The Sentinel=record., 1913-01-24

existing arbitration treaty it may not have been possible to settle by diplomacy" me note holds that the suggestion of arbitration is preina- ture. Before passing from tha1 stage of the question Secretary Knox em- Ihatically diselaims entertaining any doubt as to the right to exempt Am. CT an warships and other govern ment vessels from tolls as they are
 | art of the governments protective system and 1t is mot understood that Great Britain challenges the right Of the United States to protect the cana or to require an explanation or what relation the movement of a particular vessel through the canal has to its protection.
 Thus clearing away all objections which Mr. Knox believes non rele. want, the note proceeds to discuss the British assertion that the exemption of United States coaswise vessels from tolls is a discrimination against British vessels. Mir Knox recalls Sir hdward GTey's admission of the right of the United States to grant srb. sldies to it's shipping generally or to any particular branch and, although '--s Is form of subsidy to exempt the coastwise shipping from tolls he regards 1t as objectionable, as throw ing an unfair share of the burden of up-keeping the canal on foreign ship. ping.
 The secretary points out that the British do not claim the right to par tlcipate in American coastwise trade, but object to the exemption of that trade from tolls, because they may adversely affect British ships to equal treatment in the payment of tolls. or to just and equitable tolls. He also recalls the British objection that eoastwise trade cannot be circum- scribed so completely that benefits conferred upon it will not affect yes sells engaged in the foreign trade. Thus cargo intended for American ports beyond the canal and shipped on board a foreign snip could be sent to it's destination more cheaply through the operation of the pro- posed exemption by being landed at a United States port before reaching the canal, and then sent on as coast wise trade, to the detriment of fore ign ships in direct trade. Taking this statement in connection with one by Mir. Innes on the same point to the effect that perhaps no objection could be taken to the exemption if limited to bonafide coastwise traffic Secre- tary Knox declares this to be admis- sion of the American right to exempt its vessels in the coastwise trade from tolls.
 As to this" says the secretary Tit is sufficient to say that obvious ly the United States is not to be de- nied the power to remit tolls to it's own coastwise trade, because of suspicion of possibility that the regu- lations yet to be framed may not re- strict this exemption to bona fide coastwise traffic. The answer to this objection, therefore apart from any question of treaty interpretation Is that it rests on conjecture as to what may happen, rather than upon facts and does mot present a question for submission to arbitration as 1t has not as yet passed beyond the stage where it can properly be dealt with by diplomatic discussion"
 Tt will be remembered that only questions which 1t may not be possi- ble to settle by diplomacy are re- quired by our arbitration treaties to be referred to arbitration" MT. Knox says.
 The secretary dismissed in the same way another British conten- ton that there is nothing in the United States law to prevent any Am erican vessel from combining fore ign commerce with coastwise trade to the detriment of foreign shipping. which he declares depends upon fu- ture conditions and facts not yet as- certained of which would be prema- ture.