The Secretary Of State having understood from communications with the commissioners of His Catholic Majesty, subsequent to that which he reported to the President on the end of December last, that though they considered the navigation of the Mississippi as the principal object of negotiation between the two countries, yet it was expected by their Court that the conferences would extend to all the matters which were under negotiation on the former occasion with Mr. Gardoqui, and particularly to some arrangements of commerce, is of opinion that to renew the conferences on this subject also, since they desire it, will be but friendly and respectful, and can lead to nothing without our own consent, and that to refuse it might obstruct the settlement of the questions of navigation and boundary, and therefore reports to the President of the United States the following observations and instructions to the commissioners of the United States appointed to negotiate with the Court of Spain a treaty or convention relative to the navigation of the Mississippi, which observations and instructions he is of opinion should be laid before the Senate of the United States, and their decision be desired whether they will advise and consent that a treaty be entered into by the commissioners of the United States with Spain conformably thereto.

After stating to our commissioners the foundation of our rights to navigate the Mississippi and to hold our southern boundary at the thirty-first degree of latitude, and that each of these is to be a sine qua non, it is proposed to add as follows:

On the former conferences on the navigation of the Mississippi, Spain chose to blend with it the subject of commerce, and accordingly specific propositions thereon passed between the negotiators. Her object then was to obtain our renunciation of the navigation and to hold out commercial arrangements perhaps as a lure to us. Perhaps, however, she might then, and may now, really set a value on commercial arrangements with us, and may receive them as a consideration for accommodating us in the navigation, or may wish for them to have the appearance of receiving a consideration. Commercial arrangements, if acceptable in themselves, will not be the less so if coupled with those relating to navigation and boundary. We have only to take care that they be acceptable in themselves.

There are two principles which may be proposed as the basis of a commercial treaty: First, that of exchanging the privileges of native citizens, or, second, those of the most favored nation.

First. With the nations holding important possessions in America we are ready to exchange the rights of native citizens, provided they be extended through the whole possessions of both parties; but the propositions of Spain made on the former occasion (a copy of which accompanies this) were that we should give their merchants, vessels, and productions the privileges of native merchants, vessels, and productions through the whole of our possessions, and they give the same to ours only in Spain and the Canaries. This is inadmissible, because unequal; and as we believe that Spain is not ripe for an equal exchange on this basis, we avoid proposing it.

Second. Though treaties which merely exchange the rights of the most favored nations are not without all inconvenience, yet they have their conveniences also. It is an important one that they leave each party free to make what internal regulations they please, and to give what preferences they find expedient to native merchants, vessels, and productions; and as we already have treaties on this basis with France, Holland, Sweden, and Prussia, the two former of which are perpetual, it will be but small additional embarrassment to extend it to Spain. On the contrary, we are sensible it is right to place that nation on the most favored footing, whether we have a treaty with them or not, and it can do us no harm to secure by treaty a reciprocation of the right.

Of the four treaties before mentioned, either the French or the Prussian might be taken as a model; but it would be useless to propose the Prussian, because we have already supposed that Spain would never consent to those articles which give to each party access to all the dominions of the other; and without this equivalent we would not agree to tie our own hands so materially in war as would be done by the twenty-third article, which renounces the right of fitting out privateers or of capturing merchant vessels. The French treaty, therefore, is proposed as the model. In this, however, the following changes are to be made:

We should be admitted to all the dominions of Spain to which any other foreign nation is or may be admitted.

Article 5, being an exemption from a particular duty in France, will of course be omitted as inapplicable to Spain.

Article 8 to be omitted as unnecessary with Morocco, and inefficacious and little honorable with any of the Barbary powers(1); but it may furnish occasion to sound Spain on the project of a convention of the powers at war with the Barbary States to keep up by rotation a constant cruise of a given force on their coasts till they shall be compelled to renounce forever and against all nations their predatory practices. Perhaps the infidelities of the Algerines to their treaty of peace with Spain, though the latter does not choose to break openly, may induce her to subsidize us to cruise against them with a given force.

Articles 9 and 10, concerning fisheries, to be omitted as inapplicable.

Article 11 (2). The first paragraph of this article respecting the droit d'aubaine to be omitted, that law being supposed peculiar to France.

Article 17, giving asylum in the ports of either to the armed vessels of the other with the prizes taken from the enemies of that other, must be qualified as it is in the nineteenth article of the Prussian treaty, as the stipulation in the latter part of the article that " no shelter or refuge shall be given in the ports of the one to such as shall have made prize on the subjects of the other of the parties" would forbid us, in case of a war between France and Spain, to give shelter in our ports to prizes made by the latter on the former, while the first part of the article would oblige us to shelter those made by the former on the latter-a very dangerous covenant, and which ought never to be repeated in any other instance.

Article 29. Consuls should be received at all the ports at which the vessels of either party may be received.

Article 30, concerning free ports in Europe and America, free ports in the Spanish possessions in America, and particularly at The Havannah, are more to be desired than expected. It cad therefore only be recommended to the best endeavors of the commissioners to obtain them. It will be something to obtain for our vessels, 'dour, etc., admission to those ports during their pleasure. In like manners if they could be prevailed on to reestablish our right of cutting logwood in the Bay of Campeachy on the footing on which it stood before the treaty of 1763, it would be desirable and not endanger to us any contest with the English, who by the revolution treaty are restrained to the southeastern parts of Yucatan.

Article 31. The act of ratification on our part may require a twelvemonth from the date of the treaty, as the Senate meets regularly but once a year, and to return it to Madrid for exchange may require four months more.

The treaty must not exceed years duration, except the clauses relating to boundary and the navigation of the Mississippi, which must be perpetual and final. Indeed, these two subjects had better be in a separate instrument

There might have been mentioned a third species of arrangement-that of making special agreements on every special subject of commerce, and of settling a tariff of duty to be paid on each side on every particular article; but this would require in our commissioners a very minute knowledge of our commerce, as it is impossible to foresee every proposition of this kind which might be brought into discussion and to prepare them for it by information and instruction from hence. Our commerce, too, is as yet rather in a course of experiment, and the channels in which it will ultimately flow are not sufficiently known to enable us to provide for it by special agreement; nor have the exigencies of our new Government as yet so far developed themselves as that we can know to what degree we may or must have recourse to commerce for the purposes of revenue. No common consideration, therefore, ought to induce us as yet to arrangements of this kind. Perhaps nothing should do it with any nation short of the privileges of natives in all their possessions, foreign and domestic.

It were to be wished, indeed, that some positively favorable stipulations respecting our grain, flour, and fish could be obtained, even on our giving reciprocal advantages to some of the commodities of Spain, say her wines and brandies; but,

First. If we quit the ground of the most favored nation as to certain articles for our convenience, Spain may insist on doing the same for other articles for her convenience, and thus our commissioners will get themselves on the ground of a treaty of detail, for which they will not be prepared.

Second. If we grant favor to the wines and brandies of Spain, then Portugal and France will demand the same; and in order to create an equivalent Portugal may lay a duty on our fish and grain, and France a prohibition on our whale oils, the removal of which will be proposed as an equivalent.

Thus much, however, as to grain and flour may be attempted. There has not long since been a considerable duty laid on them in Spain. This was while a treaty on the subject of commerce was pending between us and Spain, as that Court considers the matter. It is not generally thought right to change the state of things pending a treaty concerning them. On this consideration and on the motive of cultivating our friendship, perhaps the commissioners may induce them to restore this commodity to the footing on which it was on opening the conferences with Mr. Gardoqui, on the 26th day of July, 1785. If Spain says, " Do the same by your tonnage on our vessels," the answer may be that " Our foreign tonnage affects Spain very little and other nations very much; whereas the duty on flour in Spain affects us very much and other nations very little; consequently there would be no equality in reciprocal relinquishment, as there had been none in the reciprocal innovation; and Spain, by insisting on this, would in fact only be aiding the interests of her rival nations, to whom we should be forced to extend the same indulgence. " At the time of opening the conferences, too, we had as yet not erected any system, our Government itself being not yet erected. Innovation then was unavoidable on our parts if it be innovation to establish a system. We did it on fair and general ground, on ground favorable to Spain; but they had a system, and therefore innovation was avoidable on their part.

TH: JEFFERSON.

ARTICLES PROPOSED BY DON DIEGO GARDOQI TO BE INSERTED IN THE TREATY WITH THE UNITED STATES.

First. That all commercial regulations affecting each other shall be founded in perfect reciprocity. Spanish merchants shall enjoy all the commercial privileges of native merchants in the United States, and American merchants shall enjoy all the commercial privileges of native merchants in the Kingdom of Spain and in the Canaries and other islands belonging to and adjacent thereto. The same privileges shall extend to their respective vessels and merchandise consisting of the manufactures and products of their respective countries.

Second. Each party may establish consuls in the countries of the other (excepting such provinces in Spain into which none have heretofore been admitted, viz, Bilboa and Guipusca), with such powers and privileges as shall be ascertained by a particular convention.

Third. That the bona fide manufactures and productions of the United States (tobacco only excepted, which shall continue under its present regulations may be imported in American or Spanish vessels into any parts of His Majesty's European dominions and islands aforesaid in like manner as if they were the productions of Spain, and, on the other hand, that the bona fide manufactures and productions of His Majesty's dominions may be imported into the United States in Spanish or American vessels in like manner as if they were the manufactures and productions of the said States. And further, that all such duties and imposts as may mutually be thought necessary to lay on them by either party shall be ascertained and regulated on principles of exact reciprocity by a tariff, to be formed by a convention for that purpose, to be negotiated and made within one year after the exchange of the ratification of this treaty; and in the meantime that no other duties or imposts shall be exacted from each other's merchants and ships than such as may be payable by natives in like cases.

Fourth. That inasmuch as the United States, from not having mines of gold and silver, may often want supplies of specie for a circulating medium, His Catholic Majesty, as a proof of his good will, agrees to order the masts and timber which may from time to time be wanted for his royal navy to be purchased and paid for in specie in the United States, provided the said masts and timber shall be of equal quality and when brought to Spain shall not cost more than the like may there be had for from other countries.

Fifth. It is agreed that the articles commonly inserted in other treaties of commerce for mutual and reciprocal convenience shall be inserted in this, and that this treaty and every article and stipulation therein shall continue in full force for ______ years, to be computed from the day of the date hereof.