the President gives his instructions to public ministers and consuls and conducts his negotiations with representatives of foreign governments, and thus stands in a peculiar relation to the Executive in the performance of his constitutional function.

In considering the relation of our diplomacy to the business interests of the country, it should always be remembered that the Department which deals with our foreign relations is the Department of Peace. The resources of negotiation, of reason and persuasion are within its control. The very foundation of all business security, in an important sense, is within the keeping of the Foreign Offices of Governments, as to them-as the agencies of peoples-must be entrusted the practical processes by which nations may adjust their mutual interests, settle their disputes and prevent the frightful losses and dislocations of war. I have always advocated the judicial settlement of all international disputes which can be regarded as having a justiciable character, and have favored the development of institutions for that purpose. But with due recognition of the importance of this means of settlement, it must be borne in mind that the most serious international controversies, and this is especially true at this time, are not of a legalistic nature and must be settled, if they are settled at all, by negotiations and agreements. They lie outside the application of defined juristic principles and the more unstable we find world conditions to be, the greater the necessity of the efficient operations of diplomacy and of the adequate organization and support of the Peace Department of our Government. The alternative of friendly settlement is resort to coercion, and, if you wish peace, you must pursue the methods of friendly intercourse between Governments and recognize whatever is essentially involved in these methods. There is no other way.

A fundamental question at this time is the preservation of the essential bases of international intercourse through the demand for the recognition of valid titles acquired in accordance with existing law and for the maintenance of the sanctity of contracts and of adequate means of enforcing them. Intercourse, from the standpoint of business, consists in the making of contracts and the acquisition of property rights. Nations may adopt what policies they please for the future conduct of their local affairs, and if these policies are not enlightened, the result will inevitably be that production will languish and trade will shrivel up, and they will look in vain for security and confidence: still they will be within their rights in determining their future policy in local matters. But if they seek international intercourse, they must perform international obligations. When they have invited intercourse with other nations, have established their laws under which contracts have been made and property rights validly acquired, they put themselves outside the pale of international intercourse if they enter upon a policy of confiscation. International relations proceed upon the postulates of international morality, and the most important principle to be

maintained at this time with respect to international relations is that no State is entitled to a place within the family of nations if it destroys the foundation of honorable intercourse by resort to confiscation and repudiation, and fails to maintain an adequate system of government through which valid rights and valid engagements are recognized and enforced. This is in the obvious interest of business, and this is merely a way of saying that this course is vital to the prosperity of all peoples for the activities of business are those of production and exchange upon which the welfare of peoples inevitably depend. If profits are anticipated through a departure from this clear path of honorable dealing, they will be found to be illusory.

At this time we also have occasion to deal with the enlarging of the opportunities for industry and commerce by the recognition and extension of the policy of the "Open-Door". At the recent Conference held in Washington the participating Powers succeeded in taking what has been the subject of general diplomatic phrases in relation to China and putting it with more definite explication in the precise form of a treaty engagement. Thus they have agreed that they will not seek nor support their respective nationals in seeking (a) "any arrangement which might purport to establish in favor of their interests any general superiority of rights with respect to commercial or economic development in any designated region of China", or (b) "any such monopoly or preference as would deprive the nationals of any other Power of the right of undertaking any legitimate trade or industry in China, or of participating with the Chinese Government, or with any local authority, in any category of public enterprise, or which by reason of its scope, duration or geographical extent is calculated to frustrate the practical application of the principle of equal opportunity."

This Government has been insisting, and I am glad to say with a gratifying measure of success, upon the application of this principle to the territories which recently have become the subject of the novel arrangement of mandates, and we have received important assurances with respect to equality of commercial opportunity in these regions.

In giving appropriate diplomatic support to American enterprise, our Government does not, of course, attempt to secure contracts for its nationals or to institute particular undertakings. I assume that no one could wish the Government to be so involved. Its object is to keep open the course of fair and equal opportunity. Hence, it is a vital principle that it must act with absolute impartiality with respect to American business interests. which may happen to be in competition. It does not attempt to favor one at the expense of another, but to maintain such policies with respect to international intercourse as will give all a fair chance.

And, in this connection, permit me to say a word to the effect that the relations between the Department of State and business men involve a certain measure of reciprocity. It is not only important that there should be an alert and efficient organization of this branch of the government, but it is

also important that it should always be remembered that good faith and cordial feeling are of the utmost importance in international affairs and that nothing in diplomatic intercourse can atone for the conduct of disreputable business agents and speculators who do not carry into their undertakings abroad those methods of honorable dealing which must always be assumed in giving diplomatic support. This Government is not engaged in endeavoring to promote the opportunities of chicanery, and business interests in their dealings abroad are under a patriotic obligation to maintain the prestige of their country.

Aside from these observations as to fundamental principle, I could easily enumerate a host of special instances in which the activities of the Department are now engaged of vast importance to the business community. But such a narration would not aid in the safeguarding of the particular business interests concerned and at best could serve to emphasize by particularization the general observations I am making as to the importance of the adequate organization of the Department.

The organization of the conduct of foreign affairs implies the mechanism (1) for obtaining complete and accurate information, and (2) for constant and direct contact with all those concerned; and the operation of this mechanism must be dominated (3) by an American policy conceived and defined with an accurate appreciation of all American interests involved.

This manifestly requires unification of effort. The function of directing intercourse with foreign governments in the nature of things cannot be divided. There must be unity in the formulation and direction of policy and unity in its execution. Manifestly, you cannot deal with different governments through different instrumentalities; and you cannot deal with the same government through independent agencies, or you will work to cross purposes. However important and helpful it may be, and I agree that it is most important and helpful to have specialized efforts to promote trade, to secure technical assistance, to gather and disseminate in the most expert manner all needed information, to organize the facilities of commerce and provide for the manifold exigencies of our merchants-and I am as anxious as anyone to see this provision generously made-still it remains so clearly true as in my judgment to be beyond controversy that when you come to the point of dealing with governments you must have a single governmental agency of international intercourse or you will have confusion and make definite and consistent policy and effective governmental action impossible. It is especially important to recognize this fact at this time, when our international problems tend to become mainly economic problems. There is the more imperative necessity of adequately organizing international intercourse. The effective intertwining of political and economic problems imposes a heavier strain upon the machinery and requires suitable readjustment, but the exigency requiring a unified system of contact with foreign powers remains exactly the same. In truth, many of our economic problems

have now the feature that governments, directly or indirectly, are themselves more largely involved in economic projects, and economic problems must of necessity to a larger extent than before be taken up with governments through diplomatic channels. Unity of control of contact with foreign governments is absolutely essential.

There are two main divisions of the organization of intercourse with other Powers: (1) the Field and (2) the Department. These are interdependent agencies. The Field consists of Ambassadors, Ministers, Consuls and special commissioners, with their necessary staffs, constituting the instrumentalities of information and contact. There is still a lingering notion that in view of the fact that the representatives of our Government act under instructions from the Department of State and because of the improved facilities of communication, these representatives continue what is mainly a social tradition and are of slight practical value. Some may think that communications cabled directly to foreign powers would be sufficient. It is a very crude and limited view which would deny the importance of even social contacts. But the inadequacy of mere written communications, however important these may be, and of the necessity of direct personal approach should be apparent to everyone whose horizon is broad enough to enable him to consider foreign affairs to any advantage. The facilities of communication increase the opportunities for business and the multiplicity of business interests and intimacies of business relations serve not to lessen but greatly to increase the necessity for the factor of personality in contacts with foreign governments.

The tendency is strikingly shown in the endeavor at the present time, in view of the complexities of international relations, to increase the opportunity for personal contacts through the medium of international conferences. That is the whole significance of conferences, that diplomatic notes will not suffice. Everyone familiar with foreign affairs knows that while the statement of foreign policies in formal writings is absolutely necessary, still in order to accomplish results in negotiations, there should be so far as practicable the personal contacts of diplomatic representatives. Every important business concern that can send an agent personally to conduct delicate negotiations does so. Every responsible foreign minister longs to get away from interminable note writing through which controversies tend to approach an impasse. An hour of direct intercourse between responsible Ministers is often worth months of written communications. The international conference itself is largely successful in inverse proportion to its numbers and to the extent that it represents the common purpose of a few who are interested in a particular problem and sincerely wish to find an appropriate method of solution. In the larger gatherings real accomplishment is likely to be hindered by the breaking up into groups with rival purposes which prevent results. The point is that the present effort of diplomacy is not to rely on mechanical facilities of communication but to

get to the maximum the advantage of personality in negotiations. The method of conference is a mere extension to a group of that which in a limited way is found every day in the contacts of public ministers representing their different countries.

In every part of the earth the Diplomatic and Consular Officers of the United States are watching every turn of events in their relation to the general policies of this Government. They report every source of international irritation; they note the signals of economic and political unrest, of international rivalries, prejudices, subversive tendencies and discriminatory policies. They aid the Government not merely in settling disputes but in removing or limiting the causes of possible controversy.

It seems to me that no one surveying the matter intelligently could wish to do aught but increase the efficiency of this representation. We have recently endeavored to stop competition in naval armament by agreeing upon ratios of capital ships in the case of the principal naval powers. We have been solicitous in this country, while scrapping a large part of our capital ships, to maintain a reasonable relation of our naval power to that of other countries, but diplomatic strength is even more important than naval strength, and it is a poor patriot who would scrap both his ships and his diplomats at the same time. If you are to get along without the one you must have the other. Every American should feel ashamed that any country in the world should have a better diplomatic organization than the United States. This is not a matter simply of national pride; it is a matter of national security.

I shall therefore make no apologies for asking not only your support but your active and urgent demand in the interest of American business for the maintenance and development of the most efficient organization of our diplomatic agencies. The truth is that our Foreign Service is undermanned and underpaid. Of course, in the Department of State, as in other Departments, we are most deeply interested in economy and reduction of unnecessary expense. At this time with the vast burdens resting upon our people as a result of the war, all avoidable outlays should be rigorously cut down, and the Department of State has done its full share. Let me call attention to the fact that the expenses of the entire service of the Department, including the Diplomatic and Consular Services and that of the Department in Washington, amount to less than $11,000,000. Indeed, under the present schedule of passport fees, which I shall be glad to see revised and reduced, for the last fiscal year the receipts of the Department exceeded the total expenditures of all services by over $1,270,000. In other words, it was a money-making institution. I am not, therefore, asking outlays which threaten the tax-payer with any serious increase of his heavy burden. A relatively small amount would be sufficient to give the equipment that is needed to provide the essential basis of a career and thus to keep trained men in the service of the Government.