Page:The Panama Canal Controversy.djvu/44

 we have just seen, the amount of tolls on coastwise vessels must be taken into account in order to fix the amount payable on other vessels.

The diplomatic controversy was begun by a note from the British charge d'affaires on July 8, 1912, in which objection was taken to the proposals then under consideration for the exemption of all American shipping or for the exemption of coastwise vessels only. The Panama Canal Act was passed on August 24 following, and on signing it the President published a Memorandum to which reference has been made, in which he claimed that the United States had full powers to exempt all American shipping if it were thought proper so to do, and argued that exemption was only a form of subsidy, and that in any view of the Treaty subsidies were not covered by it. On November 14 Sir Edward Grey presented a reply to the American contention which deals with that raised in Mr. Taft's Memorandum at length and concludes with a statement that His Majesty's Government are ready to submit the question to arbitration. The remaining dispatches exchanged between the two Governments, that of July 17 from Mr. Knox and the reply to it of February 27 from Mr. Bryce, are confined to the question of arbitration. Mr. Knox takes the view that no question has yet arisen for determination since the President has not yet made use of the power given him by the Canal Act to discriminate against all foreign shipping, and because the tolls to be charged on foreign shipping have been fixed after taking into account the amount of the tolls payable on exempted vessels. His Majesty's Government replied that the passing of a statute in contravention of a Treaty does afford ground for remonstrance, and that it is not