developed the industry of the country. The consequence was that regular employment was altogether inadequate when compared with the number seeking it, because they could not themselves go directly from the land. The province was thus condemned to a mere hand-to-mouth existence, which largely accounted for the very noticeable backwardness of its economic development as compared with the progress of the adjoining states.

Canadian resources were admittedly as good as those of the northern states, the people were personally as capable of developing their country, and the British markets were more accessible. The Canadian highways to the ocean were naturally superior to those of the United States, but required very considerable capital expenditure to render them thoroughly serviceable for all kinds of transportation. It was only the lack of capital, wisely invested, which caused Canada to drag behind her neighbours. It is true that when the public works were in process of construction Canada found it possible to employ, and thus to hold in the province, the larger proportion of the immigrants who came to her shores. But the public works, which were mainly connected with transportation and military establishments, themselves gave little permanent employment when they were completed. There were few established industries to which the labourers could turn their attention; hence they must needs leave the country, which they did in large numbers.

Undoubtedly the public works undertaken in Canada were for the most part highly necessary for the development of the country, and it would have been a mistake to construct them on any more limited scale; at the same time the general development of the colony did not keep pace with its transportation facilities, as had been the case in the adjoining states, where the corresponding public works proved to be profitable undertakings almost from the start by reason of the rapid and well-balanced progress of the country. In Canada, as we have seen, the mistake lay in attempting to build up the country with an impecunious body of settlers who, however capable they might be in their personal capacity, could not be expected to make encouraging progress

when simply left to face the wilderness with little else than the equipment with which nature had furnished them. Little wonder that, when they learned how much more rapidly others of the same type as themselves were winning success in the adjoining states, they should have become discouraged, and, after a short trial of Canadian conditions, journeyed to the republic. Thus it was that, in spite of the natural inclination of many British immigrants to settle in the British North American provinces, they found it relatively unprofitable to do so. Thus the United States gained not only the ever-increasing volume of British immigration which passed directly from Britain to that country, but also a very large section of the immigrants who came to the British American provinces with the intention to settle there.

The responsibility for this unfortunate situation is partly to be laid at the door of the then prevalent idea that the colonies should be discouraged from undertaking anything more than a one-sided development which would furnish the mother country with raw materials for her various industries, and take from her all the manufactured articles which they required. It was thought that only on this basis could the colonies be worth anything to the mother country, or in any way repay her for the very great outlay which their maintenance occasioned her. As yet it had occurred to only a limited number of people either in Britain or the colonies that a more normal and all-round development of them would have led to the reduction of these heavy subsidies, and that the advantage of more rapid progress in the colonies under a better-balanced system would have occasioned a much greater volume of British trade with them than could ever be afforded in their restricted condition. Needless to say, that element in the colonies-and it was long the most powerful political and economic factor in them-which profited so largely and so easily from the heavy British expenditure was strongly opposed to the larger and more progressive idea of colonial development.

VOL. V

VI

CANADIAN AND AMERICAN TRADE RIVALRY

IN

N the meantime special favours, on which the Canadian economic expansion from 1841 to 1847 was chiefly built, were, first, the loan guaranteed by the British government for £1,500,000 for the completion of the St Lawrence canal system and other public works; second, the abolition of the duty, except a registration fee of Is. per quarter, on Canadian grain and flour entering the British market. This was to include flour ground in Canada from American wheat imported on payment of a duty of 3s. per quarter. This latter was accomplished by the Canada Corn Bill of July 12, 1843. This act declares that, in consideration of the legislature of Canada having, on October 12, 1842, imposed a duty of 3s. per quarter on wheat imported into that country after October 10, 1843, the duty on wheat from Canada on entering the British market shall be Is. per quarter, and on each barrel of flour the same duty as on 381⁄2 gallons of wheat; in other words, the duty on flour to be equivalent to the duty on wheat. This afforded a very substantial preference over grain and flour sent direct from the United States.

One of the chief results expected from this combination of improved transportation and special preference was the conversion of the Great Middle West of the United States into a commercial, and possibly later a political, adjunct to Canada. The interests of this American region were chiefly agricultural, and its transportation was tributary to the Great Lakes. By offering these western states higher prices for their grain and cheaper and more rapid communication with the Atlantic, with a correspondingly cheaper and more direct means of obtaining their supplies of manufactured goods from Europe, the Canadian interests, relying upon their special preferences from Britain, were confident of separating the American West from the East and making it a Canadian annex. In the language of one of the official

dispatches referring to the proposed plan of dealing with the western states: 'It is thus evident that their commercial interests, like those of the southern states, will eventually become separated from those of the eastern manufacturing states, and, with the high protecting duties imposed on British manufactured goods, will prove each day more obnoxious to them.' However, both Canadians and Americans were to discover that the most convincing schemes for annexing each other's trade were not so easily realized as might appear in advance.

As illustrating the complexity of the conditions to be dealt with, we find that during the autumn of 1842 there was a very considerable increase in the amount of American produce imported into Canada for reshipment to Britain, but during the following year there was a severe falling off in this trade, and the merchants of Buffalo were comforting themselves with the assurance that the Canadian plans had proved a failure. On further inquiry, however, one finds that the limited means of the Canadian capitalists had been so heavily invested in building mills and otherwise preparing for the new trade, that they had found themselves financially exhausted in 1843, and consequently unable to purchase American grain as freely as they wished. This defect was corrected in the following year, when the imports of American grain largely increased.

The commercial and milling interests of Montreal, which were chiefly benefited by the British preference on Canadian grain and flour, and by the transhipment and grinding of American wheat for the British market, made another move for the special advantage of their interests. They managed to get an act through the Canadian legislature establishing a differential duty on all goods imported to Canada by inland routes, in other words, from or by way of the United States. The object, of course, was to force the whole of the trade. of Western Canada through the gateway of Montreal. Tributary transportation centres, such as Kingston and St Catharines, also favoured the measure, but the traders and farmers of Western Canada were greatly opposed to it, and did not cease their opposition even when the bill had become law.

The Board of Trade of Toronto gave expression to the views of the western merchants in a memorial to the queen dated April 7, 1845. Referring to the debate on the bill while before the legislature, it was pointed out that the intention of the measure, as frankly stated by its sponsors, was to force the trade between the Atlantic ports of the United States and Western Canada from its existing course via the Erie and Oswego Canals around by the St Lawrence route in order to secure for the new canals the tolls to be derived from this trade. On this the Board of Trade commented that, if the public works, which had been constructed at such enormous cost to the country, could be utilized only by placing ruinous restrictions upon the commerce of Western Canada, it were better that they should never have been undertaken. It was pointed out that New York was the chief market in which American goods were purchased; the distance from New York to Toronto was much the same as from Montreal to Toronto; the freight charges also were much the same. The differential duty was thus intended to outweigh the cost of freight between New York and Montreal, a long and difficult voyage. The burden at once of the extra duty and of the inconvenience and delay were to be borne entirely by Western Canada; but this was the district which was the mainstay of Canada, since it furnishes the greater part of the agricultural produce for export, and it should not be placed at the mercy of a few capitalists of Montreal. It was true that the rates of duty imposed by the recent act were not very heavy, and would not accomplish the object sought, but the principle was laid down in the act, and if accepted the rates would be increased as a matter of course until the object was secured. The protest, therefore, was directed against the principle of the act.

But undoubtedly the most interesting and far-reaching section of this memorial is that in which the board discusses the relative powers of the British and Canadian governments in dealing with the foreign trade of Canada. It refers with approval to the circular dispatch from Lord Stanley to the colonial governors dated June 28, 1843. The substance of this was that when discriminating duties were imposed on