I.—General Remarks.

It will be apparent, Mr, Chairman and gentlemen, from what has gone before, that I have been led to form a high estimate of the possibilities of trade between New Zealand and the Islands of the South Pacific, visited by me in the character of your delegate. That estimate, I hope, is not an exaggerated one, nor has it been arrived at without a due consideration of the many and serious obstacles which exist to the further development of trade with these Islands. From the foregoing notes, and from the statistical tables appended (compiled with as much accuracy and fulness as were possible in the circumstances), it will be seen that the import and export trade of the Islands for the year 1884 reached a total value of nearly £700,000; and of this over a quarter of a million sterling is the increase of the last thirteen years. It is not going too far to say that the whole of this increase in trade might have been secured to New Zealand, had this Colony at an earlier stage adopted the policy now being pursued, of fostering and aiding in the development of commercial interchange. As the case stands at present, one half of the Island trade is divided between Germany and America in nearly equal proportions; New Zealand, Australia, and England have each one-eighth, and France about one-twentieth. It is also worthy of note that (excluding the French military population at Tahiti) the English residents in these Islands exceed in number those of any other foreign nationality; and this, added to the fact that the combined trade of England and her colonies exceeds that of any other nationality by 50 per cent., goes to prove that British interests are widely established all over these groups, and are deserving of recognition and support. Of a total shipping trade of 284 vessels of 60,586 tons, England and her Colonies were last year represented by 115 vessels of 24,918 tons, the greater portion of these being colonial vessels.

II.—Circumstances Favourable to New Zealand Trade.

My reasons for believing that the trade between this Colony and the South Pacific Islands might be greatly extended are based upon the following facts :—

(1).	The Natural Position occupied by New Zealand as Entrepot for Island Products, and for Shipping Merchandise to the Islands.—Auckland is the nearest harbour of any importance to these Islands, being 750 miles nearer to Tonga than Sydney is, and 1300 miles nearer to Tahiti than is San Francisco, which latter port has at present almost a complete monopoly of the import trade of the Society Islands.
(2).	The Suitability of the Products of New Zealand for Island Consumption.—The Pacific Islanders consume immense quantities of flour, biscuits, preserved meat and fish, soap, etc., in the supplying of which New Zealand ought to be able to compete successfully with the world. The value of flour and biscuits imported last year was £52,000; preserved meat and fish,£31,000; soap, timber, etc., £30,000; or in all, £113,000 worth of articles produced in New Zealand; while cotton and drapery goods were imported to the value of £125,000—a grand total of £238,000, which might be supplied by or through New Zealand. The consumpt of these articles must steadily increase, especially in the Tonga and Samoa groups, where the natives have adopted European modes of life to a very limited extent as yet.
(3).	The Superiority of certain New Zealand Products over those of Sydney and San Francisco.—Auckland salt and tinned meats are largely consumed and are generally considered to be superior to the American and Australian brands, though I found a few traders who preferred the Sydney meats. This superiority our exporters should do their utmost to maintain, and they should pay greater attention to the careful packing of the meat and the artistic adornment of the tins. New Zealand potatoes, onions, cheese, etc., are greatly in request among the European residents, but as the natives do not use these articles, the market for them is limited.
(4).	The Enormous Natural Resources the Islands.—There are in these islands land and labour sufficient (were they utilised and directed) to produce twenty-fold more than at present. This is especially true of the Samoa, Tonga, and Society Groups, where there are extensive areas of uncultivated land and a numerous native population. The British West Indies, with an area of 13,000 square miles, had in 1871 a total trade of £10,000,000; and the Pacific Islands, with an area of 4,000 square miles, might soon (were the natives to adopt European habits of living and page 57 industry) have a trade worth £5,000,000. Even that large sum would be doubled were an additional supply of labourers available.
(5).	Regular and Rapid Communication.—From the close connection now established between New Zealand and the Islands, by the two-monthly running of the mail steamer Janet Nicoll, this colony should secure the larger portion of the increase of trade.

III.—Obstacles to New Zealand Trade.

The obstacles to the extension of trade between New Zealand and the Islands are as follow :—

(1).	The Debased Coin in Circulation.—The difficulty of finding an equitable medium of exchange is by this means, and the absence of banking establishments, rendered very great; and the only profitable method of carrying on trade is to barter goods for native products.
(2).	The Small Consumption or Manufacture Island Products in New Zealand.—Of a total of £340,000 worth of produce exported from the Islands in 1884, only about,£17,000 worth (representing the value of fruits, coffee, and wool) were articles that are consumed or manufactured in New Zealand. The copra exported was valued at £209,000; the cotton-seed at £73,000—these going chiefly to Europe direct, though some was sent via New Zealand. Copra has been used in manufacture, in small quantities, by the Union Soap and Candle Company of Auckland; but there is in the meantime no prospect of a local consumpt springing up sufficient to balance our exports to the Islands, while the loss to the copra by handling, combined with the double freights, must very soon extinguish the transhipping trade, unless the Harbour Board offer special facilities for its continuance.
(3).	High Price and Unsuitability of some New Zealand Products.—Our flour, biscuits, soap, and timber are everywhere spoken against—the flour, biscuits, and timber as being unsuited for the Islands, and the soap as being of inferior quality; while frequent complaints were made of too high prices being charged for all these articles. Our millers, if they wish to secure this market, must kiln-dry their flour, so as to make it lighter for baking and better for keeping. Californian biscuits and Sydney soap are preferred, on the grounds of excellence and price combined; but I consider, with regard to these items, it is custom and prejudice that rule. There appears to be reason in the objections to kauri timber, though even in respect to it I have heard contradictory statements—some people who had used it alleging that they found it most durable. The explanation of these conflicting opinions must, I think, be sought in the quality of the timber supplied from Auckland, and this in page 58 some cases is very bad—so much so that Mr. Baker, Premier of Tonga, said that when he wanted good kauri he sent to Sydney for it. The fact would seem to be that lots of sap kauri are sent down with the idea that "it is good enough for the Islands," whereas the contrary rule should be applied, as the best timber is required to withstand the more trying climate and the more voracious ants. In the meantime our timber has got such a bad reputation, that it may take years to convince traders in the South Sea Islands that good heart of kauri timber is superior in durability for building purposes to any other.
(4).	The, High Rate of Freights, Shipping and Customs Dues, &c.—New Zealand freight rates compare most unfavourably with those of San Francisco; regular communication should also be more frequent, and certain shipping charges and Customs duties should be abated, in order to allow New Zealand ports to compete on equal terms with Sydney.
(5).	The Want of Settled Government at Samoa and Cook Islands.—This Objection applies equally to the commerce of other nations as to that of New Zealand, and need not be enlarged upon.
(6).	Character and Remutneration of Employés.—New Zealand trade has suffered in the past from the character of the commercial men sent to do business—the principle acted upon being that "anybody was good enough for the Islands." The Germans pursue a totally different plan; the manager of the leading Company has a salary of £3,000 a year, and many scions of German nobility (including a nephew of Prince Bismarck) have been at various times sent to the Islands as clerks and overseers. There is not an English employé in the Islands who has even £1,000 a year; and though the old reproach of the worthlessness of our commercial representatives has been removed, they are deficient in ability, social status, and influence as compared with the Germans.

IV.—Recommendations.

To take advantage of the favourable circumstances named, and to overcome the obstacles enumerated, I would suggest the adoption of one, or other, or all of the following recommendations, which I submit without further comment for your consideration :—

(1).	Form a New Zealand and South Sea Island Trading Company. (If under Government auspices, these should go no further than guaranteeing interest on paid-up capital for a brief term of years.)
(2).	Have head-quarters at Samoa, and resident manager, who should visit other groups as required. (If Government guarantee page 59 interest, this gentleman might be a Government Trading Agent, with powers analogous to those of Consul, which would add greatly to his influence.)
(3).	Buy out one or two of the leading trading houses, thus securing at once a connection and the services of experienced men.
(4).	Assist in establishing branches of a New Zealand Bank at Apia, Papeete, and Nukualofa.
(5).	Stamp out the base coinage and establish English currency.
(6).	Encourage the formation of a settled Government at Samoa.
(7).	Secure Treaties of Reciprocity with Tonga and Tahiti.
(8).	Have New Zealand import duties on Island products abolished.
(9).	Make Auckland a free port.
(10).	Reduce freight charges to and from the Islands.
(11).	Make Auckland the terminal port in New Zealand for the mail steamer, and despatch her every sixth week, instead of every eighth, as at present.

Most of these suggested changes are, I know, beyond the power of your Chamber to effect of its own ability or volition; but I have no doubt that your influence, individual and collective, if exerted in the directions indicated, would powerfully affect the result.

Thanking you for the trust reposed in me, which I only regret to have so imperfectly discharged,