W. L. MACKENZIE KING, Deputy Minister of Labor, Ottawa.

41. Canada - Commerce, Tariffs, and Transportation. In their earlier condition the various provinces of British North America, now forming the Dominion of Canada, were all alike subject to those general laws which embodied the principles, if not always the practice, of the British Colonial System. Owing, however, to variations in location, natural resources, and the character of the inhabitants, the commerce and tariffs of the various provinces were more or less adapted to their special conditions.

Before the conquest of Canada, the Maritime Provinces, under the general name of

therefore, that, after the conquest of Canada and the independence of the United States, Nova Scotia should still continue to trade chiefly with the New England States and the West Indies, and only to a limited extent with Canada.

Owing to their extensive coast line and numerous harbors, New Brunswick being also well supplied with river navigation, the question of transportation was long a simple one for the Maritime Provinces. For Canada, the Saint Lawrence and its tributaries had always furnished the great highway of the country. But above Montreal the river was greatly obstructed by rapids, hence the trade to the West was first developed along the easier Ottawa route, which passed by way of Lake Nipissing to the Georgian Bay. There it followed the sheltered northern channel and the Saint Mary River, with a portage at Sault Sainte Marie, up to Lake Superior, and on, by numerous lakes and streams, to the vast Indian country beyond.

The coming of the Loyalists, as the first

9,117,465)

CANADA.

settlers in what is now the Province of Ontario, rendered necessary a regular traffic up the Saint Lawrence and along the lower lakes. From Montreal to Prescott and Kingston this traffic was carried on by means of various forms of large flat-bottomed boats, known as bateaux, which were towed up the rapids, later with the aid of horses. These bateaux brought up limited supplies of European imports, chiefly British goods, and took down the furs and, so far as their space would allow, the potash and flour of the Western settlements. The Revolutionary War had led to the building of the first British vessels on the Lakes. After the peace, several of these became trading vessels and others were built, the number steadily increasing with the growth of the Canadian and American settlements on either side of the Lakes. The presence of lake vessels diverted the greater part of the Indian trade from the northern to the southern route.

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At first most of the surplus produce of the Western settlements found a ready local market in supplying the temporary needs of new settlers, and in furnishing provisions for the Indian posts and the British garrisons. With increasing crops, however, there soon arose necessity for export, especially of such articles as wheat, flour, peas, salt meat, and various minor provisions. About the beginning of the 19th century the amount of provisions exported from western Canada was nearly equivalent to the amount purchased by the British Government for consumption at the garrisons and posts. In 1801 the total exports of Canada amounted to $4,800,000. This growing trade required a more extensive and economical means of conveyance than that afforded by the bateaux. A trade in staves and various forms of timber having developed about the same time, and being sent to market in the shape of rafts, these were utilized to convey such provisions as might suffer a little exposure. Large square scows were also built for the purpose of taking provisions to market in bulk.

As regards tariffs and trade regulations in the earlier Colonial period, nothing was left to the Provincial authorities; all was regulated by British statutes and administered by imperial officers. In the matter of taxation, after the American Revolution the British North American colonies had little to complain of, for instead of being taxed to assist Britain the British people were taxed to assist the colonies. In return for her freedom to determine the commercial policy of the colonies and to appoint their officials, Britain had to meet their deficits, besides furnishing the whole of the naval and military services.

The first important change in colonial commercial relations resulted from the recognition of the independence of the United States in 1783. Pitt and Shelburne had desired to continue practically the same commercial relations with the late colonies after the separation as had existed before it, considering that political independence did not alter the value of a profitable mutual trade. Technically, however, such a policy would do violence to the whole commercial and colonial system, including the Navgation Acts, the system of "ships, colonies and commerce," upon which the whole British empire was supposed to rest - and this could not be permitted.

Canadians were for a long time too com. pletely absorbed in questions connected with the control of their internal affairs to be much concerned with the fiscal policy of the country. Indeed they rather looked upon Britain's control of the fiscal policy as a means of obtaining increasing assistance from the mother country. The earlier tariffs were simple affairs, the revenue was derived chiefly from duties on spirituous liquors and the molasses from which rum was distilled. The sweeping prohibitions of the Navigation Acts simplified matters very much. There was no trouble with foreign European goods, because they were forbidden to be admitted to the colonies even in British ships, except when they had passed through British ports. It was in Britain, therefore, that the tariff dealt with them and qualified them for entrance to the colonies. In the matter of spirits and such things as were dealt with in colonial tariffs, a variety of preferential duties favored the more as against the less direct trade with Britain and the colonies. After the granting of representative legislatures in the colonies (1791 in Canada) they were permitted to impose customs duties on imports, for rev.. enue purposes only. The right of disallowance exercised by the Crown prevented any unfavorable treatment of British goods.

By the Act of 1778 the British Parliament maintained and freely exercised the right to regulate, by tariff or other restrictions, the commerce of the colonies, but explicitly stated that all revenue incidentally obtained, after paying the expenses of its collection, should go to the treasury of the colony in which it was collected. There was thus a double jurisdiction in the matter of tariffs, the Imperial and the Colonial. But, so far as the colonial and imperial tariffs covered the same ground, only the colonial tariff was enforced. The imperial tariff applied only where its rate of duty exceeded that of the colonial. The colonial tariff was practically only for revenue purposes; the imperial tariff was entirely for the regulation of commerce in the interests of imperial trade.

The first legally recognized trade between the United States and Canada was provided for in the Quebec Ordinances of 1787-8, which permitted the free export of all goods except furs and peltries, and the import of all forms of timber and naval stores, all kinds of grain and other natural products, and settlers' effects. Rum, spirits and manufactured goods were entirely prohibited, but in 1790 pig iron was added to the list of permissible imports. Pitt's commercial treaty with the United States in 1794 greatly promoted trade between the British American provinces and that country. In this he partly realized his earlier idea of permitting a free mutual trade in all ordinary goods between the United States and the British colonies. But, in deference to the Navigation Acts, so far as the trade was conducted by sea it must be in British ships. A direct trade to the East Indies was also permitted to the United States, and later this led to several important relaxations of the British colonial policy.

The Canadian merchants at such western points as Kingston and Queenston (Niagara), sent their orders for British goods to their Montreal correspondents, who imported them from London, guaranteeing payment there, and forwarded them to the western centres, whence

they were distributed to the local dealers in Canada and the United States. The same agents were employed in collecting and forwarding the western produce, consisting of grain, provisions, potash and staves, as well as some of the cash which the original settlers had carried with them to meet their first wants. By these means payments to the Montreal merchants were partly made, the balance being met chiefly by commissariat and other bills of the British Government, for supplies and salaries.

The United States was the first to interfere with the freedom of this trade, duties being imposed in 1801 in the interest of eastern American traders. However, custom houses did not flourish in the wilderness, and for many years trade with the United States was not greatly hampered by tariffs. In 1805 duties were imposed, in Lower Canada, on certain goods coming from the United States, but in practice this applied to the Lake Champlain route only.

The trade relations of the Maritime Provinces, as we have seen, were well established before the United States secured its independence, but, while the United States enjoyed great freedom of trade with all countries, the Maritime Provinces still remained under the close_restrictions of the Navigation Acts and the Colonial System. Thus general merchandise, even British and East Indian goods, was cheaper in the United States than in the British American ports. As a natural result there was extensive smuggling along the coasts of Nova Scotia and New Brunswick, and especially among the islands of Passamaquoddy Bay. American vessels supplied the colonists with liquor, tea, tobacco, molasses and other East and West Indian produce, and the chief lines of European and American goods, and received in return furs, fish, lumber, grain, etc., which they carried to their own ports and to the West Indies. Thus the restrictions designed to give Britain a monopoly of the colonial trade and shipping worked to the opposite purpose. Plainly the system had either to be given up or enforced by quite drastic measures. On the death of Pitt the latter policy was adopted, beginning with the Orders in Council, which in turn induced the non-intercourse policy of the United States, and ultimately the war of 1812-15.

While disastrous to the West Indies and most injurious to great Britain, yet the troubles between Britain and the United States were immensely profitable, for the time being, to the British North American colonies. To insure the carrying of the West Indian supplies in British ships, American produce was collected in ports of the Maritime Provinces and in Canada, where it might be taken by sea in either American or British vessels, by overland transport, or by inland navigation. This stimulated the trade and shipping of the Canadian and Maritime Provinces and enriched the colonial produce dealers. The ultimate benefit, however, of these and later abnormal conditions was more than doubtful. After the Peace of 1815, Canada suffered a severe reaction, emphasized by an unfortunate land and emigration policy.

The enormous preference in the British market on British North American timber, which had been built up during the Napoleonic wars, was retained and developed because it enriched British shipowners and timber merchants.

By the new Corn Law of 1815 a preference was granted to Canadian grain, but it was very uncertain in its operation, since the grain was not admitted at all until the price had risen to quite a high level, in the case of wheat to about $2.10 a bushel.

The international restrictions necessary to preserve a fair equality for British shipping, under the disadvantages of her Colonial System, involved further trouble with the United States. Britain admitted a reciprocal shipping trade between the home country and the United States, and between her colonial possessions and the United States in the inland waters of North America, but denied corresponding reciprocity by sea between the United States and her American colonial possessions. In 1818 the United States retaliated, and direct trade with the West Indies was again suspended. Halifax in Nova Scotia and Saint John in New Brunswick, were then made free ports for American vessels bringing certain lines of goods necessary for the suppy of the West Indies. In 1823 American vessels were admitted to the colonial trade generally for all direct dealings between the United States and the colonies. Once more the trade of the Saint Lawrence languished, and complaints poured in upon the home government. In 1825 Mr. Huskisson, who had revived the policy of Pitt, sought to promote freer trade in America. But he found it impossible as yet to grant perfect reciprocity in shipping. Differential duties were imposed in favor of British shipping in the trade between the United States and the West Indies. The Americans applied the same differentials on their side, and there resulted another period of non-intercourse, from 1826 to 1831, with corresponding activity and prosperity for the Saint Lawrence route and the British North American ports. By admitting to the colonies provisions from the northern nations of Europe in their own ships, Huskisson managed to prevent the Americans from forcing his hand. They came to terms in 1831 and normal trade was once more resumed. But by this time the Colonial System was badly shattered, and almost the only thing left of the Navigation Acts was the British monopoly of the domestic shipping of the empire. The way was being gradually prepared for the final stroke of colonial economic emancipation.

In 1825 Huskisson weakened the corn laws by greatly increasing the preference on Canadian wheat. Regardless of the local price, Canadian wheat was to be admitted at a uniform duty of five shillings per quarter. For a time the exports of wheat were greatly stimulated, but the benefit was not permanent, and the cry for additional preferences was soon resumed.

The prosperous period of 1826-31, augmented by large expenditures on Canadian public works and an increased emigration, continued for a couple of years after the resumption of normal relations with the United States. But trade de. pression and political troubles brought Canada to a very low ebb in 1837-8. In 1840 the two Canadian provinces were united, their political freedom was greatly enlarged, and trade revived. In 1843, after urgent petitions, which more or less coincided with the rising demand in Britain for free food, Canada obtained the ominously liberal concession of access to the British market, at the nominal rate of one shilling per quarter, for all the flour she could