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

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 Panama tolls in the same way that she has exempted her own coasting trade vessels? If she would not--and who doubts that she would not?--she would certainly discriminate in favour of her own vessels against foreign vessels. Could not the foreign States concerned make the same assertion that is now made by the United States, viz. that, foreign vessels being excluded from their coasting trade, the exemption of their own coasting