goods imported to any of the British colonies for the purpose of protecting British or colonial interests, the colonial legislatures are not likely to have the necessary knowledge as to commercial treaties or as to the international consequences of their action, nor can several colonies act in harmony with each other in such matters; hence, confusion in imperial policy must result. Only, therefore, where the matter has been previously arranged with the home government can the colonies be permitted to impose differential duties. The various governors are therefore instructed to use all their influence towards preventing the introduction of such measures, but should they be persisted in, they must, when submitted for the governor's assent, be reserved for the consideration of the home government. The Toronto Board of Trade appeals to the principle laid down in this dispatch, and strongly approves of its wisdom and necessity. The board frankly states that it does not trust the Canadian legislature to deal properly with commercial matters, as 'the commercial interests of the colony are very inadequately represented in the popular branch.'

In

William Ewart Gladstone, as yet a comparatively young statesman, found himself face to face with this interesting and delicate question in self-government as one of the first which met him on taking over the Colonial Office. his dispatch to Lord Cathcart, February 3, 1846, he stated that the essential question was whether this matter was one of imperial or colonial concern. From the imperial point of view the home government had no intention of imposing differential duties on any of the channels of entry to Canada, although it was true that the imperial statutes all favoured the St Lawrence route. If, however, the colonial legislature, in dealing with its own interests, chose to make such a discrimination in routes, it must be regarded as free to do so, provided that it did not interfere with the British interests. In another dispatch of the same date Gladstone added that the home government objected to the introduction of higher rates on British imports than existed previously, and was opposed to the general principle of increasing duties. This was, indeed, a very cautious treatment of the question, but

characteristic alike of the man and of the new laisser-faire policy of the home government.

Hincks's paper, the Montreal Pilot, was strongly opposed to the differential duties proposed, taking the same stand as the Toronto Board of Trade and the Western Canadian papers. The matter was further complicated by the American Drawback Act of 1845, which enabled American dealers in foreign goods, on re-exporting them to the British North American provinces, to obtain a drawback, or refund, of the duties which had been paid when they were imported to the United States. In Canada it was held, however, and afterwards confirmed by official rulings, that this act did not particularly affect imports into Canada, because British goods obtained from the United States would be treated as foreign goods, and pay the rates appointed for such goods, but similar British goods could be imported to the British North American provinces direct at considerably lower rates. The Canadian Differential Act was not disallowed, but was not further developed at this time. We shall find, however, this same question coming to the front in a more serious form during the period of the American Reciprocity Treaty.

TH

VII

BRITISH TARIFF REFORM AND CANADA

HE historic Imperial Act, which brought long-sought relief to the working classes of Britain by terminating the corn laws, and which, in doing so, destroyed the special preference enjoyed by the Canadian grain dealers and millers, was passed on June 26, 1846. It did not at once abolish the whole of the duties on grain and flour, but it very greatly reduced them, and provided that after February 1, 1849, all the duties should be removed except the Is. per quarter registration duty, or fee, on all grains, and 41⁄2d. per cwt. on flour and meal. In the meantime the duty on wheat, which had ranged from £1 per quarter, when the price was under 51s. per quarter, to Is., when the price was 73s. or upwards, was reduced to range from 10s. per quarter, when

the price was under 48s. per quarter, to 4s., when the price was 53s. and upwards. A corresponding reduction took place on all other grains and on the flour and meal produced from them.

The proposed change was officially announced to Canada in the speech from the throne, delivered on March 20, 1846, by Lord Cathcart, who had succeeded Lord Metcalfe as governorgeneral. In announcing the momentous approaching change in the commercial policy of the Empire, Cathcart stated that he had pressed upon the attention of the home government a due consideration of its consequences to Canada. This announcement had reference to his correspondence with Gladstone as colonial secretary, in which, voicing the sentiments of the executive council, he urged the necessity for continuing the protection to the colonial trade in wheat and flour, and pointed out that the internal communications of the provinces were undertaken on the ground of the advantages of sending wheat and flour to England via Quebec. It was shown also that practically all the surplus grain of Canada which was shipped to Britain was grown in Upper or Western Canada, and, if the preference were withdrawn and the Americans should permit the free export of Canadian produce through the United States, Canadian exports would go to Europe via the New York channels instead of the Canadian. Moreover, the Drawback Law of the United States, recently passed, had caused most of the imports of tea, sugar and other goods to come to Western Canada via New York. Again, the proposed change would directly affect the British shipping trade from Montreal. Finally, a decrease in the price of Canadian grain, which it was thought must result from the change, would lessen the ability of the farmers to purchase British goods.

Most of this line of argument, it may be observed, is almost the direct antithesis of that which was put forward when the building of the Canadian canals was advocated, and the money for constructing them was to be borrowed. Then it was maintained that the construction of the Canadian canals would undoubtedly render transport from the West to the sea so much cheaper by the Canadian route that,

not only would all Canadian traffic outward and inward pass through the Canadian canals, but practically all the Western American traffic would follow the same route. Indeed, so decided would be the advantage and so great the traffic via the Canadian route, that not only would the Canadian canals be self-supporting, but they would furnish so large a revenue that it would permit of abolishing all customs duties on British imports. Finally, the maintenance of a preference on the fragment of British food supplied by Canada was sought, the fact that such a preference was detrimental to the great mass of the British public being ignored. Yet the people who urged this narrow and selfish view on a great imperial issue were the members of the legislative council, and their commercial and financial allies, who regarded themselves as almost the only persons in the colony whose loyalty was unquestionable, and who had the truly imperial spirit and point of view.

Gladstone, in making his reply, quietly reminded this element that the British government was by no means unmindful of the interests of Canada, but that in a matter of British public policy of so great importance the supply of food for the people of this country, and the employment of its population, must be paramount.' In the changes regarding both the grain and timber duties, it proposed to regard the interests of the colonies by making them as gradual as possible. Moreover, it was the policy of the government to afford as complete freedom as possible to Canadian trade by admitting all forms of Canadian imports as nearly free of duty as possible. Thus the duties would be lowered from fifty to a hundred per cent on the following articles which might be furnished from Canada: pearled barley, butter, cheese, hams, bacon, salt pork, beef, peas, beans, rye and oats. Moreover, he reminded them of their claims as to the great things which the new canals were about to achieve for Canada.

The radical nature of the change in commercial policy upon which Britain had entered, which was not confined to removing the duty on food products, led to many secondary speculations and practical consequences. Among other

things, the adoption of a free trade policy in the matter of imports raised the radical and extensive question of the protective restrictions involved in the Navigation Acts. This question was almost immediately raised by the colonies, and was soon the centre of discussion on both sides of the Atlantic.

In the meantime several special and more exclusively colonial questions were raised. A speculative discussion immediately began in the Canadian and American papers as to the comparative advantages of the Canadian and American routes to the sea under the changed trade conditions. A number of American papers, believing that the only advantage possessed by the Canadian route was its being the medium for the introduction of American produce to the British market practically free of duty, were confident that when the term for the preference terminated in 1849, the American route to the ocean would supplant even the improved Canadian one, and that, instead of the western states becoming a commercial adjunct to Canada, as the Canadians had anticipated, Western Canada was more likely to become a commercial adjunct to the United States-a consummation which was particularly desired by those whose interests were associated with the Erie Canal route.

The Canadians themselves, especially in the chief centres of trade, were soon divided into two camps on the subject of trade policy. Quite a number, following the lead of the English free traders, held that the American claim would be justified in its concrete applications, especially in developing a new and distinctively Canadian line of policy. The majority, however, still adhered to the old lines, and supported the rapidly diminishing body of protectionist landlords in Britain, hoping for the restoration of the corn laws against the world, but with free trade and preference for Canada. Montreal, the chief centre of Canadian manufacture and finance, naturally took the lead in both the reactionary and the progressive policy. Soon after the passing of the act abolishing the corn laws, a Free Trade Association was formed in the city, the leader of which was George Moffatt. The members of this association, and their supporters and