The Panama Canal Tolls Controversy OR A Statement of the Reasons for the Adoption and Maintenance of the Traditional American Policy in the Management of the Panama Canal WITH INTRODUCTIONS BT William J. Bryan, Secretary of State Oscar S. Straus, Member of the Hague Court Wm, Hughes, United States Senator By HUGH GORDON MILLER of the New York Bar, former Special Assistant to the Attornej'-General of the United States and JOSEPH C. FREEHOFF, PH. D. Statistician with the Public Service Commission for New York City BOSTON Chapple Publishing Company, Ltd. 1914 . , , , .-- COPYRIGHT, 1914 Chapplb Publishino Compant, Limited Boston, Massachusetts -Rills' to PRESIDENT WOODROW WILSON (DEMOCRAT) whx) in his efforts to secure the repeal of the tolls- exemption clause of the Panama Canal act, took and successfully maintained as exalted moral, courageous and patriotic a position as was ever taken and maintained by any Executive of any nation; SENATOR ELIHU ROOT (REPUBLICAN) former Secretary of State and authority on international questions, whose persistent efforts and unanswerable arguments contributed most in support of the President to secure the repeal of the foregoing statute; and HON. OSCAR S. STRAUS (PROGRESSIVE) Minister and late Ambassador to Turkey; member of the Permanent Court of Arbitration at the Hagu€, succeeding Benjamin Harrison, ex- President; lawyer, author, statesman and author- ity on matters of diplomacy, for using his great influence in favor of the repeal of tlie foregoing clause repugnant to the Hay-Pauncefote Treaty. CONTENTS Page Introduction by William J. Bryan xxi Introduction by Oscar S. Straus xxiii Introduction by William Hughes xxvii Chapter I. — The Meaning of the Hay-Pauncefote Treaty 1 Chapter II. — Legal and Moral Aspects of Tolls Exemption 71 Chapter III. — The Financial Aspects of Tolls Exemption 140 APPENDICES Page (a) The Claj-'ton-Bulwer Treaty 171 (6) The Suez Canal Convention 178 (c) The Hay-Pauncefote Treaty of 1900 .... 185 (d) The Hay-Pauncefot« Treaty of 1901 .... 189 (e) Treaty with Panama 193 i t PREFACE THIS work was undertaken for the purpose of showing the meaning of the Hay-Pauncefote treaty; and, while the subject is uppermost in public attention, to give that meaning the widest possible publicity. We concluded, upon examination of the record after President Wilson's brief message asking the Congress to repeal the tolls-exemption clause of the Panama Canal act, that many honest, sincere and patriotic American citizens had, as we ourselves had before examining the subject in a judicial frame of mind, assumed basic conditions contrary to the actual record, and that many had argued upon popular misconceptions of vital facts. We aimed to present a conclusive statement of facts demonstrating that the United States cannot grant free transportation through the Panama Canal to its coastwise and foreign shipping without violating the Hay-Paunce- fote treaty. This work is })rimarily a source book. Chapter I contains the traditional documents and the sections of other treaties which assist one in ascertaining the real meaning of the Hay-Pauncefote treaty. The letters of the negotiators of the treaty supplement these data. By comments and the use of quotations, we aimed to weave this material into a connected whole so that the viii Preface real meaning of the Hay-Pauncefote treaty would stand out distinctly. In Chapter II we assembled able arguments of public men in favor of the repeal of the tolls-exemption clause of the Panama Canal act. This Chapter and Chapter I are primarily designed to be sources of documents, ex- cerpts from treaties, letters and arguments by others. It is believed that therein are assembled all the docu- ments and arguments necessary to arrive at a correct conclusion. These documents and arguments are widely scattered. They are here assembled in one volume for the convenience of those desiring a correct understanding of this memorable controversy. Chapters I and II contain the essential documents bearing on the meaning of the treaty and excerpts from con\'incing arguments in favor of the repeal of the tolls- exemption clause of the Panama Canal act. These are woven into a connected statement thus combining the source book and connected argument method. It seemed to the authors that this would be the most effective method of presenting the data having a bearing on the meaning of the treaty and the arguments showing that meaning. Owing to the nature of the material used and the manner of using it, it was not always possible to give adequate credit. Readers of the able speeches of Senators Root, McCumber, Burton and Representative Stevens will readily see that great use has been made of their arguments. The addresses of these three Senators and of Representative Stevens are the principal source of the secondary material used in this work. Preface ix In Chapter III we have supplemented the meager data on the financial aspects of the question by an ex- tended original discussion of the business and public utility aspect of the Panama Canal. The argument is based on the fact that our traditional policy, the clause of the treaty, "Such conditions and charges of traffic shall be just and equitable," and the method adopted in securing title to the Canal Zone obligate the United States to treat this international waterway as a public utility. The financial and commercial policy that the United States must adopt to conform thereto is outlined. It is shown that this policy is in complete harmony with the Hay-Pauncefote treaty. The work contains some repetition. Because of the number of sources from which the material used was drawn, repetition could not have been avoided. It would not have been desirable to have avoided it entirely if it could have been easily done. All minds are not equally mature and so it may well be that the method of here a little and there a little from different standpoints is the way of correct understanding. Fundamental principles and important documents are involved in the consideration of a question like this, and, as they have a bearing on the various standpoints from which the question was considered, repetition was inevitable. We aimed to assemble that which would be most effective from many sources and to weave it into a connected whole. This makes accessible in a single volume all that is worth while that has any bearing on the tolls-exemption controversy. X Preface It is customary for quotations to be printed solid in order to set them apart from the context. It was not found feasible to do so in this work owing to the extent to which quotations have been used. Quotations within quotations are printed solid in order to difiPerentiate them from the quotations of which they are a part. This work was well advanced before the tolls-exemp- tion clause of the Panama Canal act was repealed. Its tone is argumentative — urging repeal. The same argu- ments will apply if any attempt is made to re-enact the clause or a similar one. That is why this work was under- taken and prosecuted to its final conclusion — publication. Its sole object is opposition to tolls-exemption inasmuch as it would violate the Hay-Pauncefote treaty. The tolls-exemption clause of the Panama Canal act is repealed. This is primarily due to the efforts of those members of the Democratic Party who loyally supported the President. Paramount credit is due to them. Able addresses in favor of the repeal of this statute were de- livered by them in the Senate and in the House. To have used excerpts from these speeches would have resulted in needless repetition. Suffice it to say that excerpts therefrom could have been used in place of arguments actually used without impairment of the strength of the narrative. The tolls-exemj)tion clause of the Panama Canal act was clearly in violation of the Hay-Pauncefote treaty, and reversed the traditional policy of the United States. This work was prepared in the hope that it would assist in keeping tolls-exemption for our coastwise and foreign commerce in a state of innocuous desuetude. Preface xi During the McKinley administration the Hay-Paunce- fote treaty was negotiated. Before it was signed Roose- velt had become President. His iSrst pubHc utterance as President was to the effect that he would keep unbroken the policies of William McKinley. Roosevelt kept the faith. The McKinley-Hay canal policy was kept un- broken. Observe Roosevelt's own statement in its proper setting: Mr. Hay, in transmitting the Hay-Pauncefote treaty to the President, writes: "I submit for your consideration * * * a convention * * * to remove any objection which may arise out of the * * * Clayton-Bulwer treaty * * * without im- pairing the ^general principle'' of neutralization established in Article 8 of that convention." President Roosevelt, in transmitting the treaty to the Senate, says: "I transmit, for the advice and consent of the Senate to its ratification, a convention signed November 18, 1901, * * * to remove any objection which may arise out of the convention of April 19, 1850, * * * to the construction of §uch canal under the auspices of the Government of the United States without impairing the 'general principle" of neutralization established in Article 8 of that convention." The following is the ^'general principle'' as understood at that time by those who negotiated the treaty: "It is always understood by the United States and Great Britain that the parties constructing or owning the same — the interoceanic communication — shall impose no xii Preface other charges or conditions of traffic thereupon than are just and equitable, and that the same canals or railways, being open to the citizens and subjects of the United States and Great Britain on equal terms, shall also be open on like terms to the citizens and subjects of every other state." The "general principle" had the unqualified approval of President McKinley. Note the following by Secretary of State Hay: "The President was, however, not only willing but desirous that 'the general principle' of neutralization referred to in the preamble of this treaty should be applicable to this canal now intended to be built, not- withstanding any change of sovereignty or of international relations of the territory through which it should pass. This 'general principle' of neutralization had always in fact been insisted upon by the United States." President Roosevelt kept the faith as stated above. Note the following: President Roosevelt, in submitting the second Hay- Pauncefote treaty, said: "It specifically provides that the United States alone shall do the work of building and assume the responsi- bility of safeguarding the canal and shall regulate its neutral use by all nations on terms of equality without the guaranty of interference of any outside nation from any quarter." * * * Again, he says, on January 4, 1904, in a special message: "* * * Under the Hay-Pauncefote treaty it was explicitly provided that the United States should control, Preface xiii police and protect the canal which was to be built, keeping it open for the vessels of all nations on equal terms. The United States thus assumes the position of guarantor of the canal and of its peaceful use by all the world." In a note by Secretary Hay on the following day, he states : " * * * The Clayton-Bulwer treaty was conceived to form an obstacle, and the British Government there- fore agreed to abrogate it, the United States only prom- ising in return to protect the canal and keep it open on equal terms to all nations, in accordance with our tradi- tional policy.''' The meaning of the Hay-Pauncefote treaty is made clear in the following by Secretary Hay: "More direct and convincing is the evidence of Willis Fletcher Johnson, a journalist of the highest standing, who recalls distinctly a conversation with Secretary Hay in 1904 to this effect: "I asked Colonel Hay plumply if the treaty meant what it appeared to mean on its face, and whether the phrase, 'vessels of all nations,' was intended to include our o^Ti shipping, or was to be interpreted as meaning 'all other nations.' The Secretary smiled, half indul- gently, half quizzically, as he replied: " 'All means all. The treaty was not so long that we could not have made room for the word 'other' if we had understood that it belonged there. 'All nations' means all nations, and the United States is certainly a nation.' " 'That was the understanding between yourself and Lord Pauncefote when you and he made the treaty.'' I pursued. xiv Preface " *It certainly was,' he replied. *It was the under- standing of both Governments, and I have no doubt that the Senate realized that in ratifying the second treaty without such an amendment it was committing us to the principle of giving all friendly nations equal privileges in the canal with ourselves. That is our Golden Rule.' " — Harvey. Ambassador Choate confirms this construction of the Hay-Pauncefote treaty in the following: "It is true that I had something to do with the nego- tiation of this treaty. In the summer of 1901 — you will remember that the treaty was ratified by the Senate in November, 1901 — I was in England until October and was in almost daily contact with Lord Pauncefote and was also in very frequent correspondence with Mr. Hay, our Secretary of State, under whom I was acting. "As the lips of both of these diplomatists and great patriots, who were each true to his own country, and each regardful of the rights of others, are sealed in death, I think it is quite proper that I should say what I believe both of them, if they were here, would say today, that the clause in the Panama Canal bill exempting coast- wise American shipping from the payment of tolls is in direct violation of the treaty. I venture to say now that in the whole course of the negotiation of this particular treaty, no claim, no suggestion, was made that there should be any exemption of anybody." It is evident that Roosevelt as President, John Hay as Secretary of State and Joseph H. Choate as Ambassa- dor to Great Britain gave Great Britain to understand and Great Britain did understand when the Hay-Paunce- Preface xv fote treaty was prepared and proclaimed that tlie "'general principle'' found in Article VIII of the Clayton-Bulwer treaty was preserved unim})aired. The Roosevelt administration gave Great Britain to understand that the United States would construct and operate the canal "for the benefit of mankind on equal terms to all" as the mandatory of civilization. The Taft administration sought to deprive Great Britain of the foregoing right by the tolls-exemption clause of the Panama Canal act. The Wilson administration restored to Great Britain, in the repeal of the tolls-exemption clause of the Panama Canal act, her rights under the Hay- Pauncefote treaty. President Wilson asked this of Congress in the following message, worthy of the occasion: "Gentlemen of the Congress: I have come to you upon an errand which can be very briefly performed, but I beg that you will not measure its importance by the immber of sentences in which I state it. No communi- cation I have addressed to the Congress carried with it graver or more far-reaching implications as to the interest of the country, and I come now to speak upon a matter with regard to which I am charged in a particular degree, by the Constitution itself, with personal responsibility. "I have come to ask you for the repeal of that provision of the Panama Canal act of August 24, 1912, which ex- empts vessels engaged in the coastwise trade of the United States from payment of tolls, and to urge upon you the justice, the wisdom, and the large policy of such a repeal with the utmost earnestness of which I am capable. xvi Preface "In my own judgment, very fully considered and maturely formed, that exemption constitutes a mistaken economic policy from every point of view, and is, moreover, in plain contravention of the treaty with Great Britain concerning the canal concluded on November 18, 1901. But I have not come to urge upon you my personal views. I have come to state to you a fact and a situation. Whatever may be our own differences of opinion concerning this much debated measure, its meaning is not debated out- side the United States. Everywhere else the language of the treaty is given but one interpretation, and that interpretation precludes the exemption I am asking you to repeal. We consented to the treaty; its language we accepted, if we did not originate it; and we are too big, too powerful, too self-respecting a Nation to interpret with a too strained or refined reading the words of our own promises just because we have power enough to give us leave to read them as we please. The large thing to do is the only thing we can afford to do, a voluntary with- drawal from the position everywhere questioned and mis- understood. We ought to reverse our action without raising the question whether we were right or wrong, and so once more deserve our reputation for generosity and for the redemption of every obligation without quibble or hesitation. "I ask this of you in support of the foreign policy of the administration. I shall not know how to deal with other matters of even greater delicacy and nearer consequence if you do not grant it to me in ungrudging measure." The high moral purpose of this memorable state paper is recognized abroad. Sir Edward Grey, the British Preface x\'ii Foreign Secretary, complemented it in a speech in tlie House of Commons. In the course of his remarks, he exposed misrepresentation, and, in so doing, revealed the exalted sense of justice of our President. The following excerpts from Sir Edward Grey's speech should have the widest circulation: "It is due to the President of the United States and to ourselves that I should so far as possible clear away that misrepresentation. It was stated in some quarters that the settlement was the result of bargaining or diplomatic pressure. Since President Wilson came into office no correspondence has passed, and it ought to be realized in the United States that any line President Wilson has taken was not because it was our line, but his own. "President Wilson's attitude was not the result of any diplomatic communication since he has come into power and it must have been the result of papers already pub- lished to all the world. "It has not been done to please us or in the interests of good relations, but I beheve from a much greater motive — the feeling that a government which is to use its influence among the nations to make relations better must never when the occasion arises flinch or quail from interpreting treaty rights in a strictly fair spirit." The following is in harmony therewith: "London, July 4. — Viscount Bryce, former British Ambassador to the United States, speaking at the Inde- pendence Day dinner of the American Society, held at the Savoy tonight, paid a high tribute to President Wilson. He said: xviii Preface " 'Courage is a virtue rare among politicians. What we have all admired in the President is his courage in the matter of the canal tolls.' " 'Absolutely no pressure was brought to bear by Great Britain to obtain repeal of the tolls-exemption clause of the Panama Canal act,' he said. He (James Bryce) had told his Government that if President Wilson thought it right to repeal the clause or submit the matter to arbitration he would do it. "Ambassador Page said the last British letter to the United States Government relating to the canal was written by Ambassador Bryce before the end of the Taft administration." President Wilson's attitude toward the tolls-exemption clause of the Panama Canal act was reaffirmed in his Fourth of July address at Independence Hall. It is reported as follows: "I say that it is patriotic sometimes to prefer the honor of the country to its material interest. Would you rather be deemed by all nations of the world incapable of keeping your treaty obligations in order that you might have free tolls for American ships? The treaty under which we gave up that right may have been a mistaken treaty, but there was no mistake about its meaning. "When I have made a promise as a man I try to keep it, and I know of no other rule permissible to a nation. The most distinguished nation in the world is the nation that can and will keep its promises even to its own hurt. And I want to say, parenthetically, that I do not think anybody was hurt. I cannot be enthusiastic for sub- sidies to a monopoly, but let those who are enthusiastic Preface xix for subsidies ask themselves whether they prefer sub- sidies to unsullied honor." Tolls-exemptions is a question in which international and not domestic considerations are controlling. As such, political considerations should not have entered into or influenced its discussion. Therefore, a work of this character is properly prepared by persons not members of President Wilson's party but who are in complete agreement \\4th him. The authors of this work are in complete accord with the President's interpretation of the Hay-Pauncefote treaty. As enrolled members of the Progressive Party, they were also politically qualified for the undertaking. This is one reason why preference was given, in the use of quotations, to arguments advanced by members of the Republican Party. The controlling reason was the fact that Senators Root, Burton, Lodge, McCumber and Representative Stevens were, at the time, in an official way in touch with negotiators of the Hay-Pauncefote treaty and had first- hand knowledge of the intent of the negotiators. They were in a position to learn the truth and they did. The then administration was Republican. They be- longed to the inner political circle or were affiliated with a member or members of that circle. Therefore, what they say in support of the tolls policy of the President is of such importance that it should be final with reasonable men. This work is published for the purpose of showing that the Hay-Pauncefote treaty is a world-pact, and, as interpreted by Sir Edward Grey, is an agreement without a flaw as far as concerns all parties in interest. It should be continued without modification as long as the Panama XX Preface Canal endures. If this work contributes aught to secure this end, the result will have justified its publication. The notable introductions to this work by Secretary- Bryan, ex-Ambassador Straus and Senator Hughes make this book to an appreciable degree their handiwork. The authors share with them whatever merit it has and whatever success it may attain. We pause to record our deep appreciation for courtesies shown us in the preparation of this work by Senator Hughes of New Jersey. Words cannot adequately ex- press the extent of our obligations and of our grateful- ness to the Senator. INTRODUCTION DEPARTMENT OF STATE, WASHINGTON, September 4, 1914. Hon. Hugh Gordon Miller and Professor Joseph C. Freehoff, 220 Broadway, New York, N. Y. Gentlemen: — I have read the preface to your proposed volume en- titled, "The Panama Canal Tolls Controversy," and beg to commend both the purpose and the style of the work. From the outline of the book's contents, as set forth in the preface, I feel sure that the publication will be of great value to the public, and will assist American citizens to understand the merits of the question. The position taken by the President on the tolls ques- tion aroused more opposition at that time than it would arouse today, subsequent events having completely vindi- cated the wisdom of his action. The enviable position which our nation occupies today is due, in part, to the fact that it has allowed no doubt to exist as to its purpose to live up to the stipula- tions of its treaty. Introduction heavily in favor of the repeal of the free tolls law, but these were less important than those which affected the international standing of our nation. A government must be above suspicion in the matter of good faith; no pecuniary advantage, even where such an advantage actually exists, can for a moment justify the violation of a treaty obligation, and violation must be the more scrupulously avoided if the question is one which is not to be submitted to arbitration. In international matters the question is not whether we are ourselves certain of our Government's purpose in the position taken, but whether other nations, also, have confidence in our rectitude. The President set a high standard and the support given to him in the Senate and House was as creditable to Congress as it was complimentary to him. The popular approval which is now accorded to both the President and Congress on this subject is proof positive that the people can be trusted to pass judgment upon the merit of international, as well as domestic, questions. Your book will be a reference book to those who have already informed themselves, while it will furnish in- struction to those who have not heretofore been in position to sit in judgment upon the principle involved and the facts adduced in support of the action taken. Very truly yours, (Signed) WM. J. BRYAN. INTRODUCTION There is no more honorable chapter in the highly creditable history of the diplomacy of our country than the repeal of the PANAMA TOLLS ACT under the present administration. Being a controversy affecting our international relations, it is gratifying that, aside from the leadership of the President, the repeal was effected not solely by the party in power, but by the help of leaders in all three parties, rising above the plane of partisan politics to the higher reaches of broad states- manship, guided by a scrupulous regard for our inter- national character in accord with "a decent respect for the opinions of mankind," as expressed in the Declaration of Independence. The debates in Congress upon the subject of repeal proved to be of a quality in learning, ability and elo- quence in keeping with the best traditions of our national legislature. Some of the leading Democratic members of the Senate and the House opposed the President's recommendations for the repeal, while some of the leading members of the opposition effectively supported the Presi- dent. The debates in Congress and the discussion by dis- tinguished publicists developed three distinct points of view. Former President Taft, who when President ap- proved the Panama Act, held substantially that the Act did not violate our treaty obligations, and therefore we had a right to exempt our ships from tolls. A similar po- sition was taken by Senator O'Gorman and Representative xxiv Introduction Underwood, the Administration leaders in the Senate and the House, and other prominent Democrats, some of whom took the ground that there was no basis for arbitration because the question was clear and undoubted, that the provision of our score or more of treaties providing for arbitration when the construction of a treaty was involved did not apply, as there was nothing to arbitrate. A second group of opponents to the repeal held with former President Roosevelt, who will be recognized in history as the father of the Panama Canal, and whose former action and justified course, when all the facts are taken in consideration, free from partisan bias, made it possible for us to build the Canal; he held, while we have the right under the treaties to exempt our coastwise ships from toll, yet, as the Panama Act involved the construc- tion of treaties, it was our duty to arbitrate if arbitration was demanded by Great Britain. A third group, led by Senator Root, whose speech in the Senate will be treasured as a classic in our Congres- sional debates, maintained that the Panama Act was so plainly in violation of our treaty obligations both in letter and in spirit as confirmed by the negotiators and the negotiations of the Hay-Pauncefote treaties, that it was our plain duty to repeal the exemption clause of the Act. The position of President Wilson, as taken in his Special Message to Congress, placed him in a group by himself. In his appeal on moral and international grounds to Congress he said: "The large thing to do is the only thing we can afford to do, a voluntary withdrawal from a position everywhere quoted and misunderstood. We ought to reverse our action without raising the question whether we were right or wrong, and so once more deserve Introduction xxv our reputation for generosity and for the redemption of our every obligation without quibble or hesitation." President Taft, in signing the PANAMA CANAL Act, which was approved by him on the i24th of August, 1J)1'2, filed a memorandum wherein he stated that in a message to Congress he had suggested a possible amend- ment by which all persons and especially British subjects who felt aggrieved by its provisions on the ground that they are in violation of the Hay-Pauncefote treaty, might try that question out in the Supreme Court of the United States. This raises a constitutional question about which there is much misconception, namely, the conflict between a treaty and a later act of Congress. Article II, Section 1 of the Constitution provides that the laws of the United States and all treaties made under the authority of the United States shall be the supreme law of the land. There have been many decisions of the Supreme Court upon the subject which, if read apart from the specific issues involved, are apt to confuse. This subject cannot be adequately considered in this introduction, and there- fore I shall content myself with quoting from Justice Miller's decision in the Supreme Court, in the Head Money Cases, 112 U. S. He says: "A treaty is primarily a compact between independent nations. It depends for the enforcement of its provisions on the interest and the honor of the Governments which are parties to it. If these fail, its infraction becomes the subject of international negotiations and reclamations, so far as the injured party chooses to seek redress, which maj^ in the end be enforced by actual war. It is obvious that irith all this the judicial courts have nothing to do and can give no XX vi Introduction The authors of this book, by learning and ability, are eciuipped to present "THE PANAMA CANAL TOLLS Controversy" with an impartial spirit, and they have rendered a useful serviee in presenting in a clear and connected form this important chapter in our legislative history, together with its bearing upon our international obligations. In the repeal of the Tolls Provision of the Panama Act, we were not cringing or yielding to either Great Britain or to any other foreign power; we were actu- ated not by a spirit of weakness, as some of the opponents of the repeal charged, but by a spirit of conscientious righteousness and of conscious strength. We yielded to our own exalted sense of public honor to the credit of this and future generations of America. The example we have set will not be forgotten. That it was rightly interpreted by the chancelleries of the world and by Great Britain is shown by the speech made by Sir Edward Grey, her Secretary of State for Foreign Affairs, in the House of Commons. He said: "It has not been done to please us, or in the interest of good relations, but I believe from a much greater motive — the feeling that a Government which is to use its influence among nations to make relations better must never, when the occasion arises, flinch or quail from interpreting treaty rights in a strictly fair spirit." This statement has a pecuhar, if not prophetic sig- nificance in connection with the expressed reasons pre- sented by Sir Edward Grey which impelled Great Britain to take part in this gigantic and deplorable war now devastating the European worlds OSCAR S. STRAUS. INTRODUCTION UNITED STATES SENATE Washington, D. C. In this work, the authors have estabhshed the cor- rectness of President Wilson's Panama Canal Tolls policy. They hold that the Hay-Pauncefote treaty is a world pact, and, as now construed, is an international agreement without a flaw. In this they are in full accord with the late President McKinley and his great Secretary of State, John Hay, by whom the treaty was negotiated. In the dedication they show their appreciation of President Wilson in the following: PRESIDENT WOODROW WILSON (Democrat) who in his efforts to secure the repeal of the tolls- exemption clause of the Panama Canal Act, took and successfully maintained as exalted moral, courageous and patriotic a position as was ever taken and main- tained by any Executive of any nation. , That the great Secretary of State, William Jennings Bryan — confronted in this great international upheaval and calamity with graver questions and greater burdens in actual labor than have confronted any Secretary since the Republic was founded (in which tremendous labor xxviii Introduction I happen to know he is and has been engaged with all his soul, body and mental faculties, which were long ago dedicated to his country and the final and permanent peace of the world, a cause now so rudely and suddenly interrupted, leaving his Government apparently, and for the time being, at least, its only hope and repository), should pause those labors to write an introduction to the book and commend its purpose and style, shows its importance now and for the future. The same can be said of the introduction (a substantial contribution in itself to the value of the work) by Hon. Oscar S. Straus, member for the United States of the Permanent Court of Arbitration at the Hague, and, with the single excep- tion of Colonel Roosevelt, the most prominent member of the leading minority (Progressive) party in the last national election; who, while the central figure at Wash- ington, in an effort to bring about peace in Europe, paused to examine the manuscript and commend the work. No further comment on the importance or excellence of the work is necessary. This book is intelligently conceived and well executed. It is on an important international question on which an enlightened public opinion is most desirable. It states the correct view on this question in a clear, logical and convincing argument. I commend it to the public as a creditable contribution to the discussion of the question. The chapter which treats of the financial aspects of tolls-exemption is a novel contribution to the subject. It applies the principle developed in the regulation of national, state and municipal utilities to the management of the Panama Canal — an international utility whereof Introduction xxix the United States is merely trustee. It shows that the sentence of the Hay-Pauncefote treaty: "Such conditions and changes of traflSc shall be just and equitable" obligates the United States to manage it as a public utility, that is, for the benefit of mankind "on equal terms to all." This chapter alone makes the work one of merit and commends it to the considerate attention of the public. The work as a whole makes a searching analysis of the data (historical and contemporary)bearing on the mean- ing of the Hay-Pauncefote treaty, and shows the meaning that the data reveal in forceful English. It makes effec- tive use of the conclusions arrived at by others. Thus the reader will get a comprehensive survey of the whole question in a single volume. The authors of this work are members of the Pro- gressive Party. Their vigorous defense of an important policy of a President belonging to another party is re- markable, and shows a commendable spirit. They aim at the elimination of tolls-exemption from domestic politics. To further this object, they have quoted exten- sively from Republican addresses while recognizing the great merit of contemporary Democratic addresses in the Senate and the House. The Democratic Party is given paramount credit for the repeal of the tolls exemption clause of the Panama Canal Act. The tolls-exemption clause of the Panama Canal Act is repealed due to the zeal, sustained effort of exalted moral purpose of the President, supported by the great majority of the members of his own party. Re-enact- XXX Introduction ment of such a statute should be made impossible. This book is a sane, forceful and unanswerable statement of the case against the right of the United States to exempt any of its shipping, coastwise and foreign, through the canal, as was proposed in the foregoing statute which was declared to be repugnant to the Hay-Pauncefote treaty. This work should contribute much to the formation of a sound public opinion on this extremely delicate inter- national question and thereby aid in eliminating it from domestic politics. Tolls-exemption is a dangerous ques- tion because of its susceptibility to the uses of the political demagogue. We own the canal and are sovereign in the Canal Zone. It is, therefore, only right and proper that we should manage it as we please. Why knuckle down to England? Such half-truths as these are more mis- leading than deliberate falsehoods, and make this question an annoying political issue because wrong may easily gain ascendancy. Therefore, all good citizens, regardless of party, should aid in forming a sound public opinion on this question. This is an admirable handbook for use in this connection. Candidates for membership in the House of Repre- sentatives and the United States Senate who are opposed to the policy of tolls-exemption will find this work a great help in conclusively answering, opponents who favor tolls- exemption. They can effectively point to its authorship by two members of the Progressive Party and quote therefrom unanswerable arguments taken from notable addresses in favor of the repeal of the tolls-exemption clause of the Panama Canal Act by members of the Republican Party. Introdvction xxxi Of the joint authors of this work, one is a distinguished member of the Bar of the Supreme Court of the United States, was a Federal Attorney under the McKinley administration and Special Assistant to the Attorney- General of the United States in charge of important cases in that Court and elsewhere under the adminis- trations of both Roosevelt and Taft; was an important Commissioner of the State of New York under the ad- ministrations of Governors Higgins and Hughes, and held an important commission to go abroad under the Taft administration. He is a member of the State Com- mittee of the Progressive Party in New York, one of the organizers and principal supporters of that party, and its choice in the fusion movement of 1913 for Supreme Court Justice. The other, also a prominent Progressive, and a former Professor of Political Economy in Cornell College, is now statistician with the Public Service Com- mission for New York City and hence as well qualified to discuss the financial, economic as well as the public utility phases of the Canal tolls problem as any other authority in the United States. Both authors, therefore, are peculiarly qualified, professionally and politically, to prepare the history of this vital and lately menacing problem without bias toward the President or the party happening to be in power at the time of the repeal of the tolls-exemption clause of the Panama Canal Act com- plained of by practically all of the maritime nations of the world. Having been a member of Congress in 1912 when the Canal Act was passed with the objectionable clause, and a member of the United States Senate in 1914 when the xxxii Introduction same was repealed, and having heard the notable and exhaustive debates on the subject on both occasions, I am justified in saying, after an examination of the work, that the essence of the whole matter is contained in this volume. In my judgment it will at once become the authoritative work on this great question, not only in the United States, but in all nations interested in the use of the Panama Canal. I may also add that the manuscript of this book was shown to President Wilson, who examined it hurriedly. He then stated that it appeared to him "to have been most intelligently conceived and well executed," and that "it would stand securely on its own merits." Further commendation of this work — The Panama Canal Tolls Controversy — is unnecessary. It should be as widely circulated as possible by those who believe that the United States should manage the Panama Canal in accordance with the world-view design embodied in the Hay-Pauncefote treaty. WILLIAM HUGHES, United States Senator from New Jersey. Chapter I The Meaning of the Hay-Pauncefote Treaty Early Spanish explorers ascended every river of Central America for the purpose of finding a passage through which their vessels might reach those lands of boundless wealth of which Marco Polo had given a vivid description. They were bent on finding the shortest route from Cadiz to Cathay, and thus sought a natural interoceanic waterway. With the advent of settlements arose the idea of artificial transit across the Isthmus. A wagon road was built from Porto Bello to Panama in the sixteenth century. More ambitious projects flourished and decayed during the lapse of centuries. They furnish a history of failure and blighted hopes. Spain, Holland, Belgium, France and England were at one time or another interested in the construction of an Isthmian Canal. The United States became interested in 1826. Henry Clay, Secretary of State, wrote to our representatives to the Panama congress held that year: "A cut or a canal for purposes of navigation some- where through the Isthmus that connects the two Americas to unite the Pacific and Atlantic Oceans will form a proper subject of consideration at the congress. That vast ob- ject, if it should be ever accomplished, will be interesting in a greater or less degree to all parts of the world. But 2 The Panama Tolls Controversy to this continent will probably accrue the largest amount of benefit from its execution, and to Colombia, Mexico, the Central Republic, Peru and the United States more than to any other of the American nations. What is to rebound to the advantage of all America should be effected by common means and united exertions and should not be left to the separate and unassisted efforts of any one power. * * * jj iJig work should ever be executed so as to admit of the passage of sea vessels from ocean to ocean, the benefits of it ought not to be exclusively appropriated to any one nation, but should be extended to all parts of the globe upon the payment of a just compensation or reasonable tolls.'" The declaration by the then Secretary of State that the benefits of the canal should be extended to all parts of the globe and should not be exclusively appro- priated by any nation has been confirmed by American statesmen of all parties — Whig, Democratic and Repub- lican — with substantial unanimity. The principle has been enunciated by presidential messages, by instructions from Secretaries of State and by resolutions of the House and Senate of Congress. Senator Burton is credited with the following : "The romantic triumphs of Decatur, Bainbridge and the other heroes of our early days against the Barbary pirates of the Mediterranean were particularly notable because they secured to our commerce and to the commerce of other nations the assurance of safety in those waters without the payment of ransom or tribute. * * * Jf there is one policy to which as a nation we have been committed during the entire time of our existence, it is Meaning of Hay-Pauncefote Treaty 3 that of neutralization of waterways and the use of all waterways, natural and artificial, by all nations on equal terms. Our country was one of the most active in protest- ing against the sound dues imposed by the Danish Govern- ment, although ships had to pass from the North Sea to the Baltic Sea within cannon shot of shore, and these channels were furnished by the Danish Government with such aids to navigation as lights and buoys. We insisted upon the continued neutralization of the Strait of Magel- lan. In 1879 Mr. William M. Evarts, then Secretary of State, declared that the United States would not tolerate exclusive claims by any nation whatsoever to the Strait of Magellan and would hold any nation responsible that might undertake by any pretext to lay any impost or check on the commerce of the United States through that strait." The foregoing shows the traditional policy of the United States in its formative period. We will trace its development. In the year 1835, during the administration of Presi- dent Jackson, the Senate of the United States unanimously adopted a resolution, as follows: ^'Resolved, That the President of the United States be respectfully requested to consider the expediency of opening negotiations with the Governments of other na- tions, and particularly with the Governments of Central America and New Granada, for the purpose of effectually protecting, by suitable treaty stipulations with them, such individuals or companies as may undertake to open a communication between the Atlantic and Pacific Oceans by the construction of a ship canal across the isthmus 4 The Panama Tolls Controversy which connects North and South America, and of securing forever by such stipulations the free arid equal right of navigating such canal to all such nations on the payment of such reasonable tolls as may be established to compen- sate the capitalists who may engage in such undertaking and complete the work." During the administration of President Van Buren, in a report to the House of Representatives March 2, 1839, Mr. Mercer, of Virginia, from the Committee on Roads and Canals, stated: "The policy is not less apparent which would prompt the United States to co-operate in this enterprise, liberally and efficiently, before other disposition may be awakened in the particular State within whose territory it may be ceded or other nations shall seek by negotiations to engross a commerce ivhich is now and sJiould ever continue open to all." In the same year the House of Representatives by unanimous vote adopted a resolution much the same as that of the Senate in 1835, requesting the President — "to consider the expediency of opening or continuing negotiations with the Governments of other nations, and particularly with those the territorial jurisdiction of which comprehends the Isthmus of Panama, and to which the United States have accredited ministers or agents, for the purpose of ascertaining the practicability of effecting a communication between the Atlantic and Pacific Oceans by the construction of a ship canal across the Isthmus and of securing forever by suitable treaty stipulations the free and equal right of navigating such canal by all nations." In a letter to Mr. Buchanan, Secretary of State, Meaning of Hay-Pauncefote Treaty 5 on December 17, 1845, the commissioner accredited to examine a canal route said: "Like all other international questions, it can only be satisfactorily adjusted by concert with the other maritime powers which have similar interests, more or less import- ant, and whose assent is necessary to place the proposed passage under the protection and guaranty of the public law, recognized by the whole world." In the treaty of 1846 with New Granada occurs the following: "Any modes of communication that now exist, or that may be hereafter constructed, shall be open and free to the Government and citizens of the United States, and for the transportation of any articles of pro- duce, manufactures or merchandise of lawful commerce belonging to the citizens of the United States; that no other tolls or charges shall be levied or collected upon the citizens of the United States, or their said merchandise thus passing over any road or canal that may be made by the Government of New Granada, or by the authority of the same, than is, under like circumstances, levied upon and collected from the Granadian citizens." On the conclusion of the treaty with New Granada in 1846 President Polk submitted it to the Senate with a message, in which he said: "In entering into the mutual guaranties proposed by the thirty-fifth article, neither the Government of New Granada nor that of the United States has a narrow or exclusive view. The ultimate object, as presented by the Senate of the United States in their resolution (March 3, 1835), to which I have already referred, ?'.s' to secure 6 The Panama Tolls Controversy to all nations the free and equal right of passage over the Isthmus." ,THE CLAYTON-BULWER TREATY This treaty was adopted July 5, 1850. The territorial background as it then existed and the clearly defined neutralization policy developed in prior administrations are the causes of which the contents of this treaty are the resultant. In the foregoing, w^e outlined the then American isthmian canal policy. The territorial background is clearly stated in the following by Senator Root: "In the year 1850, there were two great powers in possession of the North American continent to the north of the Rio Grande. The United States had but just come to its full stature. By the Webster-Ashburton treaty of 1842 our northeastern boundary had been settled, leaving to Great Britain that tremendous stretch of seacoast including Nova Scotia, New Brunswick, Newfoundland, Labrador and the shores of the Gulf of St. Lawrence, now forming the Province of Quebec. In 1846 the Oregon boundary had been settled, assuring to the United States a title to that vast region which now constitutes the States of Washington, Oregon and Idaho. In 1848 the treaty of Guadalupe-Hidalgo had given to us that great empire wrested from Mexico as a result of the Mexican War, which now spreads along the coast of the Pacific as the State of California and the great region between California and Texas. "Inspired by the manifest requu-ements of this new empire, the United States turned its attention to the pos- sibility of realizing the dream of centuries and connecting Meaning of Hay-Paimcefote Treaty 7 its two coasts — its old coast upon the Atlantic and its new coast upon the Pacific — by a ship canal through the Isthmus; but when it turned its attention in that direction it found the other empire holding the place of advantage. Great Britain had also her coast upon the Atlantic and her coast upon the Pacific, to be joined by a canal. Further than that, Great Britain Avas a Caribbean power. She had Bermuda and the Bahamas; she had Jamaica and Trini- dad; she had the Windward Islands and the Leeward Islands; she had British Guiana and British Honduras; she had, moreover, a protectorate over the Mosquito Coast, a great stretch of territory upon the eastern shore of Central America which included the river San Juan and the valley and harbor of San Juan de Nicaragua, or Grey- town. All men's minds then were concentrated upon the Nicaragua Canal route, as they were until after the treaty of 1901 was made. '"And thus when the United States turned its atten- tion toward joining these two coasts by a canal through the Isthmus it found Great Britain in possession of the eastern end of the route which men generally believed would be the most available route for the canal. Accord- ingly, the United States sought a treaty with Great Britain by which Great Britain should renounce the advantage which she had and admit the United States to equal par- ticipation with her in the control and the protection of a canal across the Isthmus. From that came the Clayton- Bulwer treaty. "Let me repeat that this treaty was sought not by England but by the United States. Mr. Clayton, who was Secretary of State at the time, sent our minister to France, 8 The Panama Tolls Controversy Mr, Rives, to London for the purpose of urging upon Lord Palmerston the making of the treaty. The treaty was made by Great Britain as a concession to the urgent demands of the United States." "In the administration of President Taylor, our Secre- tary of State, Mr. Clayton, opened negotiations with Great Britain with a view to adjusting the differences between the two countries, Mr. Rives, our minister to France, being appointed to submit the views of the United States to Lord Palmerston. Mr. Rives, in his letter to Secretary Clayton of September 25, 1849, describes his interview with Lord Palmerston and states that in pursuance of his instructions he had said to him: That the United States, moreover, as one of the principal commercial powers of the world, and the one nearest to the scene of the proposed communication, and holding, besides, a large domain on the western coast of America, had a special, deep and national interest in the free and unobstructed use, in common with other powers, of any channel of intercourse which might be opened from the one sea to the other; * * * iji^i the United States sought no exclusive privilege or ■preferential right of any kind in regard to the proposed communication, and their sincere wish, if it should he found practicable, was to see it dedicated to the common use of all nations on the most liberal terms and a fooling of perfect equality for all; * * * that the United Stales would not, if they could, obtain any exclusive right or privilege in a great highway which naturally belonged to all mankind. "That was the spirit of the Clayton-Bulwer conven- tion. That was what the United States asked Great Britain to agree upon. That self-denying declaration underlaid and permeated and found expression in the Meaning of Ilay-Paunccfote Treaty 9 terms of the Clayton-Bulwer convention. And upon that representation Great Britain in that convention relin- quished her coign of vantage which she herself had for the benefit of her great North American empire for the control of the canal across the Isthmus." That the foregoing representation is correct is con- firmed by Henderson in the following taken from his work on American Diplomatic Questions: "In the correspondence that took place between Mr. Clayton and Messrs. Bancroft and Lawrence, successive American ministers in London, and also in the records of interviews between Mr. Clayton and Mr. Crampton, the British minister in Washington, preparatory to the actual negotiations for a treaty, the attitude of Mr. Clayton and of the Taylor administration toward the question of a Central American Canal is fully and most clearly set forth. The Secretary of State was thoroughly in accord with the popular view that under no circumstances should the United States permit Great Britain or any other power to exercise exclusive control of any isthmian transit route. Upon the other hand, he did not seek for his own country the exclusive control he denied to others, and in assuming his position he followed the universally accepted theory of the complete neutrality of ship canals. The doctrine of international freedom of transit as applying to artificial waterways had been defended by Clay in 1826, and supported by unanimous resolutions of Congress in 1835 and again in 1839. President Polk had not found this doctrine inconsistent with his notions of an aggressive Monroe Doctrine, and his successor, in his annual message to Congress of 1849, had declared that no power should 10 The Panama Tolls Controversy occupy a position that would enable it hereafter to exercise so controlling an influence over the commerce of the world, or to obstruct a highway which ought to be dedicated to the common use of mankind. The convention concluded with Colombia three years previously contained a special clause calling for a guarantee of neutrality of the pro- posed isthmian transit route. No other ideas of the political status of an interoceanic ship canal had ever been entertained. * * * "When it was understood by both Mr. Clayton and Lord Palmerston, as revealed by their correspondence, that neither power actually sought monopoly power over the canal, the way was cleared of the most formidable obstacle to the conclusion of a treaty. * * * "Having in mind a policy thus broad and liberal, Mr. Clayton entered upon the negotiations of a treaty with Great Britain, desirous of obtaining no exclusive privileges in Central America that should be incompatible with the just rights of other nations; he was intent only on prepar- ing the way for the construction of a great international highway that should be open to the world's commerce upon terms equal to all." As the ''general principle" of neutralization estab- lished in Article VIII of the Clayton-Bulwer treaty has not been superseded, but is continued ''unimpaired" in the preamble and in Article IV of the Hay-Pauncefote treaty, we will quote that article in full. "The Governments of the United States and Great Britain having not only desired, in entering into this convention, to accomplish a particular object, but also to Meaning of Hmj-Pauncefotc Treaty 11 establish a general principle, they hereby agree to extend their protection, by treaty stipulations, to any other practicable communications, whether by canal or railway, across the isthmus which connects North and South Amer- ica, and especially to the interoceanic communications, should the same prove to be practicable, whether by canal or railway, which are now proposed to be established by the way of Tehuantepec or Panama. In granting, however, their joint protection to any such canals or railways as are by this article specified, it is always understood by the United States and Great Britain that the parties constructing or owning the same shall impose no other charges or conditions of traffic thereupon than the afore- said Governments shall approve of as just and equitable; and that the same canals or railways, being open to the citizens and subjects of the United States and Great Britain on equal terms, shall also be open on like terms to the citizens and subjects of every other State which is willing to grant thereto such protection as the United States and Great Britain engage to afford." " There is the explicit agreement for equality of treatment to the citizens of the United States and to the citizens of Great Britain in any canal, wherever it may be constructed, across the Isthmus. That was the fundamental principle embodied in the treaty of 1850, and that was the 'general principle' that the treaty of 1901 left unimpaired.'^ Senator Root continued : "After the lapse of some thirty years, during the early part of which we were strenuously insisting upon the ob- servance by Great Britain of her obligations under the Clayton-Bulwer treaty and during the latter part of which 12 The Panama Tolls Controversy we were beginning to be restive under our obligations by reason of that treaty, we undertook to secure a modifica- tion of it from Great Britain. In the course of that under- taking there was much discussion and some difference of opinion as to the continued obligations of the treaty. But I think that was finally put at rest by the decision of Secre- tary Oluey in the memorandum upon the subject made by him in the year 1896. In that memorandum he said:" Under these circumstances, upon every principle which governs the relation to each other, either of nations or of in- dividuals, the United States is completely estopped from denying that the treaty is in full force and vigor. If changed conditions now make stipulations, which were once deemed advantageous, either inapplicable or injurious, the true remedy is not in ingenious attempts to deny the existence of the treaty or to explain away its provisions, but in a direct and straightforward application to Great Britain for a re- consideration of the whole matter. The views of our representative men in the interim of 1850, when the Clayton-Bulwer treaty was adopted, and 1901, when the Hay-Pauncefote treaty was concluded, are of interest as they throw light on what the authors intended to incorporate in the latter treaty. The more important of these views are the following: Secretary of State Cass said to Great Britain in 1857: ''The United States, as I hare before had occasion to assure your Lordship, demand no exclusive privileges in these passages, but will always exert their influence to secure their free and unrestricted benefits, both in peace and war, to the commerce of the world." Secretary of State Seward in note to Minister Adams, 1862, said: Meaning of Ilay-Pauncejote Treaty !.'> "This Government has no interest in the matter diflFerent from that of other maritime powers. It is wilHng to interpose its aid in execution of its treaty and further equal benefit of all nations." In a note to the Colombian minister, January 18, 1869, Secretary Seward expressed himself in the same manner. Secretary of State Fish : "A Darien Canal should not be regarded as hostile to a Suez Canal; they will be not so much rivals as joint contributors to the increase of the commerce of the world, and thus mutually advance each other's interests. * * * "We shall * * * be glad of any movement which shall result in the early decision of the question of the most practicable route and the early commencement and speedy completion of an interoceanic communication, which shall be guaranteed in its perpetual neutralization and dedica- tion to the commerce of all nations, without advantages to one over another of those who guarantee its assured neutrality. * * * "* * * the benefit of neutral waters at the ends thereof for all classes of vessels entitled to fly their respec- tive flags, with the cargoes on board, on equal terms in every respect as between each other." Mr. Blaine said in his instructions to Mr. Lowell on June 24, 1881, directing Mr. Lowell to propose to Great, Britain the modification of the Clayton-Bulwer treaty: "The United States recognizes a proper guarantee of neutrality as essential to the construction and successful operation of any highway across the Isthmus of Panama, 14 The Panama Tolls Controversy and in the last generation every step was taken by this Government that is deemed requisite in the premises. The necessity was foreseen and abundantly provided for long in advance of any possible call for the actual exercise of power. * * * Nor, in time of -peace, does the United States seek to have any exclusive privileges accorded to Ameri- can ships in respect to precedence or tolls through an inter- oceanic canal any more than it has sought like privileges for American goods in transit over the Panama Railway, under the exclusive control of an American corporation. The extent of the privileges of American citizens and ships is measurable under the treaty of 1846 by those of Colombian citizens and ships. It would be our earnest desire and expectation to see the world's peaceful commerce enjoy the same just, liberal and rational treatment.'''' In another place, Secretary of State Blaine said in his instructions to Mr. Lowell: '^ Nor does the United States seek any exclusive or narrow commercial advantage. It frankly agrees, and will by public proclamation declare at the proper time, in con- junction with the Republic on whose soil the canal may be located, that the same rights and privileges, the same tolls and obligations for the use of the canal, shall apply with absolute impartiality to the merchant marine of every nation on the globe; and equally in time of peace the harmless use of ike canal shall be freely granted to the war vessels of other nations." Lord Granville's reply thereto was: "* * * such communication concerned not merely the United States or the American continent, but, as was recognized by Article VIII of the Clayton-Bulwer treaty. Meaning of ?Iai/-Pauncefote Treaty lo the whole civilized world, and that England would not oppose or decline any discussion for the purpose of secur- ing on a general international basis its universal and unrestricted use." President Cleveland, in his annual message of 1885, said: "The lapse of years has abundantly confirmed the wisdom and foresight of those earlier administrations which, long before the conditions of maritime intercourse were changed and enlarged by the progress of the age, proclaimed the vital need of interoceanic transit across the American Isthmus and consecrated it in advance to the com- mon use of mankind by their positive declarations and through the formal obligations of treaties. Toward such realization the efforts of my administration will be applied, ever bearing in mind the principles on which it must rest and which were declared in no uncertain tones by Mr. Cass, who, while Secretary of State in 1858, announced that 'What the United States want in Central America next to the happiness of its people is the security and neutrality of the interoceanic routes which lead through it.' "* * * Whatever highway may be constructed across the barrier dividing the two greatest maritime areas of the world must be for the world's benefit — a trust for mankind, to be removed from the chance of domination by any single power, nor become a point of invitation for hostilities or a prize for warlike ambition. * * * "* * * These suggestions may serve to emphasize what I have already said on the score of the necessity of a neutralization of any interoceanic transit; and this can only be accomplished by making the uses of the route open 16 The Panama Tolls Controversy to all nations and subject to the ambitions and warlike necessities of none." In the foregoing public declarations, by the solemn asservations of our treaties with Colombia in 1846, with Great Britain in 1850, we presented to the world the most unequivocal guaranty of disinterested action for the common benefit of mankind and not for our selfish advantage. The Hay-Pauncefote treaty must be construed in the light of that historic background and the statements of those who are in a position to vouch for the understanding reached by the two State Departments which drafted the treaty. So construed, our so-called American coastwise trade, from the Atlantic and Gulf of Mexico ports to Pacific ports, and vice versa, must pay the same rate of toll for identical units of traffic as other commerce using the canal. THE HAY-PAUNCEFOTE TREATY The intent of the framers of the treaty is naturally of first importance. Neither Mr. Hay nor Lord Pauncefote are now living, but evidences remain. Joseph H. Choate was then American Ambassador to the Court of St. James and had to do with the negotiations. CHOATE TO SENATOR McCUMBER "Dear Senator McC umber: I have your letter of March 25, in which you ask me to answer two questions in regard to the negotiation of the Hay-Pauncefote treaty of 1901. "First. Was it understood by the State Departments of the two countries that the words 'vessels of commerce and war of all nations' included our own vessels? Meaning of Hay-Pauncefote Treaty 17 "Second. Was it understood that these words also included our own vessels engaged in the coastwise trade? "I answer both of these questions most emphatically in the affirmative. The phrase quoted. Vessels of com- merce and war of all nations,' certainly included our own vessels, and was so understood by our own State Department and by the foreign office of Great Britain. It was understood by the same parties that these words also included our own vessels engaged in the coastwise trade. * * * "When we came to the negotiation of this last treaty, that of 1901, there was no question that, as between the United States and Great Britain, the canal should be open to the citizens and subjects of both on equal terms, and that it should also be open on like terms to the citizens and subjects of every other State that brought itself within the category prescribed. On that point there was really nothing to discuss, and in the whole course of the negotia- tions there was never a suggestion on either side that the words 'the vessels of commerce and of war of all nations' meant anything different from the natural and obvious meaning of these words. Such language admitted of the exemption or exception of no particular kind of vessels of commerce and of war of any nation, whether of vessels engaged in foreign trade or coastwise trade, or of steam vessels or sailing vessels, or of black vessels or white ves- sels, or of iron vessels or wooden vessels. The parties to the negotiation tried to use terms of the meaning of which there could be no doubt or dispute, and they meant what they said and said what they meant, "It is true that in many treaties there have been 18 The Panama Tolls Controversy specific exceptions of vessels engaged in the coastwise trade, and it would have been easy to insert it here. But nobody ever suggested that there should or could be such an exception or exemption inserted by implication in this treaty. * * * "Of course, I submitted from time to time as the nego- tiations proceeded the substance of all our negotiations to our Secretary of State in dispatches and private letters, all of which, or copies of which, are, as I believe, on file in the State Department and are doubtless open to the examination of Senators. And Lord Pauncefote in like manner was in frequent communication with Lord Lans- downe or the foreign office of Great Britain, and, of course, submitted all that was said and done between us to them. So when what you refer to in your letter as the State De- partments of the two countries approved and adopted the result of our work and exchanged ratifications of the treaty as it stands, they necessarily intended that the words 'the vessels of commerce and of war of all nations' included our own vessels as well as those of Great Britain, and also included our own vessels engaged in the coastwise trade. "There was no kind of vessel that the words used did not include. I am not at liberty to furnish you with copies of my reports made from time to time to Colonel Hay of the negotiations, but I have carefully examined them to see whether any suggestion was made on either side of the possibility of the exemption or exception of our vessels engaged in the coastwise trade and find absolutely none." * * * "It is impossible, in my judgment, to discuss the Meaning of Hay-Pauncefote Treaty 19 question fairly on the true interpretation of the treaty and come to any other conclusion than that the repeal of the exemption clause in the act is necessary out of due regard for our national honor and good faith." Elsewhere the former ambassador stated : "As the lips of both these diplomatists and great patriots, who were true to their own countries and each regardful of the rights of the other, are sealed in death, I think that it is proper that I should say what I think both of them, if they were here today, would say — that the clause in the Panama Toll act, exempting coastwise American shipping from the payment of tolls, is in direct violation of the treaty. "I venture to say that in the whole course of the negotiations of this particular treaty, no claim, no sug- gestion, was made that there should be any exemption of anybody." CHOATE TO SENATOR O'GORMAN "I avail myseK of your kind permission to submit anything of mine not already published that might throw light on the pending question. "I accordingly, with the express permission of the Secretary of State, submit to your committee the inclosed copies of letters written by me to Secretary Hay between August 3 and October 12, 1901, giving step by step the negotiations between Lord Lansdowne and Lord Pauncefote and myself in regard to the Hay-Pauncefote treaty. "These, if carefully perused, will, I think, be found to confirm my views that the clause in the Panama Canal 20 The Panama Tolls Controversy act exempting our coastwise shipping from tolls is a clear violation of the treaty." CHOATE TO HENRY WHITE "I wrote to the chairman of the committee, Senator O'Gorman, inclosing to him, by the express permission of the Secretary of State, a copy of my letters to Secretary Hay between August 3 and October 12, 1901, the same that you have. To my mind they establish beyond ques- tion the intent of the parties engaged in the negotiation, that the treaty should mean exactly what it says, and excludes the possibility of any exemption of any kind of vessels of the United States. Equality between Great Britain and the United States is the constant theme, and especially in my last letter of October 2, 1901, where I speak of Lord Lansdowne's part in the matter, and say, 'He has shown an earnest desire to bring to an amicable settlement, honorable alike to both parties, this long and important controversy between the two nations. In sub- stance, he abrogates the Ciayton-Bulwer treaty, gives us an American canal, ours to build as and where we like, to own, control and govern, on the sole condition of Its being always neutral and free for the passage of the ships of all nations on equal terms, except that if we get into a war with any nation we can shut its ships out and take care of ourselves.' This was the summing up of our whole two months' negotiation." Equality between Great Britain and the United States in the use of the canal is the constant theme. It was to be effected by a new treaty "without impairing the 'general principle' of neutralization" established in Article VIII of the Claytdn-Bulwer treaty. Meaning of Hay-Pauncefote Treaty 21 CHOATE DEFINES "GENERAL PRINCIPLE" "As Article VIII stands in the Clayton-Bulwer treaty it undoubtedly contemplates further treaty stipulations, not 'these' treaty stipulations, in case any other inter- oceanic route either by land or by water should 'prove to be practicable,' and it proceeds to state what the general principle to be applied is to be, viz., no other charges or conditions of traffic therein 'than are just and equi- table,' and that said canals or railways, being open to the subjects of Great Britain and the United States on equal terms, shall also be open on like terms to the subjects and citizens of other States, which I believe to be the real general principle (of neutralization, if you choose to call it so) intended to be asserted by this eighth article of the Clayton-Bulwer treaty." — Letter dated August 20, 1901, In order to be absolutely sure that the "general principle" is reaffirmed in the new treaty being drafted. Lord Lansdowne suggested that Article 3 A, which follows, be incorporated: "In view of the permanent character of this treaty, whereby the general principle established by Article VIII of the Clayton-Bulwer convention is reaffirmed, the high contracting parties hereby declare and agree that the rules laid down in the last preceding article shall, so far as they may be applicable, govern all interoceanic communications across the isthmus ivhich connects North and South America, and that no change of territorial sovereignty, or other change of circumstances, shall affect such general principle or the obligations of the high contracting parties under the present treaty." 22 The Panama Tolls Controversy CHOATE TO SECRETARY HAY "Lord Lansdowne's object in insisting upon Article 3A is to be able to meet the objectors in Parliament by saying that although they have given up the Clayton- Bulwer treaty, they have saved the ^general principle,'' and have made it immediately effective and binding upon the United States as to all future routes and have dispensed with future 'treaty stipulations' by making it much stronger than it was before. I think his all-sufficient answer is that by giving up the Clayton-Bulwer treaty, which stood in the way of building any canal, he has se- cured the building of the canal for the benefit of Great Britain at the expense of the United States, relieved Great Britain of all responsibility about it now and forever, and imposed upon the United States stringent rules of neutrality as to Great Britain and all mankind." CHOATE'S SUBSTITUTE FOR ARTICLE 3A "Assuming that some such article must be retained, how would this do: In view of the permanent character of this treaty, whereby the general principle established by Article VIII of the Clayton-Bulwer treaty, is reaffirmed the United States hereby declares (and agrees) that it will impose no other charges or conditions of traffic upon any other canal that may be built across the Isthmus (or between the Atlantic and Pacific Oceans) than such as are just and equitable, and that such canals shall be open to the subjects and citizens of the United States and of all other nations on equal terms." The foregoing declaration "that siich canals shall be open to the subjects and citizens of the United States and of all Meaning of Hay-Pauncefote Treaty <) primary purpose with the majority of Senators. I cannot say that it was the sole purpose." "That was not seriously considered at that time" (see page 57) is important. But that that was seriously considered at that time by Great Britain is equally important. "National defense was the primary purpose with the majority of Senators" — see above. Equal and just tolls for all units of traffic using the canal was the primary purpose with Great Britain. Presumably each insisted on getting what it wanted most and the Hay- Pauncefote treaty construed in the light of history shows that each did get what it wanted most. We can state this point in greater detail as follows: The United States needed the Panama Canal as a military and naval asset, and therefore sought the modification of the Clayton- Bidiver treaty with that end in view. Great Britain desired the construction of the canal because of its large commercial interests. The one sought ownership and control as a military necessity; the other sought condi- tions and charges of traffic that would he just and equitable — that woidd be equal for identical units of traffic using the canal. The paramount object desired by the two con- tracting parties was different. Final agreememt ivas secured by writing into the Hay-Pauncefote treaty the controlling object of each of the tivo contracting parties. The United States secured thereby its desired military and naval asset. Great Britain secured thereby the assurance of equality in tolls between our nationals and its own subjects. Representative Stevens throws light on the con- struction of treaties in the following: 60 The Panama Tolls Controversy "One of the most important considerations in the construction of Section 1, Article III as to 'equality of treatment without discrimination,' and as to whether an exception concerning our coastwise vessels can be im- plied from it, must be from the language of the preamble of the treaty. This preamble is in terms : The United States of America and His Majesty Edward the Seventh, of the United Kingdom of Great Britain and Ireland, etc., being desirous to facilitate the construction of a ship canal to connect the Atlantic and Pacific Oceans by whatever route may be considered expedient, and to that end to remove any objection which may arise out of the convention of the nine- teenth of April, 1850, commonly called the Clayton-Bulwer treaty, to the construction of such canal under the auspices of the Government of the United States, without impairing the "general prijiciple" of neutralization established in Article VIII of that convention. * * * "It is a fundamental principle of construction of all documents that such a preamble shows first of all the reason for the making and existence of the agreement, document, or act; and secondly, that the language of the document, treaty, and so forth, should be so con- strued, if reasonably possible, to give efiFect to such purpose. (Moore, 5 Dig. Int. Law, p. 249.) "Thus it is important to ascertain what is the 'gen- eral principle' of neutralization established in Article VIII of the Clayton-Bulwer treaty, which must not be impaired by this treaty. This Article VIII has been previously set forth in terms, so need not here be repeated. "It will be noted that the general principle is estab- lished and embraces, first, protection to the canal; second, that the charges therein shall be just and equitable; and third, that it shall be open to the citizens and subjects of the Meaning of Hay-Pannccfote Treaty 01 United States and Great Britain un equal terms, and also shall be open on like terms to the citizens and subjects of other nations willing to grant the same protection to the canal as do Great Britain and the United States. Subsequently, by agreement in the second treaty, the protection of the canal was confided and confined to the United States, without changing the other provisions of the 'general principle.' * * * *'Secretary of State Olney, in 1896, in a memorandum on the Clayton-Bulwer treaty, said (Moore, 3 Dig. Int. Law, p. 207): As Article VIII expressly declares, the contracting parties by the convention desired not only to accomplish a particular object, but to estabUsh a general principle. This general prin- ciple is manifested by the provisions of the first seven articles, and is that the interoceanic routes there specified should, under the sovereignty of the States traversed by them, be neutral and free to all nations aUke. "The preceding articles of the treaty, which show the intent and purpose of the general principle, have already been described, and all together conclusively show that the term 'general principles' can bear no other construction with reference to the Hay-Pauncefote treaty than requiring 'equality of treatment of all vessels, foreign and domestic, coastwise and all,' and that there must be no discrimination as to charges or conditions of traffic of any nation, and that all charges and conditions should be just and equitable, must be an integral condition for neutralization of the canal. * * * "These are the same conditions set forth in Article III of the Hay-Pauncefote treaty, and on their face there 62 The Panama Tolls Controversy can be no possible exception of our commerce. Not only the language of the section but the very reason for the existence of the language forbids such exception. * * * "This has been the invariable construction of the treaties and of the policy of the United States from the beginning down to the present. There should further be noted the action of our Government in carrying out the 'general principle,'' thus construed and defined in these treaties. President Roosevelt in his message of December 4, 1901, transmitting to the Senate the Hay-Pauncefote treaty, which was ratified and is now in effect, described it as a convention without impairing the general principle of neutralization established in Article VIII of the Clay- ton-Bulwer treaty. Further, on the twenty-second day of February, 1902, in the proclamation making such treaty effective. President Roosevelt, in the preamble to it, again sets forth the existence of the 'general principle'' of neutrali- zation which was to be maintained by such treaty, and in the final statement of the proclamation is found this clause, *to the end that the same and every article and clause thereof may be observed and fulfilled with good faith by the United States and the citizens therof.' "Thus the United States Government at once in the proper way notified the world in the exact language of the treaty itself of its intention to observe and fulfill every article and clause thereof in the exact terms of the treaty itself. SUEZ CANAL RULES "It is an elementary rule in the construction of treaties and statutes that where the provision in question has been Meaning of Hay-Pavncefoie Treaty OS copied from those of another nation or state, where such provision has received a careful construction, that such construction would be of great value in considering the proper construction of the borrowed section. In this instance Article III of the treaty provides 'that the United States adopts as a basis of the neutralization of such ship canal the following rules, substantially as embodied in the convention of Constantinople, signed October 28, 1888, for the free navigation of the Suez Canal. That is to say,' then follow the six sections laying down the rules of neutrahzation and equality whch shall apply to the Panama Canal. "The article in the Suez convention relating to charges and tolls is as follows: Article X. The high contracting parties, by application of the principle of equality as regards the free use of the canal (a principle which forms one of the bases of the present treaty), agree that none of them shall endeavor to obtain, with respect to the canal, territorial or commercial advantage or privileges in any international arrangements which may be concluded. * * * "Other sections contain substantially the same provisions as in the other sections of Article III of the Hay-Pauncefote treaty. "These sections have always been construed to forbid any discrimination in favor of or against the coastwise vessels or other trade of any of the contracting nations; and though Great Britain really has the controlling voice in the management of the canal, and France is the head- quarters of the management, yet their vessels pay and are treated exactly the same as all others. * * * " This shows that the United States as owner of the Panama Canal is not entitled to grant free transportation 64 The Panama Tolls Controversy through it to its coastwise shipping as a result of such ownership. The following from Senator Burton's speech clinches the argument against the right of the United States to exempt the shipping of any of its nationals from the pay- ment of the same tolls imposed on non-nationals : "President Roosevelt, in submitting the second Hay-Pauncefote treaty, said: It specially provides that the United States alone shall do the work of building and assume the responsibility of safeguard- ing the canal and shall regulate its neutral use by all nations on terms of equality without the guaranty of interference of any outside nation from any quarter. "Again, he says, on January 4, 1904, in a special Under the Hay-Pauncefote treaty it was explicitly pro- vided that the United States should control, police and protect the canal which was to be built, keeping it open for the vessels of all nations on equal terms. The United States thus assumes the position of guarantor of the canal and of its peaceful use by aU the world. "In a note by Secretary Hay on the following day, h-^ states : The Clayion-Bulwer treaty was conceived to form an obstacle, and the British Government therefore agreed to abro- gate it, the United States only promising in return to protect the canal and keep it open on equal terms to all nations, iii accordance with our traditional policy. "Aside from correspondence and declarations relating to the proposed Isthmian canal, two negotiations remain very nearly contemporaneous with the date of the Hay- Pauncefote treaty, both of which are in entire accordance Meaning of Hay-Pavncefote Treaty 65 with our settled national policy, but which in their bearing upon the interpretation of the Ilay-Pauncefote treaty far outweigh all the preceding, not only because of the simi- larity in the questions involved but because of the further fact that they are so nearly contemporaneous with the negotiation of the treaty. The facts pertaining to them must have been clearly in mind when the treaty was framed They are: "Our negotiations in relation to the so-called open door in China in 1899 and succeeding years. [The other — the Welland Canal controversy — anon.] Great Britain, Germany, France, Russia and Japan were the countries regarded as possessing, though in unequal degrees, an advantageous position in China. * * * "Mr. Hay accordingly laid down certain principles which he desired should be formally declared by the Rus- sian Empire and by all the great powers interested in China. Of these principles he said, they 'will be eminently beneficial to the commercial interests of the whole world' : Third, that it will levy no higher harbor dues on vessels of another nationality frequenting any port in such "sphere" than shall be levied on vessels of its own nationality, and no higher railroad charges over lines built, controlled or operated within its "sphere" on merchandise belonging to citizens or subjects of other nationalities transported through such "sphere" than shall be levied on similar merchandise belonging to its own na- tionals transported over equal distances. "Special attention is called to the third of the prin- ciples, the recognition of which was requested. It included a demand that no higher railroad charges over lines built y 66 The Panama Tolls Controversy controlled or operated within its sphere on merchandise belonging to the citizens or subjects of other nationalities should be levied than on similar merchandise belonging to its own nationals. * * * ^"We thus demanded equal use of the ports controlled by these various nations, equal privileges in trade, and, what is most significant of all, equal railroad rates upon railways constructed by Russia at great expense and extend- ing into the interior through Chinese territory to a connection with railways within her own domains. * * * "Not only was the treaty in accordance with our traditional policy, but negotiations had been initiated contemporaneously with the negotiations with the various nations in China for an 'open door,' and it would have been the height of inconsistency to have made the demand for equality of treatment in China and to have denied it in a treaty relating to an Isthmian canal. "Our record was so uniform and unbroken that we could have taken no other ground. The attempt by John Adams and Franklin and Jay in the years 1782 and 1783 pointed a new way as emphatically and as decisively as any of the great principles which lie at the foundation of our Government." Negotiations were begun with the clear under- standing on the part of both Great Britain and the United States that the ships of all nations would be allowed the use of the canal on equal terms. Henry White states the results of the first conference in the following: Meanirig of Haij-Pciuncefote Treaty 07 "A brief , informal conversation followed, during which Lord Salisbury said nothing to leave me to suppose that he is unfavorably disposed — much less hostile — to the construction of the canal under our auspices, provided that it is open to the ships of all countries on equal terms." ''Open to the ships of all countries on equal terms" was understood to mean: "It is always understood by the United States and Great Britain that the parties constructing or owning the same shall impose no other charges or conditions of traffic thereupon than are just and equitable; and that the same canals or railways, being open to the citizens and subjects of the United States and Great Britain on equal terms, shall also be open on like terms to the citizens and subjects of every other State." Negotiations were closed with this understanding according to Ambassador Choate: "I wrote to the chairman of the committee, Senator O'Gorman, inclosing to him, by the express permission of the Secretary of State, a copy of my letters to Secre- tary Hay between August 3 and October 12, 1901, the same that you have. To my mind they establish beyond question the intent of the parties engaged in the negotiation that the treaty should mean exactly what it says, and excludes the possibility of any exemption of any kind of vessels of the United States. Equality between Great Britain and the United States is the constant theme, and especially in my last letter of October 2, 1901, where I speak of Lord Lansdowne's part in the matter, and say 'He has shown an earnest desire to bring to an amicable settle- ment, honorable alike to both parties, this long and 68 The Panama Tolls Cuniroversy important controversy between the two nations. In substance, he abrogates the Clayton-Bulwer treaty, gives us an American canal, ours to build as and where we like, to own, control, and govern, on the sole condition of its being always neutral and free for the passage of the ships of all nations on equal terms, except that if we get into a war with any nation, we can shut its ships out and take care of ourselves.' "This was the summing up of our whole two months' negotiation." Closed with the understanding embodied in the following, according to Secretary of State John Hay — the man toho knew: "All means all. The treaty was not so long that we could not have made room for the word 'other' if we had understood that it belonged there. 'All nations' means all nations, and the United States is certainly a nation." "That was the understanding between yourself and Lord Pauncefote when you and he made the treaty?" I pursued. "It certainly was," he replied. "It was the under- standing of both Governments, and I have no doubt that the Senate realized that in ratifying the second treaty without such an amendment it was committing us to the principle of giving all friendly nations equal privileges in the canal with ourselves. That is our golden rule." Senator INIcC umber properly says: "I cannot imagine how any Senator in this chamber who will read the history that precedes the Clayton- Bulwer treaty, who will read the Clayton-Bulwer treaty Meaning of Ilay-Pauncefotc Treat;/ (50 follo\\ang our declarations, and who will then read the declarations of this Government in all its statements from that time down to 1901, can for one moment ques- tion our great national policy of equality of treatment of all vessels which might use that canal. Then, when we come down to the conditions, the views of both Gov- ernments at the time we entered into the great obligation known as the Hay-Pauncefote treaty, when we stop and read the declaration of the British press and the declara- tion of the American press that coincide exactly, showing that the views of the two nations have never changed in the slightest degree, when we follow that up with the declaration of our negotiators * * * jn which they declare over and over again that the general principles of neutrality enunciated in the Clayton-Bulwer treaty should not be violated or impaired by this Government, and when we follow that up by the declarations that are shown in the letters [of Ambassador Choate and Henry White] * * * j cannot conceive the possi- bility of any man's mind being so everlastingly preju- diced that he will close it to all this clear, unmistakable evidence of what they and we all understood this treaty to mean, and insist that notwithstanding all this we can read the treaty another way. Our duty is to read that treaty the way the parties understood it to mean when they signed it." The matter, as indicated in the foregoing by Senator McCumber, was so fully settled by those who actually negotiated the Hay-Pauncefote treaty and the treaty with Panama — Hay-Bunau-Varilla — and knew the intent of the parties that the great English and American 70 The Panama Tolls Controversy common law doctrine of stare decisis as to the rights of the parties should apply if the doctrine could be en- forced in view of the original partnerships and vested rights. We are plainly obligated to operate the Panama Canal "Jor the benefit of mankind on equal terms to all." Chapter II Legal and Moral Aspects of Tolls "Exemption Citizens of the United States should, as we see it' brush aside all personal, political and local considerations and approach the problem on a high moral plane and in a judicial frame of mind. We should turn a deaf ear to all race or religious appeals, and turn an equally deaf ear to the blair of party trumpets, however loud and thrilling, just as a judge should when he puts on his judicial robes and ascends the bench to decide a case of law on contracts, regardless of his personal preference, feelings or other considerations not a part of the record. Careful examination of the record of the issue which has been made up; an issue which was begun, as far as the governing principles are concerned, as far back as 1826, which record is on file in the archives of all civilized Gov- ernments and of all large libraries of the world, con- strained us to urge the repeal of this ill-considered act of Congress. Before we, in that manner, go down not merely in American history, but in the history of the world, let us pause, examine the record again and reason together with- out race or party prejudice. Let us pause, and, with that immutable record before us, think again before we continue on a course with such far-reaching consequences. So far as party platforms are concerned we will not 72 The Panama Tolls Controversy discuss them. They have no standing or authority in an international dispute of this character. When the party platforms were adopted in 1912, this question was not an international, or national, issue. Only those people who took official part in formulating, negotiating and ratifying the treaties, and passing this act of Congress, were familiar with the terms of the treat- ies, and the intent of the high contracting parties as shown by contemporaneous acts and previous representations. This is the first time the matter has ever confronted the American people as a live issue. The protest of a great and friendly nation made it impossible, in any degree of reasonableness or honor, to await the outcome of any kind of available national referendum. Besides, it is not a national or domestic matter, but a diplomatic and international question of law and honor, based upon a record made up — a completed record. The unanimous vote of the American electorate, in favor of the act, and against the position of the President, would not change the facts, and the plain rights of the parties in connection with the international agreement under which the Panama Canal Zone was leased by the United States, the canal was built and must be operated, unless the agreement between the contracting powers is changed. The Constitution of the United States is supreme and not a party platform if there is a conflict. Article VI, Section 2 of the United States Constitu- tion: "This Constitution and the laws of the United States which shall be made in pursuance thereof and all treaties made, or which shall be made, under the authority of the Legal arid Moral Aspects 73 United States, shall be the supreme law of the land, and the judges in any State shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding . ' ' Members of Congress take an oath to uphold the Con- stitution of the United States on entering upon the duties of the office. That is more binding on them than a party platform. There ought to be no conflict between party platform and Constitution. If there is, the party plat- form should be revised at the earliest opportunity. Action should be in harmony with the Constitution. We cannot understand the reasoning and the sense of proportion by which men with apparently the best and most honorable intentions, have placed adherence to party planks higher than a nation's solemn international obligations. As stated in the preface to this work many entirely sincere persons have been led astray on the subject of Panama Canal tolls-exemption by the popular assumption of an entirely false promise as to the record title to the strip of land called the Canal Zone. Article XIV of the treaty with Panama states: "As the price or compensation for the rights, powers and privileges granted in this convention by the Republic of Panama to the United States [notice, sovereignty is not mentioned] the Government of the United States agrees to pay $10,000,000 in gold coin of the United States on the exchange of the ratification of this convention and also an annual payment during the life of this convention, of $250,000 in like gold coin, beginning nine years after the date aforesaid." 74 The Panama Tolls Controversy It expressly states that only rights are granted and that during the life of the convention. These rights are granted for a price. The main reason for the attitude of most people, other than those interested in getting a dis- crimination in favor of coastwise shipping, is an impres- sion, created by newspaper editorials, that the United States owns the Canal Zone, and that like the Erie and other canals it runs through our territory. That phase of the matter is well covered in an edi- torial of a New York afternoon paper dated March 27, headed the "Panama Lease." It expresses the situation on that subject as shown by the record. "When the canal strip was acquired it was not con- tended that this country had acquired sovereignty. The matter is discussed in President Roosevelt's message of January 4, 1904, written after the Panama revolution and the negotiation of the treaty with the new republic. The act of Congress of June 28, 1902, covering the preliminaries for the building of the canal, authorized the President to acquire from Colombia 'perpetual control' of a strip of land six miles wide over which this country, under the lease, was to have governmental jurisdiction. The Hay- Herran treaty negotiated with Colombia, whose rejection by Colombia precipitated the Panama revolution, so pro- vided in practically the same language as that contained in the later treaty with Panama. In the message of Janu- ary 4, 1901, Mr. Roosevelt discussed whether the Hay- Herran treaty conferred on us sovereign rights and whether Colombia was warranted in rejecting the treaty on this account. Says the message: " 'The treaty, instead of requiring a cession of Legal and Moral Aspects 75 Colombia's sovereignty over the canal strip, expressed, acknowledged, confirmed and preserved her sovereignty over it.' "It was never asserted until lately that the canal is exclusively our property. // ivas 'proclaimed over and over again that it was to he a neutral waterway for the benefit of the commerce of the world, tvith only so much control over it by us as ivas necessary to enable us to guarantee its neu- trality and to provide properly for its guardianship and operation." Senator McCumber says : "When we build a canal in the United States we do not make a contract with any other nation. The fact that we did make a contract with another nation concerning the Panama Canal presupposes that we did not have a free hand to do just as we pleased, but that we were compelled to secure certain rights, and that to secure those rights we naturally were compelled to bind ourselves to certain conditions to do something on our part. And what we want to arrive at is what we agreed to do. * * * "The remission of tolls to our coastwise vessels, or to any other vessels belonging to the citizens of the United States or of any other country, is a clear violation of our international agreement. When the Senate of the United States voted in favor of the Hay-Pauncefote treaty it did so on the clear and unequivocal understanding that this treaty on which it was voting, irrespective of any and all previous utterances and declarations of the Government, and irrespective of whether the old Clayton-Bulwer treaty was alive or dead, did bind this country to treat all vessels 76 The Panama Tolls Controversy of the world on an equality with our own vessels. I will not say that there might not have been some individual Senator who might have carried in the secret chambers of his miud a conviction that he could at some future time, if called upon, give the treaty a different construction. What I do say is that if he had any such conviction he did not publicly disclose it in the debates, and he knew that the Senate as a body and the Committee on Foreign Rela- tions which reported the treaty, as clearly shown in its reports, did understand that the treaty did bind us to this equality of treatment. And while there was a vigorous minority report by Senator Morgan, that minority report took no issue, but confirmed the construction placed upon the treaty by the majority. "With these two reports before the Senate it would be a slander upon both its judgment and its sense of in- tegrity to say that while without a word of protest it voted for this treaty that it nevertheless so voted with a secret conviction that these committee reports, which gave a certain construction to the Hay-Pauncefote treaty — a construction in harmony with the views of Secretary Hay and Lord Pauncefote — could at some future time be repudiated. "I put this question squarely up to Senators on both sides of this Chamber: Admitting that the treaty by its terms does not preclude a construction authorizing us to discriminate in favor of our own vessels, but that both countries understood that it did so, that both Mr. Hay and Lord Pauncefote understood that it did preclude us from discriminating in favor of our vessels, and that the Senate when it confirmed the treaty knew that the parties under- Legal and Moral Ampecls 77 stood it that way, aud the Senate as a whole understood it the same way, would you then declare that, notwith- standing this mutual understanding, we should give it a construction contrary to what was then understood? "Or, putting it in another form, if the contract itself is uncertain as to its intent, but the parties to the contract were agreed as to its intent when they executed it, should or should not each party be morally bound to give the contract a construction in harmony with their intent when they executed it? * * * "I shall omit all the earlier history pertaining to this question, every word of which gives added strength to my contention, and immediately proceed to the condi- tions surrounding the negotiations of the first and second Hay-Pauncefote treaties, reaching back of that only mo- mentarily to draw from the old Clayton-Bulwer treaty of 1850 only a paragraph always referred to thereafter as the 'general 'principle,'' and which was the only part of that old agreement retained, in any form, in the new. That 'general principle' was expressed in these words: And the same canals or railways being open to the citizens and subjects of the United States and Great Britain on equal terms, shall be open on like terms to the citizens and subjects of every other State — "This is our starting point. There is the 'general principle'; and while it was reiterated a thousand times thereafter, it has never been reiterated in the sense that it has been modified. "We start right here from this 'general principle,' which guaranteed equality of treatment to not only vessels 78 The Panama Tolls Controversy of the United States and Great Britain, but also to vessels of all other nations. Now, that 'general principle' was asserted and re-asserted by both parties again and again down to the adoption of the second Hay-Pauncefote treaty. Up to that time it meant equality of treatment of all vessels, including those of the United States. If it is now to have another meaning, that other meaning must be found either in an expressed declaration to that effect, or in a clear inference because of change from individual to Government ownership and control of the canal. ^^At that time in the discussio7is in the press of our oivn country we took the position that the interest upon the invest- ment and the operating expenses should he home hy all vessels passing through that canal. All our estimates for receipts in tolls to repay interest included all our vessels, coastwise and otherwise. That was what we understood on this side of the ocean. * * * "In closing, I cannot but feel, and deeply feel, that this is not a mere question of dollars and cents. The mat- ter of the payment of these tolls is a bagatelle, but we cannot measure national integrity in dollars and cents. We can throw our dollars to the winds, but we cannot throw national character to the winds. The President of the United States has taken a lofty stand in this case, and no matter whether we be Democrats or Republi- cans, we ought to stand by him in his effort to uphold the national integrity of this Government in the eyes of the whole world." We will now use excerpts from the scholarly speech of Representative Stevens: Legal and Moral Aspects 79 "It seems to me that the diflFerence in the discussion between the "two sides of this question is fundamental in this particular. Those of us who contend for eciual tolls without discrimination as to any nation believe that the principal basis in the settlement of this question should be international, and that domestic considerations should be secondary. Those who differ with us believe that domestic considerations should be primary and that international questions should be secondary. * * * "The geography of the world clearly shows its international importance. The Panama Canal is a strait connecting the two greatest oceans of the world. Upon these oceans face practically every great civilized and commercial nation of the world. Upon these oceans has been and will be carried the great mass of the water- borne commerce of the world. Upon these oceans, as we do, face nine nations, with more or less coastwise commerce between their coasts. Upon these oceans front the mother and the colonial possessions of the most im- portant nations in the world, and upon these oceans and passing through that canal will be an increasing inter- course, which will change, more or less — probably more, as the years go on — the destiny, political, commercial and social, of all of these great peoples and countries. We must realize, then, that all of these peoples and all interests of all nations are greatly interested in the man- agement and operation of this canal. They are interested in their own right, and they have natural, God-given rights in this great connecting waterway, which must be considered by any just people to whom may be intrusted the task of administering it. 80 The Pananta Tolls Controversy "I speak of natural rights in connection with the use of this canal with reason and advertently, because our country from the beginning of its history has insisted on the natural rights of our people and of our commerce in the use of every connecting waterway in the world, wherever it has seemed necessary for our people or com- merce to properly go. From the beginning of our Govern- ment, since the time when John Jay asserted that right on behalf of this country in the British treaty, I think of 1794, and President Jefferson sent our heroic little Navy against the Barbary pirates to assert the right of a free and open sea with equality of treatment, down through the discussion with Denmark of the right to levy sound dues at the entrance of the Baltic, the discussion of nat- ural and international rights in the Straits of Magellan and the rights of the nations in the Pacific, north and south everywhere, every administration of every political party has insisted that American citizens and American commerce should have equal rights with every other nation everywhere and at all times. That has been the true American policj', the historic policy of our country. "The International Parliamentary Union has col- lected and published a very elaborate document upon the subject of international rights in maritime canals. It contains a list of about forty great straits and connect- ing waterways and canals in the world, in which there are natural rights of an international character. "In many of these the United States has asserted its right of equal treatment, and wherever any question has arisen, our Government has insisted upon its right of equal treatment for its commerce and its citizens Legal and Moral Aspects 81 in every one of those waterways. The first time tliere has been any departure by our country from this in- variable rule as to equal treatment in the use of any of this class of waterways, was the enactment of this Panama bill of two years ago. * * * "There is another phase of our history that should be remembered and to which I especially wish to call the attention of my friends from New York and California. In 1846 we made a treaty with New Granada concerning communications across the Isthmus of Panama, which covered all kinds of transportation. That treaty provided that our people and our commerce should be treated on equal terms with the people and the commerce of New Granada. You will recall that was about the time of the discovery of gold fields in California. Thousands of our citizens and thousands of tons of our commerce passed over that great highway. The Governments of Panama and Colombia sought to discriminate in numberless ways against our citizens and commerce. They passed and ex- ercised various acts of discrimination against our people. Our people bitterly complained. The records of the State Department contain hundreds of protests, hundreds of complaints, from the citizens of California and from the citizens of New York against the Governments of Panama and New Granada. Our Presidents, our Secretaries of State, our ministers, protested, sometimes effectively, sometimes in vain. * * * "We protested, I say. Twice warships were sent to enforce equality of treatment, once by a Democratic 82 The Panama Tolls Controversy administration and once by a Republican administration, and we forced New Granada and we forced little Colom- bia and little Panama to yield to our citizens and to our commerce equality of treatment in the passage of that Isthmus. "Now, that same treaty is in force. Secretary Knox officially notified the Committee on Interstate and Foreign Commerce that that same treaty is in force and effect right now. Secretary Root and Secretary Hay based their negotiations with Colombia on the fact that that treaty is in force, * * * "We did require Colombia and New Granada to yield to us equality of treatment. While that same treaty is now in force, we propose to continue a law and adopt a policy which shall forbid equality of treatment by us to them. By the law now on the books we propose to exer- cise the same sort of discrimination which we sent war- ships and cannon to forbid them making against us. I leave it to you to decide as to the honesty and sincerity of that nation and that people who, after they know the facts, will insist upon that sort of discrimination and inconsistency. * * * "Now, it is argued, and strongly, that because we have spent $400,000,000 in the construction of this canal and must defend and maintain it that it is ours and we ought to have the right to do with it as we please, and pre- fer and discriminate in favor of our own people. Consider what that argument really means. We went upon that great world highway between the oceans, knowing well the rights and interests of all nations in it. We knew and loudly claimed for many years that this was a great inter- Legal and Moral AspecKf 83 national highway and that we should insist upon our rights of equal treatment in its use. We said so for fifty years before we undertook its construction. When we actually undertook the construction of that highway, we entered into an engagement with the nation which owned the land over which it passed, and promised that it should continue to be a highway for equal use of all nations. We said so in pledges to the world ; we said so in express terms to the nation which granted us the land for the highway. In the very instrument of grant, the treaty with Panama, by which the Canal Zone was ceded to us for use as a canal, among other things two were especially mentioned by Panama, one that her own public vessels should use the canal free from tolls, and second, that all vessels of all nations should be equally treated, and that there should be no discrimination to or for any traffic of any nation. These are express conditions of the grant by which we acquired the Canal Zone. Shall we now repudiate these pledges and these promises as to this waterway.'' "Senator Davis, in his great report, well said that — Our Government or our people will furnish the money to build the canal presents the single question whether it is profit- able to do so. If the canal, as property, is worth more than its cost we are not called on to divide the profits with other nations. If it is worth less and we are compelled by national necessities to build the canal, we have no right to call on other nations to make up the loss to us. In any view it is a venture that we will enter upon if it is to our interest, and if it is otherwise we will withdraw from its further considerations. * * * "When we commenced that great undertaking we knew what we were about to do. We went into it with our eyes wide open, and told the world, and especially our 84 The Panama Tolls Controversy neiglibors, of our intention; and now that it is finished, do the American people mean to say that because we want it, because we are big and it is big, we will do as we please regardless of the promises in the past? * * * "Article II provides three methods for constructing the canal: First, by the United States itself, at its own cost; second, by individuals or corporations whom the United States might assist by loan or gift of money; third, by individuals or corporations with whom the United States may co-operate through subscription to or purchase of stock or shares. Article II is as follows: Article II. It is agi*eed that the canal may be constructed under the auspices of the Government of the United States, either directly at its own cost or by gift or loan of money to individuals or corporations or through subscription to or pur- chase of stock or shares, and that, subject to the provisions of the present treaty, the said Government 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. "Necessarily the rules as to the use of the canal prescribed in Section 1, Article III, as to equality, must apply in the same way to all of these methods of con- struction and to whichever one of them may be adopted. There is nothing in the treaty indicating any different treatment of American vessels, whether the canal be constructed by private corporations or by the Govern- ment itself. This being true, with no provision in the treaty granting any preferential right or privilege, but, on the contrary, the strongest kind of language forbidding it, it must be difficult for any impartial person to fairly contend that a corporation constructing the canal at its Legal and Moral Aspects 86 own expense and operating it for a profit, as the Suez Canal was constructed and is operated, can, under these circumstances and conditions, be compelled to give free passage to a large class of vessels possibly yielding a larger profit to their owners, owned by other corpo- rations or interests not named, described, or excepted anywhere in the treaty. "It is submitted that under this treat}' any corpo- ration constructing and operating the canal under this provision would not be compelled to relinquish, without consideration, any of its legitimate revenues to another corporation owning and operating American ships in the coastwise trade. "Exactly the same rule must apply to the construction and operation by the United States itself as by a private corporation doing the same thing, because the same language and the same authority and rules apply to both. There can be no exception in one case unless it can also be an exception in the other. "It can hardly be argued that the United States might exact as a condition of any grant, aid, or subscrip- tion that there should be a preference or discrimination to the vessels of commerce of its citizens, because that very thing is expressly forbidden by the broad terms of Section 1, Article III, prohibiting any such exception or condition. "Any other stockholder or guarantor could have as much right to exact his own private conditions for his own private advantage, with the result that the enter- prise would face ruin from the start. The treaty gives the United States as a stockholder or guarantor no other 86 The Panama Tolls Controversy rights than any other interest also assisting in the enter- prise. A British, German, French or Japanese steamship company might subscribe, own and hold large blocks of stock or bonds in a corporation provided in section 2, and with equal right under the treaty might demand a preference for its vessels as an exception on account of such ownership. Of course such a demand would be absurd and unjust, and yet equally valid and equitable as a similar demand and exception for the United States. The terms of the treaty and the existing situation would seem to practically and legally make the United States a corporation sole, for the purpose of constructing, operating, and managing the canal, icith exactly the same rights, obli- gations and responsibilities which would pertain to any other corporation provided for by the treaty, doing exactly the same thing under the treaty. But as an incident to ownership, the vessels of the owner, used for its own purposes in coymection with the project, could undoubtedly be passed. A corporation coidd pass its vessels used for canal purposes. Equally the United States as a sovereign passes its public vessels used for its own purposes. That is what this sec- tion means. But its qualifying phrases clearly exclude the vessels and commerce of all else than of the owner, the sovereign in the case of the United States. The article clearly grants rights to the vessels belonging to the sovereign and as clearly puts vessels belonging to the citi- zens of that sovereign on the same terms as vessels of the citizens of all nations. "One of the principal arguments that the United States is not included within the terms *of all nations observing these rules,' is that because the United States Legal and Moral Aspects 87 is required to make and promulgate the rules, the treaty should not be construed as holding that the nation which makes the rules should be included within or bound by the rules to be promulgated by itself. This is clearly fallacious, because Article II provides that 'subject to the provisions of the treaty' the United States shall have the rights incident to such construction, and so forth. That, of course, applies the remaining portion of the treaty to the rights of ownership. The remaining portions of the treaty are Articles III and IV containing the rules framed upon the rules governing the Suez Canal. These rules at Suez and the similar ones at Panama embrace all vessels of commerce of all nations. An inspection of the rules themselves clearly shows that they do apply and were intended to apply to the United States. "It must be admitted that the last sentence of Sec- tion 1, Article III, applies to the United States, 'such conditions and charges of traffic shall be just and equit- able.' If not, then this nation can make unjust rules which would practically make the canal useless to the other nations. Again, the last sentence of Section 2 applies in terms 'the United States, however, shall be at liberty to maintain such military police along the canal as may be necessary to protect it against lawlessness and disorder.' It is difficult to argue that such language does not apply to the United States. Section 5 provides that the provisions 'of this section shall apply to water- ways adjacent to the canal within three marine miles of either end.' This was inserted because both Great Britain and the United States at various times had in- sisted that the three-mile limit might be extended under 88 The Panama Tolls Controversy certain conditions. It was agreed here clearly that the three-mile limit shall apply as one of the rules binding the United States in its treatment of the canal, except in time of war. Section 6 binds the United States itself in the time of war and peace to maintain the integrity of the canal plant. This is the main purpose of this section. So any reasonable examination of these rules clearly shows that they do apply to and bind the United States and were so intended when framed. One other thought in this connection: The preamble applies the general principle of neutralization to these rules, as set forth in Article VIII of the Clayton- Bulwer treaty. This principle is for equality and equity of treatment of all — the essence of these rules. The preamble binds the whole treaty, and so the United States. Of course, as it has been heretofore stated, that in the time of war the treaty ceases to operate and the United States may adopt any means necessary for its defense and temporarily close the canal. * * * "In the construction of the controverted clauses of any document it is always of prime importance to know exactly what the persons themselves intended by the lan- guage which is subject to dispute; and when they have set forth their own ideas as to its intention and meaning and have given good reasons for it, usually such facts have been conclusive as to the construction whenever the lan- guage has fairly allowed. "The negotiations for the modification of the Clayton- Bulwer treaty and for the framing of the Hay-Pauncefote treaty were commenced by Secretary of State John Hay by a letter, December 7, 1898, to Hon. Henry White, Legal and Moral Aspects 89 charg^ at London, and the reply of Mr. White, of date December 22, 1898. * * * "From these and other letters it appears in at least three diflferent places that the first and necessary condition of a treaty must be that all vessels of all nations must receive in the use of the canal the same terms and treatment as Ameri- can vessels. This condition was emphasized more than any other one provision, and descriptive references were for- warded to make it clear that such clause must include all vessels of all classes, foreign and coastwise, so there could be no mistake about the meaning of any language in the treaty. "Secretary Hay and our Government readily agreed to such condition, and nobody objected to it, because it has always been the consistent, continuous and historic policy of our Government for more than fifty years to do that identical thing. * * * "So Secretary Hay, with the approval of President McKinley and the proper officials of the United States, prepared the Hay-Pauncefote treaty and submitted it to Great Britain. In it were placed the clauses, heretofore referred to, maintaining the general principle of 'equality and neutrality,' and expressly setting forth in as clear and expUcit language as possible 'that the vessels of commerce and war of all nations should be treated on terms of entire equality, so that there shall be no discrimination against any nation, its citizens or subjects, in respect of the con- ditions or charges of traffic or otherwise.' Not a hint of any exception for our commerce, or any other exception; but on the contrary, the correspondence showed that all 90 The Panama Tolh Controversy officials intended clearly and beyond question that 'all vessels, commerce and citizens must be treated exactly alike.' "Surely this preliminary history, these negotiations, the language itself, the preamble and then the proclama- tion, in terms following and adopting the language, should be sufficient to show that no ambiguity or implication of any other meaning could possibly exist. In ordinary cases it would be sufficient, and no further question could be raised. But one additional fact still further re-enforces this history and construction. "At that time the ambassador of the United States to Great Britain was the Hon. Joseph H. Choate. He was absent at the time the negotiations were commenced, but returned, and, of course, became intimately acquainted with the proceedings as to both treaties. In a recent ad- dress he has stated emphatically his own recollections and understanding of the occurrences at that time. * * * It is true that I had something to do with the negotiation of this treaty. In the summer of 1901 — you will remember that this treaty was ratified by the Senate in November, 1901 — I was in England until October and was in almost daily contact with Lord Pauncefote, who on his side represented Lord Lans- downe, the foreign secretary, and was also in very frequent corre- spondence with Mr. Hay, our Secretary of State, under whom I was acting. As the lips of both of these diplomatists and great patriots, who were each true to his own country and each regard- ful of the rights of the other, are sealed in death, I think it is quite proper that I should say what I believe both of them, if they were here, would say today — that the clause in the Panama Canal bill exempting coastwise American shipping from the payment of tolls is in direct violation of the treaty. I venture to say now that in the whole course of the negotia- tion of this particular treaty no claim, no suggestion, was made Legal and Moral Aspects 91 that there shoxild be any exemption of anybody. How could there be in face of the words they agreed upon.' Lord Paunce- fote and John Hay were singularly honest and truthful men. They knew the meaning of the EngUsh language, and when they agreed upon the language of the treaty they carried out the fundamental principle of their whole diplomacy, so far as I know anything about it, and in the six years I was engaged with them their cardinal rule was to mean what they said and to say what they meant. "Only a few weeks ago Hon. Henry White delivered an address in Washington, in which he clearly and strongly affirmed the terms stated in the original note and corre- spondence, that the intention always existed on the part of all the officials of both Governments that vessels of commerce of both and all nations should always be treated on terms of entire equality. This would include all trade — foreign and coastwise. Mr. White has a more intimate knoivledge of the actual transactions than any living man, and his statement should be conclusive with fair and just men." Senator Root's speeches of January 21, 1913, and May 21, 1914, are equal to the best forensic efforts in the United States Senate. In the excerpts therefrom which follow, the Senator advances a new argument for tolls- exemption repeal which is sui generis. ARTICLE III The United States adopts, as the basis of the neutralization of such ship canal, the following rules, substantially as embodied in the convention of Constantinople, signed the twenty-eighth of October, 1888, for the free navigation of the Suez Canal; that is to say : "1. The canal shall be free and open to the vessels of com- merce and of war of all nations observing these rules, on terms of entire equality, so that there shall be no discrimmation 92 J'he Panama Tolls Controversy against any such nation or its citizens or subjects in respect of the conditions or charges of traffic, or otherwise. Such condi- tions and charges of traffic shall be just and equitable." "What is the 'entire equality' contemplated by Rule 1 of Article III of this treaty? Is it entire so that it assures equality in comparison with all ships engaged in the same trade similarly situated, the same kind of trade, or is it partial, so as to be equality in comparison only with certain ships engaged in the same kind of trade and not applying to other ships engaged in the same kind of trade, to wit, not applying to ships which are owned by American citizens? * * * "Is the kind of equality that is assured such that there will be no discrimination or that there will be no discrimin- ation except against the ships of other nations and in favor of ships belonging to American citizens? "Now, let us examine the question in the light of the circumstances which surrounded the making of this treaty and the conditions under which it was made. Treaties cannot be usefully interpreted with the microscope and the dissecting knife as if they were criminal indictments. Treaties are steps in the life and development of great nations. Public policies enter into them; public policies certified by public documents and authentic expressions of public officers. Long contests between the representa- tives of nations enter into the choice and arrangement of the words of a treaty. If you would be sure of what a treaty means, if there be any doubt, if there are two inter- pretations suggested, learn out of what conflicting public Legal and Moral Aspedn dS iwlicies the words of the treaty had their birth; what argu- ments were made for one side or the other, what conces- sions were yielded in the making of a treaty. Always, with rare exceptions, the birth and development of every important clause may be traced by the authentic records of the negotiators and of the countries which are recon- ciling their differences. So it is the universal rule in all diplomatic correspondence regarding international rights, in all courts of arbitration, that far more weight is given to records of negotiations, to the expressions of the negotia- tors, to the history of the provisions than is customary in regard to private contracts or criminal indictments. "This question as to the kind of equality that the makers of this treaty intended to give divides itself very clearly and distinctly into a question between two per- fectly well-known expedients of treaty making; one is the favored-nation provision, with which we are all verj'^ familiar in commercial treaties, and the other is the pro- vision according to citizens of another country rights measured by the rights of the nationals or citizens of the contracting country. The most-favored-nation provision has its most common expression in the provision regarding tariff duties, a provision that no higher duties shall be charged upon goods imported from one foreign country than upon goods imported from other foreign countries. That is the common 'most-favored-nation clause.' * * * "A careful examination shows this to be a fact: That it is the universal rule, with rare exceptions, that wherever the rights of the citizens of a contracting country can be made the standard of equality for the citizens of another 94 The Panama Tolls Controversy country they are made so, and that recourse is not had to the most-favored-nation clause, escept where that higher degree of equality is impossible because the citizens of the two countries occupy different relations to the business that is contemplated. "So we have the question between these two kinds of equality clearly drawn and resting upon long experience of nations, a subject fully understood by the negotiators of this treaty upon both sides. "We know now that the negotiators of this treaty, the men who made it, all understood that the larger equal- ity was intended by its terms. Of course, what the negoti- ator of a treaty says cannot be effective to overthrow a treaty; but I think we must all start, in considering this question, with the assumption that the words are capable of two constructions. I think no one can deny that, in view of the differences of opinion which have been ex- pressed here regarding their meaning. So here are words capable of two constructions, a broad construction and a narrow construction, but the fact that all the makers of the treaty intended that the words they used should have the larger effect is certainly very persuasive toward the conclusion that those words should receive the larger effect. Not only the American negotiators but the British negotiators as well so understood it. Whenever we seek to impose upon these words a narrower construction for our own interests than the makers of the treaty under- stood them to have, we should remember the fundamental rule of morals that a promiser is bound to keep a promise in the sense in which he had reason to believe the promisee understood it was made. * * * Legal and Moral Aspects 95 "The kind of equality which the negotiators in- tended — that is, an equaHty in which the treatment of American citizens is made the standard for the treatment of foreign citizens — had during all the history of the Isthmian Canal efforts been the standard sought for in negotiations and treaties. That kind of equality was the standard adopted by the public policy of the United States for all similar enterprises. It was customary; it was uniform; it was natural for negotiators of a treaty relating to a canal. Let me illustrate that by referring to the initial treaty on this subject, the treaty of New Granada of 1846. When the American negotiators making that treaty dealt with the subject of a railroad and canal, what kind of equality did they stipulate for? Why, this: The Government of New Granada guarantees to the Gov- ernment of the United States that the right of way or transit across the Isthmus of Panama upon any modes of communica- tion that now exist, or that may be hereafter constructed, shall be open and free to the Government and citizens of the United States, and for the transportation of any articles of produce, manufactures or merchandise of lawful commerce belonging to the citizens of the United States; that no other tolls or charges shall be levied or collected upon the citizens of the United States of their said merchandise thus passing over any road or canal that may be made by the Government of New Granada or by the authority of the same than is, under like circumstances, lev- ied upon and collected from the Granadian citizens. "The message of President Polk transmitting this New Granada treaty of 1846 to Congress dwells especially upon the assurance to citizens of the United States of equal charges and equal facilities in the use of railroad and canal with citizens of New Granada, "I go back again to the Clayton-Bulwer treaty of 96 The Panama Tolls Controversy 1850. There is no doubt about the kind of equality which the negotiators considered it to be valuable to get, useful to get, natural to get. * * * "Article VIII provides that — It is always understood by the United States and Great Britain that the parties constructing or owning the canal shall impose no other charges or conditions of traffic thereupon than are just and equitable, and that the same canals or rail- ways, being open to the citizens and subjects of the United States and Great Britain on equal terms, shall also be open on hke terms to the citizens and subjects of every other State. "You will perceive, sir, that the terms on which citi- zens of other countries were to be allowed to come in were not terms of the most-favored nations as among themselves. They were on like terms with those which existed between Great Britain and the United States; that is to say, each other country which came in and adhered to this Clayton- Bulwer treaty was to have the rights of its citizens meas- ured by the rights accorded to the citizens of the United States and to the citizens of Great Britain. * * * "We are asked to believe that starting with the Clay- ton-Bulwer convention, which gave to Great Britain unquestioned assurance of the larger and more valuable equality of her vessels with the vessels of American citi- zens, in a negotiation with a country which in all its his- tory had insisted regarding all canals that the measure of equality should be the measure of service and of charges to its national citizens, abandoned the vantage ground of the Clayton-Bulwer treaty and gave up that basis of equality without one word in the negotiation, without Legal and Moral Aspects 97 discussion, without its being asked, without its being mentioned without its knowing it, without the other, negotiators knowing it. But that is not all. "It was not merely the immemorial policy of the United States and Great Britain regarding all canals; it was not merely the general public policy of the United States and Great Britain regarding all ports and waters, but it was the policy of the United States regarding trade the world over, and the champion and protagonist of that policy was John Hay. At the very time that he was ne- gotiating the Hay-Pauncefote treaty he was appealing to the justice of all the nations of the world for the 'open door' in China; he was appealing to them in the interest of the world's commerce, in the interest of civilization to accord in all their possessions in China, what? Favored- nation treatment? Oh, no; the same treatment that they accorded to their own citizens. Let me ask you to attend for a moment to things that John Hay wrote regarding this great design, the accomplishment of which will ever stand in the history of diplomacy as one of the proudest contributions of America to the progress of civilization. On September 6, 1899, he wrote to Mr. Choate in London: The Government of Her Britannic Majesty has declared that its policy and its very traditions precluded it from using any privileges which might be granted it in China as a weapon for excluding commercial rivals, and that freedom of trade for Great Britain in that Empire meant freedom of trade for all the world alike. While conceding by formal agreements, first with Germany and then with Russia, the possession of "spheres of influence or interest" in China, in which they are to enjoy special rights and privileges, more especially in respect of railroads and mining enterprises. Her Britannic Majesty's Government ha.s therefore sought to maintain at the same time what is called 98 The Panama Tolls Controversy the "open-door policy" to insure to the comnaerce of the world in China equality of treatment within said "spheres" for commerce and navigation. "So he wrote all of the great nations of the world an appeal for equal treatment, an appeal for a specific stipu- lation to secure the equal treatment that no higher charges should be imposed upon the citizens of any other country in the ports and waters possessed by those great powers in China or for freight or passage over the railroads built and controlled by them than were imposed upon their own citizens. To that appeal all the great powers of the world responded in affirmance; and on the twentieth of March, 1900, Mr. Hay was able to issue his circular of instructions to all the ambassadors and ministers of the United States announcing the universal assent of the world to that great principle of equality — equality measured by the rights of the citizens of the nation granting it in all the Empire of China; yet we are asked to believe that John Hay denied, abjured, repudiated that policy of civiliza- tion in regard to the Panama Canal at the very moment that, through the same agents, he was enforcing the policy upon the same countries; and that he did it without know- ing it. "But, we are not left to inferences which must be drawn from the circumstances that I have mentioned or from declarations of public policy or from the uniform course and custom of treaty making regarding canals and regarding public waters and transportation. There is positive, and it appears to me conclusive, aflSrmative evidence that the negotiators did eflPectively proceed Legal and Moral Aspects 99 in making this treaty in accordance willi the honorable obligation of their conntry as the builder and maintainer of a public utility, as the champion of equal coniniercial rights the world over. "We begin the consideration of the express provisions leading to the conclusion that the larger equality was intended with the communication of the Hay-Pauncefote treaty to the Senate. Of course, we are all familiar with the terms of the preamble preserving the general prin- ciple of Article VIII of the Clayton-Bulwer treaty. Let me read them again, however, for convenience of reference: The United States of America and His Majesty Edward the Seventh, of the United Kingdom of Great Britain and Ireland, and of the British dominions beyond the seas, King, and Emperor of India, being desirous to facilitate the construc- tion of a ship canal to connect the Atlantic and Pacific Oceans, by whatever route may be considered expedient, and to that end to remove any objection which may arise out of the convention of the nineteenth of April, 1850, commonly called the Clayton- Bulwer treaty, to the construction of such canal under the auspices of the Government of the United States, without im- pairing the "general principle" of neutralization established in Article VIII of that convention. * * * "Now we are told that the language of a treaty or of a contract or of a statute cannot be changed by the preamble; but what is the purpose of a preaml)le? The purpose is to afford a guide to the interpretation of the terms of the treaty or of the statute. When you start with the third article of the Hay-Pauncefote treaty and have a debate as to its interpretation, you turn to the preamble and you find there a guide intended by the makers of the treaty to enable you to reach the right interpretation upon the terms of the third article. But, 100 The Panama Tolls Controversy still further than that, the idea of not impairing the general principle of neutralization is carrried into the treaty itself, for in Article IV — It is agreed that no change of territorial sovereignty or of international relations of the country or countries 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. "That is, repeating in the fourth article as being a part of the treaty itself, the words of the preamble that the obstacles of the Clayton-Bulwer treaty are to be removed without impairing the general principle of neu- tralization established in Article VIII of that convention. "This preamble, sir, which refers to the general principle of neutralization in the Clayton-Bulwer treaty and which manifestly is designed to preserve in the Hay- Pauncefote treaty something of the Clayton-Bulwer treaty, has been treated in discussion as being a matter of not very much importance. Not so the view of the negotiators of the treaty. Not so the view of anybody connected with our Government at the time the treaty was made, for you will perceive, in the first place, that in the letters of transmittal of the treaty special pains are taken to have it understood that this treaty preserves unimpaired something which is called the general principle of neutralization. "Mr. Hay, in transmitting the Hay-Pauncefote treaty to the President, writes: I submit for your consideration * * * a convention * * * to remove any objection which may arise out of the * * * Clayton-Bulwer treaty * * * without im- pairing the "general principle" of neutrahzation estabUshed in Article VIII of that convention. Legal and Moral Affpecis 101 "President Roosevelt, in transmitting the treaty to the Senate, says: I transmit, for the advice and consent of the Senate to its ratification, a convention signed November 18, 1901. * * * to remove any objection which may arise out of the convention of April 19, 1850, * * * to the construction of such canal under the auspices of the Government of the United States without impairing the '' general principle" of neutralization established in Article VIII of that convention. "That feature of the Hay-Pauncefote treaty is dwelt upon and made extraordinarily prominent, and there is a manifest feeling that the Senate ought not to lose sight of it in considering whether it shall advise the ratification of the treaty. * * * ''The only two things in Article VIII are the equality of service and of charge between the vessels of the United States and those of Great Britain and the extension of that to other countries that come in and the obligation of protec- tion. The great object of the negotiation of the Hay-Paunce- fote treaty was to take over to the United States alone the duty and the right of protection. That 2vas the difference between the Hay-Pauncefote treaty and the Clayton-Bulwer treaty — that Great Britain was to surrender the right of protection, to be relived from the duty of protection, and no other countries ivere to be permitted to come in and exercise the right of protection. The United States was to put itself on the platform that Blaine laid down in 1881 «.s' the sole protector of the canal. What, then, was there to be preserved unimpaired in the eighth article of the Clayton-Bulwer treaty? Nothing except the basis of equality, equality between the United States and Great Britain, equality measured by the 102 The Panama Tolls Controversy treatment of the nationals of one country for the nationals of the other. Nothing else was left to be preserved unimpaired. * * * "Mr. Hay, in his letter to Senator Cullom at the time the treaty was under consideration by the Senate, says: He (the President) not only was willing but earnestly de- sired that the "general principle" of neutralization referred to in the preamble of this treaty and in the eighth article of the Clayton-Bulwer treaty should be perpetually applied to this canal. This, in fact, had always been insisted upon by the United States. "There was no change in policy. He recognized the entire justice and propriety of the de- mand of Great Britain that if she was asked to surrender the material interest secured by the first article of that treaty, which might result at some indefinite future time in a change of sov- ereignty in the territory traversed by the canal, the "general principle" of neutralization as appUed to the canal should be absolutely secured. "Whatever else the Hay-Pauncefote treaty means, it means to secure absolutely the general principle of neutraliza- tion contained in the eighth article of the Clayton-Bulwer treaty, which was, according to the understanding of the \ makers of the Hay-Pauncefote treaty, the absolute equality of the ships, the citizens and the subjects of all nations with the ships and the citizens of the United States and of Great Britain; and we are not at liberty to spell out any different meaning of the Hay-Pauncefote treaty. * * * "The third article of the Hay-Pauncefote treaty provides: The United States adopts, as the basis of the neutralization of such ship canal, the following rules, substantially as embodied Legal and Moral Aspects 103 in the convention of Constantinople, signed the twenty-eighth of October, 188S, for the free navigation of the Suez Canal. "Article XII of the Suez Canal convention provides that dues are to be levied without exception or favor upon all vessels under like conditions. "That was a fundamental basis under which the Suez Canal was to be operated. The convention proceeds: The Suez Maritime Canal shall always be free and open, in time of war as in time of peace, to every vessel of commerce or of war, without distinction of flag. * * * "This convention which makes that declaration of absolute and universal equality of tolls a basis of its agree- ment was made after Great Britain had become the chief owner and arbiter of the canal. Now, I come back to the Hay-Pauncefote treaty. Article III: The United States adopts as the basis of the neutralization of such ship canal the following rules, substantially as embodied in the convention of Constantinople, etc. : 1. The canal shall be free and open to the vessels of com- merce and of war of all nations observing the rules on terms of entire equality. "An 'entire equality' substantially as embodied in the Suez convention. You are bound to say that the equality was substantially the same. When these negotiators at that very instant were appealing to the Suez convention and declaring the treaty they were making was substan- tially the same in the rule of equality which it prescribed, when they were declaring that what they were doing was substantially like what the Suez convention did — you are not at liberty to say that at that very instant they meant something entirely different. If you do]^that, you^say 104 The Panama Tolls Controversy they were dishonest, they were disingenuous, they were deceiving Great Britain. "Ah, the worst thing about it is that our Government has said from generation to generation it was going to treat all the world alike in whatever it did about this canal; that the makers of our treaty declared that they were pre- serving unimpaired the equality established in the eighth article of the Clayton-Bulwer treaty; that the makers of our treaty declared that the provision for equality was sub- stantially the same as that in the Suez treaty; that that was the uniform, the unvarying attitude of the United States in every step which we took to acquire title to the Canal Zone and to get the unrestricted right to own and operate the canal; and not until after we got it, not until after we were secure, did any American ever broach the idea that ive were to use the canal for selfish advantage commercially; that to the political control, to the military control, to the power of ownership and regulation and management we were to add a discrimination against all the rest of the world for the purpose of enabling our merchant ships to outdo them in competition." We will now use excerpts from an able speech by Senator Burton: "OUR DEMANDS IN RELATION TO CANADIAN WATER- WAYS IN 1888 TO 1892. * * * "The Canadian Government in council had in substance decreed that while the tolls on cargoes carried through the Welland Canal should be twenty cents per ton on eastbound freight, yet if the boat went as far as Legal and Moral Aspects 105 Montreal there should be a rebate of eighteen cents a ton, leaving the net toll only two cents. This gave a prefer- ence to the port of Montreal as compared with the ports of the United States on Lake Ontario, the St. Lawrence River, and, in fact, upon the north Atlantic seaboard. Its manifest object was to increase the importance of Montreal as a port for the export of grain and other commodities. * * * "A resolution by unanimous vote of Congress author- ized the President to issue a proclamation in retaliation; also the proclamation in retaliation of August 18, 1892. This action led to a revocation of the regulation of the Canadian Government by order of the council, so that equal privileges were afforded to the ships and commerce of both nations. "The distinct assertion by all of our statesmen who took part in this controversy or declared themselves upon the subject was that by the treaty of 1871 equaHty of treatment was secured not only for our shipping, but for our citizens, that regard must be had for the routes of transportation to prevent discrimination against the United States in trade. But it should be very carefully noted that the treaty of 1871 did not contain so strong language as the Hay-Pauncefote of 1901. Indeed, it is not only plausible but extremely probable that the lan- guage of the treaty of 1871 was in mind when that of 1901 was drawn, and that the object was to secure equality beyond the possibility of any ambiguity. The language of the treaty of 1871 is: The Government of Her Britannic Majesty engage lo urge 106 The Panama Tolls Controversy upon the Government of the Dominion of Canada to secure to the citizens of the United States the use of the Welland, St. Lawrence and other canals in the Dominion on terms of equality with the inhabitants of the Dominion. "The language of the Hay-Pauncefote treaty is: The canal shall he 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 citiiens or subjects, in respect of the con- ditions or charges of traffic, or otherun.se. "There is no question of territory involved in Cana- dian canals, either the Welland or those below Lake Ontario beside the rapids along the St. Lawrence River. They are all within the Dominion of Canada. It was not necessary to acquire the land through which they pass to build a canal as 'a trust for the world.' The argument in favor of the right of exclusion is, we must admit, much stronger than it is in the case of the Panama Canal; yet when a discrimination in tolls, which it was alleged was not altogether against our ships, was attempted, we demanded that it should be done away with, because it discriminated against our citizens and diverted trade and transportation which naturally belonged to our own country in another direction. Can we afford to assert the principle of equality in the use of channels when it benefits us and our trade, and at the same time establish another and entirely opposite rule when the canal or route belongs to us.^ * * * "The slight attention given in these debates to our demand from 1888 to 1892 for equal privileges in the Welland Canal and other Canadian channels is hardly Legal and Moral Aspectfi 107 fair to those who advocate the repeal of this exemption. During the debates in July and August of lOl'-^ the de- mand was made that the supporters of the House bill should reconcile their position with the attitude of the United States on this question during the administrations of President Cleveland and President Harrison. I do not recall that any reply was made to that challenge of 1912 for a consistent explanation of our course in 1888 to 1802. But now, after the lapse of two years, the explanation is offered that neither Canada, nor Great Britain acting for her, ever conceded that they were wrong; but that to the last they maintained the correctness of their position and yielded merely as a matter of expediency. But does even that afford one particle of justification for us to insist upon this preference? "We made an insistent demand, not merely by dip- lomatic notes, but by action of Congress and by a retalia- tory proclamation expressing our interpretation of the principles involved in the treaty relating to the Welland Canal and asserting the observance of our traditional policy. The action taken then was in entire harmony with declarations theretofore made in regard to the proposed Isthmian Canal, and our demands in regard to other waterways in foreign countries extending over one hundred years. It must be conceded that the posi- tion taken by the act of 1912 was squarely in contradic- tion to that of 1892. "Can we now, under changed conditions, and when we will he benefited by observing a different rule, afford to declare that our deliberate action then taken was wrong? Was there one law of honor and patriotism in 1892 and 108 The Panama Tolls Controversy another in 1912? Does it require only twenty years to change the law of fairness between nations? "* * * It has been maintained in this discussion that the Panama route is a national waterway, as it is located upon territory owned by the United States, and thus within its sole jurisdiction. Indeed, the very extreme statement has been made that we could not respect the suggestion of another Government to make all tolls equal, because it would involve an abandonment of sovereignty. * * * "A strip ten miles in width was granted for its con- struction, but this was not a territorial acquisition. If so, it would have been absolutely contrary to our settled policy with reference to the republics to the south of us. For this strip we pay an annual rental of $250,000, which is quite inconsistent with a fee-simple title. A width of ten miles was regarded as necessary for the convenient construction and operation of the canal. Material was obtained from this area or zone in the work that was done. Also material was deposited upon it. Provision was made in the treaty for going outside the zone on pay- ment of proper compensation, if necessary for the con- struction of the canal. It was deemed desirable that the land obtained be permanently held for the habitation of those engaged in the operation of the canal and for sani- tary and police control in its immediate locality. Had the mere ground through which the canal is excavated been obtained, it would have been easy for marauders to approach it, and the safeguarding of the health of the employees would have been difiBcult. The language of the treaty itself expresses in the clearest terms that the Legal and Moral Aspecf.s 109 grant of land in Panama is in trust for a certain purpose and not for territory to be incorporated in the United States as a part of its general domain. "As compared with other portions of the United States the distinctions in the control exercised over this strip are very marked. There is no legislative body. There is no provision for elections. A governor is ap- pointed by the President. In the express language of the statute, the Canal Zone 'is to be held, treated, and governed as an adjunct of such Panama Canal.' The customs laws of the United States are not applicable there, nor have the inhabitants of this strip the right to send their merchandise into the United States in the man- ner granted to the people of our country. Imports from the Canal Zone pay duties at our customhouses in the same manner as imports from a foreign country. Imports into the Canal Zone are not subject to the duties imposed by our laws. The War Department has assumed the au- thority of fixing customs regulations without any refer- ence to Congress whatever. The canal, instead of being an artery of commerce, supplying a large adjacent terri- tory, such as is the case with the great rivers or water- ways of the United States, is limited to furnishing what is needed for those who operate the canal and to the promo- tion of its traffic. Whatever trans-shipment there may be, whatever coaling or supply stations may be established, are but incident to the waterway between the oceans, and are provided to facilitate traffic through the canal. The most important of all, however, is the fact that this waterway is a mere connecting link between the two oceans, less than fifty miles in length, and is constructed 110 The Panama Tolls Controversy as a part of maritime routes of great length providing a waterway to aid the means of communication between nations, many of which are remote from the canal and are located upon seas or oceans. "Second. It has been maintained that there is a marked distinction between natural and artificial water- ways in the degree of control which may be exercised over them by the countries through which they pass. "The more recent declarations of publicists and inter- national lawyers, however, all favor the idea that artificial canals connecting great bodies of waters are international waterways. This principle was asserted in the most unequivocal language in the convention relating to the Suez Canal of 1888. The duty of a country owning the territory through which a canal may be constructed to afford opportunity for its construction was maintained in the most strenuous manner by President Roosevelt in his action with reference to Colombia. "There is no clearer statement of the American view on the subject than that contained in a letter from the Hon. Lewis Cass, our Secretary of State under President Buchanan, to Mr. Lamar, our minister to the Central American States, on July 25, 1858. He wrote, in referring to the country or countries through which a canal might be constructed, the following: Sovereignty has its duties as well as its rights, and none of these local governments * * * would be permitted, in a spirit of eastern isolation, to close these gates of intercom-se on the great highways of the world and justify the act by the preten- sion that these avenues of trade and travel belong to them, and that they choose to shut them or, what is almost equivalent, to encumber them with such unjust regulations as would prevent their general use. Legal and Moral Aspect.s 1 1 1 "We can reach no conclusion except that a canal con- structed like the Panama, under a concession, the aim and object of which is merely to provide a connecting waterway, especially in view of the language of the Hay- Pauncefote treaty, is to be considered as an international watercourse and subject to the rules pertaining to natural straits. There is, of course an exception to this, so far as regards the necessity of adopting necessary regulations to protect against hostile attack, the necessity of adopting proper regulations to insure the safety of boats in passing, to provide against injury to locks and other constructions, to police the canal and enforce sanitary regulations. Again, the position of an artificial waterway is excep- tional in that the cost of construction allows the imposition of tolls as a compensation for the expense of the improve- ment, though in many instances the improvement of natural channels so as to make them readily available for navigation is very large, and, in kind, the same as the build- ing of artificial waterways. Indeed, it is often a question over a given stretch of a river whether the most feasible method to secure navigation is by improving the main stream or by a lateral canal. In modern times the de- mand is that navigation have free scope, without inter- ruption from pirates, from payment of tribute, or from discrimination. As has been pointed out, there is no nation which has been quite so insistent in this princii)le as our own. The tendency of recent years in the making of treaties and agreements is altogether against discrim- ination in the use of artificial waterways. It should again be said that our own policy, as exemplified in nego- tiations with Canada, shows that we have maintained 11^ The Panama Tolls Controversy the principle that when a canal is a connecting link in a longer route afforded by rivers or by sea, it must be open on equal terms to all. Every declaration made upon this subject in the earlier years ivhen negotiations 1 were under way for an Isthmian canal would conde7nn\ in the most decisive language any attempt on our part toj discriminate in our favor in any canal connecting the two* oceans. * * * "The treaties pertaining to a proposed Isthmian canal are especially significant. In that of 1846 with New Granada there are two provisions. Article III contains the usual clause exempting the coastwise trade of either country. Article XXXV, which has to do with the ports of the Isthmus of Panama or any road or canal across the Isthmus that may be made by the Government of New Granada, or by the authority of the same, provides that there shall be no other tolls or charges levied or collected from the citizens of the United States than are, under like circumstances, levied and collected from the Grana- dian citizens. "The Cass treaty of November 26, 1857, with Nica- ragua, known as the Cass-Yrisarri treaty, in Article II reserves the coastwise trade; Article XIV grants transit on terms of equality to the Atlantic and Pacific, and contains the provision that no higher charges or tolls shall be imposed on the conveyance or transit of persons or property of citizens or subjects of the United States or any other country across said route of communication than are or may be imposed on the persons or property of citizens of Nicaragua. This treaty was not ratified. Legal and Moral Aspects ll.T Other treaties with Nicaragua and other countries make unequivocal reference to the coastwise trade. "In the treaty with Panama of 1903 there is in Article XIX an exemption of the vessels of the Republic of Pan- ama and its troops and munitions of war in such vessels from the payment of charges of any kind. This shows that when an exemption was intended it was regarded as neces- sary to state it. The Frelinghuysen-Zavala treaty, made in 1884 and recommended by President Arthur in his message of the same year, but withdrawn bj' President Cleveland in his first annual message of 1885, contained this provision in Article XIV : The tolls hereinbefore provided shall be equal as to vessels of the parties hereto and of all nations, except that vessels en- tirely owned and commanded by citizens of either one of the par- ties to this convention and engaged in its coasting may be favored. "Thus all of these treaties — that with New Granada, the proposed agreements with Nicaragua, and the treaty with Panama — show that in all our negotiations pertain- ing to an Isthmian canal when it was intended to exempt coastwise shipping or to grant any preferences it was specifically so stated. "Now, the Hay-Pauncefote treaty of 1901 contained no exemption of coastwise shipping, but, on the contrary, the very strongest language to express entire equality. "Is it to be believed that when, through a series of years in practically all countries near to the proposed canal, coastwise shipping was exempt from the provisions of the treaties in the most definite language it could have been intended to claim exemption or preference for our own coastwise shipping in this canal, built on soil acquired 114 The Panama Tolls Controversy from a foreign country and connecting the two great oceans of the world, without any language whatever on the sub- ject? If it was intended to exempt our coastwise shipping, why did we not say so? This, too, in the face of our own Hraditional policy' asserted against Canada less than ten years before, and asserted contemporaneously, at least in principle, in negotiations with the nations having spheres of influence in the Chinese Empire. * * * "In opposing this bill for repeal nothing has been more frequent than an appeal to patriotism and to national pride. Any such appeal must necessarily be received with a responsive spirit, and if made with earnestness it stirs the heart. But patriotism does not mean that we shall dis- regard treaty obligations or swerve from policies which have been maintained with persistency and zeal through all our national life. It is our duty to maintain a scrupu- lous regard for national faith and to follow the rules which we have laid down for ourselves as well as for all other nations. To be consistent and to be fair to all the world, that is patriotism. If we retrace our steps from the ennobling record which has characterized us for more than one hundred years, let us beware lest the most inspiring notes of patriotism, though uttered with the tongues of men and of angels, may become as sounding brass and a tinkling cymbal." SENATOR ROOT ON THE SOVEREIGNTY OF THE CANAL ZONE "Well, asserting that we were acting for the common benefit of mankind, willing to accept no preferential right Legal and Moral Aspects 115 of our own, just as we asserted it to secure the Clayton- Bulwer treaty, just as we asserted it to secure the Hay- Pauncefote treaty, when we had recognized the Republic of Panama, we made a treaty with lier on the eighteenth of November, 1903. I ask your attention now to the pro- visions of that treaty. In that treaty both Panama and the United States recognize the fact that the United States was acting, not for its own special and selfish interest, but in the interest of mankind. "The suggestion has been made that we are relieved from the obligations of our treaties with Great Britain because the Canal Zone is our territory. It is said that, because it has become ours, we are entitled to build the canal on our own territory and do what we please with it. Nothing can be further from the fact. It is not our terri- tory, except in trust. Article II of the treaty with Panama provides : The Republic of Panama grants to the United States in per- petuity the use, occupation and control of a zone of land and land under water for the construction, maintenance, operation, sanitation and protection of said canal — "And for no other purpose — of the width of ten miles extending to the distance of five miles on each side of the center hne of the route of the canal to be constructed. * * * The Republic of Panama further grants to the United States in perpetuity the use, occupation and control of any other lands and waters outside of the zone above described which may be necessary and convenient for the construction, maintenance, operation, sanitation and protection of the said canal or of any auxiliary canals or other works necessary and convenient for the construction, maintenance, operation, sanitation and pro- tection of the said enterprise. 116 The Panama Tolls Controversy "Article III provides: The Republic of Panama grants to the United States all the rights, power and authority within the zone mentioned and described in Article II of this agreement — "From which I have just read — and within the limits of all auxiliary lands and waters men- tioned and described in said Article II which the United States would possess and exercise if it were the sovereign of the terri- tory within which said lands and waters are located to the entire exclusion of the exercise by the Republic of Panama of any such sovereign rights, power or authority. "x\rticle V provides: The Republic of Panama 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 railroad across its territory between the Caribbean Sea and the Pacific Ocean. "I now read from Article XVIII: 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 III of, and in conformity with all the stipulations of, the treaty entered into by the Governments of the United States and Great Britain on Novem- ber 18, 1901. "(So, far from our being relieved of the obligations of the treaty with Great Britain by reason of the title that we have obtained to the Canal Zone, we have tahen that title im- pressed with a solemn trust. We have taken it for no purpose except the construction and maintenance of a canal in ac- cordance with all the stipulations of our treaty with Great Britain. We cannot be false to those stipulations without adding to the breach of contract a breach of the trust ivhich we have assumed, according to our own declarations, for the benefit of mankind as the mandatory of civilization. Legal and Moral ^lf accounting. In the fixing of tolls, the President is vested with some discretion. A maxunum and a minimum rate are fixed for foreign commerce using the canal. The amount im- posed on the traffic must cover carrying charges, as that is understood in modern business, as soon as it can be done without exceeding the maximum rate fixed by the canal act. The Panama Canal act is thus in harmony with the foregoing view expressed by ex-President Taft. The policy that the United States should adopt in the management of the Panama Canal is expressed as follows by Professor Johnson : "The United States should adhere to business prin- ciples in the management of the Panama Canal. The Government needs to guard its revenues carefully. Pres- ent demands on the general budget are hea\'y and are certain to be larger. Taxes must necessarily increase. Those who directly benefit from using the canal, rather than the general tax payers, ought to pay the expenses of operating and carrying the Panama Canal commercially." The following statement by Professor Johnson is now apropos: "In considering the effect of exemi)ting the coast- wise shipowners from toll payments it is possibly well to bear in mind that the charges that have been fixed bv the President for the use of the canal— one dollar and 156 The Panama Tolls Controversy twenty cents for each one hundred cubic feet of the earning capacity of vessels, with a reduction of forty per cent in the rate for vessels without passengers or cargo — are not the highest rates that might have been imposed without restricting traffic, nor are the rates such that higher charges would have lessened the revenues from the canal. The tolls are neither all the traffic would bear, nor have they been fixed with a view to securing maximum possible revenues. "It is obvious that with a given rate of tolls the canal revenues will be larger if all vessels using the canal are charged tolls, and will be smaller if any class of vessels, as the American coastwise shipping, is exempted from the charges. "It is likewise self-evident that if it be desired to se- cure an income of a definite amount, as, for example, revenues that will cover outlays for operation, main- tenance, interest and amortization — revenues that will make the canal commercially self-supporting — the rate of tolls must be increased proportionately with any reduction of the tonnage resulting from the exemption of any class or classes of shipping from the payment of the charges. "These statements are, of course, mere truisms. There will be nothing new or unusual about the Panama Canal finances. If the canal does not support itself, the taxpayers must support it. The amount required to meet the current expenses and capital costs of the canal can be derived only from the tolls paid by those who use the waterway or from taxes paid by the public who own the canal; and, as regards the income from tolls, the sum received must be affected both by the rate of charges The Financial AspecU 1.37 and by the share of the tonnage that is subject to or exempted from the charges. "It is estimated that $19,250,000 will be required annually to make the canal commercially self-sui)portiiig. This total is made up of $3,500,000 for operating and maintenance expenses, $500,000 for sanitation and zone government, $250,000 which is the annuity payable to Panama under the treaty of 1903, $11,250,000 to pay three per cent on the $375,000,000 invested in the canal, and $3,750,000 for an amortization fund of one per cent per annum upon the cost of the canal. "It has been ascertained by a detailed study of the traffic that might advantageously use the Panama Canal and of the rate at which that commerce is increasing that, during the first year or two of the canal's operation, that is in 1915, the ships passing through the canal will have an aggregate net tonnage of about 10,500,000 tons. Of this initial tonnage about 1,000,000 net tons will con- sist of shipping employed in the trade between the two seaboards of the United States. The evidence as to the past rate of grow^th of the world's commerce justifies the estimate that by the end of the first decade, that is, in 1925, the total net tonnage of the shipping passing through the canal annually wall be about 17,000,000 tons, of which at least 2,000,000 tons will be contributed by the coastwise shipping." It is likely that growth in the amount of the traffic that will be shipped through the canal will continue in later decades in even larger volume than during the first decade. This points to the possibility of making the canal commercially self-supporting. 158 The Panama Tolls Controversy Professor Johnson says in another place: "Tolls are to be levied and collected at Panama presumably to pay the expenses for running and main- taining the canal and for meeting the interest charges on the funds invested in the canal; and it is to be expected that it will be the policy of the United States to make the canal commercially self-supporting, if the traffic is large enough to secure the requisite revenues without unduly restricting the usefulness of the waterway. It will not be the policy of the United States to obtain profits in excess of the revenues required to meet operat- ing, maintenance, interest, and amortization charges; but, if the traffic proves to be as large as it seems prob- able that it will be, the policy of the United States will doubtless be to have the canal carry itself commercially — to limit Ahe canal expenses borne by the general tax- payers of the United States to the military and naval outlays required for the defense of the canal and for the maintenance, at the isthmus, of forts and naval bases. "If it shall be, as it ought to be, the policy of the Government to make the canal commercially self-support- ing, it is obvious that the rate of tolls imposed must be affected by the tonnage upon which the charges are levied; and that, if the toll-bearing tonnage is reduced by the ex- emption of the large volume of shipping owned by the in- dividuals and corporations engaged in the coastwise trade, the rate of charges payable by the owners of American ships in the foreign trade and by the citizens owning vessels under foreign flags must be higher than the rate would be if all vessels using the canal were required to pay tolls." The Financial Aspects 151) Ex-President Taft says: "The tolls have been fixed on the canal for all the world on the assumption that the coastwise traffic is to pay tolls. Our giving it immunity from tolls docs not, in our judgment, affect the traffic of the other countries in any other way than it would affect it if we had voted a sub- sidy equal to the tolls remitted to our ships." Why insist on a method of granting a subsidy to our coastwise shipping claimed to be repugnant to the Hay- Pauncefote treaty if no pecuniary advantage is aimed at . If no part of the revenue that would have been contributed by our coastwise shipping is to be levied against other shipping through the canal, it is not clear why this method of granting the subsidy should be so stubbornly insisted on. Something other than method of granting a subsidy is aimed at. Monopoly power in the management of the Panama Canal is the goal of champions of tolls-exemption. Could it have been intended as a permanent policy to estimate the amount of our coastwise shipping through the canal and to consider it in fixing the rate to be charged other shipping? There is no evidence that that was to be or could be the policy of the United States. There is evidence that it was to be the policy of the United States to treat our coastwise shipping as we treat our public vessels through the canal. The question arises as to whether the canal can be made commercially self-supporting under those condi- tions. It seems probable. It will take a longer develop- ment (initial or deficit) period and thus a deferred date when the whole liability incurred in construction can be 160 The Panama Tolls Controversy amortized through charges to revenue. It would merely defer the date when the canal would become commercially self-supporting. Therefore, the necessity of proper busi- ness and accounting methods from the beginning in order that all traffic through the canal beginning wuth the first cargo shall contribute its proportionate share to the up- keep of the canal and to the amount needed to amortize the liability incurred in construction. The United States is builder, owner and manager of the Panama Canal, an international waterway. It should manage and control it as a trust in the interest of civilization. That she has obligated herself to do this is shown in State Department and other public documents from 1826 to the adoption of the Hay-Pauncefote treaty. Civilization will clieerfully allow the United States (1) operating expenses; (2) interest on investment; (3) a reasonable amortization charge to extinguish the $400,000,000 liability incurred in construction; (4) a reasonable reserve for betterment, so that in the future we may have an up-to-date canal with a cost of construc- tion higher than the initial $400,000,000. Yet, our jingoes are not satisfied. They aim at the exercise of monopoly power. No nation is honorable enough to be entrusted with or to have the right to exercise monopoly power over an international highway such as the Panama Canal. The fleecing of the world's commerce by the Suez Maritime Canal Company is appalling. That history should find no parallel in the case of the Panama Canal. The Hay- Pauncefote treaty prohibits it. The Suez Canal treaty does The Financial Aspects im not. England has protested and her protest is in thr interest of collective civilization. The fixing of the charge that shall be just and equitable should not be left to the discretion of the United States. Stated a little differently, the United States, which is trying to eliminate — yea, is pledged to eliminate — the principle of private monopoly in the national domain, is now attempting to establish the monopoly principle in the management of the Panama Canal. It is trying to put itself into a position to fix charges that arc other than "just and equitable," the charges pledged in the Hay- Pauncefote treaty and in the Panama Canal treaty. The business situation points to large monopoly profits after traffic has been developed. When the debt is extinguished by amortization, the income can, by adjusting the rate, be made to be three to six times the total outlay for management. Monopoly power without a sovereign is dangerous — intolerable, even though exercised by the United States. The beam in John Bull's eye has its counterpart in the mote in Uncle Sam's eye. It is of the utmost importance to civilization that England shall not waive the rights guaranteed to her in the Hay-Pauncefote treaty, and that she compel their recognition by the United States. That will prevent monopoly power, a power which is intolerable when exer- cised without a sovereign, and the United States recognizes none. The United States ought to be too large-minded, too self-respecting, too decent to seek monopoly power in the management of the Panama Canal. The welfare of 162 The Panama Tolls Controversy collective civilization requires that the attempt fail and that England's contention prevail. Let us picture to ourselves the situation through operating statistics: INCOME STATEMENT OF THE SUEZ CANAL FOR 1911 Operating revenues $27,600,000 Operating expenses 2,700,000 Operating income 24,900,000 Other outlays $10,700,000 Available for dividends $14,200,000 Dividend declared 33 per cent The picture as it should have been : Investment $125,000,000 Reasonable return on investment — 6's .... $7,500,000 Operating expenses 2,700,000 Additional charge needed for safety 3,600,000 Total needed $13,800,000 Revenue in 1911 $27,600,000 Revenue needed 13,800,000 One-half the rate of toll actually levied would have yielded the $13,800,000 needed to conduct the canal as a business enterprise. The world's commerce was charged The Financial A. s- perls 1({;; exorbitant rates through the Suez Canal. This should never be paralleled in the management of the Piuiain.i Canal. Let us now imagine another picture — tiie Panama Canal in 1975: ABRIDGED CAPITAL ACTOINT Cost of construction $400,000,000 Betterment charged to revenue (assumed) . 100,000,000 Total cost $500,000,000 The investment was amortized through charges to revenue. Money cost to the United States in 1975 — nothing. ABRIDGED INCOME STATEMENT Operating revenues (conservative) $38,000,000 Operating expenses (liberal) 8,000,000 Monopoly profit $30,000,000 To prevent the possibility of such a condition as is pictured in the abridged income statement given above, England has protested against the exemption of our coast- wise shipping through the canal from the payment of lolls. Her protest was wise and timely. The state (we use the word in a technical sense) acts on the basis of living forever. This is an axiom of political science. England's protest is in harmony with 164 The Panama Tolls Controversy this principle. English statesmen are far-seeing. They see pictures similar to the ones we presented above. The monopoly power which the United States seeks to establish in the management of the Panama Canal ought not to be acquiesced in in the interest of social jus- tice and collective civilization. England's position is correct. The Hay-Pauncefote treaty should be preserved unimpaired. Its meaning is plain. John Hay, the soul of honor, has told us what it means. Senator Root says : "We know from many sources what Mr. Hay's views were. The Senator from Connecticut (Mr. McLean) has read to you a statement of them, authentic, made about the time of the treaty, at the time the treaty with Panama was under consideration." Here is what Mr. Hay says : "All means all. The treaty was not so long that we could not have made room for the word 'other' if we had understood that it belonged there. 'All nations' means all nations, and the United States is certainly a nation." "That was the understanding between yourself and Lord Pauncefote when you and he made the treaty?" I pursued. "It certainly was," he replied. "7f was the under- standing of both Governments, and I have no doubt that the Senate realized that in ratifying the second treaty without such an amendment it was committing lis to the principle of giving all friendly nations equal privileges in the canal ivith ourselves. That is our golden rule." "A decent respect to the opinions of mankind" should impel the United States to manage the Panama Canal The Financial Aspects 16.5 as a business enterprise; that is, in entire accord witli the principles established in the regulation of public utilities. If so, it will voluntarily manage the canal as the Hay- Pauncefote treaty obligates it to do — even that ivithout the intervention of a treaty. It will assume different stand- points — one as owner, the other as sovereign. As owner, it will manage the canal as a business enterprise. As a self-respecting sovereign, it will see to it that as owner it manages it as a public utility and levies the revenue (no more and no less) needed to make the canal commercially self-supporting. Again looms large the pivotal sentence of the Hay- Pauncefote treaty; namely, "Such conditions and charges of traffic shall be just and equitable."' A proper construction of this sentence precludes free transportation through the canal except the traffic named in the contract (Panama Canal treaty) to secure leasehold rights to the Canal Zone. Just and equitable is a well-defined expression in the litera- ture which deals with the regulation of public utilities. It precludes favoritism. It requires equal opportunity for all in the use of this international waterway. It re- quires that the same toll be charged for equal units of service. The direct commercial benefits of the owner must come from the fixing of an adequate rate for the use of the facility and the collection of suflBcient revenue to make it commercially self-supporting. The import, the significance, in short, the full meaning of the foregoing sentence from the Hay-Paunccfote treaty was not brought out in the recent congressional debate on the tolls-exemption repeal. All statements are either inadequate or incorrect. Viewed from the standpoint 1()6 The Panama Tolls Controversy of the principles developed in the regulation of national, state and local utilities, the sentence entitles the United States to fix a rate of toll so that it will be re-imbursed for all expenditures incurred, including interest during construction and deficits during the period in which traffic is developed. Note the following from an opinion by Jus- tice Miller of the New York Court of Appeals : "I define 'going value' for rate purposes as * * * the amount equal to the deficiency of net earnings below a fair return on the actual investment due solely to the time and expenditures reasonably necessary and proper to the development of the business and property." Deficits during a development period can be amortized after traffic is developed and revenues exceed annual out- lay. The United States, as owner of the Panama Canal, is entitled to a return on it as a public utility, collected under the restrictions established for such a utility. The limitations imposed on the United States by the Hay-Pauncefote treaty are merely commercial. Its investment interest is safeguarded by being entitled to impose a rate of toll on the traffic that is just and equitable and that is a rate of toll which will give a reasonable return on the investment. Let the United States treat the tolls problem of the Panama Canal in harmony with the Golden Rule and not view it in the spirit of a refined financial brigand of which there is regretfully some evidence. If it does so, it will ask the Hague Court to appoint an auditing committee (advisory) to represent the interests of collective civiliza- tion in this international waterway. Such a committee The Financial AspecU 167 would safeguard the reputation of the United States and assist the President in fixing rates, within the discrctioTiary limit fixed by the Panama Canal act, that would he just and equitable to all parties in interest. This done, every investment interest of the United States would be safe- guarded. The commercial interests of collective civiliza- tion would be protected by fair rates. Lastly, the United States would, by such a creditable act, give the world's peace movement increased momentum and would dedicate the canal "/o the vse of mankind on equal terms to all" as she has obligated herself to do by irrevocable treaty obligations. APPENDICES I CLAYTON-BULWER TREATY OF APRIL, IH.JO The United States of America and I lor IJritannic Majesty, being desirous of consolidating the rehitions of amity which so happily subsist between them, by setting forth and fixing in a convention their views and intentions with reference to any means of comnuinication by ship- canal which may be constructed between the Atlantic and Pacific Oceans by the way of the river San Juan de Nicaragua and either or both of the lakes of Nicaragiui or Managua, to any port or place on the Pacific Ocean, the President of the United States has conferred full powers on John M. Clayton, Secretary of State of the United States, and Her Britannic Majesty on the Right Honorable Sir Henry Lytton Bulwer, a member of Her Majesty's most honorable privy council, knight commander of the most honorable Order of the Bath, and envoy extraordinary and minister plenipotentiary of Her Britannic Majesty to the United States, for the aforesaid purpose; and the said plenipotentiaries having exchanged their full powers, which were found to be in proper form, have agreed to the foUoM'ing articles: ARTICLE I The Governments of the United States and Great Britain hereby declare that neither the one nor the other will ever obtain or maintain for itself any exclusive control over the said ship canal; agreeing that neither will ever erect or maintain any fortifications commanding the sani 172 The Panama Tolls Controversy or in the vicinity thereof, or occupy, or fortify, or colonize, or assume, or exercise any dominion over Nicaragua, Costa Rica, the Mosquito coast, or any part of Central America; nor will either make use of any protection which either affords or may afford, or any alliance which either has or may have to or with any state or people, for the purpose of erecting or maintaining any such fortifica- tions, or of occupying, fortifying, or colonizing Nicaragua, Costa Rica, the Mosquito coast, or any part of Central America, or of assuming or exercising dominion over the same; nor will the United States or Great Britain take advantage of any intimacy, or use any alliance, connection or influence that either may possess with any State or Government through whose territory the said canal may pass, for the purpose of acquiring or holding, directly or indirectly, for the citizens or subjects of the one, any rights or advantages in regard to commerce or navigation through the said canal which shall not be offered on the same terms to the citizens or subjects of the other. ARTICLE II Vessels of the United States or Great Britain travers- ing the said canal shall, in case of war between the con- tracting parties, be exempted from blockade, detention or capture by either of the belligerents; and this provision shall extend to such a distance from the two ends of the said canal as may hereafter be found expedient to establish. ARTICLE III In order to secure the construction of the said canal, the contracting parties engage that if any such canal shall The Clayton- Bui we r Treaty \1\\ be undertaken upon fair and equitable terms by any parties having the authority of the local Government or Governments through whose territory the same may pass, then the persons employed in making the said canal, and their property used, or to be used, for that object, shall be protected, from the commencement of the said canal to its completion, by the Governments of the United States and Great Britain, from unjust detention, confiscation, seizure or any violence whatsoever. ARTICLE IV The contracting parties will use whatever influence they respectively exercise with any State, States or Gov- ernments possessing or claiming to possess any jurisdic- tion or right over the territory which the said canal shall traverse, or which shall be near the waters applicable thereto, in order to induce such States or Governments to facilitate the construction of the said canal by every means in their power. And furthermore, the United States and Great Britain agree to use their good offices, wherever or however it may be most expedient, in order to procure the establishment of two free ports, one at each end of the said canal. ARTICLE V The contracting parties further engage, that when the said canal shall have been completed, they will protect it from interruption, seizure or unjust confiscation, and that they will guarantee the neutrality thereof, so that the said canal may forever be open and free, and the capital invested therein secure. Nevertheless, the Governments 174 The Panama Tolls Controversy of the United States and Great Britain, in according their protection to the construction of the said canal, and guar- anteeing its neutrahty and security when completed, always understand that this protection and guarantee are granted conditionally, and may be withdrawn by both Governments, or either Government, if both Govern- ments, or either Government, should deem that the per- sons or company undertaking or managing the same adopt or establish such regulations concerning the traffic there- upon as are contrary to the spirit and intention of this convention, either by making unfair discriminations in favor of the commerce of one of the contracting parties over the commerce of the other, or by imposing oppressive exactions or unreasonable tolls upon the passengers, ves- sels, goods, wares, merchandise or other articles. Neither party, however, shall withdraw the aforesaid protection and guarantee without first giving six months' notice to the other. ARTICLE VI The contracting parties in this convention engage to invite every State with which both or either have friendly intercourse to enter into stipulations with them similar to those which they have entered into with each other, to the end that all other States may share in the honor and advantage of having contributed to a work of such general interest and importance as the canal herein contemplated. And the contracting parties likewise agree that each shall enter into treaty stipulations with such of the Central American States as they may deem advisable, for the purpose of more effectually carrying out the great design The Clayton- Ihdwtr Trent ti 175 of this convention, namely, that of constructing and maintaining the said canal aJs a ship communication between the two oceans for the benefit of mankind, on equal terms to all, and of protecting the same; and they also agree that the good oflBces of either shall be emi)l<)ycd, when requested by the other, in aiding and assisting the negotiation of such treaty stipulations; and should any differences arise as to right or property over the territory through which the said canal shall pass between the States or Governments of Central America, and such differences should in any way impede or obstruct the execution of the said canal, the Governments of the United States and Great Britain will use their good offices to settle such differ- ences in the manner best suited to promote the interests of the said canal, and to strengthen the bonds of friendship and alliance which exist between the contracting parties. ARTICLE VII It being desirable that no time should be unnecessarily lost in commencing and constructing the said canal, the Governments of the United States and Great Britain determine to. give their support and encouragement to such persons or company as may first offer to commence the same, with the necessary capital, the consent of the local authorities, and on such principles as accord with the spirit and intention of this convention; and if any persons or company should already have, with any State through which the proposed ship canal may pass, a con- tract for the construction of such a canal as that specified in this convention, to the stipulations of which contract neither of the contracting parties in this convention have 176 The Panama Tolls Controversy any just cause to object, and the said persons or company shall moreover have made preparations and expended time, money and trouble on the faith of such contract, it is hereby agreed that such persons or company shall have a priority of claim over every other person, persons or company to the protection of the Governments of the United States and Great Britain, and be allowed a year from the date of the exchange of the ratifications of this convention for concluding their arrangements, and pre- senting evidence of sufficient capital subscribed to accom- plish the contemplated undertaking; it being understood that if, at the expiration of the aforesaid period, such per- sons or company be not able to commence and carry out the proposed enterprise, then the Governments of the United States and Great Britain shall be free to afford their protection to any other persons or company that shall be prepared to commence and proceed with the construc- tion of the canal in question. ARTICLE VIII The Governments of the United States and Great Britain having not only desired, in entering into this con- vention, to accomplish a particular object, but also to establish a general principle, they hereby a^ee tq^ expend their protec^tion, by treaty stipulations, to any other practicable communications, whether by canal or railway, across the isthmus which connects North and South Amer- ica, and especially to the interoceanic communications, should the same prove to be practicable, whether by canal or railway, which are now proposed to be established by the way of Tehuantepec or Panama. In granting, however, The Clayion-Bttlwer Treat}/ 177 their joint protection to any such canals or railways jis are by this article specified, it is always understood hy the United States and Great Britain that the parties constructing or owning the same shall impose no other charges or conditions of trafiic thereupon than the afore- said Governments shall approve of as just and equitable; and that the same canals or railways, being open to the citizens and subjects of the United States and Great Britain on equal terms, shall also be open on like terms to the citizens and subjects of every other State which is willing to grant thereto such protection as the United States and Great Britain engage to afford. ARTICLE IX The ratifications of this convention shall be exchanged at Washington within six months from this day, or sooner if possible. In faith whereof we, the respective plenipotentiaries, have signed this convention and have hereunto affixed our seals. Done at Washington the nineteenth day of April, anno Domini one thousand eight hundred and fifty. John M. Clayton. (l. s.) Henry Lytton Bi lwer. (l. s.) THE SUEZ CANAL TREATY ARTICLE I The Suez Maritime Canal shall always be free and open, in time of war as in time of peace, to every vessel of commerce or of war, without distinction of flag. Consequently, the High Contracting Parties agree not in any way to interfere with the free use of the canal, in time of war as in time of peace. The canal shall never be subjected to the exercise of the right of blockade. ARTICLE II The High Contracting Parties, recognizing that the fresh-water canal is indispensable to the maritime canal, take note of the engagements of His Highness the Khedive towards the Universal Suez Canal Company as regards the fresh-water canal; which engagements are stipulated in a convention bearing date the eighteenth of March, 1863, containing an expose and four articles. They undertake not to interfere in any way with the security of that canal and its branches, the working of which shall not be exposed to any attempt at obstruction. ARTICLE III The High Contracting Parties likewise undertake to respect the plant, establishments, buildings and works of the maritime canal and the fresh-water canal. The Suez Canal Trcati/ 17!) ARTICLE IV The maritime canal remaining open in time of war as a free passage, even to the ships of war of belligerents, according to the terms of Article I of the present treaty, the High Contracting Parties agree that no right of war, no act of hostility, nor any act having for its ohjixrt to obstruct the free navigation of the canal, shall be com- mitted in the canals and its ports of access, as well as within a radius of three marine miles from these ports, even though the Ottoman Empire should be one of the belligerent powers. Vessels of war of belligerents shall not revictual or take in stores in the canal and its ports of access, except in so far as may be strictly necessary. The transit of the aforesaid vessels through the canal shall be effected witii the least possible delay, in accordance with the regulations in force, and without any other intermission than that resulting from the necessities of the service. Their stay at Port Said and in the roadstead of Suez shall not exceed twenty-four hours, except in case of dis- tress. In such case they shall be bound to leave as s(X)n as possible. An interval of twenty-four hours shall always elapse betw^een the sailing of a belligerent ship from one of the ports of access and the departure of a ship belonging to the hostile power. ARTICLE V In time of war belligerent powers shall not disembark nor embark within the canal and its ports of access either troops, munitions or materials of war. But in case of an accidental hindrance in the canal, men may be embarked 1S(> The Pan am a Tollff Controversy or disembarked at the ports of access by detachments not exceeding one thousand men, with a corresponding amount of war material. ARTICLE VI Prizes shall be subjected, in all respects, to the same rules as the vessels of belligerents. ARTICLE VII The powers shall not keep any vessel of war in the waters of the canal (including Lake Timsah and the Bitter Lakes). Nevertheless, they may station vessels of war in the ports of excess of Port Said and Suez, the number of which shall not exceed two for each power. This right shall not be exercised by belligerents. ARTICLE VIII The agents in Egypt of the Signatory Powers of the present treaty shall be charged to watch over its execution. In case of any event threatening the security or the free passage of the canal, they shall meet on the summons of three of their number under the presidency of their Doyen, in order to proceed to the necessary verifications. They shall inform the Khedival Government of the danger of which they may have perceived, in order that that Government may take proper steps to insure the protec- tion and the free use of the canal. Under any circum- stances, they shall meet once a year to take note of the due execution of the treaty. The last-mentioned meetings shall take place under The Suez Conul Treaiif ISl the presidency of a Special ComniissioiuM- noininatt-d for that purpose by the Imperial Ottoman Governmciil. A Commissioner of the Khedive may also take part in llic meeting, and may preside over it in case of the alisnice of the Ottoman Commissioner. They shall especially demand the suppression of any work or the dispersion of any assemblage on either bank of the canal, the object or effect of which might l)e to interfere with the liberty and the entire security of the navigation. ARTICLE IX The Egyptian Government shall, within the limits of its powers resulting from the Firmans, and under the conditions provided for in the present treaty, take the necessary measures for insuring the execution of the said treaty. In case the Egyptian Government should not have sufficient means at its disposal, it shall call upon the Imperial Ottoman Government, which shall take the necessary measures to respond to such appeal: shall give notice thereof to the Signatory Powers of the Declaration of London of the seventeenth of March, 188.5; and shall. if necessary, concert with them on the subject. The provisions of Articles IV, V. VII and VIII shall not interfere with the measures which shall be taken in virtue of the present article. ARTICLE X Similarly, the provisions of Articles IV, V, VII and VIII shall not interfere with the measures which His Majesty the Sultan and His Highness the Khedive, in 182 The Panama Tolls Controversy the name of His Imperial Majesty, and within the limits of the Firmans granted, might find it necessary to take ' for securing by their own forces the defence of Egypt and the maintenance of public order. In case His Imperial Majesty the Sultan, or His Highness the Khedive, should find it necessary to avail themselves of the exceptions for which this article provides, the Signatory Powers of the Declaration of London shall be notified thereof by the Imperial Ottoman Government. It is likewise understood that the provisions of the four articles aforesaid shall in no case occasion any ob- stacle to the measures which the Imperial Ottoman Gov- " ernment may think it necessary to take in order to insure by its own forces the defence of its other possessions situated on the eastern coast of the Red Sea. ARTICLE XI The measures which shall be taken in the cases pro- vided for by Articles IX and X of the present treaty shall not interfere with the free use of the canal. In the same cases, the erection of permanent fortifications contrary to the provisions of Article VIII is prohibited. ARTICLE XII The High Contracting Parties, by application of the principle of equality as regards the free use of the canal, a principle which forms one of the bases of the present treaty, agree that none of them shall endeavour to obtain with respect to the canal territorial or commercial advan- tages or privileges in any international arrangements The Suez Caiial Treaiji 188 which may be conchided. Moreover, the rights of Turkey as the territorial power are reserved. ARTICLE XIII With the exception of the obligations expressly pro- vided by the clauses of the present treaty, the sovereign rights of His Imperial Majesty the Sultan, and the rights and immunities of His Highness the Khedive, resulting from the Firmans, are in no way affected. ARTICLE XIV The High Contracting Parties agree that the engage- ments resulting from the present treaty shall not be limited by the duration of the Acts of Concession of the Universal Suez Canal Company. ARTICLE XV The stipulations of the present treaty shall not inter- fere with the sanitary measures in force in Egypt. ARTICLE XVI The High Contracting Parties undertake to bring the present treaty to the knowledge of the States which have not signed it, inviting them to accede to it. ARTICLE XVII The present treaty shall be ratified, and the ratifica- tions shall be exchanged at Constantinople within the space of one month, or sooner, if possible. 184 The Panama Tolls Controversy In faith of which the respective plenipotentiaries have signed the present treaty, and have aflfixed to it the seal of their arms. Done at Constantinople, the twenty-ninth day of the month of October, in the year 1888. (Signed by Representatives of Great Britain, Ger- many, Austria, Spain, France, Italy, Netherlands, Russia and Turkey.) THE HAY-PAUNCEFOTE TREATY OF \m) Showing the original treaty and the treaty as aiiuMulcd in one as follows : (1) Amendments by the United States Senate arc printed in italics. (2) Article III, stricken out by the United States Senate, is printed in brackets. The United States of America and Her Majesty the Queen of the United Kingdom of Great Britain and Ire- land, Empress of India, being desirous to facilitate the construction of a ship canal to connect the Atlantic and Pacific Oceans, and to that end to remove any objection which may arise out of the convention of April 19, 1850, commonly called the Clayton-Bulwer treaty, to the con- struction of such canal under the auspices of the Govern- ment of the United States, without impairing the "general principle" of neutralization established in Article VIII of that convention, have for that purpose appointed as their plenipotentiaries : The President of the United States, John Hay. Secretary of State, of the United States of America; And Her Majesty the Queen of Great Britain and Ireland, Empress of India, The Right Honorable Lord Pauncefote, G. C. B., G. C. M. G., Her Majesty's Am- bassador Extraordinary and Plenipotentiary to the United States; 186 The Panama Tolls Controversy Who, having communicated to each other their full powers, which were found to be in due and proper form, have agreed upon the following articles: ARTICLE 1 It is agreed that the canal may be constructed under the auspices of the Government of the United States, either directly at its own cost or by gift or loan of money to individuals or corporations or through subscription to or purchase of stock or shares, and that, subject to the provisions of the present convention, the said Government shall have and enjoy all the rights incident to such con- struction, as well as the exclusive right of providing for the regulation and management of the canal. ARTICLE II The High Contracting Parties, desiring to preserve and maintain the "general principle" of neutralization established in Article VIII of the Clayton-Bulwer conven- tion, which convention is hereby superseded, adopt, as the basis of such neutralization, the following rules, sub- stantially as embodied in the convention between Great Britain and certain other powers, signed at Constantinople October 29, 1888, for the Free Navigation of the Suez Maritime Canal, that is to say : 1. The canal shall be free and open, in time of war as in time of peace, to the vessels of commerce and of war of all nations, on terms of entire equality, so that there shall be no discrimination against any nation or its citi- zens or subjects in respect of the conditions or charges of traffic, or otherwise. The Hay-Paunccjoic Treaii/ of 10(H) 1S7 2. The canal shall never he hlockaded, luir sliall any right, of war be exercised nor any act of hostility he committed within it. 3. Vessels of war of a belligerent shall not rcvictual nor take any stores in the canal except so far as may he strictly necessary; and the transit of such vessels through the canal shall be effected with the least possible delay, in accordance with the regulations in force, and with only such intermission as may result from the necessities of the service. Prizes shall be in all respects subject to the same rules as vessels of war of the belligerents. 4. No belligerent shall embark or disembark troops, munitions of war or warlike materials in the canal except in case of accidental hindrance of the transit, and in such case the transit shall be resumed with all possible despatch. 5. The provisions of this article shall apjjly to waters adjacent to the canal, within three marine miles of either end. Vessels of war of a belligerent shall not remain in such waters longer than twenty-four hours at any one time except in case of distress, and in such case shall depart a.s soon as possible; but a vessel of war of one belligerent shall not depart within twenty-four hours from the de- parture of a vessel of war of the other belligerent. It is agreed, however, that none of the immediatcb/ foregoing conditions and stipidations in sections numbered one, two, three, four and five of this article shall apply to measures which the United States may find it necessary to take for securing by its own forces the defense of the United States and the maintenance of public order. 6. The plant, establishments, buildings and all works 188 The Panama Tolls Controversy necessary to the construction, maintenance and operation of the canal shall be deemed to be part thereof, for the pur- poses of this convention, and in time of war as in time of peace shall enjoy complete immunity from attack or in- jury by belligerents and from acts calculated to impair their usefulness as part of the canal. 7. No fortifications shall be erected commanding the canal or the waters adjacent. The United States, however, shall be at liberty to maintain such military police along the canal as may be necessary to protect it against lawlessness and disorder. [ARTICLE III] [The High Contracting Parties will, immediately upon the exchange of the ratifications of this convention, bring it to the notice of the other powers and invite them to adhere to it.] ARTICLE IV The present convention shall be ratified by the Presi- dent of the United States, by and with the advice and consent of the Senate thereof, and by Her Britannic Majesty; and the ratifications shall be exchanged at Washington or at London within six months from the date hereof, or earlier if possible. In faith whereof the respective plenipotentiaries have signed this convention and thereunto affixed their seals. Done in duplicate at Washington the fifth day of February in the year of our Lord one thousand nine hundred. John Hay. Pauncefote. THE HAY-PAUNCEFOTE TREATY OF lOOl The United States of America and Ilis ^Fajesty Edward the Seventh, of the United Kingdom of (Ireat Britain and Ireland, and of the British Dominions beycMid the Seas, King, and Emperor of India, being desirous to facihtate the construction of a ship canal to connect the Atlantic and Pacific Oceans, by whatever route may be considered expedient, and to that end to remove any objection which may arise out of the convention of the nineteenth of April, 1850, commonly called the Clayton- Bulwer treaty, to the construction of such canal under the auspices of the Government of the United States, without impairing the "general principle" of neutralization estab- lished in Article VIII of that convention, have for that purpose appointed as their plenipotentiaries: The President of the United States, John Hay, Secretary of State of the United States of America; And His Majesty Edward the Seventh, of the United Kingdom of Great Britain and Ireland, and of the lirilish Dominions beyond the Seas, King, and Emperor of India, the Right Honourable Lord Pauncefote, G. G. B., G. C. M. G., His Majesty's Ambassador Extraordinary and Plenipotentiary to the United States; Who, having communicated to each other their full powers, which were found to be in due and proper form, have agreed upon the following articles: 190 The Panama Tolls Controversy ARTICLE I The High Contracting Parties agree that the present treaty shall supersede the afore-mentioned convention of the nineteenth of April, 1850. ARTICLE II It is agreed that the canal may be constructed under the auspices of the Government of the United States either directly at its own cost, or by gift or loan of money to individuals or corporations, or through subscription to or purchase of stock or shares, and that, subject to the provisions of the present treaty, the said Government shall have and enjoy all the rights incident to such con- struction, as well as the exclusive right of providing for the regulation and management of the canal. ARTICLE III The United States adopts, as the basis of the neu- tralization of such ship canal, the following rules, sub- stantially as embodied in the convention of Constantinople signed the twenty-eighth of October, 1888, for the free navigation of the Suez Canal, that is to say : 1.* 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 dis- crimination against any such nation, or its citizens or sub- jects, in respect of the conditions or charges of traffic or otherwise. Such conditions and charges of traffic shall be just and equitable. 2. The canal shall never be blockaded, nor shall any llie Han-Paiiuccfotc Tratij/ of I9