8.—6.

"(5) Due regard having been paid to the several matters mentioned in subsection four hereof, the prices fixed in respect of any dairy-produce exported after the thirty-first day of July, nineteen hundred and thirtyseven, shall be such that any efficient producer engaged in the dairy industry under usual conditions and in normal circumstances should be assured of a sufficient net return from his business to enable him to maintain himself and his family in a reasonable state of comfort." For the purpose of giving effect to these principles the Government has asked Messrs. J. Dunlop, representative of the Southern Ward on the New Zealand Dairy Board, W. E. Hale, representative of the New Zealand Co-operative Dairy Co., Ltd., on the New Zealand Dairy Board, A. Morton, President of the National Dairy Association, N. H. Moss, Barrister and Solicitor, Stratford, B. Roberts, M.P., Director of Parkvale Co-operative Dairy Co., Ltd., A. J. Sinclair, Secretary-Manager of the Te Awamutu Co-operative Dairy Co., Ltd., and D. 0. Williams, Economist, Massey Agricultural College, Palmerston North, to confer with the Executive Commission of Agriculture and report to the Minister of Marketing as to the price to be paid next year. The relation of farming costs to guaranteed prices is largely affected by interest and other land costs, and I propose later to set out the policy of the Government for adjusting the mortgage liabilities of the farmer to the guaranteed price. The Government's Marketing Department will market the dairy-produce to the best advantage, and the proceeds will be paid into the Dairy Industry Account at the Reserve Bank. In some years there may be a deficit in the account after the year's operations; in other years there may be a surplus to be offset against any deficit. New Zealand dairy-produce is mainly sold through importing houses in Tooley Street, London, most of which have regular connections with the distributors oi butter to the British consumer, and the Government has made arrangements to continue to use the efficient genuine distributor and to pay him an adequate commission for the service he performs. The more general question arises, however, of trade between the United Kingdom and New Zealand. New Zealand fully appreciates the right of and the necessity for Great Britain to safeguard the interests of her own producers and to increase her output of farm-produce. We, too, are faced with the same necessity, and farming plays a large part in New Zealand's economy. We fully recognize also the economic grounds and the reasons of national security in time of war which British policy must take into account. But such a policy vitally affects the whole fabric upon which our trade with Britain is based and upon which our economy operates. Our natural advantages make for an efficient and economic agricultural industry. On the other hand, we could produce motor-cars and other goods, but at a very much greater cost than Britain. If, however, our efficient agricultural industry is deprived of an overseas market and we cannot purchase overseas, the efficient British manufacturing industry loses' its market, and trade between the two countries suffers. On the other hand, the more we can sell abroad at an economic price the more we can buy. Our efforts will, therefore, be directed to making reciprocal trade agreements. When these agreements are completed New Zealand will have available the proceeds from an increased volume of exports. These proceeds will be used in the first place to meet our debt commitments, and secondly for imports. There is no doubt that the

Marketing Department.

Sale of produce.

Reciprocal trade.

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