within their territories, no effort should be spared,
in co-operation with the Governments of the Dominions, to initiate
new proposals and to increase the existing facilities for
settlement in the Empire overseas. [5]

Eden [6] made a goodish speech followed by Roger Lumley, one of
the young Tories. He acted as Salisbury's [7] P.P.S. on the
Australian tour. His speech was listened to with marked attention
by Baldwin. [8] I was glad to notice this as Lumley had spent an
hour in my office preparing it. Mackinder [9] from the Labour
Benches, another member of the Parliamentary Delegation to
Australia, made a very good contribution to which I should like to
draw your attention.

TROPICAL RESEARCH STATION

I have been somewhat surprised that no cable has yet reached
either the Empire Marketing Board or myself about the proposed
Tropical Agricultural Research Station in Northern Australia. I
can quite understand that questions of staff and other general
considerations will require much study by the Commonwealth Council
for Scientific and Industrial Research, but I should have imagined
that, by this time, that body would have been able to have come to
a decision, it being over seven weeks since your return to
Australia. [10]

LIAISON WORK FOR DEVELOPMENT & MIGRATION COMMISSION AND
COMMONWEALTH COUNCIL FOR SCIENTIFIC & INDUSTRIAL RESEARCH

Up to the present time I have not received any reactions from
either of these bodies on the information which I am forwarding
each mail. There would hardly have been time for this to happen. I
think we are doing useful work, however, and I trust that Gepp
[11] and Julius [12] will be of the same opinion. I do not propose
to worry you with any of the detail but one point of very
substantial interest to Australia has been under consideration and
I feel sure you would like to have a brief note thereon.

FUEL RESEARCH

The importance of supplies of fuel oil to Australia are well
recognised. Mineral oil may yet be found but the possibilities of
treating brown coal for oil require the closest study. Two general
methods have aroused widespread interest, namely:

(a) Low Temperature Carbonisation which may yield from 20 to 35
gallons of a rather doubtful oil per ton of coal and a high
calorific coke for ordinary burning purposes.

(b) Hydrogenation by a modified Bergius process which yields from
110 to 120 gallons of good oil fuel with no coke residue.

Up to the last few weeks the position was that while neither
process had been completely proven, the economics of Low
Temperature Carbonization seemed sounder for the special
circumstances of Great Britain than Hydrogenation. In Great
Britain a smokeless coke is of very considerable importance but in
Australia the importance of supplies of fuel oil outweigh the
value of smokeless fuel.

Quite recently two developments have occurred:

(i) Low Temperature Carbonisation.

A firm of which Col. Moore-Brabazon [13] M.P. is Chairman (he
resigned from the Ministry to join it) claims complete success in
Low Temperature Carbonization. The process is known as the L. and
N. process (Laing and Neilson). This firm possesses rights at
Maryvale near Morwell Victoria and is proposing to exploit the
deposits. Their representative for Australia, a journalist called
Bradstreet, is going to Australia very shortly. They hope to
receive special facilities and that the Commonwealth Government
will make the bounty on fuel oil recovered from shale apply to
fuel oil distilled from coal. The L. and N. people express the
greatest confidence in their process and Moore-Brabazon's personal
reputation is a great asset to the firm. At the same time the Fuel
Research Board is not quite satisfied as to the process and Sir
Arthur Duckham [14], who is probably the soundest technical and
commercial man on Fuel problems in this country, does not consider
the L. and N. process as better than a number of other forms of
Low Temperature Carbonization.

(ii) Hydrogenation (i.e. the liquefaction of coal by treatment
with hydrogen under high pressure).

In Germany the I.G. Farbenindustrie, after years of experiment
with the Bergius process, have decided to erect a works at a cost
variously estimated at 2,000,000 to 4000,000 to treat brown
coal.

This decision has surprised the Fuel Authorities here because they
have been in close touch with German developments. It is felt that
Germany may have discovered some additional point which increases
the efficiency of the Hydrogen process.

In Germany the brown coal is said to be available at 3/- per ton
whereas here the cheapest hard coal would be 15/- at the pit's
mouth.

About a fortnight ago Imperial Chemical Industries (Alfred Mond's
[15] new merger) acquired all the German patents for the British
Empire.

The advice which the Fuel Research Board officers and Duckham give
in regard to Australia is that we should not specially tie up with
anyone, but let any Low Temperature Carbonization Co., such as L.

and N., go ahead with all normal facilities, and that we should
establish relations with Mond's people in case the great German
venture proves a success. Meantime they suggest that 100 tons of
Morwell coal should be sent here for treatment at the East
Greenwich Government Fuel Research station where a small Bergius
plant is in operation. They point out the great variability of
Brown coal and insist that German results would not necessarily
apply to Morwell coal.

All this information in much fuller detail has been sent to Gepp
and Julius but I feel that the subject is one on which you would
appreciate a resume. If you would like occasional brief summaries
such as the above on important Research problems, please let me
know.

HADEN GUEST [16]

The result of the Southwark Election was made known last night,
Haden Guest being well at the bottom of the poll, and the Liberals
having gained a seat.

I must say I regret this result and especially regret the Liberal
victory as it will undoubtedly harden the Liberals. The defeat of
Haden Guest was almost certain and I feel sure that it was quite
unnecessary for him to resign from the Labour Party and that his
protest on the China question in the House would have been
sufficient without his resigning.

LONDON WEEKLY

I enclose 4 copies of the 'London Weekly' and in doing so I would
like to mention that the Australian advertisement that occurs on
the back page was a free advertisement and not paid for but
inserted by the Advertising Agents who were keen on supporting the
paper.

I have grave doubts as to whether the paper will be able to
continue or not. Lord Apsley [17], who is a director, came to see
me the other day to ask my views about it. I told him that he
should try to interest some of the large British manufacturing
Associations, such as the Motor Traders, electrical people, etc.,
with the idea of the journal being used as a vehicle to counter
the anti-British goods American propaganda in the Dominions.

AUSTRALIAN DELEGATION

The situation in regard to the Delegation is that E. J. Harding
[18] together with Sir William Clark [19] of the Department of
Overseas Trade, have made a list of about ten names which I
believe are now being submitted to the Cabinet and as soon as the
Cabinet have approved the list, a cable will be sent to you asking
your views on the persons proposed before they are officially
approached on behalf of the Government.

'INDUSTRY AND THE STATE'

I am forwarding a copy of a book just published and written
jointly by four members of one of the young Tory Groups in the
House of Commons, namely Robert Boothby, John Loder, Harold
Macmillan and Oliver Stanley. I have not yet had time to read the
book myself but I have read the 'Times' criticism, of which I
attach a copy. [20] I am told that the book is interesting but
represents a large number of ill-digested ideas. At the same time
I feel sure that you would like to have it.

PARLIAMENTARY DEBATES AND QUESTIONS

In addition to the Hansard report of the debate on Overseas
Settlement, I am enclosing copies of the debates on the
Cinematograph Films Bill and on Naval Estimates. [21]

I am also enclosing 3 Parliamentary questions which you may be
interested to glance at, as well as two newspaper cuttings, and an
article from the 'Sunday Times' by Alec Waugh, which is well worth
reading.

LABOUR ADVERTISEMENT

I enclose a copy of an advertisement from today's 'Daily Herald'
which strikes a new note. [22] The Advertising Agents rather
spoilt the copy as I gave it to them by adding the words which I
have placed in brackets.

I am very keen on the Empire Marketing Board issuing a steady flow
of advertisements rather along this sort of line in order that the
Labour movement may come to realise what the Empire means to it.

Yours sincerely,
F. L. MCDOUGALL