No. 92, Separate 854, CO 305/26, p. 428; received 24 January 1866 1st December 1865 Sir,

1. I have the honor to forward herewith a Petition from certain Merchants, Traders and others resident in Victoria Vancouver Island, which has been entrusted to me for transmission.

2. I have numbered the paragraphs of the Petition to facilitate reference.

3. It is to be regretted that this Petition was not presented whenthe the Resolutions of the local Legislature in favour of union with British Columbia were passed and transmitted to you in my Despatches Nos 14 and 16 dated 21st March 1865.

4. It will be within your recollection that I then informed you that a very decided majority of the electors of the City of Victoria were advocates for the union of the Colonies accompanied by a tariff, or the imposition of import duties, as evinced in the return of two Members to the Legislative Assembly who at that time offered themselvesupon upon those principles.

5. I now observe with some surprise that several influential persons who supported and voted for those Members and whose influence contributed materially toward their return have appended their names to the enclosed Petition praying for the "continuance of the Free Port policy in its fullest integrity."

6. The following analysis of the signatures appended to the Memorial is substantially correct.British British Subjects . . . . . . . 88 Americans . . . . . . . . . . 33 Germans . . . . . . . . . . . 21 French . . . . . . . . . . . . 8 Unknown . . . . . . . . . . . 7 ___ 157

7. You will also observe that many of the Petitioners sign as the Agents for absentees, whether with or without their concurrence is not shown.

8. I will now proceed to offer such remarks upon the Petition as appear to me necessary for your information.

9. Paragraph No 2. It is anundoubted undoubted fact that "great commercial depression" has existed and still exists in both these Colonies, and I am sure that you would have been glad to have learned the Petitioners' opinion of the cause or causes of it.

10. These causes in my opinion rest with the Petitioners themselves, and are beyond the reach of any remedy which you can apply. They may be found in a system of reckless credit, competition, and overtrading. It is notoriousthat that large quantities of goods were thrown into [the] Cariboo market this year by the merchants of Victoria which did not realize the cost of carriage. The supply far exceeded the demand. While this proved a great boon to the working miner, it left the Cariboo traders without means of paying their debts to Victoria, and the Victorian merchants without payment for the goods they supplied. To this obvious cause of "depression" may be added the more stringentadministration administration of the Customs Laws at San Francisco and neighbouring American ports where a large amount of goods were formerly introduced from Vancouver Island without going through the formalities of the Custom House.

11. I may further remark that this "depression" is by no means confined to British Columbia and Vancouver Island. Many thousand persons are departing monthly from San Francisco, owing to the same causes which my experience leads me to believe are common to all mining or goldproducing producing countries, and will continue more or less till men become honest and prudent.

12. Paragraph 4. As regards Vancouver Island I am of opinion that the character and small number of the population render the present form of Government inapplicable and expensive. The statistics and taxes as shown in the annual Blue Book will enable you to judge whether it can be truthfully termed "a most onerous burden upon all classes." On this subject I would refer you to a recent Despatchof of mine No 81, 22nd September 1865.

13. Paragraph No 8. The Proclamation declaring Victoria and Esquimalt Free Ports simply declares that they "shall be (free ports) until otherwise determined by proper authority."

14. Paragraph 9. The Petitioners are obviously in error in stating or thinking that "the vote of the House of Assembly praying Her Majesty to grant an union of these Colonies on such terms as to Her Majesty may seem meet is not inconsistent with the prayer of your Petitionersfor for the continuance of the Free Port policy in this Colony." A reference to my Despatches Nos 14 and 16, 1865 together with the whole tenor of the debates clearly point to "Union with a tariff."

15. I concur with the Petitioners in thinking that the uncertainty existing on this subject is producing very ill effects upon the business and prosperity of these Colonies, but this uncertainty is and has been mainly caused by the action of their own representatives over whom Her Majesty's Governmenthas has no control in this behalf.

16. Paragraph 10. My opinion on the subject of this paragraph will be found in my Despatch No 16, 21st March 1865. I see no reason to alter it.

17. I refrain from offering any opinion on the merits of the different systems of "Free Port" or import duties as applicable to the circumstances of this Colony as it must be contingent upon union or no union of these Colonies on which subject I look daily for informationor or instructions from you.

18. In conclusion I have only to state that I think this Petition ought to have been addressed to the local Legislature rather than Her Majesty's Secretary of State for the Colonies.

I have the honor to be Sir, Your most obedient Servant A.E. Kennedy Governor