THE PANAMA CANAL ACT.
THE second British protest against the Panama Canal Act was presented by Mr. Bryce in Washington on Monday, and was simultaneously published in Loudon as a Parliamentary paper. The argument is clear and convincing, and the temper admirable. The form and manner of the whole protest are indeed exactly what they ought to be in negotiations with people whom we like and esteem. Sir Edward Grey has understated rather than overstated his case, which is always a wise course when one has unanswerable arguments and is treating with a friend. We have the liveliest expectation that the protest will make a genuine impression in the United States, and our belief that a settlement will be quickly reached is increased by the fact that, so far as we know, Dr. Woodrow Wilson has not publicly committed himself to any definite opinion on the justice of the Canal Act. With Mr. Taft and Mr. Roosevelt it is otherwise. Moreover, we must not forget that many of the ablest American jurists and public men, like Mr. Root—men whose high patriotism and integrity are universally admitted•—are sincerely convinced of the justice of the British claim. The reasonableness of Sir Edward Grey's protest is also acknowledged in advance by a large proportion of the most reputable American news- papers. We should not, indeed, feel justified in using language half as strong about the Panama Canal Act as has been used by many American newspapers.
We have several times set forth the British case, but may briefly do so again. The Clayton-Bulwer Treaty of 1850 forbade both Great Britain and the United States to acquire any territory or special advantages in the American Isthmus. If this treaty had held good it obviously would have been impossible for the United States to build the canal. But in order to set the United States free the Hay-Pauncefote Treaty was concluded in 1901. Under this treaty the United States was authorized to acquire territory and to build and control the canal, but it was stipulated that the canal should be open to the commerce of " all nations " on equal terms. This obviously meant that there should be no discrimination in favour of American shipping, otherwise Great Britain would have surrendered the safeguards of the Clayton-Bulwer Treaty to no purpose. She would have given something for nothing. Now, the Panama Canal Act does discriminate in favour of American shipping. It expressly makes it possible to remit the canal dues in the case of American coastwise traffic. "What is the American defence of this dis- crimination ? Mr. Taft has asserted that " all nations " does not include the United States itself, arguing that as American coastwise trade is a monopoly it is impossible to say that there is discrimination against other nations in trade in which they do not and cannot take part. The equality of all nations, he says (meaning foreign nations), is in fact secured by the Act. Sir Edward Grey replies that the phrase " all nations " was clearly intended to include the United States, and that is the only natural sense of the phrase. The history of the negotiations which we have sketched proves this to be so. And if we are not mistaken there is a further very important proof. When the original canal treaty was passing throngh the Senate it was proposed that American coastwise shipping should be exempted from tolls (thus showing that the Senate then interpreted the treaty as we interpret it now), but the amendment was defeated. Indeed, Mr. Hay him- self said that the conditions of the Hay-Pauncefote Treaty were assented to by the United States "as a consideration for getting rid of the Clayton-Bulwer Treaty." In all respects in which new conditions were not defined it was agreed that the sense of the Clayton-Bulwer Treaty should hold good. Clause 8 of the Clayton-Bulwer Treaty says in precise language that British and United States ships shall have equal treatment. The " monopoly " argument of Mr. Taft has a certain legal plausibility, but it will not bear examination for a moment. It is an indisputable economic fact that if the tolls are remitted in the case of American coast✓ wise traffic the cost of maintaining the canal will fall more heavily on foreign shipping than on American shipping, and this is exactly what the Hay-Pauncefote Treaty was framed to prevent. Mr. Taft assumed in his argument that Great Britain wished to prevent the United States from granting subsidies to its own shipping passing through the canal. But this was not so. Sir Edward Grey has never said a word in the sense of denying the abstract right of the United States to subsidize its shipping at its own cost if it thinks fit. All he said was that under the treaty it could not be subsidized in such a way that the cost of running the canal would be higher for British ships than for American ships. Again, Mr. Taft argued that the phrase " all nations " could not rationally include the United States, because it was unthinkable that in war-time the United States should not use the canal, which is in American territory, to the detriment of some other nation, for revictualling its men-of-war or landing troops. The answer of course is that in 1901 the Panama zone did not belong to the United States, and that when it was annexed the British Government never dreamt of disputing the right of the United States to exercise belligerent rights for its protection. This has been most freely admitted by us. But it is a different question altogether from that of remitting tolls or granting subsidies to American ships in such a manner that the cost of maintaining the canal would be raised for foreign ships. Mr. Taft's latest argument about subsidies was in effect this : " If you admit, as you now say you do, my right to grant subsidies to shipping—and you could not very well deny it as you have got the same right yourselves—I am free to grant a subsidy exactly equal in amount to the toll which each ship pays in passing through the canal. Then why not save all the trouble of this circuitous procedure and simply remit the toll straight off ? It all comes to the same thing in the end. A 'subsidy' is merely the equivalent of remitting the toll." The answer of Sir Edward Grey to that is : "If the United States exempts certain classes of ships from the payment of tolls, the result would be a form of subsidy to those vessels which his Majesty's Government consider the United States are debarred by the Hay-Pauncefote Treaty from making." In other words, there are subsidies and subsidies. There are those which are reconcilable with the treaty and those which are not.
There is another point. It is almost impossible to define coastwise trade. It has been held in American law that a ship which starts from one American port and ends the voyage at another American port is engaging in coast- wise trade, even though she may have steamed practically round the world in the interval. The risk of unfair treat- ment to British shipping through an insufficient understand- ing of what coastwise shipping is, is so serious and so complicated that we here quote Sir Edward Grey's words :— " Coastwise trade cannot be circumscribed so completely that benefits conferred upon it will not affect vessels engaged in the foreign trade. To take an example, if cargo intended for a United States port beyond the canal, either from east or west, and shipped on board a foreign ship, could be sent to its destination more cheaply, through the operation of the proposed exemption, by being landed at a United States port before reaching the canal, and then sent on as coastwise trade, shippers would benefit by adopting this course in preference to sending the goods direct to their destination through the canal on board the foreign ship. Again, although certain privileges are granted to vessels engaged in an exclusively coastwise trade, his Majesty's Government are given to understand that there is nothing in the laws of the United States which prevents any United States ship from combining foreign commerce with coastwise trade, and, consequently, from entering into direct competition with foreign vessels while remain- ing prima facie entitled to the privilege of free passage through the canal. Moreover, any restrictions which may be deemed to be now applicable might at any time be removed by legislation, or even, perhaps, by mere changes in the regulations."
Sir Edward Grey ends his despatch with an expression of the extreme reluctance he has felt in formulating views at variance with those of the American Government as to the canal. We shall all share in his feelings, and for the same reason. Englishmen have never watched Americans at work with greater admiration than during the progress of the construction of the canal. We have seen difficulty after difficulty conquered, and the date of opening con- tinually brought nearer by some of the most brilliant engineering the world has known. We can well under- stand the enthusiasm of Americans, and sympathize with the pride with which they speak of " our " canal. In that sense it is unquestionably their canal. No one shares the credit with them. But we can recall no case of interpret- ing a treaty in which we felt more positive than we do now that the facts admit of only one interpretation. We hope, and we firmly believe, that the great event of opening the canal next year will not be marred by any remaining vestige of misunderstanding between the American nation and ourselves.
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