I have the honour to acknowledge the receipt of your letter dated 18th June, which has been laid before, and considered by, the members of the Chamber, at their Quarterly General Meeting.

"The subject of Intercolonial Free Trade has frequently occupied the attention of the Chamber, but more especially during the Conference of colonial Chambers of Commerce held in Sydney, in May, 1869, and I beg to recall to your notice the second resolution passed at the Conference, and subsequently adopted by the Chamber, namely—

"That a Customs Union, with one uniform tariff, is, in the opinion of this Conference, not only desirable, but the most practicable mode of giving effect to the principles of commercial federation. That a free interchange of colonial products (for which a general desire has been expressed) is unattainable except by means of a Customs Union, inasmuch as the Constitution Acts of the various colonies and the instructions to Governors prohibit the imposition of differential duties, and the Home Government, through the late Secretary of State for the Colonies, explicitly stated in his despatch to the Governor of New South Wales, dated 7th January, 1868, that the Imperial Parliament would only be willing to assent to the removal of such prohibition in favour of a page 44vi 'Customs Union' providing for the importation of goods from colony to colony, for an equitable division of the Customs duties, and for a uniform tariff as between other countries and places.

"The practical difficulty here pointed out continues in full force, namely, that a free exchange of intercolonial products can only be attained by means of a Customs Union, so that the Customs laws of the colonies may be in accord with those of the mother country.

"This Chamber is thoroughly impressed with the importance of free trade between the colonies, but they look for the attainment of this object in the extension of free trade principles rather than in special legislation, which would only be a further departure from the principles of free trade.

"While a large portion of the revenue of each colony must be derived from Customs duties, these duties must be levied in accordance with the circumstances of each colony, and with a special regard to the products of each colony; thus the production of sugar in Queensland promises to be very large, and in this colony will be considerable, and this being an article on the consumption of which a large revenue has hitherto been raised, its production will necessitate a readjustment of Customs duties, and a like readjustment will be necessary as new products are developed—a process which this Chamber hopes will steadily continue.

"The two bills,^* of which you have been good enough to transmit copies, show at once the difficulties that must arise in attempting to carry out the scheme they are intended to favour.

"Thus, while the Tasmanian Act is intended to allow the admission of all articles the product or manufacture of the other colonies, the New Zealand Act limits its operations to products or manufactures of other colonies, the raw material being the produce of such colonies, showing an important distinction, and one that in the case of New Zealand would practically confine its advantages to the raw material of other colonies, while the Tasmanian Act would admit all articles made in the colony, although the raw material were the produce of foreign countries.

"In the Tasmanian Act the colony surrenders its right to interfere with the Act during the period that may be agreed on to the colony with which the agreement is made, while New Zealand retains the right to withdraw from the agreement at six months' notice; thus, on the one hand, an element of unfairness in the relative positions of the contracting colonies is introduced, and, on the other, an uncertainty in the duration of the Act that would render it impossible for the other colonies to frame their fiscal policy on an agreement liable to be terminated on short notice. This Chamber can hardly hope that the Governments of the various colonies will be induced to adopt the unselfish policy of the Tasmanian Act, in giving to the other contracting party alone the power to terminate the agreement.

"In both Acts, spirituous liquors and tobacco are specially excluded from the benefits of the arrangement; it is a question how far this would apply to wine containing a certain proportion of spirits; and Victoria, South Australia, and this colony, being large producers of wine, might feel they were placed at a disadvantage in their wines being excluded from the benefits of the arrangement, while the products of other colonies would enter their ports free. In the same way, tobacco is an article of large production in this colony, and its ex- page 44viii clusion from the proposed agreement might come to be looked on as invidious.

"These remarks are made in no unfriendly spirit to the proposed agreement, but as illustrating the practical difficulties that now suggest themselves; and other difficulties of a like character must increase as new industries develop themselves in colonies ranging over such a variety of climates, and embracing such a variety of soil and products as do the Australian colonies and New Zealand.

"This Chamber is most anxious to see as free an interchange of colonial products as possible, but it is the opinion of the members that this can best be accomplished by extending the free list in each colony, and steadily adhering to the principle of free trade.

"I venture to enclose a copy of a series of resolutions recently adopted by this Chamber, and to express the hope that your Chamber will concur with this in advocating the principles therein expressed, and in pressing their adoption on your Legislature, and thus tending to promote, on the most sure and permanent basis, the free interchange of colonial products and manufactures.