A grant has been given to Europeans of an exclusive right of transit over the territory of Nicaragua, to which Costa Rica has given its assent, which, it is alleged, conflicts with vested rights of citizens of the United States. The Department of State has now this subject under consideration.

a congress has been invited to be held in Wash- | rejecting the treaty, to have been wisely taken ington during the present winter. in the interest of peace, and as a necessary step in the direction of a perfect and cordial friendship between the two countries. A sensitive people, conscious of their power, are more at ease under a great wrong, wholly unatoned, than under the restraint of a settlement which satisfies neither their ideas of justice nor their grave sense of the grievance they have sustained. The rejection of the treaty was followed by a state of public feeling, on both sides, which I thought not favorable to an immediate attempt at renewed negotiations. I accordingly so instructed the minister of the United States to Great Britain, and found that my views in this regard were shared by her majesty's ministers. I hope that the time may soon arrive when the two governments can approach the solution of this momen- ( tous question with an appreciation of what is

The minister of Peru having made representations that there was a state of war between Peru and Spain, and that Spain was constructing, in and near New York, thirty gunboats, which might be used by Spain in such a way as to relieve the naval force at Cuba, so as to operate against Peru, orders were given to prevent their departure. No further steps having been taken by the representative of the Peruvian government to prevent the departure of these vessels, and I not feeling authorized to detain the prop-due to the rights, dignity, and honor of each, erty of a nation with which we are at peace on a mere executive order, the matter has been referred to the courts to decide.

Toward the close of the last administration a convention was signed at London for the settlement of all outstanding claims between Great Britain and the United States, which failed to receive the advice and consent of the Senate to its ratification. The time and the circumstances attending the negotiation of that treaty were unfavorable to its acceptance by the people of the United States, and its provisions were wholly inadequate for the settlement of the grave wrongs that had been sustained by this Government as well as by its citizens. The injuries resulting to the United States by reason of the course adopted by Great Britain during our late civil war, in the increased rates of insurance, in the diminution of exports and imports, and other obstructions to domestic industry and production, in its effect upon the foreign commerce of the country, in the decrease and transfer to Great Britain of our commercial marine, in the prolongation of the war and the increased cost (both in treasure and in lives) of its suppression, could not be adjusted and satisfied as ordinary commercial claims, which continually arise between commercial nations. And yet the convention treated them simply as such ordinary claims, from which they differ more widely in the gravity of their character than in the magnitude of their amount, great even as is that difference. Not a word was found in the treaty, and not an inference could be drawn from it, to remove the sense of the unfriendliness of the course of Great Britain in our struggle for existence, which had so deeply and universally impressed itself upon the people of this country.

Believing that a convention thus misconceived in its scope and inadequate in its provisions would not have produced the hearty, cordial settlement of pending questions, which alone is consistent with the relations which I desire to have firmly established between the United States and Great Britian, I regarded the action of the Senate, in

and with the determination not only to remove the causes of complaint in the past, but to lay the foundation of a broad principle of public law, which will prevent future differences and tend to firm and continued peace and friendship. This is now the only grave question which the United States has with any foreign nation.

The question of renewing a treaty for reciprocal trade between the United States and the British provinces on this continent has not been favorably considered by the administration. The advantages of such a treaty would be wholly in favor of the British producer. Except, possibly, a few engaged in the trade between the two sections, no citizen of the United States would be benefited by reciprocity. Our internal taxation would prove a protection to the British producer, almost equal to the protection which our manufacturers now receive from the tariff. Some arrangement however, for the regulation of commercial intercourse between the United States and the Dominion of Canada may be desirable.

The commission for adjusting the claims of the "Hudson's Bay and Puget Sound Agricultural Company" upon the United States has terminated its labors. The award of $650,000 has been made, and all rights and titles of the company on the territory of the United States have been extinguished. Deeds for the property of the company have been delivered. An appropriation by Congress to meet this sum is asked.

The commissioners for determining the northwestern land boundary between the United States and the British possessions, under the treaty of 1856, have completed their labors, and the commission has been dissolved.

In conformity with the recommendation of Congress, a proposition was early made to the British government to abolish the mixed courts created under the treaty of April 7, 1862, for the suppression of the slave trade. The subject is still under negotiation.

It having come to my knowledge that a corporate company, organized under British laws, proposed to land upon the shores of the United States and to operate there a submarine cable, under a concession from his majesty the emperor of the French, of an exclusive right, for twenty years, of telegraphic communication between the shores of France and the United States,

with the very objectionable feature of subjecting gers, to which no response had been given. It all messages conveyed thereby to the scrutiny was concluded that, to be effectual, all the mariand control of the French government, I caused, time powers engaged in the trade should join in the French and British legations at Washington such a measure. Invitations have been extended to be made acquainted with the probable policy to the cabinets of London, Paris, Florence, Berof Congress on this subject, as foreshadowed by lin, Brussels, The Hague, Copenhagen, and Stockthe bill which passed the Senate in March last. holm, to empower their representatives at WashThis drew from the representatives of the com-ington to simultaneously enter into negotiations, pany an agreement to accept, as the basis of and to conclude with the United States conventheir operations, the provisions of that bill, or of tions identical in form, making uniform regulasuch other enactment on the subject as might be tions as to the construction of the parts of vessels passed during the approaching session of Con- to be devoted to the use of emigrant passengers, gress; also, to use their influence to secure from as to the quality and quantity of food, as to the the French government a modification of their medical treatment of the sick, and as to the rules concession, so as to permit the landing upon to be observed during the voyage, in order to French soil of any cable belonging to any com- secure ventilation, to promote health, to prevent pany incorporated by the authority of the United intrusion, and to protect the females, and providStates or of any State in the Union, and, on ing for the establishment of tribunals in the sevtheir part, not to oppose the establishment of, eral countries for enforcing such regulations by any such cable. In consideration of this agree- summary process. ment, I directed the withdrawal of all opposition by the United States authorities to the landing of the cable, and to the working of it, until the meeting of Congress. I regret to say that there has been no modification made in the company's concession, nor, so far as I can learn, have they attempted to secure one. Their concession excludes the capital and the citizens of the United States from competition upon the shores of France. I recommend legislation to protect the rights of citizens of the United States, as well as the dignity and sovereignty of the nation, against such an assumption I shall also endeavor to secure by negotiation an abandonment of the principle of monopolies in ocean telegraphic cables. Copies of this correspondence are herewith furnished.

The unsettled political condition of other countries, less fortunate than our own, sometimes induces their citizens to come to the United States for the sole purpose of becoming naturalized. Having secured this, they return to their native country and reside there, without disclosing their change of allegiance. They accept official positions of trust or honor, which can only be held by citizens of their native land; they journey under passports describing them as such citizens; and it is only when civil discord, after perhaps years of quiet, threatens their persons or their property, or when their native State drafts them into its military service, that the fact of their change of allegiance is made known. They reside permanently away from the United States, they contribute nothing to its revenues, they avoid the duties of its citizenship, and they only make themselves known by a claim of protection. I have directed the diplomatic and consular officers of the United States to scrutinize carefully all such claims for protection. The citizen of the United States, whether native or adopted, who discharges his duty to his country, is entitled to its complete protection. While I have a voice in the direction of affairs, I shall not consent to imperil this sacred right by conferring it upon fictitious or fraudulent claimants.

On the accession of the present administration it was found that the minister for North Germany had made propositions for the negotiation of a convention for the protection of emigrant passen

Your attention is respectfully called to the law regulating the tariff on Russian hemp, and to the question whether, to fix the charges on Russian hemp higher than they are fixed upon Manilla, is not a violation of our treaty with Russia, placing her products upon the same footing with those of the most favored nations.

Our manufactures are increasing with wonderful rapidity under the encouragement which they now receive. With the improvements in machinery already effected and still increasing, causing machinery to take the place of skilled labor to a large extent, our imports of many articles must fall off largely within a very few years. Fortunately, too, manufactures are not confined to a few localities, as formerly, and it is to be hoped will become more and more diffused, making the interest in them equal in all sections. They give employment and support to hundreds of thousands of people at home, and retain with us the means which otherwise would be shipped abroad. The extension of railroads in Europe and the East is bringing into competition with our agricultural products like products of other countries. Self-interest, if not self-preservation, therefore, dictates caution against disturbing any industrial interest of the country. It teaches us also the necessity of looking to other markets for the sale of our surplus. Our neighbors south of us, and China and Japan, should receive our special attention. It will be the endeavor of the administration to cultivate such relations with all these nations as to entitle us to their confidence, and make it their interest as well as ours to establish better commercial relations.

Through the agency of a more enlightened policy than that heretofore pursued toward China, largely due to the sagacity and efforts of one of our own distinguished citizens, the world is about to commence largely-increased relations with that populous and hitherto exclusive nation. As the United States have been the initiators in this new policy, so they should be the most earnest in showing their good faith in making it a success. In this connection I advise such legislation as will forever preclude the enslavement of the Chinese upon our soil under the name of coolies, and also prevent American vessels from engaging in the transportation of coolies to any coun

On my assuming the responsible duties of Chief Magistrate of the United States, it was with the conviction that three things were essential to its peace, prosperity, and fullest development. First among these is strict integrity in fulfilling all our obligations. Second, to secure protection to the person and property of the citizen of the United States in each and every portion of our common country, wherever he may choose to move, without reference to original nationality, religion, color, or politics, demanding of him only obedience to the laws and proper respect for the rights of others. Third, union of all the States with equal rights-indestructible by any constitutional means.

try tolerating the system. I also recommend the frontiers and in Indian countries, I do not that the mission to China be raised to one of the hold either legislation, or the conduct of the first class. whites who come most in contact with the Indian, blameless for these hostilities. The past, however, cannot be undone, and the question must be met as we now find it. I have attempted a new policy toward these wards of the nation, (they cannot be regarded in any other light than as wards,) with fair results so far as tried, and which I hope will be attended ultimately with great success. The Society of Friends is well known as having succeeded in living in peace with the Indians, in the early settlement of Pennsylvania, while their white neighbors of other sects, in other sections, were constantly embroiled. They are also known for their opposition to all strife, violence, and war, and are generally noted for their strict integrity and fair dealings. These considerations induced me to give the management of a few reservations of Indians to them, and to throw the burden of the selection of agents upon the Society itself. The result has proven most satisfactory. It will be found more fully set forth in the report of the Commissioner of Indian Affairs. For superintendents and Indian agents not on the reservations officers of the army were selected. The reasons for this are numerous. Where Indian agents are sent, there, or near there, troops must be sent also. The agent and the commander of troops are independent of each other, and are subject to orders from different departments of the Government. The army officer holds a position for life; the agent one at the will of the President. The former is personally interested in living in harmony with the Indian, and in establishing a permanent peace, to the end that some portion of his life may be spent within the limits of civilized society. The latter has no such personal interest. Another reason is an economic one; and still another, the hold which the Government has upon a life officer to secure a faithful discharge of duties in carrying out a given policy.

To secure the first of these, Congress has taken two essential steps: first, in declaring, by joint resolution, that the public debt shall be paid, principal and interest, in coin; and, second, by providing the means for paying. Providing the means, however, could not secure the object desired, without a proper administration of the laws for the collection of the revenues, and an economical disbursement of them. To this subject the administration has most earnestly addressed itself, with results, I hope, satisfactory to the country. There has been no hesitation in changing officials in order to secure an efficient execution of the laws, sometimes, too, when, in a mere party view, undesirable political results were likely to follow; nor any hesitation in sustaining efficient officials, against remonstrances wholly political.

It may be well to mention here the embarrassment possible to arise from leaving on the statutebooks the so-called "tenure-of-office acts," and to earnestly recommend their total repeal. It could not have been the intention of the framers of the Constitution, when providing that appointments made by the President should receive the consent of the Senate, that the latter should have the power to retain in office persons placed there, by federal appointment, against the will of the President. The law is inconsistent with a faithful and efficient administration of the government. What faith can an executive put in officials forced upon him, and those, too, whom he has suspended for reason? How will such officials be likely to serve an administration which they know does not trust them?

For the second requisite to our growth and prosperity, time and a firm but humane administration of existing laws (amended from time to time as they may prove ineffective, or prove harsh and unnecessary) are probably all that are requirca.

The third cannot be attained by special legislation, but must be regarded as fixed by the Constitution itself, and gradually acquiesced in by force of public opinion.

From the foundation of the Government to the present, the management of the original inhabitants of this continent, the Indians, has been a subject of embarrassment and expense, and has been attended with continuous robberies, murders, and wars. From my own experience upon

The building of railroads, and the access thereby given to all the agricultural and mineral regions of the country, is rapidly bringing civilized settlements into contact with all the tribes of Indians. No matter what ought to be the relations between such settlements and the aborigines, the fact is they do not harmonize well, and one or the other has to give way in the end. A system which looks to the extinction of a race is too horrible for a nation to adopt, without entailing upon itself the wrath of all Christendom, and engendering in the citizen a disregard for human life and the rights of others dangerous to society. I see no substitute for such a system, except in placing all the Indians on large reservations, as rapidly as it can be done, and giving them absolute protection there. As soon as they are fitted for it, they should be induced to take their lands in severalty, and to set up territorial governments for their own protection. For full details on this subject I call your special attention to the reports of the Secretary of the Interior and the Commissioner of Indian Affairs.

The report of the Secretary of War shows the expenditures of the War Department, for the

year ending June 30, 1869, to be $80,644,042, of | previous year amounted to $6,437,992. The inwhich $23,882,310 was disbursed in the payment crease of revenues for 1869 over those of 1868 of debts contracted during the war, and is not was $2,051,909, and the increase of expenditures chargeable to current army expenses. His esti- was $967,538. The increased revenue in 1869 mate of $34,531,031 for the expenses of the army, exceeded the increased revenue in 1868 by $996,for the next fiscal year, is as low as it is believed 336; and the increased expenditure in 1869 was can be relied on. The estimates of bureau officers $2,527,570 less than the increased expenditure in have been carefully scrutinized, and reduced 1868, showing by comparison this gratifying feawherever it has been deemed practicable. If, ture of improvement, that while the increase of however, the condition of the country should be expenditures over the increase of receipts in 1868 such, by the beginning of the next fiscal year, as was $2,439,535, the increase of receipts over the to admit of a greater concentration of troops, increase of expenditures in 1869 was $1,084,371. the appropriation asked for will not be expended. Your attention is repectfully called to the reThe appropriations estimated for river and commendations made by the Postmaster General harbor improvements and for fortifications are for authority to change the rate of compensation submitted separately. Whatever amount Con- to the main trunk, railroad lines for their sergress may deem proper to appropriate for these vices in carrying the mails, for having postpurposes will be expended. route maps executed, for reorganizing and increasing the efficiency of the special agency service, for increase of the mail service on the Pacific, and for establishing mail service, under the flag of the Union, on the Atlantic; and most especially do I call your attention to his recommendation for the total abolition of the franking privilege. This is an abuse from which no one receives a commensurate advantage; it reduces the receipts for postal service from twenty-five to thirty per cent., and largely increases the service to be performed. The method by which postage should be paid upon public matter is set forth fully in the report of the Postmaster General.

The recommendation of the General of the Army that appropriations be made for the forts at Boston, Portland, New York, Philadelphia, New Orleans, and San Francisco, if for no other, is concurred in. I also ask your special attention to the recommendation of the general commanding the military division of the Pacific for the sale of the seal islands of St. Paul and St. George, Alaska Territory, and suggest that it either be complied with, or that legislation be had for the protection of the seal fisheries, from which a revenue should be derived.

The report of the Secretary of War contains a synopsis of the reports of the heads of bureaus, of the commanders of military divisions, and of the districts of Virginia, Mississippi, and Texas, and the report of the General of the Army in full. The recommendations therein contained have been well considered, and are submitted for your action. I, however, call special attention to the recommendation of the Chief of Ordnance for the sale of arsenals and lands no longer of use to the Government; also, to the recommendation of the Secretary of War that the act of 3d March, 1869, prohibiting promotions and appointments in the staff corps of the army, be repealed. The extent of country to be garrisoned, and the number of military posts to be occupied, is the same with a reduced army as with a large one. The number of staff officers required is more dependent upon the latter than the former condition.

The report of the Secretary of the Interior shows that the quantity of public lands disposed of during the year ending the 30th of June, 1869, was 7,666,152 acres, exceeding that of the preceding year by 1,010,409 acres. Of this amount 2,899,544 acres were sold for cash, and 2,737,365 acres entered under the homestead laws. The remainder was granted to aid in the construction of works of internal improvement, approved to the States as swamp land, and located with warrants and scrip. The cash receipts from all sources were $4,472,886, exceeding those of the preceding year $2,840,140.

During the last fiscal year 23,196 names were added to the pension rolls and 4,876 dropped therefrom, leaving at its close 187,963. The amount paid to pensioners, including the comThe report of the Secretary of the Navy, accom- pensation of disbursing agents, was $28,422,884, panying this, shows the condition of the navy an increase of $4,411,902 on that of the previous when this administration came into office, and year. The munificence of Congress has been the changes made since. Strenuous efforts have conspicuously manifested in its legislation, for been made to place as many vessels "in commis- the soldiers and sailors who suffered in the sion," or render them fit for service, if required, recent struggle to maintain "that unity of govas possible, and to substitute the sail for steam ernment which makes us one people." The adwhile cruising, thus materially reducing the ex-ditions to the pension rolls of each successive penses of the navy and adding greatly to its efficiency. Looking to our future, I recommend a liberal though not extravagant policy toward this branch of the public service

The report of the Postmaster General furnishes a clear and comprehensive exhibit of the operations of the postal service, and of the financial condition of the Post Office Department. The ordinary postal revenues for the year ending the 30th of June, 1869, amounted to $18,344,510, and the expenditures to $23,698,131, showing an excess of expenditures over receipts of $5,353,620. The excess of expenditures over receipts for the

year since the conclusion of hostilities result in a great degree from the repeated amendments of the act of the 14th of July, 1862, which extended its provisions to cases not falling within its origi nal scope. The large outlay which is thus occasioned is further increased by the more liberal allowance bestowed since that date upon those who, in the line of duty, were wholly or permanently disabled. Public opinion has given an emphatic sanction to these measures of Congress, and it will be conceded that no part of our public burden is more cheerfully borne than that which is imposed by this branch of the service.

It necessitates for the next fiscal year, in addi- | I deem this a fitting time to execute that promtion to the amount justly chargeable to the naval ise. pension fund, an appropriation of $30,000,000. During the year ending the 30th of September, 1869, the Patent Office issued 13,762 patents, and its receipts were $686,389, being $213,926 more than the expenditures.