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the resources of our opponents-or to allow it to interfere with what is really the genuine neutral trade of a country with which we desire to have the closest commercial intercourse, would be contrary to British interests. The advantage derived from a commercial transaction between a British subject and a foreigner is mutual, and for His Majesty's Government to forbid a British subject to trade with the citizen of any foreign country necessarily entails some diminution of commercial opportunity for that British subject, and therefore some loss both to him and to his country. Consequently the United States Government, even if they are willing to ignore the whole tradition and tendency of British policy towards the commerce of other nations, might be confident that self-interest alone would render His Majesty's Government anxious not to place upon the statutory list the name of any firm which carries on a genuine bona fide neutral trade. If they did so, Great Britain herself would be the loser.

10. As to the second point, there seem to be individuals in the United States and elsewhere whom it is almost impossible to convince that the measures we take are measures against our enemies, and not intended merely to foster our own trade, at the expense of that of neutral countries. I can only reiterate what has been repeatedly explained before that His Majesty's Government have no such unworthy object in view. We have, in fact, in all the steps we have taken to prevent British subjects from trading with these specified firms, been most careful to cause the least possible dislocation of neutral trade, as much in our interests as in those of the neutral.

11. I turn now to the question whether the circumstances of the present war are such as to justify resort on the part of His Majesty's Government to this novel expedient.

12. As the United States Government are well aware, the AngloAmerican practice has in times past been to treat domicil as the test of enemy character, in contradistinction to the continental practice, which has always regarded nationality as the test. The Anglo-American rule crystallized at the time when means of transport and communication were less developed than now, and when in consequence the actions of a person established in a distant country could have but little influence upon a struggle.

13. To-day the position is very different. The activities of enemy subjects are ubiquitous, and under modern conditions it is easy for them, wherever resident, to remit money to any place where it may be required for the use of their own Government, or to act in other ways calculated to assist its purposes and to damage the interests of the powers with whom it is at war. No elaborate exposition of the situation is required to show that full use has been and is being made of these opportunities.

14. The experience of the war has proved abundantly, as the United States Government will readily admit, that many Germans in

neutral countries have done all in their power to help the cause of their own country and to injure that of the Allies ; in fact, it would be no exaggeration to say that German houses abroad have in a large number of cases been used as an integral part of an organization deliberately conceived and planned as an engine for the furtherance of German political and military ambitions. It is common knowledge that German business establishments in foreign countries have been not merely centers of German trade, but active agents for the dissemination of German political and social influence, and for the purpose of espionage. In some cases they have even been used as bases of supply for German cruisers, and in other cases as organisers and paymasters of miscreants employed to destroy by foul means factories engaged in making, or ships engaged in carrying, supplies required by the Allies. Such operations have been carried out in the territory even of the United States itself, and I am bound to observe, what I do not think will be denied, that no adequate action has yet been taken by the Government of the United States to suppress breaches of neutrality of this particularly criminal kind, which I know that they are the first to discountenance and deplore.

15. In the face of enemy activities of this nature it was essential for His Majesty's Government to take steps that should at least deprive interests so strongly hostile of the facilities and advantages of unrestricted trading with British subjects. The public opinion of this country would not have tolerated the prolongation of the war by the continued liberty of British subjects to trade with and so to enrich the firms in foreign countries whose wealth and influence were alike at the service of the enemy.

16. Let me repeat that His Majesty's Government make no such claim to dictate to citizens of the United States, nor to those of any other neutral country, as to the persons with whom they are or are not to trade. They do, however, maintain the right, which in the present crisis is also their duty towards the people of this country and to their Allies, to withhold British facilities from those who conduct their trade for the benefit of our enemies. If the value to these firms of British facilities is such as to lead them to prefer to give up their trade with our enemies rather than to run the risk of being deprived of such facilities, His Majesty's Government can not admit that their acceptance of guarantees to that effect is either arbitrary or incompatible with international law or comity.

17. There is another matter with which I should like to deal.

18. The idea would seem to be prevalent in some quarters that the military position is now such that it is unnecessary for His Majesty's Government to take any steps which might prejudice, even to a slight extent, the commerce of neutral countries, that the end of the war is in sight, and that nothing which happens in distant neutral countries can affect the ultimate result.

19. If that were really the position, it is possible that the measures taken by His Majesty's Government might be described as uncalled for, but it is not. We may well wish that it were so. Even though the military situation of the Allies has greatly improved there is still a long and bitter struggle in front of them, and one which in justice to the principles for which they are fighting imposes upon them the duty of employing every opportunity and every measure which they can legitimately use to overcome their opponents.

20. One observation which is very commonly heard is that certain belligerent acts, even though lawful, are too petty to have any influence upon a struggle of such magnitude. It is, I know, difficult for those who have no immediate contact with war to realise with what painful anxiety men and women in this country must regard even the smallest acts which tend to increase, if only by a hair's breadth, the danger in which their relatives and friends daily stand, or to prolong, if only by a minute, the period during which they are to be exposed to such perils.

21. Whatever inconvenience may be caused to neutral nations by the exercise of belligerent rights, it is not to be compared for an instant to the suffering and loss occasioned to mankind by the prolongation of the war, even for a week.

22. One other matter should be mentioned, namely, the exclusion from ships using British coal of goods belonging to firms on the statutory list. This is enforced by rendering it a condition of the supply of bunker coal. What legal objection can be taken to this course? It is British coal; why should it be used to transport the goods of those who are actively assisting our enemies? Nor is this the only point. It must be remembered that the German Government by their submarine warfare have sought to diminish the world's tonnage; they have sunk illegally and without warning hundreds of peaceful merchant ships belonging not only to Allied countries but to neutrals as well. Norwegian, Danish, Swedish, Dutch, Spanish, Greek ships have all been sunk. Between the 1st June and the 30th September, 1916, 262 vessels have been sunk by enemy submarines; 73 of these were British, 123 allied, and 66 neutrals. These totals included 10 British vessels which were sunk without warning and involved the loss of 81 lives; 2 allied, 1 of which involved the loss of 2 lives, no information being available as to the other; and 3 neutral, involving the loss of 1 life. Even so the list is incomplete. Probably other vessels were sunk without warning and more lives than those enumerated were lost. It may be added that where those on board did escape it was, as a rule, only by taking to open boats.

23. One of the first enterprises to feel the loss of tonnage has been the Commission for Relief in Belgium. Relief ships have themselves been repeatedly sunk; and in spite of all the efforts of His Majesty's Government, in spite of the special facilities given for the

supply of coal to ships engaged in the commission's service, that body is constantly unable to import into Belgium the foodstuffs absolutely necessary to preserve the life of the population. Can it then be wondered that the British Government are anxious to limit the supply of British coal in such a way as to reserve it as far as possible to ships genuinely employed in Allied or neutral trade?

24. There is, indeed, one preoccupation in regard to this use of coaling advantages by His Majesty's Government which is no doubt present in the minds of neutrals, and which I recognize. I refer to the apprehension that the potential control over means of transportation thus possessed by one nation might be used for the disruption of the trade of the world in the selfish interests of that nation. His Majesty's Government therefore take this opportunity to declare that they are not unmindful of the obligations of those who possess seapower, nor of that traditional policy pursued by the British Empire by which such power has been regarded as a trust and has been exercised in the interests of freedom. They require no representations to recall such considerations to mind, but they can not admit that, in the circumstances of the times, their present use of their coal resources, a use which only differs in extent from that exercised by the United States in the Civil War in the case of vessels proceeding to such ports as Nassau, is obnoxious to their duties or their voluntary professions.

25. In conclusion, I can not refrain from calling to mind the instructions issued by Lord Russell on the 5th July, 1862, to the merchants of Liverpool in regard to trade with the Bahamas. His Lordship there advised British subjects that their “true remedy" would be to “refrain from this species of trade" on the ground that "it exposes innocent commerce to vexatious detention and search by American cruisers.”

26. His Majesty's Government do not ask the Government of the United States to take any such action as this, but they cannot believe that the United States Government will question their right to lay upon British merchants, in the interests of the safety of the British Empire, for which they are responsible, the same prohibitions as Lord Russell issued fifty years ago out of consideration for the interests and feelings of a foreign nation. Suspicions and insinuations which would construe so simple an action as an opening for secret and unavowed designs on neutral rights should have no place in the relations between two friendly countries.

27. I trust that the explanations contained in this note will destroy such suspicions and correct the erroneous views which prevail in the United States on the subject. I have, etc.,

GREY OF FALLODON.

Consul General Skinner to the Secretary of State.

[Extract.)

No. 3475.]

AMERICAN CONSULATE GENERAL,

London, January 17, 1917. SIR: With reference to my telegram of January 13, 1917, reporting a British Order in Council amending the order of March 11, 1915, I have the honor to forward herewith the full text of the Order in Council of January 10, 1917. It is from the London Gazette of January 12, 1917. I have, etc.,

ROBERT SKINNER.

[Inclosure.]

ORDER IN COUNCIL.

At the Court at Buckingham Palace the 10th day of January, 1917.

Present the King's Most Excellent Majesty in Council

Whereas, on the 11th day of March, 1915, an order was issued by His

Majesty in Council directing that all ships which sailed from their ports of departure after the 1st day of March, 1915, might be required to discharge in a British or allied port goods which were of enemy origin or of enemy destination or which were enemy

property; And whereas such Order in Council was consequent upon certain

orders issued by the German Government purporting to declare, in violation of the usages of war, the waters surrounding the United Kingdom a military area, in which all British and allied merchant vessels would be destroyed, irrespective of the lives of passengers and crew, and in which neutral shipping would be exposed to similar danger, in view of the uncertainties of naval

warfare; And whereas the sinking of British, allied, and neutral merchant

ships, irrespective of the lives of passengers and crews, and in violation of the usages of war, has not been confined to the waters surrounding the United Kingdom, but has taken place in a large

portion of the area of naval operations; And whereas such illegal acts have been committed not only by Ger

man warships, but by warships flying the flag of each of the enemy countries;

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