157

4th April, 1928

PERSONAL & CONFIDENTIAL

My dear Prime Minister,

RATIONALISATION OF EMPIRE INDUSTRIES

I have paid the closest attention to such cabled summaries as I have been able to see of the speech which you made to the Association of British manufacturers. [1] From these summaries I gather that you made some reference, although perhaps not a very direct one, to the idea of British and Australian manufacturers coming together and arriving at some basis whereby the industries might be rationalised.

I am hoping that, before very long, I shall receive a reply to my letter of the 19th of January, in which I put this question to you at very considerable length. [2]

SUGAR

On Monday last I received a copy of your cable to the High Commissioner [3] of the 31st March, in which you requested him to ask me to convey to the British Authorities certain representations in regard to the Australian sugar industry. [4]

I immediately arranged to see Sir Francis Floud, the Chairman of the Board of Customs, and found that the Agent-General for Queensland [5], together with other representatives of Australian sugar interests, had already made representations. I was informed that the Customs could not make any recommendation to the Chancellor [6] that the delimitation in regard to duty should be increased from 98 to 99 polarisation, because if such an arrangement were made, it would facilitate foreign interests importing sugar into this country to the further handicap of the British refining interests.

Floud explained that it would be very easy indeed for foreign interests to add a small amount of moisture to the refined sugar imported at the lower rate of duty, arrange for it to be dried in this country and thus not only would the import of foreign sugar increase but the Customs would be deprived of revenue.

Floud went on to state that the Beet Sugar Producers in this country, and also the Cane Sugar Producers of Mauritius, anticipated a slight detrimental effect just in the same way as the Australian sugar interests but both the British beet sugar people and those qualified to speak on behalf of Mauritius had recognised the desirability of some further safeguard for the important sugar refining industry and had stated that they were not prepared to oppose the British Refiners' suggestions.

Floud said that the Board of Customs could not understand the suggestion that there might be some serious deterioration of Australian sugar if it was imported at a polarisation of 98 and under. He pointed out that, in 1925, a very large proportion of the Australian sugar received was under 98 polarisation. He also pointed out that the bulk of the Java sugar which arrives in Great Britain, after a voyage very similar in length and conditions to that from Australia, is under 98.

Floud went on to say that, so far as the Board of Customs could see the matter, if the Chancellor accepted the proposal of the British Sugar Refiners, all that would be necessary for the Australian industry to do would be to make a very slight adjustment in the way in which they ran their centrifugal drying machines.

Having obtained this information, I cabled to you yesterday giving you the gist of Floud's statement. [7] I have kept Amery [8] informed on the matter but in view of Floud's reply, I do not think there is any prospect of the Chancellor considering it necessary to alter his attitude to the British Refiners' proposal in consequence of the Australian sugar representations.

Incidentally Floud told me that the British Sugar people were very much annoyed with the Australian tariff. He said that they alleged that Australia had been importing sugar from foreign countries in order to release a larger quantity for export to Great Britain where a preferential benefit was obtained-at the same time Australia had prohibited the importation of golden syrup, thus stopping a fair trade which had been enjoyed by British Refining interests.

I told Floud that I would carefully look into both these questions and I have today written him a letter which shows that there is no real substance in either complaint. I enclose a copy of my letter to Floud in case the information may be of use to you.

WINE

He told me that the Board of Customs would not recommend the Chancellor to make any change in the delimitation of wines but to leave the 25 line for foreign wines and 27 for Empire wines.

This is quite satisfactory. He also told me that he had very carefully considered the representations cabled to Amery by the Australian Viticultural Council.

So far as British wine was concerned, he told me that the bulk of the British wines were under 27 in strength and therefore, even if the Chancellor desired to put them oh the same level as Empire wines, the duty which he would have to impose would not be 4/- as supposed by the Australian Viticultural Council but 2/-, being the duty on Empire wines of 27 strength and under.

I must say that this was a very surprising piece of information as I had been under the impression that the bulk of the British wine was of about 30 strength. I asked whether they had considered making a different excise on British wines over and under 27 strength. Floud told me that this had been considered but they had been forced to the conclusion that, in the event of any such delimitation in the case of British wines, the whole of the wine would be turned out at a strength of 27 and under.

It does not appear, therefore, that there is much probability of any change in the excise on British wines in this Budget. [9] I added a paragraph to my Sugar cable in order to give you information on these two points.

FODDER CONSERVATION

Recognising the immense importance to Australia of any method whereby a cheap, concentrated, highly transportable form of fodder which could be expected to keep for several years, about five months ago I arranged with the Empire Marketing Board for a really firstclass young scientist to be given the job of collating all the available information on the subject of the preservation of young grass. This work has now been completed and I am enclosing a rough proof of the memorandum which has been submitted to the Empire Marketing Board. I do not, for a moment, suppose that you will desire to go through this yourself but I am sure that you will want to pass this information on to your Pastoralist Committee. The memorandum will be printed and I shall arrange for several hundred copies to be sent to Australia but in the event of your Committee meeting shortly after the arrival of this letter, I expect they will like to have early information. On the whole I think it a remarkably good memorandum for there was very little information for the author to work on and he has made a very careful study of the position. [10]

In the event of your Committee considering that this memorandum opens up possibilities which would be useful to Australia, I should appreciate a communication which would strengthen my hand in urging the Empire Marketing Board to follow up this subject.

I am communicating with both Gepp [11] and Rivett [12] about this matter.

THE AUSTRALIAN TARIFF

The other day I met Captain Hacking [13], the Minister in charge of the Department of Overseas Trade, who talked to me very seriously about the effect of the recent tariff amendments in regard to woollens. He pointed out that the amendment which was made about a year ago, imposing very high duties on the cheaper types of woollen goods, had caused a great deal of outcry in the West Riding and that the amendment in the Senate, which had been adopted in the House of Representatives, was causing a most antagonistic feeling to things 'Australian' in the West Riding in Yorkshire. He said that he found it very hard to explain to West Riding people how it could possibly be necessary for a country like Australia, possessing almost a monopoly of the best wool, to impose so prohibitive a tariff in order to protect an old established industry. He stated that he was afraid that this amendment would nullify all the work that the Empire Marketing Board had been doing, at least so far as the West Riding was concerned.

I told Col. [sic] Hacking that there was no possible doubt that, on balance, the Australian tariff substantially helped British trade and that British industries, as a whole, would be in a very much worse position in Australia if Australia were a free trade country.

Hacking said that he recognised that there was a great deal of force in this contention and would be very happy carefully to examine any figures that I cared to put before him. He went on to say that industries helped by preference rarely, if ever, made any public acknowledgment of that help but that, on the other hand, every time any industry felt itself penalised, its leaders shrieked either in Parliament or in the press.

I immediately agreed with his statement and suggested that it was part of the duty of the Ministers concerned with British trade to point out to British industry how wrong headed this attitude was.

Hacking countered by referring to the speeches of Amery but I told him that Amery's speeches, excellent as they are, are largely discounted on the ground that everyone regards him as an Empire enthusiast and also on the ground that he is in no sense responsible for British trade. I suggested very strongly to Hacking that he and Cunliffe-Lister [14] and the Parliamentary Secretary to the Board of Trade [15] ought occasionally to make the point that the number of industries assisted by Australian and New Zealand preference were far in excess of those who were handicapped by protection.

The fact, however, that one is able effectively to convince intelligent people by a long personal conversation does not, in the least, decrease the seriousness of what Hacking said to begin with. There can be no doubt that in certain areas, particularly the West Riding, Leicester, Northampton and one or two other places in the Midlands, the whole propaganda in favor of closer Empire relationship goes for little in face of the way in which Australian tariffs operate on these districts.

I recognise that it is, of course, inevitable that certain British industries must be damaged by the development of Australian manufactures but I think you will agree that it is difficult to convince people that if Australia's industry is reasonably efficient, tariffs need to be so extremely high. There would, I think, be little criticism of a tariff of 35% ad valorem. It is when the Commonwealth Parliament pushes a tariff against British goods to duties equivalent to 50% ad valorem and over that a howl of indignation rises.

BRITISH MEAT SUPPLIES

I am enclosing another important letter which appeared in Monday's 'Times' on the subject of meat infected with foot and mouth disease imported from the Argentine. [16] I think that this subject may become of firstclass importance because it has now been definitely ascertained by the Ministry of Agriculture Veterinary Research Institute that the bones and marrow of animals subjected to temperatures, such as those employed in the transport of chilled meat, retain their virulent infected qualities up to periods of from 45 to 50 days. This fact shows that it is highly possible for Argentine chilled carcasses to cause outbreaks of foot and mouth disease among English herds. The great obstacle to any prohibition or even serious restriction of the importation of infected supplies from the Argentine is the enormous quantity of meat which would thus be affected.

The idea has occurred to me, however, that, as not less than 30% of Great Britain's population live in close proximity to great ports, a regulation might be made confining the use of meat from countries in which foot and mouth disease is endemic to port areas. I have not yet had time to test this idea on any people that matter but shall do so after Easter and will let you know what the reactions are. I would, however, suggest that you might think it worth while to inform your Pastoral Committee that the British Authorities are attaching great significance to the danger of infection of British herds through Argentine chilled meat.

Yours sincerely, F. L. MCDOUGALL

1 Reported in the Times, 4 April.

2 Bruce commented on this matter in answer to McDougall's letter of 15 March. See note 14 to Letter 155 and note 6 to Letter 144.

3 Sir Granville Ryrie.

4 The cable is on file AA:A461, E325/7/1, i.

5 John Huxham.

6 Winston Churchill, Chancellor of the Exchequer.

7 This cable, dated 3 April, is on the file cited in note 4.

8 Leopold Amery, Secretary for the Colonies and for Dominion Affairs.

9 There was in fact an increase of 6d in the excise on British wines in the Budget. Bruce, in a letter dated 14 May (file AA:M111, 1928), saw this increase as beneficial to Australian interests. For a fuller account of the question of duties on 'British' wines, see Letter 153.

10 A. N. Duckham, Grass and Fodder Crop Conservation in Transportable Form, E.M.B. 8, 1928. Duckham recommended storage of dried, young grass in cake or briquette form to conserve it in a way that combined transportability with high nutritive value.

11 H. W. Gepp, Chairman of the Commonwealth Development and Migration Commission.

12 David Riven, Deputy Chairman and Chief Executive Officer of the Commonwealth Council for Scientific and Industrial Research.

13 D. H. Hacking, Parliamentary Secretary, Department of Overseas Trade.

14 Sir Philip Curdiffe-Lister, President of the Board of Trade.

15 H. G. Williams.

16 Times, 2 April. Sir William Haldane argued that the prevalence of the disease in Argentina made its control there impossible.