"WASHINGTON,
"February 7th, 1866.
"'SIR,
"'We have the honour to inform Your Excellency that our negociations for the renewal of Reciprocal Trade with the United States have terminated unsuccessfully. You have been informed from time to time of our proceedings, but we propose briefly to recapitulate them.
"'On our arrival here, after consultation with Your Excellency, we addressed ourselves with your sanction to the Secretary of the Treasury, and we were by him put in communication with the Committee of Ways and Means of the House of Representatives. After repeated interviews with them, and on ascertaining that no renewal or extension of the existing treaty would be made by the American authorities, but that whatever was done must be by legislation, we submitted as the basis upon which we desired arrangements to be made the enclosed paper (marked A).
"'In reply we received the Memorandum from the Committee, of which a copy is enclosed (B). And finding after discussion that no important modifications in their views could be obtained, and that we were required to consider their proposition as a whole, we felt ourselves under the necessity of declining it, which was done by the Memorandum also enclosed (C).
"'It is proper to explain the grounds of our final action.
"'It will be observed that the most important provisions of the expiring treaty, relating to the free interchange of the products of the two countries, were entirely set aside, and that the duties proposed to be levied were almost prohibitory in their character. The principal object for our entering into negociations was therefore unattainable, and we had only to consider whether the minor points were such as to make it desirable for us to enter into specific engagements.
"'These points are three in number.
"'With regard to the first—the proposed mutual use of the waters of Lake Michigan and the St. Lawrence—we considered that the present arrangements were sufficient, and that the common interests of both countries would prevent their disturbance. We were not prepared to yield the right of interference in the imposition of tolls upon our canals. We believed, moreover, that the privilege allowed the United States of navigating the waters of the St. Lawrence was very much more than an equivalent for our use of Lake Michigan.
"'Upon the second point—providing for the free transit of goods under bond between the two countries—we believed that in this respect, as in the former case, the interests of both countries would secure the maintenance of existing regulations. Connected with this point was the demand made for the abolition of the free ports existing in Canada, which we were not disposed to concede, especially in view of the extremely unsatisfactory position in which it was proposed to place the trade between the two countries.
"'On both the above points, we do not desire to be understood as stating that the existing arrangements should not be extended and placed on a more permanent basis, but only that, taken apart from the more important interests involved, it did not appear to us this time necessary to deal with them exceptionally.