The Sentinel=record., 1913-01-24
STATES UNITED STATES PoSl. TON IN THE MATTER OF
 PANAMA CANAL QUESTION.
THIS NOTE WILL BE FINAL
If England Raises Further Question the Whole Matter Win be Submit. ted to Arbitration of Dlsinter-
 ested Nations.

Washington, Jan 23.-Secretary knox's reply to the British protest against the exemption of American coastwise shipping from Panama canal tolls, assured the British gov. ernment that domestic coastwise trade will not be permitted to extend operation into foreign competitive fields and that increased tolls will not be laid on foreign shipping to balance lhe remission to American ships. Ii Great Britain is not satisfied on these points. American proposes special commission of adjustment.
 The communication is devoted to the purpose of reducing to the small. est point and number the issues upon Which the two governments failed to agree and as to these-only two it Is contended that they are entirely susceptible of adjustment by diplo- matic means. and without recourse to arbitration.
 If this course should not prove ac- ceptable to the British government. 1t is suggested that the whole contro- versy be referred to a special com. mission of inquiry provision for which was made in the unratified knox-Bryce general arbitration treaty That convention was approy- ed by the senate with an amendment which curtailed the power of the spec iai commission to nerre investiga- ton and report and refused to permit mi ccin t. ,st try to a course of arbitration.
 Because of this amendment Presi- dent Taft has so far declined to cor- sumate the treaty by exchanging raIi- fications with the British govern ment.
 To meet the needs of this issue Secretary Knox now. offers to give life to the treaty by an immediate ex- change of notifications, which would insure the existence of a general ar- bitration treaty between America and England after the lapse of the exist ing Hay-Pauncefote treaty, June 1, next. As an alternative the secretary is willing that commission be ere ated for the special purpose of ascar- tainng the facts in regard to the if feet upon British shipping of the Panama canal tolls act and the presi- dents proclamation nxing the tolls.
 uch of the secretary's argument rests upon his contention that Sir Edward Grey's protest being made in advance of the issue of the presl. dents proclamation fixing the tolls. is entirely inapplicable to the contro- versy in it's present state and that as a matter of fact the British con tention rests upon apprehension of things that may happen in the future the injury of British shippiag which in all probability, never will occur
 Secretary Knox begins his note, which was delivered 10 the British foreign office through MT. Laughlin, the American charge at London by the flat statement that he cannot agree with the British interpreta- tion of the canal treaties so far as they limit the freedom of action of America or infringe British treaty rights. Pointing out that the Grey note was issued without consideration of the presidents toll proclamation, the secretary states that Sir Edward deals chiefly with the possibilities of what the president might do under the canal act, whereas the proclama- ton has entirely changed the situa- tion.
 Taking up the three objections made by the British government, Mir. hnox first discusses that which ap- plies to the exemption from tolls or the government vessels of Panama. This he declares to be a great and complete surprise 10 the United States, which always had asserted without challenge that the status of the countries immediately concerned by reason of their political relation to the territory in which the canal was to be constructed was different from that of all other countries. He does not believe therefore that the British government intended to pro pose arbitration of this question.
 In regard to a second British objec- tion that the Panama canal act might be thought to confer upon the presi- dent the power to discriminate in the Use of the canal in favor Of all ships belonging to the United States and it's citizens, even in the forsEkh trade, by granting them reduced~{blls, the Iote quotes from the memorandum attached to the canal act by the president as follows:
 Tt Is not therefore necessary 10 discuss the policy of such discrini- ration until the question may arise in the exercise of the presidents dls- cretionn
 As no question yet has arisen on this point, which, in the words of the