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traversed by the before-mentioned canal shall affect the general principle of neutralization or the obligation of the high contracting parties under the present treaty.

Of course, in agreeing to accord to Colombia this reservation, the United States is not dealing with the general subject of canal tolls. It is treating Colombia for the reasons which I have described, as being in a wholly exceptional position, not subject to the rule of equality of the Hay-Pauncefote treaty, and not to come within any schedule of tolls which may hereafter be established, which must, of course, under the treaty, be equal for all nations to whom the rule of equality is properly applicable.

The United States is especially desirous that its course shall be understood by Great Britain, and that there shall be no thought on the part of that Government that the Government of the United States is unmindful of its obligations under the Hay-Pauncefote treaty, or is willing, in any degree whatever, to fail in strict compliance with those obligations, and for this reason I am making this explanation in the hope that the Government of Great Britain will agree with us regarding the situation of Colombia as to the title to the canal to be so exceptional as not to come within the rule of equality of the Hay-Pauncefote treaty, and will agree that the contemplated provision will constitute no precedent for the exception of any other nations from the payment of equal dues for the passage of war vessels in accordance with such schedules as shall be established in accordance with the IIay-Pauncefote treaty.

Faithfully, yours,

ELIIU ROOT.

In the meantime the ambassador of the United States at London had held similar conference with the foreign office and communicated our views in a memorandum dated January 20, in which the considerations above set forth were substantially reproduced.

I have now had the pleasure to receive from you, on the 3d instant, an aide mémoire confirming your oral communication of that day, to the effect that you had been instructed by the foreign office, in view of the special circumstances of the case and in view of the explanation that Mr. Root had offered, to inform me that His Majesty's Government, on the receipt of a formal assurance that a precedent for similar and other occasions shall not be constituted by the special treatment granted to Colombia with regard to free transit for her warships, are ready to forego the protest against the infringement of the HayPauncefote treaty which they had intended to make. You added a proposal that this formal assurance and the acknowledgment thereof Should be set forth in an exchange of notes.

Being thus in accord as to what is mutually understood to be an exceptional contingency growing out of the special circumstances of the case, and is, as explained by Mr. Root, a necessity toward the realization of the purpose for which the Hay-Pauncefote treaty was concluded, I have much pleasure in responding to your proposal by giving, on the part of the Government of the United States, through you, to His Majesty's Government, formal confirmation of the assurance heretofore given to you by Secretary Root, that should the contemplated provision in favor of Colombia for the passage of Colombian warships through the Panama Canal become effective through the consummation of the treaty by ratification and exchange it will constitute no precedent for the exception of any other nations from the payment of equal dues for the passage of war vessels in accordance with such schedules as shall be established in conformity with the Hay-Pauncefote treaty.

Your acknowledgment and acceptance of this formal assurance will make it clear by exchange of notes that the Government of Great Britain agrees with the Government of the United States in regard

ing the situation of Colombia as to the title to the canal to be so exceptional as not to come within the rule of equality of the HayPauncefote treaty.

I have, etc.,

ROBERT BACON.

Mr. Bryce to Mr. Bacon.

No. 45.]

BRITISH EMBASSY, Washington, February 24, 1909. SIR: I have the honor to acknowledge receipt of your note No. 540, of the 20th instant, on the subject of the treaty between the United States and the Republic of Colombia, and to say in reply that His Majesty's Government are glad to receive the full explanation given by you of the view which the Government of the United States take of the circumstances which appear to them to place the Republic of Colombia in a wholly different relation to the Panama Canal from that in which other countries stand, and which, as they conceive, distinguish the concession to that Republic of exceptional treatment from any case in which the question of making a similar concession to any other country could hereafter arise. Without entering on any discussion of the argument by which the view of your Government is supported and illustrated, His Majesty's Government are content to note that the United States Government hold that the right of the free passage for warships which the present treaty proposes to extend to Colombia is deemed by them to grow out of the entirely special and exceptional position of Colombia toward the canal and the title thereto, and accordingly does not constitute a precedent, and will not hereafter be drawn into a precedent, for the exception of any other nation from the payment of equal dues for the passage of war vessels in accordance with such schedules as shall be hereafter constituted in conformity with the Hay-Pauncefote treaty, or for any other conces sion of a special nature to Colombia or to any other power.

I have accordingly the honor of stating to you that His Majesty's Government consider that they can forego the making of such a protest as they had formerly contemplated, and that they accept the assurance contained in your note.

I have, etc.,

42112-S. Doc. 474, 63-2-6

JAMES BRYCE.

PART III.

PAPERS SUBMITTED.

Chargé d'Affaires Innes to the Secretary of State.

BRITISH EMBASSY, Kineo, Me., July 8, 1912.

SIR: The attention of His Majesty's Government has been called to the various proposals that have from time to time been made for the purpose of relieving American shipping from the burden of the tolls to be levied on vessels passing through the Panama Canal, and these proposals, together with the arguments that have been used to support them have been carefully considered with a view to the bearing on them of the provisions of the treaty between the United States and Great Britain of November 18, 1901.

The proposals may be summed up as follows:

(1) To exempt all American shipping from the tolls; (2) to refund to all American ships the tolls which they may have paid; (3) to exempt American ships engaged in the coastwise trade; (4) to repay the tolls to American ships engaged in the coast wise trade.

The proposal to exempt all American shipping from the payment of the tolls would, in the opinion of His Majesty's Government, involve an infraction of the treaty, nor is there, in their opinion, any difference in principle between charging tolls only to refund them and remitting tolls altogether. The result is the same in either case, and the adoption of the alternative method of refunding the tolls in preference to that of remitting them, while perhaps complying with the letter of the treaty, would still contravene its spirit.

It has been argued that a refund of the tolls would merely be equivalent to a subsidy and that there is nothing in the Hay-Pauncefote treaty which limits the right of the United States to subsidize its shipping. It is true that there is nothing in that treaty to prevent the United States from subsidizing its shipping, and if it granted a subsidy His Majesty's Government could not be in a position to complain. But there is a great distinction between a general subsidy, either to shipping at large or to shipping engaged in any given trade, and a subsidy calculated particularly with reference to the amount of user of the canal by the subsidized lines or vessels. If such a subsidy were granted it would not, in the opinion of His Majesty's Government, be in accordance with the obligations of the treaty.

As to the proposal that exemption shall be given to vessels engaged in the coastwise trade, a more difficult question arises. If the trade should be so regulated as to make it certain that only bona fide coastwise traffic which is reserved for United States vessels would be benefited by this exemption, it may be that no objection could be taken. But it appears to my Government that it would be impossible.

to frame regulations which would prevent the exemption from resulting, in fact, in a preference to United States shipping and consequently in an infraction of the treaty.

I have, etc.,

Mr. Innes to Mr. Knox.

A. MITCHELL INNES,

BRITISH EMBASSY, Washington, August 27, 1912.

SIR: On the 8th July I had the honor to present to the Government of the United States the views of His Majesty's Government on certain proposals which had been formulated with the object of relieving United States ships using the Panama Canal from the payment of tolls, while levying such tolls on foreign ships.

In view of the bill which has now been passed and of the memorandum issued by the President on signing it, I am instructed to inform you that His Majesty's Government adhere to the views expressed in that note, and that when His Majesty's Government have had time to consider fully the act and the memorandum a further communication will be made to you on the subject.

I am instructed to add at the same time that should there eventually be a difference between the two countries as to the correct interpretation of the Hay-Pauncefote treaty which can not be settled by other means, His Majesty's Government, would then ask that it should be referred to arbitration in accordance with the provisions of the existing arbitration treaty concluded in 1908.

I have, etc.,

Hon. PHILANDER C. KNOX,

Secretary of State.

A. MITCHELL INNES,

Mr. Wilson to Mr. Innes.

DEPARTMENT OF STATE, Washington, August 30, 1912.

SIR: I have the honor to acknowledge the receipt of your note of the 27th instant in further expression of the views of His Britannic Majesty's Government concerning the relieving of American vessels using the Panama Canal from the payment of tolls.

Due note has been taken of the information which you communicate by instruction of your Government that His Majesty's Government adhere to the views expressed in your note of the 8th ultimo and that when His Majesty's Government has had time to consider fully the act and the memorandum issued by the President upon signing the act a further communication will be made to this Government on the subject.

I have, etc.,

HUNTINGTON WILSON.
Acting Secretary of State.

No. 2121.]

Mr. Phillips to Mr. Knox.

AMERICAN EMBASSY. London, October 11, 1912.

SIR: I have the honor to report that, in reply to a question asked yesterday in the House of Commons respecting the Panama Canal dues, Sir Edward Grey announced the action which the Government had taken during the passage of the bill through Congress and explained that in his communication to the Government of the United States he had said that should there eventually be a difference between the two countries respecting the interpretation of the Hay-Pauncefote treaty that could not be settled by other means His Majesty's Government would ask that it be referred to arbitration in accordance with the provisions of the existing arbitration treaty concluded with the United States in 1908.

Sir E. Grey added that the whole subject was one of great importance and, together with the opinions of the legal advisers of the Crown, is now under the consideration of His Majesty's Government. I beg to inclose herewith the questions and answers referred to as they appear in this morning's Times.

I have, etc.,

WILLIAM PHILLIPS.

[Inclosure.]

[From London Times, October 11, 1912. The Panama Canal dues.]

THE PANAMA CANAL DUES.

Mr. Hewins (Hereford, opp.) asked the secretary of state for foreign affairs whether he had received any definite reply to the representations made to the Government of the United States in regard to the bill which was then passing through Congress for regulating the Panama Canal dues; and whether His Majesty's Government were making any further representations, now that the bill had become law, so as to secure equitable treatment for British and Canadian ships.

Sir E. GREY. The Panama Canal bill underwent some alterations in the course of its passage through Congress, and after it was passed toward the end of August we informed the Government of the United States that we would address a communication to them after we had received and had time to consider the full text of the bill as signed by the President and his memorandum respecting it; it was added that should there eventually be a difference between the two countries respecting the interpretation of the Hay-Pauncefote treaty that could not be settled by any other means, we should ask that it be referred to arbitration in accordance with the provisions of the existing arbitration treaty concluded with the United States in 1908. The whole subject is one of great importance and, together with the views of the legal advisers of the Crown upon it, is now under consideration of His Majesty's Government. As soon as we are in a position to do so we shall be glad to make a further statement to the House.

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