Papers Relating to the Foreign Relations of the United States, 1916, Supplement, The World War

File No. 763.72112/3094

The Secretary of Commerce (Redfield) to the Secretary of State

Washington, October 23, 1916 .
[Received October 25.]

Sir: During my absence from the city, Mr. Woolsey,¹ of your Department called upon Mr. Sweet, then Acting Secretary of Commerce, and requested a statement showing what measures could be taken in regulating trade that would be effective and, at the same time, least injurious to this country, and also a statement showing the exports of ammunition from the United States to the various belligerent countries.

In compliance with the first request, a memorandum compiled in the Bureau of Foreign and Domestic Commerce of this Department is enclosed. It was understood that the request for information was directed primarily to the Act to Establish a United States Shipping Board, approved September 7, 1916, Section 36, and the Act to Increase the Revenue and for Other Purposes, approved September 8, 1916, Sections 804 to 806. The memorandum treats the subject from the commercial point of view, not the legal. The interpretation of the different provisions of law is, of course, a question for your Department to determine, and, accordingly, the memorandum has not been submitted to the legal officers of this Department for an opinion. At the same time, some of the provisions that seemed open to more than one construction have been indicated, but only so far as they are involved in the consideration of the commercial phases of the subject. In a memorandum covering so wide a subject, and one of such great delicacy and importance, only the main features of the situation could be discussed, and these could be treated only in a rather cursory manner. A more detailed study of the probable commercial effect of any measures that in your judgment merit further consideration will gladly be made.

In compliance with the second request, two statements are submitted: one showing the exports of firearms, cartridges, gunpowder, and other explosives (except dynamite), from the United States to the various countries of Europe and Canada, Japan, Russia in Asia, Australia, New Zealand, and other countries during the fiscal years ending June 30, 1915 and 1916; and, for purposes of comparison, a statement extracted from Commerce and Navigation showing the exports of these same articles to the various foreign countries during each of the five years ending June 30, 1915.²

Respectfully,

William C. Redfield

[Enclosure 1]

Memorandum on the means of combating foreign restrictions on American commerce

Legal Provisions

The Act to establish a United States Shipping Board, approved September 7, 1916, Section 36, and the Act to increase the revenue and for other purposes, approved September 8, Sections 804 to 806,¹ contain certain provisions designated to combat restrictions placed by foreign countries on American commerce. Some of the provisions are concerned particularly with restrictions applied by nations now at war. An abstract of the several provisions contained in the two laws cited follows:

Nature of restriction	Remedy provided	Reference
Import restrictions:
If any country prohibits importation of any non-injurious product of United States.	President may prohibit importation of similar (or, if such are not imported into United States) other products of such country.	Revenue, Sec. 804
If (during a war, by laws, regulations or practices, contrary to the law and practice of nations) any country prevents or restricts importation of any non-injurious product of United States into same or other country.	President may prohibit or restrict importation of similar or other products of such country.	Revenue, Sec.805
Discrimination by vessel:
If any vessel refuses appropriate cargo.	Secretary of Treasury may refuse clearance to such vessel.	Shipping, Sec. 36
If (during a war, on account of laws, regulations, or practices of a belligerent Government) any vessel gives undue preference to, or unduly discriminates against any particular shipper or particular description of cargo.	President may detain vessel.	Revenue, Sec.806
Discrimination against American vessel or American citizens:
If (during a war, by laws, regulations or practices) any belligerent country withholds from American vessels or American citizens any facilities enjoyed in United States by vessels or citizens of such belligerent, or accorded by such belligerent to vessels or citizens of other nationality.	President may withhold clearance from one or more vessels of such belligerent, or may refuse similar facilities in United States to vessels or citizens of such belligerent.	Revenue, Sec.806

Import prohibitions

There are two provisions directed against import prohibitions of foreign countries, the one general in its character, and the other concerned directly with the restrictive measures of belligerents. The general provision authorizes the President to prohibit the importation of products of any country that prohibits the importation of any product of the United States that is not injurious to health or morals. The products selected by the President, according to a strict wording of the provision, must be similar to those prohibited from the United States. Other articles may be selected by the President “in case the United States does not import similar articles from that country.” The legal interpretation of the word “similar” offers considerable difficulty. If interpreted in a broad way, it would be very difficult to show that “similar” articles are not imported, and, therefore, the President would be required to select such articles for prohibition. The very fact of the foreign prohibition against imports would indicate that normally the foreign country would import the articles in question from the United States. If such is the case, economic conditions would prevent any considerable import of the same articles, unless of widely different grade or class, from such countries into the United States, and accordingly our legal prohibition would be of little effect.

In several respects the provision intended to offset restrictions imposed by belligerent countries by Section 805 of the Revenue Act offers greater latitude. The restriction, as well as the prevention of importation by a belligerent may be penalized; the action may affect importation into the country itself or into any other country; the President may restrict, as well as prohibit, the importation of products of such country into the United States; and he may select any article—“similar or other articles”—for retaliation. So far, therefore, as action on the part of this country may be desirable because of import restrictions imposed by belligerent countries, it will be found more convenient to use the authority conferred by Section 805 than that conferred by Section 804 of the Revenue Act.

Discrimination by vessels

The next phase of restriction is discrimination on the part of vessels. Here again there are two remedial provisions, one contained in the Shipping Act, Section 36, and the other contained in the first paragraph of Section 806 of the Revenue Act. According to the former, the Secretary of the Treasury may refuse clearance to any vessel that refuses appropriate cargo. According to the latter, the President may detain any vessel that gives undue preference to any particular shipper or particular description of cargo, or unduly discriminates against any particular shipper or particular description of cargo. The first provision is general in its application, while the second is limited to discrimination occurring during a war in which the United States is not engaged and resulting from the laws, regulations, or practices of a belligerent government.

In order for the Secretary of the Treasury to refuse clearance to a vessel in accordance with the Shipping Act, five things must be shown to his satisfaction:

1. That the vessel has refused to accept freight;

2. That the freight was offered in good condition;

3. That the proper transportation charges were tendered;

4. That the vessel had space available with due regard to its proper loading; and

5. That the vessel is “adaptable” for the freight.

On account of the rigid wording of the section, it is unlikely that any action will be taken under this provision, if the discrimination complained of can be regarded as due to the law or practices of a belligerent government. The provision under the Revenue Act is much wider in scope. It covers any undue preference granted to one shipper over another, or to one kind of freight over other kinds. The President may either withhold clearance or give formal notice forbidding the departure of the vessel.

Discrimination against American vessels and citizens

The third kind of restriction for which the Revenue Act, in the second paragraph of Section 806, provides a remedy, is discrimination by belligerent countries against American vessels or American citizens. The discrimination may consist not merely of preference granted to other nationalities over Americans, but also of failure to accord reciprocal privileges to American vessels and American citizens—that is, in other words, withholding from American vessels and American citizens privileges or facilities granted by the United States to vessels or citizens of such belligerent country. The language used is very broad and might well be construed to cover any direct discrimination against American vessels or American citizens, or any failure to observe full reciprocity of trading privilege. If thus construed, it would cover, for example, any restrictions placed on citizens of the United States whose names might appear on the black list of a belligerent country, or any curtailment of the right of American citizens to deal with blacklisted firms in other countries; and it would also cover any failure to allow coaling or other privileges to vessels carrying cargo shipped by, or consigned to, blacklisted firms. At the same time it would doubtless be argued by a belligerent country that there was no discrimination in such cases—that American vessels were treated just like vessels of any other nationality, and American citizens like those of any other nationality. While trade by blacklisted firms, it might be admitted, is prevented so far as possible, the restriction applies equally to blacklisted firms of American nationality and those of all other nationalities.

In case of discrimination or failure to grant reciprocal privileges, the President has two options:

1. He may withhold clearance from one or more vessels of such belligerents, or

2. He may refuse to vessels or citizens of such belligerents “similar privileges and facilities, if any, enjoyed . . . in the United States or its possessions.”

Injuries Suffered

The formal acts of belligerent countries that have operated to restrict American commerce fall under four items as follows:

1. Embargoes or export restrictions;

2. Import prohibitions or restrictions;

3. Orders prohibiting trade with the enemy; and

4. Penalization of specified firms suspected of having aided the enemy commercially (black list) or confining trade exclusively to approved firms (white list).

A distinction may properly be drawn between export and import restrictions on the one hand, and the restrictions on neutral trade with the enemy, or with blacklisted firms on the other hand. In theory at least, the former are intended to determine merely the lines of trade in which the country itself shall engage; their principle is sanctioned by international law; exception may be taken only to their extension beyond the point of commercial necessity, or their application in such a manner, as to discriminate against particular neutral countries, or conflict with treaty stipulations. Restrictions on neutral trade with the enemy in non-contraband goods have, on the contrary, no sanction in international law. Official black lists constitute a new device in trade warfare, and are equally repugnant to international law. In other words, the prohibition against dealing with blacklisted concerns applies only to citizens of the country issuing the list. American houses are nominally free to trade with blacklisted concerns, say in Argentina, but in practice, the carrying trade of the world is so largely controlled by the belligerents that it is practically impossible to make a shipment to foreign countries that is not at some stage shipped by a vessel or handled by an intermediary that owes allegiance to the United Kingdom, or some other belligerent. Since no British vessel or British citizen is allowed to trade with blacklisted firms, the prohibition operates indirectly as a restriction on American commerce.

In general, the laws and orders have been very carefully framed so as to avoid, at least nominally, any discrimination against individual countries, or the vessels or citizens of such countries. By commercial treaty most of the countries at war have guaranteed equality of treatment to other countries, and every effort has been made to avoid any apparent infringement of the treaty provisions. Only Russia in its embargo gives certain advantages to Allied countries that are withheld from neutrals. All other belligerent countries place neutral countries, outside of Europe, on terms as favorable as are accorded to any foreign countries. There was for a time one exception in the British embargo. From May to August 1915, the United Kingdom prohibited the exportation of coal to all countries except British possessions and the Allies. Similarly in the case of import prohibitions, the position of the United States has been the same as that of the Allies.

In actual practice, however, it is at least possible that the Allied countries have enjoyed greater privileges than were accorded the United States. Exceptions are granted in individual cases, both for exportation and for importation. Recently arrangements have been made whereby licenses for importation into France may be granted in London and licenses for importation into the United Kingdom may be granted in Paris. No black list has been published of firms in Allied countries. It might naturally be argued, of course, that no black list is necessary in such cases, since the country itself has presumably taken action to prevent the commercial activity of enemy firms there resident.

Embargoes on exports

In order of time the embargoes against exportation come first. The effect of these measures has been to render extremely difficult the purchase of many important raw materials. Such as have been obtained have frequently had to be purchased under guarantee not to export the finished product into which the raw material entered. Indirectly, therefore, the embargo in its actual operation may be deemed a practice that restricts the importation of non-injurious products of the United States in countries other than that laying the embargo. While the Revenue Act provides no special remedy to combat foreign embargoes, the embargo viewed as an indirect restriction on importation into a third country may justify the prohibition, or restriction of importation into the country laying the embargo. Moreover, since no embargo has been imposed by this country, the European embargoes may be viewed as withholding from American citizens the facilities or privileges granted by the United States to citizens of the belligerent countries. In accordance with that view the President may withhold clearance from one or more vessels of the belligerent, or may refuse corresponding privileges to citizens of the belligerent country. Indirectly, therefore, under a broad construction of the law, it might be held that the President may impose an embargo to offset the European embargo. The failure of Congress explicitly to authorize the laying of embargoes might well lead to the adoption of a narrower construction of the second paragraph of Section 806 of the Revenue Act.

Import restrictions

The import prohibitions of belligerent countries came much later. Originally the lists were confined to articles of luxury and were justified as a means of enforcing economy on citizens of the warring countries, and as a means of conserving cargo space. In Italy the list is still limited to articles that may be deemed luxuries. In France the list has been extended considerably beyond that point, and in the United Kingdom a much longer list is now in force. In spite of the special licenses for importation that have been granted, the prohibition has resulted in much loss to American exporters, especially in the case of goods for individual use, as distinct from Government purchases. At the same time, import prohibitions cut off only a single market for our output, while export prohibitions may affect the whole supply of the selected raw materials, and thus indirectly restrict the exportation of the whole output manufactured therefrom.

Trade with the enemy

The British orders in council, by preventing trade between neutral countries and enemy countries, have proved to be the most serious restriction that has been applied to American commerce since the war began. Trade, both import and export, has been cut off between the United States and the Central powers. The restrictions imposed by the United Kingdom and other countries at war are in effect applied by the steamship companies. To carry cargo contrary to the regulations in force means stoppage, delay, and loss, and consequently the owners and officers of vessels observe strictly the commercial regulations of the belligerent countries.

For this reason the refusal of a vessel to accept non-contraband goods directly Or indirectly for a port or city of Germany or Austria-Hungary, may be deemed Undue discrimination on account of the laws, regulations, or practices of a belligerent government, and as such, would justify the President, under the first paragraph of Section 806 of the Revenue Act, in detaining the vessel.

Preference given to shipments accompanied by a license from a belligerent over shipments without such license may similarly be deemed to fall under the same provision of law. At the same time, if preferred, the regulations may be deemed to constitute a restriction or prohibition of American products in countries other than those that impose a restriction, and as such, to authorize the President to prohibit or restrict the importation of any products of the countries prescribing the regulation in question.

Blacklisting

The situation in respect to the blacklisting of specified American concerns and concerns in neutral countries is much the same. It may be regarded (1) as a restriction of the importation of American products into certain countries; (2) as an undue discrimination on the part of vessels that refuse cargo shipped by or to a blacklisted concern; or (3) as a failure to extend to certain American citizens the same privilege that the United States accords to all citizens of the belligerent country. According to the first view, the restriction falls under Section 805 of the Revenue Act, and the President is authorized to prohibit or restrict the importation of any product from the country imposing the restriction; according to the second view, the restriction falls under Section 806, first paragraph, of the Revenue Act, and consequently the President may detain the vessel that refuses the freight offered; according to the third view, the restriction falls under Section 806, second paragraph, of the Revenue Act, and the President may withhold clearance from one or more vessels of the belligerent, or may refuse the commercial privileges in the United States to some or all citizens of the belligerent country that issues any black list against American firms.

feasible measures

Without question, the measures taken by the United Kingdom during the present war have proved much more injurious to American commerce than the restrictions imposed by any other belligerent country. This is due in part to the comprehensive character of the restrictions imposed by the United Kingdom, and in part, to the enormous volume of trade between the United States and the United Kingdom in normal times. The control by the United Kingdom of the most important sea routes, and the preponderance of British shipping over the shipping of any other nationality combine to make the restrictions imposed by the United Kingdom effective and injurious to American commerce. What steps, if any, can be taken under the Shipping Act and the Revenue Act to induce the United Kingdom to relax its requirements, and at the same time cause the least injury and friction to American business?

Three means of retaliation are provided in the two acts:

1. Prohibition or restriction of imports;

2. Refusal of clearance or positive detention of vessels;

3. Withdrawal of privileges from vessels or citizens of the country imposing the restriction.

Restriction of imports

The prohibition or restriction of imports is the most natural means provided for combating foreign import prohibition. It may equally well be used to combat the orders in council forbidding trade with enemy countries. Under a broad interpretation of the law, it may be used to combat foreign black lists; and, under a still broader construction, foreign embargoes.

If import prohibitions or restrictions are imposed in the United States, the authority conferred upon the President by Section 805 of the Revenue Act is more elastic and better adapted to the purpose than the authority conferred by Section 804. All of the acts complained of on the part of foreign countries have occurred during the European war and have been justified as war measures.

An import prohibition, to have the maximum effect, should cover articles produced largely by the country against which the prohibition is directed and at the same time procurable in sufficient quantities from other countries. Unless the country against which the prohibition is directed is a large producer of the article, the loss of a foreign market for it will not prove a severe injury. On the other hand, if the importing country has no alternative source from which to draw its supply, it may suffer from the prohibition more than the country against which the action is taken.

Under present conditions it is difficult, if not impossible, in many cases to find several sources of supply in adequate quantities for a given article. In the great majority of lines, therefore, a prohibition of imports by the United States as a retaliatory measure is likely to react more to the disadvantage of consumers, importers, and the trade generally in this country than to the detriment of exporters in the United Kingdom.

Such action would, moreover, without question be regarded as unfriendly, and might lead to retaliation, perhaps in the form of additional embargoes. The United Kingdom through its numerous possessions controls the source of supply of many important industrial materials. Any extension or more rigid application of the British embargo is therefore to be averted.

Almost every article is imported to a greater or less extent from the United Kingdom. The products of the British Empire and of many foreign countries are reshipped from British ports to the United States. There are few distinctive products in comparison with our import trade with most other countries. Nineteen articles have been selected on account of the large proportion imported from the United Kingdom. Imports into the United States of these 19 articles from all countries represent 4 per cent of all imports for the fiscal year ending June 30, 1916; while the imports from the United Kingdom represent over 21 per cent of all imports from that country. The articles, with the values imported from all countries, and from the United Kingdom, during the fiscal year 1916, are as follows:

Articles	From all countries	From the United Kingdom
Cotton thread and yarn	$5,085,000	$5,056,000
Cotton cloth	8,846,000	7,394,000
Cotton laces	11,173,000	5,226,000
Cotton nets or nettings	2,113,000	2,064,000
Cotton plushes and other pile fabrics (except corduroys)	1,706,000	1,654,000
Earthen and crockery ware, decorated or ornamented	1,369,000	1,101,000
Ostrich feathers	2,195,000	678,000
Linens	11,256,000	10,850,000
Linoleum	513,000	487,000
Sausage casings	3,866,000	1,189,000
Mother of pearl	1,873,000	958,000
Artificial silk yarns and threads	2,924,000	1,293,000
Diamonds, uncut	11,443,000	10,676,000
Pearls, not strung or set	10,474,000	4,683,000
Malt liquors	1,457,000	1,308,000
Gin	750,000	603,000
Whisky	3,678,000	2,903,000
Woolen cloth	6,479,000	6,318,000
Woolen dress goods	1,806,000	1,663,000
Total, 19 articles	$88,906,000	$66,104,000
Total imports	$2,197,884,000	$308,443,000

This list might be extended almost at will. Taking it as it stands, however, four groups of items seem to call for particular consideration in connection with possible import prohibitions. These four groups are: cotton manufacture; woolen manufacture; diamonds and pearls; and alcoholic liquors.

In cotton manufacture, the three items most largely imported from the United Kingdom are cotton thread and yarn, cotton cloth, and cotton laces. Nettings and plushes are also imported, though to a smaller value than the items previously named. Our imports from the United Kingdom consist both of partly manufactured goods, such as the finer counts of yarns for weaving in this country, and of the more elaborate goods such as machine-made laces, nettings, plushes, and colored cloth. The only goods that may be considered strictly competitive are bleached and unbleached cloth, and even in these grades it is understood that the imports from the United Kingdom consist in the main of finer fabrics than are produced in large quantities in the United States. That an import prohibition would encourage a larger domestic production of the finer grades for which we now depend chiefly on imports, goes without saying. To some extent this might prove a permanent advantage, but only in the case of those lines in which the British and the American cost of production most closely approach. When it comes to those weaves that require a relatively large expenditure in wages, American mills can scarcely hope permanently to overcome the advantages of lower labor cost enjoyed by British mills. So far as the import prohibition encourages domestic makers to go into lines unsuited to our economic position, the permanent result would doubtless be a loss. Against the permanent gain that may be expected in certain lines, must be offset the very considerable disarrangement of trade and consequent loss to American importers and consumers.

In the case of woolen goods, the situation is similar, with this exception— nearly all the raw cotton used in our cotton mills is American grown, while our woolen mills depend largely for their raw materials on foreign sources. The effect of an import prohibition against woolen cloth and woolen dress goods would undoubtedly be a stimulus to the woolen mills located in this country. The encouragement to them might result in a lasting gain to American mills and a lasting injury to British export trade. It must be realized, however, that protection to woolen factories over a long period has not resulted in establishing domestic industries capable of supplying all demands of this country. The decisive objection to an import prohibition on woolens is the fact of our dependence on British raw wool. Any restriction placed upon the importation of British woolen goods into this country would undoubtedly result in the rigid application of the British embargo against the exportation of raw wool to the United States. This might prevent American manufacturers from replacing by their own products, the finer grades of woolen cloth now imported from England, since the raw materials needed for the manufacture of such fabrics is obtained mainly from the British Empire. To cut off from our factories Australian and New Zealand wool would undoubtedly prove more hurtful than the suspension of British competition in cloth and dress goods would be helpful.

The prohibition against diamonds and pearls might cause some inconvenience and dissatisfaction, but no real hardship to consumers in this country. The natural effect of cutting off additional supplies would be an enhancement in price. Diamonds imported from the United kingdom are mostly uncut, while those imported from the Netherlands are received already cut. To some extent, therefore, a prohibition against the United Kingdom might tend to discourage diamond cutting in the United States. The difficulty of enforcing the prohibition against an article so small in bulk and so large in value is almost insuperable.

Malt liquors are largely imported from England and Ireland, gin is largely imported from England, and whisky is largely imported from Scotland, with a considerable amount also from Ireland. A prohibition of all alcoholic beverages from the United Kingdom might be approved not merely as a reprisal on account of British restrictions, but also as a step toward reducing the consumption of liquor in the United States. It is likely, however, that the imported spirits would be replaced by larger quantities produced in the United States; if so, the measure might be favored by distillers and brewers in this country. Such an encouragement would probably prove merely temporary, since the foreign beverages are called for on account of differences in flavor and quality rather than cheaper prices.

As has been pointed out, a prohibition against the importation of woolens from the United Kingdom would doubtless result in cutting off supplies of British wool to the serious loss of manufacturers in this country. The prohibition against cotton manufacturers would not be open to this objection, but the injury it might cause to British exporters would probably be only temporary, except in a few lines in which American mills are now competing with British mills on terms almost of equality. The prohibition against diamonds and pearls and against alcoholic beverages is likely to cause much less injury to consumers in this country than the prohibition against cotton or woolen manufacture. Such measures might be advocated as indicative of our national resentment against British restrictions, but it could scarcely be expected that any loss so inflicted on British trade would bring about the removal of the objectionable restrictions. As long as the war lasts British statesmen may be expected to subordinate commercial gains to military advantage. In the long run any reprisals taken by the United States that do not accomplish their purpose are likely to injure our prestige. In view of the probability of a vast modification of commercial relations after the war, the maintenance of our prestige as a commercial nation is of prime importance.

If it be decided, as suggested in the foregoing argument, that it is undesirable to place an import prohibition against British merchandise, the question may be raised whether the prohibition of the importation of gold from the United Kingdom is advisable. The belligerent countries are in imperative need of goods from the United States. Those goods must be paid for by commodities, by securities, by loans or other instruments of credit, or by specie. It may be argued that, if the importation of gold is cut off, the belligerent must import less American goods, or ship more commodities in exchange, or sell more securities on our market or obtain by loans or otherwise, larger credits in this country. The pressing need of supplies would probably render a contraction of imports from the United States more hurtful to the importing country than to the United States. The exports from the United Kingdom are now probably as large as the present industrial capacity of the country permits. There would remain, then, as the most feasible means to offset the prohibition against the importation of gold, either the sale of securities on our market or the contraction of further loans, probably at higher rates of interest. The impossibility of enforcing a prohibition against gold, as pointed out in the next paragraph, is a decisive objection to such a measure.

So long as import restrictions are limited to countries that restrict, contrary to international law, the movement of American products into foreign countries, it will be difficult, if not impossible, to make any import prohibition fully effective. Even if the existing legal provisions are construed so as to authorize the prohibition of the indirect importation, through a neutral country, of the proscribed products of the belligerent country, the enforcement of the prohibition in all cases would be impossible. Proofs of origin would be necessary for all imports of such articles, and in spite of that requirement, some goods covered by the prohibition would probably be admitted into this country. Shipping charges and ease of identification differ vastly according to the nature of the article selected. The extra cost of shipping cottons or woolens by way of a third country might prove a sufficient deterrent, but in the case of gold, and still more in the case of diamonds, transshipment would entail comparatively little expense. British woolens and British spirits could generally be recognized, even if imported from another country; but gold can be readily exchanged and cannot be identified, and its prohibition could not be made effective, unless applied to all countries

Detention of vessels

The detention of vessels is the second means of reprisal sanctioned by the Shipping Act and the Revenue Act. As a means of correcting restrictive measures of belligerents this method seems most appropriate in the case of the orders in council, although it may be also applied probably as a method of retaliation against the blacklisting of American firms.

Against the use of this weapon it may be urged that the result would be to tie up a large volume of shipping of which our commerce is in dire need. If the British orders in council and the British black list are treated as a discrimination against the United States, or as a failure to accord reciprocal treatment, one or more vessels of British nationality may be detained by the refusal of clearance. Or any vessel refusing cargo because of these British regulations may be detained, no matter what its nationality. The last measure would simply cause the enforcement of the regulations to be placed in the hands of British naval officers instead of the officers of merchant vessels. Vessels refuse cargo merely to enjoy free and unhindered passage. If, by our laws, the vessels were compelled to accept such cargo, search and seizure of vessels by the British Navy would be more frequent. The goods would not, however, reach their intended destinations unless convoyed by an American naval vessel with imminent risk of armed conflict.

Probably the most effective remedy would be to refuse clearance to vessels carrying war supplies until the orders in council and the black list are withdrawn. This would seem to be strictly within the authority granted to the President by the Revenue Act, Section 806, paragraph 2, “To withhold clearance from one or more vessels of such belligerent country.” In effect, however, this would be to lay an American embargo, and Congress failed to authorize expressly the laying of an embargo. Moreover, it may be doubted whether an embargo on arms and ammunition would be as successful now, as a year or more ago. More factories in the United Kingdom have been converted into munition plants. While our exports of arms and ammunition have been continuously on the increase, their need is now probably less pressing. In some cases, it is understood, American concerns have taken up this work only after a contract was given for a sufficiently long period to justify the necessary alterations or enlargement of the establishment. As a result, the embargo might prove in some cases more injurious to American manufacturers than to the countries at war, and might, in practice, effect the cancellation of a contract more highly regarded by the American concern than by the British Government.

If, instead of placing a virtual embargo on munitions, one be placed on wheat, it would, without question, prove highly inconvenient, if not distinctly harmful to the United Kingdom. One advantage of the wheat embargo is that it might be justified by economic conditions within our own country. Faced by a great shortage in our wheat crop as compared with the last few years, and with an abnormal export demand, the United States is confronted by the danger of a rise in price to a famine level. To offset similar dangers the belligerent nations have resorted to the embargo, and they could scarcely deem it an unfriendly act if the United States followed their example. On the other hand, the measure would arouse the strongest antagonism on the part of the vast number of wheat growers in this country. They would argue that it would be grossly unfair by legal action to depress the price of wheat below that which would result from the unrestricted operation of economic causes, and would scarcely admit the force of the counterargument that the embargo would merely remove the excessive demand from the nations at war.

It is very doubtful whether, under existing law, an embargo could be made really effective. Clearance might be refused to belligerent vessels but not to neutral vessels unless there was proof of actual discrimination between different shippers or different classes of freight. Moreover, the practical difficulty of enforcing the embargo is as great as the legal difficulty. If direct shipment to a belligerent was made difficult or impossible, the shipments might be made indirectly through a neutral country, and it would be difficult to justify an embargo against neutral countries or to require, in the case of shipments to such countries, a guarantee that the wheat or the munitions would be retained there.

Withdrawal of privileges

The third remedy provided by the recent laws is the withdrawal of reciprocal privileges from vessels or citizens of a country that impose restrictions upon American vessels or American citizens. This remedy is most appropriate against the black list, although it might also be directed against the British embargo.

It should be repeated that there is no discrimination as such against American vessels, nor as such against American citizens. American vessels are treated like those of British nationality; if they are suspected of carrying enemy goods or unlicensed goods subject to an embargo, or goods belonging to persons on the black list, they are stopped and searched, and if found to carry any objectionable cargo, may be ordered into a British port, or coaling or other privileges may be withheld. Against most other countries, as well as the United States, there is an official black list or an official white list; and British citizens and other residents of the British Empire are even more strictly enjoined against trading with the enemy.

Coaling privileges in the United States might be withheld from one or more vessels. Trading privileges might be refused to certain British firms. The privileges of British subjects resident in the United States might be curtailed. Any of these steps, however, might be deemed an infraction of our commercial treaties, just as we deemed the action of the British authorities an infraction of our treaties, and without the excuse of being war measures. And any such step is likely to lead to a further withdrawal of privileges from American citizens.

The case of the United Kingdom has been considered in detail on account of its importance. Other belligerent countries have taken action that affected adversely our commercial interests. Many of these countries are more open to reprisals than is the United Kingdom. To take action against any of them, however, without similar measures against the United Kingdom would be unjustifiable.

Conclusions

Measures authorized by existing law

Various possible measures have been pointed out. None of them, however, seem to promise any likelihood of success in the withdrawal of restrictions on American trade and would probably jeopardize our present position. In the belligerent countries, war for the moment is supreme; commercial considerations take a subordinate place. We can attack their commerce, but our own commerce will unavoidably suffer in consequence even more than it has suffered from the restrictions placed on it by the countries at war. There is little likelihood by these means of obtaining the withdrawal of the objectionable regulations. Counterreprisals would be almost inevitable. The warring nations have not hesitated to place embargoes on their exports, thus suffering commercial loss for military gain. And they would probably not hesitate to enforce more strictly existing embargoes, besides extending the present embargo list, in retaliation for any commercial restrictions that we might impose. At present, rubber, wool, jute, tin, plumbago, and certain other raw products essential to our industries are under export prohibition in Great Britain and in the various colonies and self-governing dominions which are the principal sources of supply. Shipments of these articles have been continuously imported into the United States from British countries, however, under special agreements between the British Government and associations of leading importers of the various products. It is obvious that by a termination of these agreements, Great Britain could paralyze many of our industries.

We have suffered the effect of embargoes and orders in council for a long period, under protest but without retaliation. The restrictions are no more hurtful now than a year and a half ago. But the weapon then in our hands— an embargo on war munitions and supplies—has become dulled.

The most effective measure at our disposal is still a virtual embargo of arms and ammunition. It might still be applied if fully authorized by the Revenue Act, Section 806, second paragraph, and if, upon investigation, it promises to be effective. To determine the first condition an authoritative legal opinion is necessary; to determine the second condition a report from a competent military authority should be had. A virtual embargo on wheat, though open to serious objections, comes second in point of availability.

Before any action is taken, however, one other point must be carefully weighed. For success in commerce after the war we need the friendship of the belligerents if it can be obtained and held without undue sacrifice. Is not their good will then likely to be worth more to us than the present temporary restrictions have cost us?

Conference of neutral nations

If it should be decided to take no direct action under the provisions of the Shipping Act and the Revenue Act, one other step might well receive consideration. An international congress of neutral powers might be called to discuss means of terminating or ameliorating the commercial restrictions imposed during the present war. Concerted action would cause less hard feeling than would the action of a single country. There would be time and opportunity for a full discussion of the restrictions, their effect, and the most appropriate means to insure their abrogation. An embargo by one neutral country might be nullified by exportation first to a neutral country and reshipment thence to the belligerent against which the embargo was laid; to be effective an embargo must be observed or at least recognized by all neutral countries. While the United States is commercially the most powerful country now at peace, its action would be strengthened if it had the moral and legal support of other nations affected by the restrictive measures.

Since the Allies have recently held at Paris a conference to discuss commercial policy after the return of peace, a conference of neutrals could scarcely be viewed as unfriendly by any of the belligerents. It might be well to extend the scope of the conference to include a discussion of appropriate means to insure the “open door” policy in Europe. The calling of a conference would not bind this country to any definite course until after the recommendations of the conference were ratified.

Against the conference two objections might be raised: (1) The delay before positive retaliatory measures could be enforced; (2) the close commercial and political relations between some of the neutral countries and some of the belligerents.

It must also be recognized that the call for a conference is likely to be criticized by opponents of the administration as an evidence of reliance upon moral suasion instead of force.

Some months’ delay is inevitable. But if no measures so far authorized are considered feasible, delay at least until the next session of Congress is certain in any case, and the time could be well spent in a study of actual conditions by all the powers that would participate in the conference.

Some of the neutral powers might, on account of their close relations with the belligerents, hesitate to send representatives to the conference. Actual refusal to participate, however, seems unlikely, at least by those countries most affected by the existing regulations. . It is more likely that the nations most closely affiliated with the belligerents would attend, in order to counsel moderation. And conservative argument may well prove salutary to offset any unduly radical proposals that may be made.

Summary

The general conclusions reached by this survey are:

(1) That immediate reprisals as authorized by recent laws afford no assurance of success, and threaten even the present basis of neutral commerce.

(2) That an international conference of neutral powers might be desirable to discuss the effect of trade restrictions imposed by belligerents and the best means of obtaining their relaxation, and also to consider the general question of international tariff relations after the conclusion of the war.

[Enclosure 2]

Exports of Firearms and Explosives (Except Dynamite) from the United States to Europe, Canada, Japan, Russia in Asia, Australia and New Zealand, and Other Countries During the Years Ending June 30, 1915 and 1916

Countries	Firearms		Cartridges		Gunpowder		Other explosives
	1915	1916	1915	1916	1915	1916	1915	1916
Austria-Hungary	$275	----	----	----	----	----	----	----
Azores and Madeira Islands	----	----	$36	----	----	----	----	----
Belgium	4,031	----	2,137	$28,000	----	----	----	----
Denmark	4,858	$1,379	4,623	9,386	----	----	----	$741
France	1,253,318	3,192,414	4,926,294	6,786,591	$2,501,833	$47,514,775	$6,644,347	25,654,526
Germany	13,488	----	2,485	----	----	----	----	----
Greece	127,222	212,236	19,144	8,730	23,000	----	3,655	233
Italy	3,404	209,908	3,714	21,197	----	7,053,240	25,681	1,834,227
Netherlands	104	4,094	----	2,574		50,050	12,169	275,347
Norway	16,339	19,544	6,859	41,871	----	----	47,962	52,289
Portugal	48,321	210,913	11,011	111,692	----	----	127	5,898
Russia in Europe	231,218	3,893,437	----	218,428	923,571	25,228,417	754,591	18,619,411
Serbia, Montenegro, and Albania	----	----	----	----	----	----	125,000	----
Spain	30	157,605	9,675	1,958,484	7,600	927,546	86,327	676,389
Sweden	1,648	----	927	14,867	----	----	17,247	81,454
Switzerland	470	----	----	----	----	----	----	----
Turkey in Europe	1,724	----	----	----	----	----	----	----
England	944,998	3,933,064	7,697,865	23,523,125	732,692	57,107,391	6,914,670	179,854,441
Scotland	702,975	74,561	55,622	10,675	----	1,628,914	98,454	562,056
Ireland	711,821	3,942	----	382	----	----	----	58
Canada	823,404	3,019,690	377,608	257,663	157,814	1,852,435	1,722,475	7,241,683
Japan	4,958	11,198	297	871	200	2,118	195	213,987
Russia in Asia	1,755,328	1,505,536	11,424	232,514	487,118	31,719,428	552,098	15,500,912
Australia	163,344	250,234	219,987	376,091	878	----	40,847	275,254
New Zealand	33,883	54,051	38,436	66,072	----	----	1,883	6,141
Other countries	2,627,786	1,311,679	4,326,061	3,414,275	256,836	652,060	698,634	1,750,366
Total	$9,474,947	$18,065,485	$17,714,205	$37,083,488	$5,091,542	$173,736,374	$17,746,362	$252,605,413

1. Law Adviser to the Secretary of State.
2. For the statement showing exports of firearms, etc., see Enclosure 2, post, p. 478. The latter statement is not printed.
1. 39 Stat. L. 738, 799-800.