I have the satisfaction to inform you that an arrangement which had been commenced by my predecessor with the British Government for the reduction of the naval force by Great Britain and the United States on the Lakes has been concluded, by which it is provided that neither party shall keep in service on Lake Champlain more than one vessel, on Lake Ontario more than one, and on Lake Erie and the upper lakes more than two, to be armed each with one cannon only, and that all the other armed vessels of both parties, of which an exact list is interchanged, shall be dismantled.  It is also agreed that the force retained shall be restricted in its duty to the internal purposes of each party, and that the arrangement shall remain in force until six months shall have expired after notice given by one of the parties to the other of its desire that it should terminate.  By this arrangement useless expense on both sides and, what is of still greater importance, the danger of collision between armed vessels in those inland waters, which was great, is prevented.

I have the satisfaction also to state that the commissioners under the fourth article of the treaty of Ghent, to whom it was referred to decide to which party the several islands in the bay of Passamaquoddy belonged under the treaty of 1783, have agreed in a report, by which all the islands in the possession of each party before the late war have been decreed to it.  The commissioners acting under the other articles of the treaty of Ghent for the settlement of boundaries have also been engaged in the discharge, of their respective duties, but have not yet completed them.  The difference which arose between the two Governments under that treaty respecting the right of the United States to take and cure fish on the coast of the British provinces north of our limits, which had been secured by the treaty of 1783, is still in negotiation.  The proposition made by this Government to extend to the colonies of Great Britain the principle of the convention of London, by which the commerce between the ports of the United States and British ports in Europe had been placed on a footing of equality, has been declined by the British Government.  This subject having been thus amicably discussed between the two Governments, and it appearing that the British Government is unwilling to depart from its present regulations, it remains for Congress to decide whether they will make any other regulations in consequence thereof for the protection and improvement of our navigation.

The negotiation with Spain for spoliations on our commerce and the settlement of boundaries remains essentially in the state it held by the communications that were made to Congress by my predecessor.  It has been evidently the policy of the Spanish Government to keep the negotiation suspended, and in this the United States have acquiesced, from an amicable disposition toward Spain and in the expectation that her Government