"'Again: it is also urged that under the existing system the products of American industry subject to high rates of excise, are injuriously brought into compet.i.tion with similar products of provincial industry which are subjected to little or no excise, and then admitted into the United States free of duty. That such is the fact cannot be denied; and is itself a reason why the abrogation or modification of the present Reciprocity Treaty has become imperative. But if it were possible to effect such an arrangement with the British Provinces as would allow the imposition of duties equivalent to the American excise on all articles of provincial production pa.s.sing into the United States, it seems clear that the afore-mentioned objection would be entirely removed.

"'As the whole subject, however, is now before Congress for consideration, the Commission do not consider it as within their province to submit any specific recommendations; but would content themselves with merely pointing out that, under certain circ.u.mstances, conditions of great advantage to the United States, in a revenue point of view, might be secured.'

"Mr. Derby's report contains much that is sensational, and many curious admissions, but its general tenor is strongly in favour of a new treaty, regard being had to the revenue necessities of the United States; _i.e._, that articles admitted into the United States from Canada should pay a duty equivalent to the internal revenue tax on the same articles charged in the States. This is just as if Great Britain said that brandy from France coming into England should pay a duty equivalent to the English excise duty upon spirits, which would be quite fair.

"The next fact in the history is that delegates from Canada, New Brunswick, and Nova Scotia, are found at Washington on the 24th January, 1866, and that they remain there till the 24th February, on which day they report that after many days' discussion they have failed to do anything, and that the Reciprocity Treaty is finally at an end.

"Our Government having done nothing, the Provinces, it would appear, had, at the last moment, to send 'delegates' themselves to negociate; a mode of procedure altogether very unlike the action of 1854.

"The following papers give a _resume_ of the discussion :--

"WASHINGTON, "_February 7th_, 1866.

"'SIR,

"'We have the honour to inform Your Excellency that our negociations for the renewal of Reciprocal Trade with the United States have terminated unsuccessfully. You have been informed from time to time of our proceedings, but we propose briefly to recapitulate them.

"'On our arrival here, after consultation with Your Excellency, we addressed ourselves with your sanction to the Secretary of the Treasury, and we were by him put in communication with the Committee of Ways and Means of the House of Representatives. After repeated interviews with them, and on ascertaining that no renewal or extension of the existing treaty would be made by the American authorities, but that whatever was done must be by legislation, we submitted as the basis upon which we desired arrangements to be made the enclosed paper (marked A).

"'In reply we received the Memorandum from the Committee, of which a copy is enclosed (B). And finding after discussion that no important modifications in their views could be obtained, and that we were required to consider their proposition as a whole, we felt ourselves under the necessity of declining it, which was done by the Memorandum also enclosed (C).

"'It is proper to explain the grounds of our final action.

"'It will be observed that the most important provisions of the expiring treaty, relating to the free interchange of the products of the two countries, were entirely set aside, and that the duties proposed to be levied were almost prohibitory in their character. The princ.i.p.al object for our entering into negociations was therefore unattainable, and we had only to consider whether the minor points were such as to make it desirable for us to enter into specific engagements.

"'These points are three in number.

"'With regard to the first--the proposed mutual use of the waters of Lake Michigan and the St. Lawrence--we considered that the present arrangements were sufficient, and that the common interests of both countries would prevent their disturbance. We were not prepared to yield the right of interference in the imposition of tolls upon our ca.n.a.ls. We believed, moreover, that the privilege allowed the United States of navigating the waters of the St. Lawrence was very much more than an equivalent for our use of Lake Michigan.

"'Upon the second point--providing for the free transit of goods under bond between the two countries--we believed that in this respect, as in the former case, the interests of both countries would secure the maintenance of existing regulations. Connected with this point was the demand made for the abolition of the free ports existing in Canada, which we were not disposed to concede, especially in view of the extremely unsatisfactory position in which it was proposed to place the trade between the two countries.

"'On both the above points, we do not desire to be understood as stating that the existing arrangements should not be extended and placed on a more permanent basis, but only that, taken apart from the more important interests involved, it did not appear to us this time necessary to deal with them exceptionally.

"'With reference to the third and last point--the concessions of the right of fishing in provincial waters--we considered the equivalent proposed for so very valuable a right to be utterly inadequate. The admission of a few unimportant articles free, with the establishment of a scale of high duties as proposed, would not, in our opinion, have justified us in yielding this point.

"'While we regret this unfavourable termination of the negociations, we are not without hope that, at no distant day, they may be resumed with a better prospect of a satisfactory result.

"'We have the honour to be, "'Your Excellency's most obedient Servants,

"'A. T. GALT, Minister of Finance, Canada.

"'W. P. HOWLAND, Postmaster General, Canada.

"'W. A. HENRY, Attorney General, Nova Scotia, "'A. J. SMITH, Attorney General, New Brunswick.

"'To His Excellency, SIR FREDERICK BRUCE, K.C.B., &c., &c., &c.'"

"'MEMORANDUM A.

"'The trade between the United States and the British Provinces should, it is believed, under ordinary circ.u.mstances, be free in reference to their natural productions; but as internal taxes exceptionally exist in the United States, it is now proposed that the articles embraced in the free list of the Reciprocity Treaty should continue to be exchanged, subject only to such duties as may be equivalent to that internal taxation. It is suggested that both parties may add certain articles to those now in the said list. With reference to the fisheries and the navigation of the internal waters of the continent, the British Provinces are willing that the existing regulations should continue in effect; but Canada is ready to enter into engagements with the view of improving the means of access to the ocean, provided the a.s.surance be given that the trade of the Western States will not be diverted from its natural channel by legislation; and if the United States are not prepared at present to consider the general opening of their coasting trade, it would appear desirable that, as regards the internal waters of the Continent, no distinction should be made between the vessels of the two countries.

"'If the foregoing points be satisfactorily arranged, Canada is willing to adjust her excise duties upon spirits, beer and tobacco upon the best revenue standard which may be mutually adopted after full consideration of the subject; and if it be desired to treat any other articles in the same way the disposition of the Canadian Government is to give every facility in their power to prevent illicit trade.

"'With regard to the transit trade, it is suggested that the same regulations should exist on both sides and be defined by law. Canada is also prepared to make her patent laws similar to those of the United States.

"'WASHINGTON, D.C., "'_Feb. 2_, 1866.'"

"'MEMORANDUM B.

"'In response to the Memorandum of the Hon. Mr. Galt and his a.s.sociates, Hon. Mr. Smith, Hon. Mr. Henry, and the Hon. Mr. Howland, the Committee of Ways and Means, with the approval of the Secretary of the Treasury, are prepared to recommend to the House of Representatives for their adoption a law providing for the continuance of some of the measures embraced in the Reciprocity Treaty, soon to expire, viz.--For the use and privileges as enjoyed now under said treaty in the waters of Lake Michigan, provided the same rights and privileges are conceded to the citizens of the United States by Canada in the waters of the St.

Lawrence and its ca.n.a.ls as are enjoyed by British subjects, without discrimination as to tolls and charging rates proportioned to ca.n.a.l distance; also for the free transit of goods, wares, and merchandize in bond, under proper regulations, by railroad across the territory of the United States to and from Portland and the Canada line; provided equal privileges shall be conceded to the United States from Windsor or Port Sarnia, or other western points of departure to Buffalo or Ogdensburg, or any other points eastward, and that the free ports established in the Provinces shall be abolished; also the bounties now given to American fishermen shall be repealed, and duties not higher imposed upon fish than those mentioned in Schedule A., provided that all the rights of fishing near the sh.o.r.es existing under the treaty heretofore mentioned shall be granted and conceded by the United States to the Provinces, and by the Provinces to the United States.

"'It is also further proposed that the following list of articles shall be mutually free:--

Burr Millstones, unwrought.

Cotton and Linen Rags.

Firewood.

Grindstones, rough or unfinished.

Gypsum or plaster, unground.

"'SCHEDULE A.

FISH--Mackerel $1 50 per bbl " Herrings, pickled or salted 1 00 "

" Salmon 2 50 "

" Shad 2 00 "

" All other, pickled 1 50 "

"'Provided that any fish in packages other than barrels shall pay in proportion to the rates charged upon similar fish in barrels.

All other Fish 1/3 cent per lb

"'As to the duties which will be proposed upon the other articles included in the treaty, the following are submitted, viz.-

Animals, living, all sorts 20 per cent ad val Apples and Garden Fruit and Vegetables 10 " "

Barley 15 cts per bushel Beans (except Vanilla or Castor Oil) 30 " "

Beef 1 ct per lb Buckwheat 10 cts per bushel b.u.t.ter 4 " lb Cheese 4 " "

Corn (Indian) and Oats 10 cts per bushel Corn-meal (Indian) and Oatmeal 15 " "

Coal, bituminous 50 " ton " all other 25 " "

Flour 25 per cent, ad val Hams 2 cts per lb Hay $1 00 per ton Hides 10 per cent ad val Lard 3 cts per lb Lumber-- Pine, round or in the log $1 50 per M " sawed or hewn 2 50 "

" planed, tongued and grooved or finish'd 25 per cent ad val Spruce and Hemlock, sawed or hewn $1 00 per M Planed, finished or partly finished 25 per cent ad val Shingle bolts 10 " "

Shingles 20 " "

All other, of Black Walnut, Chesnut, Ba.s.s, White Wood, Ash, Oak, round, hewed or sawed 20 " "

Planed, tongued and grooved or finished 25 " "