Statement of commerce on canals and canalized rivers of the United States during the calendar year 1912-Continued.

3 Between Rome, Ga., and East Tennessee, Va., and Georgia Railroad bridge.
+ 9 months.

$330,000 feet of lumber and 6,775,000 feet of logs also passed through canal.

28.579 1, 172, 158 1 302,610 1,198

32.909

#145,890

568,105

414,414

$52,342

2. 484,744

113.409 5.000 41.398

11,575,329 4 8,618,389 1,667,126 33.219 588

10,310

7.965

• 10,408

42.828 9,000

1,319, 154 80, 202 139,775,372

MEMORANDUM BY GEORGE DONWORTH, OF SEATTLE, WASH.

Is the statute exempting the coastwise vessels from payment of tolls for the use of the Panama Canal in violation of the Hay-Pauncefote treaty?

Probably no section of the country will suffer more than the State of Washington from the proposed repeal of the statute exempting coastwise vessels from payment of tolls for the use of the Panama Canal. Our great product, lumber, should be allowed to reach the markets of the East without unnecessary burdens, and we feel that not only as to this product, but as to all other articles of commerce between this State and the markets of the East, the canal, built by American genius and American money, should be utilized as far as possible for the benefit of the American people. Some advocates of the repeal take the position that the tolls exemption violates the Hay-Pauncefote treaty, and must be abandoned from the standpoint of national honor, while others frankly admit that the treaty permits the exemption but favor a repeal on other grounds of policy.

There is so much at stake in both phases of the question that it is to be hoped those who take the latter view will at least not vote for an outright repeal without embodying in the repealing statute a positive declaration of the right of the United States to restore the exemption whenever it sees fit. In view of the President's message, and the legal argument on the construction of the treaty made by most of his supporters, the passage of the repealing act without some such reservation will forever estop us not only on the question of free tolls, but on the question of the right to use the Canal Zone as a base in time of war, as hereinafter pointed out.

In article 2 of the treaty it is agreed that the canal may be constructed directly by the Government of the United States, and that this Government, subject to the provisions of the treaty, "shall have and enjoy all the rights incident to such construction, as well as the exclusive right of providing for the regulation and management of the canal."

Article 3 begins with the statement that "the United States adopts" certain rules. It is to be noted in the outset that the effect of this language is to recognize the canal as the property of the United States, and that this Government "adopts" certain rules for its regulation. The language does not say that Great Britain and the United States jointly adopt any rules. The canal is recognized as belonging to the United States, with all the incidents of such ownership, subject to the provisions of the treaty, one of the provisions being that this Government adopts certain regulations. These regulations should therefore be construed in the same manner as regulations adopted by any nation regarding its own property are construed. The general recognition of the canal as the property of the United States, with all incidental rights resulting therefrom, applies to all questions. That is to say, the presumption on all questions is in favor of the right of the United States to legislate as it sees fit, and such legislation is valid unless it contravenes some one of the rules which by the terms of the treaty "the United States adopts."

The argument of our opponents is based upon subdivision 1 of article 3, which states that "the canal shall be free and open to the vessels of commerce and of war of all nations observing these rules on terms of entire equality, so that there shall be no discrimination against any such nation or its citizens or subjects in respect to the conditions or charges and traffic or otherwise."

The treaty speaks for itself that the restriction as to terms of equality is "so that there shall be no discrimination against any such nation." The prevention of discrimination is the gist of the provision. That was the object to be attained. Great Britain has no right to complain of anything under this clause which does not amount to a discrimination. As her vessels are barred in any event from the coasting trade, no exemption freeing from tolls our vessels while engaged in the coasting trade can possibly violate this provision.

The argument of our opponents on this point proves too much. If we admit their argument as valid, we must allow Great Britain to dictate many other changes in our local laws. For instance, the existing treaty of commerce and navigation with Great Britain, that of 1815, provides in the second article that "No higher or other duties or charges shall be imposed in any of the ports of the United States on British vessels than those payable in the same ports by vessels of the United States, nor in the ports of any of His Britannic Majesty's territories in Europe on vessels of the United States than shall be payable in the same ports on British vessels." (See Compilation of Treaties in force, 1904, p. 309.)

The language of this clause is much clearer than the language of the Hay-Pauncefote treaty in that the 1815 treaty expressly refers to vessels of the United States instead of vessels of all nations. Nevertheless, United States vessels engaged in the coasting trade are exempt from the payment of State pilotage charges. A British vessel arriving at the port of New York is subject to pilotage charges. So is an American vessel arriving there from a foreign port. But an American vessel engaged in the coastwise trade that is, arriving from an American port, even Porto Rico or Hawaii—is free from these charges. (Huus v. New York and Porto Rico Steamship Co., 182 U. S., 392.)

The Supreme Court distinctly holds that there is no just ground for the claim of discrimination in regulations which favor our coastwise shipping as against other shipping, notwithstanding the treaty of 1815. (Olsen v. Smith, 195 U. S., 332.)

No nation, so far as known, has ever protested against this discrimination in favor of the coasting trade. In many other respects the coasting trade is favored by our statutes. In fact, the favoring of the coastwise trade by statute has been so uniformly a part of the policy of the United States since the foundation of the Government that it would be difficult to enumerate all the instances of such favoring. The clause of the 1815 treaty, above quoted, is far stronger in support of the right of the British vessels to exemption from pilotage charges in the port of New York than is the dis puted clause in the Hay-Pauncefote treaty in support of the claim of impropriety of free tolls for coasting vessels in the canal.

A treaty should be so interpreted as to give effect to the object designed, and for that purpose all of its provisions must be examined in the light of attendant and surrounding circumstances. (Ross v. McIntyre, 140 U. S., 453.)

Now, the attendant and surrounding circumstances in the making of the HayPauncefote treaty include the historical attitude which the United States had always taken with reference to its coastwise trade. The circumstances also include the fact that the only consideration which Great Britain furnished for our engagements in the Hay-Pauncefote treaty was the annulment of the Clayton-Bulwer treaty, the canal itself being built entirely by funds contributed by the American people. Another circumstance to be borne in mind is the definite position which the American Govern

ment had declared and pursued for years with reference to such a canal. For instance, in the message of President Hayes to Congress, March 18, 1880, he said:

"An interoceanic canal across the American Isthmus will essentially change the geographical relations between the Atlantic and Pacific coasts of the United States and between the United States and the rest of the world. It would be the great ocean thoroughfare between our Atlantic and our Pacific shores, and virtually a part of the coast line of the United States. Our merely commercial interest in it is greater than that of all other countries, while its relations to our power and prosperity as a nation, to our means of defense, our unity, peace, and safety are matters of paramount concern to the people of the United States. No other great power would, under similar circumstances, fail to assert a rightful control over a work so closely and vitally affecting its interest and welfare." (Messages and papers of the Presidents, Vol. VII, p. 586.)

It is inconceivable that America should have surrendered for no definite consideration except the abrogation of a defunct treaty the rights and interests so clearly pointed out by President Hayes or that Great Britain should ever have thought so.

Discrimination being the only thing covenanted against, there can be no just ground for claiming a violation of the treaty by a regulation which imposes no tolls on vessels engaged in a class of trade which is prohibited on any terms whatever to the ships of Great Britain and other foreign countries.

What is the real ground of Great Britain's complaint? The real grounds are First. The Canadian Pacific Railway, which wants to reduce the effect of the competition of the canal to a minimum, and,

Second. The commercial ambitions of the citizens of British Columbia who feel that in their commercial rivalry with the cities of our Pacific coast they have much to gain and nothing to lose by burdening as much as possible the coastwise traffic of those cities.

As to the railroad, no one, I suppose, will for a moment claim that it is entitled to be heard in the matter. In fact it keeps in the background. It has no direct interest in the question of discrimination in toll charges for ships passing through the canal. Its indirect interest is the same as that of the American transcontinental railroads. The interest of both is in favor of making the canal a failure. No argument from the point of view of those whose interest is inimical to the success of the canal deserves any consideration whatever. The treaty must be presumed to have intended that the canal should be a success, not a failure.

The citizens of British Columbia will gain much by imposing the burden of tolls upon American vessels using the canal in the coastwise trade, but the advantage which they will derive is merely the advantage which any competitor gets from handicapping his rival. Of course the proposed enactment would not reduce the charges on ships bound to or from British Columbia by one penny. It would merely add burdens to American ships doing business with Washington, Oregon, and California. The British Columbia lumbermen, by reason of being able to use foreign bottoms, will be able to transport their lumber to ports in the Atlantic States at a much lower rate than the Puget Sound lumbermen, and if this handicap is not in part counterbalanced by free tolls the British Columbia lumbermen will have an advantage that will be insuperable. It is no answer to say that if they have this natural advantage they are entitled to retain it in the use of the canal. No natural advantage that they have will be in the slightest degree interfered with by the tolls exemption on our coast wise ships. The charges on their ships are a constant factor in either case. To admit that the treaty prevents us from encouraging our own shipping in a line of business not open to them is to convict the President and Senate who approved and ratified this treaty of stupidity. It should be axiomatic that as the citizens of British Columbia have no right to engage in the coasting trade they are not concerned legally in any question affecting the tolls on American vessels so engaged any more than they are concerned in any other condition prescribed for the conduct of the coasting trade.

The situation, in a nutshell, is that the foreign competitor (the British Columbia lumberman), having no interest in the coasting trade or the tolls charged therefor, asks the United States to raise the cost of conducting the coasting trade, so that he, the foreign competitor, may take away the trade from his American rival.

If the lumbermen of New Brunswick and Nova Scotia should protest under the treaty of 1815 against admitting lumber-laden vessels from the State of Maine to enter the port of New York without paying pilotage charges, they would have a far stronger case legally and morally than the British Columbia lumbermen have as to the canal tolls.

The fact that citizens of the United States can by means of coasting vessels transport goods under specially favorable conditions from one port to another in the United States has never been considered a discrimination against a foreign port which by

means of foreign vessels ships or desires to ship the same class of goods to the same American port. Is Nova Scotia discriminated against because our vessels engaged in the coasting trade can carry coal from Philadelphia to the Boston market, whereas different laws apply to like shipments from Nova Scotia to Boston? Does the treaty of 1815 above quoted require us to give the same rights to ships arriving from a foreign port as to ships arriving from one of our own ports? By no means. There can be no such thing as discrimination unless the party claiming to be injured has the right to do the thing concerning which the alleged advantage is conferred. If there is any discrimination at all, it goes back to the original prohibition against foreign ships engaging in the coasting trade. If that prohibition stands, all the rest is mere detail, a variation in degree and not in kind.

In construing statutes aimed to prevent discrimination the principle above suggested is invariably applied. For instance, the national banking act (U. S. Rev. Stat., sec. 5219) prohibits the taxation of the shares of national banks at any higher rate than other moneyed capital in the hands of individuals. From the beginning the Supreme Court has held that, although the word "discrimination" does not occur in the statute, the obvious intention of Congress was to prevent the States from discriminating in matters of taxation against national bank shares. Consequently that court has frequently held that it is immaterial what rate of taxation is imposed by the States or moneyed capital that does not come into competition with national banks. The expression "other moneyed capital," though general in terms, is restricted by the obvious purpose of the statute to moneyed capital which is in competition with that invested in national banks.

"The result seems to be that the term 'moneyed capital' as used in the Federal Statute does not include capital which does not come into competition with the business of national banks, and that exemptions from taxation, however large, such as deposits in savings banks, or of moneys belonging to charitable institutions which are exempted for reasons of public policy and not as an unfriendly discrimination as against investments in national banks, can not be regarded as forbidden by the Federal Statute." (First National Bank v. Chapman, 173 U. S., 205, at p. 214; also First National Bank of Aberdeen v. Chehalis County, 166 U. S., 440; National Bank of Commerce v. Seattle, 166, U. S., 463; Commercial National Bank v. Chambers, 182 U.S., 556.)

Some of our opponents urge that the exemption of coastwise shipping from payment of tolls amounts to a discrimination because it increases the burden of all other ships not so exempted. This is an a priori statement of a purely dogmatic character, as it can not be known at present whether the aggregate amount of all tolls at the rate imposed will or can reimburse the United States for the cost of operation and a fair interest on the investment. The best-informed opinion seems to indicate that the canal will be operated at a loss, even though tolls be levied on all ships of every character passing through it. Whether such will be the case or not can be positively determined only by experience. After the lapse of a reasonable time it will be possible to demonstrate whether an equitable distribution of the entire cost of operation and interest upon all ships would have resulted in a lower rate of tolls than that imposed upon British and other foreign shipping. If experience shows that the entire receipts of the canal, plus an amount equal to the remitted tolls on coastwise vessels, would still be less than the operating expense, plus interest, no nation can truthfully say that it has been overcharged. If the United States sees fit to operate the canal at a loss, no one can claim to be injured if it makes that loss greater by exempting certain of its shipping with which foreign nations do not compete.

If, on the other hand, experience should prove that a fair return on the investment and the operating cost are more than equaled by the toll receipts plus the potential receipts remitted on coastwise vessels, then for the first time will the British and foreign shipowners have the right to complain. If that situation arises the United States Government will certainly deal equitably and fairly with the situation in exact accordance with the treaty, though even then it will not be known how many coastwise ships would have used the canal if tolls had to be paid.

The Supreme Court has frequently refused to hold a rate or charge invalid for the reason that it may prove to be in excess of the amount needed for raising a certain

revenue.

In Patapsco Guano Co. v. Board of Agriculture (171 U. S., 345), where the validity of an inspection charge levied under State authority was attacked on the ground that the charge was excessive (State inspection fees being limited by the Federal Constitution to the amount required for the enforcement of the State inspection laws) the court said (p. 354): "If the receipts are found to average largely more than enough to pay the expenses, the presumption would be that the legislature would moderate the charge.' The same opinion quotes from the case of Neilson v. Garza

(2 Woods, 287), and approves the language of Mr. Justice Bradley in that case as follows:

"How the question whether a duty is excessive or not is to be decided may be doubtful. As that question is passed upon by the State legislature when the duty is imposed, it would hardly be seemly to submit it to the consideration of a jury in every case that arises. This might give rise to great diversity of judgment, the result of which would be to make the law constitutional one day and in one case and unconstitutional another day in another case. As the article of the Constitution which prescribes the limit goes on to provide that all such laws shall be subject to the revision and control of Congress, ir seems to me that Congress is the proper tribunal to decide the question whether a charge or duty is or is not excessive. If, therefore, the fee allowed in this case by the State law is to be regarded as in effect an impost or duty on imports or exports, still if the law is really an inspection law the duty must stand until Congress shall see fit to alter it. Then we are brought back to the question whether the law is really an inspection law. If it is, we can not interfere with it on account of supposed excessiveness of fees."

Under the treaty the United States is to fix the tolls and charges, and the presumption is (in fact it is a certainty) that if experience, the only guide, proves them to be excessive, they will be promptly and adequately reduced and due reparation made to any injured party.

In Knoxville v. Knoxville Water Co. (212 U. S., 1), where the water company was asking the court to enjoin the enforcement of a municipal ordinance fixing water rates, the court said:

"Where the case rests as it does here, not upon observation of the actual operation under the ordinance, but upon speculations as to its effect, based upon the operations of a prior fiscal year, we will not guess whether the substantial return certain to be earned would lack something of the return which would save the effect of the ordinance from confiscation. It is enough that the whole case leaves us in grave doubt. The valuation of the property was an estimate, and is greatly disputed. The expense account was not agreed upon. The ordinance had not actually been put into operation; the inferences were based upon the operations of the preceding year; and the conclusion of the court below rested upon that most unsatisfactory evidence, the testimony of expert witnesses employed by the parties, * * *. If hereafter it shall appear under the actual operation of the ordinance that the returns allowed by it operate as a confiscation of property nothing in this judgment will prevent another application to the courts."

In Willcox v. Gas Co. (212 U. S., 19), where the Consolidated Gas Co., of New York was attacking the validity of a statute reducing gas rates in the city of New York, the court said:

"Upon a careful consideration of the case before us we are of opinion that the complainant has failed to sustain the burden cast upon it, of showing beyond any just or fair doubt that the acts of the Legislature of the State of New York are in fact confiscatory. It may possibly be, however, that a practical experience of the effect of the acts by actual operation under them might prevent the complainant from obtaining a fair return, as already described, and in that event complainant ought to have the opportunity of again presenting its case to the court."

It is clear therefore that where the contention is that charges are too high, as claimed in the Patapsco case, or that they are too low, as claimed in the Gas and Water cases hereinbefore cited, the Supreme Court of the United States recognizes that experience is the only guide to relief, and that in all doubtful cases interested parties must await the actual results before applying to the courts for a change. No doubt the same principle is recognized and applied in the courts of Great Britain.

If this is the rule applied in ordinary cases to public service corporations, where the experience of similar corporations throws much light upon the probable earnings and expense, how much stronger is the reason for applying the rule to the greatest improvement ever undertaken by man where all calculations as to expenses and earnings must be problematical and conjectural.

Suppose an act be now passed enabling anyone who claims that the tolls exemption statute has caused him damage by taking away or impairing a right secured by the Hay-Pauncefote treaty to bring suit for damages against the United States in the Court of Claims with the right of appeal by either party to the Supreme Court. Could any such damages be recovered? Let those who answer this question affirmatively consent to put it to the test. If we must show our good faith by concession while Great Britain shows hers by insistence, the passage of such an act should certainly cover the ground. We believe we are right, and, the matter being one of domestic policy, we adhere to our course until shown to be wrong. In the meantime, if anyone suffers by our act, we will indemnify him.