has actually sprung up since the war. It would be impossible to permit the export of rubber from Great Britain unless the right of His Majesty's Government were admitted to submit to a prize court cargoes of rubber exported from the United States which they believe to be destined to any enemy country, and reasonable latitude of action for this purpose was conceded. But His Majesty's Government have now provisionally come to an arrangement with the rubber exporters in Great Britain which will permit of licenses being given under proper guaranties for the export of rubber to the United States. We are confronted with the growing danger that neutral countries contiguous to the enemy will become on a scale hitherto unprecedented a base of supplies for the armed forces of our enemies and for materials for manufacturing armament. The trade figures of imports show how strong this tendency is, but we have no complaint to make of the attitude of the Governments of those countries, which, so far as we are aware, have not departed from proper rules of neutrality. We endeavor in the interest of our own national safety to prevent this danger by intercepting goods really destined for the enemy without interfering with those which are bona fide neutral. Since the outbreak of the war the Government of the United States have changed their previous practice and have prohibited the publication of manifests till 30 days after the departure of vessels from the United States ports. We had no locus standi for complaining of this change, and did not complain. But the effect of it must be to increase the difficulty of ascertaining the presence of contraband and to render necessary in the interests of our national safety the examination and detention of more ships than would have been the case if the former practice had continued. Pending a more detailed reply, I would conclude by saying that His Majesty's Government do not desire to contest the general principles of law on which they understand the note of the United States to be based, and desire to restrict their action solely to interferences with contraband destined for the enemy. His Majesty's Government are prepared, whenever a cargo coming from the United States is detained, to explain the case on which such detention has taken place, and would gladly enter into any arrangement by which mistakes can be avoided and reparation secured promptly when any injury to the neutral owners of a ship or cargo has been improperly caused, for they are most desirous in the interest both of the United States and of other neutral countries that British action should not interfere with the normal importation and use by the neutral countries of goods from the United States. I have, etc. E. GREY. On February 10, 1915, Britain made her promised detailed reply to our note of December 26, 1914. British note, February 10, 1915, replying finally to the American note of December 26, 1914, in regard to the seizure and detention of American cargoes: (The secretary of state for foreign affairs to the American ambassador.) YOUR EXCELLENCY: Your excellency has already received the preliminary answer, which I handed to you on the 7th January, in reply to your note of the 28th December on the subject of the seizures and detentions of American cargoes destined for neutral European ports. Since that date I have had further opportunity of examining into the trade statistics of the United States, as embodied in the customs returns, in order to see whether the belligerent action of Great Britain has been in any way the cause of the trade depression which your excellency describes as existing in the United States, and also whether the seizures of vessels or cargoes which have been made by the British Navy have inflicted any loss on American owners for which our existing machinery provides no means of redress. In setting out the results of my investigation I think it well to take the opportunity of giving a general review of the methods employed by His Majesty's Government to intercept contraband trade with the enemy, of their consistency with the admitted right of a belligerent to intercept such trade, and also of the extent to which they have endeavored to meet the representations and complaints from time to time addressed to them on behalf of the United States Government. Toward the close of your note of the 28th December your excellency describes the situation produced by the action of Great Britain as a pitiful one to the commercial interests of the United States and said that many of the great industries of the country were suffering because their products were denied long-established markets in neutral European countries contiguous to the nations at war. It is unfortunately true that in these days when trade and finance are cosmopolitan any war-particularly a war of any magnitudemust result in a grievous dislocation of commerce, including that of the nations which take no part in the war. Your excellency will realize that in this tremendous struggle, for the outbreak of which Great Britain is in no way responsible, it is impossible for the trade of any country to escape all injury and loss, but for such His Majesty's Government is not to blame. I do not understand the paragraph which I have quoted from your excellency's note as referring to these indirect consequences of the state of war, but to the more proximate and direct effect of our belligerent action in dealing with neutral ships and cargoes on the high seas. Such action has been limited to vessels on their way to enemy ports or ports in neutral countries adjacent to the theater of war, because it is only through such ports that the enemy introduces the supplies which he requires for carrying on the war. In my earlier note I set out the number of ships which had sailed from the United States for Holland, Denmark, Norway, Sweden, and Italy, and I there stated that only 8 of the 773 had been placed in the prize court, and that only 45 had been temporarily detained to enable particular consignments of cargo to be discharged for the purpose of prize-court proceedings. To measure the effect of such naval action it is necessary to take into consideration the general statistics of the export trade of the United States during the months preceding the outbreak of war and those since the outbreak. Taking the figures in millions of dollars, the exports of merchandise from the United States for the seven months of January to July, 1914, inclusive, were 1,201, as compared with 1,327 in the corresponding months of 1913, a drop of $126,000,000. For the months of August, September, October, and Novemberthat is to say, for the four months of the war preceding the delivery of your excellency's note the figures of the exports of merchandise were $667,000,000 as compared with $923,000,000 in the corresponding months of 1913, a drop of $256,000,000. If, however, the single article of cotton be eliminated from the comparison, the figures show a very different result. Thus the exports of all articles of merchandise other than cotton from the United States during the first seven months of 1914 were $966,000,000 as against $1,127,000,000 in 1913, a drop of $161,000,000, or 14 per cent. On the other hand, the exports of the same articles during the months August to November amounted to $608,000,000 as compared with $630,000,000 in 1913, a drop of only $22,000,000, or less than 4 per cent. It is therefore clear that if cotton be excluded the effect of the war has been not to increase, but practically to arrest the decline of American exports which was in progress earlier in the year. In fact, any decrease in American exports which is attributable to the war is essentially due to cotton. Cotton is an article which can not possibly have been affected by the exercise of our belligerent rights, for, as your excellency is aware, it has not been declared by His Majesty's Government to be contraband of war, and the rules under which we are at present conducting our belligerent operations gives us no power in the absence of a blockade to seize or interfere with it when on its way to a belligerent country in neutral ships. Consequently no cotton has been touched. Into the cause of the decrease in the exports of cotton I do not feel that there is any need for me to enter, because whatever may have been the cause it is not to be found in the exercise of the belligerent rights of visit, search, and capture, or in our general right when at war to intercept the contraband trade of our enemy. Imports of cotton to the United Kingdom fell as heavily as those to other countries. No place felt the outbreak of war more acutely than the cotton districts of Lancashire, where for a time an immense number of spindles were idle. Though this condition has now to a large extent passed away, the consumption of the raw material in Great Britain was temporarily much diminished. The same is no doubt true of France. The general result is to show convincingly that the naval operations of Great Britain are not the cause of any diminution in the volume of American exports, and that if the commerce of the United States is in the unfavorable condition which your excellency describes the cause ought in fairness to be sought elsewhere than in the activities of His Majesty's naval forces. I may add that the circular issued by the Department of Commerce at Washington on the 23d of January admits a marked improvement in the foreign trade of the United States, which we have noted with great satisfaction. The first paragraph of the circular is worth quoting verbatim: "A marked improvement in our foreign trade is indicated by the latest reports issued by the Department of Commerce, through its Bureau of Foreign and Domestic Commerce, sales of foodstuffs and certain lines of manufactures having been unusually large in November, the latest period for which detailed information is at hand. In that month exports aggregated $206,000,000, or double the total for August last, when, by reason of the outbreak of war, our foreign trade fell to the lowest level reached in many years. In December there was further improvement, the month's exports being valued at $246,000,000, compared with $233,000,000 in December, 1913, and within $4,000,000 of the high record established in December, 1912." A better view of the situation is obtained by looking at the figures month by month. The exports of merchandise for the last five months have been (in millions of dollars): August 110 November 205 246 The outbreak of war produced in the United States, as it did in all neutral countries, an acute but temporary disturbance of trade. Since that time there seems to have been a steady recovery, for to-day the exports from the United States stand at a higher figure than on the same date last year. Before passing away from the statistics of trade, and in order to demonstrate still more clearly, if necessary, that the naval operations of Great Britain and her allies have had no detrimental effect on the volume of trade between the United States and neutral countries, it is worth while to analyze the figures of the exports to Europe since the outbreak of hostilities. For this purpose the European countries. ought to be grouped under three heads: Great Britain and those fighting with her, neutral countries, and enemy countries. It is, however, impossible for me to group the countries in this way satisfactorily, as the figures relating to the export trade of the United States with each country have not yet been published. In the preliminary statement of the export trade of the United States with foreign countries only principal countries are shown, and various countries which are tabulated separately in the more detailed monthly summary of commerce and finance are omitted. Those omitted include not only the Scandinavian countries, the exports to which are of peculiar importance in dealing with this question, but also Austria. So far as it is possible to distribute the figures under the headings which I have indicated above (all the figures given being in thousands of dollars), the results are as follows: Total exports to Europe from the 1st of August to the 30th of November, 413,995, as against 597,342 in 1913. Of these, Great Britain and her allies took 288,312, as against 316,805 in 1913. Germany and Belgium took 1,881, as against 177,136 in 1913, whereas neutral countries (among which Austria-Hungary is unavoidably included) took 123,802, as against 103,401 in 1913. The general complaint in your excellency's note was that the action of Great Britain was affecting adversely the trade of the United States with neutral countries. The naval operations of Great Britain certainly do not interfere with commerce from the United States on its way to the United Kingdom and the allied countries, and yet the exports to Great Britain and her allies during those four months diminished to the extent of over $28,000,000, whereas those to neutral countries and Austria increased by over $20,000,000. The inference may fairly be drawn from these figures, all of which are taken from the official returns published by the United States Government, that not only has the trade of the United States with the neutral countries in Europe been maintained as compared with previous years, but also that a substantial part of this trade was, in fact, trade intended for the enemy countries going through neutral ports by routes to which it was previously unaccustomed. One of the many inconveniences to which this great war is exposing the commerce of all neutral countries is undoubtedly the serious shortage in shipping available for ocean transport and the consequential result of excessive freights. It can not fairly be said that this shortage is caused by Great Britain's interference with neutral ships. At the present time there are only seven neutral vessels awaiting adjudication in the prize courts in this country and three in those in the British dominions. As your excellency is aware, I have already instructed our ambassador at Washington to remind the parties who are interested in these vessels that it is open to them to apply to the court for the release of these ships on bail, and if an application of this sort is made by them it is not likely to be opposed by the Crown. There is therefore no reason why such an application should not be favorably entertained by the court, and if acceded to, all these vessels will again be available for the carriage of commerce. Only one neutral vessel is now detained in this country in addition to those awaiting adjudication in the prize court. Every effort has been made in cases in which it has been found necessary to institute proceedings against portions of the cargo to secure the speedy discharge of the cargo and the release of the ship, so as to enable it to resume work. Great Britain is suffering from the shortage of shipping and the rise in freights as acutely as, if not more than, other nations, and His Majesty's Government have taken every step that they could consistently with their belligerent interests to increase the tonnage available for the transport of sea-borne commerce. The enemy ships which have been condemned in the prize courts in this country are being sold as rapidly as possible in order that they may become available for use; and those which have been condemned in the prize courts oversea are being brought to this country in order that they may be disposed of here and again placed in active employment. The difficulties have been accentuated by the unforeseen consequences of the convention which was signed at The Hague in 1907 relative to the status of enemy merchant vessels at the outbreak of war. This convention was a well-intentioned effort to diminish the losses which war must impose upon innocent persons, and provided that enemy merchant ships seized by a belligerent in whose ports they lay at the outbreak of war should not be condemned, but should merely be detained for the period of the war, unless they were liberated in the days of grace. We could come to no arrangement with the German Government for the reciprocal grant of days of grace, and the German merchant vessels lying in British ports when the war broke out have therefore been sentenced to detention in lieu of condemnation. The normal result would have been still further to reduce the volume of shipping available for the commerce of the world. To ease the situation, however, His Majesty's Government are resorting to the power of requisitioning which is given by the convention, so that these ships may again be placed in active service. Your excellency will see, therefore, that His Majesty's Government are doing all in their power to increase the volume of shipping avail |