THE

MERCHANTS' MAGAZINE

AND

COMMERCIAL REVIEW.

DECEMBER, 18 6 7.

THE DOMINION OF CANADA AND THE RECIPROCAL TRADE.

Absorbed as we are in the regulation of our own internal affairs, after the derangements of a great war, it is not surprising that we should overlook the importance of cultivating advantageous relations with our neighbors. It is nevertheless a fact we can ill afford to ignore that on our northern frontier we have a young nationality, rapidly growing in population and rising into commercial importance. Our misfortunes have indirectly advantaged Canada; for while the war has augmented the burthens of our people and diminished the profits of industry, our neighbors have escaped these ill fortunes and thus gained a higher vantage ground in competing with us for the markets and the surplus population of the Old World. The Dominion of Canada now occupies the same position, in respect to foreign trade, we occupied in 1795, while its population is about 600,000 less. Compared with our rapid growth, its increase in population may appear trivial, but its progress, nevertheless, is equal to our own at the same stage of our history. Judging from the progress of the provinces since 1860, it is not to be deemed among the improbabilities of the future that fifty years hence the population of the united provinces may equal that of the United States at the date of our last census. It is estimated by the Canadian authorities that since 1861 the population of all the provinces combined has increased from 3,300,000 to about 4,000,000; and although this increase may not be considered in itself as specially important yet it indicates a ratio of progress which, at no very remote period, is destined to give to our neighbors a commanding national importance. The following statement shows the area of the respective provin

ces, their populations in 1861 and the estimated population in 1867, as published in the Canadian reports:

The commerce of the Dominion is large compared with its population. The combined imports and exports of the former Province of Canada, for the last fiscal year, amounted to $105,000,000; which is equivalent to about $34 per head of population. In 1860 the foreign commerce of the United States averaged $27 per capita. This comparison shows great vigor and prosperity on the part of our neighbors. The standing of the new Dominion in respect to tonnage and foreign commerce is shown by the following statement:

COMMERCE AND TONNAGE; AVERAGE FIVE YEARS, 1861-65.

The tonnage above given for Canada is the seaward tonnage; besides which there cleared from inland ports to the United States on the average of the same five years 3,291,069 tons, and entered at inland ports from the United States 3,144,207 tons. This is exclusive of ferry navigation.

Thus far the Provinces have conducted their finances with commendable economy. Their total debts amount to about $75,000,000; an aggregate, it is true, equal to the whole debt of the United States seven years ago; but yet less than one-fifth the rate per capita of the present Federal and State debts of this country. The total governmental expenditures of the Provinces are, in round numbers, $15,000,000; which, with a population of four millions, amounts to a burthen of $3 75 per head of the population. Our own Federal taxation at present averages $13 95 per capita, to say nothing of our State burthens. As illustrating the finances of the several sections of the Dominion, we present the following statement of receipts, expenditures and debts:

REVENUE, EXPENDITURES, DEBT, ETC., 1865, (EXCLUSIVE OF LOAN ACCOUNT.)

In reviewing the resources and condition of the Dominion we have purposely kept in view our own relative position in the respective details, because it appears to be thought good national policy to exclude our neighbors to a certain extent, from commercial intercourse with the United States. The physical conditions of Canada correspond very closely with those of the most active and prosperous sections of our own country. Its natural conditions for trading in the products of the forest, the field and the sea also compare favorably with our own; while as respects governmental burthens-a matter bearing very essentially upon the inducements to both labor and capital-it has important advantages over ourselves. Can it then be considered wise statesmanship to shut ourselves out from intercourse with a people thus circumstanced, and drive them as competitors into other markets where we are ourselves sellers? So homogeneous are the interests of the two countries that there has long been a latent feeling among our people in favor of the annexation of the Provinces. One motive of the repeal of the Reciprocity Treaty was an idea that the Canadians might thereby be made to feel their dependance upon our trade, and to infer hence the desirableness of political union. Events, however, have proved that the means we selected were ill-adapted to the end sought. Canada has suffered little, while a heavy penalty has fallen upon some of our own interests. The imposition of a heavy duty upon timber has caused severe injury to our shipbuilding interest, otherwise subjected to embarrassing disabilities; while it has placed a premium on shipbuilding at St. Johns and in the ports of Great Britain. The returns of the former Province of Canada show that during the last fiscal year their imports increased six millions, and that the increase was entirely with Great Britain, while the purchases from the United States were below those of 1865-66; indicating that the diversion of the exports of the Province to other countries is attended with an increase of its purchases from such countries. The exports of the Province show a decline of about five millions upon 1865-66, the prospect of the abrogation of the treaty having induced large purchases by our people to save the subsequent import duties, but they are, at the same time, about fifteen millions in excess of the figures of 1864-5, showing that our neighbors are by no means dependent upon us for a market for their products. It was certainly a most unwise policy which led to the abrogation of the treaty. The fact of our being able, under the agreement, to exchange a much larger amount of products than had proved possible previously, was a sufficient evidence of its advantage to both parties, and no stronger argument for its continuance needed to be advanced, for ever exchange implies a mutual profit. Now, however, we are beginning to see the results of our act; and yet, in this year's trade returns we only have a slight indication of what we may expect in the future. The natural course of Canadian trade is to this country: but as we have built a wall around ourselves, and thus obstructed the natural channel, a new one is being forced. The movement at first was hardly perceptible, but is at length beginning to indicate its course; and let it once work out for itself another route, and it will require more than the restoration of the reciprocity treaty to restore it. We have a good illustration of this idea in the course of Western trade, which formerly sought the seaboard by the way of New Orleans. The war shut up the

Mississippi and all trade was forced towards the East. Now, although that river has long been open, the new channel continues to carry off the prize.

But there are already among us palpable symptoms of a desire to negotiate a new treaty. Several interests complain of injury from the repeal, while none profess to be specially benefitted. Probably the question of resuming reciprocal relations with the New Dominion may be introduced into Congress at the coming session; and we trust will result in the re-opening of negotiations for that object.

EXTINGUISHMENT OF THE PUBLIC DEBT.

BY A NEW YORK MERCHANT.

Let Congress, at the next session, authorize the Secretary of the Treasury to call in the National Bank circulation, as fast as it can be done, say within sixty or ninety days, and issue United States legal-tender notes in place of it, the legal-tender notes to be paid for by the banks with coin interest bonds.

The Government to redeem these legal-tender notes, at the rate of five millions of dollars monthly in gold, to be paid to the banks pro rata on their circulation, said redemption to commence as soon as the bank circulation is all in, and all other paper money circulation to be prohibited, except the fractional currency.

This redemption to continue for five years, at the end of which time the banks are to resume specie payment, and thereafter to keep on hand one quarter of the circulation in coin.

Upon the resumption of specie payment, the circulation of the legaltender notes to be apportioned among the banks, and the Secretary of the Treasury to be authorized to increase the amount not exceeding one hundred millions of dollars, whenever two thirds of the banks in interest, by resolution, shall request him to do so. The increase to be paid for by the banks in coin interest bonds.

The Secretary of the Treasury to loan to the banks, in case of panics, to the extent of thirty or fifty millions of gold, whenever necessary to sustain them, upon Government bonds as security, and at such rates of interest as will induce its return to the Treasury at the earliest practicable

moment.

Upon the return to specie payment, United States notes to cease to be legal-tenders.

The three hundred millions of legal tenders to be issued in place of the National Bank circulation, could be apportioned at the time of issue, and the old issue be redeemed. This would save much expense, as it would leave but one hundred millions of the old issue to be changed.

This plan will release the reserve of legal-tenders now he'd by the banks, and will make the entire circulation in United States legal tender notes about seven hundred millions, and some ninety millions more than at present.

The legal tenders, when redeemed in gold, will be in effect paying the bonds which were taken from the banks in gold, and will definitely settle the question as to how the principal of the coin interest-bonds is to be paid. This being settled, an immediate rise in our securities might be looked for, both in Europe and this country, and for such an active demand from Europe as would, to a large extent, prevent the shipment of gold for some considerable time to meet the trade indebtedness.

The gradual return to specie payment would not seriously affect the values of merchandise, and thereby create distress; but, on the contrary, we might look for an active and increasing trade in all branches of business, and a revival of that confidence which a feasible and definite policy will surely bring.

The banks will find their compensation for the loss of their circulation, and the interest on the bonds, in the sale of the gold, which they can dispose of for the first three years, as they will receive for the legal-tenders, during the five years, three hundred millions; and also in the increase in the value of the balance of the securities now held by them. We shall place our financial affairs upon a sound and firm basis, and give to the people a uniform currency, which will be recognised throughout the United States as being beyond the possibility of ever becoming worthless. That the Government should supply the circulation, is now generally conceded; and it must also be conceded, that there is no more reason why the Government should supply the banks with capital, in the shape of circulation, in order that they may profit, both by the securities held for its redemption and the circulation, upon the plea that the interest of the manufacturer and the trader, and through them, the country is largely benefited, than that capital should be furnished by the Government to the country merchant. Wherever these facilities are needed, there capital will locate, and will afford them at such rates as will be satisfactory to the banker and the accommodated.

Now, let us see whether the Government can pay the interest on the coin interest indebtedness, and redeem the legal-tender notes, as proposed. When all of the Seven-Thirties are converted, as they soon will be, the coin interest indebtedness will be about twenty-one hundred millions. This, by the issue of the three hundred millions of legal-tenders, will be reduced to eighteen hundred millions.

The annual interest will be......

The annual redemption legal tenders..

To be paid annually in coin..

The receipts from customs..

Leaving to be provided for.....

$108,000,000

60,000,000

$168,000,000

150,000,000

$18,000,000

Which can be taken from the gold reserve now in the Treasury. As the receipts from the customs are rapidly increasing, and the one hundred and fifty millions being considered the lowest point they will be likely to reach under the present tariff, the reserve, in all probability, would not be touched for this purpose.

With the revival of business, and the general confidence restored, the Government will be able to reduce the rate of taxation, and with an eco