Hay-Pauncefote Treaty they recovered that right upon the footing that the Canal should be open to British and United States vessels upon terms of equal treatment.

Sir Edward Grey says that the case cannot be put more clearly than it was put by Mr. Hay, who, as Secretary of State, negotiated the Hay-Pauncefote Treaty, in the account of the negotiations which he sent to the Senate Committee on Foreign Relations (Senate Document No. 746, 61st Congress, 3rd Session): "These rules are adopted in the treaty with Great Britain as a consideration for getting rid of the Clayton-Bulwer Treaty." If the rules set out in the Hay-Pauncefote Treaty secure to Great Britain. no more than most-favoured-nation treatment, the value of the consideration given for superseding the Clayton-Bulwer Treaty is not apparent to his Majesty's Government. Nor is it easy to see in what way the principle of Article 8 of the Clayton-Bulwer Treaty, which provides for equal treatment of British and United States ships, has been maintained.

To the argument that the words "all nations" cannot include the United States because, if the United States were at war it is impossible to believe that the country could be intended to be debarred by the treaty from using its own territory for revictualling its warships or landing troops, Sir Edward Grey replies that

The Hay-Pauncefote Treaty of 1901 aimed at carrying out the principle of the neutralization of the Panama Canal by subjecting it to the same régime as the Suez Canal. Rules 3, 4 and 5 of Article 3 of the treaty are taken almost textually from Articles 4, 5 and 6 of the Suez Canal convention of 1888. At the date of the signature of the HayPauncefote Treaty the territory, on which the Isthmian Canal was to be constructed, did not belong to the United States, consequently there was no need to insert in the draft treaty provisions corresponding to those in Articles 10 and 13 of the Suez Canal Convention, which preserve the sovereign rights of Turkey and of Egypt, and stipulate that Articles 4 ond 5 shall not affect the right of Turkey, as the local sovereign, and of Egypt within the measure of her autonomy, to take such measures as may be necessary for securing the defence of Egypt and the maintenance of public order and, in the case of Turkey, the defence of her possessions on the Red Sea.

Now that the United States has become the practical sovereign of the Canal his Majesty's Government do not question its title to exercise belligerent rights for its protection. Other arguments are advanced to emphasize the conclusion that any system by which particular vessels or classes of vessels were exempted from the payment of tolls would not comply with the stipulations of the treaty that the Canal should be open on terms of entire equality, and that the charges should be just and equitable.

The President in his memorandum argues that if there is no difference, as stated in Mr. Mitchell Innes' note of July 8, between charging tolls only to refund them and remitting tolls altogether, the effect is to prevent the United States from aiding its own commerce in the way that all other nations may freely do. This, Sir Edward says, is not so. His Majesty's Government have no desire to place upon the Hay-Paunceforte Treaty an interpretation which would impose upon the United States any restriction from which other nations are free or reserve to such other nation any privilege which is denied to the United States. Equal treatment, as specified in the treaty,

is all they claim.

It has been argued that as the coastwise trade of the United States is confined by law to United States vessels, the exemption of vessels engaged in it from the payment of tolls cannot injure the interests of foreign nations. It is clear, however, that the interests of foreign nations will be seriously injured in two material respects. In the first place, the exemption will result in the cost of the working of the Canal being borne wholly by foreign-going vessels, and on such vessels, therefore, will fall the whole burden of raising the revenue necessary to cover the cost of working and maintaining the Canal. The possibility, therefore, of fixing the toll on such vessels at a lower figure than $1.25 per ton, or of reducing the rate below that figure at some future time, will be considerably lessened by the exemption. In the second place, the exemption will, in the opinion of his Majesty's Government, be a violation of the equal treatment secured by the treaty, as it will put the "coastwise trade" in a preferential position as regards

other shipping.

The despatch concludes:

Knowing as I do full well the interest which this great undertaking has aroused in the New World and the emotion with which its opening is looked forward to by United States citizens, I wish to add before closing this despatch that it is only with great reluctance that His Majesty's Government have felt bound to raise objection on the ground of treaty rights to the provisions of the Act. Animated by an earnest desire to avoid points which might in any way prove embarrassing to the United States, his Majesty's Government have confined their objections within the narrowest possible limits, and have recognized in the fullest manner the right of the United States to control the Canal. They feel convinced that they may look with confidence to the Government of the United States to ensure that, in promoting the interests of United States shipping, nothing will be done to impair the safeguards guaranteed to British shipping by treaty.

AMERICAN VIEWS ON THE BRITISH PROTEST.

Fundamentally important though it be, there is an inclination in dealing with Sir Edward Grey's despatch to brush aside the "all nations" controversy in favour of consideration of the dues controversy in its more direct aspects. Nor is much attention given to the ethical side. of the question implied by the comparison of the ClaytonBulwer and Hay-Pauncefote Treaties.

Interest for the moment is concentrated in the prospects of a diplomatic settlement and not in the prospects of arbitration. In some quarters, indeed, it is felt that the British case, for all its moral justice, is weakened by the fineness of the distinction between the acknowledgment that the United States may give financial help to their vessels using the Canal which it is open to other nations to give, and the statement about those methods of subsidizing which are rather vaguely mentioned as discriminatory. It is, of course, recognized in certain quarters that what the distinction really means is that such financial help on the part of the United States should, to meet the British view, be a declared subsidy, and that the Canal as a neutral body cannot be used as an instrument for the private commercial policy of the United States. But at the same time it

is not believed that the United States-were their right to what appears to be rather comprehensive preferential policy finally recognized-would be averse from giving the guarantees implied by the distinction.

THE PANAMA CANAL ACT.

AMERICAN REPLY TO THE BRITISH PROTEST.

A Parliamentary paper [Cd. 6585] was issued last week giving the text of the reply of the Washington Government to the British despatch protesting against certain provisions

of the Panama Canal Act.

The American Secretary of State says at the outset that his Government does not agree with the interpretation placed by Sir Edward Grey upon the Hay-Pauncefote Treaty, or upon the Clayton-Bulwer Treaty, but, for rea

sons which will

appear herein below, it is not deemed neces

sary at present to amplify or reiterate the views of this

Government

upon

the meaning of those treaties."

The British objections, Mr. Knox declares, are, in the first place, about the Canal Act only, but that Act does not fix the tolls. He summarizes the matter in the following

words:

They (the objections) ignore the President's proclamation fixing the tolls, which puts at rest practically all of the supposititious injustice and inequality which Sir Edward Grey thinks might follow the administration of the Act, and concerning which he expresses so many and grave the Canal Act will actually injure in its operation British fears. Moreover, the gravamen of the complaint is not that shipping, or destroy rights claimed for such shipping under the Hay-Pauncefote Treaty, but that such injury or destruction may possibly be the effect thereof; and, further, and more particularly, Sir Edward Grey complains that the action of Congress in enacting the legislation under discusafter take some action which might be injurious to British sion foreshadows that Congress or the President may hereshipping and destructive of its rights under the Treaty.

TOL. XXXIII. C.L.T.-6

concerning this possible future injury it is only necessary to say that, in the absence of an allegation of actual or certainly impending injury, there appears nothing upon which to base a sound complaint concerning the infringement of rights claimed by Great Britain; (but) it may be remarked that it would, of course, be idle to contend that Congress has not the power, or that the President, properly authorized by Congress, may not have the power, to violate the terms of the Hay-Pauncefote Treaty in its aspect as a rule of municipal law. Obviously, however, the fact that Congress has the power to do something contrary to the welfare of British shipping, or that Congress has put, or may put, into the hands of the President the power to do something which may be contrary to the interests possessed by British shipping, affords no just cause for complaint. It is the improper exercise of a power, and not its possession, which alone can give rise to an international cause of action; or, to put it in terms of municipal law, it is not the possession of the power to trespass upon another's property which gives a right to action in trespassing, but only the actual exercise of that power in committing the act of trespass itself.

When, and if, complaint is made by Great Britain that the effect of the Act and the proclamation together will be to subject British vessels as a matter of fact to inequality of treatment, or to unjust and inequitable tolls, in conflict with the terms of the Hay-Pauncefote Treaty, the question will then be raised as to whether the United States is bound by that Treaty both to take into account and to collect tolls from American vessels, and also whether, under the obligations of that Treaty, British vessels are entitled to equality of treatment in all respects with the vessels of the United States. Until these objections rest upon something more substantial than mere possibility, it is not believed that they should be submitted to arbitration. Existence of an arbitration treaty does not create a right of action; it merely provides means of settlement to be resorted to only when other resources of diplomacy have failed. It is not now deemed necessary, therefore, to enter upon a discussion of the views entertained by Congress and by the President as to the meaning of the Hay-Pauncefote Treaty in relation to questions of fact which have not yet arisen, but may possibly