Part 2

Treaties of commerce and navigation and for the regulation of consular privileges have been concluded with Roumania and Servia since their admission into the family of European States.

As is natural with contiguous states having like institutions and like aims of advancement and development, the friendship of the United States and Mexico has been constantly maintained. This Government has lost no occasion of encouraging the Mexican Government to a beneficial realization of the mutual advantages which will result from more intimate commercial intercourse and from the opening of the rich interior of Mexico to railway enterprise. I deem it important that means be provided to restrain the lawlessness unfortunately so common on the frontier and to suppress the forays of the reservation Indians on either side of the Rio Grande.

The neighboring States of Central America have preserved internal peace, and their outward relations toward us have been those of intimate friendship. There are encouraging signs of their growing disposition to subordinate their local interests to those which are common to them by reason of their geographical relations.

The boundary dispute between Guatemala and Mexico has afforded this Government an opportunity to exercise its good offices for preventing a rupture between those States and for procuring a peaceable solution of the question. I cherish strong hope that in view of our relations of amity with both countries our friendly counsels may prevail.

A special envoy of Guatemala has brought to me the condolences of his Government and people on the death of President Garfield.

The Costa Rican Government lately framed an engagement with Colombia for settling boy arbitration the boundary question between those countries, providing that the post of arbitrator should be offered successively to the King of the Belgians, the King of Spain, and the President of the Argentine Confederation. The King of the Belgians has declined to act, but I am not as yet advised of the action of the King of Spain. As we have certain interests in the disputed territory which are protected by our treaty engagements with one of the parties, it is important that the arbitration should not without our consent affect our rights, and this Government has accordingly thought proper to make its views known to the parties to the agreement, as well as to intimate them to the Belgian and Spanish Governments.

The questions growing out of the proposed interoceanic waterway across the Isthmus of Panama are of grave national importance. This Government has not been unmindful of the solemn obligations imposed upon it by its compact of 1846 with Colombia, as the independent and sovereign mistress of the territory crossed by the canal, and has sought to render them effective by fresh engagements with the Colombian Republic looking to their practical execution. The negotiations to this end, after they had reached what appeared to be a mutually satisfactory solution here, were met in Colombia by a disavowal of the powers which its envoy had assumed and by a proposal for renewed negotiation on a modified basis.

Meanwhile this Government learned that Colombia had proposed to the European powers to join in a guaranty of the neutrality of the proposed Panama canal--a guaranty which would be in direct contravention of our obligation as the sole guarantor of the integrity of Colombian territory and of the neutrality of the canal itself. My lamented predecessor felt it his duty to place before the European powers the reasons which make the prior guaranty of the United States indispensable, and for which the interjection of any foreign guaranty might be regarded as a superfluous and unfriendly act.

Foreseeing the probable reliance of the British Government on the provisions of the Clayton-Bulwer treaty of 1850 as affording room for a share in the guaranties which the United States covenanted with Colombia four years before, I have not hesitated to supplement the action of my predecessor by proposing to Her Majesty's Government the modification of that instrument and the abrogation of such clauses thereof as do not comport with the obligations of the United States toward Colombia or with the vital needs of the two friendly parties to the compact.

This Government sees with great concern the continuance of the hostile relations between Chile, Bolivia, and Peru. An early peace between these Republics is much to be desired, not only that they may themselves be spared further misery and bloodshed, but because their continued antagonism threatens consequences which are, in my judgment, dangerous to the interests of republican government on this continent and calculated to destroy the best elements of our free and peaceful civilization.

As in the present excited condition of popular feeling in these countries there has been serious misapprehension of the position of the United States, and as separate diplomatic intercourse with each through independent ministers is sometimes subject, owing to the want of prompt reciprocal communication, to temporary misunderstanding, I have deemed it judicious at the present time to send a special envoy accredited to all and each of them, and furnished with general instructions which will, I trust, enable him to bring these powers into friendly relations.

The Government of Venezuela maintains its attitude of warm friendship and continues with great regularity its payment of the monthly quota of the diplomatic debt. Without suggesting the direction in which Congress should act, I ask its attention to the pending questions affecting the distribution of the sums thus far received.

The relations between Venezuela and France growing out of the same debt have been for some time past in an unsatisfactory state, and this Government, as the neighbor and one of the largest creditors of Venezuela, has interposed its influence with the French Government with the view of producing a friendly and honorable adjustment.

I regret that the commercial interests between the United States and Brazil, from which great advantages were hoped a year ago, have suffered from the withdrawal of the American lines of communication between the Brazilian ports and our own.

Through the efforts of our minister resident at Buenos Ayres and the United States minister at Santiago, a treaty has been concluded between the Argentine Republic and Chile, disposing of the long-pending Patagonian boundary question. It is a matter of congratulation that our Government has been afforded the opportunity of successfully exerting its good influence for the prevention of disagreements between these Republics of the American continent.

I am glad to inform you that the treaties lately negotiated with China have been duly ratified on both sides and the exchange made at Peking. Legislation is necessary to carry their provisions into effect. The prompt and friendly spirit with which the Chinese Government, at the request of the United States, conceded the modification of existing treaties should secure careful regard for the interests and susceptibilities of that Government in the enactment of any laws relating to Chinese immigration.

Those clauses of the treaties which forbid the participation of citizens or vessels of the United States in the opium trade will doubtless receive your approval. They will attest the sincere interest which our people and Government feel in the commendable efforts of the Chinese Government to put a stop to this demoralizing and destructive traffic.

In relation both to China and Japan some changes are desirable in our present system of consular jurisdiction. I hope at some future time to lay before you a scheme for its improvement in the entire East.

The intimacy between our own country and Japan, the most advanced of the Eastern nations, continues to be cordial. I am advised that the Emperor contemplates the establishment of full constitutional government, and that he has already summoned a parliamentary congress for the purpose of effecting the change. Such a remarkable step toward complete assimilation with the Western system can not fail to bring Japan into closer and more beneficial relationship with ourselves as the chief Pacific power.

A question has arisen in relation to the exercise in that country of the judicial functions conferred upon our ministers and consuls. The indictment, trial, and conviction in the consular court at Yokohama of John Ross, a merchant seaman on board an American vessel, have made it necessary for the Government to institute a careful examination into the nature and methods of this jurisdiction.

It appeared that Ross was regularly shipped under the flag of the United States, but was by birth a British subject. My predecessor felt it his duty to maintain the position that during his service as a regularly shipped seaman on board an American merchant vessel Ross was subject to the laws of that service and to the jurisdiction of the United States consular authorities.

I renew the recommendation which has been heretofore urged by the Executive upon the attention of Congress, that after the deduction of such amount as may be found due to American citizens the balance of the indemnity funds heretofore obtained from China and Japan, and which are now in the hands of the State Department, be returned to the Governments of those countries.

The King of Hawaii, in the course of his homeward return after a journey around the world, has lately visited this country. While our relations with that Kingdom are friendly, this Government has viewed with concern the efforts to seek replenishment of the diminishing population of the islands from outward sources, to a degree which may impair the native sovereignty and independence, in which the United States was among the first to testify a lively interest.

Relations of unimpaired amity have been maintained throughout the year with the respective Governments of Austria-Hungary, Belgium, Denmark, Hayti, Paraguay and Uruguay, Portugal, and Sweden and Norway. This may also be said of Greece and Ecuador, although our relations with those States have for some years been severed by the withdrawal of appropriations for diplomatic representatives at Athens and Quito. It seems expedient to restore those missions, even on a reduced scale, and I decidedly recommend such a course with respect to Ecuador, which is likely within the near future to play an important part among the nations of the Southern Pacific.

At its last extra session the Senate called for the text of the Geneva convention for the relief of the wounded in war. I trust that this action foreshadows such interest in the subject as will result in the adhesion of the United States to that humane and commendable engagement.

I invite your attention to the propriety of adopting the new code of international rules for the prevention of collisions on the high seas and of conforming the domestic legislation of the United States thereto, so that no confusion may arise from the application of conflicting rules in the case of vessels of different nationalities meeting in tidal waters. These international rules differ but slightly from our own. They have been adopted by the Navy Department for the governance of the war ships of the United States on the high seas and in foreign waters, and, through the action of the State Department in disseminating the rules and in acquainting shipmasters with the option of conforming to them without the jurisdictional waters of the United States, they are now very generally known and obeyed.

The State Department still continues to publish to the country the trade and manufacturing reports received from its officers abroad. The success of this course warrants its continuance and such appropriation as may be required to meet the rapidly increasing demand for these publications. With special reference to the Atlanta Cotton Exposition, the October number of the reports was devoted to a valuable collection of papers on the cotton-goods trade of the world.

The International Sanitary Conference for which, in 1879, Congress made provision assembled in this city early in January last, and its sessions were prolonged until March. Although it reached no specific conclusions affecting the future action of the participant powers, the interchange of views proved to be most valuable. The full protocols of the sessions have been already presented to the Senate.

As pertinent to this general subject, I call your attention to the operations of the National Board of Health. Established by act of Congress approved March 3, 1879, its sphere of duty was enlarged by the act of June 2 in the same year. By the last-named act the board was required to institute such measures as might be deemed necessary for preventing the introduction of contagious or infectious diseases from foreign countries into the United States or from one State into another.

The execution of the rules and regulations prepared by the board and approved by my predecessor has done much to arrest the progress of epidemic disease, and has thus rendered substantial service to the nation.

The International Sanitary Conference, to which I have referred, adopted a form of a bill of health to be used by all vessels seeking to enter the ports of the countries whose representatives participated in its deliberations. This form has since been prescribed by the National Board of Health and incorporated with its rules and regulations, which have been approved by me in pursuance of law.

The health of the people is of supreme importance. All measures looking to their protection against the spread of contagious diseases and to the increase of our sanitary knowledge for such purposes deserve attention of Congress.

The report of the Secretary of the Treasury presents in detail a highly satisfactory exhibit of the state of the finances and the condition of the various branches of the public service administered by that Department.

The ordinary revenues from all sources for the fiscal year ending June 30, 1881, were:

From customs $198,159,676.02 From internal revenue 135,264,385.51 From sales of public lands 2,201,863.17 From tax on circulation and deposits of national banks 8,116,115.72 From repayment of interest by Pacific Railway companies 810,833.80 From sinking fund for Pacific Railway companies 805,180.54 From customs fees, fines, penalties, etc. 1,225,514.86 From fees--consular, letters patent, and lands 2,244,983.98 From proceeds of sales of Government property 262,174.00 From profits on coinage 3,468,485.61 From revenues of the District of Columbia 2,016,199.23 From miscellaneous sources 6,206,880.13 ______________ Total ordinary receipts 360,782,292.57

The ordinary expenditures for the same period were:

For civil expenses $17,941,177.19 For foreign intercourse 1,093,954.92 For Indians 6,514,161.09 For pensions 50,059,279.62 For the military establishment, including river and harbor improvements and arsenals 40,466,460.55 For the naval establishment, including vessels, machinery, and improvements at navy-yards 15,686,671.66 For miscellaneous expenditures, including public buildings, light-houses, and collecting the revenue 41,837,280.57 For expenditures on account of the District of Columbia 3,543,912.03 For interest on the public debt 82,508,741.18 For premium on bonds purchased 1,061,248.78 ______________ Total ordinary expenditures 260,712,887.59

Leaving a surplus revenue of $100,069,404.98, which was applied as follows:

To the redemption of--

Bonds for the sinking fund $74,371,200.00 Fractional currency for the sinking fund 109,001.05 Loan of February, 1861 7,418,000.00 Ten-forties of 1864 2,016,150.00 Five-twenties of 1862 18,300.00 Five-twenties of 1864 3,400.00 Five-twenties of 1865 37,300.00 Consols of 1865 143,150.00 Consols of 1867 959,150.00 Consols of 1868 337,400.00 Texan indemnity stock 1,000.00 Old demand, compound-interest, and other notes 18,330.00 And to the increase of cash in the Treasury 14,637,023.93 ______________ 100,069,404.98

The requirements of the sinking fund for the year amounted to $90,786,064.02, which sum included a balance of $49,817,128.78, not provided for during the previous fiscal year. The sum of $74,480,201.05 was applied to this fund, which left a deficit of $16,305,873.47. The increase of the revenues for 1881 over those of the previous year was $29,352,901.10. It is estimated that the receipts during the present fiscal year will reach $400,000,000 and the expenditures $270,000,000, leaving a surplus of $130,000,000 applicable to the sinking fund and the redemption of the public debt.

I approve the recommendation of the Secretary of the Treasury that provision be made for the early retirement of silver certificates and that the act requiring their issue be repealed. They were issued in pursuance of the policy of the Government to maintain silver at or near the gold standard, and were accordingly made receivable for all customs, taxes, and public dues. About sixty-six millions of them are now outstanding. They form an unnecessary addition to the paper currency, a sufficient amount of which may be readily supplied by the national banks.

In accordance with the act of February 28, 1878, the Treasury Department has monthly caused at least two millions in value of silver bullion to be coined into standard silver dollars. One hundred and two millions of these dollars have been already coined, while only about thirty-four millions are in circulation.

For the reasons which he specifies, I concur in the Secretary's recommendation that the provision for coinage of a fixed amount each month be repealed, and that hereafter only so much be coined as shall be necessary to supply the demand.

The Secretary advises that the issue of gold certificates should not for the present be resumed, and suggests that the national banks may properly be forbidden by law to retire their currency except upon reasonable notice of their intention so to do. Such legislation would seem to be justified by the recent action of certain banks on the occasion referred to in the Secretary's report.

Of the fifteen millions of fractional currency still outstanding, only about eighty thousand has been redeemed the past year. The suggestion that this amount may properly be dropped from future statements of the public debt seems worthy of approval.

So also does the suggestion of the Secretary as to the advisability of relieving the calendar of the United States courts in the southern district of New York by the transfer to another tribunal of the numerous suits there pending against collectors.

The revenue from customs for the past fiscal year was $198,159,676.02, an increase of $11,637,611.42 over that of the year preceding. One hundred and thirty-eight million ninety-eight thousand five hundred and sixty-two dollars and thirty-nine cents of this amount was collected at the port of New York, leaving $50,251,113.63 as the amount collected at all the other ports of the country. Of this sum $47,977,137.63 was collected on sugar, melado, and molasses; $27,285,624.78 on wool and its manufactures; $21,462,534.34 on iron and steel and manufactures thereof; $19,038,665.81 on manufactures of silk; $10,825,115.21 on manufactures of cotton, and $6,469,643.04 on wines and spirits, making a total revenue from these sources of $133,058,720.81.

The expenses of collection for the past year were $6,419,345.20, an increase over the preceding year of $387,410.04. Notwithstanding the increase in the revenue from customs over the preceding year, the gross value of the imports, including free goods, decreased over $25,000,000. The most marked decrease was in the value of unmanufactured wool, $14,023,682, and in that of scrap and pig iron, $12,810,671. The value of imported sugar, on the other hand, showed an increase of $7,457,474; of steel rails, $4,345,521; of barley, $2,154,204, and of steel in bars, ingots, etc., $1,620,046.

Contrasted with the imports during the last fiscal year, the exports were as follows:

Domestic merchandise $883,925,947 Foreign merchandise 18,451,399 _____________ Total 902,377,346

Imports of merchandise 642,664,628 _____________ Excess of exports over imports of merchandise 259,712,718

Aggregate of exports and imports 1,545,041,974

Compared with the previous year, there was an increase of $66,738,688 in the value of exports of merchandise and a decrease of $25,290,118 in the value of imports. The annual average of the excess of imports of merchandise over exports thereof for ten years previous to June 30, 1873, was $104,706,922, but for the last six years there has been an excess of exports over imports of merchandise amounting to $1,180,668,105, an annual average of $196,778,017. The specie value of the exports of domestic merchandise was $376,616,473 in 1870 and $883,925,947 in 1881, an increase of $507,309,474, or 135 per cent. The value of imports was $435,958,408 in 1870 and $642,664,628 in 1881, an increase of $206,706,220, or 47 per cent.

During each year from 1862 to 1879, inclusive, the exports of specie exceeded the imports. The largest excess of such exports over imports was reached during the year 1864, when it amounted to $92,280,929. But during the year ended June 30, 1880, the imports of coin and bullion exceeded the exports by $75,891,391, and during the last fiscal year the excess of imports over exports was $91,168,650.

In the last annual report of the Secretary of the Treasury the attention of Congress was called to the fact that $469,651,050 in 5 per cent bonds and $203,573,750 in 6 per cent bonds would become redeemable during the year, and Congress was asked to authorize the refunding of these bonds at a lower rate of interest. The bill for such refunding having failed to become a law, the Secretary of the Treasury in April last notified the holders of the $195,690,400 6 per cent bonds then outstanding that the bonds would be paid at par on the 1st day of July following, or that they might be "continued" at the pleasure of the Government, to bear interest at the rate of 3-1/2 per cent per annum.

Under this notice $178,055,150 of the 6 per cent bonds were continued at the lower rate and $17,635,250 were redeemed.