The Panama Canal Conflict between Great Britain and the United States of America | Page 2

words "all nations," p. 26--Importance of Article IV of the Hay-Pauncefote Treaty, p. 26--The various contingencies contemplated by Article II of the same treaty, p. 27.
V. The American contention that the exemption of American coasting trade vessels from the payment of canal tolls does not discriminate against foreign vessels, p. 29--Every vessel shall bear a proportionate part of the cost of the Panama Canal, p. 30--Meaning of the term "coasting trade" as upheld by the United States, pp. 30-33--Coasting trade vessels of the United States can trade with Mexican and South American ports, p. 33--Any special favour to a particular nation involves discrimination against other nations, p. 34.
VI. Is the United States prevented from refunding to her vessels the tolls levied upon them for use in the Panama Canal?, pp. 34-35--Difference of such refunding from exempting the vessels concerned from the payment of tolls, p. 35.
VII. Prominent members of the Senate and many American newspapers condemn the special privileges granted to American vessels by the Panama Canal Act, p. 36--The defeated Bard Amendment of 1900, p. 37.
VIII. Two schools of thought concerning the relations between International and Municipal Law, p. 38--The maxim that International Law overrules Municipal Law, p. 39--The doctrine that International and Municipal Law are two essentially different bodies of law, p. 39--The two maxims of the practice of the American Courts, pp. 40-42--President Taft's message to Congress suggesting a resolution which would have empowered the American Courts to decide the question as to whether Section 5 of the Panama Canal Act violates Article III, No. 1, of the Hay-Pauncefote Treaty, pp. 42-44.
IX. The Panama Canal conflict and the British-American Arbitration Treaty, pp. 44-45--Does the term "interests" mean "advantages" or "rights"?, p. 46--Pacta tertiis nec nocent nec prosunt, p. 47--The exemption of the vessels of the Republic of Panama from payment of tolls, pp. 48-50.
X. Why it must be expected that the Panama Canal conflict will be settled by arbitration, pp. 51-52--Mr Thomas Willing Balch's letter to the New York Sun, pp. 53-57.

I.
The Panama Canal conflict is due to the fact that the Governments of Great Britain and the United States do not agree upon the interpretation of Article III, No. 1, of the Hay-Pauncefote Treaty of September 18, 1901, which stipulates as follows:--
"The Canal shall be free and open 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 such nation, or its citizens or subjects, in respect of the conditions and charges of traffic, or otherwise. Such conditions and charges of traffic shall be just and equitable."
By Section 5 of the Panama Canal Act of August 24, 1912, the President of the United States is authorised to prescribe, and from time to time to change, the tolls to be levied upon vessels using the Panama Canal, but the section orders that no tolls whatever shall be levied upon vessels engaged in the coasting trade of the United States, and also that, if the tolls to be charged should be based upon net registered tonnage for ships of commerce, the tolls shall not exceed one dollar and twenty-five cents per net registered ton nor be less, for other vessels than those of the United States or her citizens, than the estimated proportionate cost of the actual maintenance and operation of the Canal[1].
[1] As regards the enactment of Section 5 of the Panama Canal Act that the vessels of the Republic of Panama shall be entirely exempt from the payment of tolls, see below IX, p. 48.
Now Great Britain asserts that since these enactments set forth in Section 5 of the Panama Canal Act are in favour of vessels of the United States, they comprise a violation of Article III, No. 1, of the Hay-Pauncefote Treaty which stipulates that the vessels of all nations shall be treated on terms of entire equality.
This assertion made by Great Britain is met by the Memorandum which, when signing the Panama Canal Act, President Taft left to accompany the Act. The President contends that, in view of the fact that the Panama Canal has been constructed by the United States wholly at her own cost, upon territory ceded to her by the Republic of Panama, the United States possesses the power to allow her own vessels to use the Canal upon such terms as she sees fit, and that she may, therefore, permit her vessels to pass through the Canal either without the payment of any tolls, or on payment of lower tolls than those levied upon foreign vessels, and that she may remit to her own vessels any tolls which may have been levied upon them for the use of the Canal. The President denies that Article III, No. 1, of the Hay-Pauncefote Treaty can be