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The trade with the east coast of South America, comprising the ports of Brazil, Uruguay, and the Argentine Republic, is almost all conveyed in steamers, and follows the line indicated above in No. 5.

The trade with British India is about equally divided between sailing and steam-ships. All the former and a portion of the latter, comprising together three-fifths of the whole trade, go round the Cape of Good Hope; the remaining two-fifths take the Suez Canal route.

The trade with the Straits Settlements, China, Japan, Ceylon, Java, and the Philippine · Islands, though almost all conveyed in steamers, is also divided between the two last-mentioned routes in about the proportion of three-fifths to the Cape of Good Hope route, and two-fifths to the Suez Canal.

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The greater part of the trade with China, Japan, Java, and the Phillipine Islands passes through the Straits of Malacca. The trade of the Straits Settlements, whether with the United Kingdom or with foreign countries, also passes through these Straits. Westward of the Straits the trade divides; part of it passing to the Cape of Good Hope by Mauritius, and the rest to the Suez Canal by Ceylon.

The bulk of the outward-bound trade with Australia goes round the Cape of Good Hope, and is equally divided between sailing and steam-ships. The former, with few exceptions return home by Cape Horn, the latter by the Suez Canal. It may, therefore, be assumed that half the homeward-bound trade goes each way. The steam homeward trade passes Cape Leeuwin and proceeds direct to Aden, passing the Chagos Archipelago on the way.

Between the Cape of Good Hope and England the stream of trade passes without touching the Islands of St. Helena and Ascension, but converges at the Cape de Verde Islands, and unites with the Mediterranean trade off the coast of Portugal.

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The trade with the West Coast of Africa is conveyed in steamers, and between Cape de Verde and England follows the line already traced for the trade rounding the Cape of Good Hope.

We have thus attempted to give a general view of the directions of the main lines of trade: but it must be remembered that these lines are not followed equally at all times of year, nor in the same degree by steamers and sailing-ships.

One event which may be reasonably looked for within ten years will materially alter the course of British trade. The opening of a canal through the Isthmus of Panama will probably draw the whole of the trade which now passes round Cape Horn to Panama, whence it will take the direct route via the West Indies. It consists of—

The trade with the United States on the Pacific. Trade with the west coast of South America. Half homeward trade with Australia.

At present this trade is mainly carried on in sailing-ships, but it can hardly be doubted that, by the time the canal is completed, it will be largely carried on in steamers. The construction of the canal will probably tend to promote the change from sailing-ships to steamers.

It is considered by some that part of the outward-bound Australian trade, which now takes the Cape of Good Hope route, would go viâ Panama, the advantages of the two routes being very evenly balanced, But whatever may be the effect of this canal upon the route via the Cape of Good Hope, it will almost extinguish the trade round Cape Horn, while the importance of the West Indian line will be proportionately increased.

Another contingency to be borne in mind is the completion of the Canadian Pacific Railroad With increased facilities of transport, it and other lines across the North American Continent. is not improbable that part of the China trade may be directed that way.

There is another event which may not improbably occur in time of war, and would have a very important bearing upon the lines of trade. This is the closing of the Suez Canal, or the hostile occupation of the Mediterranean, which would, as we have observed elsewhere, divert the trade which now uses the Canal to the Cape of Good Hope route.

It has been shown that out of the entire trade of British possessions, amounting in all to 367,000,000, about one-half is with the United Kingdom. The other half is their trade with each other and with foreign countries.

(Signed)

September 3, 1881.

HERBERT JEKYLL, Secretary.

(Signed)

CARNARVON. CAMPERDOWN.

H. T. HOLLAND. ALEX. MILNE.

J. L. A. SIMMONS.

HENRY BARKLY.

SAM. WHITBREAD.

R. G. C. HAMILTON.

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Second Report of the Royal Commissioners appointed to inquire into the Defence of British Possessions and Commerce abroad.

I. THE DUTIES OF THE NAVY.

IN the present report we think it desirable, in the first place, to submit to your Majesty some observations upon the general question of the duties devolving upon your Majesty's navy; and such indication as we consider it within the scope of our Commission to make, with reference to the strength at which that navy should be maintained.

In the first report which we humbly laid before your Majesty, we pointed out the amount of property at stake in the sea-borne commerce of the United Kingdom and the Colonies, and stated that probably 900,000,000% would not be too high an estimate of the value of British ships and of the freights they carry annually; and that British property to the value of 144,000,000l. is at all times afloat, the greater part being on distant voyages. It is obvious that upon the outbreak of war this property would be exposed to great risk. Any measures, therefore, adopted for its protection should be of such a nature and so organized as to be immediately available.

The risk may be from two sources:

(1.) From an enemy's ships ready to sail from his home ports; or

(2.) From ships engaged at the time in their ordinary service on foreign stations, or dispatched beforehand to distant Colonies or neutral ports in readiness for immediate action on the declaration of war.

Extemporised defences, armed with comparatively light guns, have been erected since 1878 at some of our Colonial ports, and more permanent works have been commenced at others, but Singapore, Hong Kong, the ports of India, Ceylon, and, with rare exceptions, those in Australasia, in North America, and in the West Indies, are still without adequate means of defence.

It would not be safe to reckon upon being able to observe the ships of a foreign Power, and to know the objects of movements which, in the anticipation of war, may be in actual process of execution; and it must be borne in mind, as we stated in our first Report, that there is great risk, on the outbreak of war, of important and well known lines of submarine telegraph being cut, so that dependence could not be placed upon such lines in time of war for obtaining information of movements of an enemy's ships or for the transmission of orders. This and the consideration that, in the opinion of naval authorities, the use of steam will render it impossible to maintain a really effective blockade as in former times, points to the necessity of maintaining not only a fleet sufficient in number and in power to give absolute security to the sea-board of the United Kingdom, but also powerful and fast vessels so stationed as to be ready at the commencement of hostilities to deal with the enemy's ships in more distant seas.

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Unlike nations which have land frontiers, Great Britain can only carry on her commerce with other countries by sea; and the defence of that commerce, upon which our populations depend not only for employment but for food, is essentially a question of naval supremacy. This is also the case to a great extent as regards your Majesty's possessions abroad, and their commerce. is, therefore, in the true interest of the Empire at large that adequate preparation should be made during peace for maintaining this supremacy, which must depend primarily on the sufficiency in number and in the fighting power of the ships of your Majesty's navy to perform the various duties required of them, and secondly on the strategy displayed in their employment. Taking the second point for the sake of convenience first, we believe that the strategy by which a naval force is to obtain the command of a given sea will resolve itself very much into a question of coal supply, and how best to deprive the enemy of his supplies, while securing ample supplies for our own ships.

An enemy could obtain coal-

(a.) In his own ports or in those of an ally.

(6.) In the ports of a neutral State.

(c) By seizing it in the ports of your Majesty's dominions or in captured trading vessels.

(d) By supply from colliers at sea sent on to prearranged rendezvous,

(350)

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