THE

QUARTERLY REVIEW.

No. 433.-OCTOBER, 1912.

Art. 1.-THE PANAMA CANAL.

JUST as the Suez Canal wrought a fundamental change in our communications with our Eastern Empire, so is the Panama Canal destined to revolutionise the transit conditions of western South America, which offers so desirable a market for British manufacturers and so profitable an area for the British commercial marine. It may, perhaps, appear a platitude to observe that British shipping is closely dependent upon British trade, and that British trade is dependent upon British shipping; but too much emphasis cannot be laid upon the circumstance, since, in view of the threatened interference with the one, which seems destined to come under control of our keen commercial rivals in North America, the other, without being subject to the same restraint, is nevertheless likely to be seriously affected.

It is the purpose of this article to consider, firstly, the origin of the Panama Canal (apart from its technical features), and how it has come to be American; secondly, the question of exempting American shipping from tolls; thirdly, the conditions of British trade and shipping in the Pacific, as conducted upon terms of equality with all other nations; fourthly, the changes which those conditions are destined to undergo when once the canal is opened to traffic, and when all foreign vessels using the waterway, being subject to tolls, will be placed at a disadvantage -so far as trade between American ports is concerned— in competition with American ships sailing under a free permit; lastly, the economic developments which will take place in regard to the shipping of the world.

The idea of building a trans-isthmian waterway, of Vol. 217.-No. 433.

Y

entirely American ownership, originated in the United States at the time of the Spanish War. Commercial considerations at this time were set aside entirely, and the advantages which would accrue to the controlling nation in war-time alone carried weight. This, more than anything else, serves to prove how insincere were the protestations made by the United States, but accepted in good faith by Great Britain, against any overt intention to fortify the canal. It was when the 'Oregon' battleship was on its way from San Francisco to Santiago de Cuba, and was compelled to round Cape Horn, that the American people realised what opportunities were being lost, and what others might be won. The great obstacle to the immediate attainment of their ambitions was the unwillingness of Colombia, an independent, and, at that time, a well-ordered State, to allow a foreign nation to cut its territory in twain, without at least receiving adequate compensation.

Negotiations between the United States and Colombia were opened on June 23, 1902-it is important to recollect the date; and Rear-Admirat John G. Walker, U.S.N. (retired), was appointed chairman of the Isthmian Canal Commission, with power to decide which of the two routes-the Panama or the Nicaragua-should be selected, and to carry on the necessary intercourse with a view to an honourable agreement. The pourparlers resulted in a preliminary treaty ratified at Washington in March 1903, known as the Hay-Herran Treaty, by which the United States offered to Colombia the sum of $10,000,000 (2,000,000.)_in_cash and $250,000 (50,000l.) yearly; such annuity, however, only to commence nine years after the treaty had been signed. The United States were to receive a lease of a strip of territory for the canal, the term to be for 100 years, with the privilege of renewal at mutual pleasure. The sovereignty of Colombia was specifically conceded by Art. 4 of the Convention, which set forth inter alia that

the United States freely acknowledges and recognises this sovereignty of Colombia, and disavows any intention to impair it in any way whatever, or to increase its territory at the expense of Colombia or any of the Sister Republics in Central or South America, but, on the contrary, it desires to strengthen the power of the Republics on this continent.'

The President of Colombia in 1902, Señor Marroquin, having failed to obtain the sanction of Congress to the proposed Bill-since the legislature of the Republic were well aware that they were being asked to sell their precious birthright for a mess of pottage-Mr Roosevelt, who was then President of the United States, refusing to delay matters any further by continuing negotiations, openly fostered a revolution in Panama against Colombia. Into the circumstances of this intervention, and the efforts made to justify or palliate it, we forbear to enter. Suffice it to say the Panama revolution succeeded, as it was bound to do with the powerful United States Government behind it. The revolutionists, before actually firing a shot, were recognised as an independent administration; Colombian troops were forcibly prevented from invading Panama; the new State was financed at the expense of the Washington Treasury; and, in return, the United States acquired everything for which it had plotted, and more; for, whereas by the terms of the original HayHerran Treaty a lease of 100 years only was to have been granted to the United States, the new convention gave them the entire strip of territory as sovereign owners for ever. Thus, then, did this great Power fulfil the solemn pledge to acknowledge and recognise the sovereignty of Colombia,' to refrain from 'increasing its territory at the expense' of that Republic, and to 'strengthen it upon the continent.'

Great Britain has proved no more fortunate in regard to the manner in which its agreement with the United States (the Hay-Pauncefote Treaty) has been observed. There is, unfortunately, reason to believe that it was always intended to modify considerably, if not entirely repudiate, that convention so far as it related to any discrimination between vessels using the canal, and that such action was only deferred until the opportune moment should present itself. It presented itself when the scale of tolls to be levied came under consideration.

The Bill on the Government of the Panama Canal Zone, which has now followed, after an interval of sixty-two years from the signing of the Clayton-Bulwer

The Treaty was rejected by Congress at Bogotá, Colombia, by a large majority, in August 1903.

Treaty, was approved by the House of Representatives Interstate Commerce Committee when first submitted on March 8, 1912, following the visit to the Panama Canal Zone of the Committee of Congress, and when it was decided by that Committee that no preference should be given to American ships. On May 21, however, by a close vote of 100 to 90, the House of Representatives at Washington reversed its Committee's decision, and passed the resolution refusing to permit the imposition of tolls on American vessels engaged in the coast-wise trade which will use the Panama Canal; and, on the following day, May 22, the House, by 147 to 126, re-affirmed this decision. On June 11 the Senate Committee on Interoceanic Canals, in reporting favourably on the House of Representatives Bill regulating the protection and operation of the Panama Canal, retained the House of Representatives provision exempting American coasting vessels from the canal toll, but advocating strict regulation in the case of vessels owned by railroads.

An objection, couched in feeble language, against the Senate Committee's decision was lodged by Great Britain through the representative at Washington, Mr C. MitchellInnes, in the absence of the British Ambassador, Mr James Bryce; while a vigorous protest was received from Japan. The State Department at Washington took up the attitude that the British protest was not properly a matter for diplomatic treatment, and decided to refer the Foreign Office Note to the Senate for consideration. On July 13 the Senate were informed of the request of the British Government that the discussion of the Bill be postponed until July 24, after the receipt of this Government's formal protest against the establishment of preferential canal dues; the request, however, was ignored, being rejected by 40 votes to 24.

During the discussion which took place in the House of Representatives on July 17, Mr Moore, Deputy for Pennsylvania, introduced a Bill authorising the Secretary of State to open negotiations with Great Britain and other Powers for the purpose of the neutralisation of the Panama Canal, and the division of the expense of the

* Subsequently there appeared strong condemnations in the German, Austrian and French press, e.g., 'Deutsche Tageszeitung,' August 13; 'Fremdenblatt,' September 1; 'Le Temps' and 'L'Information,' August 27.

construction and the maintenance among them. But Mr Moore found no support for his measure, which was abandoned. On the other hand, in view of the strong comments which had appeared not only in the British, but in the United States press, it seemed that the Senate would give way, and would declare, by an overwhelming majority, in favour of the direct observation of the treaty. At this stage, however (July 27), Mr Mitchell-Innes, the British Chargé d'Affaires, informed Mr Philander Knox, the Secretary of State, that the British Government, having nothing to add to their previous note, submitted July 24, had decided to take no further action.'

On August 1, the matter was again debated in the Senate, when it was proposed to postpone the consideration of the Panama Canal Bill until the following Session. President Taft, however, sent a special message to Congress on August 6, urging the immediate enactment of the legislation fixing the maximum tolls, pointing out that the question of granting free passage to American ships might be determined later. On August 8, by 44 votes to 11, the United States Senate rejected the amendment of Senator Burton to strike from the Canal Bill the provision for the exemption from tolls of American coasting vessels. The unexpectedly large majority by which this amendment was rejected clearly indicated the Senate's intention to pass the Panama Canal Bill as it stood, ignoring the British protest against the contravention of the Hay-Pauncefote Treaty.

While the comments in the British press upon this matter had been of the mildest description, and while the British Government, acting upon its expressed intention, made no further protest, the press of the United States, with remarkable unanimity, denounced the action of the Senate in unmeasured terms. The influential Evening Post' declared the Senate's action to be a greater disgrace to this country than would have been a naval defeat in the waters off Colón adding, 'It is a flat disregard of the letter of the Hay-Pauncefote Treaty, and runs counter to its whole spirit. The Senate would steal our birthright of good faith and fair dealing for a mess of tolls.' The Journal of Commerce' wrote: 'It breaks a formal Treaty of the United States, and its