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 great increase in commercial prosperity, but of the much lower rate of interest paid, and of the increasing revenue derived from assets. Whereas in 1867 the rate of interest was over 4%, and interest was being paid on former provincial loans of over 6%, Canada could in 1906 borrow at 3%.

The greater part of the debt arises from the assumption of the debts of the provinces as they entered federation, expenditure on canals and assistance given to railways. It does not include the debts incurred by certain provinces since federation, a matter which concerns themselves alone. A strong prejudice against direct taxation exists, and none is imposed by the federal government, though it has been tentatively introduced in the provinces, especially in Quebec, in the form of liquor licences, succession duties, corporation taxes, &c. British Columbia has a direct tax on property and on income. The cities, towns and municipalities resort to it to supply their local needs, and there is a tendency, especially pronounced in Ontario on account of the excellence of her municipal system, to devolve the burden of educational payments, and others more properly provincial, upon the municipal authorities on the plea of decentralization.

Commerce and Manufactures.—Since 1867 the opening up of the fertile lands in the north-west, the increase of population, the discovery of new mineral fields, the construction of railways and the great improvement of the canal system have changed the conditions, methods and channels of trade. The great extension during the same period of the use of water-power has been of immense importance to Canada, most of the provinces possessing numerous swift-flowing streams or waterfalls, capable of generating a practically unlimited supply of power.

In 1878 the introduction of the so-called “National Policy” of protection furthered the growth of manufactures. Protection still remains the trade policy of Canada, though modified by a preference accorded to imports from Great Britain and from most of the British colonies. The tariff, though moderate as compared with that of the United States, amounted in 1907 to about 28% on dutiable imports and to about 16% on total imports. Tentative attempts at export duties have also been made. Inter-provincial commerce is free, and the home market is greatly increasing in importance. The power to make commercial treaties relating to Canada rests with the government of Great Britain, but in most cases the official consent of Canada is required, and for many years no treaty repugnant to her interests has been signed. The denunciation by the British government in 1897 of commercial treaties with Belgium and Germany, at the request of Canada, was a striking proof of her increasing importance, and attempts have at various times been made to obtain the full treaty-making power for the federal government. The great proportion of the foreign trade of the Dominion is with the United States and Great Britain. From the former come most of the manufactured goods imported and large quantities of raw materials; to the latter are sent food-stuffs. Farm products are the most important export, and with the extension of this industry in the north-west provinces and in northern Ontario will probably continue to be so. Gold, silver, copper and other minerals are largely exported, chiefly in an unrefined state and almost entirely to the United States. The exports of lumber are about equally divided between the two. Formerly, the logs were shipped as square timber, but now almost always in the form of deals, planks or laths; such square timber as is still shipped goes almost entirely to Great Britain. Wood pulp for the manufacture of paper is exported chiefly to the United States. To that country fresh fish is sent in large quantities, and there is an important trade in canned salmon between British Columbia and Great Britain. Few of the manufacturers do more than compete with the foreigner for an increasing share of the home market. In this they have won increased success, at least five-sixths of the manufactured goods used being produced within the country, but a desire for further protection is loudly expressed. Though the chief foreign commerce is with Great Britain and the United States, the Dominion has trade relations with all the chief countries of the world and maintains commercial agents among them. Her total foreign trade (import and export) was in 1906 over £100,000,000.

Shipping.—The chief seaports from east to west are Halifax, N.S., Sydney, N.S., St John, N.B., Quebec and Montreal on the Atlantic; and Vancouver, Esquimalt and Victoria, B.C., on the Pacific. Halifax is the ocean terminus of the Intercolonial railway; St John, Halifax and Vancouver of the Canadian Pacific railway. Prince Rupert, the western terminus of the Grand Trunk Pacific railway, was in 1906 only an uninhabited harbour, but was being rapidly developed into a flourishing city. Though Halifax and St John are open in winter, much of the winter trade eastwards is done through American harbours, especially Portland, Maine, owing to the shorter railway journey. Esquimalt, Halifax, Kingston (Ont.) and Quebec have well-equipped graving-docks. The coast, both of the ocean and of the Great Lakes, is well lighted and protected. The decay of the wooden shipbuilding industry has lessened the comparative importance of the mercantile marine, but there has been a great increase in the tonnage employed in the coasting trade and upon inland waters. Numerous steamship lines ply between Canada and Great Britain; direct communication exists with France, and the steamers of the Canadian Pacific railway run regularly to Japan and to Australia.

Internal Communications.—Her splendid lakes and rivers, the development of her canal system, and the growth of railways have made the interprovincial traffic of Canada far greater than her foreign, and the portfolio of railways and canals is one of the most important in the cabinet. There are, nominally, about 200 railways, but about one-half of these, comprising five-sixths of the mileage, have been amalgamated into four great systems: the Grand Trunk, the Canadian Pacific, the Canadian Northern and the Intercolonial; most of the others have been more or less consolidated. With the first of the four large systems is connected the Grand Trunk Pacific. The Intercolonial, as also a line across Prince Edward Island, is owned and operated by the federal government. Originally built chiefly as a military road, and often the victim of political exigencies, it has not been a commercial success. With the completion of the Grand Trunk Pacific (planned for 1911) and the Canadian Northern, the country would possess three trans-continental railways, and be free from the reproach, so long hurled at it, of possessing length without breadth.

At numerous points along the frontier, connexion is made with the railways of the United States. Liberal aid is given by the federal, provincial and municipal governments to the construction of railways, amounting often to more than half the cost of the road. The government of Ontario has constructed a line to open up the agricultural and mining districts of the north of the province, and is operating it by means of a commission. Practically all the cities and large towns have electric tramways, and electricity is also used as a motive power on many lines uniting the larger cities with the surrounding towns and villages. Since 1903 the Dominion government has instituted a railway commission of three members with large powers of control over freight and passenger rates and other such matters. Telephone and express companies are also subject to its jurisdiction. From its decisions an appeal may be made to the governor-general in council, i.e. to the federal cabinet. It has exercised a beneficial check on the railways and has been cheerfully accepted by them. In Ontario a somewhat similar commission, appointed by the local government, exercises extensive powers of control over railways solely within the province, especially over the electric lines.

Despite the increase in railway facilities, the waterways remain important factors in the transportation of the country. Steamers ply on lakes and rivers in every province, and even in the far northern districts of Yukon and Mackenzie. Where necessary obstacles are surmounted by canals, on which over £22,000,000 have been spent, chiefly since federation. The St Lawrence