reference to the even more stable schedule of commodity and class rates maintained by the transcontinental railroads and their eastern rail connections. If the regular steamship lines are required to pay Panama tolls, their payments to the Government will be a part of their operating expenses, which will thus be increased by the amount of the tolls. If the steamship companies were exempted from the payment of tolls they would thereby receive a subsidy equal to the amount of the tolls not collected by the Government.

The policy of toll exemption for the owners of the coastwise ships was urged upon Congress by appeals to patriotism. It was held to be a duty to aid the merchant marine under the American flag; and a subsidy in the form of toll exemption was granted to the owners of coastwise ships. No assistance was to be given vessels serving the foreign trade of the United States. The carriers that were to have been given this subsidy have a monopoly of the coastwise traffic, no foreign-owned ships being allowed to enter the domestic trade. Was the subsidy necessary or was it justifiable?

Senator Root, in the eloquent and forceful speech which he delivered in the Senate January 21, 1913, characterized the coastwise shipping business as "the most highly and absolutely protected special industry in the United States." This industry, moreover, is prosperous, not languishing. not languishing. There are over 3,500,000 tons of ships enrolled for the domestic trade, on the Atlantic and Pacific seaboards, and the opening of the Panama Canal will cause a large addition to be made to the coastwise fleet. It would seem that our navi

gation laws now give the shipping owned by the coastwise carriers sufficient aid and protection. At least, the burden of proof is upon the coastwise steamship companies to show need of further assistance.

It is important that business principles should be adhered to in the management of the Panama Canal. Indeed, it ought to be accepted as axiomatic that the United States Government should operate the canal in a business-like way; that the tolls charged by the Government should, if possible, be such as will stimulate traffic and at the same time safeguard the owners of the waterway against an annual deficit. If it were a private enterprise, it would be well to insist upon its being managed, if possible, so as to yield its owners a profit; but the canal being a government undertaking, it will be best for the United States to collect such revenues as are needed to meet operating and maintenance expenses and interest charges, and to provide a sinking fund that will eventually return to the treasury the sum invested in the canal.

In advocating the policy of adhering to business principles in the management of the Panama Canal, it is not recommended that the rate of tolls should be high. Indeed, the schedule of charges fixed by the President establishes relatively low rates rates that will not unduly restrict the use of the canal. The owners of the vessels that serve the coastwise trade will derive greater benefit from the canal than will the owners of any other vessels. Rates double those established by the President might be imposed without preventing the canal from being used by the coastwise

carriers. In view of these facts, it seems just that those who derive immediate benefit from the use of the canal should pay reasonable tolls. Congress acted wisely when, by the act of June 15, 1914, it repealed the provision of the law of August 24, 1912, which had exempted the shipping engaged in the coastwise trade of the United States from the payment of Panama Canal tolls.

APPENDIX

NEUTRALITY OF PANAMA CANAL ZONE

Since this book went to press the President of the United States has issued a proclamation prescribing "Rules and Regulations Governing the Use of the Panama Canal by Vessels of Belligerents and the Maintenance of Neutrality by the United States in the Canal Zone." It is noteworthy that a proclamation of this kind has been necessary so soon after the actual opening of the Canal to traffic. The proclamation is of general interest in connection with the subject matter of this book, and it is of especial interest just at the present time. The text of the proclamation follows:

BY THE PRESIDENT OF THE UNITED STATES OF AMERICA

A PROCLAMATION

WHEREAS, the United States is neutral in the present war and WHEREAS the United States exercises sovereignty in the land and waters of the Canal Zone and is authorized by its treaty with Panama of February twenty-six, nineteen hundred and four, to maintain neutrality in the cities of Panama and Colon, and the harbors adjacent to the said cities:

Now, THEREFORE, I, WOODROW WILSON, President of the United States of America, do hereby declare and proclaim the following Rules and Regulations Governing the Use of the Panama Canal by Vessels of Belligerents and the Maintenance of Neutrality by the United States in the Canal Zone, which are in addition to the general "Rules and Regulations for the Operation and Navigation of the Panama Canal and Approaches Thereto, including

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all Waters under its jurisdiction" put into force by Executive Order of July 9, 1914, and I do bring to the attention of all concerned the Protocol of an Agreement between the United States and the Republic of Panama, signed at Washington, October 10, 1914, which protocol is hereunto annexed.

Rule 1. A vessel of war, for the purposes of these rules, is defined as follows: a public armed vessel, under the command of an officer duly commissioned by the government, whose name appears on the list of officers of the military fleet, and the crew of which are under regular naval discipline, which vessel is qualified by its armament and the character of its personnel to take offensive action against the public or private ships of the enemy.

Rule 2. In order to maintain both the neutrality of the Canal and that of the United States owning and operating it as a government enterprise, the same treatment, except as hereinafter noted, as that given to vessels of war of the belligerents shall be given to every vessel, belligerent or neutral, whether armed or not, that does not fall under the definition of Rule 1, which vessel is employed by a belligerent Power as a transport or fleet auxiliary or in any other way for the direct purpose of prosecuting or aiding hostilities, whether by land or sea; but such treatment shall not be given to a vessel fitted up and used exclusively as a hospital ship.

Rule 3. A vessel of war of a belligerent, or a vessel falling under Rule 2 which is commanded by an officer of the military fleet, shall only be permitted to pass through the Canal after her commanding officer has given written assurance to the Authorities of the Panama Canal that the Rules and Regulations will be faithfully observed.

The authorities of the Panama Canal shall take such steps as may be requisite to insure the observance of the Rules and Regulations by vessels falling under Rule 2 which are not commanded by an officer of the military fleet.

Rule 4. Vessels of war of a belligerent and vessels falling under Rule 2 shall not revictual nor take any stores in the Canal except. so far as may be strictly necessary; and the transit of such vessels through the Canal shall be effected with the least possible delay in accordance with the Canal Regulations in force, and with only such intermission as may result from the necessities of the service.