Memorandum.

DEPARTMENT OF RAILWAYS AND CANALS, Ottawa, Canada, November 18, 1892. The undersigned, to whom was referred the communication of the 24th of August, 1892, from the Secretary of State to the British minister at Washington, on the subject of canal tolls, begs to report to your excellency as follows:

The undersigned notes with pleasure Mr. Foster's assurance that the delay which occurred between the passage of the "Curtis bill" on the 26th July, 1892, and its proclamation on the 20th of August following was prompted by a spirit of neighborly good will on the part of the President towards Canada, and by a desire to avail himself of possible concessions on her part to avoid the necessity for its final proclamation. Prompted by an equal desire to avoid any cause of disagreement, and with a view to the continuance of those friendly relations with the United States which it has always been their endeavor to maintain, the government of Canada, while holding firmly to their contention that they were justified in adopting the tariff of tolls and rebates which has been complained of, nevertheless consented to waive their rights in this particular instance and agreed not to reëstablish, after the close of the present season, the system of rebates and transshipment regulations heretofore in force, in consideration of continued immunity from tolls on the Sault Ste. Marie Canal and the restoration to Canada of the right of transit for domestic products under Article 30 of the treaty of Washington, which was abrogated by the United States in 1885. The undersigned regrets that the President was unable to accept this statement, made by the Government of Canada in the minute of council of the 16th August, 1892, as a sufficient reason for indefinitely postponing the imposition of tolls on the Sault Ste. Marie Canal.

The Secretary of State of the United States comments unfavorably upon the fact that he did not receive the dispatch conveying the final action of the Canadian government "until after the issue of the proclamation, and not until one week after the official announcement at Ottawa." The undersigned begs to say that no announcement was made at Ottawa or in Canada, of the decision arrived at by the government, beyond some paragraphs which appeared in the newspapers professing, as a matter of news, to indicate the action taken. The official announcement, forwarded with all possible dispatch through the Governor-General, was in Mr. Foster's hands within one week of the meeting of the council on the 13th August, and on the very day on which the proclamation was issued, and before its issue, Mr. Foster was informed by the British chargé d'affaires, unofficially, of the conclusion which had been arrived at, and was told that the official dispatch was expected by him at any moment. Mr. Foster appears to regard as unnecessary, and somewhat in the nature of a threat, the proviso in the proposal of August 16, to the effect that the undertaking not to reestablish the system of rebates and transshipment regulations after the present season (upon certain conditions named therein) would not be binding on the Canadian government if the President of the United States should, in the meantime, proclaim and enforce the imposition of tolls on the Sault Ste. Marie canal. In another communication, addressed to the British chargé d'affaires, Mr. Foster cites the proposal as proof that the Canadian government are convinced that their course was in violation of the treaty, or they would not have agreed to abandon the rebate system.

The undersigned begs to remark that neither of these conclusions is warranted. The Canadian government, whilst holding to what they believe to be their right, were willing, for the sake of amity and good feeling, to waive that right in so far as the rebates were concerned after the close of the current season on the conditions that Canadian citizens should have the use as heretofore of the Sault Ste. Marie Canal, and that the privileges of domestic transit should be restored as in article 30 of the treaty of Washington. It was certainly not contemplated by the Government to waive their right in respect of the Canadian canals and at the same time to leave the people and merchandise of Canada subjected to the imposition of tolls on the Sault Ste. Marie Canal. The proviso in the communication of August was simply meant to give expression to this fact, and should not be interpreted as in any sense a "threat;" nor should Canada's attempt to avoid a dispute with the United States in this respect be interpreted as a proof of her conviction of unsoundness in her contentions.

Mr. Foster next draws attention to the neglect of the Canadian government to respond to representations made on the subject of discriminating canal tolls by the United States and cites three instances to prove his contentions.

First. That "in 1888 Mr. Bayard brought the matter to the attention of the Canadian government, but received no response." It is true that in 1888 the subject was brought to the attention of the Government in two ways-one by a note addressed by Mr. Bayard to the British minister at Washington on the 21st July, inclosing a memorandum as to alleged discriminatory rates of toll on the Welland Canal, and

the other by a resolution introduced into Congress by Mr. Dingley on June 4 of that year. Both of these were considered by the Canadian government, and a minute of council was passed thereon, setting forth the facts as to the tolls on the Welland Canal and the St. Lawrence canals, and a certified copy of the minute was, on August 13, 1888, sent to Mr. Bayard by the British minister. The record of this latter fact appears in the United States Foreign Relations, 1888, pp. 816, 825.

In the second place, Mr. Foster states that "in May, 1891, the United States consulgeneral addressed the Ottawa government without eliciting any information."" The undersigned finds that in May, 1891, Consul-General Lay addressed a letter to the late Sir John A. MacDonald, asking whether grain transshipments made at United States ports were precluded from the benefit of rebates? Sir John A. MacDonald personally, perhaps, made no answer; but on April 21 preceding the secretary of the department of railways and canals (over which Sir John was presiding as minister) had, by instruction, answered a precisely similar inquiry from Mr. Lay, furnishing him with the full official information.

The third instance cited is that "in 1891 the British legation was addressed upon the subject without eliciting any reply from the Canadian government."

The dispatch referred to was one inclosing a memorial of the Lake Carriers' Association, and reached the Canadian government on the 23d October, 1891. It was at once referred to the minister of railways and canals for report and engaged the attention of that department, but the report was not expedited, owing to changes in the government consequent upon the death of Sir John A. MacDonald and to the fact that the season was then about closing, not to reopen until the spring of 1892. Before that time the matter was informally discussed in conference of February, 1892, at the State Department in Washington. The delay was fully explained to Mr. Blaine, theu Secretary of State for the United States, and to Mr. Foster, the present Secretary, who also took part in the conference; and it is surely a misapprehension for Mr. Foster, writing on the 24th August, 1892, to say that no reply was made, inasmuch as before that date the subject had not only been discussed at the conference of February, but also at a further conference which took place in Washington in June, the dispatch itself being formally replied to later by a minute of council.

The undersigned can not allow to pass, without remark, the statement made by Mr. Foster that Canada is justly chargeable with pursuing an "unneighborly course" in maintaining what she believes to be her rights under the treaty of Washington, nor the assumption that in this matter Canada is willfully violating the terms of the treaty. The difference of opinion which exists as to the treaty rights of the two countries is to be regretted, but it forms no basis for a charge that either country, in maintaining its own views, proceeds with a willful disregard of solemn obligations or a desire to be unfriendly to the other.

The undersigned is confident that a fair review of the conduct of both countries in the matter of privileges of inland navigation will not be to the disadvantage of Canada.

*

Mr. Foster states that "immediately after the conclusion of the treaty of 1871, the United States took steps to carry out the stipulation of Article 27, and without unreasonable delay the canals of the national and State governments, representing a vast system, constructed at very great expense, were thrown open to the nse of Canadian commerce."

The facts are that although the Michigan (Sault Ste. Marie) Canal was immediately opened by that State to the use of Canadian vessels, five full years elapsed from the date of the treaty before Canadian vessels had the privilege of using the New York State canals, and this delay was due, not to any restriction on the part of the State authorities, but solely on account of the legislation of Congress and regulations of the Federal authorities. During this period repeated representations were made by the Canadian Government, but without avail. It was shown that the United States Government required every Canadian vessel to report at the first port in the United States territory and to unload cargo thereat. This regulation prohibited any Canadian vessel from traversing a single mile of the Erie or Champlain canals with cargo, or even from entering with her cargo either of those canals.

Even in 1876, when, through the efforts of the British Government, the representations of Canada were at last heard at Washington, permission was given to Canadian vessels to pass through the Champlain Canal and to go as far as Albany, the first port below the canal, but no further, although the bulk of their cargoes was for New York.

The only canal embraced in the category of those which the United States were to recommend the State governments to grant the equal use of, which has been of benefit to Canada, is the Sault Ste. Marie; the others were actually closed to Cauadian vessels up to 1876 in consequence of restrictions imposed and enforced by the United States Government itself, and the concessions of their use subsequently has been of no practical value.

It is worth while in this connection to contrast the neighborly spirit shown by Canada.

In the treaty of 1854 there was a stipulation providing for the use of Canadian and United States reciprocally. From 1854 until 1866, when the treaty was abrogated, United States vessels were granted free and equal use of all the Canadian canals, while not a single State canal was thrown open to the free and equal use of Canadan vessels, nor is there any record that the United States Government during this long period used its friendly offices to that end. Even after the abrogation of this treaty in 1866, and until the ratification of the treaty of 1871, United States vessels were continued in the free and equal use of the Canadian canals, though like reciprocal privileges were not granted Canadian vessels in State canals in the United States.

Since 1871 United States vessels have been allowed to come from the Hudson River ports with cargo, through the Richelieu River, and after traversing the River St. Lawrence, to navigate the Ottawa River and its system of canals (not included in the treaty), taking return cargoes from Ottawa, the great center of lumbering operations, to the Hudson River ports, including New York, thus successfully competing with Canadian vessels, which are debarred from the like privileges in the Hudson River.

The Canadian canals which are open to the equal use of the United States vessels have nearly all a depth of from 9 to 14 feet (the Welland, the one most valuable to American commerce, being 14 feet), have already cost Canada for construction $12,000,000, and taking the period from 1886 to 1891 as an average, necessitate a yearly expenditure, over revenue, of more than $250,000.

It is therefore a fact that while Canadians are practically prevented from the use of the Erie and Champlain canals (being debarred from objective points which might render these canals of value to them as a means of access), the vast system of canals constructed at very great expense," which Mr. Foster referred to, as opened to Canadian commerce, narrows itself down to the use of St. Clair Flats Channel (which it should be noted Canada has an equal right to use, irrespective of the treaty of 1871) and the Sault Ste. Marie Canal. Of the free use of this latter canal our people are now deprived by the recent proclamation of the President. It may be observed in this connection that by the terms of the transfer of the canal from the State to the Federal Government it was stipulated that the canal should be “free of tolls."

It is plain to which country the great balance of advantage has accrued, and the undersigned believes that Canada has no reason to fear a full comparison of the action of the two governments, as manifested in the record of inland navigation, and of the spirit of fairness and friendliness and respect for treaty obligations which each country has evinced.

The undersigned desires also to observe that in the treaty of 1871 the commissioners stipulated that the privileges of transit for internal commerce across intervening territory of either country were to be granted. For this privilege of transit, to be enjoyed by Canada, she gave in return a like reciprocal privilege to the United States, bound herself to place no export duty on such goods as went in transit, and at large financial cost commuted, for a perpetual yearly payment, the export duty on lumber imposed theretofore by the government of New Brunswick.

In 1885 the United States abrogated clause 30 of the treaty of Washington, and thus deprived Canadians of the benefit of such transit as was therein granted. Canada, however, still allows the United States the privilege of carriage in transit between her ports, and still provides for the export-duty exemption in regard to logs cut in the State of Maine and carried through New Brunswick for export to the United States. In other words, Canada still accords a valuable and costly privilege to the United States after the withdrawal from Canada by the United States of all reciprocal treatment.

The undersigned here desires to call the attention of your excellency to a matter the importance of which consists in a certain seeming imputation of bad faith on the part of the representatives of Canada, which it is desirable to remove. This matter is the mention made in the message of President Harrison to the Senate, transmitted 20th June, 1892, of the report of Mr. Blaine with regard to what transpired in respect of canal tolls at the conference of February, 1892, as to which Mr. Blaine says:

"The fifth was an informal engagement to repeal and abandon the drawback of 18 cents a ton given to wheat that is carried through to Montreal and shipped therefrom to Europe."

The facts are as follows: At the conference of February the discussion of the canal tolls came up unexpectedly, not having been among the subjects set down and agreed upon for discussion. Allusion was made to the fact that there was an unanswered dispatch upon the subject from the United States, and the Canadian delegates assured Mr. Blaine that upon their return to Ottawa they would have the matter taken

up and carefully considered, with a view to meeting any just complaint and disposing of the question in as friendly a spirit as possible.

The following letter written by Mr. Blaine to Hon. N. C. Blanchard on the 15th of February, whilst the conference was in progress at Washington, and when the discussion was fresh in his memory, corroborates this:

"SIR: I have the honor to acknowledge the receipt of your letter of the 2d instant, relative to the discrimination of the Canadian government against American citizens in the use of the Welland Canal.

"On the 18th of September, 1891, the Lake Carriers' Association presented to this Department a memorial regarding the matter, and the subject was fully presented to Sir Julian Pauncefote, Her Britannic Majesty's minister at this city, on the 10th of October following. No formal reply thereto has been received beyond an acknowledgment of the receipt of the Department's note and a statement by Sir Julian that it had been referred to his Government. The matter has been brought to the attention of the Canadian commissioners now in this city, and an assurance given by them that the complaint which we have preferred shall have careful and prompt consideration, with a view to a faithful observance of the treaty stipulations.

Replying to your further inquiry, I would say that the only treaty stipulation in force applicable to the use by American and Canadian citizens of the canals connected with the Great Lakes and the St. Lawrence River is contained in the twentyseventh article of the treaty of Washington, and is clearly intended to be reciprocal in character.

"I have, etc.,

"Hon. N. C. BLANCHARD,

Chairman Committee on Rivers and Harbors,

'House of Representatives."

"JAMES G. BLAINE.

It will be observed that the fourth sentence in Mr. Blaine's letter coincides with the statement of the Canadian delegates, and differs from his later recollections, as contained in the statement of Mr. Blaine to the President. It differs also, it would seem, from Mr. Foster's recollection of what had occurred.

In the later conference of June a certain misunderstanding which appeared to be in the minds of Mr. Blaine and Mr. Foster as to what had previously been said was fully discussed, and, as the Canadian delegates supposed, thoroughly removed, and it can not be regarded as other than a matter for regret that after this it should have been thought necessary to detail the circumstances to Congress in such a way as to give rise to a suspicion of bad faith on the part of the Canadian delegates.

In conclusion, the undersigned would again declare that Canada and the Canadian government are actuated by a desire for the continuation of the most friendly relations between the two countries, and he ventures to hope that upon further consideration of the proposal made to that end by the Canadian government, in August last, the Government of the United States may be inclined to accept it as a reasonable and final settlement of the question in dispute.

The undersigned recommends that your excellency be moved to cause this present document to be communicated to the United States Government and to the Government of Her Britannic Majesty.

Respectfully submitted.

JOHN HAGGART,

Minister of Railways and Canals.

Sir Julian Pauncefote to Mr. Foster.

BRITISH LEGATION,

Washington, December 14, 1892. (Received December 15.) SIR: I have the honor to inform you that a copy of your note of the 6th September last with respect to wrecking privileges for American vessels in the Welland Canal, was transmitted to the governor-general of Canada, and that I have now received from his excellency in reply a dispatch inclosing copy of an approved minute of privy council concurring in a report of the minister of railways and canals dealing with

the subject, and to which are attached regulations submitted by him with a view of enabling the United States wrecking vessels to render aid to disabled American vessels in the Welland Canal.

I have the honor to inclose a copy of that minute.
I have the honor, etc.,

[Inclosure.]

JULIAN PAUNCEFOTE.

PRIVY COUNCIL, CANADA.

Certified copy of a report of a committee of the honorable the privy council, approved by his excellency the governor-general in council, on the 19th November, 1892.

The committee of the privy conncil have had under consideration a dispatch, hereto attached, dated 9th September, 1892, from Her Majesty's chargé d'affaires at Washington, covering a copy of a note received by him from the Secretary of State for the United States, dated the 6th of September, 1892, in which the Secretary of State acknowledges the receipt of a copy of the minute of council passed on the 27th of August last, with respect to wrecking privileges for American vessels in the Welland Canal whereby there was conveyed the intimation that as the waters of the canal are not "contiguous" to the United States they did not seem to come within the scope of the enactment of last session respecting reciprocity in wrecking and towing.

The minister of railways and canals, to whom the dispatch and inclosures were referred, observes that the Secretary of State in his present communication represents that the President is not prepared to admit certain conclusions of a note, probably addressed to the United States Government by the British chargé d'affaires, which has not been communicated to this government, but which is presumed to have been based on the minute of council of the 27th August last.

The minister further observes that the gist of these conclusions appears to have been that the words "wrecked, disabled, or in distress" (in their ordinary sense) are not applicable to vessels in canals or such waterways.

Upon this the Secretary of State of the United States observes as follows: "The phrase must evidently be construed with reference to the ordinary navigation of such channels, and any of the lesser casualties to which tugs and their tows, or self-propelled vessels, are liable in such waters, such as an accident to the engine or steering gear, the breaking of the towline, the grounding of a tug or its tow in shallow waters, and the like, constitute a practical case of disability or distress within the purview of the intended reciprocity. Past experience has shown that in such contingencies any assistance rendered by an American vessel, however legitimate, even in the case of a tug picking up or pulling off its own tow, is treated by the Canadian authorities as wrecking and punished accordingly when performed in Canadian waters."

The minister observes further in relation to the foregoing that by section 6 of the Consolidated Orders in Council, Cap. 21, it is expressly provided that the rule prohibiting foreign vessels having other vessels in tow and having parted with them in Canadian waters from again taking them in tow to move them further in Canadian waters shall not apply to "an accidental parting of such vessel by breaking hawser or other temporary damages."

The minister of railways and canals concurs in the view of the Secretary of State for the United States that distress of the temporary nature indicated should be within the purview of the intended reciprocity if it is not otherwise provided for, but the Secretary of State is mistaken if he supposes that assistance in any such case has ever been punished when performed in Canadian canals.

The minister with respect to the main question now under discussion between the two governments, namely, whether the Welland Canal should be included in the reciprocal arrangements for wrecking, and desiring to assist to a satisfactory conclusion, submits for the consideration of your excellency in council a set of regulations which may be found available for the purpose contemplated.

The committee concurring therein recommended that the same be adopted.
The committee advise that your excellency be moved to forward a copy hereof to
Her Majesty's minister at Washington.

All which is respectfully submitted for your excellency's approval.

JOHN J. MCGEE, Clerk of the Privy Council.