From the foregoing brief outline of the issues and arguments presented in the diplomatie discussion of this controversy it will be seen that it is still an open question as to whether the two Governments can not harmoniously settle their differences with regard to this treaty without resorting to arbitration. Great Britain has proposed arbitration, and the United States has not as yet accepted that suggestion, but it has not refused to do so, having taken the position that the issues between the two countries should first be more clearly defined, and that arbitration at present would be premature, because the controversy has not yet passed beyond the stage when it could profitably be dealt with by diplomatic negotiation.

To sum up the whole situation, the United States and Great Britain differ as to the meaning and effect of the treaty in its relation to certain features of the Panama Canal act. Great Britain has asked that these differences should be settled by arbitration, and the United States has replied that there is as yet no necessity for resorting to arbitration, for even under Great Britain's interpretation of the treaty it is believed that they have failed to make out a case showing any violation of treaty obligations. In other words, the United States in effect has interposed a demurrer to the British complaint and contended that even under the British interpretation of the Hay-Pauncefote treaty the provisions of the Panama Canal act, when taken in conjunction with the President's proclamation, are not in conflict with that treaty; and that the objections advanced by Sir Edward Grey do not present any questions which, under the terms of our arbitration treaty with Great Britain, can fairly be regarded as requiring submission to arbitration at the present stage of the discussion.

[From Senate Document No. 2, Sixty-third Congress, special session.] THE PANAMA CANAL-SHALL IT BE AMERICAN OR ANGLOAMERICAN?

(Article by Samuel Seabury, justice of the Supreme Court of the State of New York, printed in the Outlook on March 8, 1913.)

"I commend an American canal, on American soil, to the American people." (Gen. Grant.)

"The policy of this country is a canal under American control. The United States can not consent to surrender this control to any European power." (President Hayes.)

Introduction.

As early as 1550 the idea of a canal which should unite the waters of the Atlantic and of the Pacific was publicly discussed. From that time until the present idealists have dreamed and statesmen have struggled to bring about its realization. Difficulties-physical, financial, and political-have barred the pathway which led to achievement. The treaty which the United States made with the Republic of Panama removed the legal and political obstacles in the way of commencing the task which had been so long in contemplation. Since that time the United States has acted with characteristic energy. One of the greatest engineering achievements of mankind is being carried to a successful conclusion. The cost of the canal to the Government of the United States will exceed $400,000,000. In the near future vessels of commerce will pass through the canal from the Atlantic to the Pacific. It is estimated that within a year from the time it is opened a net tonnage of over 10,000,000 tons will use the canal. Of this tonnage, not quite one-quarter will be engaged in American coastwise trade. The Panama route will have a monopoly of the traffic of Hawaii and of the west coast of North and South America, with the exception of a small part of the trade of southern Chile, although it must compete with other routes for the large and valuable commerce of Pacific Asia and of Australia. The canal will decrease the distance from New York to San Francisco about 8.500 miles, and from New York to Australia about 4,000 miles. The saving in time for a vessel of 9 knots speed from New York to Iquique, Chile, one of the ports from which the heavy nitrate shipments are made, will be over 23 days. The trip from Liverpool to Iquique will be decreased nearly 3,000 miles. The saving of time and money which will result to those engaged in the world's commerce by the use of the Panama Canal can not be calculated.

The Panama Canal is the achievement of the United States alone. No other nation has aided in its creation. In August, 1912, the act of Congress making provision for the permanent government of the Canal Zone became a law. The law exempts coastwise trade from tolls. This comparatively unimportant provision and the provisions of the law which deny the right to use the canal to vessels owned by railway companies and those violating the provisions of the Sherman antitrust law have been made the basis of a formal protest by Great Britain on the ground that they are in conflict with the Hay-Pauncefote treaty. That protest raises questions of the utmost importance. The manner in which those questions shall be determined will profoundly affect the commercial development and national integrity of the United States.

The History of the Canal.

A brief history of the Panama Canal is essential to an understanding of the present controversy. In 1846 a treaty was entered into between the United States and Colombia, then called New Granada. The treaty gave to the United States a right of transit over the Isthmus of Panama "from the one to the other sea. The Panama Railroad, which was completed in 1855, was a result of this treaty. In 1849 the United States entered into a treaty with Nicaragua which provided for the construction of a ship canal from Greytown (San Juan), on the Atlantic coast, to the Pacific coast by way of the Lake of Nicaragua. Great Britain, claiming a protectorate over the Mosquito Indians, in whose territory the Atlantic end would be placed, insisted that it alone should dictate the terms upon which the Nicaragua route should be opened. The British claim was in defiance of the Monroe doctrine and without moral or legal basis.

Mr. Lawrence, United States minister at London, presented the protest of his Government. It was ignored. Sir Henry Bulwer, the British minister at Washington, realizing that Mr. Clayton, the Secretary of State in President Zachary Taylor's Cabinet, had been alarmed by other acts of British aggression involving the seizure of Tigre Island, ignored Mr. Lawrence and concluded the Clayton-Bulwer treaty directly with Mr. Clayton. This treaty was ratified July 5, 1850. The treaty provided that neither Great Britain nor the United States should ever obtain or maintain for itself any exclusive control over the canal or erect fortifications upon it, nor occupy or exercise any dominion over any part of Central America; and that in the event of war the vessels of Great Britain or the United States must be permitted to pass unmolested, and that both parties should guard the safety and preserve the neutrality of the canal. The treaty also provided that the parties to it had been actuated not only by the desire to accomplish a particular object, “but also to establish a general principle," and that "they hereby agree to extend their protection, by treaty stipulation, to any other practicable communication, whether by canal or railway, across the Isthmus and especially to interoceanic communications ** * * which are now proposed to be established by way of Tehuantepec or Panama."

* * *

By this treaty Great Britain tied the hands of the United States and reserved to herself the absolute power of obstruction. It is unnecessary to comment upon the opposition which the American people manifested to this treaty or to trace the many diplomatic controversies which arose in regard to it or to note the forcible objections which Seward, Evarts, and Blaine felt compelled to make to it. The significant fact to be here noted is that until the treaty was superseded in 1901 it presented a complete bar to the efforts of the United States to secure the building of the canal.

In 1878 the Wyse concession was made by Colombia, and subsequently a French construction company was organized under the presidency of Ferdinand de Lesseps to build the Panama Canal. The prospect of the canal under French control was cause for alarm in the United States. In a special message to Congress, March 8, 1880, President Hayes asserted that the policy of the United States required a canal under American control. Mr. Blaine, in language so forcible as not to permit of misunderstanding, pointed out that the passage of the armed vessels of a hostile nation through the Panama Canal would be no more admissible than the passage of armed forces of a hostile nation over the railway lines joining the Atlantic and the Pacific shores of the United States. The French Government gave the United States its assurance than it did not aim at political control, and expressed "its firm purpose to allow the character

of the enterprise inaugurated by M. de Lesseps to remain an essentially private one." (See the Treaty regulations of the United States and Colombia," by John H. Latané, Ph. D., Annals of the American Academy of Political Science, 1903.) The failure of the French company in 1888 permanently defeated the efforts of M. de Lesseps, and the hope that the canal would be built was again deferred.

On November 18, 1901, the Hay-Pauncefote treaty was concluded. It recites the desire of the United States and Great Britain to facilitate the construction of a ship canal "by whatever route may be considered expedient" and to remove the objections arising from the Clayton-Bulwer treaty without impairing the "general principle of neutralization established in article 8 of that convention."

The first article of the treaty provided that it should supersede the ClaytonBulwer treaty. The second article provides "that the canal may be constructed under the auspices of the Government of the United States," either at its own cost or by gift or loan of money to individuals or corporations or through subscription to or to purchase of stock and shares. This article also provides that the United States "shall have and enjoy all the rights incident to such construction, as well as the exclusive right of providing for the regulation and management of the canal."

The third article of the Hay-Pauncefote treaty deals with the neutralization of the canal, and in its first subdivision provides that "the canal shall be free and open to the vessels of commerce and of war of all nations observing these rules, on terms of entire equality, so that there shall be no discrimination against any such nation, or its citizens or subjects, in respect of the conditions or charges of traffic or otherwise. Such conditions and charges shall be just and equitable."

Article 4 of the treaty provides "that no change of territorial sovereignty or of international relations of the country or countries traversed by the beforementioned canal shall affect the general principle of neutralization or the obligation of the high contracting parties to the present treaty." This clause was evidently inserted to guard against the treaty's being impaired by changes in the South American Republics, but it did not contemplate the possibility of the United States acquiring the territory through which the canal is to be pierced. A study of the treaty in connection with the convention of Constantinople and with a full understanding of the circumstances under which the treaty was made shows clearly that the acquisition of the canal territory by the United States was not foreseen by either of the contracting parties. It should be noted that nothing contained in the treaty imposes any prohibition upon either of the contracting parties from purchasing territory to be traversed by the proposed canal.

On January 20, 1902, President Roosevelt sent to Congress a message recommending the construction of the canal at Panama. His message proposed the purchase of the French rights for $40,000,000. Congress acted upon this suggestion and appropriated $170,000,000, and directed the President, if the consent of Colombia could not be obtained, to have the canal constructed by the Nicaragua route at a cost not to exceed $180,000,000. The Hay-Herran treaty between the United States and Colombia was then negotiated, by which Colombia was to grant the desired privilege in return for $10,000,000 and an annual rental of $250,000. The terms of this proposed treaty had been agreed upon between the accredited representatives of the United States and Colombia, and the Senate of the United States on March 17, 1903, ratified the proposed treaty. The Colombian Government, however, sought to repudiate the promise of its representative, and indicated that it would ratify the treaty if it was paid $25,000,000. When the United States refused to yield to this demand Colombia concluded that it could not "constitutionally comply with its promise to ratify the treaty. That the alleged constitutional objection was a mere pretense is evident from the fact that it could have been overcome by a payment of $15,000,000 more than the United States had agreed to pay and Colombia to accept. The action of Colombia in causing the proposed treaty to fail of ratification incensed and embittered the people of the State of Panama, whose interests would have been greatly promoted by the construction of the canal. The attitude of Colombia served to intensify the spirit of revolt among the people of Panama, who for many years had been treated unjustly by the Colombian Government. This last act of Colombia showed such a total disregard of the interests of the people of Panama and was instigated by motives

so sordid and odious that the State of Panama seceded from Colombia and established a provisional government. Within a short time the United States, Great Britain, and France recognized the independence of the new Republic of Panama.

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On November 18, 1903, M. Bunau-Varilla, the accredited representative of Panama, and Secretary Hay signed the treaty of Panama, which was duly ratified. This treaty grants the United States in perpetuity a zone of land and land under water for the construction, maintenance, operation, sanitation, and protection of the canal of the width of 10 miles, beginning in the Caribbean Sea and extending to and across the Isthmus of Panama into the Pacific Ocean, with the exception of the cities of Panama and Colon. Certain other incidental territory and islands are also granted. The treaty grants the United States "all the rights, power, and authority" within the zone mentioned "which the United States would possess and exercise if it were the sovereign of the territory within which the said lands and waters are located, to the entire exclusion of the Republic of Panama of any such sovereign rights, power, and authority." Article 5 of this treaty grants to the United States in perpetuity a monopoly for the construction, maintenance, and operation of any system of communication, by means of canal or railway, across its territory between the Caribbean Sea and the Pacific Ocean. In return for this grant the United States guarantees to maintain the independence of the Republic of Panama and to pay Panama $10,000,000, and from nine years after the date of the treaty to make an annual payment of $250,000 during the life of the treaty. The eighteenth article of this treaty provides that the canal, when constructed, and the entrances thereto, shall be neutral in perpetuity, and shall be opened upon the terms provided for by section 1 of article 3 of and in conformity with all the stipulations of the treaty entered into by the Governments of the United States and Great Britain on November 18, 1901." In considering this provision of the Panama treaty, it is to be borne in mind that it is binding only upon the parties to it. That treaty prescribes and defines the correlative rights and duties of the United States and of the Republic of Panama. It does not enlarge the rights of Great Britain in reference to the canal. Great Britain was not a party to the Hay-Varilla treaty, and any obligation that was imposed upon the United States under it is due solely to the Republic of Panama, and is subject to any change that may be effected by mutual consent of the contracting parties. This historical outline makes clear the steps which the United States has taken and the difficulties which it has finally overcome. The territory through which the canal is being constructed is subject solely to the sovereignty of the United States. Now that the United States has done everything requisite and necessary to make the canal available for use and has pledged itself to preserve to the commerce of the world the right to use it upon fair and reasonable terms, Great Britain comes forward to enter its protest against the exemption of American coastwise trade, with which, under existing laws, foreign nations can not compete.

The British Protest.

The Panama Canal act, providing for the government of the Canal Zone and exempting coastwise trade from tolls, was enacted after a careful and scientific inquiry by Congress into the conditions affecting the Panama Canal. On December 9, 1912, Ambassador Bryce filed with the Secretary of State of the United States a protest against certain provisions of the Panama Canal act. The protest was signed for the British Government by Sir Edward Grey. The protest is based on the contention that the provisions of the Panama Canal act contravene the provisions of the Hay-Pauncefote treaty. The particulars in which this act is claimed to be in conflict with the treaty are: (1) The provisions of section 5 of the act, which confer upon the President, within certain defined limits, the right to fix the tolls, but provide that no tolls are to be levied upon ships engaged in the coastwise trade of the United States. There is also an exemption made pursuant to article 19 of the Panama treaty, according to which the Republic of Panama has the right to transport over the canal its vessels and its troops and munitions of war without paying charges of any kind. If the United States should yield to this part of the British protest it would be necessary for it to act in violation of its treaty with the Republic of Panama. It is claimed that these provisions, first, are in conflict with the rule established in article 8 of the Clayton-Bulwer treaty of equal treatment for British and United States ships; and, second, would enable tolls to be fixed

which would not be just and equitable and would therefore not comply with rule 1 of article 3 of the Hay-Pauncefote treaty. (2) The provisions of section 11 of the act, which prohibit a railway company subject to the interstate-commerce act of 1887 from having any interest in vessels which operate through the canal, and that part of the same section which provides that a vessel permitted to engage in coastwise or foreign trade of the United States shall not be permitted to use the canal if its owner is guilty of violating the Sherman Antitrust Act.

Both of these claims rest upon the assumption that the events which have occurred since the ratification of the Hay-Pauncefote treaty can have no effect upon the validity of that treaty. In reference to the claim based on section 11 of the act, the protest makes no argument, but calls attention to the fact that if the provisions of that section are to be deemed applicable to British ships, the British Government reserves the right to amplify its protest after further study of the question involved. The reasons which impelled Congress to enact section 1 of the act are obvious. By these provisions it was sought to prevent monopoly of transportation in the canal and thus to keep the canal open to the free competition of the commerce of the world. Experience has taught the lesson that when the same company controls the means of transportation by land and sea competition is rendered impossible.

President Taft, in an effort to place upon the Hay-Pauncefote treaty a construction which would make it adaptable to the changed conditions which have resulted since the acquisition of the Canal Zone by the United States, treated the words "all nations," used in subdivision 1 of article 3 of the Hay-Pauncefote treaty, as excluding the United States. The British protest refuses to accept this construction, and, referring to the argument of President Taft, announces plainly that "His Majesty's Government believe this statement of the case to be wholly at variance with the real question. They consider that by the Clayton-Bulwer treaty the United States has surrendered the right to construct the canal, and that by the Hay-Pauncefote treaty it recovered that right, upon the footing that the canal should be open to British and United States vessels upon equal terms." Great Britain, therefore, having explicitly refused to be bound by any construction of the treaty which recognizes and makes allowance for the changed conditions which have resulted since the adoption of the treaty, squarely presents to the United States the alternative of adopting an American canal policy or an Anglo-American canal policy. Under the Clayton-Bulwer treaty Great Britain claimed to be a partner in the canal enterprise with the United States. Under the British protest, transmitted by Sir Edward Grey, Great Britain still claims all the benefits of a partnership, although all the burdens of the enterprise are, under the Hay-Pauncefote treaty, to be borne solely by the United States. The importance of the protest consists, not in the fact that it relates to tolls, but in the fact that it carries with it the assertion that the Hay-Pauncefote treaty exists with the same force and effect today that it possessed before the United States became the sovereign over the territory through which the canal is being constructed. If this claim be admitted and the words "all nations," as used in subdivision 1 of article 3 of the Hay-Pauncefote treaty, are to be regarded as including the United States, then the following consequences result:

The United States must impose the same rate of tolls upon its merchant ships, war ships, or Government vessels that it does upon those of foreign nations; it can never blockade the canal or exercise any right of war in it, even if it is itself a belligerent, and the representatives of the United States at Panama must open the locks and escort a hostile fleet through the canal; if the United States becomes a belligerent it shall not revictual or take stores in the canal, except when strictly necessary; it shall not embark or disembark troops or munitions of war in the canal territory, and its own war vessels shall not remain in the waters adjacent to the canal within the 3-mile limit for longer than 24 hours at any one time; and it can not use the plant and surroundings of the canal for any hostile purpose.

In short, if the United States should become a belligerent, it could not use its own canal for naval and military purposes, and the canal would be of no more strategic value to it than it would be to its enemy. (Judge Seabury is, of course, stating these conclusions as a reducto ad absurdum. The reply to this argument, made by those who advocate the maintenance of the HayPauncefote treaty, is that in time of war all treaties will be abrogated, but the