privilege adverted to has hitherto been enjoyed. The expediency of taking into your serious consideration proper measures for countervailing the policy referred to will, it is presumed, engage your earnest attention.

The massacres of French and Russian residents at Tien-Tsin, under circumstances of great barbarity, were supposed by some to have been premeditated, and to indicate a purpose among the populace to exterminate foreigners in the Chinese empire. The evidence fails to establish such asupposition, but shows a complicity between the local authorities and the mob. The Government at Pekin, however, seems to have been disposed to fulfill its treaty obligations so far as it was able to do so. Unfortunately, the news of the war between the German States and France reached China soon after the massacre. It would appear that the popular mind became possessed with the idea that this contest, extending to Chinese waters, would neutralize the Christian influence and power, and that the time was coming when the superstitious masses might expel all foreigners and restore mandarin influence. Anticipating trouble from this cause I invited France and North Germany to make an authorized suspension of hostilities in the East, (where they were temporarily suspended by act of the commanders,) and toact together for the future protection, in China, of the lives and properties of Americans and Europeans.

Since the adjournment of Congress the ratifications of the treaty with Great Britain for abolishing the mixed courts for the suppression of the slave trade, have been exchanged. It is believed that the slave trade is now confined to the eastern coast of Africa, whence the slaves are taken to Arabian markets. * -x- * * #

I regret to say that no conclusion has been reached for the adjustment of the claims against Great Britain growing out of the course adopted by that Government during the rebellion. The cabinet of London, so far as its views have been expressed, does not appear to be willing to concede that her Majesty's Government was guilty of any negligence, or did or permitted any act during the war, by which the United States has just cause of complaint. Our firm and unalterable convictions are directly the reverse. I therefore recommend to Congress to authorize the appointment of a commission to take proof of the amounts, and the ownership of these several claims, on notice to the representative of her Majesty at Washington, and that authority be given for the settlement of these claims by the United States, so that the Government shall have the ownership of the private claims, as well as the responsible control of all the demands against Great Britain. It cannot be necessary to add that, whenever her Majesty's Government shall entertain a desire for a full and friendly adjustment of these claims, the United States will enter upon their consideration with an earnest desire for a conclusion consistent with the honor and dignity of both nations. The course pursued by the Canadian au

thorities toward the fishermen of the United States during the past season has not been marked by a friendly feeling. By the first article of the convention of 1818, between Great Britain and the United States, it was agreed that the inhabitants of the United States should have forever, in common with British subjects, the right of taking fish in certain waters therein defined. In the waters not included in the limits named in the convention (within three miles of parts of the British coast) it has been the custom for many years to give to intruding fishermen of the United States a reasonable warning of their violation of the technical rights of Great Britain. The imperial Government is understood to have delegated the whole or a share of its jurisdiction or control of these in-shore fishing grounds to the colonial authority known as the Dominion of Canada, and this semiindependent but irresponsible agent has exercised its delegated powers in an unfriendly way. Vessels have been seized without notice or warning, in violation of the custom previously prevailing, and have been taken into the colonial ports, their voyages broken up, and the vessels condemned.

There is reason to believe that this unfriendly and vexatious treatment was designed to bear harshly upon the hardy fisherman of the United States, with a view to political effect upon this Government. The statutes of the Dominion of Canada assume a still broader and more untenable jurisdiction over the vessels of the United States. They authorize officers or persons to bring vessels hovering within three marine miles of any of the coasts, bays, creeks, or harbors of Canada into port, to search the cargo, to examine the master on oath touching the cargo and voyage, and to inflict upon him a heavy pecuniary penalty if true answers are not given; and if such a vessel is found "preparing to fish" within three marinemiles of any of such coasts, bays, creeks, or harbors without a license, or after the expiration of the period named in the last license granted to it, they provide that the vessel, with her tackle, &c, shall be forfeited. It is not known that any condemnations have been made under this statute. Should the authoritiesof Canada attempt to enforce it, it will become my duty to take such steps as may be necessary to protect the rights of the citizens of the United States.

It has been claimed by her Majesty's officers that the fishing-vessels of the United States have no right to enter the open ports of the British possessions in North America, except for the purposes of shelter and repairing damages, of purchasing wood, and obtaining water; that they have no right to enter at the British custom-houses or to trade there except in the purchase of wood and water; and that they must depart within twenty-four hours after notice to leave. It is not known that any seizure of a fishing-vessel carrying the flag of the United States has been made under this claim. So far as the claim is founded on an alleged construction of the convention of 1818 it cannot be acquiesced in by the United States. It is hoped that it will not be insisted on by her Majesty's Government.

During the conferences which preceded the negotiation of the convention of 1818 the British commissioners proposed to expressly exclude the fishermen of the United States from "the privilege of carrying on trade with any of his Britannic Majesty's subjects residing within the limits assigned fortheir use;" and also that it should not be "lawful for the vessels of the United States, engaged in said fishery, to have on board any goods, wares, or merchandise whatever, except such as may be necessary for the prosecution of their voyages to and from the said fishing grounds. And any vessel of the United States which shall contravene this regulation maybe seized, condemned, and confiscated with her cargo." This proposition, which is identical with the construction now put upon the language of the convention, was emphatically rejected by the American commissioners, and thereupon was abandoned by the British plenipotentiaries, and article one, as it stands in the convention, was substituted.

li\ however, it be said that this claim is founded on provincial or colonial statutes, and not upon the convention, this Government cannot bat regard them as unfriendly, and in contravention of the spirit, if not of the letter of the treaty, for the faithful execution of which the imperial Government is alone responsible.

Anticipating that an attempt may possibly be made by the Canadian authorities in the coming season to repeat their unneighborly acts toward our fishermen, 1 recommend you to confer upon the Executive the power to suspend, by proclamation, the operation of the laws authorizing the transit of goods, wares, and merchandise in bond across the territory of the United States to Canada 5 and further, should such an extreme measure become necessary, to suspend the operation of any laws whereby the vessels of the Dominion of Canada are permitted to enter the waters of the United States.

A like unfriendly disposition has been manifested on the part of Canadain the maintenance of a claim of right to exclude the citizens of the United States from the navigation of the St. Lawrence. This river constitutes a natural outlet to the ocean for eight States with an aggregate population ofabout seventeen million six hundred thousand inhabitants, and with an aggregate tonnage of six hundred and sixtyone thousand three hundred and sixty-seven tons upon the waters which discharge into it. The foreign commerce of our ports on these waters is open to British competition, and the major part of it is done in British bottoms.

If the American seamen be excluded from this natural avenue to the ocean, the monopoly of the direct commerce of the lake ports with the Atlantic would be in foreign hands; their vessels on transatlantic voyages having an access to our lake ports which would be denied to American vessels on similar voyages. To state such a proposition is to refute its justice.

During the administration of Mr. John Quincy Adams, Mr. Clay unanswerably demonstrated the natural right of the citizens of the United States to the navigation of this river, claiming that the act of the congress of Vienna, in opening the Rhine and other rivers to all nations, showed the judgment of European jurists and statesmen that the inhabitants of a country through which a navigable river passes have a natural right to enjoy the navigation of that river to and into the sea, even though passing through the territories of another Power. This right does not exclude the coequal right of the sovereign possessing the territory through which the river debouches into the sea to make such regulations relative to the police of the navigation as may be reasonably necessary; but those regulations should be framed in a liberal spirit of comity, and should not impose needless burdens upon the commerce which has the right of transit. It has been found in practice more advantageous to arrange these regulations by mutual agreement. The United States are ready to make any reasonable arrangement as to the police of the St. Lawrence which may be suggested by Great Britain.

If the claim made by Mr. Clay was just when thepopulation of States bordering on the shores of the lakes was only three million four hundred thousand, it now derives greater force and equity from the increased population, wealth, production, and tonnage of the States on the Canadian frontier. Since Mr. Clay advanced his argument in behalf of our right the principle for which he contended has been frequently, and by various nations, recognized by law or by treaty, and has been extended to several other great rivers. By the treaty concluded at Mayence, in 1831, the Rhine was declared free from the point where it is first navigable into the sea. By the convention between Spain and Portugal, concluded in 1835, the navigation of the Douro, throughout its whole extent, was made free for the subjects of both crowns. In 1853 the Argentine Confederation by treaty threw open the free navigation of the Parana and the Uruguay to the merchant vessels of all nations. In 1856 the Crimean war was closed by a treaty which provided for the free navigation of the Danube. In 1858 Bolivia, by treaty, declared that it regarded the rivers Amazon and La Plata, in accordance with fixed principles of national law, as highways or channels opened by nature for the commerce of all nations. In 1859 the Paraguay was made free by treaty, and in December 1866 the Emperor of Brazil, by imperial decree, declared the Amazon to be open, to the frontier of Brazil, to the merchant ships of all nations.

The greatest living British authority on this subject, while asserting the abstract right of the British claim, says: "It seems difficult to deny that Great Britain may ground her refusal upon strict law, but it is equally difficult to deny, first, that in so doing she exercises harshly an extreme and hard law; secondly, that her conduct with respect to the navigation of the St. Lawrence is in glaring and discreditable inconsistency with her conduct with respect to the navigation of the Mississippi. On the ground that she possessed a small domain, in which the Mississippi took its rise, she insisted on the right to navigate the entire volume of its waters. On the ground that she possesses both banks of the St. Lawrence, where it disembogues itself into the sea, she denies to the United States the right of navigation, though about one half of the waters of Lakes Ontario, Erie, Huron, and Superior, and the whole of Lake Michigan, through which the river flows, are the property of the United States."

The whole nation is interested in securing cheap transportation from the agricultural States of the West to the Atlantic sea-board. To the citizens of those States it secures a greater return for their labor; to the inhabitants of the sea-board it affords cheaper food; to the nation an increase in the annual surplus of wealth. It is hoped that the Government of Great Britain will see the justice of abandoning the narrow and inconsistent claim to which her Canadian provinces have urged her adherence.

Our depressed commerce is a subject to which I called your special attention at the last session, and suggested that we will in the future have to look more to the countries south of us, and to China and Japan, for its revival. Our representatives to all these Governments have exerted their influence to encourage trade between the United States and the countries to which they are accredited. But the fact exists that the carrying is done almost entirely in foreign bottoms, and while this state of affairs exists we cannot control our due share of the commerce of the world. That between the Pacific States and China and Japan is about all the carrying trade now conducted in American vessels. I would recommend a liberal policy toward that line of American steamers, one that will insure its success, and even increased usefulness.

The cost of building iron vessels, the only Ones that can compete with foreign ships in the carrying trade, is so much greater in the United States than in foreign countries that, without some assistance from the Government, they cannot be successfully built here. There will be several propositions laid before Congress in the course of the present session looking to a remedy for this evil. Even if it should be at some cost to the national Treasury, I hope such encouragement will be given as will secure American shipping on the high seas and American ship-building at home.

* * * # # ■ #*

The estimates for the expenses of the Government for the next fiscal year are $18,244,346 01 less than for the current one, but exceed the appropriations for the present year, for the same items, $8,972,127 56. In this estimate, however, is included $22,338,278 37 for public works heretofore begun under congressional provision, and of which only so much is asked as Congress may choose to give. The' appropriation for the same works for the present fiscal year was $11,984,518 08.

The average value of gold as compared with national currency, for the whole of the year 1869, was about one hundred and thirty-four, and for eleven months of 1870, the same relative value has been about one hundred and fifteen. The approach to a specie basis is very gratifying, but the fact cannot be denied that the instability of the value of our currency is prejudicial to our prosperity, and tends to keep up prices to the detriment of trade. The evils of a depreciated and fluctuating currency are so great that now, when the premium on gold has fallen so much, it would seem that the time has arrived when, by wise and prudent legislation, Congress should look to a policy which would place our currency at par with gold at no distant day.

The tax collected from the people has been reduced more than eightymillion ot dollars per annum. By steadiness in our present course there is no reason why, in a few short years, the national tax-gatherer may not disappear from the door of the citizen almost entirely. With the revenue stamp dispensed by postmasters in every community, a tax upon liquors of all sorts, and tobacco in all itsforms, and by a wise adjustment of the tariff, which will put a duty only upon those articles which we could dispense with, known as luxuries, and on those which we use more of than we produce, revenue enough may be raised, after a few years of peace and consequent reduction of indebtedness, to fulfill all our obligations. A further reduction of expenses, in addition to a reduction of interest account, may be relied on to make this practicable. Revenue reform, if it means this, has my hearty support. If it implies a collection of all the revenue for the support of Government, for the payment of principal and interest of the public debt, pensions, &c, by directly taxing the people, then I am against revenue reform, and confidently believe the people are with me. If it means failure to provide the necessary means to defray all the expenses of Government, and thereby repudiation of the public debt and pensions, then I am still more opposed to such kind of revenue reform. Revenue reform has not been defined by any of its advocates, to my knowledge, but seems to be accepted as something which is to supply every man's wants without any cost or effort on his part.

A true revenue reform cannot be made in a day, but must be the work of national legislation and of time. As soon as the revenue can be dispensed with, all duty should be removed from coffee, tea, and other articles of universal use not produced by ourselves. The necessities of the country compel us to collect revenue from our imports. An army of assessors and collectors is not a pleasant sight to the citizen, but that or a tariff for revenue is necessary. Such a tariff, so far as it acts as an encouragement to home production, affords employment to labor at living wages, in contrast to the pauper labor of the Old World, and also in the development of home resources. Under the act of Congress of the 15th day

of July, 1870, the Army has gradually been reduced, so that on the 1st day of January, 1871, the number of commissioned officers and men will not exceed the number contemplated by that law. * * * *

The expenses of the Navy for the whole of the last year, i. e , from December 1, 1869, the date of the last report, are less than nineteen million dollars, or about one million dollars less than they were the previous year. The expenses since the commencement of this fiscal year, i. e., since July 1, show for the five months a decrease of over two million four hundred thousand dollars from those of the corresponding months of last year. Theestimates for the currentyearwere $28,205,671 37. Those for the next year are $20,683,317, with $955,100 additional for necessary permanent improvements. These estimates are made closely for the mere maintenance of the naval establishment as it now is, without much in the nature of permanent improvement. The appropriations made for the last and current years were evidently intended by Congress, and are sufficient only, to keep the Navy on its present footing by the repairing and refitting of our old ships.

This policy must, of course, gradually but surely destroy the Navy, and it is in itself far from economical, as each year that it is pursued the necessity for mere repairs in ships and navy-yards becomes more imperative and more costly; and our current expenses are annually increased for the mere repairof ships, many of which must soon become unsafe and useless. I hope during the present session of Congress to be able to submit to it a plan by which naval vessels can be built and repairs made with great saving upon the present cost.

It can hardly be wise statesmanship in a Government which represents a country with over five thousand miles of coast line on both oceans, exclusive of Alaska, and containing forty millions of progressive people, with relations of every nature with almost every foreign country, to rest with such inadequate means of enforcing any foreign policy, either of protection or redress. Separated by the ocean from the nations of the eastern continent, our Navy is our only means of direct protection to our citizens abroad, or for the enforcement of any foreign policy.

The accompanying report of the Postmaster General shows a most satisfactory working of that Department. With the adoption of the recommendations contained therein, particularly those relating to a reform in the franking privilege, and the adoption of the "correspondence cards," a self-sustaining postal system may speedily be looked for, and, at no distant day, a further reduction of the rate of postage be attained. * * * *

Always favoring practical reforms, I respectfully call your attention to one abuse of long standing which I would like to see remedied by this Congress. It is a reform in the civil service of the country. I would have it go beyond the mere fixing of the tenure of

office of clerks and employes, who do not require "the advice and consent of the Senate" to make their appointments complete. I would have it govern, not the tenure, but the manner of making all appointments. There is no duty which so much embarrasses the Executive and heads of Departments as that of appointments; nor is there any such arduous and thankless labor imposed on Senators and Representatives as that of finding places for constituents. The present system does not secure the best men, and often not even fit men, for public place. The elevation and purification of the civil service of the Government will be hailed with approval by the whole people of the United States.

Reform in the management of Indian affairs has received the special attention of the Administration from its inauguration to the present day. The experiment of making it a missionary work was tried with a few agencies given to the denomination of Friends, and has been found to work most advantageously. All agencies and superintendencies not so disposed of were given to officers of the Army. The act of Congress reducing the Army renders Army officers ineligible for civil positions. Indian agencies being civil offices, I determined to give all the agencies to such religious denominations as had heretofore established missionaries among the Indians, and perhaps to some other denominations who would undertake the work on the same terms; that is, as a missionary work. The societies selected are allowed to name their own agents, subject to the approval of the Executive, and are expected to watch over them and aid them as missionaries, to Christianize and civilize the Indian, and to train him in the arts of peace. The Government watches over the official acts of these agents, and requires of them as strict an accountability as if they were appointed in any other manner. I entertain the confident hope that the policy now pursued will, in a few years, bring all the Indians upon reservations, where they will live in houses, have school-houses and churches, and will be pursuing peaceful and self-sustaining avocations, and where they maybe visited by the law abiding white man with the same impunity that he now visits the civilized white settlements. I call your special attention to the report of the Commissioner of Indian Affairs for full information on this subject.

During the last fiscal year eight million ninety-five thousand four hundred and thirteen acres of public land were disposed of. Of this quantity three million six hundred and ninetyeight thousand nine hundred and ten and five one hundredths acres were taken under the homestead law, and two million one hundred and fifty-nine thousandfive hundredand fifteen and eighty-one one hundredths acres sold for cash. The remainder was located with military warrants, college or Indian scrip, or applied in satisfaction of grants to railroads, or for other public uses. The entries under the homestead law during the last year covered nine hundred and sixty-one thousand five hundred and forty-five acres more than those during the preceding year. Surveys have been vigorously prosecuted to the full extent of the means applicable to the purpose. The quantity of land in market will amply supply the present demand. The claim of the settler, under the homestead or the preemption laws, is not, however, limited to lands subject to sale at private entry. Any unappropriated surveyed public land may, to a limited amount, be acquired under the former laws if the party entitled to enter under them will comply with the requirements thpy prescribe in regard to the residence and cultivation.

The actual settler's preference right of purchase is even broader, and extends to lands which were unsurveyed at the time of his settlement. His right was formerly confined within much narrower limits, and at one period of our history was conferred only by special statutes. They were enacted from time to time to legalize what was then regarded as an unauthorized intrusion upon the national domain. The opinion that the public lands should be regarded chiefly as a source of revenue is no longer maintained. The rapid settlement and successful cultivation of them are now justly considered of more importance to our well-being than is the fund which the sale of them would produce. The remarkable growth and prosperity of our new States and Territories attest the wisdom of the legislation which invites the tiller of the soil to secure a permanent home on terms within the reach of all. The pioneer who incurs the dangers and privations of a frontier life, and thus aids in laying the foundation of new commonwealths, renders a signal service to his country, and is entitled to its special favor and protection. These laws secure that object and largely promote the general welfare. They should, therefore, be cherished as a permanent feature of our land system.

Good faith requires us to give full effect to existing grants. The time-honored and beneficent policy of setting apart certain sections of public land for educational purposes in the new States should be continued. When ample provision shall have been made for these objects I submit as a question worthy of serious consideration whether the residue of our national domain should not be wholly disposed of under the provisions of the homestead and preemption laws.

In addition to the swamp and overflowed lands granted to the States in which they are situated, the lands taken under the agricultural college acts, and for internal improvement purposes, under the act of September, 1841, and the acts supplemental thereto, there had been conveyed up to the close of the last fiscal year, by patent or other equivalent title, to States and corporations twenty-seven million eight hundred and thirty-six thousand two hundred and fifty-seven and sixty-three one hundredths acres for railways, canals, and wagon-roads. It is estimated that an additional quantity of one hundred and seventyfour million seven hundred and thirty-five

thousand five hundred and twenty-three acres is still due under grants for like uses.

The policy of thus aiding the States in building works of internal improvement was inaugurated more than forty years since in the grants to Indiana and Illinois, to aid those States in opening canals to connect the waters of the Wabash with those of Lake Erie, and the waters of the Illinois with those of Lake Michigan. It was followed, with some modifications, in the grant to Illinois of alternate sections of public lands within certain limits of the Illinois Central railway. Fourteen States and sundry corporations have received similar subsidies in connection with railways completed or in process of construction. As the reserved sections are rated at the double minimum, the sale of them at the enhanced price has thus in many instances indemnified the Treasury for the granted lands. The construction of some of these thoroughfares has undoubtedly given a vigorous impulse to the development of our resources and the settlement of the more, distaut portions of the country. It may,however, be well insisted that much of our legislation in this regard has been characterized by indiscriminate and profuse liberality. The United States should not loan their credit in aid of any enterprise undertaken by States or corporations, nor grant lands in any instance, unless the projected work is of acknowledged national importance. I am strongly inclined to the opinion that it is inexpedient and unnecessary to bestow subsidies of either description; but should Congress determine otherwise, I earnestly recommend that the rights of settlers and of the public be more effectually secured and protected by appropriate legislation. * * * * * * * ■

During the last fiscal year the sum paid to pensioners, including the cost of disbursement, was $27,780,811 11, and one thousand seven hundred and fifty-eight bounty-land warrants were issued. At its close one hundred and ninety-eight thousand six hundred and eighty-six names were on the pensionrolls. • * * * * * * *

In conclusion, I would sum up the policy of the Administration to be a thorough enforcement of every law; a faithful collection of every tax provided for; economy in the disbursement of the same; a prompt payment of every debt of the nation; a reduction of taxes as rapidly as the requirements of the country will admit; reductions of taxation and tariff, to be so arranged as to afford the greatest relief to the greatest number; honest and fair dealings with all other peoples, to the end that war, with all its blighting consequences, may be avoided, but without surrendering any right or obligation due to us; a reform in the treatment of Indians, and in the whole civil service of the country; and, finally, in securing a pure, untrammeled ballot, where every man entitled to cast a vote may do so, just once, at each election, without fear of molestation or proscription on account of his political faith, nativity, or color.

U. S. Grant.