ussia enacted that trade between any of her ports is to
be considered coasting trade, and the trade between St Petersburg and
Vladivostock is, therefore, coasting trade from which foreign vessels
are excluded. Will the United States, since the Panama Canal Act
exempts all American coasting trade vessels from the Panama Canal tolls
be ready to exempt Russian coasting trade vessels likewise? Surely the
refusal of such exemption would be a discrimination against Russian in
favour of American coasting trade vessels!

(3) The unheard-of extension by the United States of the meaning of the
term coasting trade would allow an American vessel sailing from New
York to the Hawaiian Islands, but touching at the ports of Mexico or of
a South American State, after having passed the Panama Canal, to be
considered as engaged in the coasting trade of the United States. Being
exempt from paying the Canal tolls she could carry goods from New York
to the Mexican and South American ports concerned at cheaper rates than
foreign vessels plying between New York and these Mexican and South
American ports. There is, therefore, no doubt that in such cases the
exemption of American coasting trade vessels from the tolls would
involve a discrimination against foreign vessels in favour of vessels
of the United States.

(4) It has been asserted that the wording of Article III, No. 1, of the
Hay-Pauncefote Treaty only prohibits discrimination _against_ some
particular nation, and does not prohibit a _special favour_ to a
particular nation, and that, therefore, special favours to the coasting
trade vessels of the United States are not prohibited. But this
assertion is unfounded, although the bad drafting of Article III, No.
1, lends some slight assistance to it. The fact that in this article
the words "so that there shall be no discrimination against any such
nation" are preceded by the words "the canal shall be free and open to
the vessels of commerce and of war of all nations observing these
rules, _on terms of entire equality_," proves absolutely that any
favour to any particular nation is prohibited because it must be
considered to involve a discrimination against other nations.

VI.

There is one more contention in the memorandum of President Taft in
favour of the assertion that the United States is empowered to exempt
all her vessels from the Panama Canal tolls. It is thefollowing:--Since
the rules of the Hay-Pauncefote Treaty do not p