Canada's participation in the scheme was invited, and the arrangement made by the British government with the Australian colonies was submitted to the Canadian government.[298] Under this arrangement the British government was to make the contract for the service, and the colonies should pay half the expense involved.
The proposal found no favour in Canada. The Cunard service, the expense of which Canada was expected to share, was far from being an unmixed advantage to the British North American provinces. It was indeed a most serious obstacle to the realization of plans, which Canada conceived essential to its expansion on the lines marked out by nature.
For many years the thought of Upper Canadians had turned to the advantages which were to be derived from the utilizing of the great water system extending through lake and river, from the head waters of the lake Superior to the ocean, and measures had been carried forward to overcome the obstacles caused by the falls and rapids on the course of the passage.
By 1849, the canal system was completed, which permitted the free passage of inland vessels from the upper lakes to Montreal, and it was anticipated that the greater part of the movement of immigration and freight to and from Upper Canada and the western states, would be upon Canadian waterways. Merchandise could be carried from lake Erie to Quebec at less cost than from Buffalo by the Erie Canal to New York. But in spite of these facts, trade on the Erie Canal increased largely and steadily, while the trade on the Canadian water routes increased but slowly.
The principal reason for the apparent disregard of the economic law that trade will follow the superior route was found in the fact that for a large proportion of the traffic the destination was Europe, and that the charges to the out-ports of New York and Quebec were only a part of the total charge to which the traffic were subject. If, for any reason, the conveyance across the Atlantic from New York to Europe was so much cheaper than the conveyance from Quebec, that the total charge from lake Erie to Europe was lower by way of New York than by way of Quebec, then it is obvious that the trade would not be attracted to the route which seemed to be naturally the superior one.
This was the case at that time. Owing to the large subsidies given by the British government to the steamers sailing to and from New York, vessels running to and from Quebec could not compete with those from the rival port. The assistance to the Cunard line, therefore, which the British government desired Canada to give in part, was a positive detriment to the development of the transport business of upper and lower Canada.
The question of establishing a steamship line from a St. Lawrence port had engaged the attention of the legislature of the United Provinces as early as 1851. In that year a resolution was offered to the house of assembly, setting forth the advantages of the Canadian route, and the fact that these advantages were offset by the aid given by the British government to the Cunard and Collins lines (the latter was owned by an American company), and asking that the British government be approached with a request that they grant assistance to a Canadian line similar to that given to the lines running in and out of New York.[299]
A committee of the assembly took the subject into consideration, and in the following year a contract was made with a British firm,[300] which was shortly afterwards converted into the Canadian Steam Navigation Company, for a service from Liverpool to Quebec and Montreal during the season of open navigation in the St. Lawrence, and to Portland, Maine, during the five months when the river route was not practicable. The trips were to be fortnightly to the Canadian ports and monthly to Portland; and the steamers to be employed were to be of at least 1200 tons burthen.
Twenty-four thousand pounds a year were to be paid to the company by way of subsidy—£19,000 by the government of Canada, £4000 by the Atlantic and St. Lawrence railway (later a section of the Grand Trunk railway) and £1000 by the city of Portland.