The favour to Canada appeared slight enough but the British post office refused to grant it. First, it objected that the arrangements would involve a great deal of trouble; and afterwards, when driven from that ground, it took an extraordinary position. The British post office declared that the British mails exchanged with the United States were treated in that office as mails carried by packets under contract with the United States, and that it would be inconvenient and objectionable to treat French mails, carried by the same Canadian vessels, as mails conveyed by British packets.

It maintained, furthermore, that the postmaster general of the United States, having entered into an agreement with the Canadian post office for the transmission of United States mails by the Canadian vessels, might very naturally object to any arrangement between the British and French post offices under which the French mails were paid for as mails conveyed by Great Britain's packets.

The pettifogging of disobliging illwill could go no further. In no single respect did the service rendered to the United States by the British government, in conveying the mails of that country to Great Britain, differ from the services rendered to the United States by the Canadian government in the conveyance of the United States mails to Great Britain by the steamers of the Canadian line. Both were paid by the United States for the service, and the fact that the British took pay from the United States no more rendered the Cunard an American line, than a similar fact regarding the Canadian government made the Canadian an American line.

Smith, in dwelling upon this point, affected to discover that the ground of the British official objection, was that the Cunard Company received a subsidy from the British government, while the Canadian Company did not. If this were indeed the difficulty at which the British office stumbled, and the Canadian line could be made British by granting a subsidy for its maintenance, it was important that it should have impressed upon it this distinctive mark of British nationality.

But these arguments fell upon deaf ears. The French office tried to make the British officials see reason, but their success was no better. The situation became one of real difficulty. The French could have invoked the assistance of the United States and asked that country to act as intermediary in the settlement of the account between France and Canada, but there would have been much delay, as the United States would almost certainly seek an explanation of the attitude of Great Britain toward her colony, and that would not have been easy to give.

The British post office, however, suggested a way out of the difficulty. Taking its stand on the ground that the Canadian steamers were part of the United States packet service, the British post office held that the proper course for France was to arrange the matter of payment with the United States post office. But as the negotiations between the United States and France might delay the start of the service, the British expressed its willingness as a temporary measure to take from the French government the sums due to Canada, and pay them over to whom? To the Canadian government to whom alone they belonged? Not at all. It would pay these sums to the postmaster general of the United States.

Smith, the postmaster general of Canada, contended no further. He thanked the postmaster general of England for his consideration, and addressed himself to the director of the French posts, and to the postmaster general in Washington. But the director was completely puzzled, and sought an explanation of the British post office. Disclaiming the right to interfere in any agreement between the British and Canadian offices, he declared himself unable to understand why this payment should be made to the United States, or how it could possibly happen that the United States should have any right to claim any sea rate. He set out all the facts of the case, and after looking them over carefully, he repeated that he did not understand why the amount paid by the French government to the British office for conveyance under the British flag by Canadian packets should be paid over to the United States office.[310]

By the middle of February 1860, Smith was back in the United States, and at Washington. Within a day he concluded arrangements by which, among the other matters, the United States post office agreed to accept the sums due to Canada by France and the other Continental countries. Provision was also made for the exceptional handling of correspondence for New Orleans and other southern cities by the officials of the Canadian service.

The matter of accounting having been arranged on this basis the Canadian line began to be employed extensively on both sides of the Atlantic. Two changes were made in 1860, which augmented its efficiency. As it was found that Cork was out of the way of steamers from Quebec to Liverpool, in May, Londonderry, at the north of Ireland was substituted as the last port of call.

This change had the additional advantage that it enabled the steamers to take a later mail from Scotland, and it avoided the rivalry with the Cunard and Inman lines, which made Cork their port of call in Ireland.