transportation and exportation of goods, wares, and merchandise in bond to Mexico overland, or by inland waters, and for other purposes, which was referred to the joint Select Committee on Retrenchment. That committee reported favorably to the Senate Mr. Patterson's bill on May 16, 1870. The report was presented by Mr. Patterson himself, and shows a complete misunderstanding of the case. It repeats the charges made by Mr. Belden, Mr. Downey and others, giving them, on account of Mr. Patterson's position, a great deal more importance than they had before. It assumes that the establishment

of the Free Zone in Mexico was a hostile act against the United States, decreed for the purpose of defrauding her revenues, that the Mexican Government had sympathized with the rebellion, and had, for the purpose of assisting it, altered her revenue laws, with a view to allowing contraband trade through Mexican territory; both statements being entirely incorrect.

The idea that the Mexican Government sympathized with the socalled Southern Confederacy and assisted it materially is simply preposterous, as everybody knows that Louis Napoleon, availing himself of the civil war in the United States, tried to establish an European empire in Mexico, with the ultimate purpose of acquiring a foothold in that country, and the Mexican people and the Mexican Government were therefore as anxious as the most patriotic of the Union men in this country to have the Union restored, if for no other reason than to obtain the restoration of the republic in Mexico, and the soundness of these views was fully confirmed by the subsequent facts.

I have reviewed carefully all the laws and regulations issued by the Federal Government of Mexico from 1861 to 1865, while the civil war lasted in the United States, and the only act that I find concerning either cotton or commerce with the Southern States, is one issued by President Juarez, under extraordinary powers at San Luis Potosi, on July 28, 1863, for the purpose of establishing an additional duty of one cent per pound on national, and two cents per pound on foreign. raw cotton, to be paid at the place of consumption; and that duty, far from being a discrimination in favor of the Confederates, was, in the nature of things, a heavy tax on their principal product.

Under the regulations of the Free Zone, all goods that came to the United States to ports or places in Mexico north of parallel twenty-three degrees thirty minutes north latitude, or the cancellation of bonds given for the exportation and landing of goods, wares, and merchandise at such ports and places be, and the same are hereby repealed; and all authority to issue certificates in respect to the landing and delivery of goods, wares, and merchandise, conferred by law upon merchants and consuls of the United States resident at places in Mexico north of said parallel, is hereby revoked."

Passed the Senate without amendment, June 9, 1870, but failed in the House of Representatives.

same were free of import duties, and only paid them when they were taken outside of the Free Zone to be imported into Mexico. Any cotton imported into Mexico from the United States or from any other country, therefore, which did not go outside of the limits of the Free Zone, was not liable to the payment of duties, and could be freely exported. General Vidaurri, who in 1861 was the Governor and Military Commandant of the State of Nuevo Leon, with authority over Coahuila and Tamaulipas, issued an order, on April 5, 1862, levying transit duties of one cent per pound upon all cotton which had come free of duty to the Free Zone and was re-exported from the same.' The only object of General Vidaurri was, of course, to obtain revenue for his state government, and not to assist in the exportation of cotton through the Mexican frontier. If anybody had any right to complain of that duty it was the officials and the people of the so-called Confederate States, as the duty was a charge upon their main product, which at the time had a very high price, and was almost their only export abroad. I understand that even that duty was later increased to 1 cents per pound, but I have not been able to find the act establishing that increase.

Senator Patterson could not have understood fully the nature of the Free Zone and the conditions of the case, as otherwise I do not think he would have found fault with the Mexican officials for not forbidding the export of foreign cotton through Mexican ports. As no international law or act of comity could prevent the transit of such merchandise through Mexico, for the sole reason that the Southern States of this country had rebelled against the Federal Government, the Government of Mexico could not close its ports to the exportation of goods from the Southern States; and to do so, would have been equivalent to an alliance with the United States against the Southern States, and although the Federal Government of Mexico desired at heart the success of the Union, especially for the reason that its success

1 I give below the order of General Vidaurri which created a tax on foreign cotton exported from Matamoros :

"MILITARY DEPARTMENT OF TAMAULIPAS.

"Taking into consideration the increased expenses that have to be incurred by merchants dealing in cotton who bring this article in order to re-export it, and it being desirable to increase, if possible, the arrival at this port of merchant vessels, I have deemed it proper to grant, in view of the petition presented for such purpose by the American citizen, J. A. Quintero, that hereafter all cotton imported to be re-exported shall pay as the only and entire duty the sum of one dollar per quintal or hundredweight. I communicate the same to you so that it may be duly complied with, and I renew you the assurances of my esteem.

"God and Liberty. MONTEREY, April 5, 1862.

"To the Citizen Collector of the Maritime and Frontier Custom-House of Matamoros."

"(Signed) SANTIAGO VIDAURRI,

insured the prompt end of the French intervention in Mexico, it would not have been justified in taking that step.

Senator Patterson's Bill, reported favorably and without amendment by the Joint Committee on Retrenchment, on May 16, 1870,' passed the Senate without amendment, on June 9, 1870. In the House of

1 Forty-first Congress, 2d Session. Senate Report No. 166. In the Senate of the United States, May 16, 1870. Ordered to be printed. Mr. Patterson made the following report. (To accompany Bill S. No. 783.)

The Joint Select Committee on Retrenchment, to whom was referred Senate bill No. 783, 'to repeal all existing laws authorizing the transportation and exportation of goods, wares, and merchandise in bond to Mexico overland, or by inland waters, and for other purposes,' having considered the same, respectfully submit the following report:

"The object of the bill is to protect, so far as it can be done by legislation on our part, the revenue of the United States and the interests of our frontier bordering on the Rio Grande from the losses and injuries resulting from the facilities for smuggling afforded by the laws which it is proposed to repeal, and by the existence of the Zona Libre, or Free Belt, on the Mexican side of the Rio Grande.

"Prior to 1858 the American towns enjoyed greater commercial advantages and were much more thrifty and populous than their Mexican neighbors on the opposite side of the river.

"By the act of August 30, 1852, the transportation to Mexico of goods in bond was permitted by certain routes specified in the act, and by such others as the Secretary of the Treasury might prescribe. This enabled American merchants to store larger quantities of goods in our bonded warehouses, until a favorable opportunity arrived to withdraw them for consumption or for exportation in bond to Mexico.

"It is simply an impossibility to prevent smuggling on such a line as that formed by the Rio Grande, so long as a sufficient inducement to smuggle exists, and doubtless, at that time, there was considerable smuggling from the American side of the river, to the detriment of the revenue of Mexico and the legitimate commerce of her merchants, who were unable to compete successfully with those whose goods had paid only the lower rate of duty then required at the American ports, or having been exported from the United States in bond and smuggled into Mexico, had escaped payment of duties to either nation.

"On the 28th day of December, 1857, the legislature of the State of Tamaulipas passed an act creating the Zona Libre, which was promulgated March 17, 1858, by decree of Ramon Guerra, then provisional governor of Tamaulipas. The immense amount of smuggling on the Rio Grande, and the necessity for the repeal of our laws authorizing the exportation of goods in bond to Mexico, are mainly in consequence of

that act.

"As the Zona Libre promises to be a matter of considerable interest to the country, we give the decree, establishing it in full in the appendix to this report; also the testimony of competent witnesses showing its effects on our revenue and the prosperity of the frontier.

"The object of the act is clearly shown in the preamble, where it is recited that the villages on the northern frontier are found in a really ruinous state,' and that the decree is issued that they may not be entirely depopulated by emigration to the neighboring country.'

"By the first article of the decree foreign goods are admitted to Matamoros and other towns in the State of Tamaulipas on the Rio Grande, free of duty, except such

Representatives it was referred to the Committee on Commerce, but it was not reported by that Committee, and consequently failed.

Senator Reagan, from Texas, following in the footsteps of Senator as might be imposed for local purposes, which were mainly municipal and trifling in

amount.

"Article second invites merchants established on the American bank of the river to transfer their business and effects to the other side, and grants special facilities and privileges for doing so. The other articles are mainly occupied with the regulations for the transfer of merchandise from the Zona Libre to the interior of Mexico.

"That the result of this decree was not unanticipated by its authors is clearly shown in Article eighth, in which the inhabitants are invoked to impede, by every means in their power, the conversion of this benefit granted to them into a shameless contraband traffic.'

"The purpose of the act was evidently to build up the Mexican towns at the expense of their American neighbors, which was to be accomplished by furnishing to smugglers, for hundreds of miles along a frontier that it is impossible to guard, a safe and convenient place of deposit for goods which they received free of duty, until a convenient opportunity should occur to smuggle them into the United States. The inevitable result was the destruction of the commerce and prosperity of the American towns, and great frauds, estimated at from $2,000,000 to $6,000,000 per annum, on the revenue of the United States.

"The general government of Mexico hesitated to approve an act so hostile to the interests of a friendly nation; and it was not until July 30, 1861, when Texas was in the possession of the so-called Confederate States, to whom the Zona Libre would be of great advantage, that it received the sanction of President Juarez.

66

During the war the towns of the Zona Libre furnished free ports of entry for the Confederates, through which they exported their cotton, and received in return large supplies of arms and other munitions of war. The Mexican Government, while professing friendship for the United States, sympathized with the rebels, and aided them by every means in its power. It modified its customs regulations so as to facilitate the exportation of cotton and the return of war material; and while the Confederate ports were blockaded by our cruisers, permitted merchandise and munitions of war, imported into the Zona Libre, to be transferred to the Confederacy at one-fourth the rate of duty required on the same articles when shipped to other countries, or even taken to other places in Mexico. Under the guise of friendship and neutrality the Mexican Government did us more harm during the late war than it could have done if openly hostile; for in that case we could have easily blockaded the mouth of the Rio Grande, and have completely cut off that great source of Confederate supplies.

"Since the close of the war the Zona Libre has served as a base from which smuggling into the United States can be safely carried on. The American towns have decayed, and the Mexican towns have flourished in proportion, so that instead of being in a 'really ruinous state,' and liable to be entirely depopulated by emigration to the neighboring country,' as they were in 1858, they contained in 1868 a population more than three times as large as that of their American neighbors, that ten years before were threatening to absorb them. Honest merchants, unable to compete with the smugglers, have been compelled to abandon the country or to engage in illicit trade themselves, and the whole community on both sides of the river has become so thoroughly demoralized that smuggling is generally considered a legitimate and honorable business. The desperate characters whom this condition of things has attracted or created, plunder private citizens as well as defraud the government, and frequently make raids into Texas and drive large herds of cattle across the river into Mexico. It

Patterson, introduced in the Senate of the United States, on January 6, 1890, a Bill to prevent the transportation of merchandise in bond is estimated by well-informed men that the loss by these raids is sometimes as high as two hundred thousand head a year.

The prosperity of the whole frontier is paralyzed by the existence of the Zona Libre. The revenue of Mexico suffers as well as our own. By the decree of Ramon Guerra, only goods consumed in the Zona Libre were exempted from duty; but, although the importations exceed many times the amount that can be consumed by the population of that territory, the custom-houses collect barely enough to pay their own

expenses.

'The Secretary of the Treasury of Mexico, in his Report, published in the fall of 1869, says:

***Another of the causes which have contributed most powerfully to diminish the product of the public rents, and especially that of importation duties, has been the institution of the Free Zone, enjoyed by the frontier of Tamaulipas. The establishment of this institution, owing in the beginning to the desire of favoring the frontier population of Tamaulipas, constitutes an exception which can with difficulty be sustained according to good economical principles, and which has given and will still give margin for abuses and frauds of importance by which suffer greatly the commerce of good faith and the Federal exchequer.'

"

'Soon after the restoration of order, the attention of the Mexican Government was called to the injuries resulting to both countries from the existence of the Zona Libre, and to the unfriendly spirit shown by enacting for the territory bordering on our frontier different customs regulations from those which existed in other parts of the country, by which the enforcement of our laws and the prevention of frauds on our revenue were made impossible. The President and heads of the executive departments admitted the justice of our complaints, and gave reason to hope that the decree establishing the Zona Libre would be abrogated at the next session of Congress. No action was taken by the Mexican Congress until December last, when, instead of abrogating the decree, they extended it so as to include the States of Nuevo Leon and Coahuila.

"The following extract from an article which appeared in La Cronica, March 18, 1870, and which it is understood was written by a distinguished member of the Mexican Congress, will show the spirit in which this extension was made and the manner in which the Zona Libre is regarded by the enlightened statesmen of Mexico:

"The newspapers of the United States are full of complaints against the institution of the Free Zone on our northern frontier. The evils resulting therefrom to the treasury and the commerce of their country are serious, and they denounce the measure as contrary to the reciprocity which should exist between the two countries. For ourselves, from the time the establishment of the Free Zone was discussed in Congress, it never seemed to us a measure favorable to the interests of Mexico, and we believed further that it would tend to destroy the relations of friendship existing between the two nations.

"We remember that Congress was deluded by the assurance that the institution of the Free Zone injured the commerce of the United States, and for this reason favored the interests of Mexico. We admit the former proposition, but are far from expecting that the latter will prove true. We do believe, after having studied the question, that the Free Zone injures both nations; the United States, because all that frontier being a free port, the merchants of the American side will come to our territory to store their goods, and watch for an opportunity to introduce them in a clandestine manner into Texas. Thus Mexico will be in the position of a person who injures himself and at the same time injures his neighbor.