Page images

United States or its possessions were to be admitted free of duty. The governor of the Canal Zone was authorized to negotiate a "tentative agreement" providing for reciprocal trade relations with the Republic of Panama, and for "a readjustment of customs duties and tariff regulations so as to secure uniformity of rates and privileges and avoid the disadvantages resulting from different schedules. duties, and administrative measures in limited territory subject to the same conditions and not separated by natural obstacles."* To carry out the terms of the order, a division of revenues, imposts. and customs was established under the department of civil adminis tration.37

This order led immediately to protests from the merchants of Panama and the government of the Republic, and to serious controversies between officials of the Canal Zone and of the Republic The merchants of Panama objected to the order on the ground the their sales in the Canal Zone would be lost to the merchants of the Canal Zone, because merchants in the Zone would be able under the order to import goods duty free from the United States, whereas the goods of the Panama merchants would be subject to the rates of the United States tariff act of 1897. The government of the Republic of Panama denied that the United States had acquired under the treaty of 1903 any rights of sovereignty over the ports of Ancon and Cristobal, and denied, further, that the administration of the Canal Zone had under that treaty the right to maintain its own fiscal system or to collect import duties in any part of the zone. It urged also that the free admission of all American products and the collection of duties on foreign imports by the Canal Zone government would deprive the treasury of the Panama Republic of an important source of revenue.

Article III of the convention of 1903 is as follows:

* * *

The Republic of Panama grants to the United States all the rights, power, and authority within the zone which the United States would possess and exer cise if it were the sovereign of the territory within which said lands and waters are located to the entire exclusion of the exercise by the Republic of Panama of any such sovereign rights, power, or authority.

The United States rested its claims on this article, but the Republic of Panama denied that it implied full and unlimited sovereignty. Article XIII granted to the United States the right to

import at any time into the said zone and auxiliary lands, free of customs duties imposts, taxes, or other charges, and without any restrictions, any and all vessels, dredges, engines, cars, machinery, tools, explosives, materials, supplies, and other articles necessary and convenient in the construction, maintenance, operation, sanitation and protection of the canal and auxiliary works, and all provisions, medicines, clothing, supplies and other things necessary and convenient for the officers, employees, workmen and laborers in the service and employ of the United States and for their families.

Article X further enumerated effects which were to be free from taxation by the Republic of Panama in the Canal Zone, but made no mention of import duties. Article IX stipulated that the towns of Panama and Colon were to be free ports, but that the Republic of Panama could collect customs duties on goods landed there, if

36 Secs. 1, 5, 6, 7, and 9.

37 Goethals, G. W.: Op. cit., pp. 21, 22.

as Cf. United States Foreign Relations, 1904, pp. 587,588.

lestined for consumption in the rest of the Republic of Panama. The convention made no explicit provision, other than the exempions from taxation stipulated in Article XIII quoted above, with egard to the taxation of imports into the Canal Zone. The Republic of Panama claimed, on the other hand, that its right to levy taxes vithin the Canal Zone was implicitly acknowledged in the convention by Articles X and XIII, which in surrendering the right to levy ertain types of taxes implied the continued right to levy taxes of very kind not enumerated.

In order to settle the controversy, which was causing considerable Excitement among the officials and public of Panama, the sections of the President's order of June 24, 1904, which authorized the governor of the Canal Zone to negotiate a customs agreement with Panama and which had theretofore been withheld from publication, were made known to the Panama Government on August 9, 1904, and a formal invitation was extended to Panama to enter into negotiations leading to a solution of the matters in controversy.39 This invitation was accepted, and in November, 1904, Secretary of War Taft was sent to Panama to carry on the negotiations for the United States. In the meanwhile an informal modus vivendi maintained the status quo.

An agreement was soon reached, and on December 3, 1904, the President issued an Executive order " embodying the agreement, to take effect December 12, 1904.11

Section 1 of the Executive order stipulated that no goods should be entered at Ancon or Cristobal, the ports of entry of the canal, except those described in Article XIII of the convention of 1903, except goods in transit across the isthmus for a destination without its limits, and except coal and fuel oil for passing ships, such coal and fuel oil to be admitted to these ports free of duty. All of these stipulations were made subject to the provisions that the ad valorem duties in the Panama tariff should be reduced from 15 per cent to 10 per cent; that the other duties in the Panama tariff except the duties on wines, liquors, alcohol, and opium should not be increased; that the consular fees and charges at the ports of Panama and Colon should be reduced to 60 per cent of the rates then in force; and that no direct or indirect charges other than the duties specified in the Panama tariff were to be imposed on goods imported at the ports of Panama and Colon and destined for the Canal Zone.

As for goods entering from Panama, section 4 of the Executive order revoked the section of the Executive order of June 24, 1904, providing that duties on importations into the Canal Zone were to be levied equal to the duties on foreign goods imported into the United States, and imports henceforth were made entirely free of duty. These stipulations were made subject to the provision that the Republic of Panama should grant reciprocal free admission of goods imported into the Republic from the Canal Zone.

The effect of this agreement was to make free ports of the terminals of the canal with respect to all purchases for the canal or its employees other than laborers ac

39 United States Foreign Relations, 1904, p. 597.

This order is printed in United States Foreign Relations, 1904, pp. 640-642, but apparently does not contain the full text of the agreement. See footnote on next page.

The agreement was made subject to the action of the Fifty-eighth Congress, as contemplated by the United States act of Apr. 28, 1904.

customed to the Tropics. On the other hand, the inhabitants of the zone, in contradistinction to canal employees, paid duty to the Republic of Panama on all merchandise imported direct, and no duties were paid on articles passing from the T Republic of Panama to the Canal Zone, and vice versa. As a consequence the zone revenues were depleted by all customs receipt. 42


On March 3, 1905, or shortly after the signing of the Taft agree ment, Congress passed an act declaring that all laws affecting imports into the United States from foreign countries apply to articles a imported from the Canal Zone. The full duties of the United States tariff had hitherto been enforced against imports from the Canal Zone, and this action was now confirmed by statute.

The United States tariff act of August 5, 1909, required that the rates of duty prescribed in that act should be levied upon all artic imported from any foreign country into the United States or into its possessions, with the exception of the Philippines, Guam, and Tutuila (American Samoa). If the Canal Zone had been a "pos session" in the meaning of this act, imports into the Canal Zone from foreign countries would have become dutiable at the rates d the United States tariff act of 1909. But the Attorney Gener rendered an opinion to the effect that the Canal Zone was not one of the possessions of the United States within the meaning of the act, but rather "a place subject to the use, occupation, and control of the United States for the purpose of constructing and maintaining a ship canal connecting the waters of the Atlantic and Pacific Oceans," and that the tariff act of 1909 consequently did not apply to the Canal Zone.43 The act of March 3, 1905, therefore continued in effect, making imports from the Canal Zone into the United States subject to the general tariff rates.

No further changes have been made in the tariff relations of the United States and the Canal Zone. Imports into the United States from the Canal Zone are now subject, therefore, to the same duties as are levied on imports from foreign countries under the tariff act of 1913 and subsequent tariff legislation, and imports into the Cansi Zone from the United States are subject to the terms of the Taft agreement of 1904. In so far as tariff regulations are concerned. since the agreement of 1901, the Canal Zone has not been regarded as territorially separate from Panama. Exports entering the United States pay duty as from Panama and imports from the United States. except articles destined for Government officials and employees in the Canal Zone pay the regular duties of Panama.

42 Goethals, G. W.: Op. cit., p. 33. Gen. Goethals, who was later governor of the Canal Zone, states ( cit., p. 30) that this agreement excluded from the benefits of the commissaries established by the Ca Commission for the sale of the articles entitled to free admission under Article XIII of the convention 1903 all employees who were natives of tropical countries, provided that the merchants of Panama co supply them with their needs, but that it later transpired that they could not, and this provision w consequently not enforced. He states also that this agreement was to continue in force, subject toate by Congress, during the construction period of the canal. The Executive order of Dec. 3, 1904, confirming the agreement, makes no mention of these provisions.

The arrangement was practicable because of the purely Governmental nature of the Canal Zone, which distinguishes it from all the other possessions of the United States-that is, no private commercial activity is carried on within its borders; all things necessary and convenient for the officers, employees, workmen, and laborers in the service and employ of the United States, and for their families," who comprise the entire stable population, are imported as Government stores; and in the nature of the case, there are no exports.

43 27 Op. Atty. Gen. 594 (1909).


The laws restricting the coastwise trade of the United States to vessels of American registry have never been applied to the trade between the United States and the Canal Zone. Section 21 of the merchant marine (Jones) act of July 5, 1920, provided for the extension of the coast wise laws to "the island Territories and possessions of the United States not now covered thereby," but as the Canal Zone is neither insular nor treated as a possession" of the United States, this provision is not applicable to the Zone.

[ocr errors]


[See also the general works listed on p. 835 and the texts of treaties on p. 834.]

Senate and House documents.

Congressional Record.

Supreme Court Reports.


Department of State: Foreign Relations of the United States.
Department of Justice: Opinions of the Attorney General.

Department of Commerce and Labor, Bureau of Foreign and Domestic Commerce:
Special Agent's Series No. 67. Commerce and Industries of Alaska, Hawaii,
Porto Rico, and the Philippine Islands, 1913.

Department of Commerce, Bureau of Foreign and Domestic Commerce: Special Agent's Series No. 129. The Danish West Indies. 1917.

Commerce Reports, Supplement No. 77a, Trade of the Virgin Islands. 1920. Statistical Abstract of the United States. Annually.

War Department, Bureau of Insular Affairs: Monthly Summary of the Commerce of the Philippine Islands.

Annual Reports.

Navy Department: Memoranda furnished for use of Senate Committee on Pacific

Islands and Porto Rico.


Treasury Department, Commissioner of Internal Rvenue.

Philippine Islands, Governor General: Report for 1919.

Report for 1919.

Bureau of Customs: Foreign Commerce of the Philippine Islands, 1913-14.

Report of the Collector for 1919.

Porto Rico, Governor: Report for 1919.

Amended Customs Tariff Regulations. 1899.

Report and Recommendations of Robert F. Porter to the Secretary of the Treasury

on the Customs Tariff of the Island of Porto Rico.

American Samoa. A General Report of the Governor.



Tutuila. General Orders issued by the Naval Governor. 1903.

Virgin Islands. Report of Joint Congressional Committee. 1920.
Panama. Isthmian Canal Commission. Report for 1904.

The Island of Guam. Report by Naval Government of Guam for 1917.


American Year Book. New York. Annually.

Elliott, Charles B.: The Philippines to the End of Commission Government. Indianapolis, [1917].

Goethals, G. W.: The Government of the Canal Zone. Washington. 1915.

Hitchcock, F. H.: Trade of the Philippine Islands. Washington, 1898.

Hoxie, R. F.: American Colonial Policy and the Tariff. In The Journal of Political Economy, Chicago, March, 1903.

Willis, Henry P.: Our Philippine Problem. New York, 1905.

Willoughby, W. W.: On the Constitution (The Constitutional Law of the United States.) New York, 1910.

Willoughby, Wm. F.: Territories and Dependencies of the United States. New

York, 1905.

Philippine Chamber of Congress: Yearbook of the Philippine Islands.




EMPIRE, TO 1914.

I. The old colonial system:

The Navigation Acts..

Tariff preferences to British goods in the



[blocks in formation]

II. British tariff policy-Continued.
The move ment toward protection-Con
Agitation for repeal of treaties stand-
ing in the way of preference..
Ottawa colonial conference, 1894..
British reply to colonial resolutions..

III. The movement for imperial preference,

Congress of the chambers of commerce,

The colonial conference, 1897.

Termination of the treaties with Belgium
and the Zollverein..

Colonial conference at London, 1902-
Preference proposals and resolutions.
The "corn" duties, 1902-3..

The Brussels sugar convention, 1902..
Preferences in Crown colonies..
Controversy with Germany in regard to
colonial preferences, 1903.

Chamberlain's campaign for imperial
preference, 1903-4.

The "tariff reform" movement, 1906.
The colonial conference of 1907.

Preference resolutions.

The tariff reform" movement, 1907-1912.
The imperial conference of 1911.

IV. Summary...



[subsumed][ocr errors][ocr errors][ocr errors][merged small][merged small][subsumed][subsumed][subsumed][ocr errors][ocr errors]

By way of introduction, brief reference will be made to certain phases of the colonial policy of Great Britain in the seventeenth and eighteenth centuries.


In earlier days the Navigation Acts formed an important means of controlling the colonial trade in the interest of merchants and manufacturers of the mother country. Although they were of much earlier origin, the first important navigation act was passed in 1651. It was followed by the act of 1660, which, in substance, continued in effect for two hundred years. Originally designed to regulate commerce between England and her European neighbors, the Navigation Acts were later extended and modified so as to maintain a monopoly of the colonial trade. The chief provisions of the acts were as follows: (1) Certain specified articles "the enumerated articles," includ ing the chief articles of commerce-could be imported into England only in English ships or ships of the country of which they were the produce, or from which they were generally exported; but no produce of Asia, Africa, America, Russia, or Turkey could be imported except in British ships or ships of the producing country.



« PreviousContinue »