however, Admiral
Dewey received a cable from the Navy Department stating that Spanish
ships had been granted the privilege of trading to American ports
during the suspension of hostilities, and that American ships could be
granted a similar privilege for Spanish ports. I understood that on
the strength of this cable General Otis intended to allow the United
States Consul at Manila to grant these vessels an American Register
and then allow them to clear for the other islands. I do not know
what the arrangement, if any was made, in regard to the payment of
export duties at Iloilo. Clearly the hemp cannot pay export duties
at both Iloilo and Manila, and the Spaniards are not likely to allow
it to leave Iloilo free while we collect an export duty on it at
Manila. Incidentally, this illustrates the complications and loss
that will arise if the islands are subdivided. The principal merchants
for all the islands are at Manila, and 90 per cent, of the duties in
imports and exports are collected at its Custom House. A large part
of the imports are redistributed through the islands; and all the
hemp and sugar, which form the principal exports, come to Manila from
other islands. If, then, we retain Luzon and give the other islands
back to Spain or some other nation, that nation will impose import
and export duties on everything coming from or to Manila. The foreign
trade of that city as a distributing and collecting point for all the
islands will be lost, and its prosperity will be destroyed; moreover,
the Government revenue from that trade will be lost.

In view of the fact that Spanish officials declined to co-operate or
assist in any way in the American government of Manila, the ease and
rapidity with which order was maintained, the machinery of government
put in operation and business reestablished, after our entry into
Manila is very remarkable. For every position in the Government
service, legal, administrative, financial, mechanical, clerical, men
could be found in our volunteer ranks who were experienced in just
that class of work at home, and they took charge of their Spanish
positions with promptness and confidence.

Even in the matter of language no serious difficulty was encountered,
for no less than 30 good interpreters were found in the California
and Colorado regiments.

The Military Government as now organized and administered, fulfills all
the requirements of preserving order and collecting the public revenue.