H.—l7.

2

and Oriental, and the Orient Pacific Mail Lines at £3 13s. 4d. per ton. Immediately these contracts were accomplished facts I again communicated with the shipping companies interested in the oversea transport of the colony and asked them to reconsider the question of freight on dairy-produce. I am glad to say that the present contract which has two years to run is to be determined and a new contract is being negotiated at reduced rates of freight. I hope the reduced rate will be satisfactory and consistent with the rates obtaining from Australia, as in these days of keen competition the colony cannot afford to let its competitors have- any advantage in the matter of freight if such can possibly be avoided. The question of oversea freight Qn_.p_ro.duce is very important to the well-being of the producers, so much so that in my opinion the most careful supervision should be kept by this Department over all developments, and when the interests of the colony's producers are being inimically affected it should speak with no uncertain sound, and, if necessary, the colony should step in to insure that freights from New Zealand be maintained at reasonable rates. The subsidised service to South Africa has been carried on regularly during the past year, shipments of produce to a considerable extent having been made. The present contract terminates during October next, and I have no intimation in the meantime from the contractors as to whether it is their intention to continue the service after the termination of the present contract. I have always hoped that with the assistance of the three-years contract and subsidy that the colony's trade with South Africa would have developed to such an extent that the steamship company would have been warranted in continuing the service without any further assistance from the colony. The discontinuation of the service would be a heavy loss to the producers of the colony and to those enterprising traders who have built up trade with South Africa by this [opportunity, as it has given them the advantages of a new market. In these days of keen competition we cannot afford to neglect any available market, however small, and it should be our policy to encourage and promote steam services in every possible direction. One must remember that any diversion of the colony's produce into new markets is followed by a general appreciation of the whole. Compared with our Australian neighbours we are at a great disadvantage in the matter of oversea freights on produce. We are paying in almost every instance from 25 to 50 per cent, more freight, and the reason of it is that their business is competed for by a number of different steamship lines. As shewing what the results of competitive over-sea freights are, one has only to note the growth of the trade from the United States of America to New Zealand during the past five years, which is undoubtedly due to the competitive rates of freights that have prevailed during that period. New York freights have ruled at about 12s. 6d. per ton for all classes of cargo, while rates on simiW goods from London to this colony have ranged from 255. t0,605. per ton. This presents a most undesirable condition of affairs, and militates against the benefits that should be derived under the preferential tariff. The whole question of the rates of freight ruling from New Zealand to London on wool, frozen meats, and dairy produce is of the utmost importance to the colony. The steam services to and from the west-coast ports of the United Kingdom have developed trade both ways in a most satisfactory manner, and some very large shipments of this colony's produce have been made to markets that have hitherto not been avaliable to New Zealand except by indirect means. As far as one can judge, the time is not far off when the trade promoted by this steam service will assume such dimension as will warrant the contractors supplying a direct service, and not, as at present, via South Africa. Should that possibility become an accomplished fact, I look forward with confidence to a still greater increase in the volume of business now being done. The contractors for this service in response to a representation from me to consider the question of freight on butter to the westcoast ports of England signified their intention to reduce the present rate of freight from fd. per pound to fd. per pound. If, in addition to this reduction in freight, direct sailings to the west-coast ports are provided, there seems every probability of a very large share of the export of dairy-produce finding its way. out of the colony at greater reduced rates than hitherto prevailed. Should this reduction in freight on bvitter from the colony to the west-coast ports of the United Kingdom become general it will mean a saving of freight on the colony's output of butter to the extent of £60,000 per annum, and it means placing this colony on the same footing regarding freight on butter as is enjoyed by our Australian neighbours. This is as it should be, as there is no valid reason why this colony should pay any higher rates of freight on produce than those obtaining in Australia. I am again forced to draw attention to the slowness of the development of our trade with the Far East. The principal drawback to progress being the fact that all the steamship lines trading to and from that part of the world do not extend their services beyond Australia, and with this disadvantage we are unable to compete with Australia, and participate in the trade. There are now several lines of well-equipped steamers running regularly between Australia and Japan, calling at Manila and Hongkong, and in my opinion as soon as the present excitement in the East is over and business resumes its normal channels, we must make overtures to one or more of these shipping companies to extend their services to this colony. Once we have a line of steamers connecting with the markets of Japan, China, and Manila, I am convinced we shall find a satisfactory outlet for a portion of almost everything this colony produces. I had hoped to be able, in making this report, to make a satisfactory announcement of the establishment of a steam cargo service to and from the western ports of Canada, but, although both Canada and New Zealand have expressed their willingness to contribute £10,000 per annum each for one year towards the establishment of such a service, nothing of a satisfactory nature has been so far arranged. lam of the opinion that some vigorous policy should be adopted with the object of promoting trade and interchange with Canada. At the present time our annual imports from the United States of America amount in value to £1,528,000, while from Canada and British Columbia our annual imports amount to only £113,000. This discrepancy should not exist, because the manufacturing conditions are much the same in both countries, but the United States of America has the