The Panama Canal Conflict between Great Britain and the United States of America | Page 7

neutralisation or the
obligation of the high contracting parties under the treaty. The general
principle of neutralisation is, as laid down in the preamble of the
Hay-Pauncefote Treaty, the general principle of neutralisation as
established by Article VIII of the Clayton-Bulwer Treaty, and it has
already been shown--see above IV, No. 2, p. 24--that equal treatment of
British, American, and any other nation's vessels using the Canal is part
and parcel of that general principle of neutralisation.
(6) Lastly, Article IV of the Hay-Pauncefote Treaty must be read in
conjunction with Article II. The latter does not exclusively contemplate
the construction of the Canal by the United States, it contemplates
rather the construction under the auspices of the United States, either
directly at her cost, or by gift or loan of money to individuals or
corporations, or through subscription to or purchase of stocks and
shares. The question may well be asked whether, in case the United

States had not acquired the Canal territory and had not herself made the
Canal, but had enabled a company to construct it by the grant of a loan,
or by taking shares, and the like, she would then also have interpreted
the words "all nations" to mean "all foreign nations," and would,
therefore, have claimed the right to insist upon her own vessels
enjoying such privileges in the use of the Canal as need not be granted
to vessels of other nations. Can there be any doubt that she would not
have done it? And if we can reasonably presume that she would not
have done it under those conditions, she cannot do it now after having
acquired the Canal territory and having herself made the Canal, for
Article IV declares that a change in the territorial sovereignty of the
Canal territory shall neither affect the general principle of neutralisation
nor the obligation of the parties under the treaty.

V.
I have hitherto only argued against the contention of President Taft that
the words "all nations" mean all foreign nations, and that, therefore, the
United States could grant to her vessels privileges which need not be
granted to vessels of other States using the Panama Canal. For the
present the United States does not intend to do this, although Section 5
of the Panama Canal Act--see above I, p. 6--empowers the President to
do it within certain limits. For the present the Panama Canal Act
exempts only vessels engaged in the American coasting trade from the
payment of tolls, and the memorandum of President Taft maintains that
this exemption does not discriminate against foreign vessels since these,
according to American Municipal Law, are entirely excluded from the
American coasting trade and, therefore, cannot be in any way put to a
disadvantage through the exemption from the payment of the Canal
tolls of American vessels engaged in the American coasting trade.
At the first glance this assertion is plausible, but on further
consideration it is seen not to be correct, for the following reasons:
(1) According to Article III, No. 1, of the Hay-Pauncefote Treaty the
charges for the use of the Canal shall be just and equitable. This can

only mean that they shall not be higher than the cost of construction,
maintenance, and administration of the Canal requires, and that every
vessel which uses the Canal shall bear a proportionate part of such cost.
Now if all the American vessels engaged in the American coasting
trade were exempt from the payment of tolls, the proportionate part of
the cost to be borne by other vessels will be higher, and, therefore, the
exemption of American coasting trade vessels is a discrimination
against other vessels.
(2) The United States gives the term "coasting trade" a meaning of
unheard-of extent which entirely does away with the distinction
between the meaning of coasting trade and colonial trade hitherto kept
up by all other nations. I have shown in former publications--see the
Law Quarterly Review, Vol. XXIV (1908), p. 328, and my treatise on
International Law, 2nd edition (1912), Vol. I, §579--that this attitude of
the United States is not admissible. But no one denies that any State
can exclude foreign vessels not only from its coasting trade, but also
from its colonial trade, as, for instance, France, by a law of April 2,
1889, excluded foreign vessels from the trade between French and
Algerian ports. I will not, therefore, argue the subject again here, but
will only take into consideration the possibility that Great Britain, and
some other States, might follow the lead of America and declare all the
trade between the mother countries and ports of their colonies to be
coasting trade, and exclude foreign vessels therefrom. Would the
United States be ready then to exempt coasting trade vessels of foreign
States from the payment of