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possible to conclude a working agreement with her which will be mutually satisfac- tory to both parties as their neighbourly relations are of a peculiarly intimate character and transcend those of ordinary international trade. There may be also a possibility, remote perhaps, of concluding barter agreements with other neigh- bouring Governments."
17. Apart however, from such bilateral agreements with outside authorities, a field for constructive action must exist within the Colony. Hitherto the Govern- ment has been content to provide security and sound administration and, for the rest, to adopt a laissez-faire attitude towards trade and industry generally. There was no occasion to question the soundness of this policy in days when China was a low tariff country and trade flowed smoothly in traditional channels, though it is possible that, even then, the industrial potentialities of the Colony did not receive sufficient consideration or were too hastily dismissed as necessarily opposed to our entrepot interests. Now, however, these spacious days are gone and in their place has come a time when, in our opinion, there is a need for the closest and most active co- operation between Government, commerce and industry.
18. Signs are not wanting to show that a movement towards this end has already been made. We have referred to the recent appointment of a Committee to enquire into and report upon pig and poultry breeding in the Colony with a view to improving the local food supply and conserving, or rather retaining, as far as possible, the Colony's income within the Colony's boundaries.
There may well be scope for a similar, though permanent, body to foster trade and industry and to act as a connecting link between these interests and the Government. For example, productive enterprises which increase the income of the community do not now obtain sites or extensions of sites on any privileged terms nor do they invariably secure the transportation facilities by land and water that they merit. Moreover, even though Governmental action cannot ultimately force trade and industry, yet much can be done by the adoption of a consistently progressive policy in exploiting our assets of cheap labour, plentiful capital, good position, cheap shipping facilities and freedom from restrictive duties.
19. Although taxation direct and indirect is relatively light in Hong Kong, it shows a disquieting tendency to increase and, by raising the cost of living, to neu- tralise one of the Colony's chief assets vis-a-vis its competitors. No doubt the social services provided by the Government must render the constant increase of public expenditure inevitable, but the standard set should take into account the conditions which apply in the rest of the economic area of which Hong Kong is a part. Of equal significance as burdens on the trading community are the legis- lative restrictions imposed on the conduct of industrial enterprise. Social reforms based on Western models should only be introduced into Hong Kong in reasonable conformity with those enforced in neighbouring countries.
20. Though the Colony is fortunate in that the public utilities controlled locally by private enterprise can bear comparison with any in the world in efficiency and cheapness, the Government should constantly recognise that all such public charges should, in the interests of the trade of the Colony, be kept to the absolute minimum and that these services as the handmaids of industry should be afforded all possible encouragement and liberal treatment.
Chapter IV.
THE CAUSES AND EFFECTS OF THE DEPRESSION.
1. The first portion of our terms of reference required us to enquire into the causes and effects of the present trade depression in Hong Kong. While we were unanimously convinced that Hong Kong was suffering under a severe depression we quickly realised that a clear portrayal of this would be difficult owing to lack of accurate and detailed records over a number of years. Particularly in regard to trade figures were we handicaped, as for the period 1925 to 1930 inclusive