My dear Prime Minister,
THE IMPERIAL CONFERENCE
Since my last letter I have, at Sir Horace Hamilton's  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  of the Dominions Office that Casey  had made a similar suggestion in regard to the political side of the Imperial Conference and that both Batterbee and Whiskard  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  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  and Tallents , 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  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  and for W. S. Kelly  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  views would need to be taken at a very early stage. You may also desire to give Gepp  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  '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.
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.
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