Douglas to Carnarvon

My connection with Her Majesty's Government, and many years service
as Governor of the Colonies of Vancouver Island and British
 Columbia, will I trust be considered a sufficient apology for the
present Communication.

2. Whatever may be asserted to the contrary there is no reasonable
doubt, that Vancouver Island and British
 Columbia are in a most
critical and alarming state; not a mere casual depression, but a
condition that threatens their very existence as self supporting
Colonies.

Already has the most valuable Country and City property in and
around Victoria, so much depreciated, that it has hardly any
exchangeable value; trade languishes; the inhabitants are leaving
by every steamer; business is failing; establishments are being
closed; and one third or more of the shops and dwelling Houses
within the City limits, are without occupants.

3. New Westminster is little better, and the prospect is even more
 gloomy in other parts of British Columbia, the merchants being
overwhelmed with debts; failures universal; credit and Capital
gone, and it is generally believed that all the up-Country trading
Firms except two, are in a state of insolvency.

4. Never perhaps was there a time, in the history of these two
Colonies, when the interference of Her Majesty's Government was
more needed, or could have a more beneficial effect.

5. In tracing the causes of the existing distress, some weight is
due to an Act passed by the Governor and Council of British Columbia, entitled "The British Columbia Gold Export Ordinance 1865," for imposing a duty on the export of gold; it was repealed
 in the following Session 1866, the experiment having proved a
failure; but its influence may be felt for years to come. A more
unpopular tax could not have been imposed, hundreds of miners left
the Colony in disgust, and by their reports and murmurs, arrested
the usual influx of capital and miners from the neighbouring
Territories of the United States; a large and important class of
the population.

6. There had previously passed in the same session of the
Legislature, a new Tariff Law for British Columbia entitled, "The
 Customs Amendment Ordinance 1865."

This Act is peculiar, and whatever may have been the real motives
of the Authors of the measure, it certainly appears to aim at
nothing less than ruin to Victoria, by means of oppressive charges
 on its trade, with British Columbia.

The Act is so framed and worded that it practically imposes a
differential duty on foreign goods shipped from Vancouver Island,
equal to a charge of 30 to 50 per cent, in excess of the duties
charged on goods shipped from other Countries. The rule which it
prescribes for determining the duteable value of goods gives no
uniformity in the duties charged, one country may be required to
pay ten per cent, another 20 per cent, and so on, on goods of the
same kind and value.

7. The United States Tariff Law imposes a duty on charges
connected with shipments of Merchandise as well as on the articles
themselves.

The "British Columbia Customs Ordinance 1859" directs that the
duties shall be charged on all goods imported, at their value at
the Port of Entry. By either of these methods a uniform duty is
obtained; It is not so in the "Customs Ordinance 1865," the duties
are to be levied as the Act declares "on their fair market value in
the Country whence the Goods were last shipped, or exported direct
to British Columbia." This gives a constantly varying dutiable
value.

Thus, a cargo arriving direct from France is valued for duties at
its cost in France say £5000.

But let us suppose this cargo is first landed in Victoria, it would
 be valued for duties at its cost in Victoria, that is, about 50 per
cent above its cost in France or £7500. Thus the direct shipment
from France would be entered at 20 per cent on £5000, and charged
£1000 for duties while by first landing the same cargo at Victoria,
 before sending it to British Columbia, the shipper would have to
pay £1500 for duties, or 20 per cent on £7500—the Victoria value
of the goods.

8. This example will suffice to shew the working of the new
Tariff Law as respects Vancouver Island; in the case of shipment
of merchandise from the United States or other Countries the law
will probably be evaded by means of fictitious Invoices, and
enforcing its penalties on foreign ships, may raise serious
questions of international law.

9. It is not requisite to draw your attention more than I have
done in the above example, to this extraordinary instance of one
British Colony imposing differential duties in another British
Colony, and this to the extent of 20 to 50 per cent in excess of
the charges made on foreign countries. It could only have one
object in view; to stop the inter-colony Trade; this, though it may
be the ultimate effect, it was impossible to attain at once,
consequently trade continued to flow on in its usual channel and
shipments to be made from Victoria, notwithstanding the Act and its
oppressive charges.

These however told severely upon Trade enhancing the general
distress, and adding to the number of insolvents. The principal
British Columbia trading Firms failed from mere inability to meet
their Bills, and are hopelessly in debt to Outfitting Houses in
Victoria, who in turn are reeling under the shock of these heavy
reverses.

10. Thus when taxation exceeds the fair returns of Capital, it
encroaches on the power of producing wealth, and brings poverty and
wretchedness in its train.

11. The first measure of relief I would suggest to your Lordship,
and it will be hailed with joy by both Colonies, is the immediate
disallowance of the "British Columbia Customs Amendment Ordinance
1865." An Act which should never have appeared in our Statute
Book, and it is certainly unfortunate that it ever came into operation.

12. An Act almost idential with that, was brought forward by some
members of the Council, during the last year of my Administration
in British Columbia, and was rejected for two sufficient reasons.
First, because it involved unmitigated evil to the Country; and
Secondly, because I had no power to make laws imposing differential
duties which is expressly forbidden in the 14th Clause of my
instructions from the Queen.

13. I am within bounds in saying, that the new Customs Law is
thoroughly vicious in principle; unEnglish in character; it fosters
foreign at the expense of British Trade, forcing by unjustifiable
means the trade of Vancouver Island into American channels; It was
the aim and study of my government to keep British Trade within
British territory. This Act violates every principle of that
policy.

14. Why should this differential tax be imposed in the trade of
Vancouver Island? It matters little from whence goods are shipped,
provided the duties are paid, and the public Revenue is not
defrauded. Are Customs duties imposed for the purpose of thwarting
and opposing trade, or to create Revenue with as little pressure as
possible on Trade? Is it intended to change the course of trade,
and force it from Victoria to New Westminster? This is simply
chimerical, if for no other cause, from the mere relative position
of the two places, the one situated inland on a comparatively
inaccessible River, the other built on a safe and commodious
harbor, on the margin of the Ocean.

There is no cause for rivalry; no art can ever make New Westminster, what Victoria now is—a resort for Ocean going ships.
 Were Victoria destroyed New Westminster would not profit by the
loss, on the contrary, it would be to her, the greatest possible
calamity. Its effect would be to throw the trade of the coast into
the American Ports in the Straits of De Fuca, and British Columbia
would become, commercially, a dependency of the United States.
Such Ports now exist, and British supremacy was established only
after a severe struggle. If Victoria be necessary to British Columbia, is it wise thus to oppress its trade; if not necessary,
the trade will of itself cease.

15. Viewing the question in all its bearings, adds force to the
suggestion, I have made to your Lordship, for the immediate
disallowment of the Act in question.

16. I trust your Lordships will see the matter in the same light
and at once, and for ever, seal the fate of a measure, fraught with
loss and disaster, to the country at large.

17. This is not the only relief the Country demands, it is but one
step towards a perfect recovery. I am prevented from pursuing the
subject, at present, by the sudden departure of the European mail,
and I must reserve my remarks for a future communication.