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CANADA.

discriminating duties against the United States. In 1849 the Provincial Legislature passed an Act
[12 Vict. cap. 3.] authorizing the removal of duties on all articles being the growth or production of the
United States, upon condition that the United States should pass a similar law. Up to this period the
Legislature of Canada carried out the colonial commercial policy of Great Britain to the letter.

14. In 1854 the Reciprocity Treaty (which emanated from an Address of the House of Assembly in 1846) came into operation. By reference to the evidence of Mr. Wilkins, British Consul, Chicago; Mr. Worthington, Inspector of Ports for Upper Canada and others, appended hereto, [See App. Nos. 1 and 8,] it appears that the spirit and intention of the Reciprocity Treaty is being evaded. Under article third of this treaty the high contracting parties agree that the articles enumerated, being the growth and produce of the colonies, or the United States, shall be mutually admitted free of duty; grain, flour, and breadstuffs of all kinds being the principal articles named. In the Provincial Act of 1849 the words "growth or produce of either country" were inserted, but in the 3rd article of the treaty the word "and" was substituted for "or." This change was doubtless unintentional, but under the Customs regulations of the Treasury of the United States this portion of the treaty is interpreted to exclude flour and breadstuffs ground in Canada, from grain grown in the United States. As an illustration of this construction, although peas, as well as grain of all kinds ground in Canada, are admitted free, when split they become liable to duty. [See App. No. 9]. In article fourth the United States Government engages to urge upon the State Governments to secure to the subjects of Her Britannic Majesty the use of the several State canals on terms of equality with the inhabitants of the United States, proving clearly that unreserved reciprocity in its broadest sense was intended, and that no further restrictions were meant to be imposed on the articles named, or in the vessels carrying them between the two countries, than between separate States of the Union, and in that spirit have all the productions of the United States been received in this province. That it was so understood by the Treasury of the United States on the 12th February last is manifest from the instructions of the Treasury to the different Officers of Customs. [See Report of British Consul, App. A, page 41.] Your Committee therefore believe that on a clear representation of the facts being made to the Government of the United States, these restrictions will be removed.

15. They also beg to call the attention of the Provincial Government to the operation of the amended Customs Act of 1853. The 6th clause of the Act 12 Vict., cap. 1., enacts, "That in all cases where "any duty is or shall be imposed on any goods imported into this province ad valorem, or according to "the value thereof, such value shall be understood to be the actual cash value thereof in the principal "markets in the country where the same were purchased, and whence they were exported to this "province." The 3rd clause of the Act 16 Vict. cap. 85. (April 1853), repeals the above clause, and enacts, “That in all cases where any duty is or shall be imposed on any goods imported into this "province ad valorem, or according to the value of such goods, such value shall be understood to be "the fair market value thereof in the principal markets of the country, whence the same were exported "directly to this province." Under the operation of the Act of 1849 a brisk trade sprang up between Halifax and Canada; under the operation of the Act of 1853 this trade was abandoned and transferred to New York.

16. On the 13th October 1854 a Committee of 12 Members of the Legislative Assembly was appointed to inquire into the commercial intercourse between Canada and Great Britain, North American Colonies, British West India Islands, the United States, and other foreign countries. After a laborious investigation on the 29th May 1855 they reported upon the results produced, which your Committee recommend to the careful consideration of the Imperial and Provincial Governments. From a close examination of the effects resulting from the existing commercial policy of Great Britain, Canada, and the United States, since the above report, your Committee find the trade of the province still remains practically under the control of the Government of the United States.

Your Committee therefore earnestly recommend:

1st. That the despatch of 1843 be withdrawn, leaving the Legislature to regulate the duties on imports as heretofore under the Act of 1846, without restriction; also that an Address be presented to Her Majesty, representing the evasion of the Reciprocity Treaty, and praying that a negotiation with the Government of the United States may be entered into for the removal of all restrictions under the said treaty.

2nd. They also recommend the removal of all duties on the productions of the British possessions in America, so that precisely the same principle as exists in the intercourse between the different States of the American Union may be established in these Colonies.

3rd. That the principle of reciprocity with the United States be extended to manufactures, the registration of Canadian and United States built vessels, and to the shipping and coasting trade, in the same manner as to the productions of the soil.

4th. That the mode of imposing duties on imports, under the Act 12 Vict. cap. 1, sec. 6, be restored, leaving the consumer in the Western States and Canada subject to no greater duty, viâ the St. Lawrence, than by New York, and that the St. Lawrence Canals be immediately deepened, to admit vessels of the same draft of water as those which pass through the Welland Canal.

The whole, nevertheless, humbly submitted.

WM. HAMILTON MERRITT,

Committee Room, Legislative Assembly,

27th July 1858.

Chairman.

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APPENDIX A.

No. 1.

To the Hon. W. H. MERRITT, M. P. P., Chairman of the Committee to inquire into the Home and
Foreign Trade, Legislative Assemby, Toronto, C. W.

British Consulate,

SIR,

Chicago, July 6th, 1858.

I HAVE the honour to forward my reply to your request that I should transmit to you1. A statement of the course of trade between Chicago and Great Britain, shewing what portion goes to New York and what portion to Quebec.

2. What are the relative advantages in the coasting trade to American and Canadian ships? 3. What are the relative amounts of exports and imports by the canals and railways through the United States and the same through Canada?

4. In what manner the existing Treaties or Acts of the respective countries affect the present trade?

5. What remedies are required to place them on an equal footing?

1. Course of Trade between Chicago and Great Britain.

It must be understood that although a large amount of transatlanic merchandize ultimately finds a consuming market in the regions west of Lake Michigan, and the productions of the western states are distinctively quoted in European markets, nevertheless Lake Michigan ports cannot be said to have direct trade with transatlantic countries. any

The direct relations between European merchants and those of the western states of the Union are of a desultory and unimportant character.

Both as regards exports and imports, the direct trade of Lake Michigan is at present with markets to its eastward, through to the Atlantic seaboard, and no farther.

As regards the statistics bearing on the trade on the inland lakes, it must be remarked that they are not so exact or so satisfactorily arranged as their importance demands. Mr. Guthrie, the Secretary of the Treasury Department of the United States, in his annual report for the year 1856, says, "We have no data to ascertain the annual number of persons or the annual tons of freight carried in our coasting trade, nor the value thereof."

Regulations to remedy this are from time to time being instituted. The annexed tables are, however, sufficient approximations to warrant the deductions made from them, and as regards the trade from this port with Canada, are substantially correct.

The following tables are annexed:

1. Total imports and exports received and shipped by rail and lake respectively, at port of Chicago, during 1857.

2. Analytical table shewing shipments from Chicago to British Provinces in British and American vessels.

3. Shewing trade in British vessels for four years.

It seems to be generally considered, that the effect of resent legislation of both countries, and the Reciprocity Treaty of June 5, 1854, has been to divert a great portion both of the import and export trade of Upper Canada across Lakes Ontario and Erie, which previously had its entrance and exit by the St. Lawrence River, to the prejudice of the forwarding and other interests, of Lower Canada, and to the benefit of New York State.

On the other hand, cereals and provisions from the United States bordering on Lakes Erie and Michigan now find their way down the St. Lawrence, to Montreal and Quebec. See Table 2.

The only imports to this lake, by way of the St. Lawrence River, worth notice in the proposed comparison, are railway iron and foreign salt. For various reasons, I think that these will never materially increase in quantity, even if they ever again reach the amount of former years.

For the last four years no railway iron has reached Chicago in British vessels.

It is in the rade with the western states that the equivalent for the diversion of Upper Canada trade from the St. Lawrence across the lakes should be found.

Whether this equivalent has been found, and under the existing international relations ever would be found, may be judged of by the comparisons and remarks following.

2. Relative advantages to Canadian and American Vessels.

Table 1. shews No. of tons shipped by lake from Chicago in 1857 - 507,600 tons.
Table 2. Shipment of same to Canada in British and American

vessels:

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56,309

451,291

Thus only one ninth could have been shipped in British vessels; actually less than one twentieth was. A strong inducement to Canadian purchasers to ship in American vessels, is, that cargoes afloat can be ordered either to American or Canadian markets, on arriving at the Welland Canal, Shipments in Canadian vessels must be discharged at a British port, and cannot be reshipped to the United States

CANADA.

under the Reciprocity Treaty. (See Appendix A. Remarks on Navigation Laws and Treasury Circular of 12 February 1858, requiring Consular certificates of the origin of shipments from Canada to the United States.)

In these remarks Chicago has been made the basis of comparison.

By taking imports and exports from Milwaukie, Racine, and Kenosha, on this lake, although no statistics are before me, my knowledge of the trade warrants the assertion that by including the trade with these points the comparison would be increased in favour of the United States.

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1,297,074

As regards Table 1., which, for the reason stated above, is scarcely more than an estimate, it must be remarked that of the total receipts 739,000 tons are of lumber, a very large proportion of which was from the United States shores of St. Clare River, Lakes Huron and Michigan, and 134,000 tons of coals from Cleveland.

Probably some 200,000 tons were carried from Buffalo and points east of the Welland Canal, consisting of general merchandise of home and foreign production.

Table 3., which can be relied on, shows the quantity imported in British vessels in the aggregate about 19,000.

Carrying Trade across Lakes Erie and Ontario.

I have no means of estimating the proportion of the carrying trade across Lakes Ontario and Erie in Canadian and American vessels.

The impression I find entertained is, that it is largely in favour of American vessels.

The table, p. 204, in the Trade and Navigation Returns (Canada) for 1856, does not determine this but taking the totals of the entries inwards and outwards given in that table, it appears that the Americans are of the whole.

The table appears to include the coasting trade, which must be done in British vessels.

This result certainly points to the conclusion, either that the proportion of the coasting trade is very small, or that the larger share of the international trade is done by American vessels. If this be the case it would seem that by the operation of the existing laws and treaty the shipping of Canada competes unsuccessfully with that of the United States in the trade across the Lakes; and that in the anticipated equivalent to be found in the trade with the Western States (taking this port as a basis), the United States vessels engross all but a trifling portion of the carrying trade westward; and in the eastward trade the one-ninth, which could lawfully be done by British vessels, was last year shared nearly equally by American. The restrictions against American vessels carrying Canadian produce coastwise, so far as regards timber and staves from the St. Clare River and Lake Erie is, I am informed, evaded by shipping to French Creek (Clayton), and then rafting to Quebec, which would seem to be as much an evasion of the British Navigation Laws and breach of the Reciprocity Treaty as carrying wheat from Chicago to Kingston in a British vessel, and transhipping it to Ogdensburgh or Oswego. See Appendix A. I have no personal knowledge on this matter, but am told that contracts have this year been made by Americans to carry timber and staves in the way described.

This trade is a very desirable one to British vessels, and several masters of vessels have spoken to me about it. See fol. 42.

Again, is any Canadian produce manufactured in the United States and reshipped to Canada, e. g., Canadian wheat floured at Oswega to Montreal.

Relative Amounts of Exports and Imports by Rail and Canal.

3. What are the relative Amounts of Exports and Imports by the Canals and Railways through the United States, and the same through Canada? On this point my observations would be of no value.

I beg to refer your Committee to the annexed tables, Nos. 1 and 5, furnished me by J. McAlpine, Esq., and to that gentleman's reports on the canals of New York for the years 1852 and 1853. I have his permission to state, that five years' subsequent experience have confirmed him in the conclusions then arrived at.

With regard to the shipments from Chicago by railway eastward, it may be stated that the most of the articles of hog's lard, pork, and flour, which constitute a large portion of the whole, are shipped by railway during the close of navigation,

The subject of your inquiry has been further discussed in the report of Messrs. Childe, McAlpine, and Kirkwood, C.E., on the trade and navigation of the St. Lawrence, which is probably before your Committee.

In this connexion I would make two remarks,

Ist. That in such articles as pork, flour, lard, &c. the trade with Main and other Eastern states, during the winter months, by the Grand Trunk Railway cannot, under the present construction of the Reciprocity Treaty, be done, except by sending articles through in bond to the United States line. They cannot be carried to Montreal and resold to enter the United States under the Reciprocity Treaty. See Appendix A.

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2d. That, until a trade in general merchandise between the Canadian seaboard and the Western States is established, the Grand Trunk traffic for the Western States will be little more than passengers and express parcels.

[See Appendix B. Remarks on United States Tariff Laws as impeding growth of trade between Montreal and Chicago.]

4. Manner in which Acts or Treaties of respective Countries affect the present Trade.

1st. United States laws and construction of treaties:

Even if direct commercial relations with Great Britain were established, the following regulations must be complied with to entitle the merchandise passing through Canada in bond to be entered at a United States lake port on the same terms as at New York.

See Appendix B.

1. It must appear by the invoice they were intended for a particular port.

2. Their identity must be traced by affidavit of transhipper.

3. Ownership must not have changed in Canada.

4. The continuity of the voyage must not be broken for an unreasonable time; and,

5. The whole amount named in the invoice must be forwarded for entry.

Though in theory these appear simple, yet in practice they all give rise to inconveniences, and would certainly check the growth of a trade which can be done by other channels free from any restrictions.

2d. The construction of the United States tariff laws, which prevents merchants at Montreal and Quebec for competing for trade of the Western States in general merchandize of foreign productions and manufacture, whilst New York can compete in various articles with Montreal and Quebec in Western Canada.

See Appendix B.

I would respectfully call the attention of your Committee to the decision of the United States Supreme Court, mentioned therein.

Last year I obtained a portion of a consignment of castor oil, imported into Montreal from Calcutta, and offered it for entry here at the value in Great Britain. In the face of that decision, the only objection offered was, that it must be accompanied by an invoice from Montreal, and that if the invoice showed a higher value than the markets of Great Britain the duty mnst be assessed on the value of

the invoice.

This was not clear, however, and the article was entered during my absence at the London price, on the understanding that it was not to be considered a precedent.

If, in the view of your Committee, taking into consideration the yearly increasing connexion between the provinces and the Western States of the Union, a trade such as is indicated in Appendix B is likely to ensue were these tariff difficulties removed. I beg to suggest that a case be carried to the Supreme Court at Washington for decision there.

This course has the advantage over applying for the action of the United States Federal Legislature in this, that the Western States of the Union would be in favor of opening up a new purchasing market for foreign merchandise, and in the event of the Supreme Court of the United States deciding that the existing laws permit such trade, the rival interests of New York and Boston would find as great difficulties in getting this privilege to the Western States interfered with as Canada and the Western States combined would meet with in obtaining an alteration of existing laws.

The case would have been tested before had the amounts involved been sufficiently large.

3rdly. The construction of the Reciprocity Treaty by which western cereals and provisions shipped to Canada cannot be re-shipped to the United States. See Appendix A.

4. The Navigation Laws of the United States.

The importance of obtaining an alteration in the policy of the United States Government on these questions as regards the trade of the inland lakes is shewn by the results of the present trade, and as regards the future its significance may be illustrated thus :-

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In the event of a ship canal connecting the St. Lawrence with Lake Champlain being made, and a route to New York without any transhipment for the produce of the Western States being opened up, all this trade must be done in American vessels, so long as the United States laws requires that "No "goods shall be imported under penalty of forfeiture thereof from one port in the United States to "another port of the United States in a vessel belonging wholly or in part to a subject of any foreign

power." Act of Congress, March 3rd 1817, sec. 4. See Appendix A, with Mr. Guthrie's

remarks.

The United States laws do not admit foreign built vessels to registry. And further, even where the vessel is American and sold to a British owner will not allow a re-registry as an American vessel. An owner (who also is master) of cne of the finest British sail vessels which trades with this port finding the difficulties his vessel laboured under in this trade, expressed his intention of becoming an American citizen and enrolling his vessel under the American flag. He found, however, that although he would have no difficulty in becoming a citizen himself he could not take his vessel with him.

Appendix C treats of the difference between the laws of Canada and the United States relating to inland shipping, and the uncertainty existing as to what laws govern the titles of the inland shipping of Canada.

Lastly. What Remedy is required to place the Trade on an equal Footing?

In the foregoing remarks my aim has been to shew the national disadvantages under which the

CANADA.

CANADA. province of Canada labours in her trade with the Western States, especially as regards the development

of the advantages and position she possesses in her natural water communication with them.

On the extent of these advantages over the other routes to the Atlantic seaboard and Europe I have not touched.

These have been fully discussed in reports of able engineers and in the published remarks of practical merchants.

Indeed it has seemed to me that these have been too much relied on as alone sufficient for the development of the expected trade, whilst the national position and disadvantages have been too little considered.

The protective policy of the United States in her tariff and navigation laws, and her construction of the Reciprocity Treaty, foster the growth of her inland marine and preserve the trade with the Western States of the Union to her own channels, whilst in that portion of the carrying trade open to the Canadian vessel owner he has to meet the American in competition at all points with the exception of the coasting trade of Canada, and even a portion of that appears in practice to be divided.

The remedy lies in the action of the United States.

I am aware of the difficulties which presented themselves in former negociations previous to the conclusion of the Reciprocity Treaty, but it must be recollected that since those negociations took place the North-western States of the Union have immensely increased in national importance.

They have found a valuable customer in the province of Canada, and by the use of the Welland Canal established relations with their own ports in Lake Ontario which could not otherwise exist.

With the exception of the vessel interest, which is very small in comparison with others, I think that the whole of the North-western States would raise their voice for any fair concessions in international intercourse.

My own observations are necessarily local.

I shall be obliged for suggestions directing attention to any points which your Committee may consider of value.

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APPENDIX A.

REMARKS on Navigation Laws, and United States Treasury Circular of 12th February 1858, requiring
Consular Certificates of the origin of Shipments from Canada to the United States.

THE Construction of the Reciprocity Treaty by the United States Government, which appears to have been received with some surprise in Canada, has for two years past been acted on at this point with regard to the article of lumber.

Pine logs, the growth of the United States, were floated over to the Canadian shores from Michigan, and cut into lumber in such a way that had the logs been the growth of Canada the lumber would have been admitted free under the Reciprocity Treaty.

This was shipped from Canada to Chicago, and on entry here was charged with a duty of thirty per cent., on the ground that it was not entitled to a free entry as it was not the growth of Canada.

As regards the trade between the primary markets of the Western States and the distributing markets of Canada, of which Montreal is the chief, the practice of grinding into flour wheat brought from the Western States, in Montreal or St. Catharines, and sending it to the United States for sale, independently of the effect of diminishing the grist to the mills of the United States distributing markets of Buffalo, Rochester, Oswego, and Ogdensburgh, is probably considered as tending to an indirect violation of the 4th section of the Act of Congress of March 3rd 1817, intituled "An Act concerning "the Navigation of the United States," which enacts that "No goods, &c. shall be imported, under penalty of forfeiture thereof, from one port in the United States to another port in the United States " in a vessel belonging wholly or in part to a subject of any foreign power,"-the basis of the system of "Coasting laws," especially referred to and advocated by Mr. Secretary Guthrie in his annual report for 1856, as follows:

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"The coasting trade of the United States has from the beginning been strictly reserved for vessels "built within the United States, to the exclusion of foreign built and foreign owned vessels." *

In the protection given to our shipping interest there appears to have been but little division of sentiment from the earliest times to the present, whilst the yearly increase of our tonnage proves the wisdom of our laws in this particular.

Ever since the commencement of the trade the restrictions imposed on British vessels by this law have been found to place them at great disadvantage with United States vessels, and various attempts were made to establish the position that if a transhipment of the goods takes place in Canada, the United States law would not be infringed.

In some cases which arose in the autumn of 1856 the Treasury Department decided that this was an infringement of the law, and made seizures of some wheat belonging to a United States citizen, that had been shipped from Chicago to Ogdensburg in a British vessel, to be transhipped at Kingston, Canada. West. The wheat was released on the ground that no fraud was intended.

During the season of 1857, as these views were well understood, nothing of the kind occurred at this. point; and I did not notice any indication of further action on the part of the United States Government, until the issue of a Treasury circular dated 12th February last, requiring all shipments of

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