In the course of the negotiations, the United States Commissioners had offered as an equivalent for the rights of Fishery, to admit Canadian Coal and Salt, free of duty, and Lumber after the 1st of July, 1874. This was deemed both by the Imperial and Canadian Governments an inadequate offer, and a counter proposition was made by the British Commissioners, that lumber should be admitted free immediately, and that in consideration of the continued exclusion of cereals, live stock and other articles, admitted under the Treaty of 1854, a sum of money should be paid to Canada. The United States Commissioners, not only refused the counter proposition, but withdrew their former offer substituting one which the Committee of Council infer, from the Earl of Kimberley's Despatch, was in the opinion of Her Majesty's Government, more favorable to Canada, that that which had been rejected as inadequate. Wide, however, as are the differences of opinion on this Continent regarding the Treaty, there is but one opinion on the point under consideration. It is clear that the United States preferred paying a sum of money to the concession of commercial advantages to Canada, and the Committee of Council feel assured that there is not a single member of the Canadian Parliament, who would not have much preferred the rejected proposition to that which was finally adopted.

The Committee of Council cannot, with the Earl of Kimberley's Despatch before them, continue to affirm that Her Majesty's Government are of opinion that the cession of the Fishery rights was made for an inadequate consideration, but they regret that they are themselves of a different opinion.

While still adhering to their expressed opinions as to the Fishery Articles of the Treaty of Washington, they are yet most anxious to meet the views of Her Majesty's Government and to be placed in a position to propose the necessary legislative measures, and they will therefore proceed to make a suggestion which they earnestly hope may receive a favorable response.

The adoption of the principle of a money payment in satisfaction of the expenses incurred by the Fenian raids, would not only be of no assistance with reference to the Treaty, but might lead to some complications. It is not improbable that differences of opinion would arise in the discussion of the details of those claims between the two Governments, which might lead to mutual dissatisfaction. Again, such a solution of the question, would necessitate a discussion in the Imperial Parliament, in the course of which opinions might be expressed by members, which might irritate the people of Canada and might moreover encourage the Fenian leaders in the United States, who have not ceased their agitation.

There is in the opinion of the Committee of Council a mode by which their hands might be so materially strengthened that they would be enabled not only to abandon all claims on account of the Fenian raids, but likewise to propose, with a fair prospect of success, the measures necessary to give effect to those clauses in the Treaty of Washington which require the concurrence of the Dominion Parliament. That mode is by an Imperial Guarantee to a portion of the loan which it will be necessary for Canada to raise in order to procure the construction of certain important public works, which will be highly beneficial to the United Kingdom as well as to Canada. It is not pretended that the construction of these works is contingent on an Imperial guarantee. The credit of Canada has never stood so high in the money market as at the present time, its 5 per cent. securities being at a premium. But there is no doubt that with the Imperial Guarantee, a considerable saving of interest could be effected.

The Committee of Council feel assured that Her Majesty's Government will recognize the scrupulous good faith which has invariably been observed by Canada under Governments of various shades of politics. Her Majesty's Government are aware that one of the conditions on which British Columbia joined the Confederation, was that Canada, should procure the construction of an Interoceanic Railroad. In order to procure the construction of this gigantic work, a cash subsidy will have to be granted to the Company undertaking it, to the extent in all probability of five millions sterling. This Railroad will open up for settlement the vast prairies of the North-West, which will sustain an enormous population. According to the most reliable statistics, the immigration from

the United Kingdom to Canada, is in about the proportion of one to six to that from the United Kindom to the United States, the population of the United States being more than ten times as great as that of Canada. On the other hand, the imports into Canada of staple articles of British manufacture, such as cottons, woollens, and iron and hardware, are about three times as large in proportion to population as those into the United States. It is therefore clearly the interest of the United Kindom that the British North West Territories should be opened for settlement as speedily as possible, and to effect this object, the Canadian Pacific Railroad is indispensably necessary. That Railroad, it may be added, would in all probability be found the most eligible mode of conveying a portion of Her Majesty's mails to the East.

The time has arrived when the enlargement and extension of the Canadian Canals, so earnestly desired by the United States, as appears by the protocols attached to the Treaty of Washington, can no longer be postponed.

The required works must be constructed by the Government, and will cost about three millions sterling, the aggregate for the Railroad and Canals being eight millions. The revenues of Canada are in a most satisfactory condition, and fully able to bear the increased charge which will be gradually thrown upon them. The taxes are much less than in the adjoining republic, and are cheerfully borne by the people.

The Committee of Council are of opinion that Her Majesty's Government might fairly be urged to propose to Parliament a guarantee for a Canadian loan, not to exceed four millions sterling, on the condition that such guaranteed loan should be raised at the same time, and in equal proportion with a Canadian unguaranteed lcan for the same objects. The Committee of Council do not believe that any other mode can be suggested by which they would be enabled to surmount the difficulties in the way of their obtaining the consent of the Canadian Parliament to the measures necessary to give effect to the Treaty of Washington, than that which they have felt it their duty to recommend. The Committee of Council trust, that should other difficulties be removed, Her Majesty's Government will enable them to assure the Canadian Parliament, that any recommendation made by Canada to terminate the articles of the Treaty of Washington, numbered 18 to 25 inclusive, and likewise Article 30, in conformity with Article 33, would be acted on. Certified,

WM. H. LEE,

Clerk Privy Council,
Canada.

The Secretary of State for the Colonies to the Governor General. (Copy-Canada-No. 58.)

DOWNING STREET, 18th March, 1872.

MY LORD,-Her Majesty's Government have given their most careful attention to the report of the Committee of the Canadian Privy Council enclosed in your Lordship's despatch No. 13, of January 22.

The Committee state that, while adhering to their opinion as to the Fishery Articles of the Treaty of Washington, they are yet most anxious to meet the views of Her Majesty's Government, and to be placed in a position to propose the necessary legislative measures. They maintain that Canada has a just claim for compensation for expenses incurred in consequence of the Fenian raids, but they are of opinion that the adoption of the principle of a money payment in satisfaction of those expenses would be of no assistance with reference to the Treaty, and would be open to objection on other grounds. They therefore suggest another mode of settlement by which in their opinion their hands might be so materially strengthened that they would be enabled, not only to abandon all claims on account of Fenian raids, but likewise to propose to the Dominion Parliament, with a fair prospect of success, the measures necessary to give effect to the Treaty.

Their suggestion is, that Her Majesty's Government should propose to Parliament a guarantee for a Canadian Loan, not exceeding four millions sterling, being half the amount (£8,000,000) which it is intended to raise for the purpose of constructing the railroad through British territory to the Pacific, and of enlarging and extending the Canadian Canals.

Her Majesty's Government have considered this suggestion with an earnest desire to remove the difficulties which are felt by the Canadian Government, and I have now to convey to you the conclusions at which they have arrived.

They are of opinion that the most convenient course will be that it should be provided in the Acts to be passed by the Dominion Parliament to give effect to the Treaty that such acts should only come into force upon the issue of a Proclamation by the Governor General in Council bringing them into operation. On their part Her Majesty's Government will engage that when the Treaty shall have taken effect by the issue of such proclamation they will propose to Parliament to guarantee a Canadian Loan of £2,500,000, such loan to be applied to the purposes indicated by the Council, namely, the construction of the railroad through British Territory from Canada to the Pacific, and the improvement and enlargement of the Canadian Canals, and to be raised at the same time and in equal proportion with the Canadian unguaranteed loan for the same objects, on the understanding that Canada abandon all claims on this country on account of the Fenian raids.

As regards the request of the Privy Council that Her Majesty's Government will enable them to assure the Dominion Parliament that any recommendation made by Canada to terminate the articles of the Treaty numbered 18 to 25 inclusive, and likewise article 30 in conformity with article 33, would be acted on; I may observe that no such assurance was asked or given in the case of the Reciprocity Treaty, but Her Majesty's Government recognize that it is not unreasonable that Canada should desire some assurance on this point, and they have therefore no hesitation in declaring that the greatest deference would be paid to the expression of the wishes of the Dominion, signified by Addresses from both Houses of the Dominion Parliament, and that those wishes would certainly be attended to; subject, of course, to the necessary reservation of Her Majesty's discretion to take into consideration in the interest of the whole empire the state of her relations with foreign powers at the particular juncture.

I have already conveyed to your Lordship by telegraph the substance of this despatch.

MY LORD,-With reference to Your Lordship's despatch, No. 58, of March 18th, 1872, I have now the honor to forward herewith a copy of a Minute of 15th April, 1872. the Privy Council of the Dominion, from which Your Lordship will perceive that the Ministers announce their intention of proposing to the Canadian Parliament the measures necessary to give effect to those clauses of the Treaty of Washington which relate to Canada.

Copy of a Report of a Committee of the Honorable the Privy Council, approved by His Excellency the Governor General in Council on the 15th day of April, 1872.

The Committee of the Privy Council have had under their consideration the Earl of Kimberley's despatch to Your Excellency, dated the 18th ult., communicating the views of Her Majesty's Imperial Government on the proposition submitted in the report of the Privy Council transmitted in Your Excellency's despatch of 22nd January last.

From the despatch it appears that Her Majesty's Government are of opinion, that the most convenient course will be that it should be provided in the Acts to be passed by the Dominion Parliament to give effect to the Treaty, that such Acts should only come into force upon the issue of a Proclamation by the Governor General in Council bringing them into operation; that on their part Her Majesty's Government will engage that when the Treaty shall have taken effect by the issue of such Proclamation, they will propose to Parliament to guarantee a Canadian loan of £2,500,000, such loan to be applied to the purposes indicated by the Council, namely, the construction of the railroad through British Territory from Canada to the Pacific, and the improvement and enlargement of the Canadian Canals, and to be raised at the same time and in equal proportions with the Canadian unguaranteed loan for the same objeets, on the understanding that Canada abandon all claims on England on account of the Fenian Raids.

The Earl of Kimberley further observes, that Her Majesty's Government will enable the Canadian Government to assure the Dominion Parliament that any recommendation made by Canada to terminate the Articles of the Treaty numbered XVIII to XXV inclusive, and likewise Article XXX in conformity with Article XXXIII, will be acted on, that they have no hesitation in declaring that the greatest deference would be paid to the expression of the wishes of the Dominion signified by Addresses from both Houses of the Dominion Parliament, and that those wishes would certainly be attended to, subject, of course, to the necessary reservation of Her Majesty's discretion to take into consideration in the interests of the whole Empire, the state of her relations with foreign powers at the particular juncture.

The Committee of the Privy Council feel that although Her Majesty's Government have been unable to accede to their proposition in full, it is nevertheless their duty, in the interests both of Canada and the Empire at large, to accept the modified proposition of the Earl of Kimberley, and they will accordingly be prepared to propose to the Canadian Parliament, the measures necessary to give effect to those clauses of the Treaty relative to Canada.

Certified,
WM. H. LEE.
Clerk, Privy Council, Canada.