Second. The routes from Chicago and from Du Luth to the prov ince of Manitoba, forming connecting-links in the highways of commerce between that province and the provinces of Ontario and Quebec.

Third. That portion of the Grand Trunk Railway crossing the States of New Hampshire and Maine, the Vermont Central Railway, and the several rail-lines and the Hudson River and Champlain Canal route, forming highways of commerce between the Dominion of Canada and foreign countries, and constituting the cities of Portland, Boston, and New York seaports for the foreigu commerce of Canada with countries beyond the United States, especially during the six months of the year when the navigation of the Saint Lawrence route is closed.

An appreciation of the mutual interests of transportation which have sprung up in consequence of the opening of these various highways of commerce has naturally led to that reciprocity of facilities commonly known as "the transit trade."

The commercial intercourse between the United States and Canada over these various highways of commerce is the subject of treaty rela tions between the government of Great Britain and the government of the United States. These treaty stipulations embrace the privilege accorded to the people of Canada of transporting merchandise through the territory of the United States, and the privilege accorded to the citizens of the United States of transporting dutiable merchandise through the Dominion of Canada, under customs locks and seals, accompanied by customs manifest without payment of duty or the inspections incident to customs regulations. The ports from which and to which and the routes over which merchandise may be transported under these recip rocal relations of traffic are set forth in the regulations of the Treasury Department of the United States. The following are the routes for the transportation of American merchandise through Canada:

First. The Grand Trunk Railroad from Port Huron, in Michigan, to Buffalo, Niagara Falls, Ogdensburgh, N. Y., Saint Albans, Vt., and Island Pond, near the northern boundary of the State of Vermont.

Second. The Great Western Railroad of Canada, from Detroit and Sarnia to Suspension Bridge and Buffalo.

Third. The Canada Southern Railroad from Trenton, a point near the city of Detroit, to Buffalo, New York.

Fourth. The Saint Lawrence River and the Canadian canals.

The prescribed routes for the transportation of Canadian merchandise across the territory of the United States are:

First. The railroad-lines extending from Portland and Boston to Canada.

Second. The rail and water lines from the city of New York to the Dominion of Canada.

Third. The overland route from the head of Lake Michigan, across the territory of Minnesota into the British province of Manitoba.

Fourth. The rail-line from the province of New Brunswick, across the States of Maine, New Hampshire, and Vermont, to the Canadian boundary line near Island Pond.

Thus far the reciprocity of transportation facilities has been in a very high degree beneficial to both countries. The question as to which country has realized the greater advantages from the arrangement is not, therefore, one of any practical moment. Commercial intercourse. has been stimulated and the transportation-routes of both countries. have realized great advantages from the additional traffic secured. Important advantages have been realized by shippers in the United States through the competition afforded by the several Canadian lines, and the facilities afforded by these lines are highly appreciated by the citizens of the United States.

Statistics showing the quantity and value of the commodities shipped in the transit trade have been annually published since 1870. The following statement, compiled from the annual report of commerce and navigation, shows the value of commodities shipped by the people of Canada through the territory of the United States:

No plan has yet been adopted for the collection of statistics showing either the quantity or the value of commodities shipped through the territory of Canada by citizens of the United States, owing to the fact that it is deemed to be a part of our internal commerce, and that the Government of the United States has heretofore neglected to adopt any measures for collecting information upon this subject. This traffic. greatly exceeds the value of commodities shipped by the people of Canada through the territory of the United States.

The intimate connection between the transportation-lines of Canada and of the United States has tended very greatly to increase commercial intercourse between the two countries, and it appears to be a matter of great importance that this trade should be fostered by every practicable expedient.

DIRECT TRADE BETWEEN INTERIOR POINTS IN THE UNITED STATES AND FOREIGN COUNTRIES.

The facilities which have been provided for the direct shipment of commodities between distant points in the United States and between points in the Western States and Europe constitute a very important agency in securing cheap transportation. This has been effected

mainly through the saving of terminal and transfer charges and intermediate expenses of various kinds, such as commissions, warehousing, insurance, weighing, &c.

These economies of transport do not, however, alone determine the course of commerce. All experience proves that, in the great commercial movements of the globe, one of the most important economic requirements is the massing of merchandise at the great centers of trade and its distribution thence to the smaller trade centers and to consumers in the ordinary course of business. A single merchant can thus attend to the distribution of as large a quantity of any given article of merchandise as would require the attention of many merchants and forwarders in a direct or comparatively retail trade.

This mode of exchange subserves very important economies, both of transportation and of trade. The quantity of merchandise of one kind transported over a railroad constitutes one of the most important conditions toward securing cheap transportation, and this requirement is met by the traffic afforded by the commerce of a great city. This centralization of trade also utilizes the higher order of talent required in the conduct of large commercial enterprises, and in various ways subserves the interests of commerce; it constitutes the strength of commercial cities; it is the indispensable function of great markets, and it can never be substituted by any general mode of direct trade between the producer and the consumer of every article of merchandise embraced in the grand schedule of human wants. This applies to the exportation of domestic products to foreign countries, to the importation of foreign merchandise into the United States, and, to a great extent, to the movements of our internal commerce.

But in the course of the millions of exchanges which constitute the internal commerce of the United States, the direct transportation of products from the producer to the consumer is oftentimes the more important condition, and this requirement has been met by the facilities of rail-transport provided during the last ten years.

In regard to a very considerable part of the internal commerce of this country there are also obvious limitations to the value of the option of the markets of commercial cities, and to the advantages which they afford through their capital, their warehousing facilities, the tact and commercial knowledge of their merchants, and the economic advantages above alluded to. Accordingly, it is found that wherever excessive intermediate charges, delays, or hinderances occur, commerce avoids such obstructions and moves on direct lines. This applies in widely different degrees to different articles of merchandise, under the great variety of circumstances which present themselves in the course of trade.

The complete elucidation of this subject would involve a dissertation. upon the causes of the rise and fall of commercial cities, and it might also

lead into much abstract reasoning. The force of the general proposition, however, that the influence exercised by every commercial city is a limited one, may be shown by means of one or two practical illustrations. A charge exceeding 2 cents per bushel on grain at the chief Atlantic seaports will tend to force a direct trade in grain between the West and Europe through those ports. The same fact is true in regard to the great grain-markets of the West. Whenever the railroads extending east and west from Chicago combine so that the through rate from a point west of Chicago to New York is made about five cents less than the rates to and from that city, it is found that grain is largely deflected from the Chicago market to a direct movement between the point of production and the Atlantic seaport, and perhaps, also, to a direct movement from the remote western point to a port in Europe. It is evident, therefore, that the possibilities of direct shipment from interior points at the West to Europe tend to regulate terminal charges at the great commercial cities, and to enforce upon the merchants of those cities the greatest possible degree of economy in the receipt and shipment of merchandise, and in the conduct of trade generally.

The same thing applies as to direct importations at interior points. The enactment of those laws of the United States under which foreign merchandise is imported directly at the principal cities of the interior undoubtedly resulted from the delays and charges incurred in importing goods through the Atlantic seaports. The value of the merchandise imported directly at interior cities during the year ending June 30, 1876, amounted to only $5,190,433, this amount being but one per cent. of the value of the total imports into the United States during that year. It is probable that the economies of commercial operations will enable the great seaports to retain very largely the receipt and distribution of foreign merchandise, as well as the receipt and exportation of domestic productions.

The facilities for direct importation and exportation to and from interior points afford a striking illustration of the regulating power of the competition of transportation-lines, not only over each other but over the profits which may be realized and the charges which may be imposed in the course of trade.

With these prefatory remarks, let us turn to the consideration of some facts which serve to develop the direct shipment of merchandise from iuterior points in the United States to Europe, and the direct importation of merchandise from foreign countries to interior points in the United States.

The direct shipment of merchandise from interior points in the United States to Europe.

The direct consignment of products of the West from interior points. to ports in Europe is one of the results of the formation of throughfreight lines and of arrangements entered into between railroads and

ocean-steamer lines. Telegraphic communication between the United States and foreign countries has also served an important part in the development of this direct trade. Soon after the establishment of trans-Atlantic telegraphic communication the market news of foreign countries was published daily in the public journals of all the commercial cities throughout the United States. Purchasers and sellers were thus brought into immediate communication with each other, and in the course of a few years the modes and habits of commerce were conformed to the new order of things.

The relations of this traffic to the interests of the great trunk lines and to the commercial interests of Boston, New York, Philadelphia, and Baltimore, have been for two or three years the subject of a sharp contest. This contest involves the question of determining the relative rates. which shall prevail from western points to Boston, New York, Philadel phia, and Baltimore, and also the through rates from interior points to. foreign countries, covering both the rail and ocean rates.

Besides the economic features involved, the subject embraces the competition of rival railroads, the competition of product with product in the various markets of the country, and the available supply of tonnage at the various ports. At the north, Boston has claimed the privilege of maintaining lower through-rates on account of the less distance from that port to Europe than from any other Atlantic sea-port, and at the south, Baltimore has claimed the privilege of lower through-rates ou account of its shorter rail-line to the trade-centers of the West. This subject is more fully treated of in another section of this report.

As yet the direct exportation of products of the West from interior points is small in proportion to the total quantity of the products of the West which are shipped to the principal seaports on the Atlantic coast, and thence exported to foreign countries.

The direct shipment of western produce from interior points to Europe began in the year 1859, from Cincinnati and Chicago. At that time. such shipments were made by way of the Grand Trunk Railway and by steamer from Montreal during the summer months, and by the Grand Trunk Railway and steamer from Portland, Me., during the winter months. For several years this direct shipment was carried on in a small way by private enterprise, and was in the nature of an express business rather than of a general freight traffic.

Direct trade from the West to Europe began via New York in 1861, by means of sailing-vessels, and by steamers in 1863. It was not, however, until about the year 1865 that the direct shipment of the products of the West from interior points to ports in Europe was undertaken by the transportation-lines themselves as a branch of their regular traffic. Since that time the business has grown rapidly. Grain, provisions, and fresh meats are the commodities chiefly shipped direct from points at the West to Europe.

Direct shipments from Chicago to Europe.-A statement of the quantity