treaty wholly unsuited to its aims and desires. It therefore asked England to enter into a new convention; the Hay-Pauncefote treaty treaty was the result. This document declared that its purpose was to remove any objections that might arise under the Clayton-Bulwer treaty to the construction of an Isthmian canal under the auspices of the Government of the United States without impairing the general principle of neutralization.

Under this treaty the Government of Great Britain made a protest against the decision of the United States to exempt its coastwise traffic from the payment of tolls, claiming such exemption to be a violation of the neutrality agreement. This protest came in the form of two notes to the American Government. The first was written as a warning to Congress that the British Government would regard the exemption of American coastwise traffic from the payment of tolls as a discrimination against British shipping, and a violation of the neutrality agreement between the two countries. It admitted that if the United States were to refund or to remit the tolls charged, it would not be a violation of the letter of the treaty, and acknowledged that if the exemption of coastwise American shipping from toll charges were so regulated as to make it certain that only bona fide coastwise traffic, which is reserved for American vessels, would be benefited by this agreement, then Great Britain could have no objection. But it declared that England did not believe that such regulation was possible. After Congress, with this note in mind, had

passed the canal toll law with an exemption to ships carrying goods between the two coasts of the United States, President Taft, in approving the measure, declared that the canal was built wholly at the cost of the United States on territory ceded to it by a nation that had the indisputable right to make the cession, and that, therefore, it was nobody else's business how we managed it. He contended that for many years American law had given to American ships the exclusive right to handle cargo between American ports, and that, therefore, England was not hurt at all when that shipping was exempted from toll charges.

England responded, in a second note, that the clear obligation of the United States under the treaty was to keep the canal open to the citizens and subjects of the United States and Great Britain on equal terms, and to allow the ships of all nations to use it on terms of entire equality. It also contended that the United States is embraced in this term of "all nations"; that the British Government would scarcely have entered into the Hay-Pauncefote treaty if it had understood that England was to be denied the equal use of the Panama Canal with America. The three direct objections urged by the British against the American canal law were: That it gives the President the right to discriminate against foreign shipping; that it exempts coastwise traffic from paying tolls; and that it gives the Government-owned vessels of the Republic of Panama the right to use the canal free. The answer of the United States to the first of these

objections was that the right of the President to fix tolls in a way that would be discriminatory against British shipping was a question that could be considered only when the President should exercise such action.

The British Government expressed the fear that the United States, in remitting tolls on coastwise business, would assess the entire charges of maintenance of the canal upon the vessels of foreign trade and thus cause them to bear an unequal burden. This, the second objection was answered with the statement that, whereas the treaty gives the United States the right to levy charges sufficient to meet the interest of the capital expended and the cost of maintaining and operating the canal, the early years of its operation will be at a loss and, therefore, at a lower rate than Great Britain could ask under the treaty. The third objection was considered insignificant.

The British Government, after laying down its objections to the American canal toll law, requested that the matter be submitted to The Hague tribunal for adjudication. The American Government declared that this course would not be just to the United States, since the majority of the court would be composed of men, the interests of whose countries would be identical with those of England in such a controversy. Before leaving office President Taft proposed that the matter should be submitted to the Supreme Court of the United States. The whole question was left in that situation when the change from the Taft to the Wilson administration took place.

As to the merits of the controversy, there is no

unanimity of opinion on either side of the Atlantic. Some British authorities entirely justify the American position, while some American authorities take the British position. It is probable that the controversy will require years for settlement. Before the canal was open for traffic there was much speculation as to what rate policies the railroads would adopt to meet the situation caused by the competition of the Panama Canal. If the same classes of goods are handled through the canal as across the United States, there will be more than 3,000 different articles on the tariff books of steamship lines using the canal. In his report on the effects of canal tolls on railroad rates, Prof. Emory R. Johnson expressed the opinion that the payment of tolls by ships engaged in coast trade would affect neither the rates of the regular steamship lines nor the charges of the transcontinental railroads.

A provision of the canal toll law forbids any railroad to be directly or indirectly interested in any ship passing through the canal, carrying freight in competition with that railroad. This provision was inserted to prevent the railroads from controlling the steamship lines using the canal, and through that control fixing rates between the two coasts on such a basis as to prevent effective competition with the railroads themselves. The result was that a number of railroads had to dispose of their steamships engaged in coastwise trade. This provision affects several Canadian railroads, and after it was made the British Government served notice on the United States that it intended to take up this