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wiser to repeal the Canal Act, or so much of it as relates to the exemption of our coastwise shipping from tolls?

Professor Emory R. Johnson, the special commissioner on Panama Canal traffic and tolls, has recently submitted an elaborate report to the Secretary of War. After an exhaustive study of the whole traffic history of the Suez, Kiel, Manchester, and Amsterdam canals, and a careful analysis of the commerce that will be attracted to the Panama Canal and the rates it can stand, he states the following conclusions:

1. In managing the Panama Canal and in fixing tolls, the usefulness of the waterway to commerce and industry should be given first consideration. The policy as regards tolls and revenue should not be allowed to limit the traffic usefulness of the waterway.

2. The Panama Canal should be made commercially self-supporting. Tolls based upon the value of the service rendered by the canal are justifiable. Those who use the waterway may justly be required to make some compensation for the benefits received. Tolls, not unduly restricting the commercial usefulness of the waterway, may be levied that will yield revenue enough to meet operation, maintenance, sanitation, government, annuity, and interest charges.

3. The same rate of toll should be charged upon American as upon foreign vessels, because (a) the omission or repayment of tolls on American shipping would be of assistance mainly to our coastwise shipping which does not need aid and would be of but little help to American vessels engaged in the foreign trade; (b) Such subsidies as are given the American merchant marine should be paid to vessels employed in our foreign trade; but the remission or repayment to vessel owners of Panama tolls on American ships in the foreign trade would be an ineffective subsidy that might invite retaliatory measures by foreign governments; (c) The exemption of coastwise shipping from Panama tolls would inure mainly to the benefit of the coastwise carriers and only partially to the benefit of shippers and consumers. Neither the rates of the steamship lines nor the charges of the rail carriers will be appreciably higher if tolls are charged on coastwise shipping than they will be if such shipping is relieved from the payment of tolls.

4. The United States should adhere to business principles in the management of the Panama Canal. The Government needs to guard its revenues carefully. Present demands on the general budget are heavy and are certain to be larger. Taxes must necessarily increase. Those who directly benefit from using the canal, rather than the general tax-payers, ought to pay the expenses of operating and carrying the Panama Canal commercially.1

1 E. R. Johnson, Panama Canal Traffic and Tolls,

p. 201.

* * *

Mr. Stimson, in his annual report as Secretary of War, dated December 8, 1912, strongly endorses Professor Johnson's position. He says: "Since it is becoming constantly more apparent that the remission of tolls to our coastwise vessels will in effect amount to a payment of national funds to a special industry which does not need such assistance, I renew my suggestion that such remission of tolls be not granted, and that the act be amended to that effect." President Taft has adopted Professor Johnson's recommendations as to the rates to be charged, but has not taken his advice on the subject of the coastwise trade. The question, why should we make our ships pay tolls to pass through a canal which we have built with our money, sounds very plausible, but as Professor Johnson points out, the benefit will accrue not to the American people who have built the canal, but to a small group of shipowners engaged in the coastwise trade, while the American people will have to pay for the exemption through increased taxation.

The Panama Canal Act was passed without due understanding of the questions involved. Many of our most experienced public men regard it as a mistake. Why not repeal, or modify it? We would in this way avoid the risk of an adverse decision from the Hague Court and the heavy expense incident to the suit. It is of vast importance that the world should be convinced that we intend to act in good faith in this matter. If the canal is to fill the place that we expect it to fill as a great channel for the world's commerce, then we must administer it with due regard for the interests of the world at large.



Neutralization is the imposition by international agreement of a condition of permanent neutrality upon lands and waterways.

The author of the essay 1 of which the foregoing is the opening sentence draws the following distinction between the neutrality and the neutralization of states (p. 1):

While simple neutrality is the condition of those states which in time of war take no part in the contest, but continue pacific intercourse with the belligerents, neutralization perpetuates this condition by means of treaties effected between several powerful nations and the neutralized state.

Dr. T. J. Lawrence makes the same distinction as follows:

In ordinary neutrality are involved the two elements of abstention from taking part in an existing war and freedom to engage in it or not at pleasure. In neutralization the first element remains the same; but, instead of the second, there is imposed by international law either an obligation not to fight except in the strictest self-defense or an obligation to abstain from warlike use of certain places and things which have had the neutral character stamped upon them by convention.2

So Rivier in his Principes du Droit des Gens, I, 162, cited in Moore's International Law Digest, III, 4:

Territories or portions of territory belonging to a state other than those to which a permanent and conventional neutrality is assured, may, by an international act or in an international interest, be sheltered from acts of war. Such are said to be neutralized. This neutrality bears only on the territory, on the soil, and exercises no direct influence on the generality of rights of the sovereign territorial state, nor on the population.

1 Neutralization, by Cyrus French Wicker, M. A., LL.B., B. C. L., Oxon. Henry Frowde, Oxford University Press, London, New York and Toronto, 1911.

2 A Handbook on Public International Law, by Dr. T. J. Lawrence, Part IV, p. 140.

The contractual and international nature of neutralization is stated by Mr. Wicker as follows (p. 1):

The international relationship thus arising between a neutralized state and its guarantors is a purely contractual one. It exists neither by rules of international law nor in the agreed customs of nations, but solely in the treaties by which it is created, their purpose being to effect a relationship which shall exist permanently between all the parties concerned, requiring from the neutralized state a continuous observance of peace toward all the world and from the guarantors the recognition of that state in integrity, independence, and perpetual peace.

Referring to this international guaranty as an essential of true "neutralization," and to a frequent but inaccurate use of the term, Dr. Law

rence says:

As neutralization alters the rights and obligations of all the States affected by it, either their express consent, or the agreement of the Great Powers acting as in some sort their representatives, is necessary in order to give it validity. The word is often used in a loose and inaccurate manner to cover undertakings in abatement or mitigation of war, entered into by one or two States. We must, therefore, remember that there can be no true neutralization without the complete and permanent imposition of the neutral character by general consent. Thus Argentina and Chile could not impose an obligation on the rest of the world to refrain from warfare in the Straits of Magellan by declaring them neutralized, as they did by treaty between themselves in 1881.3

The same author, assuming that the United States would keep the Hay-Pauncefote treaty in its letter and spirit, observed (ante motam litem):

But an agreement between the States most directly interested may in practice amount to much the same thing, if they are powerful and determined, and covenant for the application of rules which have already received general consent in a similar case. The Treaty of 1901 between Great Britain and the United States for applying to the Panama Canal, when made, the rules of navigation now applied to the Suez Canal, is an illustration.4

'A Handbook on Public International Law, by Dr. T. J. Lawrence, p. 141.

♦ Ibid. For an instructive discussion of Neutrality and Neutralization, see Chapter XIV of Dr. Holland's Studies in International Law, entitled "The International Position of the Suez Canal."

Referring to the Hay-Pauncefote treaty, Mr. Wicker says (p. 80):

This treaty with England, which, however, does not amount to complete neutralization, since it is an agreement between two nations only, further provides that the Canal is to be safeguarded and maintained in neutrality by the United States alone, and consequently is a compromise between neutralization and complete American control.

In his Manuel de Droit International Public, 273, M. Bonfils says that the Suez Canal is not neutralized, because it is not closed to the ships of war of belligerents, but Professor Moore, who cites the passage in his Digest of International Law, III, 267, remarks that "the term 'neutralization' has come to be used in a sense less strict than that indicated by the author."

While Great Britain and the nations who may signify their adherence to the rules which the United States has adopted in Article III of the Hay-Pauncefote treaty for the neutralization of the canal, might not be bound in case of need to maintain the neutrality of the canal, would they not surely so do if requested by the United States? Would not their adhesion to the "rules" and the use of the canal thereunder be a virtual guaranty of its neutralization even if the United States alone could not maintain its neutrality? And would not this neutralization be in the interest of the commerce and peace of the world?

The object of the Hay-Pauncefote treaty, as declared in the preamble by both the high contracting parties, is

To facilitate the construction of a ship canal to connect the Atlantic and Pacific Oceans by whatever route may be considered expedient and to that end to remove any objection which may arise out of the convention of the 19th April, 1850, commonly called the Clayton-Bulwer Treaty, to the construction of such canal under the auspices of the Government of the United States, without impairing the "general principle" of neutralization established in Article VIII of that convention.

The rules that "the United States adopts" are agreed to by Great Britain as a party to the treaty, and the second rule ordains that

The Canal shall never be blockaded nor shall any right of war be exercised nor any act of hostility be committed within it.

Would not Great Britain be morally bound by this agreement to uphold that immunity from war, if occasion required? So with the other

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