SAN FRANCISCO MAIL SERVICE

27

E.—No. 2

No. 13. The Hon. C. Gavan Duffy to the Hon. J. Vogel, Sic,— Chief Secretary's Office, Melbourne, 29th February, 1872. I have the honor to acknowledge your letter of the 27th instant, containing a proposal of terms on which Victoria is invited to join New Zealand in subsidizing Mr. Webb's line of steamers from San Francisco. This Government are not at all disposed to undervalue the advantage of direct communication with the United States for commercial purposes, or even for postal purposes, though this advantage is less certain ; nor do they deny the claim New Zealand has upon this colony for friendly aid in the attempt she has made to establish such communication. We will be quite willing to consider the basis of an agreement between the colonies, and to debate it, in a personal interview with Mr. Webb and yourself, on one condition, but that condition is a sine qua non —that the main steamers shall come to Melbourne. We do not consider a branch service, such as you propose, one worth paying a subsidy for, or which would or ought to satisfy the wants of the principal city in Australasia. Should you be disposed to negotiate on the basis which I have indicated, we will be happy to consider your suggestion as to obtaining better terms from the Imperial Government, which ought, we think, to bear a moiety of the expenditure of any line accepted by the principal colonies. I have, &c, The Hon. Julius Vogel. C. Gavan Duefy.

No. 14 I The Hon. J. Vogel to the Hon. C. Gavan Dufey. Sir,— Melbourne, 2nd March, 1872. I have carefully considered the objections to the proposal 1 have made to you, contained in your letter of the 29th ult., as also those urged at the interview' I had with you and your colleagues ; and, after discussing the whole subject with Mr. Webb, I have agreed with that gentleman to make you a proposal which would substantially amount to your entering into a contract with Mr. Webb, jointly and upon an equal footing with New Zealand. In order to do this, an arrangement must be made by which, so to speak, the colonies would share the terminus of the line, which may, I think, be effected in the following manner: — I propose that a fourth main-service boat shall be provided ; that the steamers leaving San Francisco shall proceed to Melbourne by way of Auckland ; and that the steamers leaving Port Chalmers shall proceed to San Francisco also by way of Auckland. One of the main-service boats would have to await at Auckland the arrival of the boat to or from San Francisco, and to tranship at once for Melbourne or Port Chalmers, as the case might be. Thus, a steamer would leave San Francisco, and on reaching Auckland would tranship to the boat waiting there to proceed to Port Chalmers; and the boat from San Francisco would proceed to Melbourne. On the route to San Francisco, the vessel from Port Chalmers would proceed through to San Francisco, meeting at Auckland the boat from Melbourne. By this plan, the whole of the four boats would regularly visit Melbourne and Port Chalmers. The boats from San Francisco would proceed to Melbourne without transhipment of passengers or freight for that port, whilst the boats from Port Chalmers would proceed to San Francisco without the New Zealand passengers or freight having to be transhipped. As the whole journey, in either case, would be performed by main-service boats, I am of opinion that, to all intents and purposes, the passengers in each case would look upon the service as a direct one, and the inconvenience of occasional transhipment would be very trifling. In respect to freight, shippers would have no concern with the transhipment, since it would be made from one of Mr. Webb's vessels to another, at the expense of tho contractors. There would not be tho inconvenience of transhipment from large to smaller vessels, as is frequently the case with two of the principal ocean lines in the world —the Peninsular and Oriental Company and the Eoyal Mail Steam Company's vessels. I have supposed that the steamer from San Francisco would proceed through to Melbourne, and that the steamer from Port Chalmers would proceed through to San Francisco. I should certainly prefer such being the arrangement; but, it is possible that you may desire that the steamer from Melbourne should proceed through to San Francisco, and that the vessel arriving at Auckland from San Francisco should proceed to Port Chalmers. Should it prove that, in respect to this point, each of us wishes the same thing for his colony, the course that suggests itself is, that each colony should have the benefit of that arrangement for six months during the year, or that each should have it in alternate years. There would be no difficulty in such a course : in fact, when the boats met at Auckland, it would be easy to arrange which should proceed to Melbourne, which to Port Chalmers, and which to San Francisco. I am of opinion that the arrangement I nowr propose will meet the objection that you would not be willing to subsidize any service which did not give you the use of the main boats. Not only will the proposed arrangement give you the use of the main boats, but Victoria will enjoy, equally with New Zealand, the advantage of being the terminus of the line. As far as passengers and freight are concerned, I am of opinion Mr. Webb's arrangements will be so effective, that those who use the line, whether in New Zealand or in Victoria, will fail to perceive anything short of the advantages of direct communication and of the terminus of the line. With respect to terms, I have arranged with Mr. Webb to make you the following offer: —That Victoria and New Zealand shall each pay him £30,000 per annum, and each receive one-third of the amount of any subsidies obtained from other colonies, after deducting the necessary payments for branch services to connect those other colonies with the main service : Mr. Webb to have the remaining one-third. That is to say, supposing it to be arranged that New South Wales shall pay