6. As a natural accompaniment to all this, men who were supposed to be worth thousands in land and buildings suddenly found themselves the owners of that which no one could buy, or which, if sold at all, would not fetch one-tenth part of the nominal price that it bore six months before.

7. These phænomena, however, were not peculiar to Canada. In one respect we may boast our superiority over our neighbours in the United States. None of our banks suspended specie payments, and we were thus spared the misery inflicted by the sudden collapse of the paper circulation in the hands of the middle and lower classes.

8. The pressure however, has not yet passed away.

9. The finances of 1857, and of the current year have shewn: and will show, strong and manifest marks of the embarrassed condition of the country. The diminution of revenue, taken together with the large undertakings in public works in which the Government had long since embarked, will task the energies of Canada to meet the crisis and its consequences. Still, I believe, that substantially, the resources of the country are unimpaired, and that its tendency to advance will overcome the temporary depression which now weighs us down.

10. There is one great source of future prosperity in Canada which ought to increase in importance from day to day. I mean the western trade.

11. Her Majesty's Government are already in possession of the reports of Mr. Consul Wilkins, of Chicago. What do these documents show? They prove that since the year 1854, under the Reciprocity Treaty, a new line of communication has been opened. It appears that in 1854 the number of British vessels entering Chicago was 5, and clearing from it 6. In 1855 those numbers rose to 77 and 61. In 1856, to 110 and 104. In 1857, to 119 and 101. The imports of lumber in British vessels were in 1850, nil. In 1857, about 15,000,000 feet.

12. You are well aware, sir, of the fact that the progress of Chicago has itself been most marvellous. In 1854 it is said to have contained a population of 80,000 persons, and in 1856, this population amounted to 110,000. But I am informed that the progress of Chicago represents but feebly the rapid growth of the North Western States of the American Union, which are fast settling from day to day. The produce of these lands will be enormous, and their demand for manufactured goods and other imports will necessarily be in proportion.

13. Perhaps the most important question for Canada must be, what will be the natural and most easy road for this commerce to pursue?

14. Mr. Wilkins is of opinion, that the grain from Chicago may be laid down for shipment to Europe at Montreal at least from 40 to 50 per cent cheaper than at New York. I have no means of testing the accuracy of these figures, but the consideration is a most important one.

15. A short time since a very intelligent Norwegian gentleman, who has settled at Green Bay, high up on Lake Michigan, called on me. He assured me that the deep conviction of himself and the persons settled about him was, that their own trade, and that of the North Western regions beyond them, must ultimately look to Montreal as its port, and the St. Lawrence as its highway to the ocean.

16. I believe that no man can at present estimate the volume of the tide of commerce which twenty years hence may pour down this channel.

17. It is painful for me to state that petty and vexatious restrictions, in the nature of consular certificates loaded with high fees, have, in some degree, impeded this trade with the United States, and the working of the Reciprocity Treaty since last year.

18. My efforts, through His Excellency Lord Napier, to get these restrictions taken off have hitherto failed. If a feeling of irritation on the subject springs up in Canada,, there will be a strong effort made to impose trammels of the same kind on the American trade which crosses our territory-a proceeding fraught with inconvenience to both countries, and more especially detrimental to the trade of Detroit.

19. In my "Blue Book Despatch" of last year, I alluded to the number of cattle conveyed across our Peninsula from Windsor to the Suspension Bridge over the Niagara River. The number of these animals transported in 1857, by the Great Western Railway, was as follows:

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20. If this transit trade were to be embarrassed by consular certificates on each animal, or each car-load of pigs, the loss to all parties would be very considerable.

21. I wish I were able to say that I thought the Reciprocity Treaty had been acted on throughout by the United States Government in a liberal and conciliatory spirit, but such is not my opinion.

No

22. I have spoken above of the pressure of the monetary crisis on the farmers. doubt, as I observed last year, some slight alleviation to such pressure at the dead season of the year has been afforded by the power of getting grain and produce to market by means of the railways. From the 1st of December 1857 to the 30th of April 1858, whilst all navigation was closed, the Grand Trunk Railway carried the following quantities of flour and grain :

Enclosure.

Of this, 47,841 barrels of flour, and 35,238 bushels of grain, were carried to the coast for shipment at Portland.

23. I annex to this Despatch a printed copy of the Report of the Committee of the Canadian Legislative Assembly, on the Trade of the lakes and seaboard between the different Atlantic ports in America and Great Britain. I am far from professing to agree with all the reasoning or suggestions of the Committee, but the report and the appendices thereto contain much valuable information on the trade of Canada. The statement with reference to the impediments offered to British vessels by the Navigation Laws of the United States is peculiarly important, and I would strongly urge that the adoption of some more liberal system should be pressed on the United States Government.

24. Even if it were confined to the lakes the boon would be great, and the power of shipping goods from one American port to another, or one British port to another, by British or American vessels respectively, would be materially beneficial. As a matter of course, the admission of British built vessels to an American registry, and the opening of the coasting trade on the seaboard would be a great additional advantage.

25. In conclusion, I would observe, that the efforts made to promote railways in Canada, and to extend our public works, have taxed the strength of the colony, and must for long draw heavily on its resources; but these railways and improvements are, we may hope, sure to produce additional ability to meet the burthen thus imposed upon us. I consider our present condition as one of langour and temporary weakness, not one of constitutional feebleness and total prostration.

26. A great interest attaches to the working of the Elective Legislative Council. I think it right to state that twelve additional elective members will be chosen this autumn, leaving two more groups of twelve each to be added at intervals of two years. Up to the present time no difficulty has arisen from the presence of the twelve chosen by the people in connexion with the remaining members originally nominated by the Crown, who retain their seats for life. On the contrary, many valuable members of the council have been added by the choice of the people. Free discussion, combined with decorum, and an independent bearing as one of the two Houses of Parliament, have marked their proceedings, and I see no reason to fear that an additional infusion of the elective element will disturb this state of things.

27. In compliance with the suggestion made in your Despatch of the 11th June, No. 6, I enclose a list of the Acts assented to by me in the session just closed, with copies of the following five Acts :

a. The duties imposed by this Act are somewhat higher than those levied under the Act previously in force. The main object has been to obtain an increase of the revenue for the sake of meeting the obligations of the province. It is impossible to deny, however, that there exists in the assembly a feeling in favour of protective duties, and the ad valorem principle.

b. In this Act I would refer to the 17th and following clauses as directed against the system of fraudulent assignments and preferences, but I apprehend great difficulty may be found in establishing in court the facts required to bring certain classes of cases under the operation of these clauses.

c. This is an Act likely to work most beneficially, and it is urgently required. The frauds practised at the last election were numerous and notorious.

d. This Act declares the meaning of the Act 19 & 20 Vict. c. 141. which was reserved by me and sanctioned by Her most Gracious Majesty, after a reference to the Judicial Committee of the Privy Council. Had the provisions of the present Act in any way substantially altered those of the former one, I should have thought it my duty in like manner to reserve it for the Queen's pleasure, but it does nothing more than legally attach to the first clause of that Act the meaning which has already been assumed to he the true one in Upper Canada, that is to say, that the laity were to meet at the preliminary synod by representatives, not personally, or as it were, in a sort of primary assembly. At Quebec, an attempt has been made to assert this last to be the true meaning of the Act, and indeed, the omission of all notice of representation in the first section, taken together with its express mention in the second, makes it probable that such would have been the decision of a court on the words of the Statute. The Bishop of Quebec visited Toronto, and expressed a strong opinion that such on interpretation would be fatal to the beneficial working of the law in his diocese, and it was sufficiently obviousfrom what took place, that this must have been the case. Considering too, that the circumstances admitted of no delay, I have not hesitated to pass this Bill as supplementary to the former Act.

e. This Act relaxes to a certain degree the restrictions previously existing on the interest of money. Although conscientiously opposed by a certain number of the Roman Catholics, and by a large body of the Lower Canadians, it was much desired by the commercial community at large, and I have little doubt that it will be found to work beneficially, so far as it goes. My own opinions are strongly in favour of no restriction on the rate of interest, especially in a country where capital is urgently required, and where in good policy every inducement ought to be offered for its investment.

Right Hon. Sir E. B. Lytton, Bart., M.P.

I have, &c. (Signed)

EDMUND HEAD.

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THE Select Committe appointed with power to inquire into the past and present course of trade between the Lakes and the seaboard, and between the different Atlantic ports in America and Great Britain, the comparative amount of traffic passing through the United States and this province, the cost and time required in transportation, and the general cost of ocean freights; also, the practical operation of all existing treaties, Acts of Parliament, despatches, orders in council, rules and regulations, of the respective Governments of Great Britain, the United States, and this province, and of all tariffs, duties, and tolls; and the effect already produced and likely hereafter to be produced thereby upon the trade of this province, as well as upon agricultural, manufacturing, shipping, and general interests, also the effects produced upon the inhabitants of the United States and of Canada; and generally all matters and things relating to the home and foreign trade of this province; and other references,-beg leave to submit the following report:

(No. 1. On Postal Subsidies.)

1. Your Committee have examined the official documents and returns, and also all the evidence that could be procured during the short time they have been enabled to give their attention to the various subjects submitted to them.

2. His Excellency the Governor-General having, at the opening of the present session, recommended to the notice of the Legislature the increasing value of the lake commerce of Canada, and the importance attached to emigration, and the employment of ocean steamers, your Committee cannot too strongly urge them on the favourable consideration of the House. The increasing value of the Lake trade is referred to in the reply of the British consul, J. Edward Wilkins, Esquire, of Chicago, [See App. No. 1. Report of Mr. Wilkins, British Consul, Chicago] who points out the unsatisfactory operation of the coasting trade in British vessels, as well as on the direct import and export trade between the western regions and Great Britain, and other transatlantic countries, by way of the river St. Lawrence and the Great Lakes, the restrictions which exist, and at the same time suggests a remedy This document is entitled to attention.

3. The proportion of the Lake trade diverted to New York is as six and one-half million tens to about half a million forwarded to Quebec. The relative value and amount of tolls is also given in Appendix No. 2. The comparisons made by Messrs. McAlpine and Kirkwood was as eighty-five to

Enclosure.

CANADA. fifteen in favour of New York (as shewn in their report to the Harbour Commissioners, Montreal), which corresponds very nearly with the above quantities.

4. The imports into Canada by the canals and railways in the United States, in the year 1856 amounted to the sum of $28,216,180 [See Trade and Navigation Returns, Table 2, p. 134], while the imports into the United States by the St. Lawrence Canals, through Canada, during the same year, was only $13,492 [See said Returns, Table 7, p. 129]. The value of the exports from Western Canada, through the ports of New York and Quebec, are not given in the Trade Returns. However, the exports from Canada to the United States amounted to $17,979,753 [See said Returns, Table 14, p. 188.]

5. In 1850 the Provincial Government discovering, from the comparative amount of toll received on the Erie and St. Lawrence Canals, that the trade of the Lakes was diverted to New York, instituted an investigation, and attributed the cause to the high price of ocean freight from Quebec to Liverpool, [See Report of Chief Commissioner of Public Works in Journals, 1851,] the large amount paid by the Governments of Great Britain and the United States, as a postal subsidy, to the mail steamers plying between Liverpool and New York, representing at five per cent. a capital of 7,000,000l. sterling, the effect of which was to force an equal amount of tonnage in packet ships (which were displaced by those steamers) into the emigrant trade, thereby reducing return freights to ballast prices.

6. Emigration at the port of Quebec increased from 20,000 in 1844 to 90,000 in 1847, after which it decrease within three years to 32,292; while emigration at the port of New York had increased from about 80,000 in 1847 to 331,276 in 1851, [See App. A. No. 3. Return Chief Agent Emigration]. A more striking instance of the diversion of the ocean trade from Quebec to New York could not be adduced. This diversion does not arise from any defect in the navigation, or excess in the prices of freight between Quebec and any ports in the interior. The comparative prices of freight from Chicago to the seaboard average from 25 to 50 per cent. in favour of the St. Lawrence [See App. No. 4. Letter of Secretary, Board of Trade, Toronto; Letter of K. Tully, Esq., Civil Engineer, Toronto; Letter of Mr. Bundy, Toronto; Opinions of W. Kenighan, Chicago; Letter of Secretary, Board of Trade, Quebec: and see also App. No. 7, Evidence of Captain Pierce before Committee]. 7. As an additional proof of the natural advantages the St. Lawrence possesses, reference is made to the Appendix, which shows the comparative length, dimensions, and capacity of the canals, railways, and natural water communications through Canada, compared with those through the United States. [See App. A. No. 5]. From the above facts it is apparent that the mails, passengers, emigrants, and every description of goods, can, at the present moment, be conveyed from Quebec to Chicago or any lake port in the interior, or vice versâ, at less cost and in less time than from New York, notwithstanding that the high price of freight between Quebec and Liverpool has diverted almost the entire trade of the lakes to and from Europe to New York.

8. To regain this trade it is proposed to establish a daily line of screw steamers of not less than 2,000 tons burden, with a speed of from ten to twelve miles per hour, between Liverpool and Quebec [See App. No. 6], to connect with another line of steamers of 1,000 tons burden, of the same speed to the Welland Canal and Railway, Toronto or Hamilton, intersecting a line of similar steamers on lakes Erie or Huron to Chicago. By this connection, first-class passengers could reach Chicago from Liverpool, over the Grand Trunk Railway, by Quebec, in about twelve days; emigrants and light freights, by rail and water combined, in about 15 days; and by steamer throughout, in from fifteen to twenty days, thus shortening the passage, as per the log of the "Dean Richmond," from sixty-two days to twelve or twenty, and also lessening the price of transportation from 25 to 50 per cent. [See App. No. 7, Captain Pierce's Evidence].

9. The proposed line of ocean steamers would not interfere with any existing interest, neither would it give any exclusive privilege; steamers could be placed in the line as required, receiving a share of the subsidy in proportion to their tonnage, until a sufficient number is provided. Those not familiar with the trade of the West are startled at the idea of a daily line, but, when reduced to figures, it will not be found formidable; 2,000 tons per day for 200 days, the length of the season, makes only 400,000 tons. We find the Erie Canal, before its enlargement, with locks of only 90 x 15 x 4, in 1853, conveyed 4,247,832 tons, valued at $207,199,570, on which tolls amounting to $3,204,718 were received. To show that the principle portion of this trade is carried on in the summer season, we find that, out of 3,129,118 barrels of flour conveyed from Buffalo to New York in 1856, only 482,000 barrels were conveyed by railway during the five months the Erie Canal was closed, (as shewn in the Canal Commissioners Report, 4th February 1858), proving conclusively that the bulk of the trade of the West comes forward during the period of navigation, which by the way of Quebec commences as early and continues as late as by the Hudson.

10. Owing to the saving in distance by this route (some 500 miles), two days would be gained in the conveyance of the mails to Quebec over New York, and a communication established with a lake coast of double the extent of the seaboard of North America, creating a direct trade between the producer and consumer, which would yield a greater revenue than the amount of the subsidy paid by the Government; and, while attracting a large traffic to the Grand Trunk Railway and the St. Lawrence Canals, which do not now pay the cost of management, would render them productive. The establishment of this trade will be the means of removing restrictions and charges imposed by the Customs regulations in the United States, and all evasions of the Reciprocity Treaty by making England our best market, would cease, as it would be reached at less cost through our canals and by our own vessels, than through the United States. It will also create an indentity of feeling with the citizens of the Western States, which cannot fail to produce the most important commercial and political results, and may truly be considered a national object. For these reasons your Committee recommend a joint Address to Her Majesty, praying that Her Majesty may be pleased to recommend to the Imperial Parliament to grant the same amount of postal subsidy to the ocean steamers between Liverpool and Quebec as now paid to

the line of steamers between Liverpool and New York, upon condition that a daily line be established between Quebec and Liverpool in summer, and a weekly or a semi-weekly line, as may be required, between Portland and Liverpool in the winter.

(No. 2. On Duties, Tolls, and Public Debt.)

11. Your Committee, having examined into the practical operation of the duties, tolls, and public debt of the Government of the State of New York, and of this Province, have given due consideration to its bearing upon the trade of the respective countries. The public debt of Canada has increased from year to year to about fifty millions of dollars, twenty-five millions of which have been created since 1853, principally in the construction of railways yielding no income [See Public Accounts, 1857, p. 223]; while that of the State of New York has been reduced to about $31,000,000 (as shewn in the Comptroller's Report, State New York, same year, p. 63), of which about twenty-five millions have been expended in the construction of her canals, the income from which repays the interest, and, under the provisions of her constitution, will repay the principal within twenty years, leaving thereafter, notwithstanding the reduction of the tolls by one third, a liberal support for the maintenance of her State Government, with the assurance that when the debt shall be paid off tolls may be almost wholly removed. It is, therefore, imperative, if Canada is to become a successful competitor for the trade of New York, that her public debt be reduced to the same limit within the same time. The trade of Canada has been diverted through other channels: both her imports and revenue have fallen off; available capital cannot be obtained at any reasonable rate of interest; and a general depression prevails throughout the country requiring immediate relief. Canada, however, still retains the elements of wealth incident to a young and rising country, and only requires time and the introduction of capital to regain her former prosperity.

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12. This capital can be obtained by a loan of imperial credit, and the strongest possible grounds exist to warrant the expectation of its being granted by the Imperial Government, because this Province was induced to make the loans referred to for the construction of railways on the invitation of Her Majesty's Government, as the following Despatches clearly point out :-On the 1st April 1857, Lord Grey intimated to Lord Elgin," that Her Majesty's servants will not be slow to propose, nor, judging "from the opinions generally expressed, would Parliament be slow to sanction the employment of the " pecuniary resources of Great Britain, in furtherance of the construction of railways and canals for "the purpose of promoting immigration and colonization in British North America." On the 14th March 1851, in a Despatch from Lord Grey to the Earl of Elgin, is enclosed a letter from Mr. UnderSecretary Hawes to Joseph Howe, Esq., dated 10th March 1851, wherein it is stated "that Her Majesty's Government were prepared to recommend to Parliament to give the guarantee of the "Imperial credit to a loan for the construction of the proposed line of railway from Halifax to Quebec "or Montreal, or to advance the funds required out of the British Treasury upon certain stipulated condi"tions." The Despatch of the Right Hon. Sir John Pakington to the Earl of Elgin, 20th May 1852, leads to the same encouragement, viz. :-That Her Majesty's Government are anxious to act with the most perfect good faith towards the Legislature and people of the British American Provinces, and to fulfil every just expectation that may have been held out by their predecessors. The Committee, reposing every confidence in the willingness of Her Majesty's Government to fulfil the just expectations held out to Her faithful subjects, entertain no doubt but that the Imperial Parliament will extend the guarantee of the nation to loan this Province her credit, which is about three per cent., for a limited period, upon the express condition that it be used for no other purpose than in reducing the public debt, by purchasing up Provincial and Municipal Debentures bearing six per cent., and, with this difference between Imperial and Provincial credit, creating a Sinking Fund with which the principal of the loan can be paid off within 18 years. which would be effected without the imposition of any tax on Her Majesty's subjects, either in England or here. It will be the means of improving public credit, and will enable the Government hereafter to obtain loans at the lowest rates of interest, for the redemption of the remainder of the Provincial debt. Your Committee would therefore recommend to the favourable consideration of the Government the moving of a joint Address to Her Majesty, praying that she may be pleased to propose to Her Imperial Parliament the granting of a loan to the Provincial Government of 5,000,000l., payable in twenty years, for the above purpose.

(No. 3.

On the Commercial Policy of Great Britain, Canada, and the United States.) 13. Your Committee have examined into the colonial commercial policy of Great Britain and Canada, also the commercial policy of the United States, the treaties and different acts under which -that policy is enforced, and the results produced. In 1846, under the provisions of the Imperial Act 9 & 10 Vict., chap. 22., entitled " An Act to amend the Laws relating to the Importation of Corn," the productions of the United States were admitted into the markets of Great Britain upon the same terms as those of Canada, while no provision was made by the Imperial Government with the Government of the United States to admit the productions of Canada into their markets upon similar terms. The effect of this law was to depreciate the value of all articles grown or produced in Canada 20 per cent. under the value of like articles grown or produced in the United States, and this difference in value continued up to the year 1854, a period of nearly nine years. During that year the Imperial Act 9 & 10 Vict., cap. 94., entitled "An Act to enable certain British Possessions to reduce or repeal "certain Customs Duties," became law, after nine years of continued application, public attention. having been first drawn to the subject in the Legislative Assembly of Canada in 1837. In 1847, in deference to the opinions expressed in the Despatch of the 24th May 1843, under the Act of 1846, 9 & 10 Vict. cap. 94., duties on American manufactures were reduced from 12 to 7 per cent., and increased on British manufactures from 5 to 7 per cent. The effect of this Act being to remove all

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