Douglas to Carnarvon
Vancouver Island
14 September 1866
My Lord
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.
AlreadyManuscript image
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.
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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Columbia, entitled "The British Columbia Gold Export Ordinance 1865," for imposing a duty on the export of gold; it was repealed in the following Session 1866, the experiment having proved a failure; but its influence may be felt for years to come.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 minersleftManuscript image 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 wordedthatManuscript image 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.ByManuscript image 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 toBritishManuscript image 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 inexcessManuscript image 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 initsManuscript image 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 ofmyManuscript image 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 thepurposeManuscript image 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, andBritishManuscript image 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 perfectrecoveryManuscript image 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.
I have the honor to be
Your Lordship's
most obedient
humble Servant
James Douglas

To The Right Honble
Lord Carnarvon
H.M. Principal Secretary of State
for the Colonies
Minutes by CO staff
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Sir F. Rogers
In describing the present condition of V.C. Island, & B. Columbia Sir J.D. attributes the existing alleged distress to the B.C. Gold Export Ordinance—which was only an experiment & lasted for no more than one year—and to the B.C. Customs Ordinance, which is to be disallowed if it is not amended before 29 June/67. But in my judgment he should have attributed the present distress, if he had wished to draw a fair picture, to a remoter period. V.C.I. was an insignificant place before the discovery of Gold in B.C. Victoria then naturally became the rendezvous for the Miners. Store shops & so called Merchants established themselves there. They got rich, speculated largely, & relied upon the free trade & the everlasting continuance of the gold fields in B.C. But miners are migratory, & these have been for a time seduced to Oregon & California by the reports of other gold miners. They return, however, to B.C. which must, like all gold producing Countries be fluctuating in its prosperity. Taking B.C. at it's [one line off microfilm] that it, is other than a complete success. Except for the Royal Engineers who were sent there it has cost this Country nothing, and it at once commenced with a revenue in the first year of £50,000, wh. has risen to £150,000, though now it only amounts to about £116,000. I do not dispute the fact stated by Sir J.D. that Victoria is in a bad way. His statements abt B.C. I do doubt. I only wish to say that not in my opinion only, but in that of competent persons, if any can be found who are unconnected with Commerce, the temporary bankruptcy of Victoria is due solely to over trading, smuggling, dependence on the success of B.C. as a gold Colony and to the incubus of an Assembly which by its legislation or perhaps want of proper Legislation has frustrated every attempt on the part of an able an honest & a patient Governor to direct its course into channels whh wd be beneficial to the Community. I wd add in conclusion that Sir J. Douglas' representation should be read by the Light of Governor Kennedy's despatches on the state of the Colony. And especially I invite attention to his desp: of the 24 Jany/66 Confidential P 63 which forbids the expectation of any other result than that described by Sir J.D. when a Colony is legislated for by such a set of Legislators as they have had in Victoria.
Lord Carnarvon will give us directions as to the ansr wh: he will wish to have returned to Sir J.D. The main facts are that though the Gold Export Ordinance may have been faulty, it was only an experiment to raise money for the necessities of the Colony and is abandoned. And as to the Customs Amendment Act it has been ordered to be disallowed.
ABd 31 Oct
I should be inclined to direct the Govr to inform Sir James Douglas that Lord C. has received his letter.Manuscript image That Sir J.D. must be too well acquainted with the rules of the Colonial Service to suppose that Ld C. could take any notice of it till it had been transmitted thro' the Governor accordg [to] the practice wh is uniformly considered indispensable. And that he will readily consider this or any other representation wh he may deem to make in that the proper manner.
As to the Substance of the matter Sir J.D. unfortunately is the man in the whole world whose personal authority is least valuable on this question. He ([being?] Governor) acquired a large property in V.C.I. and is accused I do not say whether justly or not of having so carried on the Govt of the two Colonies, as to give valueManuscript image to property in V.C.I. Certain it is—as he complains himself—that since B.C. has had an independent Governor the value of property in V.C.I. has been destroyed. Very likely from the causes enumerated by Mr Blackwood—but very likely in part also from successful attempts made by the B. Columbian merchants to retain the custom of B.C. miners who used [initially?] to spend their money in Victoria—or by buying imports from Victoria.
I do not believe the export duty on gold to be a bad tax abstractedly but it seems to have been unpopular & difficult to collect (of course).
The differential import duty I do not doubt to have been outrageous. But it is to be amended—after having served as a spur to union, by showing V.C.I. the disadvantages of disunion.
FR 1/11
CBA 1/11
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This letter from Sir J. Douglas has only just reached me.
Dft the answer on Sir F. Rogers' min. but let me see it.
The differential import duty Ordinance is a very bad one; but I understand it to have no force as soon as the union of the two Colonies is proclaimed?
I think that a copy of Sir J.D.'s comn may go out to Govr Seymour informing him of my answer. I sd wish to hear from Govr Seymour what he has to say on the point.
C 12 Nov
Other documents included in the file
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Draft reply, Carnarvon to Officer Administering the Government, No. 22, 16 November 1866.
Minutes by CO staff
I have ventured to submit some softening words.
TFE 14/11
Other documents included in the file
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Draft reply, Carnarvon to Seymour, No. 22, 15 November 1866.