James Madison Papers

To James Madison from Samuel Smith, 3 April 1807

Baltimore April 3d: 1807.


I am honored with your letter covering copies of the 3d: 4th: 5: & 6 articles of the treaty lately concluded between the American & British commissioners in London, on which you wish such information as my acquaintance with the subject may enable me to give. It will afford me infinite pleasure if my practical knowledge shall enable me to throw any new light on a subject, with the theory of which you are so perfectly acquainted.

Article 3d.

This Article respects the trade carried on by Citizens of the U. States with the British possessions in India, a trade & navigation which heretofore have been highly advantageous to the United States & which tended, as I conceive, to the advantage of British India: To advantage of the latter, because it was, & is carried on with ⟨silver⟩; difficult for them to ⟨procure⟩, especially in time of War, & absolutely necessary to their existence, which Silver is invested in Goods after the best & most choice have been selected by the Company & at high prices; that is, the Americans take & pay high prices for the Surplu⟨s⟩ Articles, after the demand for the Company’s service has been satisfied. These advantages have been of such importance to the Company, that little opposition has been given by them to a commerce, which, at a first view, would be supposed by Theorists to tend to their prejudice. The trade is very popular among the British & Native inhabitants of India, & being unquestionably highly profitable to them, they would consider the loss thereby as greatly & oppressively injurious to their interest. The Commerce & Navigation to India have been of great advantage to the U. States; They afforded very great gain to those concerned prior to the treaty made by Mr. Jay, & a moderate profit since that period. It may not be improper to take a view, thereof since their commencement, & of what they would be under the proposed article

First--prior to Mr. Jay’s treaty.

The ships of the U States navigating freely either direct to & from British India, or in any other manner which to them appeared the most profitable. Some went with specie on board direct, others with part specie, touched at Madeira purchased wines on credit & proceeded to the different ports of India making sales where it was to advantage, & returned either direct to the U States or to the ports of Italy or Ostend with sugar, pepper salt-petre, cotton goods, silk handkerchiefs &c. &c. Others took a cargo of our own produce to some of the ports of Europe, enlarged their funds by the gain & freight thereon & for the amount necessary to complete thier return cargoes they draw on their friends in London or Amsterdam to whom they made payment by our produce sent to them or by bills drawn by others for our produce, sold in Europe & proceeded with the dollars purchased in Europe to India & from thence returned either home or to Europe.

These modes were pursued by capitalists, were convenient to commerce & navigation & were attended with important advantages to both.

A third mode connected with commerce more particularly regarded our navigation. Ships sailed from the U States in ballast or with some triffles to pay charges with provisions & stores on board sufficient for two years. On their arrival in India, those ships were let to freight from port to port and frequently did in the two years gain as much by their labor as enabled them to purchase a full & valuable cargo, gained without capital, with which they returned to their own country. Others sailed for Bombay (those were cargo ships) where they were certain to obtain a full & profitable freight of cotton for China, which together with half a capital carried with them in specie, or by bills drawn from Canto on their owners enabled them to return home fully laden; those Bombay freights are very profitable. Nor was this system injurious to the British. It furnished them with ships & seamen to carry for them on reasonable terms, and enlivened a trade which without our aid will be stagnant for want of sufficient of transport. They have not Country ships or men sufficient to carry on the immense coasting trade that their possessions require. And the profit which resulted to us therefrom went to their advantage in great part by its being invested in their Sugar, Pepper & Manufactures. In time of war it would tend to their advantage, for thei⟨r⟩ enemies infest their coasting trade where our ships would go free & the British manufactures gained thereby, would have been by us introduced into the Countries of her enemies, particularly into their colonies. This valuable part of our intercourse with India was entirely cut off by the treaty made by Mr. Jay. That treaty also annihilated another very valuable branch of our trade, to wit, supplying Mannilla for its own consumption & its annual ships to Peru with the goods of India & Batavia, & the Islands of France & Bourbon with similar goods; a trade which but for that treaty could and would have been extended to an immence amount.


During the term of Jays treaty & since, American ships have continued to go to Europe with cargoes, proceeds whereof have been invested in dollars wherewith they have proceeded to British India and purchased cargoes, & generally returned direct home. In this trade they have never experienced any interruption. It has even been considered as being conformable to the letter of that treaty. That treaty compelled our ships to return direct to the UStates when they were laden in the ports of British India which was annother important injury resulting therefrom. Our ships frequently created funds by freighting & by a trade with the native nations, or with the French, Dutch & Spanish possessions beyond the Cape of Good Hope with which they go to the British possessions & puchase their manufactures & return home. It happens every year that vessels which leave the UStates with specie bound to Mocha the Maurities & Batavia for coffee are ennabled to procure Cargoes there & in consequence proceeded to Calcutta for a return cargo. Many vessels would go to the Maurities & some to Batavia with dry goods (principally manufactures of Great Britain). They there sell those & the residue of their cargoes (consisting usually of beef, pork, flour & iron) and not being able to procure coffee, proceed with dollars obtained with such goods, to India for their return cargoes; those intermediate modes of carrying on the India trade have been at all times a great convenience and frequently have been found profitable, nor are they disadvantageous to G. Britain. They cause a sale of their home manufactures to their enemies, they draw the specie from them & place on the spot where the British Government most want it: a new investiture is there commenced in British India goods which (not being calculated upon) create a surplus beyond our wants for home consumption. We are compelled by want of demand at home to seek the means of finding vent therefore; and this can be done in no way but to countries where the British cannot go with their ships, to wit, the Colonies of their enemies; from whom we draw specie and other articles that aid us in paying for the immense quantity of the home manufactures we annually draw from Great Britain for our own use & for foreign commerce.

The article of the new treaty cuts off all the advantages which might be derived from any intermediate trade. We must go direct to India & return direct to the UStates. We must turn neither to the left hand nor to the right. We must no longer stop in Europe to purchase dollars. We must no longer stop at the Maurities, at Batavia or elsewhere to procure the means for purchasing a cargo in India. The India trade can only be carried on with dollars. How are we to procure them? In time of war between Great Britain & Spain, the latter is compelled to admit us to her colonial ports; to those we carry European goods, our own flour, fish, pork, & beef: and therewith we procure dollars. But when Spain shall be at peace how are they to be procured? From whence are they to come? Into her colonies we are not then admitted: we must of course go to Lisbon, Leghorn, London or Amsterdam to purchase them. Can we afford the charges that will arise in consequence thereof and carry on the trade to advantage? The freight of dollars from Europe being 1 1/ 2 p. Ct. the Insurance 2 p. Ct. the loss of interest, at least 2 p. cent will create a new charge upon the trade of 5 1/ 2 p. cent; add to this the extreme uncertainty of the supply of silver arriving at the proper time for the East India trade, the ships in which trade, ought always to depart hence between the 1st. of Feby: & 1st. May. Under these circumstances it must be expected that every silver dollar will be exported from the UStates. And it is to be apprehended that a trade exposed to so much difficulty will not be thought worth the pursuit, & if pursued, it will be done with languor. It may be considered doubtful whether the goods will not be purchased cheaper in London at the company sales than in India, charged with the many new expences & difficulties that appear to surround it under this new article. I ever did consider the East India article in Jay’s treaty as injuring our navigation & commerce. 3d article in the New Treaty adds much, very much to that injury, & having been introduced will I fear rivit the evil whether we adopt it or not, for the British, if we insist on expunging it may & probably will effect the same by customhouse regulations. The question will be shall we risk that and their excluding us altogether from their ports in India? Or shall we accept the trade laden with the difficulties imposed by this new system, and incur the odium of having made bad, worse? I presume (but this cannot be reduced to a correct calculation) that the new article would reduce the navigation engaged in the India Trade to one half of the present number of tons. The trade to British India has since Jay’s treaty afforded but a very moderate profit. It is calculated to give on an average, not more than 15 p. ct: annual interest, with our present advantages of all the world at war, our own country at peace. The other provisions in the article appear proper & acceptable. On the whole it appears to me that the British Nation are under as much obligation to us for our commerce, as we are to them for the permission to trade to India; a permission granted by them to the Danes & Portugeze without restriction. I have no data to ascertain the number of dollars annually imported into India by American vessels; that to China in 1803, 1804, & 1805 amounted to $4,837,300, and I should presume that the import to India would be nearly or perhaps equal thereto. If so, It cannot be presumed that the British will loose sight of their interest so much as to exclude a trade producing to them specie to such an amount; without which they will find great difficulty in finding the dollars to pay of their troops. At all events I am decidely of opinion that it will be more to our honor that the India trade should be shut by their custom house regulations than by any admission on our part. The Danish ports of Tranquabar & Salempore having a free commerce with Calcutta & Madrass, may & will become places of deposit, where our ships will find a free trade, & goods on terms less injurious than would arise to us under the 3d. article. I will close my observations on this article by expressing a wish that the East India trade had been placed on the same footing that the West India trade has been by the 6th. article, or what I should prefer that the treaty should be wholly silent on that subject, the trade to depend entirely for its continuance on the mutual advantages deriving to each nation therefrom; being confident they are such to the British in India as will always induce them to recieve our ships on terms at least as favorable as those granted by the former treaty. If no article is introduced in the body of the treaty respecting the India trade, our commerce will probably be carried on with British India in silence as it has been the expiration of Jay’s treaty, & by degrees we may imperceptibly slip into the advantages we have enjoyed prior thereto.

A short view of the trade of the Danish settlements & of the commerce carried on by the Danes & Portugueze with British India may be useful to a due consideration of the subject.

Tranquabar, a Danish settlement, is situated on the Coromandel coast about 165 miles from Madrass. At that port the goods usually shipped from Madrass can be obtained on terms nearly equal to those purchased there, but the mart being larger it is more convenient to obtain a Cargo at the latter place. It however may be believed that if the American demand was transferred to the former, a more abundant market would soon be created. At present immense quantities of goods are shipped from Tranquabar for Manilla, Batavia & the Isle of France, which goods are drawn as well from their own resources, as from the British residencies. A small proportion only of goods for the American commerce is drawn from Madrass & its neighbourhood; the great American demand is for goods generally shipped at Calcutta; distant only twelve miles higher up the river, is Salempore a Danish settlement, from whence goods are shipped on the same terms as those purchased at Calcutta, but cannot be obtained with the same convenience in large quantities. As the Danes purchase freely & without any charge any goods they want at Calcutta, so might Americans if necessary have them transported at an expence not worth mentioning to their ships at Salempore. The Danish ships actually lay at Calcutta & take in their cargoes from both places. If the demand of the U. S. was transferred from Calcutta to Salempore, it would naturally tend to draw the attention of the Black Merchants to that place and would probably in a few years afford a supply equal to the demand. The East India Company draw their goods principally from their residencies made by their own workmen. The goods brough⟨t⟩ to Calcutta for sale are purchased by the black merchants who bring them down the river, passing by Salempore, and deliver them to the wealthy native merchants (they do not sell to the whites) from whom they have the preceding season recieved the money necessary for the usual advances they are under the necessity of making the poor manufacturer: (for these can do nothing without money in advance). It is those wealthy native merchants who provide the cargoes for the Americans trading to Calcutta, and with them an understanding might soon be had, so as, that the goods required should be delivered at Salempore. They have during the war supplied (which, but for Jay’s treaty we should have done) Manilla, the Dutch & the French possessions without restriction, with opium, cotton-goods, silk &c. &c. purchased & shipped at Calcutta to an immense amount, which trade is certainly of great advantage to the British. A vent is thereby created for their manufactures which could not otherwise have been had. It would have been greatly increased if we could have participated therein. Nor has this trade to Salempore been untried. The owners of the ship Kensington of Philada. sent her to Salempore where she took in her cargo with which she sailed for Ostend. On her passage she stopped at St. Helena for water. The Governor seized her, alledging that as sh⟨e⟩ had taken in her cargo in British waters, she was subject to condemnation, under the treaty, which prevented ships of the U. S. from trading direct from British India to Europe. On a trial, the ship & cargo were liberated & the Governor ammersed in a fine that nearly ruined him.

The Portugueze annually carry to Calcutta from one, to two millions of hard dollars, which are invested in cotton-goods, with which they return direct to Lisbon. They are recieved with open arms by the British, are kindly treated, their commerce courted & no restriction imposed upon them. The laws of Portugal compel the ships to return to Lisbon, because the Government draw therefrom a duty of 25 p. ct. and because those goods being principally intended for the Brazil trade, must agreeably to the Colonial system be brought first to the Mother country.

Article 4th.

This article is in the words of the 14th. article of the former treaty. It permits the subjects of G. Britain to settle & carry on trade within the U. S. on equal terms with our own citizens & grants similar privileges to our merchants who may reside in the U. Dominions of G. Britain, but it excludes our citizens from being domiciliated in the Colonies of G Britain; the law of Jamaica compels strangers to employ & pay a heavy commission to their resident merchants. I presume that no mitigation can be expected on this subject.

Article 5th.

This article differs only from the 15th. article of the former treaty, in settling the points respecting discriminating & countervailling duties by admitting that the U. S. may impose on British vessels a tonnage duty equal to that payable by American vessels in British ports, and by repealing all discriminating & countervailling duties heretofore imposed by either. The tonnage provision already enforced by our laws is I conceive right, so far as it goes. Quere, will the words authorize our imposing duties equal to the town & port dues payable by foreign ships entering the ports of G. Britain? If not those, will of themselves be very heavy charges on our navigation, none similar being payable by British ships in our ports.

For a full investigation of the effect that the present discriminating & countervailing duties would have on our navigation in time of Peace, I pray your referrence to the report of the committee of commerce & manufactures made to the House of Representatives in 1802, (copy thereof now enclosed) by which it appears to be proved, that the British have secured to themselves the carriage of all the tobacco, cotton, rice, pot & pearl ashes & that it is believed that the owners of British ships being made certain of a freight of those articles from the U. S. they would willingly accept of half the usual freight payable on dry goods, and thereby the American ships would effectually be excluded in a short time from carrying either to or from G. B. (a short time after peace) for the mutual wants of either country. On the other hand I have no doubt that if the ships of each, are placed on equal terms of expence, that a decided preference will always be given to our own, over the shipping of any other nation. I have no doubt we can carry on terms as low

This article omits to provide against the extraordinary duty imposed by G. B. on goods exported to the U. S. more than that which is imposed on similar goods exported to the Nations of Europe, being at present 4. p. ct. payable by the U. S. when only 1 1/ 2 p. ct. is charged to other Nations. (See the report of the Secty. State). This was certainly understood by the Senate as one of the great objects of the extraordinary mission. If this grievance should not be repealed & completely provided against for the future, I should presume that the Senate could not & would not confirm the treaty. For myself I think it candid to say that I should be unwilling to give my consent to any treaty with any Nation, wherein it was not provided that we should be placed as to export as well as import duties on the footing of the most favored nation. If no such provision shall be made, what will, be the fair construction? We acquiesce, we acknowlege the imposition to be right; if right as to 4. p. ct. where is it to stop? They may, (& if their wants increase) they will increase it to any amount which they may deem safe, & adviseable. As to competition with France in similar goods the precedent in this case will prove to us what they will do by what they have done. This duty began by a convoy tax of 1. p.ct. Peace having taken place it was transformed into an export duty & increased to 4. p.Ct. This oppressive & unjust duty cost the U. S. much more than half a million of dollars per annum.

Article 6th.

This article offers to our citizens no kind of advantage; it ought therefore (for any kind of use it can be to the U. S.) have been left out of the treaty. Not so to the British. It secures to them the present state of the intercourse between their West Indies & the U. S, precludes us from taking any measures tending to promote the employment of our vessels by restriction on their own vessels employed in that trade or by extra duties on their West India products, so as to compel the Islanders to meet our vessels at some intermediate port for the supplies which their Islands will always require from the U. S. We ought not perhaps to attach much importance to this object. It however will serve to shew how well the British understood to provide against even possible injuries to them. They grant us no favor in the W. I. & prevent us from taking any measure of coercion against them.

It does not appear to me that the general provisions concerning the trade between the two countries, can be construed to comprehend the trade between the continental colonies of G. B. & the U. S. Those provisions or stipulations are in the words of the former treaty which has already obtained a construction.

S Smith

DLC: Samuel Smith Papers.

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