as long as it is in force, but this Bill expressly proposes in terms to abrogate all treaties in conflict with the provisions of the Bill.

If that policy, which is frequently advocated, should be adopted, the danger of retaliation would, of course, arise. How will that danger be met? In a Report of 1910 (sixty-first Congress, second Session, Report 502, Part 2) on the American merchant marine, we read:

All the commercial nations of the world need what we have to sell. They cannot afford to impose unnecessary burdens upon their own people in their efforts to punish us for the exercise of the very right which they claim for themselves. In one respect, at least, we have the advantage of any other country. We produce the cotton which keeps their factories running, gives employment to their labour and clothes their millions. They cannot get it elsewhere, and there is no substitute. It is inconceivable that England, or Germany, or any other country which manufactures cotton cloth, would put a burden upon our raw material, without which their machinery would stop and their people would suffer.

The United States very naturally desire to recover the shipping trade they have lost from those countries to which they have lost it. Owing to Great Britain's predominance on the seas, the American maritime policy is necessarily and inevitably anti-British, sympathy with Great Britain notwithstanding.

Examination of the very voluminous official investigations and reports on the subject shows clearly that the various proposals for the re-creation of the American merchant marine have hitherto not led to the adoption of a comprehensive policy because of the enormous expenditure required for equalising British and American shipping conditions by sufficiently high subsidies or by rebates on import duties. Consequently, the most prominent supporters of the American maritime policy have advocated during the last two decades to begin by building up that part of the American shipping trade in which the United States are most strongly interested, and they have naturally selected the trade between South and North America as the most promising and most immediate field of Governmental action. The United States embarked upon the construction of the Panama Canal for military and economic reasons. But whilst military considerations were uppermost in the minds of the American statesmen, economic ones predominated very naturally in the minds of the American politicians and the general public. The enthusiasm of the people was roused by the confident expectation that the Panama Canal would prove a powerful instrument for the re-creation of the American merchant marine, that it would specially benefit the Americans by handicapping the foreign shipping using it. Therefore the man in the street refused to

take the Hay-Pauncefote Treaty seriously. He argued, with good common sense: Surely the Government is not going to spend $500,000,000 of American money on the Panama Canal for the benefit of Great Britain, Germany and Japan?' He thought it a matter of course that, as the United States were to build the Canal with the money of American taxpayers, its principal advantage would be reserved to American shipping. Everyone acquainted with the United States knew beforehand that the American Government would find it exceedingly difficult to act in accordance with the stipulations of the Hay-Pauncefote Treaty, because these were opposed to popular expectations, and, indeed, to common sense.

American diplomacy made, no doubt, a mistake in signing the Hay-Pauncefote Treaty. At that time American diplomats might have argued that the Clayton-Bulwer Treaty should be abrogated owing to the altered condition of affairs, and that, on the principle 'He who pays the piper calls the tune,' the United States were entitled to give favoured treatment to their own ships. That would have been businesslike. Legally, according to the wording of the treaty, the United States are not now entitled to grant to their ships the free use of the Canal, but morally they are so entitled. That fact has been overlooked by most British writers. The American statesmen responsible for the signing of the Hay-Pauncefote Treaty acted unwisely. Was Mr. Roosevelt responsible for the mistake? At any rate, the Americans should rather be angry with their own statesmen for having signed a stupid treaty, and thrown away America's chances, than with Great Britain for expecting the fulfilment of the treaty which they had signed after the fullest discussion.

British indignation at the non-observance of the Hay-Pauncefote Treaty is due partly to the fact that the British public is unacquainted with the justifiable maritime hopes and ambitions of the American people, and the equally justifiable expectations that the Canal should benefit their own shipping; partly it is due to an exaggerated idea of the economic importance and value of the Panama Canal and the consequences of America's decision to grant free passage through the Canal to American vessels engaged in the coasting trade. As the coasting trade is already reserved by law to American shipping, the action of the United States will not diminish in the least the business of British and other non-American shipowners using the Canal, because these are excluded from the coasting trade by law. The fear expressed by Mr. Bunau-Varilla that non-American ships would have to pay for the boon granted to American ships by increased tolls seems scarcely justified. The Americans will, no doubt, charge the highest toll which the traffic can bear, because, even

then, the Canal will not be a paying undertaking. Besides, it is not to be apprehended that the comparatively small subsidies to the American shipping passing through the Canal in the shape of freedom from tolls will enable their shipping to compete successfully in neutral markets with non-American shipping. It is to be expected that the freedom of the Canal will be given only to coasting shipping in the strict sense of the term. But even if American coastal shipping should be allowed to engage in the general shipping trade, say to Australia, New Zealand, and the countries of the Far East, the freedom of the Canal would not suffice to neutralise America's enormous handicap of high wages except on very short journeys. British shipping would not be appreciably affected by such a policy.

The Panama Canal is mainly a strategical undertaking. The British public has formed an exaggerated opinion not only as to the effect of America's Panama policy upon British shipping, but as to the economic importance of the Canal itself. The frequently heard surmise that the Panama Canal will be another, and perhaps a greater, Suez Canal is quite unjustified. The Suez Canal improved immensely the oldest and most frequented trade route of the world. It is the connecting link between the three greatest and most densely populated continents, Europe, Asia, and Africa. It is the prolongation of that wonderful inland lake the Mediterranean. It lies close to the doors of all Europe. It was virtually a monopoly, and its cost of construction was relatively small. The position of the Panama Canal is entirely different. It is of first-rate importance only to the partly barren west coast of America, which, owing to its mountainous hinterland, has little depth and is, especially as regards South America, susceptible only of limited development. It is, therefore, difficult to see where traffic comparable with that of the Suez Canal is to come from. Besides, the Panama Canal has no monopoly. It has not even a monopoly of the trade between Eastern and Western North America. The long and narrow neck of Central America can easily be crossed in many places, and there is already an important competitor to the Panama Canal in the shape of the Tehuantepec Railway. The Tehuantepec Railway of Mexico, from Goazacoalcos, on the Gulf of Mexico, to Salina Cruz, on the Gulf of Tehuantepec, built by Messrs. S. Pearson and Company, of London, and supplied with excellent terminal facilities, saves on the journey from the east coast to the west coast of North America, and vice versa, or from Europe to the west coast of North America, and vice versâ, no less than 1250 miles, or from four to five days, if compared with the Panama route. Probably the Panama Canal charges will be higher than the Tehuantepec Railway freight

charges. Besides, sailing ships, which are very important in the Western American trade, will find it difficult to use the Panama route, because calms are frequent at Panama, whilst strong winds usually prevail at the Isthmus of Tehuantepec. Nor will the Tehuantepec Railway remain the only competitor to Panama.

The Suez Canal has been a great financial success. Its 201. shares stand at present at 2401., but it would be rash to assume that the Panama Canal will be a similar success. The Suez Canal has a capital of 8,000,000l., whilst the Panama Canal will cost about 80,000,000l., or ten times as much. It seems unlikely that the Panama Canal will ever have a traffic comparable with that of the Suez Canal. Its geographical position forbids it. Notwithstanding its greater cost, the Panama Canal will have to be satisfied with lower tolls than the Suez Canal. It has been proposed to charge $1 per ton at Panama, whilst the Suez Canal charges frs. 7.25, or $1.45, per ton. However, the Tehuantepec Railway and other competitors, among them the Suez Canal, may force the Panama toll below $1 per ton. The financial prospects of the Panama Canal are by no means brilliant, and the American Government will be lucky if the Canal brings in the working expenses and the cost of maintenance, which, owing to earthquakes, may be extremely high.

The Panama Canal is likely to have a more important effect upon the manufacturing industries than upon shipping. The most important American manufacturing industries are located in the east of the United States, near the sea. They are separated from the markets of Australia, New Zealand and the Far East by the width of the North American Continent. At present Liverpool is considerably nearer to the Far East than New York. That will soon be changed. After the opening of the Canal, Yokohama will be 1805 miles, Sydney will be 2382 miles, and Wellington will be 2759 miles nearer New York than Liverpool. The Panama Canal will therefore better enable Massachusetts and other Eastern States to compete with their cotton goods, their ironware and machinery in markets in which hitherto Great Britain has had almost a monopoly. However, the greatest beneficiary of the Canal will probably be the rapidly expanding cotton industry of Japan. Cotton, grown in the South-Eastern States of North America, is shipped in enormous quantities to Japan from the Pacific ports, whereto it has to be carried by rail over a distance of 2000 miles. This long land journey not only increases its price very greatly, but causes long and unforeseen delays, which are ruinous to the Japanese cotton manufacturers. The opening of the Panama Canal should greatly benefit industrial Japan, and should considerably increase

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Japan's cotton exports to China and India, to the great harm of Lancashire. The Canal will also have an important influence upon American trans-continental railway rates, which it will control and regulate.

The Panama Canal will apparently not have a very farreaching economic effect, but if, in course of time, its importance should greatly increase, and if the trade of the British Empire or of other countries should be seriously prejudiced or injured by America granting freedom from tolls to her own ships, serious friction will be the result. The position is therefore as follows: If America's Panama policy should prove ineffective, it was not worth her while breaking the Hay-Pauncefote Treaty. If, on the other hand, it should prove effective, it will be harmful to other nations, and will lead to much friction, and possibly to retaliation. Americans should therefore ask themselves whether it is worth their while giving to their possible enemies a common grievance in addition to that of the Monroe Doctrine.

An unassailable Power can always, and a Power which is generally liked can sometimes, afford to disregard and to injure the interests of other nations. But the United States are neither universally liked nor unassailable. At the time of the SpanishAmerican War the United States discovered, not without surprise, that they had not a single friend in the world except Great Britain. Improvements made in the means of warfare and of transport have greatly abridged the distances which used to separate the United States from the warlike nations of Europe. Last, but not least, the United States used to have only one frontier open to attack-their east coast; but the rise of Japan and the unsatisfactory relations between the United States and Japan have, during the last few years, given to the United States another and very long frontier requiring defence. The thinly settled Pacific coast offers the greatest attraction to an invader. The United States army is at present scarcely strong enough to defend San Francisco against a serious attack. Was it, then, wise to create in the Panama Canal a strategical point of the very greatest importance which, though separated by 1500 miles from the nearest point of the United States coast, must at all hazards be defended against attack? That is a more important question than the question whether the Panama Canal will or will not be of advantage to the American merchant marine; and herein lies by far the most important aspect of the Panama problem.

The United States had no option in the matter. The Canal was a necessity. As the United States are not rich enough to maintain permanently both on their east coast and on their west coast a naval force strong enough to meet unaided any possible