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diff --git a/.gitattributes b/.gitattributes new file mode 100644 index 0000000..6833f05 --- /dev/null +++ b/.gitattributes @@ -0,0 +1,3 @@ +* text=auto +*.txt text +*.md text diff --git a/5033-h.zip b/5033-h.zip Binary files differnew file mode 100644 index 0000000..22f43df --- /dev/null +++ b/5033-h.zip diff --git a/5033-h/5033-h.htm b/5033-h/5033-h.htm new file mode 100644 index 0000000..c8388d0 --- /dev/null +++ b/5033-h/5033-h.htm @@ -0,0 +1,9141 @@ +<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.1//EN" + "http://www.w3.org/TR/xhtml11/DTD/xhtml11.dtd"> + +<html xmlns="http://www.w3.org/1999/xhtml" xml:lang="en"> + +<head> + +<meta http-equiv="Content-Type" content="text/html; charset=ISO-8859-1" /> + +<title> +The Project Gutenberg E-text of State of the Union Addresses, by William H. 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Taft + +This eBook is for the use of anyone anywhere in the United States and most +other parts of the world at no cost and with almost no restrictions +whatsoever. You may copy it, give it away or re-use it under the terms of +the Project Gutenberg License included with this eBook or online at +www.gutenberg.org. If you are not located in the United States, you'll have +to check the laws of the country where you are located before using this ebook. + +Title: State of the Union Addresses of William H. Taft + +Author: William H. Taft + +Release Date: December 3, 2014 [EBook #5033] + +Language: English + +Character set encoding: ISO-8859-1 + +*** START OF THIS PROJECT GUTENBERG EBOOK STATE OF THE UNION ADDRESSES *** + + + + +Produced by James Linden. HTML version by Al Haines. + + + + + +</pre> + + +<h1> +<br /><br /><br /> +State of the Union Addresses of William H. Taft +</h1> + +<p class="noindent"> +<br /><br /> +The addresses are separated by three asterisks: *** +</p> + +<p class="noindent"> +Dates of addresses by William H. Taft in this eBook: +</p> + +<p class="noindent"> + <a href="#dec1909">December 7, 1909</a><br /> + <a href="#dec1910">December 6, 1910</a><br /> + <a href="#dec1911">December 5, 1911</a><br /> + <a href="#dec1912">December 3, 1912</a><br /> +</p> + +<p><br /><br /></p> + +<p class="t3"> +*** +</p> + +<p><a id="dec1909"></a></p> + +<p class="noindent"> +State of the Union Address<br /> +William H. Taft<br /> +December 7, 1909<br /> +</p> + +<p> +The relations of the United States with all foreign governments have +continued upon the normal basis of amity and good understanding, and are +very generally satisfactory. +</p> + +<p class="noindent"> +EUROPE. +</p> + +<p> +Pursuant to the provisions of the general treaty of arbitration concluded +between the United States and Great Britain, April 4, 1908, a special +agreement was entered into between the two countries on January 27, 1909, +for the submission of questions relating to the fisheries on the North +Atlantic Coast to a tribunal to be formed from members of the Permanent +Court of Arbitration at The Hague. +</p> + +<p> +In accordance with the provisions of the special agreement the printed case +of each Government was, on October 4 last, submitted to the other and to +the Arbitral Tribunal at The Hague, and the counter case of the United +States is now in course of preparation. +</p> + +<p> +The American rights under the fisheries article of the Treaty of 1818 have +been a cause of difference between the United States and Great Britain for +nearly seventy years. The interests involved are of great importance to the +American fishing industry, and the final settlement of the controversy will +remove a source of constant irritation and complaint. This is the first +case involving such great international questions which has been submitted +to the Permanent Court of Arbitration at The Hague. +</p> + +<p> +The treaty between the United States and Great Britain concerning the +Canadian International boundary, concluded April 11, 1908, authorizes the +appointment of two commissioners to define and mark accurately the +international boundary line between the United States and the Dominion of +Canada in the waters of the Passamaquoddy Bay, and provides for the +exchange of briefs within the period of six months. The briefs were duly +presented within the prescribed period, but as the commissioners failed to +agree within six months after the exchange of the printed statements, as +required by the treaty, it has now become necessary to resort to the +arbitration provided for in the article. +</p> + +<p> +The International Fisheries Commission appointed pursuant to and under the +authority of the Convention of April 11, 1908, between the United States +and Great Britain, has completed a system of uniform and common +international regulations for the protection and preservation of the food +fishes in international boundary waters of the United States and Canada. +</p> + +<p> +The regulations will be duly submitted to Congress with a view to the +enactment of such legislation as will be necessary under the convention to +put them into operation. +</p> + +<p> +The Convention providing for the settlement of international differences +between the United States and Canada, including the apportionment between +the two countries of certain of the boundary waters and the appointment of +commissioners to adjust certain other questions, signed on the 11th day of +January, 1909, and to the ratification of which the Senate gave its advice +and consent on March 3, 1909, has not yet been ratified on the part of +Great Britain. +</p> + +<p> +Commissioners have been appointed on the part of the United States to act +jointly with Commissioners on the part of Canada in examining into the +question of obstructions in the St. John River between Maine and New +Brunswick, and to make recommendations for the regulation of the uses +thereof, and are now engaged in this work. +</p> + +<p> +Negotiations for an international conference to consider and reach an +arrangement providing for the preservation and protection of the fur seals +in the North Pacific are in progress with the Governments of Great Britain, +Japan, and Russia. The attitude of the Governments interested leads me to +hope for a satisfactory settlement of this question as the ultimate outcome +of the negotiations. +</p> + +<p> +The Second Peace Conference recently held at The Hague adopted a convention +for the establishment of an International Prize Court upon the joint +proposal of delegations of the United States, France, Germany and Great +Britain. The law to be observed by the Tribunal in the decision of prize +cases was, however, left in an uncertain and therefore unsatisfactory +state. Article 7 of the Convention provided that the Court was to be +governed by the provisions of treaties existing between the belligerents, +but that "in the absence of such provisions, the court shall apply the +rules of international law. If no generally recognized rule exists, the +court shall give judgment in accordance with the general principles of +justice and equity." As, however, many questions in international maritime +law are understood differently and therefore interpreted differently in +various countries, it was deemed advisable not to intrust legislative +powers to the proposed court, but to determine the rules of law properly +applicable in a Conference of the representative maritime nations. Pursuant +to an invitation of Great Britain a conference was held at London from +December 2, 1908, to February 26, 1909, in which the following Powers +participated: the United States, Austria-Hungary, France, Germany, Great +Britain, Italy, Japan, the Netherlands, Russia and Spain. The conference +resulted in the Declaration of London, unanimously agreed to and signed by +the participating Powers, concerning among other matters, the highly +important subjects of blockade, contraband, the destruction of neutral +prizes, and continuous voyages. The declaration of London is an eminently +satisfactory codification of the international maritime law, and it is +hoped that its reasonableness and fairness will secure its general +adoption, as well as remove one of the difficulties standing in the way of +the establishment of an International Prize Court. +</p> + +<p> +Under the authority given in the sundry civil appropriation act, approved +March 4, 1909, the United States was represented at the International +Conference on Maritime Law at Brussels. The Conference met on the 28th of +September last and resulted in the signature ad referendum of a convention +for the unification of certain regulations with regard to maritime +assistance and salvage and a convention for the unification of certain +rules with regard to collisions at sea. Two new projects of conventions +which have not heretofore been considered in a diplomatic conference, +namely, one concerning the limitation of the responsibility of shipowners, +and the other concerning marine mortgages and privileges, have been +submitted by the Conference to the different governments. +</p> + +<p> +The Conference adjourned to meet again on April 11, 1910. +</p> + +<p> +The International Conference for the purpose of promoting uniform +legislation concerning letters of exchange, which was called by the +Government of the Netherlands to meet at The Hague in September, 1909, has +been postponed to meet at that capital in June, 1910. The United States +will be appropriately represented in this Conference under the provision +therefor already made by Congress. +</p> + +<p> +The cordial invitation of Belgium to be represented by a fitting display of +American progress in the useful arts and inventions at the World's Fair to +be held at Brussels in 1910 remains to be acted upon by the Congress. +Mindful of the advantages to accrue to our artisans and producers in +competition with their Continental rivals, I renew the recommendation +heretofore made that provision be made for acceptance of the invitation and +adequate representation in the Exposition. The question arising out of the +Belgian annexation of the Independent State of the Congo, which has so long +and earnestly preoccupied the attention of this Government and enlisted the +sympathy of our best citizens, is still open, but in a more hopeful stage. +This Government was among the foremost in the great work of uplifting the +uncivilized regions of Africa and urging the extension of the benefits of +civilization, education, and fruitful open commerce to that vast domain, +and is a party to treaty engagements of all the interested powers designed +to carry out that great duty to humanity. The way to better the original +and adventitious conditions, so burdensome to the natives and so +destructive to their development, has been pointed out, by observation and +experience, not alone of American representatives, but by cumulative +evidence from all quarters and by the investigations of Belgian Agents. The +announced programmes of reforms, striking at many of the evils known to +exist, are an augury of better things. The attitude of the United States is +one of benevolent encouragement, coupled with a hopeful trust that the good +work, responsibly undertaken and zealously perfected to the accomplishment +of the results so ardently desired, will soon justify the wisdom that +inspires them and satisfy the demands of humane sentiment throughout the +world. +</p> + +<p> +A convention between the United States and Germany, under which the +nonworking provisions of the German patent law are made inapplicable to the +patents of American citizens, was concluded on February 23, 1909, and is +now in force. Negotiations for similar conventions looking to the placing +of American inventors on the same footing as nationals have recently been +initiated with other European governments whose laws require the local +working of foreign patents. +</p> + +<p> +Under an appropriation made at the last session of the Congress, a +commission was sent on American cruisers to Monrovia to investigate the +interests of the United States and its citizens in Liberia. Upon its +arrival at Monrovia the commission was enthusiastically received, and +during its stay in Liberia was everywhere met with the heartiest +expressions of good will for the American Government and people and the +hope was repeatedly expressed on all sides that this Government might see +its way clear to do something to relieve the critical position of the +Republic arising in a measure from external as well as internal and +financial embarrassments. The Liberian Government afforded every facility +to the Commission for ascertaining the true state of affairs. The +Commission also had conferences with representative citizens, interested +foreigners and the representatives of foreign governments in Monrovia. +Visits were made to various parts of the Republic and to the neighboring +British colony of Sierra Leone, where the Commission was received by and +conferred with the Governor. +</p> + +<p> +It will be remembered that the interest of the United States in the +Republic of Liberia springs from the historical fact of the foundation of +the Republic by the colonization of American citizens of the African race. +In an early treaty with Liberia there is a provision under which the United +States may be called upon for advice or assistance. Pursuant to this +provision and in the spirit of the moral relationship of the United States +to Liberia, that Republic last year asked this Government to lend +assistance in the solution of certain of their national problems, and hence +the Commission was sent. +</p> + +<p> +The report of our commissioners has just been completed and is now under +examination by the Department of State. It is hoped that there may result +some helpful measures, in which case it may be my duty again to invite your +attention to this subject. +</p> + +<p> +The Norwegian Government, by a note addressed on January 26, 1909, to the +Department of State, conveyed an invitation to the Government of the United +States to take part in a conference which it is understood will be held in +February or March, 1910, for the purpose of devising means to remedy +existing conditions in the Spitzbergen Islands. +</p> + +<p> +This invitation was conveyed under the reservation that the question of +altering the status of the islands as countries belonging to no particular +State, and as equally open to the citizens and subjects of all States, +should not be raised. +</p> + +<p> +The European Powers invited to this Conference by the Government of Norway +were Belgium, Denmark, France, Germany, Great Britain, Russia, Sweden and +the Netherlands. +</p> + +<p> +The Department of State, in view of proofs filed with it in 1906, showing +the American possession, occupation, and working of certain coal-bearing +lands in Spitzbergen, accepted the invitation under the reservation above +stated, and under the further reservation that all interests in those +islands already vested should be protected and that there should be +equality of opportunity for the future. It was further pointed out that +membership in the Conference on the part of the United States was qualified +by the consideration that this Government would not become a signatory to +any conventional arrangement concluded by the European members of the +Conference which would imply contributory participation by the United +States in any obligation or responsibility for the enforcement of any +scheme of administration which might be devised by the Conference for the +islands. +</p> + +<p class="noindent"> +THE NEAR EAST. +</p> + +<p> +His Majesty Mehmed V, Sultan of Turkey, recently sent to this country a +special embassy to announce his accession. The quick transition of the +Government of the Ottoman Empire from one of retrograde tendencies to a +constitutional government with a Parliament and with progressive modern +policies of reform and public improvement is one of the important phenomena +of our times. Constitutional government seems also to have made further +advance in Persia. These events have turned the eyes of the world upon the +Near East. In that quarter the prestige of the United States has spread +widely through the peaceful influence of American schools, universities and +missionaries. There is every reason why we should obtain a greater share of +the commerce of the Near East since the conditions are more favorable now +than ever before. +</p> + +<p> +LATIN AMERICA. +</p> + +<p> +One of the happiest events in recent Pan-American diplomacy was the +pacific, independent settlement by the Governments of Bolivia and Peru of a +boundary difference between them, which for some weeks threatened to cause +war and even to entrain embitterments affecting other republics less +directly concerned. From various quarters, directly or indirectly +concerned, the intermediation of the United States was sought to assist in +a solution of the controversy. Desiring at all times to abstain from any +undue mingling in the affairs of sister republics and having faith in the +ability of the Governments of Peru and Bolivia themselves to settle their +differences in a manner satisfactory to themselves which, viewed with +magnanimity, would assuage all embitterment, this Government steadily +abstained from being drawn into the controversy and was much gratified to +find its confidence justified by events. +</p> + +<p> +On the 9th of July next there will open at Buenos Aires the Fourth +Pan-American Conference. This conference will have a special meaning to the +hearts of all Americans, because around its date are clustered the +anniversaries of the independence of so many of the American republics. It +is not necessary for me to remind the Congress of the political, social and +commercial importance of these gatherings. You are asked to make liberal +appropriation for our participation. If this be granted, it is my purpose +to appoint a distinguished and representative delegation, qualified +fittingly to represent this country and to deal with the problems of +intercontinental interest which will there be discussed. +</p> + +<p> +The Argentine Republic will also hold from May to November, 1910, at Buenos +Aires, a great International Agricultural Exhibition in which the United +States has been invited to participate. Considering the rapid growth of the +trade of the United States with the Argentine Republic and the cordial +relations existing between the two nations, together with the fact that it +provides an opportunity to show deference to a sister republic on the +occasion of the celebration of its national independence, the proper +Departments of this Government are taking steps to apprise the interests +concerned of the opportunity afforded by this Exhibition, in which +appropriate participation by this country is so desirable. The designation +of an official representative is also receiving consideration. +</p> + +<p> +To-day, more than ever before, American capital is seeking investment in +foreign countries, and American products are more and more generally +seeking foreign markets. As a consequence, in all countries there are +American citizens and American interests to be protected, on occasion, by +their Government. These movements of men, of capital, and of commodities +bring peoples and governments closer together and so form bonds of peace +and mutual dependency, as they must also naturally sometimes make passing +points of friction. The resultant situation inevitably imposes upon this +Government vastly increased responsibilities. This Administration, through +the Department of State and the foreign service, is lending all proper +support to legitimate and beneficial American enterprises in foreign +countries, the degree of such support being measured by the national +advantages to be expected. A citizen himself can not by contract or +otherwise divest himself of the right, nor can this Government escape the +obligation, of his protection in his personal and property rights when +these are unjustly infringed in a foreign country. To avoid ceaseless +vexations it is proper that in considering whether American enterprise +should be encouraged or supported in a particular country, the Government +should give full weight not only to the national, as opposed to the +individual benefits to accrue, but also to the fact whether or not the +Government of the country in question is in its administration and in its +diplomacy faithful to the principles of moderation, equity and justice upon +which alone depend international credit, in diplomacy as well as in +finance. +</p> + +<p> +The Pan-American policy of this Government has long been fixed in its +principles and remains unchanged. With the changed circumstances of the +United States and of the Republics to the south of us, most of which have +great natural resources, stable government and progressive ideals, the +apprehension which gave rise to the Monroe Doctrine may be said to have +nearly disappeared, and neither the doctrine as it exists nor any other +doctrine of American policy should be permitted to operate for the +perpetuation of irresponsible government, the escape of just obligations, +or the insidious allegation of dominating ambitions on the part of the +United States. +</p> + +<p> +Beside the fundamental doctrines of our Pan-American policy there have +grown up a realization of political interests, community of institutions +and ideals, and a flourishing commerce. All these bonds will be greatly +strengthened as time goes on and increased facilities, such as the great +bank soon to be established in Latin America, supply the means for building +up the colossal intercontinental commerce of the future. +</p> + +<p> +My meeting with President Diaz and the greeting exchanged on both American +and Mexican soil served, I hope, to signalize the close and cordial +relations which so well bind together this Republic and the great Republic +immediately to the south, between which there is so vast a network of +material interests. +</p> + +<p> +I am happy to say that all but one of the cases which for so long vexed our +relations with Venezuela have been settled within the past few months and +that, under the enlightened regime now directing the Government of +Venezuela, provision has been made for arbitration of the remaining case +before The Hague Tribunal. On July 30, 1909, the Government of Panama +agreed, after considerable negotiation, to indemnify the relatives of the +American officers and sailors who were brutally treated, one of them +having, indeed, been killed by the Panaman police this year. +</p> + +<p> +The sincere desire of the Government of Panama to do away with a situation +where such an accident could occur is manifest in the recent request in +compliance with which this Government has lent the services of an officer +of the Army to be employed by the Government of Panama as Instructor of +Police. +</p> + +<p> +The sanitary improvements and public works undertaken in Cuba prior to the +present administration of that Government, in the success of which the +United States is interested under the treaty, are reported to be making +good progress and since the Congress provided for the continuance of the +reciprocal commercial arrangement between Cuba and the United States +assurance has been received that no negotiations injuriously affecting the +situation will be undertaken without consultation. The collection of the +customs of the Dominican Republic through the general receiver of customs +appointed by the President of the United States in accordance with the +convention of February 8, 1907, has proceeded in an uneventful and +satisfactory manner. The customs receipts have decreased owing to disturbed +political and economic conditions and to a very natural curtailment of +imports in view of the anticipated revision of the Dominican tariff +schedule. The payments to the fiscal agency fund for the service of the +bonded debt of the Republic, as provided by the convention, have been +regularly and promptly made, and satisfactory progress has been made in +carrying out the provisions of the convention looking towards the +completion of the adjustment of the debt and the acquirement by the +Dominican Government of certain concessions and monopolies which have been +a burden to the commerce of the country. In short, the receivership has +demonstrated its ability, even under unfavorable economic and political +conditions, to do the work for which it was intended. +</p> + +<p> +This Government was obliged to intervene diplomatically to bring about +arbitration or settlement of the claim of the Emery Company against +Nicaragua, which it had long before been agreed should be arbitrated. A +settlement of this troublesome case was reached by the signature of a +protocol on September 18, 1909. +</p> + +<p> +Many years ago diplomatic intervention became necessary to the protection +of the interests in the American claim of Alsop and Company against the +Government of Chile. The Government of Chile had frequently admitted +obligation in the case and had promised this Government to settle. There +had been two abortive attempts to do so through arbitral commissions, which +failed through lack of jurisdiction. Now, happily, as the result of the +recent diplomatic negotiations, the Governments of the United States and of +Chile, actuated by the sincere desire to free from any strain those cordial +and friendly relations upon which both set such store, have agreed by a +protocol to submit the controversy to definitive settlement by His +Britannic Majesty, Edward VII. +</p> + +<p> +Since the Washington Conventions of 1907 were communicated to the +Government of the United States as a consulting and advising party, this +Government has been almost continuously called upon by one or another, and +in turn by all the five Central American Republics, to exert itself for the +maintenance of the Conventions. Nearly every complaint has been against the +Zelaya Government of Nicaragua, which has kept Central America in constant +tension or turmoil. The responses made to the representations of Central +American Republics, as due from the United States on account of its +relation to the Washington Conventions, have been at all times conservative +and have avoided, so far as possible, any semblance of interference, +although it is very apparent that the considerations of geographic +proximity to the Canal Zone and of the very substantial American interests +in Central America give to the United States a special position in the zone +of these Republics and the Caribbean Sea. +</p> + +<p> +I need not rehearse here the patient efforts of this Government to promote +peace and welfare among these Republics, efforts which are fully +appreciated by the majority of them who are loyal to their true interests. +It would be no less unnecessary to rehearse here the sad tale of +unspeakable barbarities and oppression alleged to have been committed by +the Zelaya Government. Recently two Americans were put to death by order of +President Zelaya himself. They were reported to have been regularly +commissioned officers in the organized forces of a revolution which had +continued many weeks and was in control of about half of the Republic, and +as such, according to the modern enlightened practice of civilized nations, +they were entitled to be dealt with as prisoners of war. +</p> + +<p> +At the date when this message is printed this Government has terminated +diplomatic relations with the Zelaya Government, for reasons made public in +a communication to the former Nicaraguan charge d'affaires, and is +intending to take such future steps as may be found most consistent with +its dignity, its duty to American interests, and its moral obligations to +Central America and to civilization. It may later be necessary for me to +bring this subject to the attention of the Congress in a special message. +</p> + +<p> +The International Bureau of American Republics has carried on an important +and increasing work during the last year. In the exercise of its peculiar +functions as an international agency, maintained by all the American +Republics for the development of Pan-American commerce and friendship, it +has accomplished a great practical good which could be done in the same way +by no individual department or bureau of one government, and is therefore +deserving of your liberal support. The fact that it is about to enter a new +building, erected through the munificence of an American philanthropist and +the contributions of all the American nations, where both its efficiency of +administration and expense of maintenance will naturally be much augmented, +further entitles it to special consideration. +</p> + +<p class="noindent"> +THE FAR EAST. +</p> + +<p> +In the Far East this Government preserves unchanged its policy of +supporting the principle of equality of opportunity and scrupulous respect +for the integrity of the Chinese Empire, to which policy are pledged the +interested Powers of both East and West. +</p> + +<p> +By the Treaty of 1903 China has undertaken the abolition of likin with a +moderate and proportionate raising of the customs tariff along with +currency reform. These reforms being of manifest advantage to foreign +commerce as well as to the interests of China, this Government is +endeavoring to facilitate these measures and the needful acquiescence of +the treaty Powers. When it appeared that Chinese likin revenues were to be +hypothecated to foreign bankers in connection with a great railway project, +it was obvious that the Governments whose nationals held this loan would +have a certain direct interest in the question of the carrying out by China +of the reforms in question. Because this railroad loan represented a +practical and real application of the open door policy through cooperation +with China by interested Powers as well as because of its relations to the +reforms referred to above, the Administration deemed American participation +to be of great national interest. Happily, when it was as a matter of broad +policy urgent that this opportunity should not be lost, the indispensable +instrumentality presented itself when a group of American bankers, of +international reputation and great resources, agreed at once to share in +the loan upon precisely such terms as this Government should approve. The +chief of those terms was that American railway material should be upon an +exact equality with that of the other nationals joining in the loan in the +placing of orders for this whole railroad system. After months of +negotiation the equal participation of Americans seems at last assured. It +is gratifying that Americans will thus take their share in this extension +of these great highways of trade, and to believe that such activities will +give a real impetus to our commerce and will prove a practical corollary to +our historic policy in the Far East. +</p> + +<p> +The Imperial Chinese Government in pursuance of its decision to devote +funds from the portion of the indemnity remitted by the United States to +the sending of students to this country has already completed arrangements +for carrying out this purpose, and a considerable body of students have +arrived to take up their work in our schools and universities. No one can +doubt the happy effect that the associations formed by these representative +young men will have when they return to take up their work in the +progressive development of their country. +</p> + +<p> +The results of the Opium Conference held at Shanghai last spring at the +invitation of the United States have been laid before the Government. The +report shows that China is making remarkable progress and admirable efforts +toward the eradication of the opium evil and that the Governments concerned +have not allowed their commercial interests to interfere with a helpful +cooperation in this reform. Collateral investigations of the opium question +in this country lead me to recommend that the manufacture, sale and use of +opium and its derivatives in the United States should be so far as possible +more rigorously controlled by legislation. +</p> + +<p> +In one of the Chinese-Japanese Conventions of September 4 of this year +there was a provision which caused considerable public apprehension in that +upon its face it was believed in some quarters to seek to establish a +monopoly of mining privileges along the South Manchurian and Antung-Mukden +Railroads, and thus to exclude Americans from a wide field of enterprise, +to take part in which they were by treaty with China entitled. After a +thorough examination of the Conventions and of the several contextual +documents, the Secretary of State reached the conclusion that no such +monopoly was intended or accomplished. However, in view of the widespread +discussion of this question, to confirm the view it had reached, this +Government made inquiry of the Imperial Chinese and Japanese Governments +and received from each official assurance that the provision had no purpose +inconsistent with the policy of equality of opportunity to which the +signatories, in common with the United States, are pledged. +</p> + +<p> +Our traditional relations with the Japanese Empire continue cordial as +usual. As the representative of Japan, His Imperial Highness Prince Kuni +visited the Hudson-Fulton Celebration. The recent visit of a delegation of +prominent business men as guests of the chambers of commerce of the Pacific +slope, whose representatives had been so agreeably received in Japan, will +doubtless contribute to the growing trade across the Pacific, as well as to +that mutual understanding which leads to mutual appreciation. The +arrangement of 1908 for a cooperative control of the coming of laborers to +the United States has proved to work satisfactorily. The matter of a +revision of the existing treaty between the United States and Japan which +is terminable in 1912 is already receiving the study of both countries. +</p> + +<p> +The Department of State is considering the revision in whole or in part, of +the existing treaty with Siam, which was concluded in 1856, and is now, in +respect to many of its provisions, out of date. +</p> + +<p class="noindent"> +THE DEPARTMENT OF STATE. +</p> + +<p> +I earnestly recommend to the favorable action of the Congress the estimates +submitted by the Department of State and most especially the legislation +suggested in the Secretary of State's letter of this date whereby it will +be possible to develop and make permanent the reorganization of the +Department upon modern lines in a manner to make it a thoroughly efficient +instrument in the furtherance of our foreign trade and of American +interests abroad. The plan to have Divisions of Latin-American and Far +Eastern Affairs and to institute a certain specialization in business with +Europe and the Near East will at once commend itself. These +politico-geographical divisions and the detail from the diplomatic or +consular service to the Department of a number of men, who bring to the +study of complicated problems in different parts of the world practical +knowledge recently gained on the spot, clearly is of the greatest advantage +to the Secretary of State in foreseeing conditions likely to arise and in +conducting the great variety of correspondence and negotiation. It should +be remembered that such facilities exist in the foreign offices of all the +leading commercial nations and that to deny them to the Secretary of State +would be to place this Government at a great disadvantage in the rivalry of +commercial competition. +</p> + +<p> +The consular service has been greatly improved under the law of April 5, +1906, and the Executive Order of June 27, 1906, and I commend to your +consideration the question of embodying in a statute the principles of the +present Executive Order upon which the efficiency of our consular service +is wholly dependent. +</p> + +<p> +In modern times political and commercial interests are interrelated, and in +the negotiation of commercial treaties, conventions and tariff agreements, +the keeping open of opportunities and the proper support of American +enterprises, our diplomatic service is quite as important as the consular +service to the business interests of the country. Impressed with this idea +and convinced that selection after rigorous examination, promotion for +merit solely and the experience only to be gained through the continuity of +an organized service are indispensable to a high degree of efficiency in +the diplomatic service, I have signed an Executive Order as the first step +toward this very desirable result. Its effect should be to place all +secretaries in the diplomatic service in much the same position as consular +officers are now placed and to tend to the promotion of the most efficient +to the grade of minister, generally leaving for outside appointments such +posts of the grade of ambassador or minister as it may be expedient to fill +from without the service. It is proposed also to continue the practice +instituted last summer of giving to all newly appointed secretaries at +least one month's thorough training in the Department of State before they +proceed to their posts. This has been done for some time in regard to the +consular service with excellent results. +</p> + +<p> +Under a provision of the Act of August 5, 1909, I have appointed three +officials to assist the officers of the Government in collecting +information necessary to a wise administration of the tariff act of August +5, 1909. As to questions of customs administration they are cooperating +with the officials of the Treasury Department and as to matters of the +needs and the exigencies of our manufacturers and exporters, with the +Department of Commerce and Labor, in its relation to the domestic aspect of +the subject of foreign commerce. In the study of foreign tariff treatment +they will assist the Bureau of Trade Relations of the Department of State. +It is hoped thus to coordinate and bring to bear upon this most important +subject all the agencies of the Government which can contribute anything to +its efficient handling. +</p> + +<p> +As a consequence of Section 2 of the tariff act of August 5, 1909, it +becomes the duty of the Secretary of State to conduct as diplomatic +business all the negotiations necessary to place him in a position to +advise me as to whether or not a particular country unduly discriminates +against the United States in the sense of the statute referred to. The +great scope and complexity of this work, as well as the obligation to lend +all proper aid to our expanding commerce, is met by the expansion of the +Bureau of Trade Relations as set forth in the estimates for the Department +of State. +</p> + +<p class="noindent"> +OTHER DEPARTMENTS. +</p> + +<p> +I have thus in some detail described the important transactions of the +State Department since the beginning of this Administration for the reason +that there is no provision either by statute or custom for a formal report +by the Secretary of State to the President or to Congress, and a +Presidential message is the only means by which the condition of our +foreign relations is brought to the attention of Congress and the public. +</p> + +<p> +In dealing with the affairs of the other Departments, the heads of which +all submit annual reports, I shall touch only those matters that seem to me +to call for special mention on my part without minimizing in any way the +recommendations made by them for legislation affecting their respective +Departments, in all of which I wish to express my general concurrence. +</p> + +<p class="noindent"> +GOVERNMENT EXPENDITURES AND REVENUES. +</p> + +<p> +Perhaps the most important question presented to this Administration is +that of economy in expenditures and sufficiency of revenue. The deficit of +the last fiscal year, and the certain deficit of the current year, prompted +Congress to throw a greater responsibility on the Executive and the +Secretary of the Treasury than had heretofore been declared by statute. +This declaration imposes upon the Secretary of the Treasury the duty of +assembling all the estimates of the Executive Departments, bureaus, and +offices, of the expenditures necessary in the ensuing fiscal year, and of +making an estimate of the revenues of the Government for the same period; +and if a probable deficit is thus shown, it is made the duty of the +President to recommend the method by which such deficit can be met. +</p> + +<p> +The report of the Secretary shows that the ordinary expenditures for the +current fiscal year ending June 30, 1910, will exceed the estimated +receipts by $34,075,620. If to this deficit is added the sum to be +disbursed for the Panama Canal, amounting to $38,000,000, and $1,000,000 to +be paid on the public debt, the deficit of ordinary receipts and +expenditures will be increased to a total deficit of $73,075,620. This +deficit the Secretary proposes to meet by the proceeds of bonds issued to +pay the cost of constructing the Panama Canal. I approve this proposal. +</p> + +<p> +The policy of paying for the construction of the Panama Canal, not out of +current revenue, but by bond issues, was adopted in the Spooner Act of +1902, and there seems to be no good reason for departing from the principle +by which a part at least of the burden of the cost of the canal shall fall +upon our posterity who are to enjoy it; and there is all the more reason +for this view because the actual cost to date of the canal, which is now +half done and which will be completed January 1, 1915, shows that the cost +of engineering and construction will be $297,766,000, instead of +$139,705,200, as originally estimated. In addition to engineering and +construction, the other expenses, including sanitation and government, and +the amount paid for the properties, the franchise, and the privilege of +building the canal, increase the cost by $75,435,000, to a total of +$375,201,000. The increase in the cost of engineering and construction is +due to a substantial enlargement of the plan of construction by widening +the canal 100 feet in the Culebra cut and by increasing the dimensions of +the locks, to the underestimate of the quantity of the work to be done +under the original plan, and to an underestimate of the cost of labor and +materials both of which have greatly enhanced in price since the original +estimate was made. +</p> + +<p> +In order to avoid a deficit for the ensuing fiscal year, I directed the +heads of Departments in the preparation of their estimates to make them as +low as possible consistent with imperative governmental necessity. The +result has been, as I am advised by the Secretary of the Treasury, that the +estimates for the expenses of the Government for the next fiscal year +ending June 30, 1911, are less than the appropriations for this current +fiscal year by $42,818,000. So far as the Secretary of the Treasury is able +to form a judgment as to future income, and compare it with the +expenditures for the next fiscal year ending June 30, 1911, and excluding +payments on account of the Panama Canal, which will doubtless be taken up +by bonds, there will be a surplus of $35,931,000. +</p> + +<p> +In the present estimates the needs of the Departments and of the Government +have been cut to the quick, so to speak, and any assumption on the part of +Congress, so often made in times past, that the estimates have been +prepared with the expectation that they may be reduced, will result in +seriously hampering proper administration. +</p> + +<p> +The Secretary of the Treasury points out what should be carefully noted in +respect to this reduction in governmental expenses for the next fiscal +year, that the economies are of two kinds--first, there is a saving in the +permanent administration of the Departments, bureaus, and offices of the +Government; and, second, there is a present reduction in expenses by a +postponement of projects and improvements that ultimately will have to be +carried out but which are now delayed with the hope that additional revenue +in the future will permit their execution without producing a deficit. +</p> + +<p> +It has been impossible in the preparation of estimates greatly to reduce +the cost of permanent administration. This can not be done without a +thorough reorganization of bureaus, offices, and departments. For the +purpose of securing information which may enable the executive and the +legislative branches to unite in a plan for the permanent reduction of the +cost of governmental administration, the Treasury Department has instituted +an investigation by one of the most skilled expert accountants in the +United States. The result of his work in two or three bureaus, which, if +extended to the entire Government, must occupy two or more years, has been +to show much room for improvement and opportunity for substantial +reductions in the cost and increased efficiency of administration. The +object of the investigation is to devise means to increase the average +efficiency of each employee. There is great room for improvement toward +this end, not only by the reorganization of bureaus and departments and in +the avoidance of duplication, but also in the treatment of the individual +employee. +</p> + +<p> +Under the present system it constantly happens that two employees receive +the same salary when the work of one is far more difficult and important +and exacting than that of the other. Superior ability is not rewarded or +encouraged. As the classification is now entirely by salary, an employee +often rises to the highest class while doing the easiest work, for which +alone he may be fitted. An investigation ordered by my predecessor resulted +in the recommendation that the civil service he reclassified according to +the kind of work, so that the work requiring most application and knowledge +and ability shall receive most compensation. I believe such a change would +be fairer to the whole force and would permanently improve the personnel of +the service. +</p> + +<p> +More than this, every reform directed toward the improvement in the average +efficiency of government employees must depend on the ability of the +Executive to eliminate from the government service those who are +inefficient from any cause, and as the degree of efficiency in all the +Departments is much lessened by the retention of old employees who have +outlived their energy and usefulness, it is indispensable to any proper +system of economy that provision be made so that their separation from the +service shall be easy and inevitable. It is impossible to make such +provision unless there is adopted a plan of civil pensions. Most of the +great industrial organizations, and many of the well-conducted railways of +this country, are coming to the conclusion that a system of pensions for +old employees, and the substitution therefor of younger and more energetic +servants, promotes both economy and efficiency of administration. +</p> + +<p> +I am aware that there is a strong feeling in both Houses of Congress, and +possibly in the country, against the establishment of civil pensions, and +that this has naturally grown out of the heavy burden of military pensions, +which it has always been the policy of our Government to assume; but I am +strongly convinced that no other practical solution of the difficulties +presented by the superannuation of civil servants can be found than that of +a system of civil pensions. +</p> + +<p> +The business and expenditures of the Government have expanded enormously +since the Spanish war, but as the revenues have increased in nearly the +same proportion as the expenditures until recently, the attention of the +public, and of those responsible for the Government, has not been fastened +upon the question of reducing the cost of administration. We can not, in +view of the advancing prices of living, hope to save money by a reduction +in the standard of salaries paid. Indeed, if any change is made in that +regard, an increase rather than a decrease will be necessary; and the only +means of economy will be in reducing the number of employees and in +obtaining a greater average of efficiency from those retained in the +service. +</p> + +<p> +Close investigation and study needed to make definite recommendations in +this regard will consume at least two years. I note with much satisfaction +the organization in the Senate of a Committee on Public Expenditures, +charged with the duty of conducting such an investigation, and I tender to +that committee all the assistance which the executive branch of the +Government can possibly render. +</p> + +<p class="noindent"> +FRAUDS IN THE COLLECTION OF CUSTOMS. +</p> + +<p> +I regret to refer to the fact of the discovery of extensive frauds in the +collections of the customs revenue at New York City, in which a number of +the subordinate employees in the weighing and other departments were +directly concerned, and in which the beneficiaries were the American Sugar +Refining Company and others. The frauds consisted in the payment of duty on +underweights of sugar. The Government has recovered from the American Sugar +Refining Company all that it is shown to have been defrauded of. The sum +was received in full of the amount due, which might have been recovered by +civil suit against the beneficiary of the fraud, but there was an express +reservation in the contract of settlement by which the settlement should +not interfere with, or prevent the criminal prosecution of everyone who was +found to be subject to the same. +</p> + +<p> +Criminal prosecutions are now proceeding against a number of the Government +officers. The Treasury Department and the Department of Justice are +exerting every effort to discover all the wrongdoers, including the +officers and employees of the companies who may have been privy to the +fraud. It would seem to me that an investigation of the frauds by Congress +at present, pending the probing by the Treasury Department and the +Department of Justice, as proposed, might by giving immunity and otherwise +prove an embarrassment in securing conviction of the guilty parties. +</p> + +<p class="noindent"> +MAXIMUM AND MINIMUM CLAUSE IN TARIFF ACT. +</p> + +<p> +Two features of the new tariff act call for special reference. By virtue of +the clause known as the "Maximum and Minimum" clause, it is the duty of the +Executive to consider the laws and practices of other countries with +reference to the importation into those countries of the products and +merchandise of the United States, and if the Executive finds such laws and +practices not to be unduly discriminatory against the United States, the +minimum duties provided in the bill are to go into force. +</p> + +<p> +Unless the President makes such a finding, then the maximum duties provided +in the bill, that is, an increase of twenty-five per cent. ad valorem over +the minimum duties, are to be in force. Fear has been expressed that this +power conferred and duty imposed on the Executive is likely to lead to a +tariff war. I beg to express the hope and belief that no such result need +be anticipated. +</p> + +<p> +The discretion granted to the Executive by the terms "unduly +discriminatory" is wide. In order that the maximum duty shall be charged +against the imports from a country, it is necessary that he shall find on +the part of that country not only discriminations in its laws or the +practice under them against the trade of the United States, but that the +discriminations found shall be undue; that is, without good and fair +reason. I conceive that this power was reposed in the President with the +hope that the maximum duties might never be applied in any case, but that +the power to apply them would enable the President and the State Department +through friendly negotiation to secure the elimination from the laws and +the practice under them of any foreign country of that which is unduly +discriminatory. No one is seeking a tariff war or a condition in which the +spirit of retaliation shall be aroused. +</p> + +<p class="noindent"> +USES OF THE NEW TARIFF BOARD. +</p> + +<p> +The new tariff law enables me to appoint a tariff board to assist me in +connection with the Department of State in the administration of the +minimum and maximum clause of the act and also to assist officers of the +Government in the administration of the entire law. An examination of the +law and an understanding of the nature of the facts which should be +considered in discharging the functions imposed upon the Executive show +that I have the power to direct the tariff board to make a comprehensive +glossary and encyclopedia of the terms used and articles embraced in the +tariff law, and to secure information as to the cost of production of such +goods in this country and the cost of their production in foreign +countries. I have therefore appointed a tariff board consisting of three +members and have directed them to perform all the duties above described. +This work will perhaps take two or three years, and I ask from Congress a +continuing annual appropriation equal to that already made for its +prosecution. I believe that the work of this board will be of prime utility +and importance whenever Congress shall deem it wise again to readjust the +customs duties. If the facts secured by the tariff board are of such a +character as to show generally that the rates of duties imposed by the +present tariff law are excessive under the principles of protection as +described in the platform of the successful party at the late election, I +shall not hesitate to invite the attention of Congress to this fact and to +the necessity for action predicated thereon. Nothing, however, halts +business and interferes with the course of prosperity so much as the +threatened revision of the tariff, and until the facts are at hand, after +careful and deliberate investigation, upon which such revision can properly +be undertaken, it seems to me unwise to attempt it. The amount of +misinformation that creeps into arguments pro and con in respect to tariff +rates is such as to require the kind of investigation that I have directed +the tariff board to make, an investigation undertaken by it wholly without +respect to the effect which the facts may have in calling for a +readjustment of the rates of duty. +</p> + +<p class="noindent"> +WAR DEPARTMENT. +</p> + +<p> +In the interest of immediate economy and because of the prospect of a +deficit, I have required a reduction in the estimates of the War Department +for the coming fiscal year, which brings the total estimates down to an +amount forty-five millions less than the corresponding estimates for last +year. This could only be accomplished by cutting off new projects and +suspending for the period of one year all progress in military matters. For +the same reason I have directed that the Army shall not be recruited up to +its present authorized strength. These measures can hardly be more than +temporary--to last until our revenues are in better condition and until the +whole question of the expediency of adopting a definite military policy can +be submitted to Congress, for I am sure that the interests of the military +establishment are seriously in need of careful consideration by Congress. +The laws regulating the organization of our armed forces in the event of +war need to be revised in order that the organization can be modified so as +to produce a force which would be more consistently apportioned throughout +its numerous branches. To explain the circumstances upon which this opinion +is based would necessitate a lengthy discussion, and I postpone it until +the first convenient opportunity shall arise to send to Congress a special +message upon this subject. +</p> + +<p> +The Secretary of War calls attention to a number of needed changes in the +Army in all of which I concur, but the point upon which I place most +emphasis is the need for an elimination bill providing a method by which +the merits of officers shall have some effect upon their advancement and by +which the advancement of all may be accelerated by the effective +elimination of a definite proportion of the least efficient. There are in +every army, and certainly in ours, a number of officers who do not violate +their duty in any such way as to give reason for a court-martial or +dismissal, but who do not show such aptitude and skill and character for +high command as to justify their remaining in the active service to be +Promoted. Provision should be made by which they may be retired on a +certain proportion of their pay, increasing with their length of service at +the time of retirement. There is now a personnel law for the Navy which +itself needs amendment and to which I shall make further reference. Such a +law is needed quite as much for the Army. +</p> + +<p> +The coast defenses of the United States proper are generally all that could +be desired, and in some respects they are rather more elaborate than under +present conditions are needed to stop an enemy's fleet from entering the +harbors defended. There is, however, one place where additional defense is +badly needed, and that is at the mouth of Chesapeake Bay, where it is +proposed to make an artificial island for a fort which shall prevent an +enemy's fleet from entering this most important strategical base of +operations on the whole Atlantic and Gulf coasts. I hope that appropriate +legislation will be adopted to secure the construction of this defense. +</p> + +<p> +The military and naval joint board have unanimously agreed that it would be +unwise to make the large expenditures which at one time were contemplated +in the establishment of a naval base and station in the Philippine Islands, +and have expressed their judgment, in which I fully concur, in favor of +making an extensive naval base at Pearl Harbor, near Honolulu, and not in +the Philippines. This does not dispense with the necessity for the +comparatively small appropriations required to finish the proper coast +defenses in the Philippines now under construction on the island of +Corregidor and elsewhere or to complete a suitable repair station and +coaling supply station at Olongapo, where is the floating dock "Dewey." I +hope that this recommendation of the joint board will end the discussion as +to the comparative merits of Manila Bay and Olongapo as naval stations, and +will lead to prompt measures for the proper equipment and defense of Pearl +Harbor. +</p> + +<p class="noindent"> +THE NAVY. +</p> + +<p> +The return of the battle-ship fleet from its voyage around the world, in +more efficient condition than when it started, was a noteworthy event of +interest alike to our citizens and the naval authorities of the world. +Besides the beneficial and far-reaching effect on our personal and +diplomatic relations in the countries which the fleet visited, the marked +success of the ships in steaming around the world in all weathers on +schedule time has increased respect for our Navy and has added to our +national prestige. +</p> + +<p> +Our enlisted personnel recruited from all sections of the country is young +and energetic and representative of the national spirit. It is, moreover, +owing to its intelligence, capable of quick training into the modern +man-of-warsman. Our officers are earnest and zealous in their profession, +but it is a regrettable fact that the higher officers are old for the +responsibilities of the modern navy, and the admirals do not arrive at flag +rank young enough to obtain adequate training in their duties as flag +officers. This need for reform in the Navy has been ably and earnestly +presented to Congress by my predecessor, and I also urgently recommend the +subject for consideration. +</p> + +<p> +Early in the coming session a comprehensive plan for the reorganization of +the officers of all corps of the Navy will be presented to Congress, and I +hope it will meet with action suited to its urgency. +</p> + +<p> +Owing to the necessity for economy in expenditures, I have directed the +curtailment of recommendations for naval appropriations so that they are +thirty-eight millions less than the corresponding estimates of last year, +and the request for new naval construction is limited to two first-class +battle ships and one repair vessel. +</p> + +<p> +The use of a navy is for military purposes, and there has been found need +in the Department of a military branch dealing directly with the military +use of the fleet. The Secretary of the Navy has also felt the lack of +responsible advisers to aid him in reaching conclusions and deciding +important matters between coordinate branches of the Department. To secure +these results he has inaugurated a tentative plan involving certain changes +in the organization of the Navy Department, including the navy-yards, all +of which have been found by the Attorney-General to be in accordance with +law. I have approved the execution of the plan proposed because of the +greater efficiency and economy it promises. +</p> + +<p> +The generosity of Congress has provided in the present Naval Observatory +the most magnificent and expensive astronomical establishment in the world. +It is being used for certain naval purposes which might easily and +adequately be subserved by a small division connected with the Naval +Department at only a fraction of the cost of the present Naval Observatory. +The official Board of Visitors established by Congress and appointed in +1901 expressed its conclusion that the official head of the observatory +should be an eminent astronomer appointed by the President by and with the +advice and consent of the Senate, holding his place by a tenure at least as +permanent as that of the Superintendent of the Coast Survey or the head of +the Geological Survey, and not merely by a detail of two or three years' +duration. I fully concur in this judgment, and urge a provision by law for +the appointment of such a director. +</p> + +<p> +It may not be necessary to take the observatory out of the Navy Department +and put it into another department in which opportunity for scientific +research afforded by the observatory would seem to be more appropriate, +though I believe such a transfer in the long run is the best policy. I am +sure, however, I express the desire of the astronomers and those learned in +the kindred sciences when I urge upon Congress that the Naval Observatory +be now dedicated to science under control of a man of science who can, if +need be, render all the service to the Navy Department which this +observatory now renders, and still furnish to the world the discoveries in +astronomy that a great astronomer using such a plant would be likely to +make. +</p> + +<p class="noindent"> +DEPARTMENT OF JUSTICE EXPEDITION IN LEGAL PROCEDURE +</p> + +<p> +The deplorable delays in the administration of civil and criminal law have +received the attention of committees of the American Bar Association and of +many State Bar Associations, as well as the considered thought of judges +and jurists. In my judgment, a change in judicial procedure, with a view to +reducing its expense to private litigants in civil cases and facilitating +the dispatch of business and final decision in both civil and criminal +cases, constitutes the greatest need in our American institutions. I do not +doubt for one moment that much of the lawless violence and cruelty +exhibited in lynchings is directly due to the uncertainties and injustice +growing out of the delays in trials, judgments, and the executions thereof +by our courts. Of course these remarks apply quite as well to the +administration of justice in State courts as to that in Federal courts, and +without making invidious distinction it is perhaps not too much to say +that, speaking generally, the defects are less in the Federal courts than +in the State courts. But they are very great in the Federal courts. The +expedition with which business is disposed of both on the civil and the +criminal side of English courts under modern rules of procedure makes the +delays in our courts seem archaic and barbarous. The procedure in the +Federal courts should furnish an example for the State courts. I presume it +is impossible, without an amendment to the Constitution, to unite under one +form of action the proceedings at common law and proceedings in equity in +the Federal courts, but it is certainly not impossible by a statute to +simplify and make short and direct the procedure both at law and in equity +in those courts. It is not impossible to cut down still more than it is cut +down, the jurisdiction of the Supreme Court so as to confine it almost +wholly to statutory and constitutional questions. Under the present +statutes the equity and admiralty procedure in the Federal courts is under +the control of the Supreme Court, but in the pressure of business to which +that court is subjected, it is impossible to hope that a radical and proper +reform of the Federal equity procedure can be brought about. I therefore +recommend legislation providing for the appointment by the President of a +commission with authority to examine the law and equity procedure of the +Federal courts of first instance, the law of appeals from those courts to +the courts of appeals and to the Supreme Court, and the costs imposed in +such procedure upon the private litigants and upon the public treasury and +make recommendation with a view to simplifying and expediting the procedure +as far as possible and making it as inexpensive as may be to the litigant +of little means. +</p> + +<p class="noindent"> +INJUNCTIONS WITHOUT NOTICE. +</p> + +<p> +The platform of the successful party in the last election contained the +following: "The Republican party will uphold at all times the authority and +integrity of the courts, State and Federal, and will ever insist that their +powers to enforce their process and to protect life, liberty, and property +shall be preserved inviolate. We believe, however, that the rules of +procedure in the Federal courts with respect to the issuance of the writ of +injunction should be more accurately defined by statute, and that no +injunction or temporary restraining order should be issued without notice, +except where irreparable injury would result from delay, in which case a +speedy hearing thereafter should be granted." I recommend that in +compliance with the promise thus made, appropriate legislation be adopted. +The ends of justice will best be met and the chief cause of complaint +against ill-considered injunctions without notice will be removed by the +enactment of a statute forbidding hereafter the issuing of any injunction +or restraining order, whether temporary or permanent, by any Federal court, +without previous notice and a reasonable opportunity to be heard on behalf +of the parties to be enjoined; unless it shall appear to the satisfaction +of the court that the delay necessary to give such notice and hearing would +result in irreparable injury to the complainant and unless also the court +shall from the evidence make a written finding, which shall be spread upon +the court minutes, that immediate and irreparable injury is likely to ensue +to the complainant, and shall define the injury, state why it is +irreparable, and shall also endorse on the order issued the date and the +hour of the issuance of the order. Moreover, every such injunction or +restraining order issued without previous notice and opportunity by the +defendant to be heard should by force of the statute expire and be of no +effect after seven days from the issuance thereof or within any time less +than that period which the court may fix, unless within such seven days or +such less period, the injunction or order is extended or renewed after +previous notice and opportunity to be heard. +</p> + +<p> +My judgment is that the passage of such an act which really embodies the +best practice in equity and is very like the rule now in force in some +courts will prevent the issuing of ill-advised orders of injunction without +notice and will render such orders when issued much less objectionable by +the short time in which they may remain effective. +</p> + +<p class="noindent"> +ANTI-TRUST AND INTERSTATE COMMERCE LAWS. +</p> + +<p> +The jurisdiction of the General Government over interstate commerce has led +to the passage of the so-called "Sherman Anti-trust Law" and the +"Interstate Commerce Law" and its amendments. The developments in the +operation of those laws, as shown by indictments, trials, judicial +decisions, and other sources of information, call for a discussion and some +suggestions as to amendments. These I prefer to embody in a special message +instead of including them in the present communication, and I shall avail +myself of the first convenient opportunity to bring these subjects to the +attention of Congress. +</p> + +<p class="noindent"> +JAIL OF THE DISTRICT OF COLUMBIA. +</p> + +<p> +My predecessor transmitted to the Congress a special message on January 11, +1909, accompanying the report of Commissioners theretofore appointed to +investigate the jail, workhouse, etc., in the District of Columbia, in +which he directed attention to the report as setting forth vividly, "the +really outrageous conditions in the workhouse and jail." +</p> + +<p> +The Congress has taken action in pursuance of the recommendations of that +report and of the President, to the extent of appropriating funds and +enacting the necessary legislation for the establishment of a workhouse and +reformatory. No action, however, has been taken by the Congress with +respect to the jail, the conditions of which are still antiquated and +insanitary. I earnestly recommend the passage of a sufficient appropriation +to enable a thorough remodeling of that institution to be made without +delay. It is a reproach to the National Government that almost under the +shadow of the Capitol Dome prisoners should be confined in a building +destitute of the ordinary decent appliances requisite to cleanliness and +sanitary conditions. +</p> + +<p class="noindent"> +POST-OFFICE DEPARTMENT. SECOND-CLASS MAIL MATTER. +</p> + +<p> +The deficit every year in the Post-Office Department is largely caused by +the low rate of postage of 1 cent a pound charged on second-class mail +matter, which includes not only newspapers, but magazines and miscellaneous +periodicals. The actual loss growing out of the transmission of this +second-class mail matter at 1 cent a pound amounts to about $63,000,000 a +year. The average cost of the transportation of this matter is more than 9 +cents a pound. +</p> + +<p> +It appears that the average distance over which newspapers are delivered to +their customers is 291 miles, while the average haul of magazines is 1,049, +and of miscellaneous periodicals 1,128 miles. Thus, the average haul of the +magazine is three and one-half times and that of the miscellaneous +periodical nearly four times the haul of the daily newspaper, yet all of +them pay the same postage rate of 1 cent a pound. The statistics of 1907 +show that second-class mail matter constituted 63.91 per cent. of the +weight of all the mail, and yielded only 5.19 per cent. of the revenue. +</p> + +<p> +The figures given are startling, and show the payment by the Government of +an enormous subsidy to the newspapers, magazines, and periodicals, and +Congress may well consider whether radical steps should not be taken to +reduce the deficit in the Post-Office Department caused by this discrepancy +between the actual cost of transportation and the compensation exacted +therefor. +</p> + +<p> +A great saving might be made, amounting to much more than half of the loss, +by imposing upon magazines and periodicals a higher rate of postage. They +are much heavier than newspapers, and contain a much higher proportion of +advertising to reading matter, and the average distance of their +transportation is three and a half times as great. +</p> + +<p> +The total deficit for the last fiscal year in the Post-Office Department +amounted to $17,500,000. The branches of its business which it did at a +loss were the second-class mail service, in which the loss, as already +said, was $63,000,000, and the free rural delivery, in which the loss was +$28,000,000. These losses were in part offset by the profits of the letter +postage and other sources of income. It would seem wise to reduce the loss +upon second-class mail matter, at least to the extent of preventing a +deficit in the total operations of the Post-Office. +</p> + +<p> +I commend the whole subject to Congress, not unmindful of the spread of +intelligence which a low charge for carrying newspapers and periodicals +assists. I very much doubt, however, the wisdom of a policy which +constitutes so large a subsidy and requires additional taxation to meet +it. +</p> + +<p class="noindent"> +POSTAL SAVINGS BANKS. +</p> + +<p> +The second subject worthy of mention in the Post-Office Department is the +real necessity and entire practicability of establishing postal savings +banks. The successful party at the last election declared in favor of +postal savings banks, and although the proposition finds opponents in many +parts of the country, I am convinced that the people desire such banks, and +am sure that when the banks are furnished they will be productive of the +utmost good. The postal savings banks are not constituted for the purpose +of creating competition with other banks. The rate of interest upon +deposits to which they would be limited would be so small as to prevent +their drawing deposits away from other banks. +</p> + +<p> +I believe them to be necessary in order to offer a proper inducement to +thrift and saving to a great many people of small means who do not now have +banking facilities, and to whom such a system would offer an opportunity +for the accumulation of capital. They will furnish a satisfactory +substitute, based on sound principle and actual successful trial in nearly +all the countries of the world, for the system of government guaranty of +deposits now being adopted in several western States, which with deference +to those who advocate it seems to me to have in it the seeds of +demoralization to conservative banking and certain financial disaster. The +question of how the money deposited in postal savings banks shall be +invested is not free from difficulty, but I believe that a satisfactory +provision for this purpose was inserted as an amendment to the bill +considered by the Senate at its last session. It has been proposed to delay +the consideration of legislation establishing a postal savings bank until +after the report of the Monetary Commission. This report is likely to be +delayed, and properly so, cause of the necessity for careful deliberation +and close investigation. I do not see why the one should be tied up with +the other. It is understood that the Monetary Commission have looked into +the systems of banking which now prevail abroad, and have found that by a +control there exercised in respect to reserves and the rates of exchange by +some central authority panics are avoided. It is not apparent that a system +of postal savings banks would in any way interfere with a change to such a +system here. Certainly in most of the countries of Europe where control is +thus exercised by a central authority, postal savings banks exist and are +not thought to be inconsistent with a proper financial and banking system. +</p> + +<p class="noindent"> +SHIP SUBSIDY. +</p> + +<p> +Following the course of my distinguished predecessor, I earnestly recommend +to Congress the consideration and passage of a ship subsidy bill, looking +to the establishment of lines between our Atlantic seaboard and the eastern +coast of South America, as well as lines from the west coast of the United +States to South America. China, Japan, and the Philippines. The profits on +foreign mails are perhaps a sufficient measure of the expenditures which +might first be tentatively applied to this method of inducing American +capital to undertake the establishment of American lines of steamships in +those directions in which we now feel it most important that we should have +means of transportation controlled in the interest of the expansion of our +trade. A bill of this character has once passed the House and more than +once passed the Senate, and I hope that at this session a bill framed on +the same lines and with the same purposes may become a law. +</p> + +<p class="noindent"> +INTERIOR DEPARTMENT. NEW MEXICO AND ARIZONA. +</p> + +<p> +The successful party in the last election in its national platform declared +in favor of the admission as separate States of New Mexico and Arizona, and +I recommend that legislation appropriate to this end be adopted. I urge, +however, that care be exercised in the preparation of the legislation +affecting each Territory to secure deliberation in the selection of persons +as members of the convention to draft a constitution for the incoming +State, and I earnestly advise that such constitution after adoption by the +convention shall be submitted to the people of the Territory for their +approval at an election in which the sole issue shall be the merits of the +proposed constitution, and if the constitution is defeated by popular vote +means shall be provided in the enabling act for a new convention and the +drafting of a new constitution. I think it vital that the issue as to the +merits of the constitution should not be mixed up with the selection of +State officers, and that no election of State officers should be had until +after the constitution has been fully approved and finally settled upon. +</p> + +<p class="noindent"> +ALASKA. +</p> + +<p> +With respect to the Territory of Alaska, I recommend legislation which +shall provide for the appointment by the President of a governor and also +of an executive council, the members of which shall during their term of +office reside in the Territory, and which shall have legislative powers +sufficient to enable it to give to the Territory local laws adapted to its +present growth. I strongly deprecate legislation looking to the election of +a Territorial legislature in that vast district. The lack of permanence of +residence of a large part of the present population and the small number of +the people who either permanently or temporarily reside in the district as +compared with its vast expanse and the variety of the interests that have +to be subserved, make it altogether unfitting in my judgment to provide for +a popular election of a legislative body. The present system is not +adequate and does not furnish the character of local control that ought to +be there. The only compromise it seems to me which may give needed local +legislation and secure a conservative government is the one I propose. +</p> + +<p class="noindent"> +CONSERVATION OF NATIONAL RESOURCES. +</p> + +<p> +In several Departments there is presented the necessity for legislation +looking to the further conservation of our national resources, and the +subject is one of such importance as to require a more detailed and +extended discussion than can be entered upon in this communication. For +that reason I shall take an early opportunity to send a special message to +Congress on the subject of the improvement of our waterways, upon the +reclamation and irrigation of arid, semiarid, and swamp lands; upon the +preservation of our forests and the reforesting of suitable areas; upon the +reclassification of the public domain with a view of separating from +agricultural settlement mineral, coal, and phosphate lands and sites +belonging to the Government bordering on streams suitable for the +utilization of water power. +</p> + +<p class="noindent"> +DEPARTMENT OF AGRICULTURE. +</p> + +<p> +I commend to your careful consideration the report of the Secretary of +Agriculture as showing the immense sphere of usefulness which that +Department now fills and the wonderful addition to the wealth of the nation +made by the farmers of this country in the crops of the current year. +</p> + +<p class="noindent"> +DEPARTMENT OF COMMERCE AND LABOR. THE LIGHT-HOUSE BOARD. +</p> + +<p> +The Light-House Board now discharges its duties under the Department of +Commerce and Labor. For upwards of forty years this Board has been +constituted of military and naval officers and two or three men of science, +with such an absence of a duly constituted executive head that it is +marvelous what work has been accomplished. In the period of construction +the energy and enthusiasm of all the members prevented the inherent defects +of the system from interfering greatly with the beneficial work of the +Board, but now that the work is chiefly confined to maintenance and repair, +for which purpose the country is divided into sixteen districts, to which +are assigned an engineer officer of the Army and an inspector of the Navy, +each with a light-house tender and the needed plant for his work, it has +become apparent by the frequent friction that arises, due to the absence of +any central independent authority, that there must be a complete +reorganization of the Board. I concede the advantage of keeping in the +system the rigidity of discipline that the presence of naval and military +officers in charge insures, but unless the presence of such officers in the +Board can be made consistent with a responsible executive head that shall +have proper authority, I recommend the transfer of control over the +light-houses to a suitable civilian bureau. This is in accordance with the +judgment of competent persons who are familiar with the workings of the +present system. I am confident that a reorganization can be effected which +shall avoid the recurrence of friction between members, instances of which +have been officially brought to my attention, and that by such +reorganization greater efficiency and a substantial reduction in the +expense of operation can be brought about. +</p> + +<p class="noindent"> +CONSOLIDATION OF BUREAUS. +</p> + +<p> +I request Congressional authority to enable the Secretary of Commerce and +Labor to unite the Bureaus of Manufactures and Statistics. This was +recommended by a competent committee appointed in the previous +administration for the purpose of suggesting changes in the interest of +economy and efficiency, and is requested by the Secretary. +</p> + +<p class="noindent"> +THE WHITE SLAVE TRADE. +</p> + +<p> +I greatly regret to have to say that the investigations made in the Bureau +of Immigration and other sources of information lead to the view that there +is urgent necessity for additional legislation and greater executive +activity to suppress the recruiting of the ranks of prostitutes from the +streams of immigration into this country--an evil which, for want of a +better name, has been called "The White Slave Trade." I believe it to be +constitutional to forbid, under penalty, the transportation of persons for +purposes of prostitution across national and state lines; and by +appropriating a fund of $50,000 to be used by the Secretary of Commerce and +Labor for the employment of special inspectors it will be possible to bring +those responsible for this trade to indictment and conviction under a +federal law. +</p> + +<p class="noindent"> +BUREAU OF HEALTH +</p> + +<p> +For a very considerable period a movement has been gathering strength, +especially among the members of the medical profession, in favor of a +concentration of the instruments of the National Government which have to +do with the promotion of public health. In the nature of things, the +Medical Department of the Army and the Medical Department of the Navy must +be kept separate. But there seems to be no reason why all the other bureaus +and offices in the General Government which have to do with the public +health or subjects akin thereto should not be united in a bureau to be +called the "Bureau of Public Health." This would necessitate the transfer +of the Marine-Hospital Service to such a bureau. I am aware that there is +wide field in respect to the public health committed to the States in which +the Federal Government can not exercise jurisdiction, but we have seen in +the Agricultural Department the expansion into widest usefulness of a +department giving attention to agriculture when that subject is plainly one +over which the States properly exercise direct jurisdiction. The +opportunities offered for useful research and the spread of useful +information in regard to the cultivation of the soil and the breeding of +stock and the solution of many of the intricate problems in progressive +agriculture have demonstrated the wisdom of establishing that department. +Similar reasons, of equal force, can be given for the establishment of a +bureau of health that shall not only exercise the police jurisdiction of +the Federal Government respecting quarantine, but which shall also afford +an opportunity for investigation and research by competent experts into +questions of health affecting the whole country, or important sections +thereof, questions which, in the absence of Federal governmental work, are +not likely to be promptly solved. +</p> + +<p class="noindent"> +CIVIL SERVICE COMMISSION. +</p> + +<p> +The work of the United States Civil Service Commission has been performed +to the general satisfaction of the executive officers with whom the +Commission has been brought into official communication. The volume of that +work and its variety and extent have under new laws, such as the Census +Act, and new Executive orders, greatly increased. The activities of the +Commission required by the statutes have reached to every portion of the +public domain. +</p> + +<p> +The accommodations of the Commission are most inadequate for its needs. I +call your attention to its request for increase in those accommodations as +will appear from the annual report for this year. +</p> + +<p class="noindent"> +POLITICAL CONTRIBUTIONS. +</p> + +<p> +I urgently recommend to Congress that a law be passed requiring that +candidates in elections of Members of the House of Representatives, and +committees in charge of their candidacy and campaign, file in a proper +office of the United States Government a statement of the contributions +received and of the expenditures incurred in the campaign for such +elections and that similar legislation be enacted in respect to all other +elections which are constitutionally within the control of Congress. +</p> + +<p class="noindent"> +FREEDMAN'S SAVINGS AND TRUST COMPANY. +</p> + +<p> +Recommendations have been made by my predecessors that Congress appropriate +a sufficient sum to pay the balance--about 38 per cent.--of the amounts due +depositors in the Freedman's Savings and Trust Company. I renew this +recommendation, and advise also that a proper limitation be prescribed +fixing a period within which the claims may be presented, that assigned +claims be not recognized, and that a limit be imposed on the amount of fees +collectible for services in presenting such claims. +</p> + +<p class="noindent"> +SEMI-CENTENNIAL OF NEGRO FREEDOM. +</p> + +<p> +The year 1913 will mark the fiftieth anniversary of the issuance of the +Emancipation Proclamation granting freedom to the negroes. It seems fitting +that this event should be properly celebrated. Already a movement has been +started by prominent Negroes, encouraged by prominent white people and the +press. The South especially is manifesting its interest in this movement. +</p> + +<p> +It is suggested that a proper form of celebration would be an exposition to +show the progress the Negroes have made, not only during their period of +freedom, but also from the time of their coming to this country. +</p> + +<p> +I heartily indorse this proposal, and request that the Executive be +authorized to appoint a preliminary commission of not more than seven +persons to consider carefully whether or not it is wise to hold such an +exposition, and if so, to outline a plan for the enterprise. I further +recommend that such preliminary commission serve without salary, except as +to their actual expenses, and that an appropriation be made to meet such +expenses. CONCLUSION. +</p> + +<p> +I have thus, in a message compressed as much as the subjects will permit, +referred to many of the legislative needs of the country, with the +exceptions already noted. Speaking generally, the country is in a high +state of prosperity. There is every reason to believe that we are on the +eve of a substantial business expansion, and we have just garnered a +harvest unexampled in the market value of our agricultural products. The +high prices which such products bring mean great prosperity for the farming +community, but on the other hand they mean a very considerably increased +burden upon those classes in the community whose yearly compensation does +not expand with the improvement in business and the general prosperity. +Various reasons are given for the high prices. The proportionate increase +in the output of gold, which to-day is the chief medium of exchange and is +in some respects a measure of value, furnishes a substantial explanation of +at least a part of the increase in prices. The increase in population and +the more expensive mode of living of the people, which have not been +accompanied by a proportionate increase in acreage production, may furnish +a further reason. It is well to note that the increase in the cost of +living is not confined to this country, but prevails the world over, and +that those who would charge increases in prices to the existing protective +tariff must meet the fact that the rise in prices has taken place almost +wholly in those products of the factory and farm in respect to which there +has been either no increase in the tariff or in many instances a very +considerable reduction. +</p> + +<p><br /><br /><br /></p> + +<p class="t3"> +*** +</p> + +<p><a id="dec1910"></a></p> + +<p class="noindent"> +State of the Union Address<br /> +William H. Taft<br /> +December 6, 1910<br /> +</p> + +<p class="noindent"> +To the Senate and House of Representatives: +</p> + +<p> +During the past year the foreign relations of the United States have +continued upon a basis of friendship and good understanding. +</p> + +<p> +ARBITRATION. +</p> + +<p> +The year has been notable as witnessing the pacific settlement of two +important international controversies before the Permanent Court of The +Hague. +</p> + +<p> +The arbitration of the Fisheries dispute between the United States and +Great Britain, which has been the source of nearly continuous diplomatic +correspondence since the Fisheries Convention of 1818, has given an award +which is satisfactory to both parties. This arbitration is particularly +noteworthy not only because of the eminently just results secured, but also +because it is the first arbitration held under the general arbitration +treaty of April 4, 1908, between the United States and Great Britain, and +disposes of a controversy the settlement of which has resisted every other +resource of diplomacy, and which for nearly ninety years has been the cause +of friction between two countries whose common interest lies in maintaining +the most friendly and cordial relations with each other. +</p> + +<p> +The United States was ably represented before the tribunal. The complicated +history of the questions arising made the issue depend, more than +ordinarily in such cases, upon the care and skill with which our case was +presented, and I should be wanting in proper recognition of a great +patriotic service if I did not refer to the lucid historical analysis of +the facts and the signal ability and force of the argument--six days in +length--presented to the Court in support of our case by Mr. Elihu Root. As +Secretary of State, Mr. Root had given close study to the intricate facts +bearing on the controversy, and by diplomatic correspondence had helped to +frame the issues. At the solicitation of the Secretary of State and myself, +Mr. Root, though burdened by his duties as Senator from New York, undertook +the preparation of the case as leading counsel, with the condition imposed +by himself that, in view of his position as Senator, he should not receive +any compensation. +</p> + +<p> +The Tribunal constituted at The Hague by the Governments of the United +States and Venezuela has completed its deliberations and has rendered an +award in the case of the Orinoco Steamship Company against Venezuela. The +award may be regarded as satisfactory since it has, pursuant to the +contentions of the United States, recognized a number of important +principles making for a judicial attitude in the determining of +international disputes. +</p> + +<p> +In view of grave doubts which had been raised as to the constitutionality +of The Hague Convention for the establishment of an International Prize +Court, now before the Senate for ratification, because of that provision of +the Convention which provides that there may be an appeal to the proposed +Court from the decisions of national courts, this government proposed in an +Identic Circular Note addressed to those Powers who had taken part in the +London Maritime Conference, that the powers signatory to the Convention, if +confronted with such difficulty, might insert a reservation to the effect +that appeals to the International Prize Court in respect to decisions of +its national tribunals, should take the form of a direct claim for +compensation; that the proceedings thereupon to be taken should be in the +form of a trial de novo, and that judgment of the Court should consist of +compensation for the illegal capture, irrespective of the decision of the +national court whose judgment had thus been internationally involved. As +the result of an informal discussion it was decided to provide such +procedure by means of a separate protocol which should be ratified at the +same time as the Prize Court Convention itself. +</p> + +<p> +Accordingly, the Government of the Netherlands, at the request of this +Government, proposed under date of May 24, 1910, to the powers signatory to +The Hague Convention, the negotiation of a supplemental protocol embodying +stipulations providing for this alternative procedure. It is gratifying to +observe that this additional protocol is being signed without objection, by +the powers signatory to the original convention, and there is every reason +to believe that the International Prize Court will be soon established. +</p> + +<p> +The Identic Circular Note also proposed that the International Prize Court +when established should be endowed with the functions of an Arbitral Court +of Justice under and pursuant to the recommendation adopted by the last +Hague Conference. The replies received from the various powers to this +proposal inspire the hope that this also may be accomplished within the +reasonably near future. +</p> + +<p> +It is believed that the establishment of these two tribunals will go a long +way toward securing the arbitration of many questions which have heretofore +threatened and, at times, destroyed the peace of nations. +</p> + +<p> +PEACE COMMISSION. +</p> + +<p> +Appreciating these enlightened tendencies of modern times, the Congress at +its last session passed a law providing for the appointment of a commission +of five members "to be appointed by the President of the United States to +consider the expediency of utilizing existing international agencies for +the purpose of limiting the armaments of the nations of the world by +international agreement, and of constituting the combined navies of the +world an international force for the preservation of universal peace, and +to consider and report upon any other means to diminish the expenditures of +government for military purposes and to lessen the probabilities of war." +</p> + +<p> +I have not as yet made appointments to this Commission because I have +invited and am awaiting the expressions of foreign governments as to their +willingness to cooperate with us in the appointment of similar commissions +or representatives who would meet with our commissioners and by joint +action seek to make their work effective. +</p> + +<p> +GREAT BRITAIN AND CANADA. +</p> + +<p> +Several important treaties have been negotiated with Great Britain in the +past twelve months. A preliminary diplomatic agreement has been reached +regarding the arbitration of pecuniary claims which each Government has +against the other. This agreement, with the schedules of claims annexed, +will, as soon as the schedules are arranged, be submitted to the Senate for +approval. +</p> + +<p> +An agreement between the United States and Great Britain with regard to the +location of the international boundary line between the United States and +Canada in Passamaquoddy Bay and to the middle of Grand Manan Channel was +reached in a Treaty concluded May 21, 1910, which has been ratified by both +Governments and proclaimed, thus making unnecessary the arbitration +provided for in the previous treaty of April 11, 1908. +</p> + +<p> +The Convention concluded January 11, 1909, between the United States and +Great Britain providing for the settlement of international differences +between the United States and Canada including the apportionment between +the two countries of certain of the boundary waters and the appointment of +Commissioners to adjust certain other questions has been ratified by both +Governments and proclaimed. +</p> + +<p> +The work of the International Fisheries Commission appointed in 1908, under +the treaty of April 11, 1908, between Great Britain and the United States, +has resulted in the formulation and recommendation of uniform regulations +governing the fisheries of the boundary waters of Canada and the United +States for the purpose of protecting and increasing the supply of food fish +in such waters. In completion of this work, the regulations agreed upon +require congressional legislation to make them effective and for their +enforcement in fulfillment of the treaty stipulations. PORTUGAL. +</p> + +<p> +In October last the monarchy in Portugal was overthrown, a provisional +Republic was proclaimed, and there was set up a de facto Government which +was promptly recognized by the Government of the United States for purposes +of ordinary intercourse pending formal recognition by this and other Powers +of the Governmental entity to be duly established by the national +sovereignty. LIBERIA. +</p> + +<p> +A disturbance among the native tribes of Liberia in a portion of the +Republic during the early part of this year resulted in the sending, under +the Treaty of 1862, of an American vessel of war to the disaffected +district, and the Liberian authorities, assisted by the good offices of the +American Naval Officers, were able to restore order. The negotiations which +have been undertaken for the amelioration of the conditions found in +Liberia by the American Commission, whose report I transmitted to Congress +on March 25 last, are being brought to conclusion, and it is thought that +within a short time practical measures of relief may be put into effect +through the good offices of this Government and the cordial cooperation of +other governments interested in Liberia's welfare. +</p> + +<p> +THE NEAR EAST. TURKEY. +</p> + +<p> +To return the visit of the Special Embassy announcing the accession of His +Majesty Mehemet V, Emperor of the Ottomans, I sent to Constantinople a +Special Ambassador who, in addition to this mission of ceremony, was +charged with the duty of expressing to the Ottoman Government the value +attached by the Government of the United States to increased and more +important relations between the countries and the desire of the United +States to contribute to the larger economic and commercial development due +to the new regime in Turkey. +</p> + +<p> +The rapid development now beginning in that ancient empire and the marked +progress and increased commercial importance of Bulgaria, Roumania, and +Servia make it particularly opportune that the possibilities of American +commerce in the Near East should receive due attention. MONTENEGRO. +</p> + +<p> +The National Skoupchtina having expressed its will that the Principality of +Montenegro be raised to the rank of Kingdom, the Prince of Montenegro on +August 15 last assumed the title of King of Montenegro. It gave me pleasure +to accord to the new kingdom the recognition of the United States. +</p> + +<p> +THE FAR EAST. +</p> + +<p> +The center of interest in Far Eastern affairs during the past year has +again been China. +</p> + +<p> +It is gratifying to note that the negotiations for a loan to the Chinese +Government for the construction of the trunk railway lines from Hankow +southward to Canton and westward through the Yangtse Valley, known as the +Hukuang Loan, were concluded by the representatives of the various +financial groups in May last and the results approved by their respective +governments. The agreement, already initialed by the Chinese Government, is +now awaiting formal ratification. The basis of the settlement of the terms +of this loan was one of exact equality between America, Great Britain, +France, and Germany in respect to financing the loan and supplying +materials for the proposed railways and their future branches. +</p> + +<p> +The application of the principle underlying the policy of the United States +in regard to the Hukuang Loan, viz., that of the internationalization of +the foreign interest in such of the railways of China as may be financed by +foreign countries, was suggested on a broader scale by the Secretary of +State in a proposal for internationalization and commercial neutralization +of all the railways of Manchuria. While the principle which led to the +proposal of this Government was generally admitted by the powers to whom it +was addressed, the Governments of Russia and Japan apprehended practical +difficulties in the execution of the larger plan which prevented their +ready adherence. The question of constructing the Chinchow-Aigun railway by +means of an international loan to China is, however, still the subject of +friendly discussion by the interested parties. +</p> + +<p> +The policy of this Government in these matters has been directed by a +desire to make the use of American capital in the development of China an +instrument in the promotion of China's welfare and material prosperity +without prejudice to her legitimate rights as an independent political +power. +</p> + +<p> +This policy has recently found further exemplification in the assistance +given by this Government to the negotiations between China and a group of +American bankers for a loan of $50,000,000 to be employed chiefly in +currency reform. The confusion which has from ancient times existed in the +monetary usages of the Chinese has been one of the principal obstacles to +commercial intercourse with that people. The United States in its Treaty of +1903 with China obtained a pledge from the latter to introduce a uniform +national coinage, and the following year, at the request of China, this +Government sent to Peking a member of the International Exchange +Commission, to discuss with the Chinese Government the best methods of +introducing the reform. In 1908 China sent a Commissioner to the United +States to consult with American financiers as to the possibility of +securing a large loan with which to inaugurate the new currency system, but +the death of Their Majesties, the Empress Dowager and the Emperor of China, +interrupted the negotiations, which were not resumed until a few months +ago, when this Government was asked to communicate to the bankers concerned +the request of China for a loan of $50,000,000 for the purpose under +review. A preliminary agreement between the American group and China has +been made covering the loan. +</p> + +<p> +For the success of this loan and the contemplated reforms which are of the +greatest importance to the commercial interests of the United States and +the civilized world at large, it is realized that an expert will be +necessary, and this Government has received assurances from China that such +an adviser, who shall be an American, will be engaged. +</p> + +<p> +It is a matter of interest to Americans to note the success which is +attending the efforts of China to establish gradually a system of +representative government. The provincial assemblies were opened in +October, 1909, and in October of the present year a consultative body, the +nucleus of the future national parliament, held its first session at +Peking. +</p> + +<p> +The year has further been marked by two important international agreements +relating to Far Eastern affairs. In the Russo-Japanese Agreement relating +to Manchuria, signed July 4, 1910, this Government was gratified to note an +assurance of continued peaceful conditions in that region and the +reaffirmation of the policies with respect to China to which the United +States together with all other interested powers are alike solemnly +committed. +</p> + +<p> +The treaty annexing Korea to the Empire of Japan, promulgated August 29, +1910, marks the final step in a process of control of the ancient empire by +her powerful neighbor that has been in progress for several years past. In +communicating the fact of annexation the Japanese Government gave to the +Government of the United States assurances of the full protection of the +rights of American citizens in Korea under the changed conditions. +</p> + +<p> +Friendly visits of many distinguished persons from the Far East have been +made during the year. Chief among these were Their Imperial Highnesses +Princes Tsai-tao and Tsai-Hsun of China; and His Imperial Highness Prince +Higashi Fushimi, and Prince Tokugawa, President of the House of Peers of +Japan. The Secretary of War has recently visited Japan and China in +connection with his tour to the Philippines, and a large delegation of +American business men are at present traveling in China. This exchange of +friendly visits has had the happy effect of even further strengthening our +friendly international relations. +</p> + +<p> +LATIN AMERICA. +</p> + +<p> +During the past year several of our southern sister Republics celebrated +the one hundredth anniversary of their independence. In honor of these +events, special embassies were sent from this country to Argentina, Chile, +and Mexico, where the gracious reception and splendid hospitality extended +them manifested the cordial relations and friendship existing between those +countries and the United States, relations which I am happy to believe have +never before been upon so high a plane and so solid a basis as at present. +</p> + +<p> +The Congressional commission appointed under a concurrent resolution to +attend the festivities celebrating the centennial anniversary of Mexican +independence, together with a special ambassador, were received with the +highest honors and with the greatest cordiality, and returned with the +report of the bounteous hospitality and warm reception of President Diaz +and the Mexican people, which left no doubt of the desire of the +immediately neighboring Republic to continue the mutually beneficial and +intimate relations which I feel sure the two governments will ever +cherish. +</p> + +<p> +At the Fourth Pan-American Conference which met in Buenos Aires during July +and August last, after seven weeks of harmonious deliberation, three +conventions were signed providing for the regulation of trade-marks, +patents, and copyrights, which when ratified by the different Governments, +will go far toward furnishing to American authors, patentees, and owners of +trade-marks the protection needed in localities where heretofore it has +been either lacking or inadequate. Further, a convention for the +arbitration of pecuniary claims was signed and a number of important +resolutions passed. The Conventions will in due course be transmitted to +the Senate, and the report of the Delegation of the United States will be +communicated to the Congress for its information. The special cordiality +between representative men from all parts of America which was shown at +this Conference cannot fail to react upon and draw still closer the +relations between the countries which took part in it. +</p> + +<p> +The International Bureau of American Republics is doing a broad and useful +work for Pan American commerce and comity. Its duties were much enlarged by +the International Conference of American States at Buenos Aires and its +name was shortened to the more practical and expressive term of Pan +American Union. Located now in its new building, which was specially +dedicated April 26 of this year to the development of friendship, trade and +peace among the American nations, it has improved instrumentalities to +serve the twenty-two republics of this hemisphere. +</p> + +<p> +I am glad to say that the action of the United States in its desire to +remove imminent danger of war between Peru and Ecuador growing out of a +boundary dispute, with the cooperation of Brazil and the Argentine Republic +as joint mediators with this Government, has already resulted successfully +in preventing war. The Government of Chile, while not one of the mediators, +lent effective aid in furtherance of a preliminary agreement likely to lead +on to an amicable settlement, and it is not doubted that the good offices +of the mediating Powers and the conciliatory cooperation of the Governments +directly interested will finally lead to a removal of this perennial cause +of friction between Ecuador and Peru. The inestimable value of cordial +cooperation between the sister republics of America for the maintenance of +peace in this hemisphere has never been more clearly shown than in this +mediation, by which three American Governments have given to this +hemisphere the honor of first invoking the most far-reaching provisions of +The Hague Convention for the pacific settlement of international disputes. +</p> + +<p> +There has been signed by the representatives of the United States and +Mexico a protocol submitting to the United States-Mexican Boundary +Commission (whose membership for the purpose of this case is to be +increased by the addition of a citizen of Canada) the question of +sovereignty over the Chamizal Tract which lies within the present physical +boundaries of the city of E1 Paso, Tex. The determination of this question +will remove a source of no little annoyance to the two Governments. +</p> + +<p> +The Republic of Honduras has for many years been burdened with a heavy +bonded debt held in Europe, the interest on which long ago fell in arrears. +Finally conditions were such that it became imperative to refund the debt +and place the finances of the Republic upon a sound basis. Last year a +group of American bankers undertook to do this and to advance funds for +railway and other improvements contributing directly to the country's +prosperity and commerce--an arrangement which has long been desired by this +Government. Negotiations to this end have been under way for more than a +year and it is now confidently believed that a short time will suffice to +conclude an arrangement which will be satisfactory to the foreign +creditors, eminently advantageous to Honduras, and highly creditable to the +judgment and foresight of the Honduranean Government. This is much to be +desired since, as recognized by the Washington Conventions, a strong +Honduras would tend immensely to the progress and prosperity of Central +America. +</p> + +<p> +During the past year the Republic of Nicaragua has been the scene of +internecine struggle. General Zelaya, for seventeen years the absolute +ruler of Nicaragua, was throughout his career the disturber of Central +America and opposed every plan for the promotion of peace and friendly +relations between the five republics. When the people of Nicaragua were +finally driven into rebellion by his lawless exactions, he violated the +laws of war by the unwarranted execution of two American citizens who had +regularly enlisted in the ranks of the revolutionists. This and other +offenses made it the duty of the American Government to take measures with +a view to ultimate reparation and for the safeguarding of its interests. +This involved the breaking off of all diplomatic relations with the Zelaya +Government for the reasons laid down in a communication from the Secretary +of State, which also notified the contending factions in Nicaragua that +this Government would hold each to strict accountability for outrages on +the rights of American citizens. American forces were sent to both coasts +of Nicaragua to be in readiness should occasion arise to protect Americans +and their interests, and remained there until the war was over and peace +had returned to that unfortunate country. These events, together with +Zelaya's continued exactions, brought him so clearly to the bar of public +opinion that he was forced to resign and to take refuge abroad. +</p> + +<p> +In the above-mentioned communication of the Secretary of State to the +Charge d'Affaires of the Zelaya Government, the opinion was expressed that +the revolution represented the wishes of the majority of the Nicaraguan +people. This has now been proved beyond doubt by the fact that since the +complete overthrow of the Madriz Government and the occupation of the +capital by the forces of the revolution, all factions have united to +maintain public order and as a result of discussion with an Agent of this +Government, sent to Managua at the request of the Provisional Government, +comprehensive plans are being made for the future welfare of Nicaragua, +including the rehabilitation of public credit. The moderation and +conciliatory spirit shown by the various factions give ground for the +confident hope that Nicaragua will soon take its rightful place among the +law-abiding and progressive countries of the world. +</p> + +<p> +It gratifies me exceedingly to announce that the Argentine Republic some +months ago placed with American manufacturers a contract for the +construction of two battle-ships and certain additional naval equipment. +The extent of this work and its importance to the Argentine Republic make +the placing of the bid an earnest of friendly feeling toward the United +States. +</p> + +<p> +TARIFF NEGOTIATIONS. +</p> + +<p> +The new tariff law, in section 2, respecting the maximum and minimum +tariffs of the United States, which provisions came into effect on April 1, +1910, imposed upon the President the responsibility of determining prior to +that date whether or not any undue discrimination existed against the +United States and its products in any country of the world with which we +sustained commercial relations. +</p> + +<p> +In the case of several countries instances of apparent undue discrimination +against American commerce were found to exist. These discriminations were +removed by negotiation. Prior to April 1, 1910, when the maximum tariff was +to come into operation with respect to importations from all those +countries in whose favor no proclamation applying the minimum tariff should +be issued by the President, one hundred and thirty-four such proclamations +were issued. This series of proclamations embraced the entire commercial +world, and hence the minimum tariff of the United States has been given +universal application, thus testifying to the satisfactory character of our +trade relations with foreign countries. +</p> + +<p> +Marked advantages to the commerce of the United States were obtained +through these tariff settlements. Foreign nations are fully cognizant of +the fact that under section 2 of the tariff act the President is required, +whenever he is satisfied that the treatment accorded by them to the +products of the United States is not such as to entitle them to the +benefits of the minimum tariff of the United States, to withdraw those +benefits by proclamation giving ninety days' notice, after which the +maximum tariff will apply to their dutiable products entering the United +States. In its general operation this section of the tariff law has thus +far proved a guaranty of continued commercial peace, although there are +unfortunately instances where foreign governments deal arbitrarily with +American interests within their jurisdiction in a manner injurious and +inequitable. +</p> + +<p> +The policy of broader and closer trade relations with the Dominion of +Canada which was initiated in the adjustment of the maximum and minimum +provisions of the Tariff Act of August, 1909, has proved mutually +beneficial. It justifies further efforts for the readjustment of the +commercial relations of the two countries so that their commerce may follow +the channels natural to contiguous countries and be commensurate with the +steady expansion of trade and industry on both sides of the boundary line. +The reciprocation on the part of the Dominion Government of the sentiment +which was expressed by this Government was followed in October by the +suggestion that it would be glad to have the negotiations, which had been +temporarily suspended during the summer, resumed. In accordance with this +suggestion the Secretary of State, by my direction, dispatched two +representatives of the Department of State as special commissioners to +Ottawa to confer with representatives of the Dominion Government. They were +authorized to take such steps for formulating a reciprocal trade agreement +as might be necessary and to receive and consider any propositions which +the Dominion Government might care to submit. +</p> + +<p> +Pursuant to the instructions issued conferences were held by these +commissioners with officials of the Dominion Government at Ottawa in the +early part of November. +</p> + +<p> +The negotiations were conducted on both sides in a spirit of mutual +accommodation. The discussion of the common commercial interests of the two +countries had for its object a satisfactory basis for a trade arrangement +which offers the prospect of a freer interchange for the products of the +United States and of Canada. The conferences were adjourned to be resumed +in Washington in January, when it is hoped that the aspiration of both +Governments for a mutually advantageous measure of reciprocity will be +realized. +</p> + +<p> +FOSTERING FOREIGN TRADE. +</p> + +<p> +All these tariff negotiations, so vital to our commerce and industry, and +the duty of jealously guarding the equitable and just treatment of our +products, capital, and industry abroad devolve upon the Department of +State. +</p> + +<p> +The Argentine battle-ship contracts, like the subsequent important one for +Argentine railway equipment, and those for Cuban Government vessels, were +secured for our manufacturers largely through the good offices of the +Department of State. +</p> + +<p> +The efforts of that Department to secure for citizens of the United States +equal opportunities in the markets of the world and to expand American +commerce have been most successful. The volume of business obtained in new +fields of competition and upon new lines is already very great and Congress +is urged to continue to support the Department of State in its endeavors +for further trade expansion. +</p> + +<p> +Our foreign trade merits the best support of the Government and the most +earnest endeavor of our manufacturers and merchants, who, if they do not +already in all cases need a foreign market, are certain soon to become +dependent on it. Therefore, now is the time to secure a strong position in +this field. +</p> + +<p> +AMERICAN BRANCH BANKS ABROAD. +</p> + +<p> +I cannot leave this subject without emphasizing the necessity of such +legislation as will make possible and convenient the establishment of +American banks and branches of American banks in foreign countries. Only by +such means can our foreign trade be favorably financed, necessary credits +be arranged, and proper avail be made of commercial opportunities in +foreign countries, and most especially in Latin America. +</p> + +<p> +AID TO OUR FOREIGN MERCHANT MARINE. +</p> + +<p> +Another instrumentality indispensable to the unhampered and natural +development of American commerce is merchant marine. All maritime and +commercial nations recognize the importance of this factor. The greatest +commercial nations, our competitors, jealously foster their merchant +marine. Perhaps nowhere is the need for rapid and direct mail, passenger +and freight communication quite so urgent as between the United States and +Latin America. We can secure in no other quarter of the world such +immediate benefits in friendship and commerce as would flow from the +establishment of direct lines Of communication with the countries of Latin +America adequate to meet the requirements of a rapidly increasing +appreciation of the reciprocal dependence of the countries of the Western +Hemisphere upon each other's products, sympathies and assistance. +</p> + +<p> +I alluded to this most important subject in my last annual message; it has +often been before you and I need not recapitulate the reasons for its +recommendation. Unless prompt action be taken the completion of the Panama +Canal will find this the only great commercial nation unable to avail in +international maritime business of this great improvement in the means of +the world's commercial intercourse. +</p> + +<p> +Quite aside from the commercial aspect, unless we create a merchant marine, +where can we find the seafaring population necessary as a natural naval +reserve and where could we find, in case of war, the transports and +subsidiary vessels without which a naval fleet is arms without a body? For +many reasons I cannot too strongly urge upon the Congress the passage of a +measure by mail subsidy or other subvention adequate to guarantee the +establishment and rapid development of an American merchant marine, and the +restoration of the American flag to its ancient place upon the seas. +</p> + +<p> +Of course such aid ought only to be given under conditions of publicity of +each beneficiary's business and accounts which would show that the aid +received was needed to maintain the trade and was properly used for that +purpose. +</p> + +<p> +FEDERAL PROTECTION TO ALIENS. +</p> + +<p> +With our increasing international intercourse, it becomes incumbent upon me +to repeat more emphatically than ever the recommendation which I made in my +Inaugural Address that Congress shall at once give to the Courts of the +United States jurisdiction to punish as a crime the violation of the rights +of aliens secured by treaty with the United States, in order that the +general government of the United States shall be able, when called upon by +a friendly nation, to redeem its solemn promise by treaty to secure to the +citizens or subjects of that nation resident in the United States, freedom +from violence and due process of law in respect to their life, liberty and +property. +</p> + +<p> +MERIT SYSTEM FOR DIPLOMATIC AND CONSULAR SERVICE. +</p> + +<p> +I also strongly commend to the favorable action of the Congress the +enactment of a law applying to the diplomatic and consular service the +principles embodied in Section 1753 of the Revised Statutes of the United +States, in the Civil Service Act of January 16, 1883, and the Executive +Orders of June 27, 1906, and of November 26, 1909. The excellent results +which have attended the partial application of Civil Service principles to +the diplomatic and consular services are an earnest of the benefit to be +wrought by a wider and more permanent extension of those principles to both +branches of the foreign service. The marked improvement in the consular +service during the four years since the principles of the Civil Service Act +were applied to that service in a limited way, and the good results already +noticeable from a similar application of civil service principles to the +diplomatic service a year ago, convince me that the enactment into law of +the general principles of the existing executive regulations could not fail +to effect further improvement of both branches of the foreign service, +offering as it would by its assurance of permanency of tenure and promotion +on merit, an inducement for the entry of capable young men into the service +and an incentive to those already in to put forth their best efforts to +attain and maintain that degree of efficiency which the interests of our +international relations and commerce demand. +</p> + +<p> +GOVERNMENT OWNERSHIP OF OUR EMBASSY AND LEGATION PREMISES. +</p> + +<p> +During many years past appeals have been made from time to time to Congress +in favor of Government ownership of embassy and legation premises abroad. +The arguments in favor of such ownership have been many and oft repeated +and are well known to the Congress. The acquisition by the Government of +suitable residences and offices for its diplomatic officers, especially in +the capitals of the Latin-American States and of Europe, is so important +and necessary to an improved diplomatic service that I have no hesitation +in urging upon the Congress the passage of some measure similar to that +favorably reported by the House Committee on Foreign Affairs on February +14, 1910 (Report No. 438), that would authorize the gradual and annual +acquisition of premises for diplomatic use. +</p> + +<p> +The work of the Diplomatic Service is devoid of partisanship; its +importance should appeal to every American citizen and should receive the +generous consideration of the Congress. +</p> + +<p> +TREASURY DEPARTMENT. +</p> + +<p> +ESTIMATES FOR NEXT YEAR'S EXPENSES. +</p> + +<p> +Every effort has been made by each department chief to reduce the estimated +cost of his department for the ensuing fiscal year ending June 30, 1912. I +say this in order that Congress may understand that these estimates thus +made present the smallest sum which will maintain the departments, bureaus, +and offices of the Government and meet its other obligations under existing +law, and that a cut of these estimates would result in embarrassing the +executive branch of the Government in the performance of its duties. This +remark does not apply to the river and harbor estimates, except to those +for expenses of maintenance and the meeting of obligations under authorized +contracts, nor does it apply to the public building bill nor to the navy +building program. Of course, as to these Congress could withhold any part +or all of the estimates for them without interfering with the discharge of +the ordinary obligations of the Government or the performance of the +functions of its departments, bureaus, and offices. +</p> + +<p> +A FIFTY-TWO MILLION CUT. +</p> + +<p> +The final estimates for the year ending June 30, 1912, as they have been +sent to the Treasury, on November 29 of this year, for the ordinary +expenses of the Government, including those for public buildings, rivers +and harbors, and the navy building program, amount to $630,494,013.12. This +is $52,964,887.36 less than the appropriations for the fiscal year ending +June 30, 1911. It is $16,883,153.44 less than the total estimates, +including supplemental estimates submitted to Congress by the Treasury for +the year 1911, and is $5,574,659.39 less than the original estimates +submitted by the Treasury for 1911. +</p> + +<p> +These figures do not include the appropriations for the Panama Canal, the +policy in respect to which ought to be, and is, to spend as much each year +as can be economically and effectively expended in order to complete the +Canal as promptly as possible, and, therefore, the ordinary motive for +cutting down the expense of the Government does not apply to appropriations +for this purpose. It will be noted that the estimates for the Panama Canal +for the ensuing year are more than fifty-six millions of dollars, an +increase of twenty millions over the amount appropriated for this year--a +difference due to the fact that the estimates for 1912 include something +over nineteen millions for the fortification of the Canal. Against the +estimated expenditures of $630,494,013.12, the Treasury has estimated +receipts for next year $680,000,000, making a probable surplus of ordinary +receipts over ordinary expenditures of about $50,000,000. +</p> + +<p> +A table showing in detail the estimates and the comparisons referred to +follows. +</p> + +<p> +TYPICAL ECONOMIES. +</p> + +<p> +The Treasury Department is one of the original departments of the +Government. With the changes in the monetary system made from time to time +and with the creation of national banks, it was thought necessary to +organize new bureaus and divisions which were added in a somewhat haphazard +way and resulted in a duplication of duties which might well now be ended. +This lack of system and economic coordination has attracted the attention +of the head of that Department who has been giving his time for the last +two years, with the aid of experts and by consulting his bureau chiefs, to +its reformation. He has abolished four hundred places in the civil service +without at all injuring its efficiency. Merely to illustrate the character +of the reforms that are possible, I shall comment on some of the specific +changes that are being made, or ought to be made by legislative aid. +</p> + +<p> +AUDITING SYSTEM. +</p> + +<p> +The auditing system in vogue is as old as the Government and the methods +used are antiquated. There are six Auditors and seven Assistant Auditors +for the nine departments, and under the present system the only function +which the Auditor of a department exercises is to determine, on accounts +presented by disbursing officers, that the object of the expenditure was +within the law and the appropriation made by Congress for the purpose on +its face, and that the calculations in the accounts are correct. He does +not examine the merits of the transaction or determine the reasonableness +of the price paid for the articles purchased, nor does he furnish any +substantial check upon disbursing officers and the heads of departments or +bureaus with sufficient promptness to enable the Government to recoup +itself in full measure for unlawful expenditure. A careful plan is being +devised and will be presented to Congress with the recommendation that the +force of auditors and employees under them be greatly reduced, thereby +effecting substantial economy. But this economy will be small compared with +the larger economy that can be effected by consolidation and change of +methods. The possibilities in this regard have been shown in the reduction +of expenses and the importance of methods and efficiency in the office of +the Auditor for the Post Office Department, who, without in the slightest +degree impairing the comprehensiveness and efficiency of his work, has cut +down the expenses of his office $120,000 a year. +</p> + +<p> +Statement of estimates of appropriations for the fiscal years 1912 and +1911, and of appropriations for 1911, showing increases and decreases. - +Final Estimates for 1912 as of November 29 - Original Estimates submitted +by the Treasury for 1911 - Total Estimates for 1911 including supplementals +- Appropriations for 1911 - Increase (+) and decrease (-), 1912 estimates +against 1911 total estimates - Increase (+) and decrease (-), 1912 +estimates against 1911 total appropriations - Increase (+) and decrease +(-), 1911 estimates against 1911 total appropriations +</p> + +<p> +Legislature - $13,426,805.73 - $13,169,679.70 - $13,169,679.70 - +$12,938,048.00 - + $257,126.03 - + $488,757.73 - + $231,631.70 +</p> + +<p> +Executive - 998,170.00 - 472,270.00 - 722,270.00 - 870,750.00 - + +275,900.00 - + 127,420.00 - - 148,480.00 +</p> + +<p> +State Department: - 4,875,576.41 - 4,875,301.41 - 4,749,801.41 - +5,046,701.41 - + 125,775.00 - - 171,125.00 - - 296,900.00 +</p> + +<p> +TREASURY DEPARTMENT: Treasury Department proper - 68,735,451.00 - +69,865,240.00 - 70,393,543.75 - 69,973,434.61 - - 1,658,092.75 - - +1,237,983.61 - + 420,109.14 +</p> + +<p> +Public buildings and works - 11,864,545.60 - 6,198,365.60 - 7,101,465.60 - +5,565,164.00 - + 4,763,080.00 - + 6,299,381.60 - + 1,536,301.60 +</p> + +<p> +Territorial governments - 202,150.00 - 287,350.00 - 292,350.00 - 282,600.00 +- - 90,200.00 - - 80,450.00 - + 9,750.00 +</p> + +<p> +Independent offices - 2,638,695.12 - 2,400,695.12 - 2,492,695.12 - +2,128,695.12 - + 146,000.00 - + 510,000.00 - + 364,000.00 +</p> + +<p> +District of Columbia - 13,602,785.90 - 11,884,928.49 - 12,108,878.49 - +11,440,346.99 - + 1,492,907.41 - + 2,162,439.91 - + 668,532.50 +</p> + +<p> +WAR DEPARTMENT: War Department proper - 120,104,260.12 - 124,165,656.28 - +125,717,204.77 - 122,322,178.12 - - 5,612,944.65 - - 2,217,918.00 - + +3,395,026.65 +</p> + +<p> +Rivers and harbors - 28,232,438.00 - 28,232,465.00 - 28,232,465.00 - +49,390,541.50 - - 27.00 - -21,158,103.50 - -21,158,076.50 +</p> + +<p> +NAVY DEPARTMENT: Navy Department proper - 116,101,730.24 - 117,029,914.38 - +119,768,860.83 - 119,596,870.46 - - 3,667,130.59 - - 3,495,140.22 - + +171,990.37 +</p> + +<p> +New navy building program - 12,840,428.00 - 12,844,122.00 - 12,844,122.00 - +14,790,122.00 - - 3,694.00 - - 1,949,694.00 - - 1,946,000.00 +</p> + +<p> +Interior Department - 189,151,875.00 - 191,224,182.90 - 193,948,582.02 - +214,754,278.00 - - 4,796,707.02 - -25,602,403.00 - -20,805,698.98 +</p> + +<p> +Post-Office Department proper - 1,697,490.00 - 1,695,690.00 - 1,695,690.00 +- 2,085,005.33 - + 1,800.00 - - 387,515.33 - - 389,315.33 +</p> + +<p> +Deficiency in postal revenues - --------------- - 10,634,122.63 - +10,634,122.63 - 10,634,122.63 - -10,634,122.65 - -10,634,122.63 - +----------------- +</p> + +<p> +Department of Agriculture - 19,681,066.00 - 17,681,136.00 - 17,753,931.24 - +17,821,836.00 - + 1,927,134.76 - + 1,859,230.00 - - 67,904.76 +</p> + +<p> +Department of Commerce and +</p> + +<p> +Labor - 16,276,970.00 - 14,187,913.00 - 15,789,271.00 - 14,169,969.32 - + +487,699.00 - + 2,107,000.68 - + 1,619,301.68 +</p> + +<p> +Department of Justice - 10,063,576.00 - 9,518,640.00 - 9,962,233.00 - +9,648,237.99 - + 101,343.00 - + 415,338.01 - + 313,995.01 - +</p> + +<p><br /><br /><br /></p> + +<p class="t3"> +*** +</p> + +<p><a id="dec1911"></a></p> + +<p class="noindent"> +State of the Union Address<br /> +William H. Taft<br /> +December 5, 1911<br /> +</p> + +<p class="noindent"> +Jump to <a href="#II-1911">Part II</a> | <a href="#III-1911">Part III</a> | <a href="#IV-1911">Part IV</a> +</p> + +<p> +This message is the first of several which I shall send to Congress during +the interval between the opening of its regular session and its adjournment +for the Christmas holidays. The amount of information to be communicated as +to the operations of the Government, the number of important subjects +calling for comment by the Executive, and the transmission to Congress of +exhaustive reports of special commissions, make it impossible to include in +one message of a reasonable length a discussion of the topics that ought to +be brought to the attention of the National Legislature at its first +regular session. +</p> + +<p> +THE ANTI-TRUST LAW-THE SUPREME COURT DECISIONS. +</p> + +<p> +In May last the Supreme Court handed down decisions in the suits in equity +brought by the United States to enjoin the further maintenance of the +Standard Oil Trust and of the American Tobacco Trust, and to secure their +dissolution. The decisions are epoch-making and serve to advise the +business world authoritatively of the scope and operation of the anti-trust +act of 1890. The decisions do not depart in any substantial way from the +previous decisions of the court in construing and applying this important +statute, but they clarify those decisions by further defining the already +admitted exceptions to the literal construction of the act. By the decrees, +they furnish a useful precedent as to the proper method of dealing with the +capital and property of illegal trusts. These decisions suggest the need +and wisdom of additional or supplemental legislation to make it easier for +the entire business community to square with the rule of action and +legality thus finally established and to preserve the benefit, freedom, and +spur of reasonable competition without loss of real efficiency or +progress. +</p> + +<p> +NO CHANGE IN THE RULE OF DECISION-MERELY IN ITS FORM OF EXPRESSION. +</p> + +<p> +The statute in its first section declares to be illegal "every contract, +combination in the form of trust or otherwise, or conspiracy, in restraint +of trade or commerce among the several States or with foreign nations," and +in the second, declares guilty of a misdemeanor "every person who shall +monopolize or attempt to monopolize or combine or conspire with any other +person to monopolize any part of the trade or commerce of the several +States or with foreign nations." +</p> + +<p> +In two early cases, where the statute was invoked to enjoin a +transportation rate agreement between interstate railroad companies, it was +held that it was no defense to show that the agreement as to rates +complained of was reasonable at common law, because it was said that the +statute was directed against all contracts and combinations in restraint of +trade whether reasonable at common law or not. It was plain from the +record, however, that the contracts complained of in those cases would not +have been deemed reasonable at common law. In subsequent cases the court +said that the statute should be given a reasonable construction and refused +to include within its inhibition, certain contractual restraints of trade +which it denominated as incidental or as indirect. +</p> + +<p> +These cases of restraint of trade that the court excepted from the +operation of the statute were instances which, at common law, would have +been called reasonable. In the Standard Oil and Tobacco cases, therefore, +the court merely adopted the tests of the common law, and in defining +exceptions to the literal application of the statute, only substituted for +the test of being incidental or indirect, that of being reasonable, and +this, without varying in the slightest the actual scope and effect of the +statute. In other words, all the cases under the statute which have now +been decided would have been decided the same way if the court had +originally accepted in its construction the rule at common law. +</p> + +<p> +It has been said that the court, by introducing into the construction of +the statute common-law distinctions, has emasculated it. This is obviously +untrue. By its judgment every contract and combination in restraint of +interstate trade made with the purpose or necessary effect of controlling +prices by stifling competition, or of establishing in whole or in part a +monopoly of such trade, is condemned by the statute. The most extreme +critics can not instance a case that ought to be condemned under the +statute which is not brought within its terms as thus construed. +</p> + +<p> +The suggestion is also made that the Supreme Court by its decision in the +last two cases has committed to the court the undefined and unlimited +discretion to determine whether a case of restraint of trade is within the +terms of the statute. This is wholly untrue. A reasonable restraint of +trade at common law is well understood and is clearly defined. It does not +rest in the discretion of the court. It must be limited to accomplish the +purpose of a lawful main contract to which, in order that it shall be +enforceable at all, it must be incidental. If it exceed the needs of that +contract, it is void. +</p> + +<p> +The test of reasonableness was never applied by the court at common law to +contracts or combinations or conspiracies in restraint of trade whose +purpose was or whose necessary effect would be to stifle competition, to +control prices, or establish monopolies. The courts never assumed power to +say that such contracts or combinations or conspiracies might be lawful if +the parties to them were only moderate in the use of the power thus secured +and did not exact from the public too great and exorbitant prices. It is +true that many theorists, and others engaged in business violating the +statute, have hoped that some such line could be drawn by courts; but no +court of authority has ever attempted it. Certainly there is nothing in the +decisions of the latest two cases from which such a dangerous theory of +judicial discretion in enforcing this statute can derive the slightest +sanction. +</p> + +<p> +FORCE AND EFFECTIVENESS OF STATUTE A MATTER OF GROWTH. +</p> + +<p> +We have been twenty-one years making this statute effective for the +purposes for which it was enacted. The Knight case was discouraging and +seemed to remit to the States the whole available power to attack and +suppress the evils of the trusts. Slowly, however, the error of that +judgment was corrected, and only in the last three or four years has the +heavy hand of the law been laid upon the great illegal combinations that +have exercised such an absolute dominion over many of our industries. +Criminal prosecutions have been brought and a number are pending, but +juries have felt averse to convicting for jail sentences, and judges have +been most reluctant to impose such sentences on men of respectable standing +in society whose offense has been regarded as merely statutory. Still, as +the offense becomes better understood and the committing of it partakes +more of studied and deliberate defiance of the law, we can be confident +that juries will convict individuals and that jail sentences will be +imposed. +</p> + +<p> +THE REMEDY IN EQUITY BY DISSOLUTION. +</p> + +<p> +In the Standard Oil case the Supreme and Circuit Courts found the +combination to be a monopoly of the interstate business of refining, +transporting, and marketing petroleum and its products, effected and +maintained through thirty-seven different corporations, the stock of which +was held by a New Jersey company. It in effect commanded the dissolution of +this combination, directed the transfer and pro rata distribution by the +New Jersey company of the stock held by it in the thirty-seven corporations +to and among its stockholders; and the corporations and individual +defendants were enjoined from conspiring or combining to restore such +monopoly; and all agreements between the subsidiary corporations tending to +produce or bring about further violations of the act were enjoined. +</p> + +<p> +In the Tobacco case, the court found that the individual defendants, +twenty-nine in number, had been engaged in a successful effort to acquire +complete dominion over the manufacture, sale, and distribution of tobacco +in this country and abroad, and that this had been done by combinations +made with a purpose and effect to stifle competition, control prices, and +establish a monopoly, not only in the manufacture of tobacco, but also of +tin-foil and licorice used in its manufacture and of its products of +cigars, cigarettes, and snuffs. The tobacco suit presented a far more +complicated and difficult case than the Standard Oil suit for a decree +which would effectuate the will of the court and end the violation of the +statute. There was here no single holding company as in the case of the +Standard Oil Trust. The main company was the American Tobacco Company, a +manufacturing, selling, and holding company. The plan adopted to destroy +the combination and restore competition involved the redivision of the +capital and plants of the whole trust between some of the companies +constituting the trust and new companies organized for the purposes of the +decree and made parties to it, and numbering, new and old, fourteen. +</p> + +<p> +SITUATION AFTER READJUSTMENT. +</p> + +<p> +The American Tobacco Company (old), readjusted capital, $92, 000,000; the +Liggett & Meyers Tobacco Company (new), capital, $67,000,000; the P. +Lorillard Company (new), capital, $47,000,000; and the R. J. Reynolds +Tobacco Company (old), capital, $7,525,000, are chiefly engaged in the +manufacture and sale of chewing and smoking tobacco and cigars. The former +one tinfoil company is divided into two, one of $825,000 capital and the +other of $400,000. The one snuff company is divided into three companies, +one with a capital Of $15,000,000, another with a capital of $8,000,000, +and a third with a capital of $8,000,000. The licorice companies are two +one with a capital Of $5,758,300 and another with a capital of $200,000. +There is, also, the British-American Tobacco Company, a British +corporation, doing business abroad with a capital Of $26,000,000, the Porto +Rican Tobacco Company, with a capital of $1,800,000, and the corporation of +United Cigar Stores, with a capital of $9,000,000. +</p> + +<p> +Under this arrangement, each of the different kinds of business will be +distributed between two or more companies with a division of the prominent +brands in the same tobacco products, so as to make competition not only +possible but necessary. Thus the smoking-tobacco business of the country is +divided so that the present independent companies have 21-39 per cent, +while the American Tobacco Company will have 33-08 per cent, the Liggett & +Meyers 20.05 per cent, the Lorillard Company 22.82 per cent, and the +Reynolds Company 2.66 per cent. The stock of the other thirteen companies, +both preferred and common, has been taken from the defendant American +Tobacco Company and has been distributed among its stockholders. All +covenants restricting competition have been declared null and further +performance of them has been enjoined. The preferred stock of the different +companies has now been given voting power which was denied it under the old +organization. The ratio of the preferred stock to the common was as 78 to +40. This constitutes a very decided change in the character of the +ownership and control of each company. +</p> + +<p> +In the original suit there were twenty-nine defendants who were charged +with being the conspirators through whom the illegal combination acquired +and exercised its unlawful dominion. Under the decree these defendants. +will hold amounts of stock in the various distributee companies ranging +from 41 per cent as a maximum to 28.5 per cent as a minimum, except in the +case of one small company, the Porto Rican Tobacco Company, in which they +will hold 45 per cent. The twenty-nine individual defendants are enjoined +for three years from buying any stock except from each other, and the group +is thus prevented from extending its control during that period. All +parties to the suit, and the new companies who are made parties are +enjoined perpetually from in any way effecting any combination between any +of the companies in violation of the statute by way of resumption of the +old trust. Each of the fourteen companies is enjoined from acquiring stock +in any of the others. All these companies are enjoined from having common +directors or officers, or common buying or selling agents, or common +offices, or lending money to each other. +</p> + +<p> +SIZE OF NEW COMPANIES. +</p> + +<p> +Objection was made by certain independent tobacco companies that this +settlement was unjust because it left companies with very large capital in +active business, and that the settlement that would be effective to put all +on an equality would be a division of the capital and plant of the trust +into small fractions in amount more nearly equal to that of each of the +independent companies. This contention results from a misunderstanding of +the anti-trust law and its purpose. It is not intended thereby to prevent +the accumulation of large capital in business enterprises in which such a +combination can secure reduced cost of production, sale, and distribution. +It is directed against such an aggregation of capital only when its purpose +is that of stifling competition, enhancing or controlling prices, and +establishing a monopoly. If we shall have by the decree defeated these +purposes and restored competition between the large units into which the +capital and plant have been divided, we shall have accomplished the useful +purpose of the statute. +</p> + +<p> +CONFISCATION NOT THE PURPOSE OF THE STATUTE. +</p> + +<p> +It is not the purpose of the statute to confiscate the property and capital +of the offending trusts. Methods of punishment by fine or imprisonment of +the individual offenders, by fine of the corporation or by forfeiture of +its goods in transportation, are provided, but the proceeding in equity is +a specific remedy to stop the operation of the trust by injunction and +prevent the future use of the plant and capital in violation of the +statute. +</p> + +<p> +EFFECTIVENESS OF DECREE. +</p> + +<p> +I venture to say that not in the history of American law has a decree more +effective for such a purpose been entered by a court than that against the +Tobacco Trust. As Circuit judge Noyes said in his judgment approving the +decree: +</p> + +<p> +"The extent to which it has been necessary to tear apart this combination +and force it into new forms with the attendant burdens ought to demonstrate +that the Federal anti-trust statute is a drastic statute which accomplishes +effective results; which so long as it stands on the statute books must be +obeyed, and which can not be disobeyed without incurring far-reaching +penalties. And, on the other hand, the successful reconstruction of this +organization should teach that the effect of enforcing this statute is not +to destroy, but to reconstruct; not to demolish, but to re-create in +accordance with the conditions which the Congress has declared shall exist +among the people of the United States." +</p> + +<p> +COMMON STOCK OWNERSHIP. +</p> + +<p> +It has been assumed that the present pro rata and common ownership in all +these companies by former stockholders of the trust would insure a +continuance of the same old single control of all the companies into which +the trust has by decree been disintegrated. This is erroneous and is based +upon the assumed inefficacy and innocuousness of judicial injunctions. The +companies are enjoined from cooperation or combination; they have different +managers, directors, purchasing and sales agents. If all or many of the +numerous stockholders, reaching into the thousands, attempt to secure +concerted action of the companies with a view to the control of the market, +their number is so large that such an attempt could not well be concealed, +and its prime movers and all its participants would be at once subject to +contempt proceedings and imprisonment of a summary character. The immediate +result of the present situation will necessarily be activity by all the +companies under different managers, and then competition must follow, or +there will be activity by one company and stagnation by another. Only a +short time will inevitably lead to a change in ownership of the stock, as +all opportunity for continued cooperation must disappear. Those critics who +speak of this disintegration in the trust as a mere change of garments have +not given consideration to the inevitable working of the decree and +understand little the personal danger of attempting to evade or set at +naught the solemn injunction of a court whose object is made plain by the +decree and whose inhibitions are set forth with a detail and +comprehensiveness. +</p> + +<p> +VOLUNTARY REORGANIZATIONS OF OTHER TRUSTS AT HAND. +</p> + +<p> +The effect of these two decisions has led to decrees dissolving the +combination of manufacturers of electric lamps, a southern wholesale +grocers' association, an interlocutory decree against the Powder Trust with +directions by the circuit court compelling dissolution, and other +combinations of a similar history are now negotiating with the Department +of justice looking to a disintegration by decree and reorganization in +accordance with law. It seems possible to bring about these reorganizations +without general business disturbance. +</p> + +<p> +MOVEMENT FOR REPEAL OF THE ANTI-TRUST LAW. +</p> + +<p> +But now that the anti-trust act is seen to be effective for the +accomplishment of the purpose of its enactment, we are met by a cry from +many different quarters for its repeal. It is said to be obstructive of +business progress to be an attempt to restore old-fashioned methods of +destructive competition between small units, and to make impossible those +useful combinations of capital and the reduction of the cost of production +that are essential to continued prosperity and normal growth. +</p> + +<p> +In the recent decisions the Supreme Court makes clear that there is nothing +in the statute which condemns combinations of capital or mere bigness of +plant organized to secure economy in production and a reduction of its +cost. It is only when the purpose or necessary effect of the organization +and maintenance of the combination or the aggregation of immense size are +the stifling of competition, actual and potential, and the enhancing of +prices and establishing a monopoly, that the statute is violated. Mere size +is no sin against the law. The merging of two or more business plants +necessarily eliminates competition between the units thus combined, but +this elimination is in contravention of the statute only when the +combination is made for purpose of ending this particular competition in +order to secure control of, and enhance, prices and create a monopoly. +</p> + +<p> +LACK OF DEFINITENESS IN THE STATUTE. +</p> + +<p> +The complaint is made of the statute that it is not sufficiently definite +in its description of that which is forbidden, to enable business men to +avoid its violation. The suggestion is, that we may have a combination of +two corporations, which may run on for years, and that subsequently the +Attorney General may conclude that it was a violation of the statute, and +that which was supposed by the combiners to be innocent then turns out to +be a combination in violation of the statute. The answer to this +hypothetical case is that when men attempt to amass such stupendous capital +as will enable them to suppress competition, control prices and establish a +monopoly, they know the purpose of their acts. Men do not do such a thing +without having it clearly in mind. If what they do is merely for the +purpose of reducing the cost of production, without the thought of +suppressing competition by use of the bigness of the plant they are +creating, then they can not be convicted at the time the union is made, nor +can they be convicted later, unless it happen that later on they conclude +to suppress competition and take the usual methods for doing so, and thus +establish for themselves a monopoly. They can, in such a case, hardly +complain if the motive which subsequently is disclosed is attributed by the +court to the original combination. +</p> + +<p> +NEW REMEDIES SUGGESTED. +</p> + +<p> +Much is said of the repeal of this statute and of constructive legislation +intended to accomplish the purpose and blaze a clear path for honest +merchants and business men to follow. It may be that such a plan will be +evolved, but I submit that the discussions which have been brought out in +recent days by the fear of the continued execution of the anti-trust law +have produced nothing but glittering generalities and have offered no line +of distinction or rule of action as definite and as clear as that which the +Supreme Court itself lays down in enforcing the statute. +</p> + +<p> +SUPPLEMENTAL LEGISLATION NEEDED--NOT REPEAL OR AMENDMENT. +</p> + +<p> +I see no objection-and indeed I can see decided advantages-in the enactment +of a law which shall describe and denounce methods of competition which are +unfair and are badges of the unlawful purpose denounced in the anti-trust +law. The attempt and purpose to suppress a competitor by underselling him +at a price so unprofitable as to drive him out of business, or the making +of exclusive contracts with customers under which they are required to give +up association with other manufacturers, and numerous kindred methods for +stifling competition and effecting monopoly, should be described with +sufficient accuracy in a criminal statute on the one hand to enable the +Government to shorten its task by prosecuting single misdemeanors instead +of an entire conspiracy, and, on the other hand, to serve the purpose of +pointing out more in detail to the business community what must be +avoided. +</p> + +<p> +FEDERAL INCORPORATION RECOMMENDED. +</p> + +<p> +In a special message to Congress on January 7, 1910, I ventured to point +out the disturbance to business that would probably attend the dissolution +of these offending trusts. I said: +</p> + +<p> +"But such an investigation and possible prosecution of corporations whose +prosperity or destruction affects the comfort not only of stockholders but +of millions of wage earners, employees, and associated tradesmen must +necessarily tend to disturb the confidence of the business community, to +dry up the now flowing sources of capital from its places of hoarding, and +produce a halt in our present prosperity that will cause suffering and +strained circumstances among the innocent many for the faults of the guilty +few. The question which I wish in this message to bring clearly to the +consideration and discussion of Congress is whether, in order to avoid such +a possible business danger, something can not be done by which these +business combinations may be offered a means, without great financial +disturbance, of changing the character, organization, and extent of their +business into one within the lines of the law under Federal control and +supervision, securing compliance with the anti-trust statute. +</p> + +<p> +"Generally, in the industrial combinations called 'trusts,' the principal +business is the sale of goods in many States and in foreign markets; in +other words, the interstate and foreign business far exceeds the business +done in any one State. This fact will justify the Federal Government in +granting a Federal charter to such a combination to make and sell in +interstate and foreign commerce the products of useful manufacture under +such limitations as will secure a compliance with the anti-trust law. It is +possible so to frame a statute that while it offers protection to a Federal +company against harmful, vexatious, and unnecessary invasion by the States, +it shall subject it to reasonable taxation and control by the States with +respect to its purely local business. * * * +</p> + +<p> +"Corporations organized under this act should be prohibited from acquiring +and holding stock in other corporations (except for special reasons, upon +approval by the proper Federal authority), thus avoiding the creation under +national auspices of the holding company with subordinate corporations in +different States, which has been such an effective agency in the creation +of the great trusts and monopolies. +</p> + +<p> +"If the prohibition of the anti-trust act against combinations in restraint +of trade is to be effectively enforced, it is essential that the National +Government shall provide for the creation of national corporations to carry +on a legitimate business throughout the United States. The conflicting laws +of the different States of the Union with respect to foreign corporations +make it difficult, if not impossible, for one corporation to comply with +their requirements so as to carry on business in a number of different +States." +</p> + +<p> +I renew the recommendation of the enactment of a general law providing for +the voluntary formation of corporations to engage in trade and commerce +among the States and with foreign nations. Every argument which was then +advanced for such a law, and every explanation which was at that time +offered to possible objections, have been confirmed by our experience since +the enforcement of the antitrust, statute has resulted in the actual +dissolution of active commercial organizations. +</p> + +<p> +It is even more manifest now than it was then that the denunciation of +conspiracies in restraint of trade should not and does not mean the denial +of organizations large enough to be intrusted with our interstate and +foreign trade. It has been made more clear now than it was then that a +purely negative statute like the anti-trust law may well be supplemented by +specific provisions for the building up and regulation of legitimate +national and foreign commerce. +</p> + +<p> +GOVERNMENT ADMINISTRATIVE EXPERTS NEEDED TO AID COURTS IN TRUST +DISSOLUTIONS. +</p> + +<p> +The drafting of the decrees in the dissolution of the present trusts, with +a view to their reorganization into legitimate corporations, has made it +especially apparent that the courts are not provided with the +administrative machinery to make the necessary inquiries preparatory to +reorganization, or to pursue such inquiries, and they should be empowered +to invoke the aid of the Bureau of Corporations in determining the suitable +reorganization of the disintegrated parts. The circuit court and the +Attorney General were greatly aided in framing the decree in the Tobacco +Trust dissolution by an expert from the Bureau of Corporations. +</p> + +<p> +FEDERAL CORPORATION COMMISSION PROPOSED. +</p> + +<p> +I do not set forth in detail the terms and sections of a statute which +might supply the constructive legislation permitting and aiding the +formation of combinations of capital into Federal corporations. They should +be subject to rigid rules as to their organization and procedure, including +effective publicity, and to the closest supervision as to the issue of +stock and bonds by an executive bureau or commission in the Department of +Commerce and Labor, to which in times of doubt they might well submit their +proposed plans for future business. It must be distinctly understood that +incorporation under Federal law could not exempt the company thus formed +and its incorporators and managers from prosecution under the anti-trust +law for subsequent illegal conduct, but the publicity of its procedure and +the opportunity for frequent consultation with the bureau or commission in +charge of the incorporation as to the legitimate purpose of its +transactions would offer it as great security against successful +prosecutions for violations of the law as would be practical or wise. +</p> + +<p> +Such a bureau or commission might well be invested also with the duty +already referred to, of aiding courts in the dissolution and recreation of +trusts within the law. It should be an executive tribunal of the dignity +and power of the Comptroller of the Currency or the Interstate Commerce +Commission, which now exercise supervisory power over important classes of +corporations under Federal regulation. +</p> + +<p> +The drafting of such a Federal incorporation law would offer ample +opportunity to prevent many manifest evils in corporate management to-day, +including irresponsibility of control in the hands of the few who are not +the real owners. +</p> + +<p> +INCORPORATION VOLUNTARY. +</p> + +<p> +I recommend that the Federal charters thus to be granted shall be +voluntary, at least until experience justifies mandatory provisions. The +benefit to be derived from the operation of great businesses under the +protection of such a charter would attract all who are anxious to keep +within the lines of the law. Other large combinations that fail to take +advantage of the Federal incorporation will not have a right to complain if +their failure is ascribed to unwillingness to submit their transactions to +the careful official scrutiny, competent supervision, and publicity +attendant upon the enjoyment of such a charter. +</p> + +<p> +ONLY SUPPLEMENTAL LEGISLATION NEEDED. +</p> + +<p> +The opportunity thus suggested for Federal incorporation, it seems tome, is +suitable constructive legislation needed to facilitate the squaring Of +great industrial enterprises to the rule of action laid down by the +anti-trust law. This statute as construed by the Supreme Court must +continue to be the line of distinction for legitimate business. It must be +enforced, unless we are to banish individualism from all business and +reduce it to one common system of regulation or control of prices like that +which now prevails with respect to public utilities, and which when applied +to all business would be a long step toward State socialism. +</p> + +<p> +IMPORTANCE OF THE ANTI-TRUST ACT. +</p> + +<p> +The anti-trust act is the expression of the effort of a freedom-loving +people to preserve equality of opportunity. It is the result of the +confident determination of such a people to maintain their future growth by +preserving uncontrolled and unrestricted the enterprise of the individual, +his industry, his ingenuity, his intelligence, and his independent +courage. +</p> + +<p> +For twenty years or more this statute has been upon the statute book. All +knew its general purpose and approved. Many of its violators were cynical +over its assumed impotence. It seemed impossible of enforcement. Slowly the +mills of the courts ground, and only gradually did the majesty of the law +assert itself. Many of its statesmen-authors died before it became a living +force, and they and others saw the evil grow which they had hoped to +destroy. Now its efficacy is seen; now its power is heavy; now its object +is near achievement. Now we hear the call for its repeal on the plea that +it interferes with business prosperity, and we are advised in most general +terms, how by some other statute and in some other way the evil we are just +stamping out can be cured, if we only abandon this work of twenty years and +try another experiment for another term of years. +</p> + +<p> +It is said that the act has not done good. Can this be said in the face of +the effect of the Northern Securities decree? That decree was in no way so +drastic or inhibitive in detail as either the Standard Oil decree or the +Tobacco decree; but did it not stop for all time the then powerful movement +toward the control of all the railroads of the country in a single hand? +Such a one-man power could not have been a healthful influence in the +Republic, even though exercised under the general supervision of an +interstate commission. +</p> + +<p> +Do we desire to make such ruthless combinations and monopolies lawful? When +all energies are directed, not toward the reduction of the cost of +production for the public benefit by a healthful competition, but toward +new ways and means for making permanent in a few hands the absolute control +of the conditions and prices prevailing in the whole field of industry, +then individual enterprise and effort will be paralyzed and the spirit of +commercial freedom will be dead. +</p> + +<p> +<a id="II-1911"></a> +PART II. +</p> + +<p> +The relations of the United States with other countries have continued +during the past twelve months upon a basis of the usual good will and +friendly intercourse. ARBITRATION. +</p> + +<p> +The year just passed marks an important general movement on the part of the +Powers for broader arbitration. In the recognition of the manifold benefits +to mankind in the extension of the policy of the settlement of +international disputes by arbitration rather than by war, and in response +to a widespread demand for an advance in that direction on the part of the +people of the United States and of Great Britain and of France, new +arbitration treaties were negotiated last spring with Great Britain and +France, the terms of which were de signed, as expressed in the preamble of +these treaties, to extend the scope and obligations of the policy of +arbitration adopted in our present treaties with those Governments To pave +the way for this treat with the United States, Great Britain negotiated an +important modification in its alliance with Japan, and the French +Government also expedited the negotiations with signal good will. The new +treaties have been submitted to the Senate and are awaiting its advice and +consent to their ratification. All the essentials of these important +treaties have long been known, and it is my earnest hope that they will +receive prompt and favorable action. +</p> + +<p> +CLAIM OF ALSOP & CO. SETTLED. +</p> + +<p> +I am glad to report that on July 5 last the American claim of Alsop & Co. +against the Government of Chile was finally disposed of by the decision of +His Britannic Majesty George V, to whom, as amiable compositeur, the matter +had been referred for determination. His Majesty made an award of nearly +$1,000,000 to the claimants, which was promptly paid by Chile. The +settlement of this controversy has happily eliminated from the relations +between the Republic of Chile and the United States the only question which +for two decades had given the two foreign offices any serious concern and +makes possible the unobstructed development of the relations of friendship +which it has been the aim of this Government in every possible way to +further and cultivate. +</p> + +<p> +ARBITRATIONS--PANAMA AND COSTA RICA--COLOMBIA AND HAITI. +</p> + +<p> +In further illustration of the practical and beneficent application of the +principle of arbitration and the underlying broad spirit of conciliation, I +am happy to advert to the part of the United States in facilitating +amicable settlement of disputes which menaced the peace between Panama and +Costa Rica and between Haiti and the Dominican Republic. +</p> + +<p> +Since the date of their independence, Colombia and Costa Rica had been +seeking a solution of a boundary dispute, which came as an heritage from +Colombia to the new Republic of Panama, upon its beginning life as an +independent nation. Although the disputants had submitted this question for +decision to the President of France under the terms of an arbitration +treaty, the exact interpretation of the provisions of the award rendered +had been a matter of serious disagreement between the two countries, both +contending for widely different lines even under the terms of the decision. +Subsequently and since 1903 this boundary question had been the subject of +fruitless diplomatic negotiations between the parties. In January, 1910, at +the request of both Governments the agents representing them met in +conference at the Department of State and subsequently concluded a protocol +submitting this long-pending controversy to the arbitral judgment of the +Chief justice of the United States, who consented to act in this capacity. +A boundary commission, according to the international agreement, has now +been appointed, and it is expected that the arguments will shortly proceed +and that this long-standing dispute will be honorably and satisfactorily +terminated. +</p> + +<p> +Again, a few months ago it appeared that the Dominican Republic and Haiti +were about to enter upon hostilities because of complications growing out +of an acrimonious boundary dispute which the efforts of many years had +failed to solve. The Government of the United States, by a friendly +interposition of good offices, succeeded in prevailing upon the parties to +place their reliance upon some form of pacific settlement. Accordingly, on +the friendly suggestion of this Government, the two Governments empowered +commissioners to meet at Washington in conference at the State Department +in order to arrange the terms of submission to arbitration of the boundary +controversy. +</p> + +<p> +CHAMIZAL ARBITRATION NOT SATISFACTORY. +</p> + +<p> +Our arbitration of the Chamizal boundary question with Mexico was +unfortunately abortive, but with the earnest efforts on the part of both +Governments which its importance commands, it is felt that an early +practical adjustment should prove possible. +</p> + +<p> +LATIN AMERICA. VENEZUELA. +</p> + +<p> +During the past year the Republic of Venezuela celebrated the one hundredth +anniversary of its independence. The United States sent, in honor of this +event, a special embassy to Caracas, where the cordial reception and +generous hospitality shown it were most gratifying as a further proof of +the good relations and friendship existing between that country and the +United States. MEXICO. +</p> + +<p> +The recent political events in Mexico received attention from this +Government because of the exceedingly delicate and difficult situation +created along our southern border and the necessity for taking measures +properly to safeguard American interests. The Government of the United +States, in its desire to secure a proper observance and enforcement of the +so-called neutrality statutes of the Federal Government, issued directions +to the appropriate officers to exercise a diligent and vigilant regard for +the requirements of such rules and laws. Although a condition of actual +armed conflict existed, there was no official recognition of belligerency +involving the technical neutrality obligations of international law. +</p> + +<p> +On the 6th of March last, in the absence of the Secretary of State, I had a +personal interview with Mr. Wilson, the ambassador of the United States to +Mexico, in which he reported to me that the conditions in Mexico were much +more critical than the press dispatches disclosed; that President Diaz was +on a volcano of popular uprising; that the small outbreaks which had +occurred were only symptomatic of the whole condition; that a very large +per cent of the people were in sympathy with the insurrection; that a +general explosion was probable at any time, in which case he feared that +the 40,000 or more American residents in Mexico might be assailed, and that +the very large American investments might be injured or destroyed. +</p> + +<p> +After a conference with the Secretary of War and the Secretary of the Navy, +I thought it wise to assemble an Army division of full strength at San +Antonio, Tex., a brigade of three regiments at Galveston, a brigade of +Infantry in the Los Angeles district of southern California, together with +a squadron of battleships and cruisers and transports at Galveston, and a +small squadron of ships at San Diego. At the same time, through our +representative at the City of Mexico, I expressed to President Diaz the +hope that no apprehensions might result from unfounded conjectures as to +these military maneuvers, and assured him that they had no significance +which should cause concern to his Government. +</p> + +<p> +The mobilization was effected with great promptness, and on the 15th of +March, through the Secretary of War and the Secretary of the Navy, in a +letter addressed to the Chief of Staff, I issued the following +instructions: It seems my duty as Commander in Chief to place troops in +sufficient number where, if Congress shall direct that they enter Mexico to +save American lives and property, an effective movement may be promptly +made. Meantime, the movement of the troops to Texas and elsewhere near the +boundary, accompanied with sincere assurances of the utmost goodwill toward +the present Mexican Government and with larger and more frequent patrols +along the border to prevent insurrectionary expeditions from American soil, +will hold up the hands of the existing Government and will have a healthy +moral effect to prevent attacks upon Americans and their property in any +subsequent general internecine strife. Again, the sudden mobilization of a +division of troops has been a great test of our Army and full of useful +instruction, while the maneuvers that are thus made possible can occupy the +troops and their officers to great advantage. +</p> + +<p> +The assumption by the press that I contemplate intervention on Mexican soil +to protect American lives or property is of course gratuitous, because I +seriously doubt whether I have such authority under any circumstances, and +if I had I would not exercise it without express congressional approval. +Indeed, as you know, I have already declined, without Mexican consent, to +order a troop of Cavalry to protect the breakwater we are constructing just +across the border in Mexico at the mouth of the Colorado River to save the +Imperial Valley, although the insurrectos had scattered the Mexican troops +and were taking our horses and supplies and frightening our workmen away. +My determined purpose, however, is to be in a position so that when danger +to American lives and property in Mexico threatens and the existing +Government is rendered helpless by the insurrection, I can promptly execute +congressional orders to protect them, with effect. +</p> + +<p> +Meantime, I send you this letter, through the Secretary, to call your +attention to some things in connection with the presence of the division in +the Southwest which have doubtless occurred to you, but which I wish to +emphasize. +</p> + +<p> +In the first place, I want to make the mobilization a first-class training +for the Army, and I wish you would give your time and that of the War +College to advising and carrying out maneuvers of a useful character, and +plan to continue to do this during the next three months. By that time we +may expect that either Ambassador Wilson's fears will have been realized +and chaos and its consequences have ensued, or that the present Government +of Mexico will have so readjusted matters as to secure tranquillity-a +result devoutly to be wished. The troops can then be returned to their +posts. I understood from you in Washington that Gen. Aleshire said that you +could probably meet all the additional expense of this whole movement out +of the present appropriations if the troops continue in Texas for three +months. I sincerely hope this is so. I observe from the newspapers that you +have no blank cartridges, but I presume that this is an error, or that it +will be easy to procure those for use as soon as your maneuvers begin. +</p> + +<p> +Second. Texas is a State ordinarily peaceful, but you can not put 20,000 +troops into it without running some risk of a collision between the people +of that State, and especially the Mexicans who live in Texas near the +border and who sympathize with the insurrectos, and the Federal soldiers. +For that reason I beg you to be as careful as you can to prevent friction +of any kind. We were able in Cuba, with the army of pacification there of +something more than 5,000 troops, to maintain them for a year without any +trouble, and I hope you can do the same thing in Texas. Please give your +attention to this, and advise all the officers in command of the necessity +for very great circumspection in this regard. +</p> + +<p> +Third. One of the great troubles in the concentration of troops is the +danger of disease, and I suppose that you have adopted the most modern +methods for preventing and, if necessary, for stamping out epidemics. That +is so much a part of a campaign that it hardly seems necessary for me to +call attention to it. +</p> + +<p> +Finally, I wish you to examine the question of the patrol of the border and +put as many troops on that work as is practicable, and more than are now +engaged in it, in order to prevent the use of our borderland for the +carrying out of the insurrection. I have given assurances to the Mexican +ambassador on this point. +</p> + +<p> +I sincerely hope that this experience will always be remembered by the Army +and Navy as a useful means of education, and I should be greatly +disappointed if it resulted in any injury or disaster to our forces from +any cause. I have taken a good deal of responsibility in ordering this +mobilization, but I am ready to answer for it if only you and those under +you use the utmost care to avoid the difficulties which I have pointed +out. +</p> + +<p> +You may have a copy of this letter made and left with Gen. Carter and such +other generals in command as you may think wise and necessary to guide them +in their course, but to be regarded as confidential. I am more than happy +to here record the fact that all apprehensions as to the effect of the +presence of so large a military force in Texas proved groundless; no +disturbances occurred; the conduct of the troops was exemplary and the +public reception and treatment of them was all that could have been +desired, and this notwithstanding the presence of a large number of Mexican +refugees in the border territory. +</p> + +<p> +From time to time communications were received from Ambassador Wilson, who +had returned to Mexico, confirming the view that the massing of American +troops in the neighborhood had had good effect. By dispatch of April 3, +1911, the ambassador said: The continuing gravity of the situation here and +the chaos that would ensue should the constitutional authorities be +eventually overthrown, thus greatly increasing the danger to which American +lives and property are already subject, confirm the wisdom of the President +in taking those military precautions which, making every allowance for the +dignity and the sovereignty of a friendly state, are due to our nationals +abroad. +</p> + +<p> +Charged as I am with the responsibility of safeguarding these lives and +property, I am bound to say to the department that our military +dispositions on the frontier have produced an effective impression on the +Mexican mind and may, at any moment, prove to be the only guaranties for +the safety of our nationals and their property. If it should eventuate that +conditions here require more active measures by the President and Congress, +sporadic attacks might be made upon the lives and property of our +nationals, but the ultimate result would be order and adequate protection. +The insurrection continued and resulted In engagements between the regular +Mexican troops and the insurgents, and this along the border, so that in +several instances bullets from the contending forces struck American +citizens engaged in their lawful occupations on American soil. +</p> + +<p> +Proper protests were made against these invasions of American rights to the +Mexican authorities. On April 17, 1911, I received the following telegram +from the governor of Arizona: As a result of to-day's fighting across the +international line, but within gunshot range of the heart of Douglas, five +Americans wounded on this side of the line. Everything points to repetition +of these casualties on to-morrow, and while the Federals seem disposed to +keep their agreement not to fire into Douglas, the position of the +insurrectionists is such that when fighting occurs on the east and +southeast of the intrenchments people living in Douglas are put in danger +of their lives. In my judgment radical measures are needed to protect our +innocent people, and if anything can be done to stop the fighting at Agua +Prieta the situation calls for such action. It is impossible to safeguard +the people of Douglas unless the town be vacated. Can anything be done to +relieve situation, now acute? After a conference with the Secretary of +State, the following telegram was sent to Governor Sloan, on April IS, 1911 +9 11, and made public: Your dispatch received. Have made urgent demand upon +Mexican Government to issue instructions to prevent firing across border by +Mexican federal troops, and am waiting reply. Meantime I have sent direct +warning to the Mexican and insurgent forces near Douglas. I infer from your +dispatch that both parties attempt to heed the warning, but that in the +strain and exigency of the contest wild bullets still find their way into +Douglas. The situation might justify me in ordering our troops to cross the +border and attempt to stop the fighting, or to fire upon both combatants +from the American side. But if I take this step, I must face the +possibility of resistance and greater bloodshed, and also the danger of +having our motives misconstrued and misrepresented, and of thus inflaming +Mexican popular indignation against many thousand Americans now in Mexico +and jeopardizing their lives and property. The pressure for general +intervention under such conditions it might not be practicable to resist. +It is impossible to foresee or reckon the consequences of such a course, +and we must use the greatest self-restraint to avoid it. Pending my urgent +representation to the Mexican Government, I can not therefore order the +troops at Douglas to cross the border, but I must ask you and the local +authorities, in case the same danger recurs, to direct the people of +Douglas to place themselves where bullets can not reach them and thus avoid +casualty. I am loath to endanger Americans in Mexico, where they are +necessarily exposed, by taking a radical step to prevent injury to +Americans on our side of the border who can avoid it by a temporary +inconvenience. I am glad to say that no further invasion of American rights +of any substantial character occurred. +</p> + +<p> +The presence of a large military and naval force available for prompt +action, near the Mexican border, proved to be most fortunate under the +somewhat trying conditions presented by this invasion of American rights +Had no movement theretofore taken place, and because of these events it had +been necessary then to bring about the mobilization, it must have had +sinister significance. On the other hand, the presence of the troops before +and at the time of the unfortunate killing and wounding of American +citizens at Douglas, made clear that the restraint exercised by our +Government in regard to this Occurrence was not due to lack of force or +power to deal with it promptly and aggressively, but was due to a real +desire to use every means possible to avoid direct intervention in the +affairs of our neighbor whose friendship we valued and were most anxious to +retain. +</p> + +<p> +The policy and action of this Government were based upon an earnest +friendliness for the Mexican people as a whole, and it is a matter of +gratification to note that this attitude of strict impartiality as to all +factions in Mexico and of sincere friendship for the neighboring nation, +without regard for party allegiance, has been generally recognized and has +resulted in an even closer and more sympathetic understanding between the +two Republics and a warmer regard one for the other. Action to suppress +violence and restore tranquillity throughout the Mexican Republic was of +peculiar interest to this Government, in that it concerned the safeguarding +of American life and property in that country. The Government of the United +States had occasion to accord permission for the passage of a body of +Mexican rurales through Douglas, Arizona, to Tia Juana, Mexico, for the +suppression of general lawlessness which had for some time existed in the +region of northern Lower California. On May 25, 1911, President Diaz +resigned, Senor de la Barra was chosen provisional President. Elections for +President and Vice President were thereafter held throughout the Republic, +and Senor Francisco I. Madero was formally declared elected on October 15 +to the chief magistracy. On November 6 President Madero entered upon the +duties of his office. +</p> + +<p> +Since the inauguration of President Madero a plot has been unearthed +against the present Government, to begin a new insurrection. Pursuing the +same consistent policy which this administration has adopted from the +beginning, it directed an investigation into the conspiracy charged, and +this investigation has resulted in the indictment of Gen. Bernardo Reyes +and others and the seizure of a number of officers and men and horses and +accoutrements assembled upon the soil of Texas for the purpose of invading +Mexico. Similar proceedings had been taken during the insurrection against +the Diaz Government resulting in the indictments and prosecution of persons +found to be engaged in violating the neutrality laws of the United States +in aid of that uprising. +</p> + +<p> +The record of this Government in respect of the recognition of constituted +authority in Mexico therefore is clear. +</p> + +<p> +CENTRAL AMERICA-HONDURAS AND NICARAGUA TREATIES PROPOSED. +</p> + +<p> +As to the situation in Central America, I have taken occasion in the past +to emphasize most strongly the importance that should be attributed to the +consummation of the conventions between the Republics of Nicaragua and of +Honduras and this country, and I again earnestly recommend that the +necessary advice and consent of the Senate be accorded to these treaties, +which will make it possible for these Central American Republics to enter +upon an era of genuine economic national development. The Government of +Nicaragua which has already taken favorable action on the convention, has +found it necessary, pending the exchange of final ratifications, to enter +into negotiations with American bankers for the purpose of securing a +temporary loan to relieve the present financial tension. III connection +with this temporary loan and in the hope of consummating, through the +ultimate operation of the convention, a complete and lasting economic +regeneration, the Government of Nicaragua has also decided to engage an +American citizen as collector general of customs. The claims commission on +which the services of two American citizens have been sought, and the work +of the American financial adviser should accomplish a lasting good of +inestimable benefit to the prosperity, commerce, and peace of the Republic. +In considering the ratification of the conventions with Nicaragua and +Honduras, there rests with the United States the heavy responsibility of +the fact that their rejection here might destroy the progress made and +consign the Republics concerned to still deeper submergence in bankruptcy, +revolution, and national jeopardy. PANAMA. +</p> + +<p> +Our relations with the Republic of Panama, peculiarly important, due to +mutual obligations and the vast interests created by the canal, have +continued in the usual friendly manner, and we have been glad to make +appropriate expression of our attitude of sympathetic interest in the +endeavors of our neighbor in undertaking the development of the rich +resources of the country. With reference to the internal political affairs +of the Republic, our obvious concern is in the maintenance of public peace +and constitutional order, and the fostering of the general interests +created by the actual relations of the two countries, without the +manifestation of any preference for the success of either of the political +parties. +</p> + +<p> +THE PAN AMERICAN UNION. +</p> + +<p> +The Pan American Union, formerly known as the Bureau of American Republics, +maintained by the joint contributions of all the American nations, has +during the past year enlarged its practical work as an international +organization, and continues to prove its usefulness as an agency for the +mutual development of commerce, better acquaintance, and closer intercourse +between the United States and her sister American republics. +</p> + +<p> +THE FAR EAST. +</p> + +<p> +THE CHINESE LOANS. +</p> + +<p> +The past year has been marked in our relations with China by the conclusion +of two important international loans, one for the construction of the +Hukuang railways, the other for carrying out of the currency reform to +which China was pledged by treaties with the United States, Great Britain, +and Japan, of which mention was made in my last annual message. +</p> + +<p> +It will be remembered that early in 1909 an agreement was consummated among +British, French, and German financial groups whereby they proposed to lend +the Chinese Government funds for the construction of railways in the +Provinces of Hunan and Hupeh, reserving for their nationals the privilege +of engineering the construction of the lines and of furnishing the +materials required for the work. After negotiations with the Governments +and groups concerned an agreement was reached whereby American, British, +French, and German nationals should participate upon equal terms in this +important and useful undertaking. Thereupon the financial groups, supported +by their respective Governments, began negotiations with the Chinese +Government which terminated in a loan to China Of $30,000,000, with the +privilege of increasing the amount to $50,000,000. The cooperative +construction of these trunk lines should be of immense advantage, +materially and otherwise, to China and should greatly facilitate the +development of the bountiful resources of the Empire. On the other hand, a +large portion of these funds is to be expended for materials, American +products having equal preference with those of the other three lending +nations, and as the contract provides for branches and extensions +subsequently to be built on the same terms the opportunities for American +materials will reach considerable proportions. +</p> + +<p> +Knowing the interest of the United States in the reform of Chinese +currency, the Chinese Government, in the autumn of 1910 sought the +assistance of the American Government to procure funds with which to +accomplish that all-important reform. In the course of the subsequent +negotiations there was combined with the proposed currency loan one for +certain industrial developments in Manchuria, the two loans aggregating the +sum Of $50,000,000. While this was originally to be solely an American +enterprise, the American Government, consistently with its desire to secure +a sympathetic and practical cooperation of the great powers toward +maintaining the principle of equality of opportunity and the administrative +integrity of China, urged the Chinese Government to admit to participation +in the currency loan the associates of the American group in the Hukuang +loan. While of immense importance in itself, the reform contemplated in +making this loan is but preliminary to other and more comprehensive fiscal +reforms which will be of incalculable benefit to China and foreign +interests alike, since they will strengthen the Chinese Empire and promote +the rapid development of international trade. +</p> + +<p> +NEUTRAL FINANCIAL ADVISER. +</p> + +<p> +When these negotiations were begun, it was understood that a financial +adviser was to be employed by China in connection with the reform, and in +order that absolute equality in all respects among the lending nations +might be scrupulously observed, the American Government proposed the +nomination of a neutral adviser, which was agreed to by China and the other +Governments concerned. On September 28, 1911, Dr. Vissering, president of +the Dutch Java Bank and a financier of wide experience in the Orient, was +recommended to the Chinese Government for the post of monetary adviser. +</p> + +<p> +Especially important at the present, when the ancient Chinese Empire is +shaken by civil war incidental to its awakening to the many influences and +activities of modernization, are the cooperative policy of good +understanding which has been fostered by the international projects +referred to above and the general sympathy of view among all the Powers +interested in the Far East. While safeguarding the interests of our +nationals, this Government is using its best efforts in continuance of its +traditional policy of sympathy and friendship toward the Chinese Empire and +its people, with the confident hope for their economic and administrative +development, and with the constant disposition to contribute to their +welfare in all proper ways consistent with an attitude of strict +impartiality as between contending factions. +</p> + +<p> +For the first time in the history of the two countries, a Chinese cruiser, +the Haichi, under the command of Admiral Ching, recently visited New York, +where the officers and men were given a cordial welcome. +</p> + +<p> +NEW JAPANESE TREATY. +</p> + +<p> +The treaty of commerce and navigation between the United States and Japan, +signed in 1894, would by a strict interpretation of its provisions have +terminated on July 17, 1912. Japan's general treaties with the other +powers, however, terminated in 1911, and the Japanese Government expressed +an earnest desire to conduct the negotiations for a new treaty with the +United States simultaneously with its negotiations with the other powers. +There were a number of important questions involved in the treaty, +including the immigration of laborers, revision of the customs tariff, and +the right of Americans to hold real estate in Japan. The United States +consented to waive all technicalities and to enter at once upon +negotiations for a new treaty on the understanding that there should be a +continuance throughout the, life of the treaty of the same effective +measures for the restriction of immigration of laborers to American +territory which had been in operation with entire satisfaction to both +Governments since 1908. The Japanese Government accepted this basis of +negotiation, and a new treaty was quickly concluded, resulting in a highly +satisfactory settlement of the other questions referred to. +</p> + +<p> +A satisfactory adjustment has also been effected of the questions growing +out of the annexation of Korea by Japan. +</p> + +<p> +The recent visit of Admiral Count Togo to the United States as the Nation's +guest afforded a welcome opportunity to demonstrate the friendly feeling so +happily existing between the two countries. SIAM. +</p> + +<p> +There has been a change of sovereigns in Siam and the American minister at +Bangkok was accredited in a special capacity to represent the United States +at the coronation ceremony of the new King. +</p> + +<p> +EUROPE AND THE NEAR EAST. +</p> + +<p> +In Europe and the Near East, during the past twelve-month, there has been +at times considerable political unrest. The Moroccan question, which for +some months was the cause of great anxiety, happily appears to have reached +a stage at which it need no longer be regarded with concern. The Ottoman +Empire was occupied for a period by strife in Albania and is now at war +with Italy. In Greece and the Balkan countries the disquieting +potentialities of this situation have been more or less felt. Persia has +been the scene of a long internal struggle. These conditions have been the +cause of uneasiness in European diplomacy, but thus far without direct +political concern to the United States. +</p> + +<p> +In the war which unhappily exists between Italy and Turkey this Government +has no direct political interest, and I took occasion at the suitable time +to issue a proclamation of neutrality in that conflict. At the same time +all necessary steps have been taken to safeguard the personal interests of +American citizens and organizations in so far as affected by the war. +</p> + +<p> +COMMERCE WITH THE NEAR EAST. +</p> + +<p> +In spite of the attendant economic uncertainties and detriments to +commerce, the United States has gained markedly in its commercial standing +with certain of the nations of the Near East. Turkey, especially, is +beginning to come into closer relations with the United States through the +new interest of American manufacturers and exporters in the possibilities +of those regions, and it is hoped that foundations are being laid for a +large and mutually beneficial exchange of commodities between the two +countries. This new interest of Turkey in American goods is indicated by +the fact that a party of prominent merchants from a large city in Turkey +recently visited the United States to study conditions of manufacture and +export here, and to get into personal touch with American merchants, with a +view to cooperating more intelligently in opening up the markets of Turkey +and the adjacent countries to our manufactures. Another indication of this +new interest of America in the commerce of the Near East is the recent +visit of a large party of American merchants and manufacturers to central +and eastern Europe, where they were entertained by prominent officials and +organizations of the large cities, and new bonds of friendship and +understanding were established which can not but lead to closer and greater +commercial interchange. +</p> + +<p> +CORONATION OF KING GEORGE V. +</p> + +<p> +The 22d of June of the present year marked the coronation of His Britannic +Majesty King George V. In honor of this auspicious occasion I sent a +special embassy to London. The courteous and cordial welcome extended to +this Government's representatives by His Majesty and the people of Great +Britain has further emphasized the strong bonds of friendship happily +existing between the two nations. +</p> + +<p> +SETTLEMENT OF LONG-STANDING DIFFERENCES WITH GREAT BRITAIN. +</p> + +<p> +As the result of a determined effort on the part of both Great Britain and +the United States to settle all of their outstanding differences a number +of treaties have been entered into between the two countries in recent +years, by which nearly all of the unsettled questions between them of any +importance have either been adjusted by agreement or arrangements made for +their settlement by arbitration. A number of the unsettled questions +referred to consist of pecuniary claims presented by each country against +the other, and in order that as many of these claims as possible should be +settled by arbitration a special agreement for that purpose was entered +into between the two Governments on the 18th day of August, 1910, in +accordance with Article 11 of the general arbitration treaty with Great +Britain of April 4, 19o8. Pursuant to the provisions of this special +agreement a schedule of claims has already been agreed upon, and the +special agreement, together with this schedule, received the approval of +the Senate when submitted to it for that purpose at the last session of +Congress. Negotiations between the two Governments for the preparation of +an additional schedule of claims are already well advanced, and it is my +intention to submit such schedule as soon as it is agreed upon to the +Senate for its approval, in order that the arbitration proceedings may be +undertaken at an early date. In this connection the attention of Congress +is particularly called to the necessity for an appropriation +to cover the expense incurred in submitting these claims to arbitration. +</p> + +<p> +PRESENTATION TO GERMANY OF REPLICA OF VON STEUBEN STATUE. +</p> + +<p> +In pursuance of the act of Congress, approved June 23, 1910, the Secretary +of State and the joint Committee on the Library entered into a contract +with the sculptor, Albert Jaegers, for the execution of a bronze replica of +the statue of Gen. von Steuben erected in Washington, for presentation to +His Majesty the German Emperor and the German nation in recognition of the +gift of the statue of Frederick the Great made by the Emperor to the people +of the United States. +</p> + +<p> +The presentation was made on September 2 last by representatives whom I +commissioned as the special mission of this Government for the purpose. +</p> + +<p> +The German Emperor has conveyed to me by telegraph, on his own behalf and +that of the German people, an expression of appreciative thanks for this +action of Congress. RUSSIA. +</p> + +<p> +By direction of the State Department, our ambassador to Russia has recently +been having a series of conferences with the minister of foreign affairs of +Russia, with a view to securing a clearer understanding and construction of +the treaty of 1832 between Russia and the United States and the +modification of any existing Russian regulations which may be found to +interfere in any way with the full recognition of the rights of American +citizens under this treaty. I believe that the Government of Russia is +addressing itself seriously to the need of changing the present practice +under the treaty and that sufficient progress has been made to warrant the +continuance of these conferences in the hope that there may soon be removed +any justification of the complaints of treaty violation now prevalent in +this country. +</p> + +<p> +I expect that immediately after the Christmas recess I shall be able to +make a further communication to Congress on this subject. LIBERIA. +</p> + +<p> +Negotiations for the amelioration of conditions found to exist in Liberia +by the American commission, undertaken through the Department of State, +have been concluded and it is only necessary for certain formalities to be +arranged in securing the loan which it is hoped will place that republic on +a practical financial and economic footing. +</p> + +<p> +RECOGNITION OF PORTUGUESE REPUBLIC. +</p> + +<p> +The National Constituent Assembly, regularly elected by the vote of the +Portuguese people, having on June 19 last unanimously proclaimed a +republican form of government, the official recognition of the Government +of the United States was given to the new Republic in the afternoon of the +same day. +</p> + +<p> +SPITZBERGEN ISLANDS. +</p> + +<p> +Negotiations for the betterment of conditions existing in the Spitzbergen +Islands and the adjustment of conflicting claims of American citizens and +Norwegian subjects to lands in that archipelago are still in progress. +</p> + +<p> +INTERNATIONAL CONVENTIONS AND CONFERENCES. +</p> + +<p> +INTERNATIONAL PRIZE COURT. +</p> + +<p> +The supplementary protocol to The he Hague convention for the establishment +of an international prize court, mentioned in my last annual message, +embodying stipulations providing for an alternative procedure which would +remove the constitutional objection to that part of The Hague convention +which provides that there may be an appeal to the proposed court from the +decisions of national courts, has received the signature of the governments +parties to the original convention and has been ratified by the Government +of the United States, together with the prize court convention. +</p> + +<p> +The deposit of the ratifications with the Government of the Netherlands +awaits action by the powers on the declaration, signed at London on +February 26, 1909 of the rules of international law to be recognized within +the meaning of article 7 of The Hague convention for the establishment of +an International Prize Court. +</p> + +<p> +FUR-SEAL TREATY. +</p> + +<p> +The fur-seal controversy, which for nearly twenty-five years has been the +source of serious friction between the United States and the powers +bordering upon the north Pacific Ocean, whose subjects have been permitted +to engage in pelagic sealing against the fur-seal herds having their +breeding grounds within the jurisdiction of the United States, has at last +been satisfactorily adjusted by the conclusion of the north Pacific sealing +convention entered into between the United States, Great Britain, Japan, +and Russia on the 7th of July last. This convention is a conservation +measure of very great importance, and if it is carried out in the spirit of +reciprocal concession and advantage upon which it is based, there is every +reason to believe that not only will it result in preserving the fur-seal +herds of the north Pacific Ocean and restoring them to their former value +for the purposes of commerce, but also that it will afford a permanently +satisfactory settlement of a question the only other solution of which +seemed to be the total destruction of the fur seals. In another aspect, +also, this convention is of importance in that it furnishes an illustration +of the feasibility of securing a general international game law for the +protection of other mammals of the sea, the preservation of which is of +importance to all the nations of the world. +</p> + +<p> +LEGISLATION NECESSARY. +</p> + +<p> +The attention of Congress is especially called to the necessity for +legislation on the part of the United States for the purpose of fulfilling +the obligations assumed under this convention, to which the Senate gave its +advice and consent on the 24th day of July last. +</p> + +<p> +PROTECTION OF INDUSTRIAL PROPERTY UNION. +</p> + +<p> +The conference of the International Union for the Protection of Industrial +Property, which, under the authority of Congress, convened at Washington on +May 16, 1911, closed its labors on June 2, 1911, by the signature of three +acts, as follows: +</p> + +<p> +(I) A convention revising the Paris convention of March 20, 1883, for the +protection of industrial property, as modified by the additional act signed +at Brussels on December 14, 1900; +</p> + +<p> +(2) An arrangement to replace the arrangement signed at Madrid on April 14, +1891 for the international registration of trade-marks, and the additional +act with regard thereto signed at Brussels on December 14, 1900; and +</p> + +<p> +(3) An arrangement to replace the arrangement signed at Madrid on April 14, +1891, relating to the repression of false indication of production of +merchandise. +</p> + +<p> +The United States is a signatory of the first convention only, and this +will be promptly submitted to the Senate. +</p> + +<p> +INTERNATIONAL OPIUM COMMISSION. +</p> + +<p> +In a special message transmitted to the Congress on the 11th of January, +1911, in which I concurred in the recommendations made by the Secretary of +State in regard to certain needful legislation for the control of our +interstate and foreign traffic in opium and other menacing drugs, I quoted +from my annual message of December 7, 1909, in which I announced that the +results of the International Opium Commission held at Shanghai in February, +1909, at the invitation of the United States, had been laid before this +Government; that the report of that commission showed that China was making +remarkable progress and admirable efforts toward the eradication of the +opium evil; that the interested governments had not permitted their +commercial interests to prevent their cooperation in this reform; and, as a +result of collateral investigations of the opium question in this country, +I recommended that the manufacture, sale, and use of opium in the United +States should be more rigorously controlled by legislation. +</p> + +<p> +Prior to that time and in continuation of the policy of this Government to +secure the cooperation of the interested nations, the United States +proposed an international opium conference with full powers for the purpose +of clothing with the force of international law the resolutions adopted by +the above-mentioned commission, together with their essential corollaries. +The other powers concerned cordially responded to the proposal of this +Government, and, I am glad to be able to announce, representatives of all +the powers assembled in conference at The Hague on the first of this +month. +</p> + +<p> +Since the passage of the opium-exclusion act, more than twenty States have +been animated to modify their pharmacy laws and bring them in accord with +the spirit of that act, thus stamping out, to a measure, the intrastate +traffic in opium and other habit-forming drugs. But, although I have urged +on the Congress the passage of certain measures for Federal control of the +interstate and foreign traffic in these drugs, no action has yet been +taken. In view of the fact that there is now sitting at The Hague so +important a conference, which has under review the municipal laws of the +different nations for the mitigation of their opium and other allied evils, +a conference which will certainly deal with the international aspects of +these evils, it seems to me most essential that the Congress should take +immediate action on the anti-narcotic legislation to which I have already +called attention by a special message. +</p> + +<p> +BUENOS AIRES CONVENTIONS. +</p> + +<p> +The four important conventions signed at the Fourth Pan American Conference +at Buenos Aires, providing for the regulation of trademarks, patents, and +copyrights, and for the arbitration of pecuniary claims, have, with the +advice and consent of the Senate, been ratified on the part of the United +States and the ratifications have been deposited with the Government of the +Argentine Republic in accordance with the requirements of the conventions. +I am not advised that similar action has been taken by any other of the +signatory governments. +</p> + +<p> +INTERNATIONAL ARRANGEMENT TO SUPPRESS OBSCENE PUBLICATIONS. +</p> + +<p> +One of the notable advances in international morality accomplished in +recent years was an arrangement entered into on April 13th of the present +year between the United States and other powers for the repression of the +circulation of obscene publications. +</p> + +<p> +FOREIGN TRADE RELATIONS OF THE UNITED STATES. +</p> + +<p> +In my last annual message I referred to the tariff negotiations of the +Department of State with foreign countries in connection with the +application, by a series of proclamations, of the minimum tariff of the +United States to importations from the several countries, and I stated +that, in its general operation, section 2 of the new tariff law had proved +a guaranty of continued commercial peace, although there were, +unfortunately, instances where foreign governments dealt arbitrarily with +American interests within their jurisdiction in a manner injurious and +inequitable. During the past year some instances of discriminatory +treatment have been removed, but I regret to say that there remain a few +cases of differential treatment adverse to the commerce of the United +States. While none of these instances now appears to amount to undue +discrimination in the sense of section 2 Of the tariff law of August 5, +1909, they are all exceptions to that complete degree of equality of tariff +treatment that the Department of State has consistently sought to obtain +for American commerce abroad. +</p> + +<p> +While the double tariff feature of the tariff law of 1909 has been amply +justified by the results achieved in removing former and preventing new, +undue discriminations against American commerce it is believed that the +time has come for the amendment of this feature of the law in such way as +to provide a graduated means of meeting varying degrees of discriminatory +treatment of American commerce in foreign countries as well as to protect +the financial interests abroad of American citizens against arbitrary and +injurious treatment on the part of foreign governments through either +legislative or administrative measures. +</p> + +<p> +It would seem desirable that the maximum tariff of the United States should +embrace within its purview the free list, which is not the case at the +present time, in order that it might have reasonable significance to the +governments of those countries from which the importations into the United +States are confined virtually to articles on the free list. +</p> + +<p> +RECORD OF HIGHEST AMOUNT OF FOREIGN TRADE. +</p> + +<p> +The fiscal year ended June 30, 1911, shows great progress in the +development of American trade. It was noteworthy as marking the highest +record of exports of American products to foreign countries, the valuation +being in excess of $2,000,000,000. These exports showed a gain over the +preceding year of more than $300,000,000. +</p> + +<p> +FACILITIES FOR FOREIGN TRADE FURNISHED BY JOINT ACTION OF DEPARTMENT OF +STATE AND OF COMMERCE AND LABOR. +</p> + +<p> +There is widespread appreciation expressed by the business interests of the +country as regards the practical value of the facilities now offered by the +Department of State and the Department of Commerce and Labor for the +furtherance of American commerce. Conferences with their officers at +Washington who have an expert knowledge of trade conditions in foreign +countries and with consular officers and commercial agents of the +Department of Commerce and Labor who, while on leave of absence, visit the +principal industrial centers of the United States, have been found of great +value. These trade conferences are regarded as a particularly promising +method of governmental aid in foreign trade promotion. The Department of +Commerce and Labor has arranged to give publicity to the expected arrival +and the itinerary of consular officers and commercial agents while on leave +in the United States, in order that trade organizations may arrange for +conferences with them. +</p> + +<p> +As I have indicated, it is increasingly clear that to obtain and maintain +that equity and substantial equality of treatment essential to the +flourishing foreign trade, which becomes year by year more important to the +industrial and commercial welfare of the United States, we should have a +flexibility of tariff sufficient for the give and take of negotiation by +the Department of State on behalf of our commerce and industry. +</p> + +<p> +CRYING NEED FOR AMERICAN MERCHANT MARINE. +</p> + +<p> +I need hardly reiterate the conviction that there should speedily be built +up an American merchant marine. This is necessary to assure favorable +transportation facilities to our great ocean-borne commerce as well as to +supplement the Navy with an adequate reserve of ships and men It would have +the economic advantage of keeping at home part of the vast sums now paid +foreign shipping for carrying American goods. All the great commercial +nations pay heavy subsidies to their merchant marine so that it is obvious +that without some wise aid from the Congress the United States must lag +behind in the matter of merchant marine in its present anomalous position. +</p> + +<p> +EXTENSION OF AMERICAN BANKING TO FOREIGN COUNTRIES. +</p> + +<p> +Legislation to facilitate the extension of American banks to foreign +countries is another matter in which our foreign trade needs assistance. +</p> + +<p> +CHAMBERS OF FOREIGN COMMERCE SUGGESTED. +</p> + +<p> +The interests of our foreign commerce are nonpartisan, and as a factor in +prosperity are as broad as the land. In the dissemination of useful +information and in the coordination of effort certain unofficial +associations have done good work toward the promotion of foreign commerce. +It is cause for regret, however, that the great number of such associations +and the comparative lack of cooperation between them fails to secure an +efficiency commensurate with the public interest. Through the agency of the +Department of Commerce and Labor, and in some cases directly, the +Department of State transmits to reputable business interests information +of commercial opportunities, supplementing the regular published consular +reports. Some central organization in touch with associations and chambers +of commerce throughout the country and able to keep purely American +interests in closer touch with different phases of commercial affairs +would, I believe, be of great value. Such organization might be managed by +a committee composed of a small number of those now actively carrying on +the work of some of the larger associations, and there might be added to +the committee, as members ex officio, one or two officials of the +Department of State and one or two officials from the Department of +Commerce and Labor and representatives of the appropriate committees of +Congress. The authority and success of such an organization would evidently +be enhanced if the Congress should see fit to prescribe its scope and +organization through legislation which would give to it some such official +standing as that, for example, of the National Red Cross. +</p> + +<p> +With these factors and the continuance of the foreign-service establishment +(departmental, diplomatic, and consular) upon the high plane where it has +been placed by the recent reorganization this Government would be abreast +of the times in fostering the interests of its foreign trade, and the rest +must be left to the energy and enterprise of our business men. +</p> + +<p> +IMPROVEMENT OF THE FOREIGN SERVICE. +</p> + +<p> +The entire foreign-service organization is being improved and developed +with especial regard to the requirements of the commercial interests of the +country. The rapid growth of our foreign trade makes it of the utmost +importance that governmental agencies through which that trade is to be +aided and protected should possess a high degree of efficiency. Not only +should the foreign representatives be maintained upon a generous scale in +so far as salaries and establishments are concerned, but the selection and +advancement of officers should be definitely and permanently regulated by +law so that the service shall not fail to attract men of high character and +ability. The experience of the past few years with a partial application of +civil-service rules to the Diplomatic and Consular Service leaves no doubt +in my mind of the wisdom of a wider and more permanent extension of those +principles to both branches of the foreign service. The men selected for +appointment by means of the existing executive regulations have been of a +far higher average of intelligence and ability than the men appointed +before the regulations were promulgated. Moreover, the feeling that under +the existing rules there is reasonable hope for permanence of tenure during +good behavior and for promotion for meritorious service has served to bring +about a zealous activity in the interests of the country, which never +before existed or could exist. It is my earnest conviction that the +enactment into law of the general principles of the existing regulations +can not fail to effect further improvement in both branches of the foreign +service by providing greater inducement for young men of character and +ability to seek a career abroad in the service of the Government, and an +incentive to those already in the service to put forth greater efforts to +attain the high standards which the successful conduct of our international +relations and commerce requires. +</p> + +<p> +I therefore again commend to the favorable action of the Congress the +enactment of a law applying to the diplomatic and consular service the +principles embodied in section 1753 of the Revised Statutes of the United +States, in the civil-service act of January 16, 1883, and the Executive +orders of June 27, 1906, and of November 26, 1909. In its consideration of +this important subject I desire to recall to the attention of the Congress +the very favorable report made on the Lowden bill for the improvement of +the foreign service by the Foreign Affairs Committee of the House of +Representatives. Available statistics show the strictness with which the +merit system has been applied to the foreign service during recent years +and the absolute nonpartisan selection of consuls and diplomatic-service +secretaries who, indeed, far from being selected with any view to political +consideration, have actually been chosen to a disproportionate extent from +States which would have been unrepresented in the foreign service under the +system which it is to be hoped is now permanently obsolete. Some +legislation for the perpetuation of the present system of examinations and +promotions upon merit and efficiency would be of greatest value to our +commercial and international interests. +</p> + +<p> +<a id="III-1911"></a> +PART III. +</p> + +<p> +THE WHITE HOUSE, December 20, 1911. To the Senate and House of +Representatives: +</p> + +<p> +In my annual message to Congress, December, 1909, I stated that under +section 2 of the act of August 5, 1909, I had appointed a Tariff Board of +three members to cooperate with the State Department in the administration +of the maximum and minimum clause of that act, to make a glossary or +encyclopedia of the existing tariff so as to render its terms intelligible +to the ordinary reader, and then to investigate industrial conditions and +costs of production at home and abroad with a view to determining to what +extent existing tariff rates actually exemplify the protective principle, +viz., that duties should be made adequate, and only adequate, to equalize +the difference in cost of production at home and abroad. +</p> + +<p> +I further stated that I believed these investigations would be of great +value as a basis for accurate legislation, and that I should from time to +time recommend to Congress the revision of certain schedules in accordance +with the findings of the Board. +</p> + +<p> +In the last session of the Sixty-first Congress a bill creating a permanent +Tariff Board of five members, of whom not more than three should be of the +same political party, passed each House, but failed of enactment because of +slight differences on which agreement was not reached before adjournment. +An appropriation act provided that the permanent Tariff Board, if created +by statute, should report to Congress on Schedule K in December, 1911. +</p> + +<p> +Therefore, to carry out so far as lay within my power the purposes of this +bill for a permanent Tariff Board, I appointed in March, 1911, a board of +five, adding two members of such party affiliation as would have fulfilled +the statutory requirement, and directed them to make a report to me on +Schedule K of the tariff act in December of this year. +</p> + +<p> +In my message of August 17, 1911, accompanying the veto of the wool bill, I +said that, in my judgment, Schedule K should be revised and the rates +reduced. My veto was based on the ground that, since the Tariff Board would +make, in December, a detailed report on wool and wool manufactures, with +special reference to the relation of the existing rates of duties to +relative costs here and abroad, public policy and a fair regard to the +interests of the producers and the manufacturers on the one hand and of the +consumers on the other demanded that legislation should not be hastily +enacted in the absence of such information; that I was not myself possessed +at that time of adequate knowledge of the facts to determine whether or not +the proposed act was in accord with my pledge to support a fair and +reasonable protective policy; that such legislation might prove only +temporary and inflict upon a great industry the evils of continued +uncertainty. +</p> + +<p> +I now herewith submit a report of the Tariff Board on Schedule K. The board +is unanimous in its findings. On the basis of these findings I now +recommend that the Congress proceed to a consideration of this schedule +with a view to its revision and a general reduction of its rates. +</p> + +<p> +The report shows that the present method of assessing the duty on raw +Wool--this is, by a specific rate on the grease pound (i. e., unscoured) +--operates to exclude wools of high shrinkage in scouring but fine quality +from the American market and thereby lessens the range of wools available +to the domestic manufacturer; that the duty on scoured wool Of 33 cents per +pound is prohibitory and operates to exclude the importation of clean, +low-priced foreign wools of inferior grades, which are nevertheless +valuable material for manufacturing, and which can not be imported in the +grease because of their heavy shrinkage. Such wools, if imported, might be +used to displace the cheap substitutes now in use. +</p> + +<p> +To make the preceding paragraph a little plainer, take the instance of a +hundred pounds of first-class wool imported under the present duty, which +is 11 cents a pound. That would make the duty on the hundred pounds $11. +The merchantable part of the wool thus imported is the weight of the wool +of this hundred pounds after scouring. If the wool shrinks 80 per cent, as +some wools do, then the duty in such a case would amount to $11 $11 on 20 +pounds of scoured wool. This, of course, would be prohibitory. If the wool +shrinks only 50 per cent, it would be $11 on 50 pounds of wool, and this is +near to the average of the great bulk of wools that are imported from +Australia, which is the principal source of our imported wool. +</p> + +<p> +These discriminations could be overcome by assessing a duty in ad valorem +terms, but this method is open to the objection, first, that it increases +administrative difficulties and tends to decrease revenue through +undervaluation; and, second, that as prices advance, the ad valorem rate +increases the duty per pound at the time when the consumer most needs +relief and the producer can best stand competition; while if prices decline +the duty is decreased at the time when the consumer is least burdened by +the price and the producer most needs protection. +</p> + +<p> +Another method of meeting the difficulty of taxing the grease pound is to +assess a specific duty on grease wool in terms of its scoured content. This +obviates the chief evil of the present system, namely, the discrimination +due to different shrinkages, and thereby tends greatly to equalize the +duty. The board reports that this method is feasible in practice and could +be administered without great expense. The scoured content of the wool is +the basis on which users of wool make their calculations, and a duty of +this kind would fit the usages of the trade. One effect of this method of +assessment would be that, regardless of the rate of duty, there would be +an increase in the supply and variety of wool by making available to the +American market wools of both low and fine quality now excluded. +</p> + +<p> +The report shows in detail the difficulties involved in attempting to state +in categorical terms the cost of wool production and the great differences +in cost as between different regions and different types of wool. It is +found, however, that, taking all varieties in account, the average cost of +production for the whole American clip is higher than the cost in the chief +competing country by an amount somewhat less than the present duty. +</p> + +<p> +The report shows that the duties on wools, wool wastes, and shoddy, which +are adjusted to the rate Of 33 cents on scoured wool are prohibitory in the +same measure that the duty on scoured wool is prohibitory. In general, they +are assessed at rates as high as, or higher than, the duties paid on the +clean content of wools actually imported. They should be reduced and so +adjusted to the rate on wool as to bear their proper proportion to the real +rate levied on the actual wool imports. +</p> + +<p> +The duties on many classes of wool manufacture are prohibitory and greatly +in excess of the difference in cost of production here and abroad. +</p> + +<p> +This is true of tops, of yarns (with the exception of worsted yarns of a +very high grade), and of low and medium grade cloth of heavy weight. +</p> + +<p> +On tops up to 52 cents a pound in value, and on yarns of 65 cents in value, +the rate is 100 per cent with correspondingly higher rates for lower +values. On cheap and medium grade cloths, the existing rates frequently run +to 150 per cent and on some cheap goods to over 200 per cent. This is +largely due to that part of the duty which is levied ostensibly to +compensate the manufacturer for the enhanced cost of his raw material due +to the duty on wool. As a matter of fact, this compensatory duty, for +numerous classes of goods, is much in excess of the amount needed for +strict compensation. +</p> + +<p> +On the other hand, the findings show that the duties which run to such high +ad valorem equivalents are prohibitory, since the goods are not imported, +but that the prices of domestic fabrics are not raised by the full amount +of duty. On a set of 1-yard samples of 16 English fabrics, which are +completely excluded by the present tariff rates, it was found that the +total foreign value was $41.84; the duties which would have been assessed +had these fabrics been imported, $76.90; the foreign value plus the amount +of the duty, $118.74; or a nominal duty of 183 per cent. In fact, however, +practically identical fabrics of domestic make sold at the same time at +$69.75, showing an enhanced price over the foreign market value of but 67 +per cent. +</p> + +<p> +Although these duties do not increase prices of domestic goods by anything +like their full amount, it is none the less true that such prohibitive +duties eliminate the possibility of foreign competition, even in time of +scarcity; that they form a temptation to monopoly and conspiracies to +control domestic prices; that they are much in excess of the difference in +cost of production here and abroad, and that they should be reduced to a +point which accords with this principle. +</p> + +<p> +The findings of the board show that in this industry the actual +manufacturing cost, aside from the question of the price of materials, is +much higher in this country than it is abroad; that in the making of yarn +and cloth the domestic woolen or worsted manufacturer has in general no +advantage in the form of superior machinery or more efficient labor to +offset the higher wages paid in this country The findings show that the +cost of turning wool into yarn in this country is about double that in the +leading competing country, and that the cost of turning yarn into cloth is +somewhat more than double. Under the protective policy a great industry, +involving the welfare of hundreds of thousands of people, has been +established despite these handicaps. +</p> + +<p> +In recommending revision and reduction, I therefore urge that action be +taken with these facts in mind, to the end that an important and +established industry may not be jeopardized. +</p> + +<p> +The Tariff Board reports that no equitable method has been found to, levy +purely specific duties on woolen and worsted fabrics and that, excepting +for a compensatory duty, the rate must be ad valorem on such manufactures. +It is important to realize, however, that no flat ad valorem rate on such +fabrics can be made to work fairly and effectively. Any single rate which +is high enough to equalize the difference in manufacturing cost at home and +abroad on highly finished goods involving such labor would be prohibitory +on cheaper goods, in which the labor cost is a smaller proportion of the +total value. Conversely, a rate only adequate to equalize this difference +on cheaper goods would remove protection from the fine-goods manufacture, +the increase in which has been one of the striking features of the trade's +development in recent years. I therefore recommend that in any revision the +importance of a graduated scale of ad valorem duties on cloths be carefully +considered and applied. +</p> + +<p> +I venture to say that no legislative body has ever had presented to it a +more complete and exhaustive report than this on so difficult and +complicated a subject as the relative costs of wool and woolens the world +over. It is a monument to the thoroughness, industry, impartiality, and +accuracy of the men engaged in its making. They were chosen from both +political parties but have allowed no partisan spirit to prompt or control +their inquiries. They are unanimous in their findings. I feel sure that +after the report has been printed and studied the value of such a +compendium of exact knowledge in respect to this schedule of the tariff +will convince all of the wisdom of making such a board permanent in order +that it may treat each schedule of the tariff as it has treated this, and +then keep its bureau of information up to date with current changes in the +economic world. +</p> + +<p> +It is no part of the function of the Tariff Board to propose rates of duty. +Their function is merely to present findings of fact on which rates of duty +may be fairly determined in the light of adequate knowledge in accord with +the economic policy to be followed. This is what the present report does. +</p> + +<p> +The findings of fact by the board show ample reason for the revision +downward of Schedule K, in accord with the protective principle, and +present the data as to relative costs and prices from which may be +determined what rates will fairly equalize the difference in production +costs. I recommend that such revision be proceeded with at once. +</p> + +<p> +<a id="IV-1911"></a> +PART IV. +</p> + +<p> +THE WHITE HOUSE, December 21, 1911. To the Senate and House of +Representatives: +</p> + +<p> +The financial condition of the Government, as shown at the close of the +last fiscal year, June 30, 1911, was very satisfactory. The ordinary +receipts into the general fund, excluding postal revenues, amounted to +$701,372,374.99, and the disbursements from the general fund for current +expenses and capital outlays, excluding postal and Panama Canal +disbursements, including the interest on the public debt, amounted to +$654,137,907-89, leaving a surplus Of $47,234,377.10. +</p> + +<p> +The postal revenue receipts amounted to $237,879,823,60, while the payments +made for the postal service from the postal revenues amounted to +$237,660,705.48, which left a surplus of postal receipts over disbursements +Of $219,118.12, the first time in 27 years in which a surplus occurred. +</p> + +<p> +The interest-bearing debt of the United States June 30, 1911, amounted to +$915,353,190. The debt on which interest had ceased amounted to +$1,879,830.26, and the debt bearing no interest, including greenbacks, +national bank notes to be redeemed, and fractional currency, amounted to +$386,751,917-43, or a total of interest and noninterest bearing debt +amounting to $1,303,984,937.69. +</p> + +<p> +The actual disbursements, exclusive of those for the Panama Canal and for +the postal service for the year ending June 30, 1911, were $654,137,997.89. +The actual disbursements for the year ending June 30, 1910, exclusive of +the Panama Canal and the postal service disbursements, were +$659,705,391.08, making a decrease Of $5,567,393.19 in yearly expenditures +in the year 1911 under that of 1910. For the year ending June 30, 1912, the +estimated receipts, exclusive of the postal revenues, are $666,000,000, +while the total estimates, exclusive of those for the Panama Canal and the +postal expenditures payable from the postal revenues, amount to +$645,842,799.34. This is a decrease in the 1912 estimates from that of the +1911 estimates of $1,534,367-22. +</p> + +<p> +For the year ending June 30, 1913, the estimated receipts, exclusive of the +postal revenues, are $667,000,000, while the total estimated +appropriations, exclusive of the Panama Canal and postal disbursements +payable from postal revenues, will amount to $637,920,803.35. This is a +decrease in the 1913 estimates from that of the 1912 estimates of +$7,921,995.99. +</p> + +<p> +As to the postal revenues, the expansion of the business in that +department, the normal increase in the Post Office and the extension of the +service, will increase the outlay to the sum Of $260,938,463; but as the +department was self-sustaining this year the Postmaster General is assured +that next year the receipts will at least equal the expenditures, and +probably exceed them by more than the surplus of this year. It is fair and +equitable, therefore, in determining the economy with which the Government +has been run, to exclude the transactions of a department like the Post +Office Department, which relies for its support upon its receipts. In +calculations heretofore made for comparison of economy in each year, it has +been the proper custom only to include in the statement the deficit in the +Post Office Department which was paid out of the Treasury. +</p> + +<p> +A calculation of the actual increase in the expenses of Government arising +from the increase in the population and the general expansion of +governmental functions, except those of the Post Office, for a number of +years shows a normal increase of about 4 per cent a year. By directing the +exercise of great care to keep down the expenses and the estimates we have +succeeded in reducing the total disbursements each year. +</p> + +<p> +THE CREDIT OF THE UNITED STATES. +</p> + +<p> +The credit of this Government was shown to be better than that of any other +Government by the sale of the Panama Canal 3 per cent bonds. These bonds +did not give their owners the privilege of using them as a basis for +bank-note circulation, nor was there any other privilege extended to them +which would affect their general market value. Their sale, therefore, +measured the credit of the Government. The premium which was realized upon +the bonds made the actual interest rate of the transaction 2.909 per cent. +</p> + +<p> +EFFICIENCY AND ECONOMY IN THE TREASURY DEPARTMENT. +</p> + +<p> +I In the Treasury Department the efficiency and economy work has been kept +steadily up. Provision is made for the elimination of 134 positions during +the coming year. Two hundred and sixty-seven statutory positions were +eliminated during the last year in the office of the Treasury in +Washington, and 141 positions in the year 1910, making an elimination Of +542 statutory positions since March 4, 1909; and this has been done without +the discharge of anybody, because the normal resignations and deaths have +been equal to the elimination of the places, a system of transfers having +taken care of the persons whose positions were dropped out. In the field +service if the department, too, 1,259 positions have been eliminated down +to the present time, making a total net reduction of all Treasury positions +to the number of 1,801. Meantime the efficiency of the work of the +department has increased. +</p> + +<p> +MONETARY REFORM. +</p> + +<p> +A matter of first importance that will come before Congress for action at +this session is monetary reform. The Congress has itself arranged an early +introduction of this great question through the report of its Monetary +Commission. This commission was appointed to recommend a solution of the +banking and currency problems so long confronting the Nation and to furnish +the facts and data necessary to enable the Congress to take action. The +commission was appointed when an impressive and urgent popular demand for +legislative relief suddenly arose out of the distressing situation of the +people caused by the deplorable panic of 1907. The Congress decided that +while it could not give immediately the relief required, it would provide a +commission to furnish the means for prompt action at a later date. +</p> + +<p> +In order to do its work with thoroughness and precision this commission has +taken some time to make its report. The country is undoubtedly hoping for +as prompt action on the report as the convenience of the Congress can +permit. The recognition of the gross imperfections and marked inadequacy of +our banking and currency system even in our most quiet financial periods is +of long standing; and later there has matured a recognition of the fact +that our system is responsible for the extraordinary devastation, waste, +and business paralysis of our recurring periods of panic. Though the +members of the Monetary Commission have for a considerable time been +working in the open, and while large numbers of the people have been openly +working with them, and while the press has largely noted and discussed this +work as it has proceeded, so that the report of the commission promises to +represent a national movement, the details of the report are still being +considered. I can not, therefore, do much more at this time than commend +the immense importance of monetary reform, urge prompt consideration and +action when the commission's report is received, and express my +satisfaction that the plan to be proposed promises to embrace main features +that, having met the approval of a great preponderance of the practical and +professional opinion of the country, are likely to meet equal approval in +Congress. +</p> + +<p> +It is exceedingly fortunate that the wise and undisputed policy of +maintaining unchanged the main features of our banking system rendered it +at once impossible to introduce a central bank; for a central bank would +certainly have been resisted, and a plan into which it could have been +introduced would probably have been defeated. But as a central bank could +not be a part of the only plan discussed or considered, that troublesome +question is eliminated. And ingenious and novel as the proposed National +Reserve Association appears, it simply is a logical outgrowth of what is +best in our present system, and is, in fact, the fulfillment of that +system. +</p> + +<p> +Exactly how the management of that association should be organized is a +question still open. It seems to be desirable that the banks which would +own the association should in the main manage it, It will be an agency of +the banks to act for them, and they can be trusted better than anybody else +chiefly to conduct it. It is mainly bankers' work. But there must be some +form of Government supervision and ultimate control, and I favor a +reasonable representation of the Government in the management. I entertain +no fear of the introduction of politics or of any undesirable influences +from a properly measured Government representation. +</p> + +<p> +I trust that all banks of the country possessing the requisite standards +will be placed upon a footing of perfect equality of opportunity. Both the +National system and the State system should be fairly recognized, leaving +them eventually to coalesce if that shall prove to be their tendency. But +such evolution can not develop impartially if the banks of one system are +given or permitted any advantages of opportunity over those of the other +system. And I trust also that the new legislation will carefully and +completely protect and assure the individuality and the independence of +each bank, to the end that any tendency there may ever be toward a +consolidation of the money or banking power of the Nation shall be +defeated. +</p> + +<p> +It will always be possible, of course, to correct any features of the new +law which may in practice prove to be unwise; so that while this law is +sure to be enacted under conditions of unusual knowledge and authority, it +also will include, it is well to remember, the possibility of future +amendment. +</p> + +<p> +With the present prospects of this long-awaited reform encouraging us, it +would be singularly unfortunate if this monetary question should by any +chance become a party issue. And I sincerely hope it will not. The +exceeding amount of consideration it has received from the people of the +Nation has been wholly nonpartisan; and the Congress set its nonpartisan +seal upon it when the Monetary Commission was appointed. In commending the +question to the favorable consideration of Congress, I speak for, and in +the spirit of, the great number of my fellow citizens who without any +thought of party or partisanship feel with remarkable earnestness that this +reform is necessary to the interests of all the people. +</p> + +<p> +THE WAR DEPARTMENT. +</p> + +<p> +There is now before Congress a Dill, the purpose of which is to increase +the efficiency and decrease the expense of the Army. It contains four +principal features: First, a consolidation of the General Staff with the +Adjutant General's and the Inspector General's Departments; second, a +consolidation of the Quartermaster's Department with the Subsistence and +the Pay Departments; third, the creation of an Army Service Corps; and +fourth, an extension of the enlistment period from three to five years. +</p> + +<p> +With the establishment of an Army Service Corps, as proposed in the bill, I +am thoroughly in accord and am convinced that the establishment of such a +corps will result in a material economy and a very great increase of +efficiency in the Army. It has repeatedly been recommended by me and my +predecessors. I also believe that a consolidation of the Staff Corps can be +made with a resulting increase in efficiency and economy, but not along the +lines provided in the bill under consideration. +</p> + +<p> +I am opposed to any plan the result of which would be to break up or +interfere with the essential principles of the detail system in the Staff +Corps established by the act of February 2, 1901, and I am opposed to any +plan the result of which would be to give to the officer selected as Chief +of Staff or to any other member of the General Staff Corps greater +permanency of office than he now has. Under the existing law neither the +Chief. of Staff nor any other member of the General Staff Corps can remain +in office for a period of more than four years, and there must be an +interval of two years between successive tours of duty. +</p> + +<p> +The bill referred to provides that certain persons shall become permanent +members of the General Staff Corps, and that certain others are subject to +re-detail without an interval of two years. Such provision is fraught with +danger to the welfare of the Army, and would practically nullify the main +purpose of the law creating the [missing text]. +</p> + +<p> +In making the consolidations no reduction should be made in the total +number of officers of the Army, of whom there are now too few to perform +the duties imposed by law. I have in the past recommended an increase in +the number of officers by 600 in order to provide sufficient officers to +perform all classes of staff duty and to reduce the number of line officers +detached from their commands. Congress at the last session increased the +total number of officers by 200, but this is not enough. Promotion in the +line of the Army is too slow. Officers do not attain command rank at an age +early enough properly to exercise it. It would be a mistake further to +retard this already slow promotion by throwing back into the line of the +Arm a number of high-ranking officers to be absorbed as is provided in the +[missing text]. +</p> + +<p> +Another feature of the bill which I believe to be a mistake is the proposed +increase in the term of enlistment from three to five ears I believe it +would be better to enlist men for six years, release them at the end of +three years from active service, and put them in reserve for the remaining +three years. Reenlistments should be largely confined to the +noncommissioned officers and other enlisted men in the skilled grades. This +plan by the payment of a comparatively small compensation during the three +years of reserve, would keep a large body of men at the call of the +Government, trained and ready for [missing text]. +</p> + +<p> +The Army of the United States is in good condition. It showed itself able +to meet an emergency in the successful mobilization of an army division of +from 15,000 to 20,000 men, which took place along the border of Mexico +during the recent disturbances in that country. The marvelous freedom from +the ordinary camp diseases of typhoid fever and measles is referred to in +the report of the Secretary of War and shows such an effectiveness in the +sanitary regulations and treatment of the Medical Corps, and in the +discipline of the Army itself, as to invoke the highest commendation. +</p> + +<p> +MEMORIAL AMPHITHEATER AT ARLINGTON. +</p> + +<p> +I beg to renew my recommendation of last year that the Congress appropriate +for a memorial amphitheater at Arlington, Va., the funds required to +construct it upon the plans already approved. +</p> + +<p> +THE PANAMA CANAL. +</p> + +<p> +The very satisfactory progress made on the Panama Canal last year has +continued, and there is every reason to believe that the canal +will be completed as early as the 1st of July, 1913, unless something +unforeseen occurs. This is about 18 months before the time promised by the +engineers. +</p> + +<p> +We are now near enough the completion of the canal to make it imperatively +necessary that legislation should be enacted to fix the method by which the +canal shall be maintained and controlled and the zone governed. The fact is +that to-day there is no statutory law by authority of which the President +is maintaining the government of the zone. Such authority was given in an +amendment to the Spooner Act, which expired by the terms of its own +limitation some years ago. Since that time the government has continued, +under the advice of the Attorney General that in the absence of action by +Congress, there is necessarily an implied authority on the part of the +Executive to maintain a government in a territory in which he has to see +that the laws are executed. The fact that we have been able thus to get +along during the important days of construction without legislation +expressly formulating the government of the zone, or delegating the +creation of it to the President, is not a reason for supposing that we may +continue the same kind of a government after the construction is finished. +The implied authority of the President to maintain a civil government in +the zone may be derived from the mandatory direction given him in the +original Spooner Act, by which he was commanded to build the canal; but +certainly, now that the canal is about to be completed and to be put under +a permanent management, there ought to be specific statutory authority for +its regulation and control and for the government of the zone, which we +hold for the chief and main purpose of operating the canal. +</p> + +<p> +I fully concur with the Secretary of War that the problem is simply the +management of a great public work, and not the government of a local +republic; that every provision must be directed toward the successful +maintenance of the canal as an avenue of commerce, and that all provisions +for the government of those who live within the zone should be subordinate +to the main purpose. +</p> + +<p> +The zone is 40 miles long and 10 miles wide. Now, it has a population Of +50,000 or 60,000, but as soon as the work of construction is completed, the +towns which make up this population will be deserted, and only +comparatively few natives will continue their residence there. The control +of them ought to approximate a military government. One judge and two +justices of the peace will be sufficient to attend to all the judicial and +litigated business there is. With a few fundamental laws of Congress, the +zone should be governed by the orders of the President, issued through the +War Department, as it is today. Provisions can be made for the guaranties +of life, liberty, and property, but beyond those, the government should be +that of a military reservation, managed in connection with this great +highway of trade. +</p> + +<p> +FURNISHING SUPPLIES AND REPAIRS. +</p> + +<p> +In my last annual message I discussed at length the reasons for the +Government's assuming the task of furnishing to all ships that use the +canal, whether our own naval vessels or others, the supplies of coal and +oil and other necessities with which they must be replenished either before +or after passing through the canal, together with the dock facilities and +repairs of every character. This it is thought wise to do through the +Government, because the Government must establish for itself, for its own +naval vessels, large depots and dry docks and warehouses, and these may +easily be enlarged so as to secure to the world public using the canal +reasonable prices and a certainty that there will be no discrimination +between those who wish to avail themselves of such facilities. TOLLS. +</p> + +<p> +I renew my recommendation with respect to the tolls of the canal that +within limits, which shall seem wise to Congress, the power of fixing tolls +be given to the President. In order to arrive at a proper conclusion, there +must be some experimenting, and this can not be done if Congress does not +delegate the power to one who can act expeditiously. +</p> + +<p> +POWER EXISTS TO RELIEVE AMERICAN SHIPPING. +</p> + +<p> +I am very confident that the United States has the power to relieve from +the payment of tolls any part of our shipping that Congress deems wise. We +own the canal. It was our money that built it. We have the right to charge +tolls for its use. Those tolls must be the same to everyone; but when we +are dealing with our own ships, the practice of many Governments of +subsidizing their own merchant vessels is so well established in general +that a subsidy equal to the tolls, an equivalent remission of tolls, can +not be held to be a discrimination in the use of the canal. The practice in +the Suez Canal makes this clear. The experiment in tolls to be made by the +President would doubtless disclose how great a burden of tolls the +coastwise trade between the Atlantic and the Pacific coast could bear +without preventing its usefulness in competition with the transcontinental +railroads. One of the chief reasons for building the canal was to set up +this competition and to bring the two shores closer together as a practical +trade problem. It may be that the tolls will have to be wholly remitted. I +do not think this is the best principle, because I believe that the cost of +such a Government work as the Panama Canal ought to be imposed gradually +but certainly upon the trade which it creates and makes possible. So far as +we can, consistent with the development of the world's trade through the +canal, and the benefit which it was intended to secure to the east and west +coastwise trade, we ought to labor to secure from the canal tolls a +sufficient amount ultimately to meet the debt which we have assumed and to +pay the interest. +</p> + +<p> +THE PHILIPPINE ISLANDS. +</p> + +<p> +In respect to the Philippines, I urgently join in the recommendation of the +Secretary of War that the act of February 6, 1905, limiting the +indebtedness that may be incurred by the Philippine Government for the +construction of public works, be increased from $5,000,000 to $15,000,000. +The finances of that Government are in excellent condition. The maximum sum +mentioned is quite low as compared with the amount of indebtedness of other +governments with similar resources, and the success which has attended the +expenditure of the $5,000,000 in the useful improvements of the harbors and +other places in the Islands justifies and requires additional expenditures +for like purposes. NATURALIZATION. +</p> + +<p> +I also join in the recommendation that the legislature of the Philippine +Islands be authorized to provide for the naturalization of Filipinos and +others who by the present law are treated as aliens, so as to enable them +to become citizens of the Philippine Islands. +</p> + +<p> +FRIARS' LANDS. +</p> + +<p> +Pending an investigation by Congress at its last session, through one of +its committees, into the disposition of the friars' lands, Secretary +Dickinson directed that the friars' lands should not be sold in excess of +the limits fixed for the public lands until Congress should pass upon the +subject or should have concluded its investigation. This order has been an +obstruction to the disposition of the lands, and I expect to direct the +Secretary of War to return to the practice under the opinion of the +Attorney General which will enable us to dispose of the lands much more +promptly, and to prepare a sinking fund with which to meet the $7,000,000 +of bonds issued for the purchase of the lands. I have no doubt whatever +that the Attorney General's construction was a proper one, and that it is +in the interest of everyone that the land shall be promptly disposed of. +The danger of creating a monopoly of ownership in lands under the statutes +as construed is nothing. There are only two tracts of 60,000 acres each +unimproved and in remote Provinces that are likely to be disposed of in +bulk, and the rest of the lands are subject to the limitation that they +shall be first offered to the present tenants and lessors who hold them in +small tracts. +</p> + +<p> +RIVERS AND HARBORS. +</p> + +<p> +The estimates for the river and harbor improvements reach $32,000,000 for +the coming year. I wish to urge that whenever a project has been adopted by +Congress as one to be completed, the more money which can be economically +expended in its construction in each year, the greater the ultimate +economy. This has especial application to the improvement of the +Mississippi River and its large branches. It seems to me that an increase +in the amount of money now being annually expended in the improvement of +the Ohio River which has been formally adopted by Congress would be in the +interest of the public. A similar change ought to be made during the +present Congress, in the amount to be appropriated for the Missouri River. +The engineers say that the cost of the improvement of the Missouri River +from Kansas City to St. Louis, in order to secure 6 feet as a permanent +channel, will reach $20,000,000. There have been at least three +recommendations from the Chief of Engineers that if the improvement be +adopted, $2,000,000 should be expended upon it annually. This particular +improvement is especially entitled to the attention of Congress, because a +company has been organized in Kansas City, with a capital of $1,000,000, +which has built steamers and barges, and is actually using the river for +transportation in order to show what can be done in the way of affecting +rates between Kansas City and St. Louis, and in order to manifest their +good faith and confidence in respect of the improvement. I urgently +recommend that the appropriation for this improvement be increased from +$600,000, as recommended now in the completion of a contract, to $2,000,000 +annually, so that the work may be done in 10 years. +</p> + +<p> +WATERWAY FROM THE LAKES TO THE GULF. +</p> + +<p> +The project for a navigable waterway from Lake Michigan to the mouth of the +Illinois River, and thence via the Mississippi to the Gulf of Mexico, is +one of national importance. In view of the work already accomplished by the +Sanitary District of Chicago, an agency of the State of Illinois, which has +constructed the most difficult and costly stretch of this waterway and made +it an asset of the Nation, and in view of the fact that the people of +Illinois have authorized the expenditure Of $20,000,000 to carry this +waterway 62 miles farther to Utica, I feel that it is fitting that this +work should be supplemented by the Government, and that the expenditures +recommended by the special board of engineers on the waterway from Utica to +the mouth of the Illinois River be made upon lines which while providing a +waterway for the Nation should otherwise benefit that State to the fullest +extent. I recommend that the term of service of said special board of +engineers be continued, and that it be empowered to reopen the question of +the treatment of the lower Illinois River, and to negotiate with a properly +constituted commission representing the State of Illinois, and to agree +upon a plan for the improvement of the lower Illinois River and upon the +extent to which the United States may properly cooperate with the State of +Illinois in securing the construction of a navigable waterway from Lockport +to the mouth of the Illinois River in conjunction with the development of +water power by that State between Lockport and Utica. +</p> + +<p> +THE DEPARTMENT OF JUSTICE. +</p> + +<p> +Removal of clerks of Federal courts. +</p> + +<p> +The report of the Attorney General shows that he has subjected to close +examination the accounts of the clerks of the Federal courts; that he has +found a good many which disclose irregularities or dishonesty; but that he +has had considerable difficulty in securing an effective prosecution or +removal of the clerks thus derelict. I am certainly not unduly prejudiced +against the Federal courts, but the fact is that the long and confidential +relations which grow out of the tenure for life on the part of the judge +and the practical tenure for life on the part of the clerk are not +calculated to secure the strictness of dealing by the judge with the clerk +in respect to his fees and accounts which assures in the clerk's conduct a +freedom from overcharges and carelessness. The relationship between the +judge and the clerk makes it ungracious for members of the bar to complain +of the clerk or for department examiners to make charges against him to be +heard by the court, and an order of removal of a clerk and a judgment for +the recovery of fees are in some cases reluctantly entered by the judge. +For this reason I recommend an amendment to the law whereby the President +shall be given power to remove the clerks for cause. This provision need +not interfere with the right of the judge to appoint his clerk or to remove +him. +</p> + +<p> +French spoliation awards. +</p> + +<p> +In my last message, I recommended to Congress that it authorize the payment +of the findings or judgments of the Court of Claims in the matter of the +French spoliation cases. There has been no appropriation to pay these +judgments since 1905. The findings and awards were obtained after a very +bitter fight, the Government succeeding in about 75 per cent of the cases. +The amount of the awards ought, as a matter of good faith on the part of +the Government, to be paid. +</p> + +<p> +EMPLOYERS' LIABILITY AND WORKMEN'S COMPENSATION COMMISSION. +</p> + +<p> +The limitation of the liability of the master to his servant for personal +injuries to such as are occasioned by his fault has been abandoned in most +civilized countries and provision made whereby the employee injured in the +course of his employment is compensated for his loss of working ability +irrespective of negligence. The principle upon which such provision +proceeds is that accidental injuries to workmen in modern industry, with +its vast complexity and inherent dangers arising from complicated machinery +and the use of the great forces of steam and electricity, should be +regarded as risks of the industry and the loss borne in some equitable +proportion by those who for their own profit engage therein. In recognition +of this the last Congress authorized the appointment of a commission to +investigate the subject of employers' liability and workmen's compensation +and to report the result of their investigations, through the President, to +Congress. This commission was appointed and has been at work, holding +hearings, gathering data, and considering the subject, and it is expected +will be able to report by the first of the year, in accordance with the +provisions of the law. It is hoped and expected that the commission will +suggest legislation which will enable us to put in the place of the present +wasteful and sometimes unjust system of employers' liability a plan of +compensation which will afford some certain and definite relief to all +employees who are injured in the course of their employment in those +industries which are subject to the regulating power of Congress. +</p> + +<p> +MEASURES TO PREVENT DELAY AND UNNECESSARY COST OF LITIGATION. +</p> + +<p> +In promotion of the movement for the prevention of delay and unnecessary +cost, in litigation, I am glad to say that the Supreme Court has taken +steps to reform the present equity rules of the Federal courts, and that we +may in the near future expect a revision of them which will be a long step +in the right direction. +</p> + +<p> +The American Bar Association has recommended to Congress several bills +expediting procedure, one of which has already passed the House +unanimously, February 6, 1911. This directs that no judgment should be set +aside or reversed, or new trial granted, unless it appears to the court, +after an examination of the entire cause, that the error complained of has +injuriously affected the substantial rights of the parties, and also +provides for the submission of issues of fact to a jury, reserving +questions of law for subsequent argument and decision. I hope this bill +will pass the Senate and become law, for it will simplify the procedure at +law. +</p> + +<p> +Another bill 11 to amend chapter II of the judicial Code, in order to +avoid errors in pleading, was presented by the same association, and one. +enlarging the jurisdiction of the Supreme Court so as to permit that court +to examine, upon a writ of error, all cases in which any right or title is +claimed under the Constitution, or any statute or treaty of the United +States, whether the decision in the court below has been against the right +or title or in its favor. Both these measures are in the interest of +justice and should be passed. +</p> + +<p> +POST OFFICE. +</p> + +<p> +At the beginning of the present administration in 1909 the postal service +was in arrears to the extent Of $17,479,770.47. It was very much the +largest deficit on record. In the brief space of two years this has been +turned into a surplus Of $220,000, which has been accomplished without +curtailment of the postal facilities, as may be seen by the fact that there +have been established 3,744 new post offices; delivery by carrier has been +added to the service in 186 cities; 2,516 new rural routes have been +established, covering 60,000 miles; the force of postal employees has been +increased in these two years by more than 8,000, and their average annual +salary has had a substantial increase. +</p> + +<p> +POSTAL-SAVINGS SYSTEM. +</p> + +<p> +On January 3, 1911, postal-savings depositories were established +experimentally in 48 States and Territories. After three months' successful +operation the system was extended as rapidly as feasible to the 7,500 Post +offices of the first, second, and third classes constituting the +presidential grade. By the end of the year practically all of these will +have been designated and then the system will be extended to all +fourth-class post offices doing a money-order business. +</p> + +<p> +In selecting post offices for depositories consideration was given to the +efficiency of the postmasters and only those offices where the ratings were +satisfactory to the department have been designated. Withholding +designation from postmasters with unsatisfactory ratings has had a salutary +effect on the service. +</p> + +<p> +The deposits have kept pace with the extension of the system. Amounting to +only $60,652 at the end of the first month's operation in the experimental +offices, they increased to $679,310 by July, and now after 11 months of +operation have reached a total of $11,000,000. This sum is distributed +among 2,710 banks and protected tinder the law by bonds deposited with the +Treasurer of the United States. +</p> + +<p> +Under the method adopted for the conduct of the system certificates are +issued as evidence of deposits, and accounts with depositors are kept by +the post offices instead of by the department. Compared with the practice +in other countries of entering deposits in pass books and keeping at the +central office a ledger account with each depositor, the use of the +certificate has resulted in great economy of administration. +</p> + +<p> +The depositors thus far number approximately 150,000. They include 40 +nationalities, native Americans largely predominating and English and +Italians coming next. +</p> + +<p> +The first conversion of deposits into United States bonds bearing interest +at the rate of 2.5 per cent occurred on July 1, 1911, the amount of +deposits exchanged being $41,900, or a little more than 6 per cent of the +total outstanding certificates of deposit on June 30. Of this issue, bonds +to the value of $6,120 were in coupon form and $35,780 in registered form. +</p> + +<p> +PARCEL POST. +</p> + +<p> +Steps should be taken immediately for the establishment of a rural parcel +post. In the estimates of appropriations needed for the maintenance of the +postal service for the ensuing fiscal year an item of $150,000 has been +inserted to cover the preliminary expense of establishing a parcel post on +rural mail routes, as well as to cover an investigation having for its +object the final establishment of a general parcel post on all railway and +steamboat transportation routes. The department believes that after the +initial expenses of establishing the system are defrayed and the parcel +post is in full operation on the rural routes it will not only bring in +sufficient revenue to meet its cost, but also a surplus that can be +utilized in paying the expenses of a parcel post in the City Delivery +Service. +</p> + +<p> +It is hoped that Congress will authorize the immediate establishment of a +limited parcel post on such rural routes as may be selected, providing for +the delivery along the routes of parcels not exceeding eleven pounds, which +is the weight limit for the international parcel post, or at the post +office from which such route emanates, or on another route emanating from +the same office. Such preliminary service will prepare the way for the more +thorough and comprehensive inquiry contemplated in asking for the +appropriation mentioned, enable the department to gain definite information +concerning the practical operation of a general system, and at the same +time extend the benefit of the service to a class of people who, above all +others, are specially in need of it. +</p> + +<p> +The suggestion that we have a general parcel post has awakened great +opposition on the part of some who think that it will have the effect to +destroy the business of the country storekeeper. Instead of doing this, I +think the change will greatly increase business for the benefit of all. The +reduction in the cost of living it will bring about ought to make its +coming certain. +</p> + +<p> +THE NAVY DEPARTMENT. +</p> + +<p> +On the 2d of November last, I reviewed the fighting fleet of battleships +and other vessels assembled in New York Harbor, consisting of 24 +battleships, 2 armored cruisers, 2 cruisers, 22 destroyers, 12 torpedo +boats, 8 submarines, and other attendant vessels, making 98 vessels of all +classes, of a tonnage Of 576,634 tons. Those who saw the fleet were struck +with its preparedness and with its high military efficiency. All Americans +should be proud of its personnel. +</p> + +<p> +The fleet was deficient in the number of torpedo destroyers, in cruisers, +and in colliers, as well as in large battleship cruisers, which are now +becoming a very important feature of foreign navies, notably the British, +German, and Japanese. +</p> + +<p> +The building plan for this year contemplates two battleships and two +colliers. This is because the other and smaller vessels can be built much +more rapidly in case of emergency than the battleships, and we certainly +ought to continue the policy of two battleships a year until after the +Panama Canal is finished and until in our first line and in our reserve +line we can number 40 available vessels of proper armament and size. +</p> + +<p> +The reorganization of the Navy and the appointment of four aids to the +Secretary have continued to demonstrate their usefulness. It would be +difficult now to administer the affairs of the Navy without the expert +counsel and advice of these aids, and I renew the recommendation which I +made last year, that the aids be recognized by statute. +</p> + +<p> +It is certain that the Navy, with its present size, should have admirals in +active command higher than rear admirals. The recognized grades in order +are: Admiral of the fleet, admiral, vice admiral, and rear admiral. Our +great battleship fleet is commanded by a rear admiral, with four other rear +admirals under his orders. This is not as it should be, and when questions +of precedence arise between our naval officers and those of European +navies, the American rear admiral, though in command of ten times the force +of a foreign vice admiral, must yield precedence to the latter. Such an +absurdity ought not to prevail, and it can be avoided by the creation of +two or three positions of flag rank above that of rear admiral. +</p> + +<p> +I attended the opening of the new training school at North Chicago, Ill., +and am glad to note the opportunity which this gives for drawing upon young +men of the country from the interior, from farms, stores, shops, and +offices, which insures a high average of intelligence and character among +them, and which they showed in the very wonderful improvement in discipline +and drill which only a few short weeks' presence at the naval station had +made. +</p> + +<p> +I invite your attention to the consideration of the new system of detention +and of punishment for Army and Navy enlisted men which has obtained in +Great Britain, and which has made greatly for the better control of the. +men. We should adopt a similar system here. +</p> + +<p> +Like the Treasury Department and the War Department, the Navy Department +has given much attention to economy in administration, and has cut down a +number of unnecessary expenses and reduced its estimates except for +construction and the increase that that involves. +</p> + +<p> +I urge upon Congress the necessity for an immediate increase of 2,000 men +in the enlisted strength of the Navy, provided for in the estimates. Four +thousand more are now needed to man all the available vessels. +</p> + +<p> +There are in the service to-day about 47,750 enlisted men of all ratings. +</p> + +<p> +Careful computation shows that in April, 1912, 49,166 men will be required +for vessels in commission, and 3,000 apprentice seamen should be kept under +training at all times. +</p> + +<p> +ABOLITION OF NAVY YARDS. +</p> + +<p> +The Secretary of the Navy has recommended the abolition of certain of the +smaller and unnecessary navy yards, and in order to furnish a complete and +comprehensive report has referred the question of all navy yards to the +joint board of the Army and Navy. This board will shortly make its report +and the Secretary of the Navy advises me that his recommendations on the +subject will be presented early in the coming year. The measure of economy +contained in a proper handling of this subject is so great and so important +to the interests of the Nation that I shall present it to Congress as a +separate subject apart from my annual message. Concentration of the +necessary work for naval vessels in a few navy yards on each coast is a +vital necessity if proper economy in Government expenditures is to be +attained. +</p> + +<p> +AMALGAMATION OF STAFF CORPS IN THE NAVY. +</p> + +<p> +The Secretary of the Navy is striving to unify the various corps of the +Navy to the extent possible and thereby stimulate a Navy spirit as +distinguished from a corps spirit. In this he has my warm support. +</p> + +<p> +All officers are to be naval officers first and specialists afterwards. +This means that officers will take up at least one specialty, such as +ordnance, construction, or engineering. This is practically what is done +now, only some of the specialists, like the pay officers and naval +constructors, are not of the line. It is proposed to make them all of the +line. +</p> + +<p> +All combatant corps should obviously be of the line. This necessitates +amalgamating the pay officers and also those engaged in the technical work +of producing the finished ship. This is at present the case with the single +exception of the naval constructors, whom it is now proposed to amalgamate +with the line. +</p> + +<p> +COUNCIL OF NATIONAL DEFENSE. +</p> + +<p> +I urge again upon Congress the desirability of establishing the council of +national defense. The bill to establish this council was before Congress +last winter, and it is hoped that this legislation will pass during the +present session. The purpose of the council is to determine the general +policy of national defense and to recommend to Congress and to the +President such measures relating to it as it shall deem necessary and +expedient. +</p> + +<p> +No such machinery is now provided by which the readiness of the Army and +Navy may be improved and the programs of military and naval requirements +shall be coordinated and properly scrutinized with a view of the +necessities of the whole Nation rather than of separate departments. +</p> + +<p> +DEPARTMENTS OF AGRICULTURE AND COMMERCE AND LABOR. +</p> + +<p> +For the consideration of matters which are pending or have been disposed of +in the Agricultural Department and in the Department of Commerce and Labor, +I refer to the very excellent reports of the Secretaries of those +departments. I shall not be able to submit to Congress until after the +Christmas holidays the question of conservation of our resources arising in +Alaska and the West and the question of the rate for second-class mail +matter in the Post Office Department. +</p> + +<p> +COMMISSION ON EFFICIENCY AND ECONOMY. +</p> + +<p> +The law does not require the submission of the reports of the Commission on +Economy and Efficiency until the 31st of December. I shall therefore not be +able to submit a report of the work of that commission until the assembling +of Congress after the holidays. +</p> + +<p> +CIVIL RETIREMENT AND CONTRIBUTORY PENSION SYSTEM. +</p> + +<p> +I have already advocated, in my last annual message, the adoption of a +civil-service retirement system, with a contributory feature to it so as to +reduce to a minimum the cost to the Government of the pensions to be paid. +After considerable reflection, I am very much opposed to a pension system +that involves no contribution from the employees. I think the experience of +other governments justifies this view; but the crying necessity for some +such contributory system, with possibly a preliminary governmental outlay, +in order to cover the initial cost and to set the system going at once +while the contributions are accumulating, is manifest on every side. +Nothing will so much promote the economy and efficiency of the Government +as such a system. +</p> + +<p> +ELIMINATION OF ALL LOCAL OFFICES FROM POLITICS. +</p> + +<p> +I wish to renew again my recommendation that all the local offices +throughout the country, including collectors of internal revenue, +collectors of customs, postmasters of all four classes, immigration +commissioners and marshals, should be by law covered into the classified +service, the necessity for confirmation by the Senate be removed, and the +President and the others, whose time is now taken up in distributing this +patronage under the custom that has prevailed since the beginning of the +Government in accordance with the recommendation of the Senators and +Congressmen of the majority party, should be relieved from this burden. I +am confident that such a change would greatly reduce the cost of +administering the Government, and that it would add greatly to its +efficiency. It would take away the power to use the patronage of the +Government for political purposes. When officers are recommended by +Senators and Congressmen from political motives and for political services +rendered, it is impossible to expect that while in office the appointees +will not regard their tenure as more or less dependent upon continued +political service for their patrons, and no regulations, however stiff or +rigid, will prevent this, because such regulations, in view of the method +and motive for selection, are plainly inconsistent and deemed hardly worthy +of respect. +</p> + +<p><br /><br /><br /></p> + +<p class="t3"> +*** +</p> + +<p><a id="dec1912"></a></p> + +<p class="noindent"> +State of the Union Address<br /> +William H. Taft<br /> +December 3, 1912<br /> +</p> + +<p class="noindent"> +Jump to <a href="#II-1912">Part II</a> | Part III +</p> + +<p class="noindent"> +To the Senate and House of Representatives: +</p> + +<p> +The foreign relations of the United States actually and potentially affect +the state of the Union to a degree not widely realized and hardly surpassed +by any other factor in the welfare of the whole Nation. The position of the +United States in the moral, intellectual, and material relations of the +family of nations should be a matter of vital interest to every patriotic +citizen. The national prosperity and power impose upon us duties which we +can not shirk if we are to be true to our ideals. The tremendous growth of +the export trade of the United States has already made that trade a very +real factor in the industrial and commercial prosperity of the country. +With the development of our industries the foreign commerce of the United +States must rapidly become a still more essential factor in its economic +welfare. Whether we have a farseeing and wise diplomacy and are not +recklessly plunged into unnecessary wars, and whether our foreign policies +are based upon an intelligent grasp of present-day world conditions and a +clear view of the potentialities of the future, or are governed by a +temporary and timid expediency or by narrow views befitting an infant +nation, are questions in the alternative consideration of which must +convince any thoughtful citizen that no department of national polity +offers greater opportunity for promoting the interests of the whole people +on the one hand, or greater chance on the other of permanent national +injury, than that which deals with the foreign relations of the United +States. +</p> + +<p> +The fundamental foreign policies of the United States should be raised high +above the conflict of partisanship and wholly dissociated from differences +as to domestic policy. In its foreign affairs the United States should +present to the world a united front. The intellectual, financial, and +industrial interests of the country and the publicist, the wage earner, the +farmer, and citizen of whatever occupation must cooperate in a spirit of +high patriotism to promote that national solidarity which is indispensable +to national efficiency and to the attainment of national ideals. +</p> + +<p> +The relations of the United States with all foreign powers remain upon a +sound basis of peace, harmony, and friendship. A greater insistence upon +justice to American citizens or interests wherever it may have been denied +and a stronger emphasis of the need of mutuality in commercial and other +relations have only served to strengthen our friendships with foreign +countries by placing those friendships upon a firm foundation of realities +as well as aspirations. +</p> + +<p> +Before briefly reviewing the more important events of the last year in our +foreign relations, which it is my duty to do as charged with their conduct +and because diplomatic affairs are not of a nature to make it appropriate +that the Secretary of State make a formal annual report, I desire to touch +upon some of the essentials to the safe management of the foreign relations +of the United States and to endeavor, also, to define clearly certain +concrete policies which are the logical modern corollaries of the +undisputed and traditional fundamentals of the foreign policy of the United +States. +</p> + +<p> +REORGANIZATION OF THE STATE DEPARTMENT +</p> + +<p> +At the beginning of the present administration the United States, having +fully entered upon its position as a world power, with the responsibilities +thrust upon it by the results of the Spanish-American War, and already +engaged in laying the groundwork of a vast foreign trade upon which it +should one day become more and more dependent, found itself without the +machinery for giving thorough attention to, and taking effective action +upon, a mass of intricate business vital to American interests in every +country in the world. +</p> + +<p> +The Department of State was an archaic and inadequate machine lacking most +of the attributes of the foreign office of any great modern power. With an +appropriation made upon my recommendation by the Congress on August 5, +1909, the Department of State was completely reorganized. There were +created Divisions of Latin American Affairs and of Far Eastern, Near +Eastern, and Western European Affairs. To these divisions were called from +the foreign service diplomatic and consular officers possessing experience +and knowledge gained by actual service in different parts of the world and +thus familiar with political and commercial conditions in the regions +concerned. The work was highly specialized. The result is that where +previously this Government from time to time would emphasize in its foreign +relations one or another policy, now American interests in every quarter of +the globe are being cultivated with equal assiduity. This principle of +politico-geographical division possesses also the good feature of making +possible rotation between the officers of the departmental, the diplomatic, +and the consular branches of the foreign service, and thus keeps the whole +diplomatic and consular establishments tinder the Department of State in +close touch and equally inspired with the aims and policy of the +Government. Through the newly created Division of Information the foreign +service is kept fully informed of what transpires from day to day in the +international relations of the country, and contemporary foreign comment +affecting American interests is promptly brought to the attention of the +department. The law offices of the department were greatly strengthened. +There were added foreign trade advisers to cooperate with the diplomatic and +consular bureaus and the politico-geographical divisions in the innumerable +matters where commercial diplomacy or consular work calls for such special +knowledge. The same officers, together with the rest of the new +organization, are able at all times to give to American citizens accurate +information as to conditions in foreign countries with which they have +business and likewise to cooperate more effectively with the Congress and +also with the other executive departments. +</p> + +<p> +MERIT SYSTEM IN CONSULAR AND DIPLOMATIC CORPS +</p> + +<p> +Expert knowledge and professional training must evidently be the essence of +this reorganization. Without a trained foreign service there would not be +men available for the work in the reorganized Department of State. +President Cleveland had taken the first step toward introducing the merit +system in the foreign service. That had been followed by the application of +the merit principle, with excellent results, to the entire consular branch. +Almost nothing, however, had been done in this direction with regard to the +Diplomatic Service. In this age of commercial diplomacy it was evidently of +the first importance to train an adequate personnel in that branch of the +service. Therefore, on November 26, 1909, by an Executive order I placed +the Diplomatic Service up to the grade of secretary of embassy, inclusive, +upon exactly the same strict nonpartisan basis of the merit system, rigid +examination for appointment and promotion only for efficiency, as had been +maintained without exception in the Consular Service. +</p> + +<p> +STATISTICS AS TO MERIT AND NONPARTISAN CHARACTER OF APPOINTMENTS +</p> + +<p> +How faithful to the merit system and how nonpartisan has been the conduct +of the Diplomatic and Consular Services in the last four years may be +judged from the following: Three ambassadors now serving held their present +rank at the beginning of my administration. Of the ten ambassadors whom I +have appointed, five were by promotion from the rank of minister. Nine +ministers now serving held their present rank at the beginning of my +administration. Of the thirty ministers whom I have appointed, eleven were +promoted from the lower grades of the foreign service or from the +Department of State. Of the nineteen missions in Latin America, where our +relations are close and our interest is great, fifteen chiefs of mission +are service men, three having entered the service during this +administration. Thirty-seven secretaries of embassy or legation who have +received their initial appointments after passing successfully the required +examination were chosen for ascertained fitness, without regard to +political affiliations. A dearth of candidates from Southern and Western +States has alone made it impossible thus far completely to equalize all the +States' representations in the foreign service. In the effort to equalize +the representation of the various States in the Consular Service I have +made sixteen of the twenty-nine new appointments as consul which have +occurred during my administration from the Southern States. This is 55 per +cent. Every other consular appointment made, including the promotion of +eleven young men from the consular assistant and student interpreter corps, +has been by promotion or transfer, based solely upon efficiency shown in +the service. +</p> + +<p> +In order to assure to the business and other interests of the United States +a continuance of the resulting benefits of this reform, I earnestly renew +my previous recommendations of legislation making it permanent along some +such lines as those of the measure now Pending in Congress. +</p> + +<p> +LARGER PROVISION FOR EMBASSIES AND LEGATIONS AND FOR OTHER EXPENSES OF OUR +FOREIGN REPRESENTATIVES RECOMMENDED +</p> + +<p> +In connection with legislation for the amelioration of the foreign service, +I wish to invite attention to the advisability of placing the salary +appropriations upon a better basis. I believe that the best results would +be obtained by a moderate scale of salaries, with adequate funds for the +expense of proper representation, based in each case upon the scale and +cost of living at each post, controlled by a system of accounting, and +under the general direction of the Department of State. +</p> + +<p> +In line with the object which I have sought of placing our foreign service +on a basis of permanency, I have at various times advocated provision by +Congress for the acquisition of Government-owned buildings for the +residence and offices of our diplomatic officers, so as to place them more +nearly on an equality with similar officers of other nations and to do away +with the discrimination which otherwise must necessarily be made, in some +cases, in favor of men having large private fortunes. The act of Congress +which I approved on February 17, 1911, was a right step in this direction. +The Secretary of State has already made the limited recommendations +permitted by the act for any one year, and it is my hope that the bill +introduced in the House of Representatives to carry out these +recommendations will be favorably acted on by the Congress during its +present session. +</p> + +<p> +In some Latin-American countries the expense of government-owned legations +will be less than elsewhere, and it is certainly very urgent that in such +countries as some of the Republics of Central America and the Caribbean, +where it is peculiarly difficult to rent suitable quarters, the +representatives of the United States should be justly and adequately +provided with dignified and suitable official residences. Indeed, it is +high time that the dignity and power of this great Nation should be +fittingly signalized by proper buildings for the occupancy of the Nation's +representatives everywhere abroad. +</p> + +<p> +DIPLOMACY A HAND MAID OF COMMERCIAL INTERCOURSE AND PEACE +</p> + +<p> +The diplomacy of the present administration has sought to respond to modern +ideas of commercial intercourse. This policy has been characterized as +substituting dollars for bullets. It is one that appeals alike to +idealistic humanitarian sentiments, to the dictates of sound policy and +strategy, and to legitimate commercial aims. It I is an effort frankly +directed to the increase of American trade upon the axiomatic principle +that the Government of the United States shall extend all proper support to +every legitimate and beneficial American enterprise abroad. How great have +been the results of this diplomacy, coupled with the maximum and minimum +provision of the tariff law, will be seen by some consideration of the +wonderful increase in the export trade of the United States. Because +modern diplomacy is commercial, there has been a disposition in some +quarters to attribute to it none but materialistic aims. How strikingly +erroneous is such an impression may be seen from a study of the results by +which the diplomacy of the United States can be judged. +</p> + +<p> +SUCCESSFUL EFFORTS IN PROMOTION OF PEACE +</p> + +<p> +In the field of work toward the ideals of peace this Government negotiated, +but to my regret was unable to consummate, two arbitration treaties which +set the highest mark of the aspiration of nations toward the substitution +of arbitration and reason for war in the settlement of international +disputes. Through the efforts of American diplomacy several wars have been +prevented or ended. I refer to the successful tripartite mediation of the +Argentine Republic, Brazil, and the United States between Peru and Ecuador; +the bringing of the boundary dispute between Panama and Costa Rica to +peaceful arbitration; the staying of warlike preparations when Haiti and +the Dominican Republic were on the verge of hostilities; the stopping of a +war in Nicaragua; the halting of internecine strife in Honduras. The +Government of the United States was thanked for its influence toward the +restoration of amicable relations between the Argentine Republic and +Bolivia. The diplomacy of the United States is active in seeking to assuage +the remaining ill-feeling between this country and the Republic of +Colombia. In the recent civil war in China the United States successfully +joined with the other interested powers in urging an early cessation of +hostilities. An agreement has been reached between the Governments of Chile +and Peru whereby the celebrated Tacna-Arica dispute, which has so long +embittered international relations on the west coast of South America, has +at last been adjusted. Simultaneously came the news that the boundary +dispute between Peru and Ecuador had entered upon a stage of amicable +settlement. The position of the United States in reference to the +Tacna-Arica dispute between Chile and Peru has been one of nonintervention, +but one of friendly influence and pacific counsel throughout the period +during which the dispute in question has been the subject of interchange of +views between this Government and the two Governments immediately +concerned. In the general easing of international tension on the west coast +of South America the tripartite mediation, to which I have referred, has +been a most potent and beneficent factor. +</p> + +<p> +CHINA +</p> + +<p> +In China the policy of encouraging financial investment to enable that +country to help itself has had the result of giving new life and practical +application to the open-door policy. The consistent purpose of the present +administration has been to encourage the use of American capital in the +development of China by the promotion of those essential reforms to which +China is pledged by treaties with the United States and other powers. The +hypothecation to foreign bankers in connection with certain industrial +enterprises, such as the Hukuang railways, of the national revenues upon +which these reforms depended, led the Department of State early in the +administration to demand for American citizens participation in such +enterprises, in order that the United States might have equal rights and an +equal voice in all questions pertaining to the disposition of the public +revenues concerned. The same policy of promoting international accord among +the powers having similar treaty rights as ourselves in the matters of +reform, which could not be put into practical effect without the common +consent of all, was likewise adopted in the case of the loan desired by +China for the reform of its currency. The principle of international +cooperation in matters of common interest upon which our policy had already +been based in all of the above instances has admittedly been a great factor +in that concert of the powers which has been so happily conspicuous during +the perilous period of transition through which the great Chinese nation +has been passing. +</p> + +<p> +CENTRAL AMERICA NEEDS OUR HELP IN DEBT ADJUSTMENT +</p> + +<p> +In Central America the aim has been to help such countries as Nicaragua and +Honduras to help themselves. They are the immediate beneficiaries. The +national benefit to the United States is twofold. First, it is obvious +that the Monroe doctrine is more vital in the neighborhood of the Panama +Canal and the zone of the Caribbean than anywhere else. There, too, the +maintenance of that doctrine falls most heavily upon the United States. It +is therefore essential that the countries within that sphere shall be +removed from the jeopardy involved by heavy foreign debt and chaotic +national finances and from the ever-present danger of international +complications due to disorder at home. Hence the United States has been +glad to encourage and support American bankers who were willing to lend a +helping hand to the financial rehabilitation of such countries because this +financial rehabilitation and the protection of their customhouses from +being the prey of would be dictators would remove at one stroke the menace +of foreign creditors and the menace of revolutionary disorder. +</p> + +<p> +The second advantage of the United States is one affecting chiefly all the +southern and Gulf ports and the business and industry of the South. The +Republics of Central America and the Caribbean possess great natural +wealth. They need only a measure of stability and the means of financial +regeneration to enter upon an era of peace and prosperity, bringing profit +and happiness to themselves and at the same time creating conditions sure +to lead to a flourishing interchange of trade with this country. +</p> + +<p> +I wish to call your especial attention to the recent occurrences in +Nicaragua, for I believe the terrible events recorded there during the +revolution of the past summer-the useless loss of life, the devastation of +property, the bombardment of defenseless cities, the killing and wounding +of women and children, the torturing of noncombatants to exact +contributions, and the suffering of thousands of human beings-might have +been averted had the Department of State, through approval of the loan +convention by the Senate, been permitted to carry out its now +well-developed policy of encouraging the extending of financial aid to weak +Central American States with the primary objects of avoiding just such +revolutions by assisting those Republics to rehabilitate their finances, to +establish their currency on a stable basis, to remove the customhouses from +the danger of revolutions by arranging for their secure administration, and +to establish reliable banks. +</p> + +<p> +During this last revolution in Nicaragua, the Government of that Republic +having admitted its inability to protect American life and property against +acts of sheer lawlessness on the part of the malcontents, and having +requested this Government to assume that office, it became necessary to +land over 2,000 marines and bluejackets in Nicaragua. Owing to their +presence the constituted Government of Nicaragua was free to devote its +attention wholly to its internal troubles, and was thus enabled to stamp +out the rebellion in a short space of time. When the Red Cross supplies +sent to Granada had been exhausted, 8,000 persons having been given food in +one day upon the arrival of the American forces, our men supplied other +unfortunate, needy Nicaraguans from their own haversacks. I wish to +congratulate the officers and men of the United States navy and Marine +Corps who took part in reestablishing order in Nicaragua upon their +splendid conduct, and to record with sorrow the death of seven American +marines and bluejackets. Since the reestablishment of peace and order, +elections have been held amid conditions of quiet and tranquility. Nearly +all the American marines have now been withdrawn. The country should soon +be on the road to recovery. The only apparent danger now threatening +Nicaragua arises from the shortage of funds. Although American bankers have +already rendered assistance, they may naturally be loath to advance a loan +adequate to set the country upon its feet without the support of some such +convention as that of June, 1911, upon which the Senate has not yet acted. +</p> + +<p> +ENFORCEMENT OF NEUTRALITY LAWS +</p> + +<p> +In the general effort to contribute to the enjoyment of peace by those +Republics which are near neighbors of the United States, the administration +has enforced the so-called neutrality statutes with a new vigor, and those +statutes were greatly strengthened in restricting the exportation of arms +and munitions by the joint resolution of last March. It is still a +regrettable fact that certain American ports are made the rendezvous of +professional revolutionists and others engaged in intrigue against the +peace of those Republics. It must be admitted that occasionally a +revolution in this region is justified as a real popular movement to throw +off the shackles of a vicious and tyrannical government. Such was the +Nicaraguan revolution against the Zelaya regime. A nation enjoying our +liberal institutions can not escape sympathy with a true popular movement, +and one so well justified. In very many cases, however, revolutions in the +Republics in question have no basis in principle, but are due merely to the +machinations of conscienceless and ambitious men, and have no effect but to +bring new suffering and fresh burdens to an already oppressed people. The +question whether the use of American ports as foci of revolutionary +intrigue can be best dealt with by a further amendment to the neutrality +statutes or whether it would be safer to deal with special cases by special +laws is one worthy of the careful consideration of the Congress. +</p> + +<p> +VISIT OF SECRETARY KNOX TO CENTRAL AMERICA AND THE CARIBBEAN +</p> + +<p> +Impressed with the particular importance of the relations between the +United States and the Republics of Central America and the Caribbean +region, which of necessity must become still more intimate by reason of the +mutual advantages which will be presented by the opening of the Panama +Canal, I directed the Secretary of State last February to visit these +Republics for the purpose of giving evidence of the sincere friendship and +good will which the Government and people of the United States bear toward +them. Ten Republics were visited. Everywhere he was received with a +cordiality of welcome and a generosity of hospitality such as to impress me +deeply and to merit our warmest thanks. The appreciation of the Governments +and people of the countries visited, which has been appropriately shown in +various ways, leaves me no doubt that his visit will conduce to that closer +union and better understanding between the United States and those +Republics which I have had it much at heart to promote. +</p> + +<p> +OUR MEXICAN POLICY +</p> + +<p> +For two years revolution and counter-revolution has distraught the +neighboring Republic of Mexico. Brigandage has involved a great deal of +depredation upon foreign interests. There have constantly recurred +questions of extreme delicacy. On several occasions very difficult +situations have arisen on our frontier. Throughout this trying period, the +policy of the United States has been one of patient nonintervention, +steadfast recognition of constituted authority in the neighboring nation, +and the exertion of every effort to care for American interests. I +profoundly hope that the Mexican nation may soon resume the path of order, +prosperity, and progress. To that nation in its sore troubles, the +sympathetic friendship of the United States has been demonstrated to a high +degree. There were in Mexico at the beginning of the revolution some thirty +or forty thousand American citizens engaged in enterprises contributing +greatly to the prosperity of that Republic and also benefiting the +important trade between the two countries. The investment of American +capital in Mexico has been estimated at $1,000,000,000. The responsibility +of endeavoring to safeguard those interests and the dangers inseparable +from propinquity to so turbulent a situation have been great, but I am +happy to have been able to adhere to the policy above outlined-a policy +which I hope may be soon justified by the complete success of the Mexican +people in regaining the blessings of peace and good order. +</p> + +<p> +AGRICULTURAL CREDITS +</p> + +<p> +A most important work, accomplished in the past year by the American +diplomatic officers in Europe, is the investigation of the agricultural +credit system in the European countries. Both as a means to afford relief +to the consumers of this country through a more thorough development of +agricultural resources and as a means of more sufficiently maintaining the +agricultural population, the project to establish credit facilities for the +farmers is a concern of vital importance to this Nation. No evidence of +prosperity among well-established farmers should blind us to the fact that +lack of capital is preventing a development of the Nation's agricultural +resources and an adequate increase of the land under cultivation; that +agricultural production is fast falling behind the increase in population; +and that, in fact, although these well-established farmers are maintained +in increasing prosperity because of the natural increase in population, we +are not developing the industry of agriculture. We are not breeding in +proportionate numbers a race of independent and independence-loving +landowners, for a lack of which no growth of cities can compensate. Our +farmers have been our mainstay in times of crisis, and in future it must +still largely be upon their stability and common sense that this democracy +must rely to conserve its principles of self-government. +</p> + +<p> +The need of capital which American farmers feel to-day had been experienced +by the farmers of Europe, with their centuries-old farms, many years ago. +The problem had been successfully solved in the Old World and it was +evident that the farmers of this country might profit by a study of their +systems. I therefore ordered, through the Department of State, an +investigation to be made by the diplomatic officers in Europe, and I have +laid the results of this investigation before the governors of the various +States with the hope that they will be used to advantage in their +forthcoming meeting. +</p> + +<p> +INCREASE OF FOREIGN TRADE +</p> + +<p> +In my last annual message I said that the fiscal year ended June 30, 1911, +was noteworthy as marking the highest record of exports of American +products to foreign countries. The fiscal year 1912 shows that this rate of +advance has been maintained, the total domestic exports having a valuation +approximately Of $2,200,000,000, as compared with a fraction over +$2,000,000,000 the previous year. It is also significant that manufactured +and partly manufactured articles continue to be the chief commodities +forming the volume of our augmented exports, the demands of our own people +for consumption requiring that an increasing proportion of our abundant +agricultural products be kept at home. In the fiscal year 1911 the exports +of articles in the various stages of manufacture, not including foodstuffs +partly or wholly manufactured, amounted approximately to $907,500,000. In +the fiscal year 1912 the total was nearly $1,022,000,000, a gain Of +$114,000,000. +</p> + +<p> +ADVANTAGE OF MAXIMUM AND MINIMUM TARIFF PROVISION +</p> + +<p> +The importance which our manufactures have assumed in the commerce of the +world in competition with the manufactures of other countries again draws +attention to the duty of this Government to use its utmost endeavors to +secure impartial treatment for American products in all markets. Healthy +commercial rivalry in international intercourse is best assured by the +possession of proper means for protecting and promoting our foreign trade. +It is natural that competitive countries should view with some concern this +steady expansion of our commerce. If in some instance the measures taken by +them to meet it are not entirely equitable, a remedy should be found. In +former messages I have described the negotiations of the Department of +State with foreign Governments for the adjustment of the maximum and +minimum tariff as provided in section 2 of the tariff law of 1909. The +advantages secured by the adjustment of our trade relations under this law +have continued during the last year, and some additional cases of +discriminatory treatment of which we had reason to complain have been +removed. The Department of State has for the first time in the history of +this country obtained substantial most-favored-nation treatment from all +the countries of the world. There are, however, other instances which, +while apparently not constituting undue discrimination in the sense of +section 2, are nevertheless exceptions to the complete equity of tariff +treatment for American products that the Department of State consistently +has sought to obtain for American commerce abroad. +</p> + +<p> +NECESSITY FOR SUPPLEMENTARY LEGISLATION +</p> + +<p> +These developments confirm the opinion conveyed to you in my annual message +of 1911, that while the maximum and minimum provision of the tariff law of +1909 has been fully justified by the success achieved in removing +previously existing undue discriminations against American products, yet +experience has shown that this feature of the law should be amended in such +way as to provide a fully effective means of meeting the varying degrees of +discriminatory treatment of American commerce in foreign countries still +encountered, as well as to protect against injurious treatment on the part +of foreign Governments, through either legislative or administrative +measures, the financial interests abroad of American citizens whose +enterprises enlarge the market for American commodities. +</p> + +<p> +I can not too strongly recommend to the Congress the passage of some such +enabling measure as the bill which was recommended by the Secretary of +State in his letter of December 13, 1911. The object of the proposed +legislation is, in brief, to enable the Executive to apply, as the case may +require, to any or all commodities, whether or not on the free list from a +country which discriminates against the United States, a graduated scale of +duties up to the maximum Of 25 per cent ad valorem provided in the present +law. Flat tariffs are out of date. Nations no longer accord equal tariff +treatment to all other nations irrespective of the treatment from them +received. Such a flexible power at the command of the Executive would +serve to moderate any unfavorable tendencies on the part of those countries +from which the importations into the United States are substantially +confined to articles on the free list as well as of the countries which +find a lucrative market in the United States for their products under +existing customs rates. It is very necessary that the American Government +should be equipped with weapons of negotiation adapted to modern economic +conditions, in order that we may at all times be in a position to gain not +only technically just but actually equitable treatment for our trade, and +also for American enterprise and vested interests abroad. +</p> + +<p> +BUSINESS SECURED TO OUR COUNTRY BY DIRECT OFFICIAL EFFORT +</p> + +<p> +As illustrating the commercial benefits of the Nation derived from the new +diplomacy and its effectiveness upon the material as well as the more ideal +side, it may be remarked that through direct official efforts alone there +have been obtained in the course of this administration, contracts from +foreign Governments involving an expenditure of $50,000,000 in the +factories of the United States. Consideration of this fact and some +reflection upon the necessary effects of a scientific tariff system and a +foreign service alert and equipped to cooperate with the business men of +America carry the conviction that the gratifying increase in the export +trade of this country is, in substantial amount, due to our improved +governmental methods of protecting and stimulating it. It is germane to +these observations to remark that in the two years that have elapsed since +the successful negotiation of our new treaty with Japan, which at the time +seemed to present so many practical difficulties, our export trade to that +country has increased at the rate of over $1,000,000 a month. Our exports +to Japan for the year ended June 30, 1910, were $21,959,310, while for the +year ended June 30, 1912, the exports were $53,478,046, a net increase in +the sale of American products of nearly 150 per cent. +</p> + +<p> +SPECIAL CLAIMS ARBITRATION WITH GREAT BRITAIN +</p> + +<p> +Under the special agreement entered into between the United States and +Great Britain on August 18, 1910, for the arbitration of outstanding +pecuniary claims, a schedule of claims and the terms of submission have +been agreed upon by the two Governments, and together with the special +agreement were approved by the Senate on July 19, 1911, but in accordance +with the terms of the agreement they did not go into effect until confirmed +by the two Governments by an exchange of notes, which was done on April 26 +last. Negotiations, are still in progress for a supplemental schedule of +claims to be submitted to arbitration under this agreement, and meanwhile +the necessary preparations for the arbitration of the claims included in +the first schedule have been undertaken and are being carried on under the +authority of an appropriation made for that purpose at the last session of +Congress. It is anticipated that the two Governments will be prepared to +call upon the arbitration tribunal, established under this agreement, to +meet at Washington early next year to proceed with this arbitration. +</p> + +<p> +FUR SEAL TREATY AND NEED FOR AMENDMENT OF OUR STATUTE +</p> + +<p> +The act adopted at the last session of Congress to give effect to the +fur-seal convention Of July 7, 1911, between Great Britain, Japan, Russia, +and the United States provided for the suspension of all land killing of +seals on the Pribilof Islands for a period of five years, and an objection +has now been presented to this provision by the other parties in interest, +which raises the issue as to whether or not this prohibition of land +killing is inconsistent with the spirit, if not the letter, of the treaty +stipulations. The justification of establishing this close season depends, +under the terms of the convention, upon how far, if at all, it is necessary +for protecting and preserving the American fur-seal herd and for increasing +its number. This is a question requiring examination of the present +condition of the herd and the treatment which it needs in the light of +actual experience and scientific investigation. A careful examination of +the subject is now being made, and this Government will soon be in +possession of a considerable amount of new information about the American +seal herd, which has been secured during the past season and will be of +great value in determining this question; and if it should appear that +there is any uncertainty as to the real necessity for imposing a close +season at this time I shall take an early opportunity to address a special +message to Congress on this subject, in the belief that this Government +should yield on this point rather than give the slightest ground for the +charge that we have been in any way remiss in observing our treaty +obligations. +</p> + +<p> +FINAL SETTLEMENT OF NORTH ATLANTIC FISHERIES DISPUTE +</p> + +<p> +On the 20th of July last an agreement was concluded between the United +States and Great Britain adopting, with certain modifications, the rules +and method of procedure recommended in the award rendered by the North +Atlantic Coast Fisheries Arbitration Tribunal on September 7, 1910, for the +settlement hereafter, in accordance with the principles laid down in the +award, of questions arising with reference to the exercise of the American +fishing liberties under Article I of the treaty of October 20, 1818, +between the United States and Great Britain. This agreement received the +approval of the Senate on August I and was formally ratified by the two +Governments on November 15 last. The rules and a method of procedure +embodied in the award provided for determining by an impartial tribunal the +reasonableness of any new fishery regulations on the treaty coasts of +Newfoundland and Canada before such regulations could be enforced against +American fishermen exercising their treaty liberties on those coasts, and +also for determining the delimitation of bays on such coasts more than 10 +miles wide, in accordance with the definition adopted by the tribunal of +the meaning of the word "bays" as used in the treaty. In the subsequent +negotiations between the two Governments, undertaken for the purpose of +giving practical effect to these rules and methods of procedure, it was +found that certain modifications therein were desirable from the point of +view of both Governments, and these negotiations have finally resulted in +the agreement above mentioned by which the award recommendations as +modified by mutual consent of the two Governments are finally adopted and +made effective, thus bringing this century-old controversy to a final +conclusion, which is equally beneficial and satisfactory to both +Governments. +</p> + +<p> +IMPERIAL VALLEY AND MEXICO +</p> + +<p> +In order to make possible the more effective performance of the work +necessary for the confinement in their present channel of the waters of the +lower Colorado River, and thus to protect the people of the Imperial +Valley, as well as in order to reach with the Government of Mexico an +understanding regarding the distribution of the waters of the Colorado +River, in which both Governments are much interested, negotiations are +going forward with a view to the establishment of a preliminary Colorado +River commission, which shall have the powers necessary to enable it to do +the needful work and with authority to study the question of the equitable +distribution of the waters. There is every reason to believe that an +understanding upon this point will be reached and that an agreement will be +signed in the near future. +</p> + +<p> +CHAMIZAL DISPUTE +</p> + +<p> +In the interest of the people and city of El Paso this Government has been +assiduous in its efforts to bring to an early settlement the long-standing +Chamizal dispute with Mexico. Much has been accomplished, and while the +final solution of the dispute is not immediate, the favorable attitude +lately assumed by the Mexican Government encourages the hope that this +troublesome question will be satisfactorily and definitively settled at an +early day. +</p> + +<p> +INTERNATIONAL COMMISSION OF JURISTS +</p> + +<p> +In pursuance of the convention of August 23, 1906, signed at the Third Pan +American Conference, held at Rio de Janeiro, the International Commission +of jurists met at that capital during the month of last June. At this +meeting 16 American Republics were represented, including the United +States, and comprehensive plans for the future work of the commission were +adopted. At the next meeting fixed for June, 1914, committees already +appointed are instructed to I report regarding topics assigned to them. +</p> + +<p> +OPIUM CONFERENCE-UNFORTUNATE FAILURE OF OUR GOVERNMENT TO ENACT RECOMMENDED +LEGISLATION +</p> + +<p> +In my message on foreign relations communicated to the two Houses of +Congress December 7, 1911, I called especial attention to the assembling of +the Opium Conference at The Hague, to the fact that that conference was to +review all pertinent municipal laws relating to the opium and allied evils, +and certainly all international rules regarding these evils, and to the +-fact that it seemed to me most essential that the Congress should take +immediate action on the anti-narcotic legislation before the Congress, to +which I had previously called attention by a special message. +</p> + +<p> +The international convention adopted by the conference conforms almost +entirely to the principles contained in the proposed anti-narcotic +legislation which has been before the last two Congresses. It was most +unfortunate that this Government, having taken the initiative in the +international action which eventuated in the important international opium +convention, failed to do its share in the great work by neglecting to pass +the necessary legislation to correct the deplorable narcotic evils in the +United States as well as to redeem international pledges upon which it +entered by virtue of the above-mentioned convention. The Congress at its +present session should enact into law those bills now before it which have +been so carefully drawn up in collaboration between the Department of State +and the other executive departments, and which have behind them not only +the moral sentiment of the country, but the practical support of all the +legitimate trade interests likely to be affected. Since the international +convention was signed, adherence to it has been made by several European +States not represented at the conference at The Hague and also by seventeen +Latin-American Republics. +</p> + +<p> +EUROPE AND THE NEAR EAST +</p> + +<p> +The war between Italy and Turkey came to a close in October last by the +signature of a treaty of peace, subsequently to which the Ottoman Empire +renounced sovereignty over Cyrenaica and Tripolitania in favor of Italy. +During the past year the Near East has unfortunately been the theater of +constant hostilities. Almost simultaneously with the conclusion of peace +between Italy and Turkey and their arrival at an adjustment of the complex +questions at issue between them, war broke out between Turkey on the one +hand and Bulgaria, Greece, Montenegro, and Servia on the other. The United +States has happily been involved neither directly nor indirectly with the +causes or questions incident to any of these hostilities and has maintained +in regard to them an attitude of absolute neutrality and of complete +political disinterestedness. In the second war in which the Ottoman Empire +has been engaged the loss of life and the consequent distress on both sides +have been appalling, and the United States has found occasion, in the +interest of humanity, to carry out the charitable desires of the American +people, to extend a measure of relief to the sufferers on either side +through the impartial medium of the Red Cross. Beyond this the chief care +of the Government of the United States has been to make due provision for +the protection of its national resident in belligerent territory. In the +exercise of my duty in this matter I have dispatched to Turkish waters a +special-service squadron, consisting of two armored cruisers, in order that +this Government may if need be bear its part in such measures as it may be +necessary for the interested nations to adopt for the safeguarding of +foreign lives and property in the Ottoman Empire in the event that a +dangerous situation should develop. In the meanwhile the several interested +European powers have promised to extend to American citizens the benefit of +such precautionary or protective measures as they might adopt, in the same +manner in which it has been the practice of this Government to extend its +protection to all foreign residents in those countries of the Western +Hemisphere in which it has from time to time been the task of the United +States to act in the interest of peace and good order. The early appearance +of a large fleet of European warships in the Bosphorus apparently assured +the protection of foreigners in that quarter, where the presence of the +American stationnaire the U. S. S. Scorpion sufficed, tinder the +circumstances, to represent the United States. Our cruisers were thus left +free to act if need be along the Mediterranean coasts should any unexpected +contingency arise affecting the numerous American interests in the +neighborhood of Smyrna and Beirut. +</p> + +<p> +SPITZBERGEN +</p> + +<p> +The great preponderance of American material interests in the sub-arctic +island of Spitzbergen, which has always been regarded politically as "no +man's land," impels this Government to a continued and lively interest in +the international dispositions to be made for the political governance and +administration of that region. The conflict of certain claims of American +citizens and others is in a fair way to adjustment, while the settlement of +matters of administration, whether by international conference of the +interested powers or otherwise, continues to be the subject of exchange of +views between the Governments concerned. +</p> + +<p> +LIBERIA +</p> + +<p> +As a result of the efforts of this Government to place the Government of +Liberia in position to pay its outstanding indebtedness and to maintain a +stable and efficient government, negotiations for a loan of $1,700,000 have +been successfully concluded, and it is anticipated that the payment of the +old loan and the issuance of the bonds of the 1912 loan for the +rehabilitation of the finances of Liberia will follow at an early date, +when the new receivership will go into active operation. The new +receivership will consist of a general receiver of customs designated by +the Government of the United States and three receivers of customs +designated by the Governments of Germany, France, and Great Britain, which +countries have commercial interests in the Republic of Liberia. +</p> + +<p> +In carrying out the understanding between the Government of Liberia and +that of the United States, and in fulfilling the terms of the agreement +between the former Government and the American bankers, three competent +ex-army officers are now effectively employed by the Liberian Government in +reorganizing the police force of the Republic, not only to keep in order +the native tribes in the hinterland but to serve as a necessary police +force along the frontier. It is hoped that these measures will assure not +only the continued existence but the prosperity and welfare of the Republic +of Liberia. Liberia possesses fertility of soil and natural resources, +which should insure to its people a reasonable prosperity. It was the duty +of the United States to assist the Republic of Liberia in accordance with +our historical interest and moral guardianship of a community founded by +American citizens, as it was also the duty of the American Government to +attempt to assure permanence to a country of much sentimental and perhaps +future real interest to a large body of our citizens. +</p> + +<p> +MOROCCO +</p> + +<p> +The legation at Tangier is now in charge of our consul general, who is +acting as charge d'affaires, as well as caring for our commercial interests +in that country. In view of the fact that many of the foreign powers are +now represented by charges d'affaires it has not been deemed necessary to +appoint at the present time a minister to fill a vacancy occurring in that +post. +</p> + +<p> +THE FAR EAST +</p> + +<p> +The political disturbances in China in the autumn and winter of 1911-12 +resulted in the abdication of the Manchu rulers on February 12, followed by +the formation of a provisional republican government empowered to conduct +the affairs of the nation until a permanent government might be regularly +established. The natural sympathy of the American people with the +assumption of republican principles by the Chinese people was appropriately +expressed in a concurrent resolution of Congress on April 17, 1912. A +constituent assembly, composed of representatives duly chosen by the people +of China in the elections that are now being held, has been called to meet +in January next to adopt a permanent constitution and organize the +Government of the nascent Republic. During the formative constitutional +stage and pending definite action by the assembly, as expressive of the +popular will, and the hoped-for establishment of a stable republican form +of government, capable of fulfilling its international obligations, the +United States is, according to precedent, maintaining full and friendly de +facto relations with the provisional Government. +</p> + +<p> +The new condition of affairs thus created has presented many serious and +complicated problems, both of internal rehabilitation and of international +relations, whose solution it was realized would necessarily require much +time and patience. From the beginning of the upheaval last autumn it was +felt by the United States, in common with the other powers having large +interests in China, that independent action by the foreign Governments in +their own individual interests would add further confusion to a situation +already complicated. A policy of international cooperation was accordingly +adopted in an understanding, reached early in the disturbances, to act +together for the protection of the lives and property of foreigners if +menaced, to maintain an attitude of strict impartiality as between the +contending factions, and to abstain from any endeavor to influence the +Chinese in their organization of a new form of government. In view of the +seriousness of the disturbances and their general character, the American +minister at Peking was instructed at his discretion to advise our nationals +in the affected districts to concentrate at such centers as were easily +accessible to foreign troops or men of war. Nineteen of our naval vessels +were stationed at various Chinese ports, and other measures were promptly +taken for the adequate protection of American interests. +</p> + +<p> +It was further mutually agreed, in the hope of hastening an end to +hostilities, that none of the interested powers would approve the making of +loans by its nationals to either side. As soon, however, as a united +provisional Government of China was assured, the United States joined in a +favorable consideration of that Government's request for advances needed +for immediate administrative necessities and later for a loan to effect a +permanent national reorganization. The interested Governments had already, +by common consent, adopted, in respect to the purposes, expenditure, and +security of any loans to China made by their nationals, certain conditions +which were held to be essential, not only to secure reasonable protection +for the foreign investors, but also to safeguard and strengthen China's +credit by discouraging indiscriminate borrowing and by insuring the +application of the funds toward the establishment of the stable and +effective government necessary to China's welfare. In June last +representative banking groups of the United States, France, Germany, Great +Britain, Japan, and Russia formulated, with the general sanction of their +respective Governments, the guaranties that would be expected in relation +to the expenditure and security of the large reorganization loan desired by +China, which, however, have thus far proved unacceptable to the provisional +Government. +</p> + +<p> +SPECIAL MISSION OF CONDOLENCE TO JAPAN +</p> + +<p> +In August last I accredited the Secretary of State as special ambassador to +Japan, charged with the mission of bearing to the imperial family, the +Government, and the people of that Empire the sympathetic message of the +American Commonwealth oil the sad occasion of the death of His Majesty the +Emperor Mutsuhito, whose long and benevolent reign was the greater part of +Japan's modern history. The kindly reception everywhere accorded to +Secretary Knox showed that his mission was deeply appreciated by the +Japanese nation and emphasized strongly the friendly relations that have +for so many years existed between the two peoples. +</p> + +<p> +SOUTH AMERICA +</p> + +<p> +Our relations with the Argentine Republic are most friendly and cordial. +So, also, are our relations with Brazil, whose Government has accepted the +invitation of the United States to send two army officers to study at the +Coast Artillery School at Fort Monroe. The long-standing Alsop claim, which +had been the only hindrance to the healthy growth of the most friendly +relations between the United States and Chile, having been eliminated +through the submission of the question to His Britannic Majesty King George +V as "amiable compositeur," it is a cause of much gratification to me that +our relations with Chile are now established upon a firm basis of growing +friendship. The Chilean Government has placed an officer of the United +States Coast Artillery in charge of the Chilean Coast Artillery School, and +has shown appreciation of American methods by confiding to an American firm +important work for the Chilean coast defenses. +</p> + +<p> +Last year a revolution against the established Government of Ecuador broke +out at the principal port of that Republic. Previous to this occurrence the +chief American interest in Ecuador, represented by the Guayaquil & Quito +Railway Co., incorporated in the United States, had rendered extensive +transportation and other services on account to the Ecuadorian Government, +the amount of which ran into a sum which was steadily increasing and which +the Ecuadorian Government had made no provision to pay, thereby threatening +to crush out the very existence of this American enterprise. When +tranquillity had been restored to Ecuador as a result of the triumphant +progress of the Government forces from Quito, this Government interposed +its good offices to the end that the American interests in Ecuador might be +saved from complete extinction. As a part of the arrangement which was +reached between the parties, and at the request of the Government of +Ecuador, I have consented to name an arbitrator, who, acting under the +terms of the railroad contract, with an arbitrator named by the Ecuadorian +Government, will pass upon the claims that have arisen since the +arrangement reached through the action of a similar arbitral tribunal in +1908. +</p> + +<p> +In pursuance of a request made some time ago by the Ecuadorian Government, +the Department of State has given much attention to the problem of the +proper sanitation of Guayaquil. As a result a detail of officers of the +Canal Zone will be sent to Guayaquil to recommend measures that will lead +to the complete permanent sanitation of this plague and fever infected +region of that Republic, which has for so long constituted a menace to +health conditions on the Canal Zone. It is hoped that the report which this +mission will furnish will point out a way whereby the modicum of assistance +which the United States may properly lend the Ecuadorian Government may be +made effective in ridding the west coast of South America of a focus of +contagion to the future commercial current passing through the Panama +Canal. +</p> + +<p> +In the matter of the claim of John Celestine Landreau against the +Government of Peru, which claim arises out of certain contracts and +transactions in connection with the discovery and exploitation of guano, +and which has been under discussion between the two Governments since 1874, +I am glad to report that as the result of prolonged negotiations, which +have been characterized by the utmost friendliness and good will on both +sides, the Department of State has succeeded in securing the consent of +Peru to the arbitration of the claim, and that the negotiations attending +the drafting and signature of a protocol submitting the claim to an +arbitral tribunal are proceeding with due celerity. +</p> + +<p> +An officer of the American Public Health Service and an American sanitary +engineer are now on the way to Iquitos, in the employ of the Peruvian +Government, to take charge of the sanitation of that river port. Peru is +building a number of submarines in this country, and continues to show +every desire to have American capital invested in the Republic. +</p> + +<p> +In July the United States sent undergraduate delegates to the Third +International Students Congress held at Lima, American students having been +for the first time invited to one of these meetings. +</p> + +<p> +The Republic of Uruguay has shown its appreciation of American agricultural +and other methods by sending a large commission to this country and by +employing many American experts to assist in building up agricultural and +allied industries in Uruguay. +</p> + +<p> +Venezuela is paying off the last of the claims the settlement of which was +provided for by the Washington protocols, including those of American +citizens. Our relations with Venezuela are most cordial, and the trade of +that Republic with the United States is now greater than with any other +country. +</p> + +<p> +CENTRAL AMERICA AND THE CARIBBEAN +</p> + +<p> +During the past summer the revolution against the administration which +followed the assassination of President Caceres a year ago last November +brought the Dominican Republic to the verge of administrative chaos, +without offering any guaranties of eventual stability in the ultimate +success of either party. In pursuance of the treaty relations of the United +States with the Dominican Republic, which were threatened by the necessity +of suspending the operation under American administration of the +customhouses on the Haitian frontier, it was found necessary to dispatch +special commissioners to the island to reestablish the customhouses and +with a guard sufficient to insure needed protection to the customs +administration. The efforts which have been made appear to have resulted in +the restoration of normal conditions throughout the Republic. The good +offices which the commissioners were able to exercise were instrumental in +bringing the contending parties together and in furnishing a basis of +adjustment which it is hoped will result in permanent benefit to the +Dominican people. +</p> + +<p> +Mindful of its treaty relations, and owing to the position of the +Government of the United States as mediator between the Dominican Republic +and Haiti in their boundary dispute, and because of the further fact that +the revolutionary activities on the Haitian-Dominican frontier had become +so active as practically to obliterate the line of demarcation that had +been heretofore recognized pending the definitive settlement of the +boundary in controversy, it was found necessary to indicate to the two +island Governments a provisional de facto boundary line. This was done +without prejudice to the rights or obligations of either country in a final +settlement to be reached by arbitration. The tentative line chosen was one +which, under the circumstances brought to the knowledge of this Government, +seemed to conform to the best interests of the disputants. The border +patrol which it had been found necessary to reestablish for customs +purposes between the two countries was instructed provisionally to observe +this line. +</p> + +<p> +The Republic of Cuba last May was in the throes of a lawless uprising that +for a time threatened the destruction of a great deal of valuable +property-much of it owned by Americans and other foreigners-as well as the +existence of the Government itself. The armed forces of Cuba being +inadequate to guard property from attack and at the same time properly to +operate against the rebels, a force of American marines was dispatched from +our naval station at Guantanamo into the Province of Oriente for the +protection of American and other foreign life and property. The Cuban +Government was thus able to use all its forces in putting down the +outbreak, which it succeeded in doing in a period of six weeks. The +presence of two American warships in the harbor of Habana during the most +critical period of this disturbance contributed in great measure to allay +the fears of the inhabitants, including a large foreign colony. +</p> + +<p> +There has been under discussion with the Government of Cuba for some time +the question of the release by this Government of its leasehold rights at +Bahia Honda, on the northern coast of Cuba, and the enlargement, in +exchange therefor, of the naval station which has been established at +Guantanamo Bay, on the south. As the result of the negotiations thus +carried on an agreement has been reached between the two Governments +providing for the suitable enlargement of the Guantanamo Bay station upon +terms which are entirely fair and equitable to all parties concerned. +</p> + +<p> +At the request alike of the Government and both political parties in +Panama, an American commission undertook supervision of the recent +presidential election in that Republic, where our treaty relations, and, +indeed, every geographical consideration, make the maintenance of order and +satisfactory conditions of peculiar interest to the Government of the +United States. The elections passed without disorder, and the new +administration has entered upon its functions. +</p> + +<p> +The Government of Great Britain has asked the support of the United States +for the protection of the interests of British holders of the foreign +bonded debt of Guatemala. While this Government is hopeful of an +arrangement equitable to the British bondholders, it is naturally unable to +view the question apart from its relation to the broad subject of financial +stability in Central America, in which the policy of the United States does +not permit it to escape a vital interest. Through a renewal of negotiations +between the Government of Guatemala and American bankers, the aim of which +is a loan for the rehabilitation of Guatemalan finances, a way appears to +be open by which the Government of Guatemala could promptly satisfy any +equitable and just British claims, and at the same time so improve its +whole financial position as to contribute greatly to the increased +prosperity of the Republic and to redound to the benefit of foreign +investments and foreign trade with that country. Failing such an +arrangement, it may become impossible for the Government of the United +States to escape its obligations in connection with such measures as may +become necessary to exact justice to legitimate foreign claims. +</p> + +<p> +In the recent revolution in Nicaragua, which, it was generally admitted, +might well have resulted in a general Central American conflict but for the +intervention of the United States, the Government of Honduras was +especially menaced; but fortunately peaceful conditions were maintained +within the borders of that Republic. The financial condition of that +country remains unchanged, no means having been found for the final +adjustment of pressing outstanding foreign claims. This makes it the more +regrettable that the financial convention between the United States and +Honduras has thus far failed of ratification. The Government of the United +States continues to hold itself ready to cooperate with the Government of +Honduras, which it is believed, can not much longer delay the meeting of +its foreign obligations, and it is hoped at the proper time American +bankers will be willing to cooperate for this purpose. +</p> + +<p> +NECESSITY FOR GREATER GOVERNMENTAL EFFORT IN RETENTION AND EXPANSION OF OUR +FOREIGN TRADE +</p> + +<p> +It is not possible to make to the Congress a communication upon the present +foreign relations of the United States so detailed as to convey an adequate +impression of the enormous increase in the importance and activities of +those relations. If this Government is really to preserve to the American +people that free opportunity in foreign markets which will soon be +indispensable to our prosperity, even greater efforts must be made. +Otherwise the American merchant, manufacturer, and exporter will find many +a field in which American trade should logically predominate preempted +through the more energetic efforts of other governments and other +commercial nations. +</p> + +<p> +There are many ways in which through hearty cooperation the legislative and +executive branches of this Government can do much. The absolute essential +is the spirit of united effort and singleness of purpose. I will allude +only to a very few specific examples of action which ought then to result. +America can not take its proper place in the most important fields for its +commercial activity and enterprise unless we have a merchant marine. +American commerce and enterprise can not be effectively fostered in those +fields unless we have good American banks in the countries referred to. We +need American newspapers in those countries and proper means for public +information about them. We need to assure the permanency of a trained +foreign service. We need legislation enabling the members of the foreign +service to be systematically brought in direct contact with the industrial, +manufacturing, and exporting interests of this country in order that +American business men may enter the foreign field with a clear perception +of the exact conditions to be dealt with and the officers themselves may +prosecute their work with a clear idea of what American industrial and +manufacturing interests require. +</p> + +<p> +CONCLUSION +</p> + +<p> +Congress should fully realize the conditions which obtain in the world as +we find ourselves at the threshold of our middle age as a Nation. We have +emerged full grown as a peer in the great concourse of nations. We have +passed through various formative periods. We have been self-centered in the +struggle to develop our domestic resources and deal with our domestic +questions. The Nation is now too matured to continue in its foreign +relations those temporary expedients natural to a people to whom domestic +affairs are the sole concern. In the past our diplomacy has often +consisted, in normal times, in a mere assertion of the right to +international existence. We are now in a larger relation with broader +rights of our own and obligations to others than ourselves. A number of +great guiding principles were laid down early in the history of this +Government. The recent task of our diplomacy has been to adjust those +principles to the conditions of to-day, to develop their corollaries, to +find practical applications of the old principles expanded to meet new +situations. Thus are being evolved bases upon which can rest the +superstructure of policies which must grow with the destined progress of +this Nation. The successful conduct of our foreign relations demands a +broad and a modern view. We can not meet new questions nor build for the +future if we confine ourselves to outworn dogmas of the past and to the +perspective appropriate at our emergence from colonial times and +conditions. The opening of the Panama Canal will mark a new era in our +international life and create new and worldwide conditions which, with +their vast correlations and consequences, will obtain for hundreds of years +to come. We must not wait for events to overtake us unawares. With +continuity of purpose we must deal with the problems of our external +relations by a diplomacy modern, resourceful, magnanimous, and fittingly +expressive of the high ideals of a great nation. +</p> + +<p class="noindent"> +<a id="II-1912"></a> +Part II.[On Fiscal, judicial, Military and Insular Affairs.] THE WHITE +HOUSE, December 6, 1912. To the Senate and House of Representatives: +</p> + +<p> +On the 3d of December I sent a message to the Congress, which was confined +to our foreign relations. The Secretary of State makes no report to the +President or to Congress, and a review of the history of the transactions +of the State Department in one year must therefore be included by the +President in his annual message or Congress will not be fully informed of +them. A full discussion of all the transactions of the Government, with a +view to informing the Congress of the important events of the year and +recommending new legislation, requires more space than one message of +reasonable length affords. I have therefore adopted the course of sending +three or four messages during the first ten days of the session, so as to +include reference to the more important matters that should be brought to +the attention of the Congress. +</p> + +<p> +BUSINESS CONDITIONS +</p> + +<p> +The condition of the country with reference to business could hardly be +better. While the four years of the administration now drawing to a close +have not developed great speculative expansion or a wide field of new +investment, the recovery and progress made from the depressing conditions +following the panic of 1907 have been steady and the improvement has been +clear and easily traced in the statistics. The business of the country is +now on a solid basis. Credits are not unduly extended, and every phase of +the situation seems in a state of preparedness for a period of unexampled +prosperity. Manufacturing concerns are running at their full capacity and +the demand for labor was never so constant and growing. The foreign trade +of the country for this year will exceed $4,000,000,000, while the balance +in our favor-that of the excess of exports over imports-will exceed +$500,000,000. More than half our exports are manufactures or partly +manufactured material, while our exports of farm products do not show the +same increase because of domestic consumption. It is a year of bumper +crops; the total money value of farm products will exceed $9,500,000,000. +It is a year when the bushel or unit price of agricultural products has +gradually fallen, and yet the total value of the entire crop is greater by +over $1,000,000,000 than we have known in our history. +</p> + +<p> +CONDITION OF THE TREASURY +</p> + +<p> +The condition of the Treasury is very satisfactory. The total +interest-bearing debt is $963,777,770, of which $134,631,980 constitute the +Panama Canal loan. The noninterest-bearing debt is $378,301,284.90, +including $346,681,016 of greenbacks. We have in the Treasury $150,000,000 +in gold coin as a reserve against the outstanding greenbacks; and in +addition we have a cash balance in the Treasury as a general fund of +$167,152,478.99, or an increase of $26,975,552 over the general fund last +year. +</p> + +<p> +RECEIPTS AND EXPENDITURES +</p> + +<p> +For three years the expenditures of the Government have decreased under the +influence of an effort to economize. This year presents an apparent +exception. The estimate by the Secretary of the Treasury of the ordinary +receipts, exclusive of postal revenues, for the year ending June 30, 1914, +indicates that they will amount to $710,000,000. The sum of the estimates +of the expenditures for that same year, exclusive of Panama Canal +disbursements and postal disbursements payable from postal revenues, is +$732,000,000, indicating a deficit Of $22,000,000. For the year ending June +30, 1913, similarly estimated receipts were $667,000,000, while the total +corresponding estimate of expenditures for that year, submitted through the +Secretary of the Treasury to Congress, amounted to $656,000,000. This shows +an increase of $76,000,000 in the estimates for 1914 over the total +estimates of 1913. This is due to an increase Of $25,000,000 in the +estimate for rivers and harbors for the next year on projects and surveys +authorized by Congress; to an increase under the new pension bill Of +$32,500,000; and to an increase in the estimates for expenses of the Navy +Department Of $24,000,000. The estimate for the Navy Department for the +year 1913 included two battleships. Congress made provision for only one +battleship, and therefore the Navy Department has deemed it necessary and +proper to make an estimate which includes the first year's expenditure for +three battleships in addition to the amount required for work on the +uncompleted ships now under construction. In addition to the natural +increase in the expenditures for the uncompleted ships, and the additional +battleship estimated for, the other increases are due to the pay +required for 4,000 or more additional enlisted men in the Navy; and to this +must be added the additional cost of construction imposed by the change in +the eight-hour law which makes it applicable to ships built in private +shipyards. +</p> + +<p> +With the exceptions of these three items, the estimates show a reduction +this year below the total estimates for 1913 of more than $5,000,000. +</p> + +<p> +The estimates for Panama Canal construction for 1914 are $17,000,000 less +than for 1913. +</p> + +<p> +OUR BANKING AND CURRENCY SYSTEM +</p> + +<p> +A time when panics seem far removed is the best time for us to prepare our +financial system to withstand a storm. The most crying need this country +has is a proper banking and currency system. The existing one is +inadequate, and everyone who has studied the question admits it. +</p> + +<p> +It is the business of the National Government to provide a medium, +automatically contracting and expanding in volume, to meet the needs of +trade. Our present system lacks the indispensable quality of elasticity. +</p> + +<p> +The only part of our monetary medium that has elasticity is the bank-note +currency. The peculiar provisions of the law requiring national banks to +maintain reserves to meet the call of the depositors operates to increase +the money stringency when it arises rather than to expand the supply of +currency and relieve it. It operates upon each bank and furnishes a motive +for the withdrawal of currency from the channels of trade by each bank to +save itself, and offers no inducement whatever for the use of the reserve +to expand the supply of currency to meet the exceptional demand. +</p> + +<p> +After the panic of 1907 Congress realized that the present system was not +adapted to the country's needs and that under it panics were possible that +might properly be avoided by legislative provision. Accordingly a monetary +commission was appointed which made a report in February, 1912. The system +which they recommended involved a National Reserve Association, which was, +in certain of its faculties and functions, a bank, and which was given +through its governing authorities the power, by issuing circulating notes +for approved commercial paper, by fixing discounts, and by other methods of +transfer of currency, to expand the supply of the monetary medium where it +was most needed to prevent the export or hoarding of gold and generally to +exercise such supervision over the supply of money in every part of the +country as to prevent a stringency and a panic. The stock in this +association was to be distributed to the banks of the whole United States, +State and National, in a mixed proportion to bank units and to capital +stock paid in. The control of the association was vested in a board of +directors to be elected by representatives of the banks, except certain +ex-officio directors, three Cabinet officers, and the Comptroller of the +Currency. The President was to appoint the governor of the association from +three persons to be selected by the directors, while the two deputy +governors were to be elected by the board of directors. The details of the +plan were worked out with great care and ability, and the plan in general +seems to me to furnish the basis for a proper solution of our present +difficulties. I feel that the Government might very properly be given a +greater voice in the executive committee of the board of directors without +danger of injecting politics into its management, but I think the +federation system of banks is a good one, provided proper precautions are +taken to prevent banks of large capital from absorbing power through +ownership of stock in other banks. The objections to a central bank it +seems to me are obviated if the ownership of the reserve association is +distributed among all the banks of a country in which banking is free. The +earnings of the reserve association are limited in percentage tit a +reasonable and fixed amount, and the profits over and above this are to be +turned into the Government Treasury. It is quite probable that still +greater security against control by money centers may be worked into the +plan. +</p> + +<p> +Certain it is, however, that the objections which were made in the past +history of this country to a central bank as furnishing a monopoly of +financial power to private individuals, would not apply to an association +whose ownership and control is so widely distributed and is divided between +all the banks of the country, State and National, on the one hand, and the +Chief Executive through three department heads and his Comptroller of the +Currency, on the other. The ancient hostility to a national bank, with its +branches, in which is concentrated the privilege of doing a banking +business and carrying on the financial transactions of the Government, has +prevented the establishment of such a bank since it was abolished in the +Jackson Administration. Our present national banking law has obviated +objections growing out of the same cause by providing a free banking system +in which any set of stockholders can establish a national bank if they +comply with the conditions of law. It seems to me that the National Reserve +Association meets the same objection in a similar way; that is, by giving +to each bank, State and National, in accordance with its size, a certain +share in the stock of the reserve association, nontransferable and only to +be held by the bank while it performs its functions as a partner in the +reserve association. +</p> + +<p> +The report of the commission recommends provisions for the imposition of a +graduated tax on the expanded currency of such a character as to furnish a +motive for reducing the issue of notes whenever their presence in the money +market is not required by the exigencies of trade. In other words, the +whole system has been worked out with the greatest care. Theoretically it +presents a plan that ought to command support. Practically it may require +modification in various of its provisions in order to make the security +against, abuses by combinations among the banks impossible. But in the face +of the crying necessity that there is for improvement in our present +system, I urgently invite the attention of Congress to the proposed plan +and the report of the commission, with the hope that an earnest +consideration may suggest amendments and changes within the general plan +which will lead to its adoption for the benefit of the country. There is no +class in the community more interested in a safe and sane banking and +currency system, one which will prevent panics and automatically furnish in +each trade center the currency needed in the carrying on of the business at +that center, than the wage earner. There is no class in the community whose +experience better qualifies them to make suggestions as to the sufficiency +of a currency and banking system than the bankers and business men. Ought +we, therefore, to ignore their recommendations and reject their financial +judgment as to the proper method of reforming our financial system merely +because of the suspicion which exists against them in the minds of many of +our fellow citizens? Is it not the duty of Congress to take up the plan +suggested, examine it from all standpoints, give impartial consideration to +the testimony of those whose experience ought to fit them to give the best +advice on the subject, and then to adopt some plan which will secure the +benefits desired? +</p> + +<p> +A banking and currency system seems far away from the wage earner and the +farmer, but the fact is that they are vitally interested in a safe system +of currency which shall graduate its volume to the amount needed and which +shall prevent times of artificial stringency that frighten capital, stop +employment, prevent the meeting of the pay roll, destroy local markets, and +produce penury and want. +</p> + +<p> +THE TARIFF +</p> + +<p> +I have regarded it as my duty in former messages to the Congress to urge +the revision of the tariff upon principles of protection. It was my +judgment that the customs duties ought to be revised downward, but that the +reduction ought not to be below a rate which would represent the difference +in the cost of production between the article in question at home and +abroad, and for this and other reasons I vetoed several bills which were +presented to me in the last session of this Congress. Now that a new +Congress has been elected on a platform of a tariff for revenue only rather +than a protective tariff, and is to revise the tariff on that basis, it is +needless for me to occupy the time of this Congress with arguments or +recommendations in favor of a protective tariff. +</p> + +<p> +Before passing from the tariff law, however, known as the Payne tariff law +of August 5, 1909, I desire to call attention to section 38 of that act, +assessing a special excise tax on corporations. It contains a provision +requiring the levy of an additional 50 per cent to the annual tax in cases +of neglect to verify the prescribed return or to file it before the time +required by law. This additional charge of 50 per cent operates in some +cases as a harsh penalty for what may have been a mere inadvertence or +unintentional oversight, and the law should be so amended as to mitigate +the severity of the charge in such instances. Provision should also be made +for the refund of additional taxes heretofore collected because of such +infractions in those cases where the penalty imposed has been so +disproportionate to the offense as equitably to demand relief. +</p> + +<p> +BUDGET +</p> + +<p> +The estimates for the next fiscal year have been assembled by the Secretary +of the Treasury and by him transmitted to Congress. I purpose at a later +day to submit to Congress a form of budget prepared for me and recommended +by the President's Commission on Economy and Efficiency, with a view of +suggesting the useful and informing character of a properly framed budget. +</p> + +<p> +WAR DEPARTMENT +</p> + +<p> +The War Department combines within its jurisdiction functions which in +other countries usually occupy three departments. It not only has the +management of the Army and the coast defenses, but its jurisdiction extends +to the government of the Philippines and of Porto Rico and the control of +the receivership of the customs revenues of the Dominican Republic; it also +includes the recommendation of all plans for the improvement of harbors and +waterways and their execution when adopted; and, by virtue of an Executive +order, the supervision of the construction of the Panama Canal. +</p> + +<p> +ARMY REORGANIZATION +</p> + +<p> +Our small Army now consists of 83,809 men, excluding the 5,000 Philippine +scouts. Leaving out of consideration the Coast Artillery force, whose +position is fixed in our various seacoast defenses, and the present +garrisons of our various insular possessions, we have to-day within the +continental United States a mobile Army of only about 35,000 men. This +little force must be still further drawn upon to supply the new garrisons +for the great naval base which is being established at Pearl Harbor, in the +Hawaiian Islands, and to protect the locks now rapidly approaching +completion at Panama. The forces remaining in the United States are now +scattered in nearly 50 Posts, situated for a variety of historical reasons +in 24 States. These posts contain only fractions of regiments, averaging +less than 700 men each. In time of peace it has been our historical policy +to administer these units separately by a geographical organization. In +other words, our Army in time of peace has never been a united organization +but merely scattered groups of companies, battalions, and regiments, and +the first task in time of war has been to create out of these scattered +units an Army fit for effective teamwork and cooperation. +</p> + +<p> +To the task of meeting these patent defects, the War Department has been +addressing itself during the past year. For many years we had no officer or +division whose business it was to study these problems and plan remedies +for these defects. With the establishment of the General Staff nine years +ago a body was created for this purpose. It has, necessarily, required time +to overcome, even in its own personnel, the habits of mind engendered by a +century of lack of method, but of late years its work has become systematic +and effective, and it has recently been addressing itself vigorously to +these problems. +</p> + +<p> +A comprehensive plan of Army reorganization was prepared by the War College +Division of the General Staff. This plan was thoroughly discussed last +summer at a series of open conferences held by the Secretary of War and +attended by representatives from all branches of the Army and from +Congress. In printed form it has been distributed to Members of Congress +and throughout the Army and the National Guard, and widely through +institutions of learning and elsewhere in the United States. In it, for the +first time, we have a tentative chart for future progress. +</p> + +<p> +Under the influence of this study definite and effective steps have been +taken toward Army reorganization so far as such reorganization lies within +the Executive power. Hitherto there has been no difference of policy in the +treatment of the organization of our foreign garrisons from those of troops +within the United States. The difference of situation is vital, and the +foreign garrison should be prepared to defend itself at an instant's notice +against a foe who may command the sea. Unlike the troops in the United +States, it can not count upon reinforcements or recruitment. It is an +outpost upon which will fall the brunt of the first attack in case of war. +The historical policy of the United States of carrying its regiments during +time of peace at half strength has no application to our foreign garrisons. +During the past year this defect has been remedied as to the Philippines +garrison. The former garrison of 12 reduced regiments has been replaced by +a garrison of 6 regiments at full strength, giving fully the same number of +riflemen at an estimated economy in cost of maintenance of over $1,000,000 +per year. This garrison is to be permanent. Its regimental units, instead +of being transferred periodically back and forth from the United States, +will remain in the islands. The officers and men composing these units +will, however, serve a regular tropical detail as usual, thus involving no +greater hardship upon the personnel and greatly increasing the +effectiveness of the garrison. A similar policy is proposed for the +Hawaiian and Panama garrisons as fast as the barracks for them are +completed. I strongly urge upon Congress that the necessary appropriations +for this purpose should be promptly made. It is, in my opinion, of first +importance that these national outposts, upon which a successful home +defense will, primarily, depend, should be finished and placed in effective +condition at the earliest possible day. +</p> + +<p> +THE HOME ARMY +</p> + +<p> +Simultaneously with the foregoing steps the War Department has been +proceeding with the reorganization of the Army at home. The formerly +disassociated units are being united into a tactical organization of three +divisions, each consisting of two or three brigades of Infantry and, so far +as practicable, a proper proportion of divisional Cavalry and Artillery. Of +course, the extent to which this reform can be carried by the Executive is +practically limited to a paper organization. The scattered units can be +brought under a proper organization, but they will remain physically +scattered until Congress supplies the necessary funds for grouping them in +more concentrated posts. Until that is done the present difficulty of +drilling our scattered groups together, and thus training them for the +proper team play, can not be removed. But we shall, at least, have an Army +which will know its own organization and will be inspected by its proper +commanders, and to which, as a unit, emergency orders can be issued in time +of war or other emergency. Moreover, the organization, which in many +respects is necessarily a skeleton, will furnish a guide for future +development. The separate regiments and companies will know the brigades +and divisions to which they belong. They will be maneuvered together +whenever maneuvers are established by Congress, and the gaps in their +organization will show the pattern into which can be filled new troops as +the Nation grows and a larger Army is provided. +</p> + +<p> +REGULAR ARMY RESERVE +</p> + +<p> +One of the most important reforms accomplished during the past year has +been the legislation enacted in the Army appropriation bill of last summer, +providing for a Regular Army reserve. Hitherto our national policy has +assumed that at the outbreak of war our regiments would be immediately +raised to full strength. But our laws have provided no means by which this +could be accomplished, or by which the losses of the regiments when once +sent to the front could be repaired. In this respect we have neglected the +lessons learned by other nations. The new law provides that the soldier, +after serving four years with colors, shall pass into a reserve for three +years. At his option he may go into the reserve at the end of three years, +remaining there for four years. While in the reserve he can be called to +active duty only in case of war or other national emergency, and when so +called and only in such case will receive a stated amount of pay for all of +the period in which he has been a member of the reserve. The legislation is +imperfect, in my opinion, in certain particulars, but it is a most +important step in the right direction, and I earnestly hope that it will be +carefully studied and perfected by Congress. +</p> + +<p> +THE NATIONAL GUARD +</p> + +<p> +Under existing law the National Guard constitutes, after the Regular Army, +the first line of national defense. Its organization, discipline, training, +and equipment, under recent legislation, have been assimilated, as far as +possible, to those of the Regular Army, and its practical efficiency, under +the effect of this training, has very greatly increased. Our citizen +soldiers under present conditions have reached a stage of development +beyond which they can not reasonably be asked to go without further direct +assistance in the form of pay from the Federal Government. On the other +hand, such pay from the National Treasury would not be justified unless it +produced a proper equivalent in additional efficiency on the part of the +National Guard. The Organized Militia to-day can not be ordered outside of +the limits of the United States, and thus can not lawfully be used for +general military purposes. The officers and men are ambitious and eager to +make themselves thus available and to become an efficient national reserve +of citizen soldiery. They are the only force of trained men, other than the +Regular Army, upon which we can rely. The so-called militia pay bill, in +the form agreed on between the authorities of the War Department and the +representatives of the National Guard, in my opinion adequately meets these +conditions and offers a proper return for the pay which it is proposed to +give to the National Guard. I believe that its enactment into law would be +a very long step toward providing this Nation with a first line of citizen +soldiery, upon which its main reliance must depend in case of any national +emergency. Plans for the organization of the National Guard into tactical +divisions, on the same lines as those adopted for the Regular Army, are +being formulated by the War College Division of the General Staff. +</p> + +<p> +NATIONAL VOLUNTEERS +</p> + +<p> +The National Guard consists of only about 110,000 men. In any serious war +in the past it has always been necessary, and in such a war in the future +it doubtless will be necessary, for the Nation to depend, in addition to +the Regular Army and the National Guard, upon a large force of volunteers. +There is at present no adequate provision of law for the raising of such a +force. There is now pending in Congress, however, a bill which makes such +provision, and which I believe is admirably adapted to meet the exigencies +which would be presented in case of war. The passage of the bill would not +entail a dollar's expense upon the Government at this time or in the future +until war comes. But if war comes the methods therein directed are in +accordance with the best military judgment as to what they ought to be, and +the act would prevent the necessity for a discussion of any legislation and +the delays incident to its consideration and adoption. I earnestly urge its +passage. +</p> + +<p> +CONSOLIDATION OF THE SUPPLY CORPS +</p> + +<p> +The Army appropriation act of 191:2 also carried legislation for the +consolidation of the Quartermaster's Department, the Subsistence +Department, and the Pay Corps into a single supply department, to be known +as the Quartermaster's Corps. It also provided for the organization of a +special force of enlisted men, to be known as the Service Corps, gradually +to replace many of the civilian employees engaged in the manual labor +necessary in every army. I believe that both of these enactments will +improve the administration of our military establishment. The consolidation +of the supply corps has already been effected, and the organization of the +service corps is being put into effect. +</p> + +<p> +All of the foregoing reforms are in the direction of economy and +efficiency. Except for the slight increase necessary to garrison our +outposts in Hawaii and Panama, they do not call for a larger Army, but they +do tend to produce a much more efficient one. The only substantial new +appropriations required are those which, as I have pointed out, are +necessary to complete the fortifications and barracks at our naval bases +and outposts beyond the sea. +</p> + +<p> +PORTO RICO +</p> + +<p> +Porto Rico continues to show notable progress, both commercially and in the +spread of education. Its external commerce has increased 17 per cent over +the preceding year, bringing the total value up to $92,631,886, or more +than five times the value of the commerce of the island in 1901. During the +year 160,657 Pupils were enrolled in the public schools, as against 145,525 +for the preceding year, and as compared with 26,000 for the first year of +American administration. Special efforts are under way for the promotion of +vocational and industrial training, the need of which is particularly +pressing in the island. When the bubonic plague broke out last June, the +quick and efficient response of the people of Porto Rico to the demands of +modern sanitation was strikingly shown by the thorough campaign which was +instituted against the plague and the hearty public opinion which supported +the Government's efforts to check its progress and to prevent its +recurrence. +</p> + +<p> +The failure thus far to grant American citizenship continues to be the only +ground of dissatisfaction. The bill conferring such citizenship has passed +the House of Representatives and is now awaiting the action of the Senate. +I am heartily in favor of the passage of this bill. I believe that the +demand for citizenship is just, and that it is amply earned by sustained +loyalty on the part of the inhabitants of the island. But it should be +remembered that the demand must be, and in the minds of most Porto Ricans +is, entirely disassociated from any thought of statehood. I believe that no +substantial approved public opinion in the United States or in Porto Rico +contemplates statehood for the island as the ultimate form of relations +between us. I believe that the aim to be striven for is the fullest +possible allowance of legal and fiscal self-government, with American +citizenship as to the bond between us; in other words, a relation analogous +to the present relation between Great Britain and such self-governing +colonies as Canada and Australia. This would conduce to the fullest and +most self-sustaining development of Porto Rico, while at the same time it +would grant her the economic and political benefits of being under the +American flag. +</p> + +<p> +PHILIPPINES +</p> + +<p> +A bill is pending in Congress which revolutionizes the carefully worked out +scheme of government under which the Philippine Islands are now governed +and which proposes to render them virtually autonomous at once and +absolutely independent in eight years. Such a proposal can only be founded +on the assumption that we have now discharged our trusteeship to the +Filipino people and our responsibility for them to the world, and that they +are now prepared for self-government as well as national sovereignty. A +thorough and unbiased knowledge of the facts clearly shows that these +assumptions are absolutely without justification. As to this, I believe +that there is no substantial difference of opinion among any of those who +have had the responsibility of facing Philippine problems in the +administration of the islands, and I believe that no one to whom the future +of this people is a responsible concern can countenance a policy fraught +with the direst consequences to those on whose behalf it is ostensibly +urged. +</p> + +<p> +In the Philippine Islands we have embarked upon an experiment unprecedented +in dealing with dependent people. We are developing there conditions +exclusively for their own welfare. We found an archipelago containing 24 +tribes and races, speaking a great variety of languages, and with a +population over 80 per cent of which could neither read nor write. Through +the unifying forces of a common education, of commercial and economic +development, and of gradual participation in local self-government we are +endeavoring to evolve a homogeneous people fit to determine, when the time +arrives, their own destiny. We are seeking to arouse a national spirit and +not, as under the older colonial theory, to suppress such a spirit. The +character of the work we have been doing is keenly recognized in the +Orient, and our success thus far followed with not a little envy by those +who, initiating the same policy, find themselves hampered by conditions +grown up in earlier days and under different theories of administration. +But our work is far from done. Our duty to the Filipinos is far from +discharged. Over half a million Filipino students are now in the Philippine +schools helping to mold the men of the future into a homogeneous people, +but there still remain more than a million Filipino children of school age +yet to be reached. Freed from American control the integrating forces of a +common education and a common language will cease and the educational +system now well started will slip back into inefficiency and disorder. +</p> + +<p> +An enormous increase in the commercial development of the islands has been +made since they were virtually granted full access to our markets three +years ago, with every prospect of increasing development and diversified +industries. Freed from American control such development is bound to +decline. Every observer speaks of the great progress in public works for +the benefit of the Filipinos, of harbor improvements, of roads and +railways, of irrigation and artesian wells, public buildings, and better +means of communication. But large parts of the islands are still unreached, +still even unexplored, roads and railways are needed in many parts, +irrigation systems are still to be installed, and wells to be driven. Whole +villages and towns are still without means of communication other than +almost impassable roads and trails. Even the great progress in sanitation, +which has successfully suppressed smallpox, the bubonic plague, and Asiatic +cholera, has found the cause of and a cure for beriberi, has segregated the +lepers, has helped to make Manila the most healthful city in the Orient, +and to free life throughout the whole archipelago from its former dread +diseases, is nevertheless incomplete in many essentials of permanence in +sanitary policy. Even more remains to be accomplished. If freed from +American control sanitary progress is bound to be arrested and all that has +been achieved likely to be lost. +</p> + +<p> +Concurrent with the economic, social, and industrial development of the +islands has been the development of the political capacity of the people. +By their progressive participation in government the Filipinos are being +steadily and hopefully trained for self-government. Under Spanish control +they shared in no way in the government. Under American control they have +shared largely and increasingly. Within the last dozen years they have +gradually been given complete autonomy in the municipalities, the right to +elect two-thirds of the provincial governing boards and the lower house of +the insular legislature. They have four native members out of nine members +of the commission, or upper house. The chief justice and two justices of +the supreme court, about one-half of the higher judicial positions, and all +of the justices of the peach are natives. In the classified civil service +the proportion of Filipinos increased from 51 per cent in 1904 to 67 per +cent in 1911. Thus to-day all the municipal employees, over go per cent of +the provincial employees, and 60 per cent of the officials and employees of +the central government are Filipinos. The ideal which has been kept in mind +in our political guidance of the islands has been real popular +self-government and not mere paper independence. I am happy to say that the +Filipinos have done well enough in the places they have filled and in the +discharge of the political power with which they have been intrusted to +warrant the belief that they can be educated and trained to complete +self-government. But the present satisfactory results are due to constant +support and supervision at every step by Americans. +</p> + +<p> +If the task we have undertaken is higher than that assumed by other +nations, its accomplishment must demand even more patience. We must not +forget that we found the Filipinos wholly untrained in government. Up to +our advent all other experience sought to repress rather than encourage +political power. It takes long time and much experience to ingrain +political habits of steadiness and efficiency. Popular self-government +ultimately must rest upon common habits of thought and upon a reasonably +developed public opinion. No such foundations for self-government, let alone +independence are now present in the Philippine Islands. Disregarding even +their racial heterogeneity and the lack of ability to think as a nation, it +is sufficient to point out that under liberal franchise privileges only +about 3 per cent of the Filipinos vote and only 5 per cent of the people +are said to read the public press. To confer independence upon the +Filipinos now is, therefore, to subject the great mass of their people to +the dominance of an oligarchical and, probably, exploiting minority. Such a +course will be as cruel to those people as it would be shameful to us. +</p> + +<p> +Our true course is to pursue steadily and courageously the path we have +thus far followed; to guide the Filipinos into self-sustaining pursuits; to +continue the cultivation of sound political habits through education and +political practice; to encourage the diversification of industries, and to +realize the advantages of their industrial education by conservatively +approved cooperative methods, at once checking the dangers of concentrated +wealth and building up a sturdy, independent citizenship. We should do all +this with a disinterested endeavor to secure for the Filipinos economic +independence and to fit them for complete self-government, with the power +to decide eventually, according to their own largest good, whether such +self-government shall be accompanied by independence. A present declaration +even of future independence would retard progress by the dissension and +disorder it would arouse. On our part it would be a disingenuous attempt, +under the guise of conferring a benefit on them, to relieve ourselves from +the heavy and difficult burden which thus far we have been bravely and +consistently sustaining. It would be a disguised policy of scuttle. It +would make the helpless Filipino the football of oriental politics, tinder +the protection of a guaranty of their independence, which we would be +powerless to enforce. +</p> + +<p> +REGULATION OF WATER POWER +</p> + +<p> +There are pending before Congress a large number of bills proposing to +grant privileges of erecting dams for the purpose of creating water power +in our navigable rivers. The pendency of these bills has brought out an +important defect in the existing general dam act. That act does not, in my +opinion, grant sufficient power to the Federal Government in dealing with +the construction of such dams to exact protective conditions in the +interest of navigation. It does not permit the Federal Government, as a +condition of its permit, to require that a part of the value thus created +shall be applied to the further general improvement and protection of the +stream. I believe this to be one of the most important matters of internal +improvement now confronting the Government. Most of the navigable rivers of +this country are comparatively long and shallow. In order that they may be +made fully useful for navigation there has come into vogue a method of +improvement known as canalization, or the slack-water method, which +consists in building a series of dams and locks, each of which will create +a long pool of deep navigable water. At each of these dams there is usually +created also water power of commercial value. If the water power thus +created can be made available for the further improvement of navigation in +the stream, it is manifest that the improvement will be much more quickly +effected on the one hand, and, on the other, that the burden on the general +taxpayers of the country will be very much reduced. Private interests +seeking permits to build water-power dams in navigable streams usually urge +that they thus improve navigation, and that if they do not impair +navigation they should be allowed to take for themselves the entire profits +of the water-power development. Whatever they may do by way of relieving +the Government of the expense of improving navigation should be given due +consideration, but it must be apparent that there may be a profit beyond a +reasonably liberal return upon the private investment which is a potential +asset of the Government in carrying out a comprehensive policy of waterway +development. It is no objection to the retention and use of such an asset +by the Government that a comprehensive waterway policy will include the +protection and development of the other public uses of water, which can not +and should not be ignored in making and executing plans for the protection +and development of navigation. It is also equally clear that inasmuch as +the water power thus created is or may be an incident of a general scheme +of waterway improvement within the constitutional jurisdiction of the +Federal Government, the regulation of such water power lies also within +that jurisdiction. In my opinion constructive statesmanship requires that +legislation should be enacted which will permit the development of +navigation in these great rivers to go hand in hand with the utilization of +this by-product of water power, created in the course of the same +improvement, and that the general dam act should be so amended as to make +this possible. I deem it highly important that the Nation should adopt a +consistent and harmonious treatment of these water-power projects, which +will preserve for this purpose their value to the Government, whose right +it is to grant the permit. Any other policy is equivalent to throwing away +a most valuable national asset. +</p> + +<p> +THE PANAMA CANAL +</p> + +<p> +During the past year the work of construction upon the canal has progressed +most satisfactorily. About 87 per cent of the excavation work has been +completed, and more than 93 per cent of the concrete for all the locks is +in place. In view of the great interest which has been manifested as to +some slides in the Culebra Cut, I am glad to say that the report of Col. +Goethals should allay any apprehension on this point. It is gratifying to +note that none of the slides which occurred during this year would have +interfered with the passage of the ships had the canal, in fact, been in +operation, and when the slope pressures will have been finally adjusted and +the growth of vegetation will minimize erosion in the banks of the cut, the +slide problem will be practically solved and an ample stability assured for +the Culebra Cut. +</p> + +<p> +Although the official date of the opening has been set for January 1, 1915, +the canal will, in fact, from present indications, be opened for shipping +during the latter half of 1913. No fixed date can as yet be set, but +shipping interests will be advised as soon as assurances can be given that +vessels can pass through without unnecessary delay. +</p> + +<p> +Recognizing the administrative problem in the management of the canal, +Congress in the act of August 24, 1912, has made admirable provisions for +executive responsibility in the control of the canal and the government of +the Canal Zone. The problem of most efficient organization is receiving +careful consideration, so that a scheme of organization and control best +adapted to the conditions of the canal may be formulated and put in +operation as expeditiously as possible. Acting tinder the authority +conferred on me by Congress, I have, by Executive proclamation, promulgated +the following schedule of tolls for ships passing through the canal, based +upon the thorough report of Emory R. Johnson, special commissioner on +traffic and tolls: +</p> + +<p> +I. On merchant vessels carrying passengers or cargo, $1.20 per net vessel +ton-each 100 cubic feet-of actual earning capacity. 2. On vessels in +ballast without passengers or cargo, 40 per cent less than the rate of +tolls for vessels with passengers or cargo. 3. Upon naval vessels, other +than transports, colliers, hospital ships, and supply ships, 50 cents per +displacement ton. 4. Upon Army and Navy transports, colliers, hospital +ships, and supply ships, $1.20 per net ton, the vessels to be measured by +the same rules as are employed in determining the net tonnage of merchant +vessels. Rules for the determination of the tonnage upon which toll charges +are based are now in course of preparation and will be promulgated in due +season. +</p> + +<p> +PANAMA CANAL TREATY +</p> + +<p> +The proclamation which I have issued in respect to the Panama Canal tolls +is in accord with the Panama Canal act passed by this Congress August 24, +1912. We have been advised that the British Government has prepared a +protest against the act and its enforcement in so far as it relieves from +the payment of tolls American ships engaged in the American coastwise trade +on the ground that it violates British rights tinder the Hay-Pauncefote +treaty concerning the Panama Canal. When the protest is presented, it will +be promptly considered and an effort made to reach a satisfactory +adjustment of any differences there may be between the two Governments. +</p> + +<p> +WORKMEN'S COMPENSATION ACT +</p> + +<p> +The promulgation of an efficient workmen's compensation act, adapted to the +particular conditions of the zone, is awaiting adequate appropriation by +Congress for the payment of claims arising thereunder. I urge that speedy +provision be made in order that we may install upon the zone a system of +settling claims for injuries in best accord with modern humane, social, and +industrial theories. +</p> + +<p> +PROMOTION FOR COL. GOETHALS +</p> + +<p> +As the completion of the canal grows nearer, and as the wonderful executive +work of Col. Goethals becomes more conspicuous in the eyes of the country +and of the world, it seems to me wise and proper to make provision by law +for such reward to him as may be commensurate with the service that he has +rendered to his country. I suggest that this reward take the form of an +appointment of Col. Goethals as a major general in the Army of the United +States, and that the law authorizing such appointment be accompanied with a +provision permitting his designation as Chief of Engineers upon the +retirement of the present incumbent of that office. +</p> + +<p> +NAVY DEPARTMENT +</p> + +<p> +The Navy of the United States is in a greater state of efficiency and is +more powerful than it has ever been before, but in the emulation which +exists between different countries in respect to the increase of naval and +military armaments this condition is not a permanent one. In view of the +many improvements and increases by foreign Governments the slightest halt +on our part in respect to new construction throws us back and reduces us +from a naval power of the first rank and places us among the nations of the +second rank. In the past 15 years the Navy has expanded rapidly and yet far +less rapidly than our country. From now on reduced expenditures in the Navy +means reduced military strength. The world's history has shown the +importance of sea power both for adequate defense and for the support of +important and definite policies. +</p> + +<p> +I had the pleasure of attending this autumn a mobilization of the Atlantic +Fleet, and was glad to observe and note the preparedness of the fleet for +instant action. The review brought before the President and the Secretary +of the Navy a greater and more powerful collection of vessels than had ever +been gathered in American waters. The condition of the fleet and of the +officers and enlisted men and of the equipment of the vessels entitled +those in authority to the greatest credit. +</p> + +<p> +I again commend to Congress the giving of legislative sanction to the +appointment of the naval aids to the Secretary of the Navy. These aids and +the council of aids appointed by the Secretary of the Navy to assist him in +the conduct of his department have proven to be of the highest utility. +They have furnished an executive committee of the most skilled naval +experts, who have coordinated the action of the various bureaus in the +Navy, and by their advice have enabled the Secretary to give an +administration at the same time economical and most efficient. Never before +has the United States had a Navy that compared in efficiency with its +present one, but never before have the requirements with respect to naval +warfare been higher and more exacting than now. A year ago Congress refused +to appropriate for more than one battleship. In this I think a great +mistake of policy was made, and I urgently recommend that this Congress +make up for the mistake of the last session by appropriations authorizing +the construction of three battleships, in addition to destroyers, fuel +ships, and the other auxiliary vessels as shown in the building program of +the general board. We are confronted by a condition in respect to the +navies of the world which requires us, if we would maintain our Navy as an +insurance of peace, to augment our naval force by at least two battleships +a year and by battle cruisers, gunboats, torpedo destroyers, and submarine +boats in a proper proportion. We have no desire for war. We would go as far +as any nation in the world to avoid war, but we are a world power. Our +population, our wealth, our definite policies, our responsibilities in the +Pacific and the Atlantic, our defense of the Panama Canal, together with +our enormous world trade and our missionary outposts on the frontiers of +civilization, require us to recognize our position as one of the foremost +in the family of nations, and to clothe ourselves with sufficient naval +power to give force to our reasonable demands, and to give weight to our +influence in those directions of progress that a powerful Christian nation +should advocate. +</p> + +<p> +I observe that the Secretary of the Navy devotes some space to a change in +the disciplinary system in vogue in that branch of the service. I think +there is nothing quite so unsatisfactory to either the Army or the Navy as +the severe punishments necessarily inflicted by court-martial for +desertions and purely military offenses, and I am glad to hear that the +British have solved this important and difficult matter in a satisfactory +way. I commend to the consideration of Congress the details of the new +disciplinary system, and recommend that laws be passed putting the same +into force both in the Army and the Navy. +</p> + +<p> +I invite the attention of Congress to that part of the report of the +Secretary of the Navy in which he recommends the formation of a naval +reserve by the organization of the ex-sailors of the Navy. +</p> + +<p> +I repeat my recommendation made last year that proper provision should be +made for the rank of the commander in chief of the squadrons and fleets of +the Navy. The inconvenience attending the necessary precedence that most +foreign admirals have over our own whenever they meet in official functions +ought to be avoided. It impairs the prestige of our Navy and is a defect +that can be very easily removed. +</p> + +<p> +DEPARTMENT OF JUSTICE +</p> + +<p> +This department has been very active in the enforcement of the law. It has +been better organized and with a larger force than ever before in the +history of the Government. The prosecutions which have been successfully +concluded and which are now pending testify to the effectiveness of the +departmental work. +</p> + +<p> +The prosecution of trusts under the Sherman antitrust law has gone on +without restraint or diminution, and decrees similar to those entered in +the Standard Oil and the Tobacco cases have been entered in other suits, +like the suits against the Powder Trust and the Bathtub Trust. I am very +strongly convinced that a steady, consistent course in this regard, with a +continuing of Supreme Court decisions upon new phases of the trust question +not already finally decided is going to offer a solution of this +much-discussed and troublesome issue in a quiet, calm, and judicial way, +without any radical legislation changing the governmental policy in regard +to combinations now denounced by the Sherman antitrust law. I have already +recommended as an aid in this matter legislation which would declare +unlawful certain well-known phases of unfair competition in interstate +trade, and I have also advocated voluntary national incorporation for the +larger industrial enterprises, with provision for a closer supervision by +the Bureau of Corporations, or a board appointed for the purpose, so as to +make more certain compliance with the antitrust law on the one hand and to +give greater security to the stockholders against possible prosecutions on +the other. I believe, however, that the orderly course of litigation in the +courts and the regular prosecution of trusts charged with the violation of +the antitrust law is producing among business men a clearer and clearer +perception of the line of distinction between business that is to be +encouraged and business that is to be condemned, and that in this quiet way +the question of trusts can be settled and competition retained as an +economic force to secure reasonableness in prices and freedom and +independence in trade. +</p> + +<p> +REFORM OF COURT PROCEDURE +</p> + +<p> +I am glad to bring to the attention of Congress the fact that the Supreme +Court has radically altered the equity rules governing the procedure on the +equity side of all Federal courts, and though, as these changes have not +been yet put in practice so as to enable us to state from actual results +what the reform will accomplish, they are of such a character that we can +reasonably prophesy that they will greatly reduce the time and cost of +litigation in such courts. The court has adopted many of the shorter +methods of the present English procedure, and while it may take a little +while for the profession to accustom itself to these methods, it is certain +greatly to facilitate litigation. The action of the Supreme Court has been +so drastic and so full of appreciation of the necessity for a great reform +in court procedure that I have no hesitation in following up this action +with a recommendation which I foreshadowed in my message of three years +ago, that the sections of the statute governing the procedure in the +Federal courts on the common-law side should be so amended as to give to +the Supreme Court the same right to make rules of procedure in common law +as they have, since the beginning of the court, exercised in equity. I do +not doubt that a full consideration of the subject will enable the court +while giving effect to the substantial differences in right and remedy +between the system of common law and the system of equity so to unite the +two procedures into the form of one civil action and to shorten the +procedure in such civil action as to furnish a model to all the State +courts exercising concurrent jurisdiction with the Federal courts of first +instance. +</p> + +<p> +Under the statute now in force the common-law procedure in each Federal +court is made to conform to the procedure in the State in which the court +is held. In these days, when we should be making progress in court +procedure, such a conformity statute makes the Federal method too dependent +upon the action of State legislatures. I can but think it a great +opportunity for Congress to intrust to the highest tribunal in this +country, evidently imbued with a strong spirit in favor of a reform of +procedure, the power to frame a model code of procedure, which, while +preserving all that is valuable and necessary of the rights and remedies at +common law and in equity, shall lessen the burden of the poor litigant to a +minimum in the expedition and cheapness with which his cause can be fought +or defended through Federal courts to final judgment. +</p> + +<p> +WORKMAN'S COMPENSATION ACT +</p> + +<p> +The workman's compensation act reported by the special commission appointed +by Congress and the Executive, which passed the Senate and is now pending +in the House, the passage of which I have in previous messages urged upon +Congress, I venture again to call to its attention. The opposition to it +which developed in the Senate, but which was overcome by a majority in that +body, seemed to me to grow out rather of a misapprehension of its effect +than of opposition to its principle. I say again that I think no act can +have a better effect directly upon the relations between the employer and +employee than this act applying to railroads and common carriers of an +interstate character, and I am sure that the passage of the act would +greatly relieve the courts of the heaviest burden of litigation that they +have, and would enable them to dispatch other business with a speed never +before attained in courts of justice in this country. +</p> + +<p> +THE WHITE HOUSE, December 19, 1912. To the Senate and House of +Representatives: +</p> + +<p> +This is the third of a series of messages in which I have brought to the +attention of the Congress the important transactions of the Government in +each of its departments during the last year and have discussed needed +reforms. +</p> + +<p> +HEADS OF DEPARTMENTS SHOULD HAVE SEATS ON THE FLOOR OF CONGRESS +</p> + +<p> +I recommend the adoption of legislation which shall make it the duty of +heads of departments--the members of the President's Cabinet--at convenient +times to attend the session of the House and the Senate, which shall +provide seats for them in each House, and give them the opportunity to take +part in all discussions and to answer questions of which they have had due +notice. The rigid holding apart of the executive and the legislative +branches of this Government has not worked for the great advantage of +either. There has been much lost motion in the machinery, due to the lack +of cooperation and interchange of views face to face between the +representatives of the Executive and the Members of the two legislative +branches of the Government. It was never intended that they should be +separated in the sense of not being in constant effective touch and +relationship to each other. The legislative and the executive each performs +its own appropriate function, but these functions must be coordinated. Time +and time again debates have arisen in each House upon issues which the +information of a particular department head would have enabled him, if +present, to end at once by a simple explanation or statement. Time and time +again a forceful and earnest presentation of facts and arguments by the +representative of the Executive whose duty it is to enforce the law would +have brought about a useful reform by amendment, which in the absence of +such a statement has failed of passage. I do not think I am mistaken in +saying that the presence of the members of the Cabinet on the floor of each +House would greatly contribute to the enactment of beneficial legislation. +Nor would this in any degree deprive either the legislative or the +executive of the independence which separation of the two branches has been +intended to promote. It would only facilitate their cooperation in the +public interest. +</p> + +<p> +On the other hand, I am sure that the necessity and duty imposed upon +department heads of appearing in each house and in answer to searching +questions, of rendering upon their feet an account of what they have done, +or what has been done by the administration, will spur each member of the +Cabinet to closer attention to the details of his department, to greater +familiarity with its needs, and to greater care to avoid the just criticism +which the answers brought out in questions put and discussions arising +between the Members of either House and the members of the Cabinet may +properly evoke. +</p> + +<p> +Objection is made that the members of the administration having no vote +could exercise no power on the floor of the House, and could not assume +that attitude of authority and control which the English parliamentary +Government have and which enables them to meet the responsibilities the +English system thrusts upon them. I agree that in certain respects it would +be more satisfactory if members of the Cabinet could at the same time be +Members of both Houses, with voting power, but this is impossible under our +system; and while a lack of this feature may detract from the influence of +the department chiefs, it will not prevent the good results which I have +described above both in the matter of legislation and in the matter of +administration. The enactment of such a law would be quite within the power +of Congress without constitutional amendment, and it has such possibilities +of usefulness that we might well make the experiment, and if we are +disappointed the misstep can be easily retraced by a repeal of the enabling +legislation. +</p> + +<p> +This is not a new proposition. In the House of Representatives, in the +Thirty-eighth Congress, the proposition was referred to a select committee +of seven Members. The committee made an extensive report, and urged the +adoption of the reform. The report showed that our history had not been +without illustration of the necessity and the examples of the practice by +pointing out that in early days Secretaries were repeatedly called to the +presence of either Rouse for consultation, advice, and information. It also +referred to remarks of Mr. justice Story in his Commentaries on the +Constitution, in which he urgently presented the wisdom of such a change. +This report is to be found in Volume I of the Reports of Committees of the +First Session of the Thirty-eighth Congress, April 6, 1864. +</p> + +<p> +Again, on February 4, 1881, a select committee of the Senate recommended +the passage of a similar bill, and made a report, In which, while approving +the separation of the three branches, the executive, legislative, and +judicial, they point out as a reason for the proposed change that, although +having a separate existence, the branches are "to cooperate, each with the +other, as the different members of the human body must cooperate, with each +other in order to form the figure and perform the duties of a perfect +man." +</p> + +<p> +The report concluded as follows: This system will require the selection of +the strongest men to be heads of departments and will require them to be +well equipped with the knowledge of their offices. It will also require the +strongest men to be the leaders of Congress and participate in debate. It +will bring these strong men in contact, perhaps into conflict, to advance +the public weal, and thus stimulate their abilities and their efforts, and +will thus assuredly result to the good of the country. +</p> + +<p> +If it should appear by actual experience that the heads of departments in +fact have not time to perform the additional duty imposed on them by this +bill, the force in their offices should be increased or the duties +devolving on them personally should be diminished. An undersecretary should +be appointed to whom could be confided that routine of administration which +requires only order and accuracy. The principal officers could then confine +their attention to those duties which require wise discretion and +intellectual activity. Thus they would have abundance of time for their +duties under this bill. Indeed, your committee believes that the public +interest would be subserved if the Secretaries were relieved of the +harassing cares of distributing clerkships and closely supervising the mere +machinery of the departments. Your committee believes that the adoption of +this bill and the effective execution of its provisions will be the first +step toward a sound civil-service reform which will secure a larger wisdom +in the adoption of policies and a better system in their execution.(Signed) +GEO. H. PENDLETON. W. B. ALLISON. D. W. VOORHEES. J. G. BLAINE. M. C. +BUTLER. JOHN J. INGALLS. O. H. PLATT. J. T. FARLEY. It would be difficult +to mention the names of higher authority in the practical knowledge of our +Government than those which are appended to this report. +</p> + +<p> +POSTAL SAVINGS BANK SYSTEM +</p> + +<p> +The Postal Savings Bank System has been extended so that it now includes +4,004 fourth-class post offices', as well as 645 branch offices and +stations in the larger cities. There are now 12,812 depositories at which +patrons of the system may open accounts. The number of depositors is +300,000 and the amount of their deposits is approximately $28,000,000, not +including $1,314,140 which has been with drawn by depositors for the +purpose of buying postal savings bonds. Experience demonstrates the value +of dispensing with the pass-book and introducing in its place a certificate +of deposit. The gross income of the postal savings system for the fiscal +year ending June 30, 1913, will amount to $700,000 and the interest payable +to depositors to $300,000. The cost of supplies, equipment, and salaries is +$700,000. It thus appears that the system lacks $300,000 a year of paying +interest and expenses. It is estimated, however, that when the deposits +have reached the sum Of $50,000,000, which at the present rate they soon +will do, the system will be self-sustaining. By law the postal savings +funds deposited at each post office are required to be redeposited in local +banks. State and national banks to the number of 7,357 have qualified as +depositories for these funds. Such deposits are secured by bonds +aggregating $54,000,000. Of this amount, $37,000,000 represent municipal +bonds. +</p> + +<p> +PARCEL POST +</p> + +<p> +In several messages I have favored and recommended the adoption of a system +of parcel post. In the postal appropriation act of last year a general +system was provided and its installation was directed by the 1st of +January. This has entailed upon the Post Office Department a great deal of +very heavy labor, but the Postmaster General informs me that on the date +selected, to wit, the 1st of January, near at hand, the department will be +in readiness to meet successfully the requirements of the public. +</p> + +<p> +CLASSIFICATION OF POSTMASTERS +</p> + +<p> +A trial, during the past three years, of the system of classifying +fourth-class postmasters in that part of the country lying between the +Mississippi River on the west, Canada on the north, the Atlantic Ocean on +the east, and Mason and Dixon's line on the south has been sufficiently +satisfactory to justify the postal authorities in recommending the +extension of the order to include all the fourth-class postmasters in the +country. In September, 1912, upon the suggestion of the Postmaster General, +I directed him to prepare an order which should put the system in effect, +except in Alaska, Guam, Hawaii, Porto Rico, and Samoa. Under date of +October 15 I issued such an order which affected 36,000 postmasters. By the +order the post offices were divided into groups A and B. Group A includes +all postmasters whose compensation is $500 or more, and group B those whose +compensation is less than that sum. Different methods are pursued in the +selection of the postmasters for group A and group, B. Criticism has been +made of this order on the ground that the motive for it was political. +Nothing could be further from the truth. The order was made before the +election and in the interest of efficient public service. I have several +times requested Congress to give me authority to put first-, second-, and +third-class postmasters, and all other local officers, including +internal-revenue officers, customs officers, United States marshals, and +the local agents of the other departments under the classification of the +civil-service law by taking away the necessity for confirming such +appointments by the Senate. I deeply regret the failure of Congress to +follow these recommendations. The change would have taken out of politics +practically every local officer and would have entirely cured the evils +growing out of what under the present law must always remain a remnant of +the spoils system. +</p> + +<p> +COMPENSATION TO RAILWAYS FOR CARRYING MAILS +</p> + +<p> +It is expected that the establishment of a parcel post on January 1st will +largely increase the amount of mail matter to be transported by the +railways, and Congress should be prompt to provide a way by which they may +receive the additional compensation to which they will be entitled. The +Postmaster General urges that the department's plan for a complete +readjustment of the system of paying the railways for carrying the mails be +adopted, substituting space for weight as the principal factor in fixing +compensation. Under this plan it will be possible to determine without +delay what additional payment should be made on account of the parcel post. +The Postmaster General's recommendation is based on the results of a +far-reaching investigation begun early in the administration with the +object of determining what it costs the railways to carry the mails. The +statistics obtained during the course of the inquiry show that while many +of the railways, and particularly the large systems, were making profits +from mail transportations, certain of the lines were actually carrying the +mails at a loss. As a result of the investigation the department, after +giving the subject careful consideration, decided to urge the abandonment +of the present plan of fixing compensation on the basis of the weight of +the mails carried, a plan that has proved to be exceedingly expensive and +in other respects unsatisfactory. Under the method proposed the railway +companies will annually submit to the department reports showing what it +costs them to carry the mails, and this cost will be apportioned on the +basis of the car space engaged, payment to be allowed at the rate thus +determined in amounts that will cover the cost and a reasonable profit. If +a railway is not satisfied with the manner in which the department +apportions the cost in fixing compensation, it is to have the right, tinder +the new plan, of appealing to the Interstate Commerce Commission. This +feature of the proposed law would seem to insure a fair treatment of the +railways. It is hoped that Congress will give the matter immediate +attention and that the method of compensation recommended by the department +or some other suitable plan will be promptly authorized. +</p> + +<p> +DEPARTMENT OF THE INTERIOR +</p> + +<p> +The Interior Department, in the problems of administration included within +its jurisdiction, presents more difficult questions than any other. This +has been due perhaps to temporary causes of a political character, but more +especially to the inherent difficulty in the performance of some of the +functions which are assigned to it. Its chief duty is the guardianship of +the public domain and the disposition of that domain to private ownership +under homestead, mining, and other laws, by which patents from the +Government to the individual are authorized on certain conditions. During +the last decade the public seemed to become suddenly aware that a very +large part of its domain had passed from its control into private +ownership, under laws not well adapted to modern conditions, and also that +in the doing of this the provisions of existing law and regulations adopted +in accordance with law had not been strictly observed, and that in the +transfer of title much fraud had intervened, to the pecuniary benefit of +dishonest persons. There arose thereupon a demand for conservation of the +public domain, its protection against fraudulent diminution, and the +preservation of that part of it from private acquisition which it seemed +necessary to keep for future public use. The movement, excellent in the +intention which prompted it, and useful in its results, has nevertheless +had some bad effects, which the western country has recently been feeling +and in respect of which there is danger of a reaction toward older abuses +unless we can attain the golden mean, which consists in the prevention of +the mere exploitation of the public domain for private purposes while at +the same, time facilitating its development for the benefit of the local +public. +</p> + +<p> +The land laws need complete revision to secure proper conservation on the +one hand of land that ought to be kept in public use and, on the other +hand, prompt disposition of those lands which ought to be disposed in +private ownership or turned over to private use by properly guarded leases. +In addition to this there are not enough officials in our Land Department +with legal knowledge sufficient promptly to make the decisions which are +called for. The whole land-laws system should be reorganized, and not until +it is reorganized, will decisions be made as promptly as they ought, or +will men who have earned title to public land under the statute receive +their patents within a reasonably short period. The present administration +has done what it could in this regard, but the necessity for reform and +change by a revision of the laws and an increase and reorganization of the +force remains, and I submit to Congress the wisdom of a full examination of +this subject, in order that a very large and important part of our people +in the West may be relieved from a just cause of irritation. +</p> + +<p> +I invite your attention to the discussion by the Secretary of the Interior +of the need for legislation with respect to mining claims, leases of coal +lands in this country and in Alaska, and for similar disposition of oil, +phosphate, and potash lands, and also to his discussion of the proper use +to be made of water-power sites held by the Government. Many of these lands +are now being withheld from use by the public under the general withdrawal +act which was passed by the last Congress. That act was not for the purpose +of disposing of the question, but it was for the purpose of preserving the +lands until the question could be solved. I earnestly urge that the matter +is of the highest importance to our western fellow citizens and ought to +command the immediate attention of the legislative branch of the +Government. +</p> + +<p> +Another function which the Interior Department has to perform is that of +the guardianship of Indians. In spite of everything which has been said in +criticism of the policy of our Government toward the Indians, the amount of +wealth which is now held by it for these wards per capita shows that the +Government has been generous; but the management of so large an estate, +with the great variety of circumstances that surround each tribe and each +case, calls for the exercise of the highest business discretion, and the +machinery provided in the Indian Bureau for the discharge of this function +is entirely inadequate. The position of Indian commissioner demands the +exercise of business ability of the first order, and it is difficult to +secure such talent for the salary provided. +</p> + +<p> +The condition of health of the Indian and the prevalence in the tribes of +curable diseases has been exploited recently in the press. In a message to +Congress at its last session I brought this subject to its attention and +invited a special appropriation, in order that our facilities for +overcoming diseases among the Indians might be properly increased, but no +action was then taken by Congress on the subject, nor has such +appropriation been made since. +</p> + +<p> +The commission appointed by authority of the Congress to report on proper +method of securing railroad development in Alaska is formulating its +report, and I expect to have an opportunity before the end of this session +to submit its recommendations. +</p> + +<p> +DEPARTMENT OF AGRICULTURE +</p> + +<p> +The far-reaching utility of the educational system carried on by the +Department of Agriculture for the benefit of the farmers of our country +calls for no elaboration. Each year there is a growth in the variety of +facts which it brings out for the benefit of the farmer, and each year +confirms the wisdom of the expenditure of the appropriations made for that +department. +</p> + +<p> +PURE-FOOD LAW +</p> + +<p> +The Department of Agriculture is charged with the execution of the +pure-food law. The passage of this encountered much opposition from +manufacturers and others who feared the effect upon their business of the +enforcement of its provisions. The opposition aroused the just indignation +of the public, and led to an intense sympathy with the severe and rigid +enforcement of the provisions of the new law. It had to deal in many +instances with the question whether or not products of large business +enterprises, in the form of food preparations, were deleterious to the +public health; and while in a great majority of instances this issue was +easily determinable, there were not a few cases in which it was hard to +draw the line between a useful and a harmful food preparation. In cases +like this when a decision involved the destruction of great business +enterprises representing the investment of large capital and the +expenditure of great energy and ability, the danger of serious injustice +was very considerable in the enforcement of a new law under the spur of +great public indignation. The public officials charged with executing the +law might do injustice in heated controversy through unconscious pride of +opinion and obstinacy of conclusion. For this reason President Roosevelt +felt justified in creating a board of experts, known as the Remsen Board, +to whom in cases of much importance an appeal might be taken and a review +had of a decision of the Bureau of Chemistry in the Agricultural +Department. I heartily agree that it was wise to create this board in order +that injustice might not be done. The questions which arise are not +generally those involving palpable injury to health, but they are upon the +narrow and doubtful line in respect of which it is better to be in some +error not dangerous than to be radically destructive. I think that the time +has come for Congress to recognize the necessity for some such tribunal of +appeal and to make specific statutory provision for it. While we are +struggling to suppress an evil of great proportions like that of impure +food, we must provide machinery in the law itself to prevent its becoming +an instrument of oppression, and we ought to enable those whose business is +threatened with annihilation to have some tribunal and some form of appeal +in which they have a complete day in court. +</p> + +<p> +AGRICULTURAL CREDITS +</p> + +<p> +I referred in my first message to the question of improving the system of +agricultural credits. The Secretary of Agriculture has made an +investigation into the matter of credits in this country, and I commend a +consideration of the information which through his agents he has been able +to collect. It does not in any way minimize the importance of the proposal, +but it gives more accurate information upon some of the phases of the +question than we have heretofore had. +</p> + +<p> +DEPARTMENT OF COMMERCE AND LABOR +</p> + +<p> +I commend to Congress an examination of the report of the Secretary of +Commerce and Labor, and especially that part in which he discusses the +office of the Bureau of Corporations, the value to commerce of a proposed +trade commission, and the steps which he has taken to secure the +organization of a national chamber of commerce. I heartily commend his view +that the plan of a trade commission which looks to the fixing of prices is +altogether impractical and ought not for a moment to be considered as a +possible solution of the trust question. +</p> + +<p> +The trust question in the enforcement of the Sherman antitrust law is +gradually solving itself, is maintaining the principle and restoring the +practice of competition, and if the law is quietly but firmly enforced, +business will adjust itself to the statutory requirements, and the unrest +in commercial circles provoked by the trust discussion will disappear. +</p> + +<p> +PANAMA-PACIFIC INTERNATIONAL EXPOSITION +</p> + +<p> +In conformity with a joint resolution of Congress, an Executive +proclamation was issued last February, inviting the nations of the world to +participate in the Panama-Pacific International Exposition to be held at +San Francisco to celebrate the construction of the Panama, Canal. A +sympathetic response was immediately forthcoming, and several nations have +already selected the sites for their buildings. In furtherance of my +invitation, a special commission visited European countries during the past +summer, and received assurance of hearty cooperation in the task of +bringing together a universal industrial, military, and naval display on an +unprecedented scale. It is evident that the exposition will be an accurate +mirror of the world's activities as they appear 400 years after the date of +the discovery of the Pacific Ocean. +</p> + +<p> +It is the duty of the United States to make the nations welcome at San +Francisco and to facilitate such acquaintance between them and ourselves as +will promote the expansion of commerce and familiarize the world with the +new trade route through the Panama Canal. The action of the State +governments and individuals assures a comprehensive exhibit of the +resources of this country and of the progress of the people. This +participation by State and individuals should be supplemented by an +adequate showing of the varied and unique activities of the National +Government. The United States can not with good grace invite foreign +governments to erect buildings and make expensive exhibits while itself +refusing to participate. Nor would it be wise to forego the opportunity to +join with other nations in the inspiring interchange of ideas tending to +promote intercourse, friendship, and commerce. It is the duty of the +Government to foster and build up commerce through the canal, just as it +was the duty of the Government to construct it. +</p> + +<p> +I earnestly recommend the appropriation at this session of such a sum as +will enable the United States to construct a suitable building, install a +governmental exhibit, and otherwise participate in the Panama-Pacific +International Exposition in a manner commensurate with the dignity of a +nation whose guests are to be the people of the world. I recommend also +such legislation as will facilitate the entry of material intended for +exhibition and protect foreign exhibitors against infringement of patents +and the unauthorized copying of patterns and designs. All aliens sent to +San Francisco to construct and care for foreign buildings and exhibits +should be admitted without restraint or embarrassment. +</p> + +<p> +THE DISTRICT OF COLUMBIA AND THE CITY OF WASHINGTON +</p> + +<p> +The city of Washington is a beautiful city, with a population of 352,936, +of whom 98,667 are colored. The annual municipal budget is about +$14,000,000. The presence of the National Capital and other governmental +structures constitutes the chief beauty and interest of the city. The +public grounds are extensive, and the opportunities for improving the city +and making it still more attractive are very great. Under a plan adopted +some years ago, one half the cost of running the city is paid by taxation +upon the property, real and personal, of the citizens and residents, and +the other half is borne by the General Government. The city is expanding at +a remarkable rate, and this can only be accounted for by the coming here +from other parts of the country of well-to-do people who, having finished +their business careers elsewhere, build and make this their permanent place +of residence. +</p> + +<p> +On the whole, the city as a municipality is very well governed. It is well +lighted, the water supply is good, the streets are well paved, the police +force is well disciplined, crime is not flagrant, and while it has purlieus +and centers of vice, like other large cities, they are not exploited, they +do not exercise any influence or control in the government of the city, and +they are suppressed in as far as it has been found practicable. Municipal +graft is inconsiderable. There are interior courts in the city that are +noisome and centers of disease and the refuge of criminals, but Congress +has begun to clean these out, and progress has been made in the case of the +most notorious of these, which is known as "Willow Tree Alley." This +movement should continue. +</p> + +<p> +The mortality for the past year was at the rate Of 17.80 per 1,000 of both +races; among the whites it was 14.61 per thousand, and among the blacks +26.12 per thousand. These are the lowest mortality rates ever recorded in +the District. +</p> + +<p> +One of the most crying needs in the government of the District is a +tribunal or public authority for the purpose of supervising the +corporations engaged in the operation of public utilities. Such a bill is +pending in Congress and ought to pass. Washington should show itself under +the direction of Congress to be a city with a model form of government, but +as long as such authority over public utilities is withheld from the +municipal government, it must always be defective. +</p> + +<p> +Without undue criticism of the present street railway accommodations, it +can be truly said that under the spur of a public utilities commission they +might be substantially improved. +</p> + +<p> +While the school system of Washington perhaps might be bettered in the +economy of its management and the distribution of its buildings, its +usefulness has nevertheless greatly increased in recent years, and it now +offers excellent facilities for primary and secondary education. +</p> + +<p> +From time to time there is considerable agitation in Washington in favor of +granting the citizens of the city the franchise and constituting an +elective government. I am strongly opposed to this change. The history of +Washington discloses a number of experiments of this kind, which have +always been abandoned as unsatisfactory. The truth is this is a city +governed by a popular body, to wit, the Congress of the United States, +selected from the people of the United States, who own Washington. The +people who come here to live do so with the knowledge of the origin of the +city and the restrictions, and therefore voluntarily give up the privilege +of living in a municipality governed by popular vote. Washington is so +unique in its origin and in its use for housing and localizing the +sovereignty of the Nation that the people who live here must regard its +peculiar character and must be content to subject themselves to the control +of a body selected by all the people of the Nation. I agree that there are +certain inconveniences growing out of the government of a city by a +national legislature like Congress, and it would perhaps be possible to +lessen these by the delegation by Congress to the District Commissioners of +greater legislative power for the enactment of local laws than they now +possess, especially those of a police character. +</p> + +<p> +Every loyal American has a personal pride in the beauty of Washington and +in its development and growth. There is no one with a proper appreciation +of our Capital City who would favor a niggardly policy in respect to +expenditures from the National Treasury to add to the attractiveness of +this city, which belongs to every citizen of the entire country, and which +no citizen visits without a sense of pride of ownership. We have had +restored by a Commission of Fine Arts, at the instance of a committee of +the Senate, the original plan of the French engineer L'Enfant for the city +of Washington, and we know with great certainty the course which the +improvement of Washington should take. Why should there be delay in making +this improvement in so far as it involves the extension of the parking +system and the construction of greatly needed public buildings? +Appropriate buildings for the State Department, the Department of justice, +and the Department of Commerce and Labor have been projected, plans have +been approved, and nothing is wanting but the appropriations for the +beginning and completion of the structures. A hall of archives is also +badly needed, but nothing has been done toward its construction, although +the land for it has long been bought and paid for. Plans have been made for +the union of Potomac Park with the valley of Rock Creek and Rock Creek +Park, and the necessity for the connection between the Soldiers' Home and +Rock Creek Park calls for no comment. I ask again why there should be delay +in carrying out these plans We have the money in the Treasury, the plans +are national in their scope, and the improvement should be treated as a +national project. The plan will find a hearty approval throughout the +country. I am quite sure, from the information which I have, that, at +comparatively small expense, from that part of the District of Columbia +which was retroceded to Virginia, the portion including the Arlington +estate, Fort Myer, and the palisades of the Potomac can be acquired by +purchase and the jurisdiction of the State of Virginia over this land ceded +to the Nation. This ought to be done. +</p> + +<p> +The construction of the Lincoln Memorial and of a memorial bridge from the +base of the Lincoln Monument to Arlington would be an appropriate and +symbolic expression of the union of the North and the South at the Capital +of the Nation. I urge upon Congress the appointment of a commission to +undertake these national improvements, and to submit a plan for their +execution; and when the plan has been submitted and approved, and the work +carried out, Washington will really become what it ought to be--the most +beautiful city in the world. +</p> + +<p><br /><br /><br /><br /></p> + + + + + + + + +<pre> + + + + + +End of the Project Gutenberg EBook of State of the Union Addresses of +William H. Taft, by William H. 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You may copy it, give it away or re-use it under the terms of +the Project Gutenberg License included with this eBook or online at +www.gutenberg.org. If you are not located in the United States, you'll have +to check the laws of the country where you are located before using this ebook. + +Title: State of the Union Addresses of William H. Taft + +Author: William H. Taft + +Posting Date: December 3, 2014 [EBook #5033] +Release Date: February, 2004 +First Posted: April 11, 2002 +Last Updated: December 16, 2004 + +Language: English + +Character set encoding: ASCII + +*** START OF THIS PROJECT GUTENBERG EBOOK STATE OF THE UNION ADDRESSES *** + + + + +Produced by James Linden. HTML version by Al Haines. + + + + + + + + +State of the Union Addresses of William H. Taft + + + +The addresses are separated by three asterisks: *** + +Dates of addresses by William H. Taft in this eBook: + + December 7, 1909 + December 6, 1910 + December 5, 1911 + December 3, 1912 + + + +*** + +State of the Union Address +William H. Taft +December 7, 1909 + +The relations of the United States with all foreign governments have +continued upon the normal basis of amity and good understanding, and are +very generally satisfactory. + +EUROPE. + +Pursuant to the provisions of the general treaty of arbitration concluded +between the United States and Great Britain, April 4, 1908, a special +agreement was entered into between the two countries on January 27, 1909, +for the submission of questions relating to the fisheries on the North +Atlantic Coast to a tribunal to be formed from members of the Permanent +Court of Arbitration at The Hague. + +In accordance with the provisions of the special agreement the printed case +of each Government was, on October 4 last, submitted to the other and to +the Arbitral Tribunal at The Hague, and the counter case of the United +States is now in course of preparation. + +The American rights under the fisheries article of the Treaty of 1818 have +been a cause of difference between the United States and Great Britain for +nearly seventy years. The interests involved are of great importance to the +American fishing industry, and the final settlement of the controversy will +remove a source of constant irritation and complaint. This is the first +case involving such great international questions which has been submitted +to the Permanent Court of Arbitration at The Hague. + +The treaty between the United States and Great Britain concerning the +Canadian International boundary, concluded April 11, 1908, authorizes the +appointment of two commissioners to define and mark accurately the +international boundary line between the United States and the Dominion of +Canada in the waters of the Passamaquoddy Bay, and provides for the +exchange of briefs within the period of six months. The briefs were duly +presented within the prescribed period, but as the commissioners failed to +agree within six months after the exchange of the printed statements, as +required by the treaty, it has now become necessary to resort to the +arbitration provided for in the article. + +The International Fisheries Commission appointed pursuant to and under the +authority of the Convention of April 11, 1908, between the United States +and Great Britain, has completed a system of uniform and common +international regulations for the protection and preservation of the food +fishes in international boundary waters of the United States and Canada. + +The regulations will be duly submitted to Congress with a view to the +enactment of such legislation as will be necessary under the convention to +put them into operation. + +The Convention providing for the settlement of international differences +between the United States and Canada, including the apportionment between +the two countries of certain of the boundary waters and the appointment of +commissioners to adjust certain other questions, signed on the 11th day of +January, 1909, and to the ratification of which the Senate gave its advice +and consent on March 3, 1909, has not yet been ratified on the part of +Great Britain. + +Commissioners have been appointed on the part of the United States to act +jointly with Commissioners on the part of Canada in examining into the +question of obstructions in the St. John River between Maine and New +Brunswick, and to make recommendations for the regulation of the uses +thereof, and are now engaged in this work. + +Negotiations for an international conference to consider and reach an +arrangement providing for the preservation and protection of the fur seals +in the North Pacific are in progress with the Governments of Great Britain, +Japan, and Russia. The attitude of the Governments interested leads me to +hope for a satisfactory settlement of this question as the ultimate outcome +of the negotiations. + +The Second Peace Conference recently held at The Hague adopted a convention +for the establishment of an International Prize Court upon the joint +proposal of delegations of the United States, France, Germany and Great +Britain. The law to be observed by the Tribunal in the decision of prize +cases was, however, left in an uncertain and therefore unsatisfactory +state. Article 7 of the Convention provided that the Court was to be +governed by the provisions of treaties existing between the belligerents, +but that "in the absence of such provisions, the court shall apply the +rules of international law. If no generally recognized rule exists, the +court shall give judgment in accordance with the general principles of +justice and equity." As, however, many questions in international maritime +law are understood differently and therefore interpreted differently in +various countries, it was deemed advisable not to intrust legislative +powers to the proposed court, but to determine the rules of law properly +applicable in a Conference of the representative maritime nations. Pursuant +to an invitation of Great Britain a conference was held at London from +December 2, 1908, to February 26, 1909, in which the following Powers +participated: the United States, Austria-Hungary, France, Germany, Great +Britain, Italy, Japan, the Netherlands, Russia and Spain. The conference +resulted in the Declaration of London, unanimously agreed to and signed by +the participating Powers, concerning among other matters, the highly +important subjects of blockade, contraband, the destruction of neutral +prizes, and continuous voyages. The declaration of London is an eminently +satisfactory codification of the international maritime law, and it is +hoped that its reasonableness and fairness will secure its general +adoption, as well as remove one of the difficulties standing in the way of +the establishment of an International Prize Court. + +Under the authority given in the sundry civil appropriation act, approved +March 4, 1909, the United States was represented at the International +Conference on Maritime Law at Brussels. The Conference met on the 28th of +September last and resulted in the signature ad referendum of a convention +for the unification of certain regulations with regard to maritime +assistance and salvage and a convention for the unification of certain +rules with regard to collisions at sea. Two new projects of conventions +which have not heretofore been considered in a diplomatic conference, +namely, one concerning the limitation of the responsibility of shipowners, +and the other concerning marine mortgages and privileges, have been +submitted by the Conference to the different governments. + +The Conference adjourned to meet again on April 11, 1910. + +The International Conference for the purpose of promoting uniform +legislation concerning letters of exchange, which was called by the +Government of the Netherlands to meet at The Hague in September, 1909, has +been postponed to meet at that capital in June, 1910. The United States +will be appropriately represented in this Conference under the provision +therefor already made by Congress. + +The cordial invitation of Belgium to be represented by a fitting display of +American progress in the useful arts and inventions at the World's Fair to +be held at Brussels in 1910 remains to be acted upon by the Congress. +Mindful of the advantages to accrue to our artisans and producers in +competition with their Continental rivals, I renew the recommendation +heretofore made that provision be made for acceptance of the invitation and +adequate representation in the Exposition. The question arising out of the +Belgian annexation of the Independent State of the Congo, which has so long +and earnestly preoccupied the attention of this Government and enlisted the +sympathy of our best citizens, is still open, but in a more hopeful stage. +This Government was among the foremost in the great work of uplifting the +uncivilized regions of Africa and urging the extension of the benefits of +civilization, education, and fruitful open commerce to that vast domain, +and is a party to treaty engagements of all the interested powers designed +to carry out that great duty to humanity. The way to better the original +and adventitious conditions, so burdensome to the natives and so +destructive to their development, has been pointed out, by observation and +experience, not alone of American representatives, but by cumulative +evidence from all quarters and by the investigations of Belgian Agents. The +announced programmes of reforms, striking at many of the evils known to +exist, are an augury of better things. The attitude of the United States is +one of benevolent encouragement, coupled with a hopeful trust that the good +work, responsibly undertaken and zealously perfected to the accomplishment +of the results so ardently desired, will soon justify the wisdom that +inspires them and satisfy the demands of humane sentiment throughout the +world. + +A convention between the United States and Germany, under which the +nonworking provisions of the German patent law are made inapplicable to the +patents of American citizens, was concluded on February 23, 1909, and is +now in force. Negotiations for similar conventions looking to the placing +of American inventors on the same footing as nationals have recently been +initiated with other European governments whose laws require the local +working of foreign patents. + +Under an appropriation made at the last session of the Congress, a +commission was sent on American cruisers to Monrovia to investigate the +interests of the United States and its citizens in Liberia. Upon its +arrival at Monrovia the commission was enthusiastically received, and +during its stay in Liberia was everywhere met with the heartiest +expressions of good will for the American Government and people and the +hope was repeatedly expressed on all sides that this Government might see +its way clear to do something to relieve the critical position of the +Republic arising in a measure from external as well as internal and +financial embarrassments. The Liberian Government afforded every facility +to the Commission for ascertaining the true state of affairs. The +Commission also had conferences with representative citizens, interested +foreigners and the representatives of foreign governments in Monrovia. +Visits were made to various parts of the Republic and to the neighboring +British colony of Sierra Leone, where the Commission was received by and +conferred with the Governor. + +It will be remembered that the interest of the United States in the +Republic of Liberia springs from the historical fact of the foundation of +the Republic by the colonization of American citizens of the African race. +In an early treaty with Liberia there is a provision under which the United +States may be called upon for advice or assistance. Pursuant to this +provision and in the spirit of the moral relationship of the United States +to Liberia, that Republic last year asked this Government to lend +assistance in the solution of certain of their national problems, and hence +the Commission was sent. + +The report of our commissioners has just been completed and is now under +examination by the Department of State. It is hoped that there may result +some helpful measures, in which case it may be my duty again to invite your +attention to this subject. + +The Norwegian Government, by a note addressed on January 26, 1909, to the +Department of State, conveyed an invitation to the Government of the United +States to take part in a conference which it is understood will be held in +February or March, 1910, for the purpose of devising means to remedy +existing conditions in the Spitzbergen Islands. + +This invitation was conveyed under the reservation that the question of +altering the status of the islands as countries belonging to no particular +State, and as equally open to the citizens and subjects of all States, +should not be raised. + +The European Powers invited to this Conference by the Government of Norway +were Belgium, Denmark, France, Germany, Great Britain, Russia, Sweden and +the Netherlands. + +The Department of State, in view of proofs filed with it in 1906, showing +the American possession, occupation, and working of certain coal-bearing +lands in Spitzbergen, accepted the invitation under the reservation above +stated, and under the further reservation that all interests in those +islands already vested should be protected and that there should be +equality of opportunity for the future. It was further pointed out that +membership in the Conference on the part of the United States was qualified +by the consideration that this Government would not become a signatory to +any conventional arrangement concluded by the European members of the +Conference which would imply contributory participation by the United +States in any obligation or responsibility for the enforcement of any +scheme of administration which might be devised by the Conference for the +islands. + +THE NEAR EAST. + +His Majesty Mehmed V, Sultan of Turkey, recently sent to this country a +special embassy to announce his accession. The quick transition of the +Government of the Ottoman Empire from one of retrograde tendencies to a +constitutional government with a Parliament and with progressive modern +policies of reform and public improvement is one of the important phenomena +of our times. Constitutional government seems also to have made further +advance in Persia. These events have turned the eyes of the world upon the +Near East. In that quarter the prestige of the United States has spread +widely through the peaceful influence of American schools, universities and +missionaries. There is every reason why we should obtain a greater share of +the commerce of the Near East since the conditions are more favorable now +than ever before. + +LATIN AMERICA. + +One of the happiest events in recent Pan-American diplomacy was the +pacific, independent settlement by the Governments of Bolivia and Peru of a +boundary difference between them, which for some weeks threatened to cause +war and even to entrain embitterments affecting other republics less +directly concerned. From various quarters, directly or indirectly +concerned, the intermediation of the United States was sought to assist in +a solution of the controversy. Desiring at all times to abstain from any +undue mingling in the affairs of sister republics and having faith in the +ability of the Governments of Peru and Bolivia themselves to settle their +differences in a manner satisfactory to themselves which, viewed with +magnanimity, would assuage all embitterment, this Government steadily +abstained from being drawn into the controversy and was much gratified to +find its confidence justified by events. + +On the 9th of July next there will open at Buenos Aires the Fourth +Pan-American Conference. This conference will have a special meaning to the +hearts of all Americans, because around its date are clustered the +anniversaries of the independence of so many of the American republics. It +is not necessary for me to remind the Congress of the political, social and +commercial importance of these gatherings. You are asked to make liberal +appropriation for our participation. If this be granted, it is my purpose +to appoint a distinguished and representative delegation, qualified +fittingly to represent this country and to deal with the problems of +intercontinental interest which will there be discussed. + +The Argentine Republic will also hold from May to November, 1910, at Buenos +Aires, a great International Agricultural Exhibition in which the United +States has been invited to participate. Considering the rapid growth of the +trade of the United States with the Argentine Republic and the cordial +relations existing between the two nations, together with the fact that it +provides an opportunity to show deference to a sister republic on the +occasion of the celebration of its national independence, the proper +Departments of this Government are taking steps to apprise the interests +concerned of the opportunity afforded by this Exhibition, in which +appropriate participation by this country is so desirable. The designation +of an official representative is also receiving consideration. + +To-day, more than ever before, American capital is seeking investment in +foreign countries, and American products are more and more generally +seeking foreign markets. As a consequence, in all countries there are +American citizens and American interests to be protected, on occasion, by +their Government. These movements of men, of capital, and of commodities +bring peoples and governments closer together and so form bonds of peace +and mutual dependency, as they must also naturally sometimes make passing +points of friction. The resultant situation inevitably imposes upon this +Government vastly increased responsibilities. This Administration, through +the Department of State and the foreign service, is lending all proper +support to legitimate and beneficial American enterprises in foreign +countries, the degree of such support being measured by the national +advantages to be expected. A citizen himself can not by contract or +otherwise divest himself of the right, nor can this Government escape the +obligation, of his protection in his personal and property rights when +these are unjustly infringed in a foreign country. To avoid ceaseless +vexations it is proper that in considering whether American enterprise +should be encouraged or supported in a particular country, the Government +should give full weight not only to the national, as opposed to the +individual benefits to accrue, but also to the fact whether or not the +Government of the country in question is in its administration and in its +diplomacy faithful to the principles of moderation, equity and justice upon +which alone depend international credit, in diplomacy as well as in +finance. + +The Pan-American policy of this Government has long been fixed in its +principles and remains unchanged. With the changed circumstances of the +United States and of the Republics to the south of us, most of which have +great natural resources, stable government and progressive ideals, the +apprehension which gave rise to the Monroe Doctrine may be said to have +nearly disappeared, and neither the doctrine as it exists nor any other +doctrine of American policy should be permitted to operate for the +perpetuation of irresponsible government, the escape of just obligations, +or the insidious allegation of dominating ambitions on the part of the +United States. + +Beside the fundamental doctrines of our Pan-American policy there have +grown up a realization of political interests, community of institutions +and ideals, and a flourishing commerce. All these bonds will be greatly +strengthened as time goes on and increased facilities, such as the great +bank soon to be established in Latin America, supply the means for building +up the colossal intercontinental commerce of the future. + +My meeting with President Diaz and the greeting exchanged on both American +and Mexican soil served, I hope, to signalize the close and cordial +relations which so well bind together this Republic and the great Republic +immediately to the south, between which there is so vast a network of +material interests. + +I am happy to say that all but one of the cases which for so long vexed our +relations with Venezuela have been settled within the past few months and +that, under the enlightened regime now directing the Government of +Venezuela, provision has been made for arbitration of the remaining case +before The Hague Tribunal. On July 30, 1909, the Government of Panama +agreed, after considerable negotiation, to indemnify the relatives of the +American officers and sailors who were brutally treated, one of them +having, indeed, been killed by the Panaman police this year. + +The sincere desire of the Government of Panama to do away with a situation +where such an accident could occur is manifest in the recent request in +compliance with which this Government has lent the services of an officer +of the Army to be employed by the Government of Panama as Instructor of +Police. + +The sanitary improvements and public works undertaken in Cuba prior to the +present administration of that Government, in the success of which the +United States is interested under the treaty, are reported to be making +good progress and since the Congress provided for the continuance of the +reciprocal commercial arrangement between Cuba and the United States +assurance has been received that no negotiations injuriously affecting the +situation will be undertaken without consultation. The collection of the +customs of the Dominican Republic through the general receiver of customs +appointed by the President of the United States in accordance with the +convention of February 8, 1907, has proceeded in an uneventful and +satisfactory manner. The customs receipts have decreased owing to disturbed +political and economic conditions and to a very natural curtailment of +imports in view of the anticipated revision of the Dominican tariff +schedule. The payments to the fiscal agency fund for the service of the +bonded debt of the Republic, as provided by the convention, have been +regularly and promptly made, and satisfactory progress has been made in +carrying out the provisions of the convention looking towards the +completion of the adjustment of the debt and the acquirement by the +Dominican Government of certain concessions and monopolies which have been +a burden to the commerce of the country. In short, the receivership has +demonstrated its ability, even under unfavorable economic and political +conditions, to do the work for which it was intended. + +This Government was obliged to intervene diplomatically to bring about +arbitration or settlement of the claim of the Emery Company against +Nicaragua, which it had long before been agreed should be arbitrated. A +settlement of this troublesome case was reached by the signature of a +protocol on September 18, 1909. + +Many years ago diplomatic intervention became necessary to the protection +of the interests in the American claim of Alsop and Company against the +Government of Chile. The Government of Chile had frequently admitted +obligation in the case and had promised this Government to settle. There +had been two abortive attempts to do so through arbitral commissions, which +failed through lack of jurisdiction. Now, happily, as the result of the +recent diplomatic negotiations, the Governments of the United States and of +Chile, actuated by the sincere desire to free from any strain those cordial +and friendly relations upon which both set such store, have agreed by a +protocol to submit the controversy to definitive settlement by His +Britannic Majesty, Edward VII. + +Since the Washington Conventions of 1907 were communicated to the +Government of the United States as a consulting and advising party, this +Government has been almost continuously called upon by one or another, and +in turn by all the five Central American Republics, to exert itself for the +maintenance of the Conventions. Nearly every complaint has been against the +Zelaya Government of Nicaragua, which has kept Central America in constant +tension or turmoil. The responses made to the representations of Central +American Republics, as due from the United States on account of its +relation to the Washington Conventions, have been at all times conservative +and have avoided, so far as possible, any semblance of interference, +although it is very apparent that the considerations of geographic +proximity to the Canal Zone and of the very substantial American interests +in Central America give to the United States a special position in the zone +of these Republics and the Caribbean Sea. + +I need not rehearse here the patient efforts of this Government to promote +peace and welfare among these Republics, efforts which are fully +appreciated by the majority of them who are loyal to their true interests. +It would be no less unnecessary to rehearse here the sad tale of +unspeakable barbarities and oppression alleged to have been committed by +the Zelaya Government. Recently two Americans were put to death by order of +President Zelaya himself. They were reported to have been regularly +commissioned officers in the organized forces of a revolution which had +continued many weeks and was in control of about half of the Republic, and +as such, according to the modern enlightened practice of civilized nations, +they were entitled to be dealt with as prisoners of war. + +At the date when this message is printed this Government has terminated +diplomatic relations with the Zelaya Government, for reasons made public in +a communication to the former Nicaraguan charge d'affaires, and is +intending to take such future steps as may be found most consistent with +its dignity, its duty to American interests, and its moral obligations to +Central America and to civilization. It may later be necessary for me to +bring this subject to the attention of the Congress in a special message. + +The International Bureau of American Republics has carried on an important +and increasing work during the last year. In the exercise of its peculiar +functions as an international agency, maintained by all the American +Republics for the development of Pan-American commerce and friendship, it +has accomplished a great practical good which could be done in the same way +by no individual department or bureau of one government, and is therefore +deserving of your liberal support. The fact that it is about to enter a new +building, erected through the munificence of an American philanthropist and +the contributions of all the American nations, where both its efficiency of +administration and expense of maintenance will naturally be much augmented, +further entitles it to special consideration. + +THE FAR EAST. + +In the Far East this Government preserves unchanged its policy of +supporting the principle of equality of opportunity and scrupulous respect +for the integrity of the Chinese Empire, to which policy are pledged the +interested Powers of both East and West. + +By the Treaty of 1903 China has undertaken the abolition of likin with a +moderate and proportionate raising of the customs tariff along with +currency reform. These reforms being of manifest advantage to foreign +commerce as well as to the interests of China, this Government is +endeavoring to facilitate these measures and the needful acquiescence of +the treaty Powers. When it appeared that Chinese likin revenues were to be +hypothecated to foreign bankers in connection with a great railway project, +it was obvious that the Governments whose nationals held this loan would +have a certain direct interest in the question of the carrying out by China +of the reforms in question. Because this railroad loan represented a +practical and real application of the open door policy through cooperation +with China by interested Powers as well as because of its relations to the +reforms referred to above, the Administration deemed American participation +to be of great national interest. Happily, when it was as a matter of broad +policy urgent that this opportunity should not be lost, the indispensable +instrumentality presented itself when a group of American bankers, of +international reputation and great resources, agreed at once to share in +the loan upon precisely such terms as this Government should approve. The +chief of those terms was that American railway material should be upon an +exact equality with that of the other nationals joining in the loan in the +placing of orders for this whole railroad system. After months of +negotiation the equal participation of Americans seems at last assured. It +is gratifying that Americans will thus take their share in this extension +of these great highways of trade, and to believe that such activities will +give a real impetus to our commerce and will prove a practical corollary to +our historic policy in the Far East. + +The Imperial Chinese Government in pursuance of its decision to devote +funds from the portion of the indemnity remitted by the United States to +the sending of students to this country has already completed arrangements +for carrying out this purpose, and a considerable body of students have +arrived to take up their work in our schools and universities. No one can +doubt the happy effect that the associations formed by these representative +young men will have when they return to take up their work in the +progressive development of their country. + +The results of the Opium Conference held at Shanghai last spring at the +invitation of the United States have been laid before the Government. The +report shows that China is making remarkable progress and admirable efforts +toward the eradication of the opium evil and that the Governments concerned +have not allowed their commercial interests to interfere with a helpful +cooperation in this reform. Collateral investigations of the opium question +in this country lead me to recommend that the manufacture, sale and use of +opium and its derivatives in the United States should be so far as possible +more rigorously controlled by legislation. + +In one of the Chinese-Japanese Conventions of September 4 of this year +there was a provision which caused considerable public apprehension in that +upon its face it was believed in some quarters to seek to establish a +monopoly of mining privileges along the South Manchurian and Antung-Mukden +Railroads, and thus to exclude Americans from a wide field of enterprise, +to take part in which they were by treaty with China entitled. After a +thorough examination of the Conventions and of the several contextual +documents, the Secretary of State reached the conclusion that no such +monopoly was intended or accomplished. However, in view of the widespread +discussion of this question, to confirm the view it had reached, this +Government made inquiry of the Imperial Chinese and Japanese Governments +and received from each official assurance that the provision had no purpose +inconsistent with the policy of equality of opportunity to which the +signatories, in common with the United States, are pledged. + +Our traditional relations with the Japanese Empire continue cordial as +usual. As the representative of Japan, His Imperial Highness Prince Kuni +visited the Hudson-Fulton Celebration. The recent visit of a delegation of +prominent business men as guests of the chambers of commerce of the Pacific +slope, whose representatives had been so agreeably received in Japan, will +doubtless contribute to the growing trade across the Pacific, as well as to +that mutual understanding which leads to mutual appreciation. The +arrangement of 1908 for a cooperative control of the coming of laborers to +the United States has proved to work satisfactorily. The matter of a +revision of the existing treaty between the United States and Japan which +is terminable in 1912 is already receiving the study of both countries. + +The Department of State is considering the revision in whole or in part, of +the existing treaty with Siam, which was concluded in 1856, and is now, in +respect to many of its provisions, out of date. + +THE DEPARTMENT OF STATE. + +I earnestly recommend to the favorable action of the Congress the estimates +submitted by the Department of State and most especially the legislation +suggested in the Secretary of State's letter of this date whereby it will +be possible to develop and make permanent the reorganization of the +Department upon modern lines in a manner to make it a thoroughly efficient +instrument in the furtherance of our foreign trade and of American +interests abroad. The plan to have Divisions of Latin-American and Far +Eastern Affairs and to institute a certain specialization in business with +Europe and the Near East will at once commend itself. These +politico-geographical divisions and the detail from the diplomatic or +consular service to the Department of a number of men, who bring to the +study of complicated problems in different parts of the world practical +knowledge recently gained on the spot, clearly is of the greatest advantage +to the Secretary of State in foreseeing conditions likely to arise and in +conducting the great variety of correspondence and negotiation. It should +be remembered that such facilities exist in the foreign offices of all the +leading commercial nations and that to deny them to the Secretary of State +would be to place this Government at a great disadvantage in the rivalry of +commercial competition. + +The consular service has been greatly improved under the law of April 5, +1906, and the Executive Order of June 27, 1906, and I commend to your +consideration the question of embodying in a statute the principles of the +present Executive Order upon which the efficiency of our consular service +is wholly dependent. + +In modern times political and commercial interests are interrelated, and in +the negotiation of commercial treaties, conventions and tariff agreements, +the keeping open of opportunities and the proper support of American +enterprises, our diplomatic service is quite as important as the consular +service to the business interests of the country. Impressed with this idea +and convinced that selection after rigorous examination, promotion for +merit solely and the experience only to be gained through the continuity of +an organized service are indispensable to a high degree of efficiency in +the diplomatic service, I have signed an Executive Order as the first step +toward this very desirable result. Its effect should be to place all +secretaries in the diplomatic service in much the same position as consular +officers are now placed and to tend to the promotion of the most efficient +to the grade of minister, generally leaving for outside appointments such +posts of the grade of ambassador or minister as it may be expedient to fill +from without the service. It is proposed also to continue the practice +instituted last summer of giving to all newly appointed secretaries at +least one month's thorough training in the Department of State before they +proceed to their posts. This has been done for some time in regard to the +consular service with excellent results. + +Under a provision of the Act of August 5, 1909, I have appointed three +officials to assist the officers of the Government in collecting +information necessary to a wise administration of the tariff act of August +5, 1909. As to questions of customs administration they are cooperating +with the officials of the Treasury Department and as to matters of the +needs and the exigencies of our manufacturers and exporters, with the +Department of Commerce and Labor, in its relation to the domestic aspect of +the subject of foreign commerce. In the study of foreign tariff treatment +they will assist the Bureau of Trade Relations of the Department of State. +It is hoped thus to coordinate and bring to bear upon this most important +subject all the agencies of the Government which can contribute anything to +its efficient handling. + +As a consequence of Section 2 of the tariff act of August 5, 1909, it +becomes the duty of the Secretary of State to conduct as diplomatic +business all the negotiations necessary to place him in a position to +advise me as to whether or not a particular country unduly discriminates +against the United States in the sense of the statute referred to. The +great scope and complexity of this work, as well as the obligation to lend +all proper aid to our expanding commerce, is met by the expansion of the +Bureau of Trade Relations as set forth in the estimates for the Department +of State. + +OTHER DEPARTMENTS. + +I have thus in some detail described the important transactions of the +State Department since the beginning of this Administration for the reason +that there is no provision either by statute or custom for a formal report +by the Secretary of State to the President or to Congress, and a +Presidential message is the only means by which the condition of our +foreign relations is brought to the attention of Congress and the public. + +In dealing with the affairs of the other Departments, the heads of which +all submit annual reports, I shall touch only those matters that seem to me +to call for special mention on my part without minimizing in any way the +recommendations made by them for legislation affecting their respective +Departments, in all of which I wish to express my general concurrence. + +GOVERNMENT EXPENDITURES AND REVENUES. + +Perhaps the most important question presented to this Administration is +that of economy in expenditures and sufficiency of revenue. The deficit of +the last fiscal year, and the certain deficit of the current year, prompted +Congress to throw a greater responsibility on the Executive and the +Secretary of the Treasury than had heretofore been declared by statute. +This declaration imposes upon the Secretary of the Treasury the duty of +assembling all the estimates of the Executive Departments, bureaus, and +offices, of the expenditures necessary in the ensuing fiscal year, and of +making an estimate of the revenues of the Government for the same period; +and if a probable deficit is thus shown, it is made the duty of the +President to recommend the method by which such deficit can be met. + +The report of the Secretary shows that the ordinary expenditures for the +current fiscal year ending June 30, 1910, will exceed the estimated +receipts by $34,075,620. If to this deficit is added the sum to be +disbursed for the Panama Canal, amounting to $38,000,000, and $1,000,000 to +be paid on the public debt, the deficit of ordinary receipts and +expenditures will be increased to a total deficit of $73,075,620. This +deficit the Secretary proposes to meet by the proceeds of bonds issued to +pay the cost of constructing the Panama Canal. I approve this proposal. + +The policy of paying for the construction of the Panama Canal, not out of +current revenue, but by bond issues, was adopted in the Spooner Act of +1902, and there seems to be no good reason for departing from the principle +by which a part at least of the burden of the cost of the canal shall fall +upon our posterity who are to enjoy it; and there is all the more reason +for this view because the actual cost to date of the canal, which is now +half done and which will be completed January 1, 1915, shows that the cost +of engineering and construction will be $297,766,000, instead of +$139,705,200, as originally estimated. In addition to engineering and +construction, the other expenses, including sanitation and government, and +the amount paid for the properties, the franchise, and the privilege of +building the canal, increase the cost by $75,435,000, to a total of +$375,201,000. The increase in the cost of engineering and construction is +due to a substantial enlargement of the plan of construction by widening +the canal 100 feet in the Culebra cut and by increasing the dimensions of +the locks, to the underestimate of the quantity of the work to be done +under the original plan, and to an underestimate of the cost of labor and +materials both of which have greatly enhanced in price since the original +estimate was made. + +In order to avoid a deficit for the ensuing fiscal year, I directed the +heads of Departments in the preparation of their estimates to make them as +low as possible consistent with imperative governmental necessity. The +result has been, as I am advised by the Secretary of the Treasury, that the +estimates for the expenses of the Government for the next fiscal year +ending June 30, 1911, are less than the appropriations for this current +fiscal year by $42,818,000. So far as the Secretary of the Treasury is able +to form a judgment as to future income, and compare it with the +expenditures for the next fiscal year ending June 30, 1911, and excluding +payments on account of the Panama Canal, which will doubtless be taken up +by bonds, there will be a surplus of $35,931,000. + +In the present estimates the needs of the Departments and of the Government +have been cut to the quick, so to speak, and any assumption on the part of +Congress, so often made in times past, that the estimates have been +prepared with the expectation that they may be reduced, will result in +seriously hampering proper administration. + +The Secretary of the Treasury points out what should be carefully noted in +respect to this reduction in governmental expenses for the next fiscal +year, that the economies are of two kinds--first, there is a saving in the +permanent administration of the Departments, bureaus, and offices of the +Government; and, second, there is a present reduction in expenses by a +postponement of projects and improvements that ultimately will have to be +carried out but which are now delayed with the hope that additional revenue +in the future will permit their execution without producing a deficit. + +It has been impossible in the preparation of estimates greatly to reduce +the cost of permanent administration. This can not be done without a +thorough reorganization of bureaus, offices, and departments. For the +purpose of securing information which may enable the executive and the +legislative branches to unite in a plan for the permanent reduction of the +cost of governmental administration, the Treasury Department has instituted +an investigation by one of the most skilled expert accountants in the +United States. The result of his work in two or three bureaus, which, if +extended to the entire Government, must occupy two or more years, has been +to show much room for improvement and opportunity for substantial +reductions in the cost and increased efficiency of administration. The +object of the investigation is to devise means to increase the average +efficiency of each employee. There is great room for improvement toward +this end, not only by the reorganization of bureaus and departments and in +the avoidance of duplication, but also in the treatment of the individual +employee. + +Under the present system it constantly happens that two employees receive +the same salary when the work of one is far more difficult and important +and exacting than that of the other. Superior ability is not rewarded or +encouraged. As the classification is now entirely by salary, an employee +often rises to the highest class while doing the easiest work, for which +alone he may be fitted. An investigation ordered by my predecessor resulted +in the recommendation that the civil service he reclassified according to +the kind of work, so that the work requiring most application and knowledge +and ability shall receive most compensation. I believe such a change would +be fairer to the whole force and would permanently improve the personnel of +the service. + +More than this, every reform directed toward the improvement in the average +efficiency of government employees must depend on the ability of the +Executive to eliminate from the government service those who are +inefficient from any cause, and as the degree of efficiency in all the +Departments is much lessened by the retention of old employees who have +outlived their energy and usefulness, it is indispensable to any proper +system of economy that provision be made so that their separation from the +service shall be easy and inevitable. It is impossible to make such +provision unless there is adopted a plan of civil pensions. Most of the +great industrial organizations, and many of the well-conducted railways of +this country, are coming to the conclusion that a system of pensions for +old employees, and the substitution therefor of younger and more energetic +servants, promotes both economy and efficiency of administration. + +I am aware that there is a strong feeling in both Houses of Congress, and +possibly in the country, against the establishment of civil pensions, and +that this has naturally grown out of the heavy burden of military pensions, +which it has always been the policy of our Government to assume; but I am +strongly convinced that no other practical solution of the difficulties +presented by the superannuation of civil servants can be found than that of +a system of civil pensions. + +The business and expenditures of the Government have expanded enormously +since the Spanish war, but as the revenues have increased in nearly the +same proportion as the expenditures until recently, the attention of the +public, and of those responsible for the Government, has not been fastened +upon the question of reducing the cost of administration. We can not, in +view of the advancing prices of living, hope to save money by a reduction +in the standard of salaries paid. Indeed, if any change is made in that +regard, an increase rather than a decrease will be necessary; and the only +means of economy will be in reducing the number of employees and in +obtaining a greater average of efficiency from those retained in the +service. + +Close investigation and study needed to make definite recommendations in +this regard will consume at least two years. I note with much satisfaction +the organization in the Senate of a Committee on Public Expenditures, +charged with the duty of conducting such an investigation, and I tender to +that committee all the assistance which the executive branch of the +Government can possibly render. + +FRAUDS IN THE COLLECTION OF CUSTOMS. + +I regret to refer to the fact of the discovery of extensive frauds in the +collections of the customs revenue at New York City, in which a number of +the subordinate employees in the weighing and other departments were +directly concerned, and in which the beneficiaries were the American Sugar +Refining Company and others. The frauds consisted in the payment of duty on +underweights of sugar. The Government has recovered from the American Sugar +Refining Company all that it is shown to have been defrauded of. The sum +was received in full of the amount due, which might have been recovered by +civil suit against the beneficiary of the fraud, but there was an express +reservation in the contract of settlement by which the settlement should +not interfere with, or prevent the criminal prosecution of everyone who was +found to be subject to the same. + +Criminal prosecutions are now proceeding against a number of the Government +officers. The Treasury Department and the Department of Justice are +exerting every effort to discover all the wrongdoers, including the +officers and employees of the companies who may have been privy to the +fraud. It would seem to me that an investigation of the frauds by Congress +at present, pending the probing by the Treasury Department and the +Department of Justice, as proposed, might by giving immunity and otherwise +prove an embarrassment in securing conviction of the guilty parties. + +MAXIMUM AND MINIMUM CLAUSE IN TARIFF ACT. + +Two features of the new tariff act call for special reference. By virtue of +the clause known as the "Maximum and Minimum" clause, it is the duty of the +Executive to consider the laws and practices of other countries with +reference to the importation into those countries of the products and +merchandise of the United States, and if the Executive finds such laws and +practices not to be unduly discriminatory against the United States, the +minimum duties provided in the bill are to go into force. + +Unless the President makes such a finding, then the maximum duties provided +in the bill, that is, an increase of twenty-five per cent. ad valorem over +the minimum duties, are to be in force. Fear has been expressed that this +power conferred and duty imposed on the Executive is likely to lead to a +tariff war. I beg to express the hope and belief that no such result need +be anticipated. + +The discretion granted to the Executive by the terms "unduly +discriminatory" is wide. In order that the maximum duty shall be charged +against the imports from a country, it is necessary that he shall find on +the part of that country not only discriminations in its laws or the +practice under them against the trade of the United States, but that the +discriminations found shall be undue; that is, without good and fair +reason. I conceive that this power was reposed in the President with the +hope that the maximum duties might never be applied in any case, but that +the power to apply them would enable the President and the State Department +through friendly negotiation to secure the elimination from the laws and +the practice under them of any foreign country of that which is unduly +discriminatory. No one is seeking a tariff war or a condition in which the +spirit of retaliation shall be aroused. + +USES OF THE NEW TARIFF BOARD. + +The new tariff law enables me to appoint a tariff board to assist me in +connection with the Department of State in the administration of the +minimum and maximum clause of the act and also to assist officers of the +Government in the administration of the entire law. An examination of the +law and an understanding of the nature of the facts which should be +considered in discharging the functions imposed upon the Executive show +that I have the power to direct the tariff board to make a comprehensive +glossary and encyclopedia of the terms used and articles embraced in the +tariff law, and to secure information as to the cost of production of such +goods in this country and the cost of their production in foreign +countries. I have therefore appointed a tariff board consisting of three +members and have directed them to perform all the duties above described. +This work will perhaps take two or three years, and I ask from Congress a +continuing annual appropriation equal to that already made for its +prosecution. I believe that the work of this board will be of prime utility +and importance whenever Congress shall deem it wise again to readjust the +customs duties. If the facts secured by the tariff board are of such a +character as to show generally that the rates of duties imposed by the +present tariff law are excessive under the principles of protection as +described in the platform of the successful party at the late election, I +shall not hesitate to invite the attention of Congress to this fact and to +the necessity for action predicated thereon. Nothing, however, halts +business and interferes with the course of prosperity so much as the +threatened revision of the tariff, and until the facts are at hand, after +careful and deliberate investigation, upon which such revision can properly +be undertaken, it seems to me unwise to attempt it. The amount of +misinformation that creeps into arguments pro and con in respect to tariff +rates is such as to require the kind of investigation that I have directed +the tariff board to make, an investigation undertaken by it wholly without +respect to the effect which the facts may have in calling for a +readjustment of the rates of duty. + +WAR DEPARTMENT. + +In the interest of immediate economy and because of the prospect of a +deficit, I have required a reduction in the estimates of the War Department +for the coming fiscal year, which brings the total estimates down to an +amount forty-five millions less than the corresponding estimates for last +year. This could only be accomplished by cutting off new projects and +suspending for the period of one year all progress in military matters. For +the same reason I have directed that the Army shall not be recruited up to +its present authorized strength. These measures can hardly be more than +temporary--to last until our revenues are in better condition and until the +whole question of the expediency of adopting a definite military policy can +be submitted to Congress, for I am sure that the interests of the military +establishment are seriously in need of careful consideration by Congress. +The laws regulating the organization of our armed forces in the event of +war need to be revised in order that the organization can be modified so as +to produce a force which would be more consistently apportioned throughout +its numerous branches. To explain the circumstances upon which this opinion +is based would necessitate a lengthy discussion, and I postpone it until +the first convenient opportunity shall arise to send to Congress a special +message upon this subject. + +The Secretary of War calls attention to a number of needed changes in the +Army in all of which I concur, but the point upon which I place most +emphasis is the need for an elimination bill providing a method by which +the merits of officers shall have some effect upon their advancement and by +which the advancement of all may be accelerated by the effective +elimination of a definite proportion of the least efficient. There are in +every army, and certainly in ours, a number of officers who do not violate +their duty in any such way as to give reason for a court-martial or +dismissal, but who do not show such aptitude and skill and character for +high command as to justify their remaining in the active service to be +Promoted. Provision should be made by which they may be retired on a +certain proportion of their pay, increasing with their length of service at +the time of retirement. There is now a personnel law for the Navy which +itself needs amendment and to which I shall make further reference. Such a +law is needed quite as much for the Army. + +The coast defenses of the United States proper are generally all that could +be desired, and in some respects they are rather more elaborate than under +present conditions are needed to stop an enemy's fleet from entering the +harbors defended. There is, however, one place where additional defense is +badly needed, and that is at the mouth of Chesapeake Bay, where it is +proposed to make an artificial island for a fort which shall prevent an +enemy's fleet from entering this most important strategical base of +operations on the whole Atlantic and Gulf coasts. I hope that appropriate +legislation will be adopted to secure the construction of this defense. + +The military and naval joint board have unanimously agreed that it would be +unwise to make the large expenditures which at one time were contemplated +in the establishment of a naval base and station in the Philippine Islands, +and have expressed their judgment, in which I fully concur, in favor of +making an extensive naval base at Pearl Harbor, near Honolulu, and not in +the Philippines. This does not dispense with the necessity for the +comparatively small appropriations required to finish the proper coast +defenses in the Philippines now under construction on the island of +Corregidor and elsewhere or to complete a suitable repair station and +coaling supply station at Olongapo, where is the floating dock "Dewey." I +hope that this recommendation of the joint board will end the discussion as +to the comparative merits of Manila Bay and Olongapo as naval stations, and +will lead to prompt measures for the proper equipment and defense of Pearl +Harbor. + +THE NAVY. + +The return of the battle-ship fleet from its voyage around the world, in +more efficient condition than when it started, was a noteworthy event of +interest alike to our citizens and the naval authorities of the world. +Besides the beneficial and far-reaching effect on our personal and +diplomatic relations in the countries which the fleet visited, the marked +success of the ships in steaming around the world in all weathers on +schedule time has increased respect for our Navy and has added to our +national prestige. + +Our enlisted personnel recruited from all sections of the country is young +and energetic and representative of the national spirit. It is, moreover, +owing to its intelligence, capable of quick training into the modern +man-of-warsman. Our officers are earnest and zealous in their profession, +but it is a regrettable fact that the higher officers are old for the +responsibilities of the modern navy, and the admirals do not arrive at flag +rank young enough to obtain adequate training in their duties as flag +officers. This need for reform in the Navy has been ably and earnestly +presented to Congress by my predecessor, and I also urgently recommend the +subject for consideration. + +Early in the coming session a comprehensive plan for the reorganization of +the officers of all corps of the Navy will be presented to Congress, and I +hope it will meet with action suited to its urgency. + +Owing to the necessity for economy in expenditures, I have directed the +curtailment of recommendations for naval appropriations so that they are +thirty-eight millions less than the corresponding estimates of last year, +and the request for new naval construction is limited to two first-class +battle ships and one repair vessel. + +The use of a navy is for military purposes, and there has been found need +in the Department of a military branch dealing directly with the military +use of the fleet. The Secretary of the Navy has also felt the lack of +responsible advisers to aid him in reaching conclusions and deciding +important matters between coordinate branches of the Department. To secure +these results he has inaugurated a tentative plan involving certain changes +in the organization of the Navy Department, including the navy-yards, all +of which have been found by the Attorney-General to be in accordance with +law. I have approved the execution of the plan proposed because of the +greater efficiency and economy it promises. + +The generosity of Congress has provided in the present Naval Observatory +the most magnificent and expensive astronomical establishment in the world. +It is being used for certain naval purposes which might easily and +adequately be subserved by a small division connected with the Naval +Department at only a fraction of the cost of the present Naval Observatory. +The official Board of Visitors established by Congress and appointed in +1901 expressed its conclusion that the official head of the observatory +should be an eminent astronomer appointed by the President by and with the +advice and consent of the Senate, holding his place by a tenure at least as +permanent as that of the Superintendent of the Coast Survey or the head of +the Geological Survey, and not merely by a detail of two or three years' +duration. I fully concur in this judgment, and urge a provision by law for +the appointment of such a director. + +It may not be necessary to take the observatory out of the Navy Department +and put it into another department in which opportunity for scientific +research afforded by the observatory would seem to be more appropriate, +though I believe such a transfer in the long run is the best policy. I am +sure, however, I express the desire of the astronomers and those learned in +the kindred sciences when I urge upon Congress that the Naval Observatory +be now dedicated to science under control of a man of science who can, if +need be, render all the service to the Navy Department which this +observatory now renders, and still furnish to the world the discoveries in +astronomy that a great astronomer using such a plant would be likely to +make. + +DEPARTMENT OF JUSTICE EXPEDITION IN LEGAL PROCEDURE + +The deplorable delays in the administration of civil and criminal law have +received the attention of committees of the American Bar Association and of +many State Bar Associations, as well as the considered thought of judges +and jurists. In my judgment, a change in judicial procedure, with a view to +reducing its expense to private litigants in civil cases and facilitating +the dispatch of business and final decision in both civil and criminal +cases, constitutes the greatest need in our American institutions. I do not +doubt for one moment that much of the lawless violence and cruelty +exhibited in lynchings is directly due to the uncertainties and injustice +growing out of the delays in trials, judgments, and the executions thereof +by our courts. Of course these remarks apply quite as well to the +administration of justice in State courts as to that in Federal courts, and +without making invidious distinction it is perhaps not too much to say +that, speaking generally, the defects are less in the Federal courts than +in the State courts. But they are very great in the Federal courts. The +expedition with which business is disposed of both on the civil and the +criminal side of English courts under modern rules of procedure makes the +delays in our courts seem archaic and barbarous. The procedure in the +Federal courts should furnish an example for the State courts. I presume it +is impossible, without an amendment to the Constitution, to unite under one +form of action the proceedings at common law and proceedings in equity in +the Federal courts, but it is certainly not impossible by a statute to +simplify and make short and direct the procedure both at law and in equity +in those courts. It is not impossible to cut down still more than it is cut +down, the jurisdiction of the Supreme Court so as to confine it almost +wholly to statutory and constitutional questions. Under the present +statutes the equity and admiralty procedure in the Federal courts is under +the control of the Supreme Court, but in the pressure of business to which +that court is subjected, it is impossible to hope that a radical and proper +reform of the Federal equity procedure can be brought about. I therefore +recommend legislation providing for the appointment by the President of a +commission with authority to examine the law and equity procedure of the +Federal courts of first instance, the law of appeals from those courts to +the courts of appeals and to the Supreme Court, and the costs imposed in +such procedure upon the private litigants and upon the public treasury and +make recommendation with a view to simplifying and expediting the procedure +as far as possible and making it as inexpensive as may be to the litigant +of little means. + +INJUNCTIONS WITHOUT NOTICE. + +The platform of the successful party in the last election contained the +following: "The Republican party will uphold at all times the authority and +integrity of the courts, State and Federal, and will ever insist that their +powers to enforce their process and to protect life, liberty, and property +shall be preserved inviolate. We believe, however, that the rules of +procedure in the Federal courts with respect to the issuance of the writ of +injunction should be more accurately defined by statute, and that no +injunction or temporary restraining order should be issued without notice, +except where irreparable injury would result from delay, in which case a +speedy hearing thereafter should be granted." I recommend that in +compliance with the promise thus made, appropriate legislation be adopted. +The ends of justice will best be met and the chief cause of complaint +against ill-considered injunctions without notice will be removed by the +enactment of a statute forbidding hereafter the issuing of any injunction +or restraining order, whether temporary or permanent, by any Federal court, +without previous notice and a reasonable opportunity to be heard on behalf +of the parties to be enjoined; unless it shall appear to the satisfaction +of the court that the delay necessary to give such notice and hearing would +result in irreparable injury to the complainant and unless also the court +shall from the evidence make a written finding, which shall be spread upon +the court minutes, that immediate and irreparable injury is likely to ensue +to the complainant, and shall define the injury, state why it is +irreparable, and shall also endorse on the order issued the date and the +hour of the issuance of the order. Moreover, every such injunction or +restraining order issued without previous notice and opportunity by the +defendant to be heard should by force of the statute expire and be of no +effect after seven days from the issuance thereof or within any time less +than that period which the court may fix, unless within such seven days or +such less period, the injunction or order is extended or renewed after +previous notice and opportunity to be heard. + +My judgment is that the passage of such an act which really embodies the +best practice in equity and is very like the rule now in force in some +courts will prevent the issuing of ill-advised orders of injunction without +notice and will render such orders when issued much less objectionable by +the short time in which they may remain effective. + +ANTI-TRUST AND INTERSTATE COMMERCE LAWS. + +The jurisdiction of the General Government over interstate commerce has led +to the passage of the so-called "Sherman Anti-trust Law" and the +"Interstate Commerce Law" and its amendments. The developments in the +operation of those laws, as shown by indictments, trials, judicial +decisions, and other sources of information, call for a discussion and some +suggestions as to amendments. These I prefer to embody in a special message +instead of including them in the present communication, and I shall avail +myself of the first convenient opportunity to bring these subjects to the +attention of Congress. + +JAIL OF THE DISTRICT OF COLUMBIA. + +My predecessor transmitted to the Congress a special message on January 11, +1909, accompanying the report of Commissioners theretofore appointed to +investigate the jail, workhouse, etc., in the District of Columbia, in +which he directed attention to the report as setting forth vividly, "the +really outrageous conditions in the workhouse and jail." + +The Congress has taken action in pursuance of the recommendations of that +report and of the President, to the extent of appropriating funds and +enacting the necessary legislation for the establishment of a workhouse and +reformatory. No action, however, has been taken by the Congress with +respect to the jail, the conditions of which are still antiquated and +insanitary. I earnestly recommend the passage of a sufficient appropriation +to enable a thorough remodeling of that institution to be made without +delay. It is a reproach to the National Government that almost under the +shadow of the Capitol Dome prisoners should be confined in a building +destitute of the ordinary decent appliances requisite to cleanliness and +sanitary conditions. + +POST-OFFICE DEPARTMENT. SECOND-CLASS MAIL MATTER. + +The deficit every year in the Post-Office Department is largely caused by +the low rate of postage of 1 cent a pound charged on second-class mail +matter, which includes not only newspapers, but magazines and miscellaneous +periodicals. The actual loss growing out of the transmission of this +second-class mail matter at 1 cent a pound amounts to about $63,000,000 a +year. The average cost of the transportation of this matter is more than 9 +cents a pound. + +It appears that the average distance over which newspapers are delivered to +their customers is 291 miles, while the average haul of magazines is 1,049, +and of miscellaneous periodicals 1,128 miles. Thus, the average haul of the +magazine is three and one-half times and that of the miscellaneous +periodical nearly four times the haul of the daily newspaper, yet all of +them pay the same postage rate of 1 cent a pound. The statistics of 1907 +show that second-class mail matter constituted 63.91 per cent. of the +weight of all the mail, and yielded only 5.19 per cent. of the revenue. + +The figures given are startling, and show the payment by the Government of +an enormous subsidy to the newspapers, magazines, and periodicals, and +Congress may well consider whether radical steps should not be taken to +reduce the deficit in the Post-Office Department caused by this discrepancy +between the actual cost of transportation and the compensation exacted +therefor. + +A great saving might be made, amounting to much more than half of the loss, +by imposing upon magazines and periodicals a higher rate of postage. They +are much heavier than newspapers, and contain a much higher proportion of +advertising to reading matter, and the average distance of their +transportation is three and a half times as great. + +The total deficit for the last fiscal year in the Post-Office Department +amounted to $17,500,000. The branches of its business which it did at a +loss were the second-class mail service, in which the loss, as already +said, was $63,000,000, and the free rural delivery, in which the loss was +$28,000,000. These losses were in part offset by the profits of the letter +postage and other sources of income. It would seem wise to reduce the loss +upon second-class mail matter, at least to the extent of preventing a +deficit in the total operations of the Post-Office. + +I commend the whole subject to Congress, not unmindful of the spread of +intelligence which a low charge for carrying newspapers and periodicals +assists. I very much doubt, however, the wisdom of a policy which +constitutes so large a subsidy and requires additional taxation to meet +it. + +POSTAL SAVINGS BANKS. + +The second subject worthy of mention in the Post-Office Department is the +real necessity and entire practicability of establishing postal savings +banks. The successful party at the last election declared in favor of +postal savings banks, and although the proposition finds opponents in many +parts of the country, I am convinced that the people desire such banks, and +am sure that when the banks are furnished they will be productive of the +utmost good. The postal savings banks are not constituted for the purpose +of creating competition with other banks. The rate of interest upon +deposits to which they would be limited would be so small as to prevent +their drawing deposits away from other banks. + +I believe them to be necessary in order to offer a proper inducement to +thrift and saving to a great many people of small means who do not now have +banking facilities, and to whom such a system would offer an opportunity +for the accumulation of capital. They will furnish a satisfactory +substitute, based on sound principle and actual successful trial in nearly +all the countries of the world, for the system of government guaranty of +deposits now being adopted in several western States, which with deference +to those who advocate it seems to me to have in it the seeds of +demoralization to conservative banking and certain financial disaster. The +question of how the money deposited in postal savings banks shall be +invested is not free from difficulty, but I believe that a satisfactory +provision for this purpose was inserted as an amendment to the bill +considered by the Senate at its last session. It has been proposed to delay +the consideration of legislation establishing a postal savings bank until +after the report of the Monetary Commission. This report is likely to be +delayed, and properly so, cause of the necessity for careful deliberation +and close investigation. I do not see why the one should be tied up with +the other. It is understood that the Monetary Commission have looked into +the systems of banking which now prevail abroad, and have found that by a +control there exercised in respect to reserves and the rates of exchange by +some central authority panics are avoided. It is not apparent that a system +of postal savings banks would in any way interfere with a change to such a +system here. Certainly in most of the countries of Europe where control is +thus exercised by a central authority, postal savings banks exist and are +not thought to be inconsistent with a proper financial and banking system. + +SHIP SUBSIDY. + +Following the course of my distinguished predecessor, I earnestly recommend +to Congress the consideration and passage of a ship subsidy bill, looking +to the establishment of lines between our Atlantic seaboard and the eastern +coast of South America, as well as lines from the west coast of the United +States to South America. China, Japan, and the Philippines. The profits on +foreign mails are perhaps a sufficient measure of the expenditures which +might first be tentatively applied to this method of inducing American +capital to undertake the establishment of American lines of steamships in +those directions in which we now feel it most important that we should have +means of transportation controlled in the interest of the expansion of our +trade. A bill of this character has once passed the House and more than +once passed the Senate, and I hope that at this session a bill framed on +the same lines and with the same purposes may become a law. + +INTERIOR DEPARTMENT. NEW MEXICO AND ARIZONA. + +The successful party in the last election in its national platform declared +in favor of the admission as separate States of New Mexico and Arizona, and +I recommend that legislation appropriate to this end be adopted. I urge, +however, that care be exercised in the preparation of the legislation +affecting each Territory to secure deliberation in the selection of persons +as members of the convention to draft a constitution for the incoming +State, and I earnestly advise that such constitution after adoption by the +convention shall be submitted to the people of the Territory for their +approval at an election in which the sole issue shall be the merits of the +proposed constitution, and if the constitution is defeated by popular vote +means shall be provided in the enabling act for a new convention and the +drafting of a new constitution. I think it vital that the issue as to the +merits of the constitution should not be mixed up with the selection of +State officers, and that no election of State officers should be had until +after the constitution has been fully approved and finally settled upon. + +ALASKA. + +With respect to the Territory of Alaska, I recommend legislation which +shall provide for the appointment by the President of a governor and also +of an executive council, the members of which shall during their term of +office reside in the Territory, and which shall have legislative powers +sufficient to enable it to give to the Territory local laws adapted to its +present growth. I strongly deprecate legislation looking to the election of +a Territorial legislature in that vast district. The lack of permanence of +residence of a large part of the present population and the small number of +the people who either permanently or temporarily reside in the district as +compared with its vast expanse and the variety of the interests that have +to be subserved, make it altogether unfitting in my judgment to provide for +a popular election of a legislative body. The present system is not +adequate and does not furnish the character of local control that ought to +be there. The only compromise it seems to me which may give needed local +legislation and secure a conservative government is the one I propose. + +CONSERVATION OF NATIONAL RESOURCES. + +In several Departments there is presented the necessity for legislation +looking to the further conservation of our national resources, and the +subject is one of such importance as to require a more detailed and +extended discussion than can be entered upon in this communication. For +that reason I shall take an early opportunity to send a special message to +Congress on the subject of the improvement of our waterways, upon the +reclamation and irrigation of arid, semiarid, and swamp lands; upon the +preservation of our forests and the reforesting of suitable areas; upon the +reclassification of the public domain with a view of separating from +agricultural settlement mineral, coal, and phosphate lands and sites +belonging to the Government bordering on streams suitable for the +utilization of water power. + +DEPARTMENT OF AGRICULTURE. + +I commend to your careful consideration the report of the Secretary of +Agriculture as showing the immense sphere of usefulness which that +Department now fills and the wonderful addition to the wealth of the nation +made by the farmers of this country in the crops of the current year. + +DEPARTMENT OF COMMERCE AND LABOR. THE LIGHT-HOUSE BOARD. + +The Light-House Board now discharges its duties under the Department of +Commerce and Labor. For upwards of forty years this Board has been +constituted of military and naval officers and two or three men of science, +with such an absence of a duly constituted executive head that it is +marvelous what work has been accomplished. In the period of construction +the energy and enthusiasm of all the members prevented the inherent defects +of the system from interfering greatly with the beneficial work of the +Board, but now that the work is chiefly confined to maintenance and repair, +for which purpose the country is divided into sixteen districts, to which +are assigned an engineer officer of the Army and an inspector of the Navy, +each with a light-house tender and the needed plant for his work, it has +become apparent by the frequent friction that arises, due to the absence of +any central independent authority, that there must be a complete +reorganization of the Board. I concede the advantage of keeping in the +system the rigidity of discipline that the presence of naval and military +officers in charge insures, but unless the presence of such officers in the +Board can be made consistent with a responsible executive head that shall +have proper authority, I recommend the transfer of control over the +light-houses to a suitable civilian bureau. This is in accordance with the +judgment of competent persons who are familiar with the workings of the +present system. I am confident that a reorganization can be effected which +shall avoid the recurrence of friction between members, instances of which +have been officially brought to my attention, and that by such +reorganization greater efficiency and a substantial reduction in the +expense of operation can be brought about. + +CONSOLIDATION OF BUREAUS. + +I request Congressional authority to enable the Secretary of Commerce and +Labor to unite the Bureaus of Manufactures and Statistics. This was +recommended by a competent committee appointed in the previous +administration for the purpose of suggesting changes in the interest of +economy and efficiency, and is requested by the Secretary. + +THE WHITE SLAVE TRADE. + +I greatly regret to have to say that the investigations made in the Bureau +of Immigration and other sources of information lead to the view that there +is urgent necessity for additional legislation and greater executive +activity to suppress the recruiting of the ranks of prostitutes from the +streams of immigration into this country--an evil which, for want of a +better name, has been called "The White Slave Trade." I believe it to be +constitutional to forbid, under penalty, the transportation of persons for +purposes of prostitution across national and state lines; and by +appropriating a fund of $50,000 to be used by the Secretary of Commerce and +Labor for the employment of special inspectors it will be possible to bring +those responsible for this trade to indictment and conviction under a +federal law. + +BUREAU OF HEALTH + +For a very considerable period a movement has been gathering strength, +especially among the members of the medical profession, in favor of a +concentration of the instruments of the National Government which have to +do with the promotion of public health. In the nature of things, the +Medical Department of the Army and the Medical Department of the Navy must +be kept separate. But there seems to be no reason why all the other bureaus +and offices in the General Government which have to do with the public +health or subjects akin thereto should not be united in a bureau to be +called the "Bureau of Public Health." This would necessitate the transfer +of the Marine-Hospital Service to such a bureau. I am aware that there is +wide field in respect to the public health committed to the States in which +the Federal Government can not exercise jurisdiction, but we have seen in +the Agricultural Department the expansion into widest usefulness of a +department giving attention to agriculture when that subject is plainly one +over which the States properly exercise direct jurisdiction. The +opportunities offered for useful research and the spread of useful +information in regard to the cultivation of the soil and the breeding of +stock and the solution of many of the intricate problems in progressive +agriculture have demonstrated the wisdom of establishing that department. +Similar reasons, of equal force, can be given for the establishment of a +bureau of health that shall not only exercise the police jurisdiction of +the Federal Government respecting quarantine, but which shall also afford +an opportunity for investigation and research by competent experts into +questions of health affecting the whole country, or important sections +thereof, questions which, in the absence of Federal governmental work, are +not likely to be promptly solved. + +CIVIL SERVICE COMMISSION. + +The work of the United States Civil Service Commission has been performed +to the general satisfaction of the executive officers with whom the +Commission has been brought into official communication. The volume of that +work and its variety and extent have under new laws, such as the Census +Act, and new Executive orders, greatly increased. The activities of the +Commission required by the statutes have reached to every portion of the +public domain. + +The accommodations of the Commission are most inadequate for its needs. I +call your attention to its request for increase in those accommodations as +will appear from the annual report for this year. + +POLITICAL CONTRIBUTIONS. + +I urgently recommend to Congress that a law be passed requiring that +candidates in elections of Members of the House of Representatives, and +committees in charge of their candidacy and campaign, file in a proper +office of the United States Government a statement of the contributions +received and of the expenditures incurred in the campaign for such +elections and that similar legislation be enacted in respect to all other +elections which are constitutionally within the control of Congress. + +FREEDMAN'S SAVINGS AND TRUST COMPANY. + +Recommendations have been made by my predecessors that Congress appropriate +a sufficient sum to pay the balance--about 38 per cent.--of the amounts due +depositors in the Freedman's Savings and Trust Company. I renew this +recommendation, and advise also that a proper limitation be prescribed +fixing a period within which the claims may be presented, that assigned +claims be not recognized, and that a limit be imposed on the amount of fees +collectible for services in presenting such claims. + +SEMI-CENTENNIAL OF NEGRO FREEDOM. + +The year 1913 will mark the fiftieth anniversary of the issuance of the +Emancipation Proclamation granting freedom to the negroes. It seems fitting +that this event should be properly celebrated. Already a movement has been +started by prominent Negroes, encouraged by prominent white people and the +press. The South especially is manifesting its interest in this movement. + +It is suggested that a proper form of celebration would be an exposition to +show the progress the Negroes have made, not only during their period of +freedom, but also from the time of their coming to this country. + +I heartily indorse this proposal, and request that the Executive be +authorized to appoint a preliminary commission of not more than seven +persons to consider carefully whether or not it is wise to hold such an +exposition, and if so, to outline a plan for the enterprise. I further +recommend that such preliminary commission serve without salary, except as +to their actual expenses, and that an appropriation be made to meet such +expenses. CONCLUSION. + +I have thus, in a message compressed as much as the subjects will permit, +referred to many of the legislative needs of the country, with the +exceptions already noted. Speaking generally, the country is in a high +state of prosperity. There is every reason to believe that we are on the +eve of a substantial business expansion, and we have just garnered a +harvest unexampled in the market value of our agricultural products. The +high prices which such products bring mean great prosperity for the farming +community, but on the other hand they mean a very considerably increased +burden upon those classes in the community whose yearly compensation does +not expand with the improvement in business and the general prosperity. +Various reasons are given for the high prices. The proportionate increase +in the output of gold, which to-day is the chief medium of exchange and is +in some respects a measure of value, furnishes a substantial explanation of +at least a part of the increase in prices. The increase in population and +the more expensive mode of living of the people, which have not been +accompanied by a proportionate increase in acreage production, may furnish +a further reason. It is well to note that the increase in the cost of +living is not confined to this country, but prevails the world over, and +that those who would charge increases in prices to the existing protective +tariff must meet the fact that the rise in prices has taken place almost +wholly in those products of the factory and farm in respect to which there +has been either no increase in the tariff or in many instances a very +considerable reduction. + +*** + +State of the Union Address +William H. Taft +December 6, 1910 + +To the Senate and House of Representatives: + +During the past year the foreign relations of the United States have +continued upon a basis of friendship and good understanding. + +ARBITRATION. + +The year has been notable as witnessing the pacific settlement of two +important international controversies before the Permanent Court of The +Hague. + +The arbitration of the Fisheries dispute between the United States and +Great Britain, which has been the source of nearly continuous diplomatic +correspondence since the Fisheries Convention of 1818, has given an award +which is satisfactory to both parties. This arbitration is particularly +noteworthy not only because of the eminently just results secured, but also +because it is the first arbitration held under the general arbitration +treaty of April 4, 1908, between the United States and Great Britain, and +disposes of a controversy the settlement of which has resisted every other +resource of diplomacy, and which for nearly ninety years has been the cause +of friction between two countries whose common interest lies in maintaining +the most friendly and cordial relations with each other. + +The United States was ably represented before the tribunal. The complicated +history of the questions arising made the issue depend, more than +ordinarily in such cases, upon the care and skill with which our case was +presented, and I should be wanting in proper recognition of a great +patriotic service if I did not refer to the lucid historical analysis of +the facts and the signal ability and force of the argument--six days in +length--presented to the Court in support of our case by Mr. Elihu Root. As +Secretary of State, Mr. Root had given close study to the intricate facts +bearing on the controversy, and by diplomatic correspondence had helped to +frame the issues. At the solicitation of the Secretary of State and myself, +Mr. Root, though burdened by his duties as Senator from New York, undertook +the preparation of the case as leading counsel, with the condition imposed +by himself that, in view of his position as Senator, he should not receive +any compensation. + +The Tribunal constituted at The Hague by the Governments of the United +States and Venezuela has completed its deliberations and has rendered an +award in the case of the Orinoco Steamship Company against Venezuela. The +award may be regarded as satisfactory since it has, pursuant to the +contentions of the United States, recognized a number of important +principles making for a judicial attitude in the determining of +international disputes. + +In view of grave doubts which had been raised as to the constitutionality +of The Hague Convention for the establishment of an International Prize +Court, now before the Senate for ratification, because of that provision of +the Convention which provides that there may be an appeal to the proposed +Court from the decisions of national courts, this government proposed in an +Identic Circular Note addressed to those Powers who had taken part in the +London Maritime Conference, that the powers signatory to the Convention, if +confronted with such difficulty, might insert a reservation to the effect +that appeals to the International Prize Court in respect to decisions of +its national tribunals, should take the form of a direct claim for +compensation; that the proceedings thereupon to be taken should be in the +form of a trial de novo, and that judgment of the Court should consist of +compensation for the illegal capture, irrespective of the decision of the +national court whose judgment had thus been internationally involved. As +the result of an informal discussion it was decided to provide such +procedure by means of a separate protocol which should be ratified at the +same time as the Prize Court Convention itself. + +Accordingly, the Government of the Netherlands, at the request of this +Government, proposed under date of May 24, 1910, to the powers signatory to +The Hague Convention, the negotiation of a supplemental protocol embodying +stipulations providing for this alternative procedure. It is gratifying to +observe that this additional protocol is being signed without objection, by +the powers signatory to the original convention, and there is every reason +to believe that the International Prize Court will be soon established. + +The Identic Circular Note also proposed that the International Prize Court +when established should be endowed with the functions of an Arbitral Court +of Justice under and pursuant to the recommendation adopted by the last +Hague Conference. The replies received from the various powers to this +proposal inspire the hope that this also may be accomplished within the +reasonably near future. + +It is believed that the establishment of these two tribunals will go a long +way toward securing the arbitration of many questions which have heretofore +threatened and, at times, destroyed the peace of nations. + +PEACE COMMISSION. + +Appreciating these enlightened tendencies of modern times, the Congress at +its last session passed a law providing for the appointment of a commission +of five members "to be appointed by the President of the United States to +consider the expediency of utilizing existing international agencies for +the purpose of limiting the armaments of the nations of the world by +international agreement, and of constituting the combined navies of the +world an international force for the preservation of universal peace, and +to consider and report upon any other means to diminish the expenditures of +government for military purposes and to lessen the probabilities of war." + +I have not as yet made appointments to this Commission because I have +invited and am awaiting the expressions of foreign governments as to their +willingness to cooperate with us in the appointment of similar commissions +or representatives who would meet with our commissioners and by joint +action seek to make their work effective. + +GREAT BRITAIN AND CANADA. + +Several important treaties have been negotiated with Great Britain in the +past twelve months. A preliminary diplomatic agreement has been reached +regarding the arbitration of pecuniary claims which each Government has +against the other. This agreement, with the schedules of claims annexed, +will, as soon as the schedules are arranged, be submitted to the Senate for +approval. + +An agreement between the United States and Great Britain with regard to the +location of the international boundary line between the United States and +Canada in Passamaquoddy Bay and to the middle of Grand Manan Channel was +reached in a Treaty concluded May 21, 1910, which has been ratified by both +Governments and proclaimed, thus making unnecessary the arbitration +provided for in the previous treaty of April 11, 1908. + +The Convention concluded January 11, 1909, between the United States and +Great Britain providing for the settlement of international differences +between the United States and Canada including the apportionment between +the two countries of certain of the boundary waters and the appointment of +Commissioners to adjust certain other questions has been ratified by both +Governments and proclaimed. + +The work of the International Fisheries Commission appointed in 1908, under +the treaty of April 11, 1908, between Great Britain and the United States, +has resulted in the formulation and recommendation of uniform regulations +governing the fisheries of the boundary waters of Canada and the United +States for the purpose of protecting and increasing the supply of food fish +in such waters. In completion of this work, the regulations agreed upon +require congressional legislation to make them effective and for their +enforcement in fulfillment of the treaty stipulations. PORTUGAL. + +In October last the monarchy in Portugal was overthrown, a provisional +Republic was proclaimed, and there was set up a de facto Government which +was promptly recognized by the Government of the United States for purposes +of ordinary intercourse pending formal recognition by this and other Powers +of the Governmental entity to be duly established by the national +sovereignty. LIBERIA. + +A disturbance among the native tribes of Liberia in a portion of the +Republic during the early part of this year resulted in the sending, under +the Treaty of 1862, of an American vessel of war to the disaffected +district, and the Liberian authorities, assisted by the good offices of the +American Naval Officers, were able to restore order. The negotiations which +have been undertaken for the amelioration of the conditions found in +Liberia by the American Commission, whose report I transmitted to Congress +on March 25 last, are being brought to conclusion, and it is thought that +within a short time practical measures of relief may be put into effect +through the good offices of this Government and the cordial cooperation of +other governments interested in Liberia's welfare. + +THE NEAR EAST. TURKEY. + +To return the visit of the Special Embassy announcing the accession of His +Majesty Mehemet V, Emperor of the Ottomans, I sent to Constantinople a +Special Ambassador who, in addition to this mission of ceremony, was +charged with the duty of expressing to the Ottoman Government the value +attached by the Government of the United States to increased and more +important relations between the countries and the desire of the United +States to contribute to the larger economic and commercial development due +to the new regime in Turkey. + +The rapid development now beginning in that ancient empire and the marked +progress and increased commercial importance of Bulgaria, Roumania, and +Servia make it particularly opportune that the possibilities of American +commerce in the Near East should receive due attention. MONTENEGRO. + +The National Skoupchtina having expressed its will that the Principality of +Montenegro be raised to the rank of Kingdom, the Prince of Montenegro on +August 15 last assumed the title of King of Montenegro. It gave me pleasure +to accord to the new kingdom the recognition of the United States. + +THE FAR EAST. + +The center of interest in Far Eastern affairs during the past year has +again been China. + +It is gratifying to note that the negotiations for a loan to the Chinese +Government for the construction of the trunk railway lines from Hankow +southward to Canton and westward through the Yangtse Valley, known as the +Hukuang Loan, were concluded by the representatives of the various +financial groups in May last and the results approved by their respective +governments. The agreement, already initialed by the Chinese Government, is +now awaiting formal ratification. The basis of the settlement of the terms +of this loan was one of exact equality between America, Great Britain, +France, and Germany in respect to financing the loan and supplying +materials for the proposed railways and their future branches. + +The application of the principle underlying the policy of the United States +in regard to the Hukuang Loan, viz., that of the internationalization of +the foreign interest in such of the railways of China as may be financed by +foreign countries, was suggested on a broader scale by the Secretary of +State in a proposal for internationalization and commercial neutralization +of all the railways of Manchuria. While the principle which led to the +proposal of this Government was generally admitted by the powers to whom it +was addressed, the Governments of Russia and Japan apprehended practical +difficulties in the execution of the larger plan which prevented their +ready adherence. The question of constructing the Chinchow-Aigun railway by +means of an international loan to China is, however, still the subject of +friendly discussion by the interested parties. + +The policy of this Government in these matters has been directed by a +desire to make the use of American capital in the development of China an +instrument in the promotion of China's welfare and material prosperity +without prejudice to her legitimate rights as an independent political +power. + +This policy has recently found further exemplification in the assistance +given by this Government to the negotiations between China and a group of +American bankers for a loan of $50,000,000 to be employed chiefly in +currency reform. The confusion which has from ancient times existed in the +monetary usages of the Chinese has been one of the principal obstacles to +commercial intercourse with that people. The United States in its Treaty of +1903 with China obtained a pledge from the latter to introduce a uniform +national coinage, and the following year, at the request of China, this +Government sent to Peking a member of the International Exchange +Commission, to discuss with the Chinese Government the best methods of +introducing the reform. In 1908 China sent a Commissioner to the United +States to consult with American financiers as to the possibility of +securing a large loan with which to inaugurate the new currency system, but +the death of Their Majesties, the Empress Dowager and the Emperor of China, +interrupted the negotiations, which were not resumed until a few months +ago, when this Government was asked to communicate to the bankers concerned +the request of China for a loan of $50,000,000 for the purpose under +review. A preliminary agreement between the American group and China has +been made covering the loan. + +For the success of this loan and the contemplated reforms which are of the +greatest importance to the commercial interests of the United States and +the civilized world at large, it is realized that an expert will be +necessary, and this Government has received assurances from China that such +an adviser, who shall be an American, will be engaged. + +It is a matter of interest to Americans to note the success which is +attending the efforts of China to establish gradually a system of +representative government. The provincial assemblies were opened in +October, 1909, and in October of the present year a consultative body, the +nucleus of the future national parliament, held its first session at +Peking. + +The year has further been marked by two important international agreements +relating to Far Eastern affairs. In the Russo-Japanese Agreement relating +to Manchuria, signed July 4, 1910, this Government was gratified to note an +assurance of continued peaceful conditions in that region and the +reaffirmation of the policies with respect to China to which the United +States together with all other interested powers are alike solemnly +committed. + +The treaty annexing Korea to the Empire of Japan, promulgated August 29, +1910, marks the final step in a process of control of the ancient empire by +her powerful neighbor that has been in progress for several years past. In +communicating the fact of annexation the Japanese Government gave to the +Government of the United States assurances of the full protection of the +rights of American citizens in Korea under the changed conditions. + +Friendly visits of many distinguished persons from the Far East have been +made during the year. Chief among these were Their Imperial Highnesses +Princes Tsai-tao and Tsai-Hsun of China; and His Imperial Highness Prince +Higashi Fushimi, and Prince Tokugawa, President of the House of Peers of +Japan. The Secretary of War has recently visited Japan and China in +connection with his tour to the Philippines, and a large delegation of +American business men are at present traveling in China. This exchange of +friendly visits has had the happy effect of even further strengthening our +friendly international relations. + +LATIN AMERICA. + +During the past year several of our southern sister Republics celebrated +the one hundredth anniversary of their independence. In honor of these +events, special embassies were sent from this country to Argentina, Chile, +and Mexico, where the gracious reception and splendid hospitality extended +them manifested the cordial relations and friendship existing between those +countries and the United States, relations which I am happy to believe have +never before been upon so high a plane and so solid a basis as at present. + +The Congressional commission appointed under a concurrent resolution to +attend the festivities celebrating the centennial anniversary of Mexican +independence, together with a special ambassador, were received with the +highest honors and with the greatest cordiality, and returned with the +report of the bounteous hospitality and warm reception of President Diaz +and the Mexican people, which left no doubt of the desire of the +immediately neighboring Republic to continue the mutually beneficial and +intimate relations which I feel sure the two governments will ever +cherish. + +At the Fourth Pan-American Conference which met in Buenos Aires during July +and August last, after seven weeks of harmonious deliberation, three +conventions were signed providing for the regulation of trade-marks, +patents, and copyrights, which when ratified by the different Governments, +will go far toward furnishing to American authors, patentees, and owners of +trade-marks the protection needed in localities where heretofore it has +been either lacking or inadequate. Further, a convention for the +arbitration of pecuniary claims was signed and a number of important +resolutions passed. The Conventions will in due course be transmitted to +the Senate, and the report of the Delegation of the United States will be +communicated to the Congress for its information. The special cordiality +between representative men from all parts of America which was shown at +this Conference cannot fail to react upon and draw still closer the +relations between the countries which took part in it. + +The International Bureau of American Republics is doing a broad and useful +work for Pan American commerce and comity. Its duties were much enlarged by +the International Conference of American States at Buenos Aires and its +name was shortened to the more practical and expressive term of Pan +American Union. Located now in its new building, which was specially +dedicated April 26 of this year to the development of friendship, trade and +peace among the American nations, it has improved instrumentalities to +serve the twenty-two republics of this hemisphere. + +I am glad to say that the action of the United States in its desire to +remove imminent danger of war between Peru and Ecuador growing out of a +boundary dispute, with the cooperation of Brazil and the Argentine Republic +as joint mediators with this Government, has already resulted successfully +in preventing war. The Government of Chile, while not one of the mediators, +lent effective aid in furtherance of a preliminary agreement likely to lead +on to an amicable settlement, and it is not doubted that the good offices +of the mediating Powers and the conciliatory cooperation of the Governments +directly interested will finally lead to a removal of this perennial cause +of friction between Ecuador and Peru. The inestimable value of cordial +cooperation between the sister republics of America for the maintenance of +peace in this hemisphere has never been more clearly shown than in this +mediation, by which three American Governments have given to this +hemisphere the honor of first invoking the most far-reaching provisions of +The Hague Convention for the pacific settlement of international disputes. + +There has been signed by the representatives of the United States and +Mexico a protocol submitting to the United States-Mexican Boundary +Commission (whose membership for the purpose of this case is to be +increased by the addition of a citizen of Canada) the question of +sovereignty over the Chamizal Tract which lies within the present physical +boundaries of the city of E1 Paso, Tex. The determination of this question +will remove a source of no little annoyance to the two Governments. + +The Republic of Honduras has for many years been burdened with a heavy +bonded debt held in Europe, the interest on which long ago fell in arrears. +Finally conditions were such that it became imperative to refund the debt +and place the finances of the Republic upon a sound basis. Last year a +group of American bankers undertook to do this and to advance funds for +railway and other improvements contributing directly to the country's +prosperity and commerce--an arrangement which has long been desired by this +Government. Negotiations to this end have been under way for more than a +year and it is now confidently believed that a short time will suffice to +conclude an arrangement which will be satisfactory to the foreign +creditors, eminently advantageous to Honduras, and highly creditable to the +judgment and foresight of the Honduranean Government. This is much to be +desired since, as recognized by the Washington Conventions, a strong +Honduras would tend immensely to the progress and prosperity of Central +America. + +During the past year the Republic of Nicaragua has been the scene of +internecine struggle. General Zelaya, for seventeen years the absolute +ruler of Nicaragua, was throughout his career the disturber of Central +America and opposed every plan for the promotion of peace and friendly +relations between the five republics. When the people of Nicaragua were +finally driven into rebellion by his lawless exactions, he violated the +laws of war by the unwarranted execution of two American citizens who had +regularly enlisted in the ranks of the revolutionists. This and other +offenses made it the duty of the American Government to take measures with +a view to ultimate reparation and for the safeguarding of its interests. +This involved the breaking off of all diplomatic relations with the Zelaya +Government for the reasons laid down in a communication from the Secretary +of State, which also notified the contending factions in Nicaragua that +this Government would hold each to strict accountability for outrages on +the rights of American citizens. American forces were sent to both coasts +of Nicaragua to be in readiness should occasion arise to protect Americans +and their interests, and remained there until the war was over and peace +had returned to that unfortunate country. These events, together with +Zelaya's continued exactions, brought him so clearly to the bar of public +opinion that he was forced to resign and to take refuge abroad. + +In the above-mentioned communication of the Secretary of State to the +Charge d'Affaires of the Zelaya Government, the opinion was expressed that +the revolution represented the wishes of the majority of the Nicaraguan +people. This has now been proved beyond doubt by the fact that since the +complete overthrow of the Madriz Government and the occupation of the +capital by the forces of the revolution, all factions have united to +maintain public order and as a result of discussion with an Agent of this +Government, sent to Managua at the request of the Provisional Government, +comprehensive plans are being made for the future welfare of Nicaragua, +including the rehabilitation of public credit. The moderation and +conciliatory spirit shown by the various factions give ground for the +confident hope that Nicaragua will soon take its rightful place among the +law-abiding and progressive countries of the world. + +It gratifies me exceedingly to announce that the Argentine Republic some +months ago placed with American manufacturers a contract for the +construction of two battle-ships and certain additional naval equipment. +The extent of this work and its importance to the Argentine Republic make +the placing of the bid an earnest of friendly feeling toward the United +States. + +TARIFF NEGOTIATIONS. + +The new tariff law, in section 2, respecting the maximum and minimum +tariffs of the United States, which provisions came into effect on April 1, +1910, imposed upon the President the responsibility of determining prior to +that date whether or not any undue discrimination existed against the +United States and its products in any country of the world with which we +sustained commercial relations. + +In the case of several countries instances of apparent undue discrimination +against American commerce were found to exist. These discriminations were +removed by negotiation. Prior to April 1, 1910, when the maximum tariff was +to come into operation with respect to importations from all those +countries in whose favor no proclamation applying the minimum tariff should +be issued by the President, one hundred and thirty-four such proclamations +were issued. This series of proclamations embraced the entire commercial +world, and hence the minimum tariff of the United States has been given +universal application, thus testifying to the satisfactory character of our +trade relations with foreign countries. + +Marked advantages to the commerce of the United States were obtained +through these tariff settlements. Foreign nations are fully cognizant of +the fact that under section 2 of the tariff act the President is required, +whenever he is satisfied that the treatment accorded by them to the +products of the United States is not such as to entitle them to the +benefits of the minimum tariff of the United States, to withdraw those +benefits by proclamation giving ninety days' notice, after which the +maximum tariff will apply to their dutiable products entering the United +States. In its general operation this section of the tariff law has thus +far proved a guaranty of continued commercial peace, although there are +unfortunately instances where foreign governments deal arbitrarily with +American interests within their jurisdiction in a manner injurious and +inequitable. + +The policy of broader and closer trade relations with the Dominion of +Canada which was initiated in the adjustment of the maximum and minimum +provisions of the Tariff Act of August, 1909, has proved mutually +beneficial. It justifies further efforts for the readjustment of the +commercial relations of the two countries so that their commerce may follow +the channels natural to contiguous countries and be commensurate with the +steady expansion of trade and industry on both sides of the boundary line. +The reciprocation on the part of the Dominion Government of the sentiment +which was expressed by this Government was followed in October by the +suggestion that it would be glad to have the negotiations, which had been +temporarily suspended during the summer, resumed. In accordance with this +suggestion the Secretary of State, by my direction, dispatched two +representatives of the Department of State as special commissioners to +Ottawa to confer with representatives of the Dominion Government. They were +authorized to take such steps for formulating a reciprocal trade agreement +as might be necessary and to receive and consider any propositions which +the Dominion Government might care to submit. + +Pursuant to the instructions issued conferences were held by these +commissioners with officials of the Dominion Government at Ottawa in the +early part of November. + +The negotiations were conducted on both sides in a spirit of mutual +accommodation. The discussion of the common commercial interests of the two +countries had for its object a satisfactory basis for a trade arrangement +which offers the prospect of a freer interchange for the products of the +United States and of Canada. The conferences were adjourned to be resumed +in Washington in January, when it is hoped that the aspiration of both +Governments for a mutually advantageous measure of reciprocity will be +realized. + +FOSTERING FOREIGN TRADE. + +All these tariff negotiations, so vital to our commerce and industry, and +the duty of jealously guarding the equitable and just treatment of our +products, capital, and industry abroad devolve upon the Department of +State. + +The Argentine battle-ship contracts, like the subsequent important one for +Argentine railway equipment, and those for Cuban Government vessels, were +secured for our manufacturers largely through the good offices of the +Department of State. + +The efforts of that Department to secure for citizens of the United States +equal opportunities in the markets of the world and to expand American +commerce have been most successful. The volume of business obtained in new +fields of competition and upon new lines is already very great and Congress +is urged to continue to support the Department of State in its endeavors +for further trade expansion. + +Our foreign trade merits the best support of the Government and the most +earnest endeavor of our manufacturers and merchants, who, if they do not +already in all cases need a foreign market, are certain soon to become +dependent on it. Therefore, now is the time to secure a strong position in +this field. + +AMERICAN BRANCH BANKS ABROAD. + +I cannot leave this subject without emphasizing the necessity of such +legislation as will make possible and convenient the establishment of +American banks and branches of American banks in foreign countries. Only by +such means can our foreign trade be favorably financed, necessary credits +be arranged, and proper avail be made of commercial opportunities in +foreign countries, and most especially in Latin America. + +AID TO OUR FOREIGN MERCHANT MARINE. + +Another instrumentality indispensable to the unhampered and natural +development of American commerce is merchant marine. All maritime and +commercial nations recognize the importance of this factor. The greatest +commercial nations, our competitors, jealously foster their merchant +marine. Perhaps nowhere is the need for rapid and direct mail, passenger +and freight communication quite so urgent as between the United States and +Latin America. We can secure in no other quarter of the world such +immediate benefits in friendship and commerce as would flow from the +establishment of direct lines Of communication with the countries of Latin +America adequate to meet the requirements of a rapidly increasing +appreciation of the reciprocal dependence of the countries of the Western +Hemisphere upon each other's products, sympathies and assistance. + +I alluded to this most important subject in my last annual message; it has +often been before you and I need not recapitulate the reasons for its +recommendation. Unless prompt action be taken the completion of the Panama +Canal will find this the only great commercial nation unable to avail in +international maritime business of this great improvement in the means of +the world's commercial intercourse. + +Quite aside from the commercial aspect, unless we create a merchant marine, +where can we find the seafaring population necessary as a natural naval +reserve and where could we find, in case of war, the transports and +subsidiary vessels without which a naval fleet is arms without a body? For +many reasons I cannot too strongly urge upon the Congress the passage of a +measure by mail subsidy or other subvention adequate to guarantee the +establishment and rapid development of an American merchant marine, and the +restoration of the American flag to its ancient place upon the seas. + +Of course such aid ought only to be given under conditions of publicity of +each beneficiary's business and accounts which would show that the aid +received was needed to maintain the trade and was properly used for that +purpose. + +FEDERAL PROTECTION TO ALIENS. + +With our increasing international intercourse, it becomes incumbent upon me +to repeat more emphatically than ever the recommendation which I made in my +Inaugural Address that Congress shall at once give to the Courts of the +United States jurisdiction to punish as a crime the violation of the rights +of aliens secured by treaty with the United States, in order that the +general government of the United States shall be able, when called upon by +a friendly nation, to redeem its solemn promise by treaty to secure to the +citizens or subjects of that nation resident in the United States, freedom +from violence and due process of law in respect to their life, liberty and +property. + +MERIT SYSTEM FOR DIPLOMATIC AND CONSULAR SERVICE. + +I also strongly commend to the favorable action of the Congress the +enactment of a law applying to the diplomatic and consular service the +principles embodied in Section 1753 of the Revised Statutes of the United +States, in the Civil Service Act of January 16, 1883, and the Executive +Orders of June 27, 1906, and of November 26, 1909. The excellent results +which have attended the partial application of Civil Service principles to +the diplomatic and consular services are an earnest of the benefit to be +wrought by a wider and more permanent extension of those principles to both +branches of the foreign service. The marked improvement in the consular +service during the four years since the principles of the Civil Service Act +were applied to that service in a limited way, and the good results already +noticeable from a similar application of civil service principles to the +diplomatic service a year ago, convince me that the enactment into law of +the general principles of the existing executive regulations could not fail +to effect further improvement of both branches of the foreign service, +offering as it would by its assurance of permanency of tenure and promotion +on merit, an inducement for the entry of capable young men into the service +and an incentive to those already in to put forth their best efforts to +attain and maintain that degree of efficiency which the interests of our +international relations and commerce demand. + +GOVERNMENT OWNERSHIP OF OUR EMBASSY AND LEGATION PREMISES. + +During many years past appeals have been made from time to time to Congress +in favor of Government ownership of embassy and legation premises abroad. +The arguments in favor of such ownership have been many and oft repeated +and are well known to the Congress. The acquisition by the Government of +suitable residences and offices for its diplomatic officers, especially in +the capitals of the Latin-American States and of Europe, is so important +and necessary to an improved diplomatic service that I have no hesitation +in urging upon the Congress the passage of some measure similar to that +favorably reported by the House Committee on Foreign Affairs on February +14, 1910 (Report No. 438), that would authorize the gradual and annual +acquisition of premises for diplomatic use. + +The work of the Diplomatic Service is devoid of partisanship; its +importance should appeal to every American citizen and should receive the +generous consideration of the Congress. + +TREASURY DEPARTMENT. + +ESTIMATES FOR NEXT YEAR'S EXPENSES. + +Every effort has been made by each department chief to reduce the estimated +cost of his department for the ensuing fiscal year ending June 30, 1912. I +say this in order that Congress may understand that these estimates thus +made present the smallest sum which will maintain the departments, bureaus, +and offices of the Government and meet its other obligations under existing +law, and that a cut of these estimates would result in embarrassing the +executive branch of the Government in the performance of its duties. This +remark does not apply to the river and harbor estimates, except to those +for expenses of maintenance and the meeting of obligations under authorized +contracts, nor does it apply to the public building bill nor to the navy +building program. Of course, as to these Congress could withhold any part +or all of the estimates for them without interfering with the discharge of +the ordinary obligations of the Government or the performance of the +functions of its departments, bureaus, and offices. + +A FIFTY-TWO MILLION CUT. + +The final estimates for the year ending June 30, 1912, as they have been +sent to the Treasury, on November 29 of this year, for the ordinary +expenses of the Government, including those for public buildings, rivers +and harbors, and the navy building program, amount to $630,494,013.12. This +is $52,964,887.36 less than the appropriations for the fiscal year ending +June 30, 1911. It is $16,883,153.44 less than the total estimates, +including supplemental estimates submitted to Congress by the Treasury for +the year 1911, and is $5,574,659.39 less than the original estimates +submitted by the Treasury for 1911. + +These figures do not include the appropriations for the Panama Canal, the +policy in respect to which ought to be, and is, to spend as much each year +as can be economically and effectively expended in order to complete the +Canal as promptly as possible, and, therefore, the ordinary motive for +cutting down the expense of the Government does not apply to appropriations +for this purpose. It will be noted that the estimates for the Panama Canal +for the ensuing year are more than fifty-six millions of dollars, an +increase of twenty millions over the amount appropriated for this year--a +difference due to the fact that the estimates for 1912 include something +over nineteen millions for the fortification of the Canal. Against the +estimated expenditures of $630,494,013.12, the Treasury has estimated +receipts for next year $680,000,000, making a probable surplus of ordinary +receipts over ordinary expenditures of about $50,000,000. + +A table showing in detail the estimates and the comparisons referred to +follows. + +TYPICAL ECONOMIES. + +The Treasury Department is one of the original departments of the +Government. With the changes in the monetary system made from time to time +and with the creation of national banks, it was thought necessary to +organize new bureaus and divisions which were added in a somewhat haphazard +way and resulted in a duplication of duties which might well now be ended. +This lack of system and economic coordination has attracted the attention +of the head of that Department who has been giving his time for the last +two years, with the aid of experts and by consulting his bureau chiefs, to +its reformation. He has abolished four hundred places in the civil service +without at all injuring its efficiency. Merely to illustrate the character +of the reforms that are possible, I shall comment on some of the specific +changes that are being made, or ought to be made by legislative aid. + +AUDITING SYSTEM. + +The auditing system in vogue is as old as the Government and the methods +used are antiquated. There are six Auditors and seven Assistant Auditors +for the nine departments, and under the present system the only function +which the Auditor of a department exercises is to determine, on accounts +presented by disbursing officers, that the object of the expenditure was +within the law and the appropriation made by Congress for the purpose on +its face, and that the calculations in the accounts are correct. He does +not examine the merits of the transaction or determine the reasonableness +of the price paid for the articles purchased, nor does he furnish any +substantial check upon disbursing officers and the heads of departments or +bureaus with sufficient promptness to enable the Government to recoup +itself in full measure for unlawful expenditure. A careful plan is being +devised and will be presented to Congress with the recommendation that the +force of auditors and employees under them be greatly reduced, thereby +effecting substantial economy. But this economy will be small compared with +the larger economy that can be effected by consolidation and change of +methods. The possibilities in this regard have been shown in the reduction +of expenses and the importance of methods and efficiency in the office of +the Auditor for the Post Office Department, who, without in the slightest +degree impairing the comprehensiveness and efficiency of his work, has cut +down the expenses of his office $120,000 a year. + +Statement of estimates of appropriations for the fiscal years 1912 and +1911, and of appropriations for 1911, showing increases and decreases. - +Final Estimates for 1912 as of November 29 - Original Estimates submitted +by the Treasury for 1911 - Total Estimates for 1911 including supplementals +- Appropriations for 1911 - Increase (+) and decrease (-), 1912 estimates +against 1911 total estimates - Increase (+) and decrease (-), 1912 +estimates against 1911 total appropriations - Increase (+) and decrease +(-), 1911 estimates against 1911 total appropriations + +Legislature - $13,426,805.73 - $13,169,679.70 - $13,169,679.70 - +$12,938,048.00 - + $257,126.03 - + $488,757.73 - + $231,631.70 + +Executive - 998,170.00 - 472,270.00 - 722,270.00 - 870,750.00 - + +275,900.00 - + 127,420.00 - - 148,480.00 + +State Department: - 4,875,576.41 - 4,875,301.41 - 4,749,801.41 - +5,046,701.41 - + 125,775.00 - - 171,125.00 - - 296,900.00 + +TREASURY DEPARTMENT: Treasury Department proper - 68,735,451.00 - +69,865,240.00 - 70,393,543.75 - 69,973,434.61 - - 1,658,092.75 - - +1,237,983.61 - + 420,109.14 + +Public buildings and works - 11,864,545.60 - 6,198,365.60 - 7,101,465.60 - +5,565,164.00 - + 4,763,080.00 - + 6,299,381.60 - + 1,536,301.60 + +Territorial governments - 202,150.00 - 287,350.00 - 292,350.00 - 282,600.00 +- - 90,200.00 - - 80,450.00 - + 9,750.00 + +Independent offices - 2,638,695.12 - 2,400,695.12 - 2,492,695.12 - +2,128,695.12 - + 146,000.00 - + 510,000.00 - + 364,000.00 + +District of Columbia - 13,602,785.90 - 11,884,928.49 - 12,108,878.49 - +11,440,346.99 - + 1,492,907.41 - + 2,162,439.91 - + 668,532.50 + +WAR DEPARTMENT: War Department proper - 120,104,260.12 - 124,165,656.28 - +125,717,204.77 - 122,322,178.12 - - 5,612,944.65 - - 2,217,918.00 - + +3,395,026.65 + +Rivers and harbors - 28,232,438.00 - 28,232,465.00 - 28,232,465.00 - +49,390,541.50 - - 27.00 - -21,158,103.50 - -21,158,076.50 + +NAVY DEPARTMENT: Navy Department proper - 116,101,730.24 - 117,029,914.38 - +119,768,860.83 - 119,596,870.46 - - 3,667,130.59 - - 3,495,140.22 - + +171,990.37 + +New navy building program - 12,840,428.00 - 12,844,122.00 - 12,844,122.00 - +14,790,122.00 - - 3,694.00 - - 1,949,694.00 - - 1,946,000.00 + +Interior Department - 189,151,875.00 - 191,224,182.90 - 193,948,582.02 - +214,754,278.00 - - 4,796,707.02 - -25,602,403.00 - -20,805,698.98 + +Post-Office Department proper - 1,697,490.00 - 1,695,690.00 - 1,695,690.00 +- 2,085,005.33 - + 1,800.00 - - 387,515.33 - - 389,315.33 + +Deficiency in postal revenues - --------------- - 10,634,122.63 - +10,634,122.63 - 10,634,122.63 - -10,634,122.65 - -10,634,122.63 - +----------------- + +Department of Agriculture - 19,681,066.00 - 17,681,136.00 - 17,753,931.24 - +17,821,836.00 - + 1,927,134.76 - + 1,859,230.00 - - 67,904.76 + +Department of Commerce and + +Labor - 16,276,970.00 - 14,187,913.00 - 15,789,271.00 - 14,169,969.32 - + +487,699.00 - + 2,107,000.68 - + 1,619,301.68 + +Department of Justice - 10,063,576.00 - 9,518,640.00 - 9,962,233.00 - +9,648,237.99 - + 101,343.00 - + 415,338.01 - + 313,995.01 - + +*** + +State of the Union Address +William H. Taft +December 5, 1911 + +Jump to Part II | Part III | Part IV + +This message is the first of several which I shall send to Congress during +the interval between the opening of its regular session and its adjournment +for the Christmas holidays. The amount of information to be communicated as +to the operations of the Government, the number of important subjects +calling for comment by the Executive, and the transmission to Congress of +exhaustive reports of special commissions, make it impossible to include in +one message of a reasonable length a discussion of the topics that ought to +be brought to the attention of the National Legislature at its first +regular session. + +THE ANTI-TRUST LAW-THE SUPREME COURT DECISIONS. + +In May last the Supreme Court handed down decisions in the suits in equity +brought by the United States to enjoin the further maintenance of the +Standard Oil Trust and of the American Tobacco Trust, and to secure their +dissolution. The decisions are epoch-making and serve to advise the +business world authoritatively of the scope and operation of the anti-trust +act of 1890. The decisions do not depart in any substantial way from the +previous decisions of the court in construing and applying this important +statute, but they clarify those decisions by further defining the already +admitted exceptions to the literal construction of the act. By the decrees, +they furnish a useful precedent as to the proper method of dealing with the +capital and property of illegal trusts. These decisions suggest the need +and wisdom of additional or supplemental legislation to make it easier for +the entire business community to square with the rule of action and +legality thus finally established and to preserve the benefit, freedom, and +spur of reasonable competition without loss of real efficiency or +progress. + +NO CHANGE IN THE RULE OF DECISION-MERELY IN ITS FORM OF EXPRESSION. + +The statute in its first section declares to be illegal "every contract, +combination in the form of trust or otherwise, or conspiracy, in restraint +of trade or commerce among the several States or with foreign nations," and +in the second, declares guilty of a misdemeanor "every person who shall +monopolize or attempt to monopolize or combine or conspire with any other +person to monopolize any part of the trade or commerce of the several +States or with foreign nations." + +In two early cases, where the statute was invoked to enjoin a +transportation rate agreement between interstate railroad companies, it was +held that it was no defense to show that the agreement as to rates +complained of was reasonable at common law, because it was said that the +statute was directed against all contracts and combinations in restraint of +trade whether reasonable at common law or not. It was plain from the +record, however, that the contracts complained of in those cases would not +have been deemed reasonable at common law. In subsequent cases the court +said that the statute should be given a reasonable construction and refused +to include within its inhibition, certain contractual restraints of trade +which it denominated as incidental or as indirect. + +These cases of restraint of trade that the court excepted from the +operation of the statute were instances which, at common law, would have +been called reasonable. In the Standard Oil and Tobacco cases, therefore, +the court merely adopted the tests of the common law, and in defining +exceptions to the literal application of the statute, only substituted for +the test of being incidental or indirect, that of being reasonable, and +this, without varying in the slightest the actual scope and effect of the +statute. In other words, all the cases under the statute which have now +been decided would have been decided the same way if the court had +originally accepted in its construction the rule at common law. + +It has been said that the court, by introducing into the construction of +the statute common-law distinctions, has emasculated it. This is obviously +untrue. By its judgment every contract and combination in restraint of +interstate trade made with the purpose or necessary effect of controlling +prices by stifling competition, or of establishing in whole or in part a +monopoly of such trade, is condemned by the statute. The most extreme +critics can not instance a case that ought to be condemned under the +statute which is not brought within its terms as thus construed. + +The suggestion is also made that the Supreme Court by its decision in the +last two cases has committed to the court the undefined and unlimited +discretion to determine whether a case of restraint of trade is within the +terms of the statute. This is wholly untrue. A reasonable restraint of +trade at common law is well understood and is clearly defined. It does not +rest in the discretion of the court. It must be limited to accomplish the +purpose of a lawful main contract to which, in order that it shall be +enforceable at all, it must be incidental. If it exceed the needs of that +contract, it is void. + +The test of reasonableness was never applied by the court at common law to +contracts or combinations or conspiracies in restraint of trade whose +purpose was or whose necessary effect would be to stifle competition, to +control prices, or establish monopolies. The courts never assumed power to +say that such contracts or combinations or conspiracies might be lawful if +the parties to them were only moderate in the use of the power thus secured +and did not exact from the public too great and exorbitant prices. It is +true that many theorists, and others engaged in business violating the +statute, have hoped that some such line could be drawn by courts; but no +court of authority has ever attempted it. Certainly there is nothing in the +decisions of the latest two cases from which such a dangerous theory of +judicial discretion in enforcing this statute can derive the slightest +sanction. + +FORCE AND EFFECTIVENESS OF STATUTE A MATTER OF GROWTH. + +We have been twenty-one years making this statute effective for the +purposes for which it was enacted. The Knight case was discouraging and +seemed to remit to the States the whole available power to attack and +suppress the evils of the trusts. Slowly, however, the error of that +judgment was corrected, and only in the last three or four years has the +heavy hand of the law been laid upon the great illegal combinations that +have exercised such an absolute dominion over many of our industries. +Criminal prosecutions have been brought and a number are pending, but +juries have felt averse to convicting for jail sentences, and judges have +been most reluctant to impose such sentences on men of respectable standing +in society whose offense has been regarded as merely statutory. Still, as +the offense becomes better understood and the committing of it partakes +more of studied and deliberate defiance of the law, we can be confident +that juries will convict individuals and that jail sentences will be +imposed. + +THE REMEDY IN EQUITY BY DISSOLUTION. + +In the Standard Oil case the Supreme and Circuit Courts found the +combination to be a monopoly of the interstate business of refining, +transporting, and marketing petroleum and its products, effected and +maintained through thirty-seven different corporations, the stock of which +was held by a New Jersey company. It in effect commanded the dissolution of +this combination, directed the transfer and pro rata distribution by the +New Jersey company of the stock held by it in the thirty-seven corporations +to and among its stockholders; and the corporations and individual +defendants were enjoined from conspiring or combining to restore such +monopoly; and all agreements between the subsidiary corporations tending to +produce or bring about further violations of the act were enjoined. + +In the Tobacco case, the court found that the individual defendants, +twenty-nine in number, had been engaged in a successful effort to acquire +complete dominion over the manufacture, sale, and distribution of tobacco +in this country and abroad, and that this had been done by combinations +made with a purpose and effect to stifle competition, control prices, and +establish a monopoly, not only in the manufacture of tobacco, but also of +tin-foil and licorice used in its manufacture and of its products of +cigars, cigarettes, and snuffs. The tobacco suit presented a far more +complicated and difficult case than the Standard Oil suit for a decree +which would effectuate the will of the court and end the violation of the +statute. There was here no single holding company as in the case of the +Standard Oil Trust. The main company was the American Tobacco Company, a +manufacturing, selling, and holding company. The plan adopted to destroy +the combination and restore competition involved the redivision of the +capital and plants of the whole trust between some of the companies +constituting the trust and new companies organized for the purposes of the +decree and made parties to it, and numbering, new and old, fourteen. + +SITUATION AFTER READJUSTMENT. + +The American Tobacco Company (old), readjusted capital, $92, 000,000; the +Liggett & Meyers Tobacco Company (new), capital, $67,000,000; the P. +Lorillard Company (new), capital, $47,000,000; and the R. J. Reynolds +Tobacco Company (old), capital, $7,525,000, are chiefly engaged in the +manufacture and sale of chewing and smoking tobacco and cigars. The former +one tinfoil company is divided into two, one of $825,000 capital and the +other of $400,000. The one snuff company is divided into three companies, +one with a capital Of $15,000,000, another with a capital of $8,000,000, +and a third with a capital of $8,000,000. The licorice companies are two +one with a capital Of $5,758,300 and another with a capital of $200,000. +There is, also, the British-American Tobacco Company, a British +corporation, doing business abroad with a capital Of $26,000,000, the Porto +Rican Tobacco Company, with a capital of $1,800,000, and the corporation of +United Cigar Stores, with a capital of $9,000,000. + +Under this arrangement, each of the different kinds of business will be +distributed between two or more companies with a division of the prominent +brands in the same tobacco products, so as to make competition not only +possible but necessary. Thus the smoking-tobacco business of the country is +divided so that the present independent companies have 21-39 per cent, +while the American Tobacco Company will have 33-08 per cent, the Liggett & +Meyers 20.05 per cent, the Lorillard Company 22.82 per cent, and the +Reynolds Company 2.66 per cent. The stock of the other thirteen companies, +both preferred and common, has been taken from the defendant American +Tobacco Company and has been distributed among its stockholders. All +covenants restricting competition have been declared null and further +performance of them has been enjoined. The preferred stock of the different +companies has now been given voting power which was denied it under the old +organization. The ratio of the preferred stock to the common was as 78 to +40. This constitutes a very decided change in the character of the +ownership and control of each company. + +In the original suit there were twenty-nine defendants who were charged +with being the conspirators through whom the illegal combination acquired +and exercised its unlawful dominion. Under the decree these defendants. +will hold amounts of stock in the various distributee companies ranging +from 41 per cent as a maximum to 28.5 per cent as a minimum, except in the +case of one small company, the Porto Rican Tobacco Company, in which they +will hold 45 per cent. The twenty-nine individual defendants are enjoined +for three years from buying any stock except from each other, and the group +is thus prevented from extending its control during that period. All +parties to the suit, and the new companies who are made parties are +enjoined perpetually from in any way effecting any combination between any +of the companies in violation of the statute by way of resumption of the +old trust. Each of the fourteen companies is enjoined from acquiring stock +in any of the others. All these companies are enjoined from having common +directors or officers, or common buying or selling agents, or common +offices, or lending money to each other. + +SIZE OF NEW COMPANIES. + +Objection was made by certain independent tobacco companies that this +settlement was unjust because it left companies with very large capital in +active business, and that the settlement that would be effective to put all +on an equality would be a division of the capital and plant of the trust +into small fractions in amount more nearly equal to that of each of the +independent companies. This contention results from a misunderstanding of +the anti-trust law and its purpose. It is not intended thereby to prevent +the accumulation of large capital in business enterprises in which such a +combination can secure reduced cost of production, sale, and distribution. +It is directed against such an aggregation of capital only when its purpose +is that of stifling competition, enhancing or controlling prices, and +establishing a monopoly. If we shall have by the decree defeated these +purposes and restored competition between the large units into which the +capital and plant have been divided, we shall have accomplished the useful +purpose of the statute. + +CONFISCATION NOT THE PURPOSE OF THE STATUTE. + +It is not the purpose of the statute to confiscate the property and capital +of the offending trusts. Methods of punishment by fine or imprisonment of +the individual offenders, by fine of the corporation or by forfeiture of +its goods in transportation, are provided, but the proceeding in equity is +a specific remedy to stop the operation of the trust by injunction and +prevent the future use of the plant and capital in violation of the +statute. + +EFFECTIVENESS OF DECREE. + +I venture to say that not in the history of American law has a decree more +effective for such a purpose been entered by a court than that against the +Tobacco Trust. As Circuit judge Noyes said in his judgment approving the +decree: + +"The extent to which it has been necessary to tear apart this combination +and force it into new forms with the attendant burdens ought to demonstrate +that the Federal anti-trust statute is a drastic statute which accomplishes +effective results; which so long as it stands on the statute books must be +obeyed, and which can not be disobeyed without incurring far-reaching +penalties. And, on the other hand, the successful reconstruction of this +organization should teach that the effect of enforcing this statute is not +to destroy, but to reconstruct; not to demolish, but to re-create in +accordance with the conditions which the Congress has declared shall exist +among the people of the United States." + +COMMON STOCK OWNERSHIP. + +It has been assumed that the present pro rata and common ownership in all +these companies by former stockholders of the trust would insure a +continuance of the same old single control of all the companies into which +the trust has by decree been disintegrated. This is erroneous and is based +upon the assumed inefficacy and innocuousness of judicial injunctions. The +companies are enjoined from cooperation or combination; they have different +managers, directors, purchasing and sales agents. If all or many of the +numerous stockholders, reaching into the thousands, attempt to secure +concerted action of the companies with a view to the control of the market, +their number is so large that such an attempt could not well be concealed, +and its prime movers and all its participants would be at once subject to +contempt proceedings and imprisonment of a summary character. The immediate +result of the present situation will necessarily be activity by all the +companies under different managers, and then competition must follow, or +there will be activity by one company and stagnation by another. Only a +short time will inevitably lead to a change in ownership of the stock, as +all opportunity for continued cooperation must disappear. Those critics who +speak of this disintegration in the trust as a mere change of garments have +not given consideration to the inevitable working of the decree and +understand little the personal danger of attempting to evade or set at +naught the solemn injunction of a court whose object is made plain by the +decree and whose inhibitions are set forth with a detail and +comprehensiveness. + +VOLUNTARY REORGANIZATIONS OF OTHER TRUSTS AT HAND. + +The effect of these two decisions has led to decrees dissolving the +combination of manufacturers of electric lamps, a southern wholesale +grocers' association, an interlocutory decree against the Powder Trust with +directions by the circuit court compelling dissolution, and other +combinations of a similar history are now negotiating with the Department +of justice looking to a disintegration by decree and reorganization in +accordance with law. It seems possible to bring about these reorganizations +without general business disturbance. + +MOVEMENT FOR REPEAL OF THE ANTI-TRUST LAW. + +But now that the anti-trust act is seen to be effective for the +accomplishment of the purpose of its enactment, we are met by a cry from +many different quarters for its repeal. It is said to be obstructive of +business progress to be an attempt to restore old-fashioned methods of +destructive competition between small units, and to make impossible those +useful combinations of capital and the reduction of the cost of production +that are essential to continued prosperity and normal growth. + +In the recent decisions the Supreme Court makes clear that there is nothing +in the statute which condemns combinations of capital or mere bigness of +plant organized to secure economy in production and a reduction of its +cost. It is only when the purpose or necessary effect of the organization +and maintenance of the combination or the aggregation of immense size are +the stifling of competition, actual and potential, and the enhancing of +prices and establishing a monopoly, that the statute is violated. Mere size +is no sin against the law. The merging of two or more business plants +necessarily eliminates competition between the units thus combined, but +this elimination is in contravention of the statute only when the +combination is made for purpose of ending this particular competition in +order to secure control of, and enhance, prices and create a monopoly. + +LACK OF DEFINITENESS IN THE STATUTE. + +The complaint is made of the statute that it is not sufficiently definite +in its description of that which is forbidden, to enable business men to +avoid its violation. The suggestion is, that we may have a combination of +two corporations, which may run on for years, and that subsequently the +Attorney General may conclude that it was a violation of the statute, and +that which was supposed by the combiners to be innocent then turns out to +be a combination in violation of the statute. The answer to this +hypothetical case is that when men attempt to amass such stupendous capital +as will enable them to suppress competition, control prices and establish a +monopoly, they know the purpose of their acts. Men do not do such a thing +without having it clearly in mind. If what they do is merely for the +purpose of reducing the cost of production, without the thought of +suppressing competition by use of the bigness of the plant they are +creating, then they can not be convicted at the time the union is made, nor +can they be convicted later, unless it happen that later on they conclude +to suppress competition and take the usual methods for doing so, and thus +establish for themselves a monopoly. They can, in such a case, hardly +complain if the motive which subsequently is disclosed is attributed by the +court to the original combination. + +NEW REMEDIES SUGGESTED. + +Much is said of the repeal of this statute and of constructive legislation +intended to accomplish the purpose and blaze a clear path for honest +merchants and business men to follow. It may be that such a plan will be +evolved, but I submit that the discussions which have been brought out in +recent days by the fear of the continued execution of the anti-trust law +have produced nothing but glittering generalities and have offered no line +of distinction or rule of action as definite and as clear as that which the +Supreme Court itself lays down in enforcing the statute. + +SUPPLEMENTAL LEGISLATION NEEDED--NOT REPEAL OR AMENDMENT. + +I see no objection-and indeed I can see decided advantages-in the enactment +of a law which shall describe and denounce methods of competition which are +unfair and are badges of the unlawful purpose denounced in the anti-trust +law. The attempt and purpose to suppress a competitor by underselling him +at a price so unprofitable as to drive him out of business, or the making +of exclusive contracts with customers under which they are required to give +up association with other manufacturers, and numerous kindred methods for +stifling competition and effecting monopoly, should be described with +sufficient accuracy in a criminal statute on the one hand to enable the +Government to shorten its task by prosecuting single misdemeanors instead +of an entire conspiracy, and, on the other hand, to serve the purpose of +pointing out more in detail to the business community what must be +avoided. + +FEDERAL INCORPORATION RECOMMENDED. + +In a special message to Congress on January 7, 1910, I ventured to point +out the disturbance to business that would probably attend the dissolution +of these offending trusts. I said: + +"But such an investigation and possible prosecution of corporations whose +prosperity or destruction affects the comfort not only of stockholders but +of millions of wage earners, employees, and associated tradesmen must +necessarily tend to disturb the confidence of the business community, to +dry up the now flowing sources of capital from its places of hoarding, and +produce a halt in our present prosperity that will cause suffering and +strained circumstances among the innocent many for the faults of the guilty +few. The question which I wish in this message to bring clearly to the +consideration and discussion of Congress is whether, in order to avoid such +a possible business danger, something can not be done by which these +business combinations may be offered a means, without great financial +disturbance, of changing the character, organization, and extent of their +business into one within the lines of the law under Federal control and +supervision, securing compliance with the anti-trust statute. + +"Generally, in the industrial combinations called 'trusts,' the principal +business is the sale of goods in many States and in foreign markets; in +other words, the interstate and foreign business far exceeds the business +done in any one State. This fact will justify the Federal Government in +granting a Federal charter to such a combination to make and sell in +interstate and foreign commerce the products of useful manufacture under +such limitations as will secure a compliance with the anti-trust law. It is +possible so to frame a statute that while it offers protection to a Federal +company against harmful, vexatious, and unnecessary invasion by the States, +it shall subject it to reasonable taxation and control by the States with +respect to its purely local business. * * * + +"Corporations organized under this act should be prohibited from acquiring +and holding stock in other corporations (except for special reasons, upon +approval by the proper Federal authority), thus avoiding the creation under +national auspices of the holding company with subordinate corporations in +different States, which has been such an effective agency in the creation +of the great trusts and monopolies. + +"If the prohibition of the anti-trust act against combinations in restraint +of trade is to be effectively enforced, it is essential that the National +Government shall provide for the creation of national corporations to carry +on a legitimate business throughout the United States. The conflicting laws +of the different States of the Union with respect to foreign corporations +make it difficult, if not impossible, for one corporation to comply with +their requirements so as to carry on business in a number of different +States." + +I renew the recommendation of the enactment of a general law providing for +the voluntary formation of corporations to engage in trade and commerce +among the States and with foreign nations. Every argument which was then +advanced for such a law, and every explanation which was at that time +offered to possible objections, have been confirmed by our experience since +the enforcement of the antitrust, statute has resulted in the actual +dissolution of active commercial organizations. + +It is even more manifest now than it was then that the denunciation of +conspiracies in restraint of trade should not and does not mean the denial +of organizations large enough to be intrusted with our interstate and +foreign trade. It has been made more clear now than it was then that a +purely negative statute like the anti-trust law may well be supplemented by +specific provisions for the building up and regulation of legitimate +national and foreign commerce. + +GOVERNMENT ADMINISTRATIVE EXPERTS NEEDED TO AID COURTS IN TRUST +DISSOLUTIONS. + +The drafting of the decrees in the dissolution of the present trusts, with +a view to their reorganization into legitimate corporations, has made it +especially apparent that the courts are not provided with the +administrative machinery to make the necessary inquiries preparatory to +reorganization, or to pursue such inquiries, and they should be empowered +to invoke the aid of the Bureau of Corporations in determining the suitable +reorganization of the disintegrated parts. The circuit court and the +Attorney General were greatly aided in framing the decree in the Tobacco +Trust dissolution by an expert from the Bureau of Corporations. + +FEDERAL CORPORATION COMMISSION PROPOSED. + +I do not set forth in detail the terms and sections of a statute which +might supply the constructive legislation permitting and aiding the +formation of combinations of capital into Federal corporations. They should +be subject to rigid rules as to their organization and procedure, including +effective publicity, and to the closest supervision as to the issue of +stock and bonds by an executive bureau or commission in the Department of +Commerce and Labor, to which in times of doubt they might well submit their +proposed plans for future business. It must be distinctly understood that +incorporation under Federal law could not exempt the company thus formed +and its incorporators and managers from prosecution under the anti-trust +law for subsequent illegal conduct, but the publicity of its procedure and +the opportunity for frequent consultation with the bureau or commission in +charge of the incorporation as to the legitimate purpose of its +transactions would offer it as great security against successful +prosecutions for violations of the law as would be practical or wise. + +Such a bureau or commission might well be invested also with the duty +already referred to, of aiding courts in the dissolution and recreation of +trusts within the law. It should be an executive tribunal of the dignity +and power of the Comptroller of the Currency or the Interstate Commerce +Commission, which now exercise supervisory power over important classes of +corporations under Federal regulation. + +The drafting of such a Federal incorporation law would offer ample +opportunity to prevent many manifest evils in corporate management to-day, +including irresponsibility of control in the hands of the few who are not +the real owners. + +INCORPORATION VOLUNTARY. + +I recommend that the Federal charters thus to be granted shall be +voluntary, at least until experience justifies mandatory provisions. The +benefit to be derived from the operation of great businesses under the +protection of such a charter would attract all who are anxious to keep +within the lines of the law. Other large combinations that fail to take +advantage of the Federal incorporation will not have a right to complain if +their failure is ascribed to unwillingness to submit their transactions to +the careful official scrutiny, competent supervision, and publicity +attendant upon the enjoyment of such a charter. + +ONLY SUPPLEMENTAL LEGISLATION NEEDED. + +The opportunity thus suggested for Federal incorporation, it seems tome, is +suitable constructive legislation needed to facilitate the squaring Of +great industrial enterprises to the rule of action laid down by the +anti-trust law. This statute as construed by the Supreme Court must +continue to be the line of distinction for legitimate business. It must be +enforced, unless we are to banish individualism from all business and +reduce it to one common system of regulation or control of prices like that +which now prevails with respect to public utilities, and which when applied +to all business would be a long step toward State socialism. + +IMPORTANCE OF THE ANTI-TRUST ACT. + +The anti-trust act is the expression of the effort of a freedom-loving +people to preserve equality of opportunity. It is the result of the +confident determination of such a people to maintain their future growth by +preserving uncontrolled and unrestricted the enterprise of the individual, +his industry, his ingenuity, his intelligence, and his independent +courage. + +For twenty years or more this statute has been upon the statute book. All +knew its general purpose and approved. Many of its violators were cynical +over its assumed impotence. It seemed impossible of enforcement. Slowly the +mills of the courts ground, and only gradually did the majesty of the law +assert itself. Many of its statesmen-authors died before it became a living +force, and they and others saw the evil grow which they had hoped to +destroy. Now its efficacy is seen; now its power is heavy; now its object +is near achievement. Now we hear the call for its repeal on the plea that +it interferes with business prosperity, and we are advised in most general +terms, how by some other statute and in some other way the evil we are just +stamping out can be cured, if we only abandon this work of twenty years and +try another experiment for another term of years. + +It is said that the act has not done good. Can this be said in the face of +the effect of the Northern Securities decree? That decree was in no way so +drastic or inhibitive in detail as either the Standard Oil decree or the +Tobacco decree; but did it not stop for all time the then powerful movement +toward the control of all the railroads of the country in a single hand? +Such a one-man power could not have been a healthful influence in the +Republic, even though exercised under the general supervision of an +interstate commission. + +Do we desire to make such ruthless combinations and monopolies lawful? When +all energies are directed, not toward the reduction of the cost of +production for the public benefit by a healthful competition, but toward +new ways and means for making permanent in a few hands the absolute control +of the conditions and prices prevailing in the whole field of industry, +then individual enterprise and effort will be paralyzed and the spirit of +commercial freedom will be dead. + +PART II. + +The relations of the United States with other countries have continued +during the past twelve months upon a basis of the usual good will and +friendly intercourse. ARBITRATION. + +The year just passed marks an important general movement on the part of the +Powers for broader arbitration. In the recognition of the manifold benefits +to mankind in the extension of the policy of the settlement of +international disputes by arbitration rather than by war, and in response +to a widespread demand for an advance in that direction on the part of the +people of the United States and of Great Britain and of France, new +arbitration treaties were negotiated last spring with Great Britain and +France, the terms of which were de signed, as expressed in the preamble of +these treaties, to extend the scope and obligations of the policy of +arbitration adopted in our present treaties with those Governments To pave +the way for this treat with the United States, Great Britain negotiated an +important modification in its alliance with Japan, and the French +Government also expedited the negotiations with signal good will. The new +treaties have been submitted to the Senate and are awaiting its advice and +consent to their ratification. All the essentials of these important +treaties have long been known, and it is my earnest hope that they will +receive prompt and favorable action. + +CLAIM OF ALSOP & CO. SETTLED. + +I am glad to report that on July 5 last the American claim of Alsop & Co. +against the Government of Chile was finally disposed of by the decision of +His Britannic Majesty George V, to whom, as amiable compositeur, the matter +had been referred for determination. His Majesty made an award of nearly +$1,000,000 to the claimants, which was promptly paid by Chile. The +settlement of this controversy has happily eliminated from the relations +between the Republic of Chile and the United States the only question which +for two decades had given the two foreign offices any serious concern and +makes possible the unobstructed development of the relations of friendship +which it has been the aim of this Government in every possible way to +further and cultivate. + +ARBITRATIONS--PANAMA AND COSTA RICA--COLOMBIA AND HAITI. + +In further illustration of the practical and beneficent application of the +principle of arbitration and the underlying broad spirit of conciliation, I +am happy to advert to the part of the United States in facilitating +amicable settlement of disputes which menaced the peace between Panama and +Costa Rica and between Haiti and the Dominican Republic. + +Since the date of their independence, Colombia and Costa Rica had been +seeking a solution of a boundary dispute, which came as an heritage from +Colombia to the new Republic of Panama, upon its beginning life as an +independent nation. Although the disputants had submitted this question for +decision to the President of France under the terms of an arbitration +treaty, the exact interpretation of the provisions of the award rendered +had been a matter of serious disagreement between the two countries, both +contending for widely different lines even under the terms of the decision. +Subsequently and since 1903 this boundary question had been the subject of +fruitless diplomatic negotiations between the parties. In January, 1910, at +the request of both Governments the agents representing them met in +conference at the Department of State and subsequently concluded a protocol +submitting this long-pending controversy to the arbitral judgment of the +Chief justice of the United States, who consented to act in this capacity. +A boundary commission, according to the international agreement, has now +been appointed, and it is expected that the arguments will shortly proceed +and that this long-standing dispute will be honorably and satisfactorily +terminated. + +Again, a few months ago it appeared that the Dominican Republic and Haiti +were about to enter upon hostilities because of complications growing out +of an acrimonious boundary dispute which the efforts of many years had +failed to solve. The Government of the United States, by a friendly +interposition of good offices, succeeded in prevailing upon the parties to +place their reliance upon some form of pacific settlement. Accordingly, on +the friendly suggestion of this Government, the two Governments empowered +commissioners to meet at Washington in conference at the State Department +in order to arrange the terms of submission to arbitration of the boundary +controversy. + +CHAMIZAL ARBITRATION NOT SATISFACTORY. + +Our arbitration of the Chamizal boundary question with Mexico was +unfortunately abortive, but with the earnest efforts on the part of both +Governments which its importance commands, it is felt that an early +practical adjustment should prove possible. + +LATIN AMERICA. VENEZUELA. + +During the past year the Republic of Venezuela celebrated the one hundredth +anniversary of its independence. The United States sent, in honor of this +event, a special embassy to Caracas, where the cordial reception and +generous hospitality shown it were most gratifying as a further proof of +the good relations and friendship existing between that country and the +United States. MEXICO. + +The recent political events in Mexico received attention from this +Government because of the exceedingly delicate and difficult situation +created along our southern border and the necessity for taking measures +properly to safeguard American interests. The Government of the United +States, in its desire to secure a proper observance and enforcement of the +so-called neutrality statutes of the Federal Government, issued directions +to the appropriate officers to exercise a diligent and vigilant regard for +the requirements of such rules and laws. Although a condition of actual +armed conflict existed, there was no official recognition of belligerency +involving the technical neutrality obligations of international law. + +On the 6th of March last, in the absence of the Secretary of State, I had a +personal interview with Mr. Wilson, the ambassador of the United States to +Mexico, in which he reported to me that the conditions in Mexico were much +more critical than the press dispatches disclosed; that President Diaz was +on a volcano of popular uprising; that the small outbreaks which had +occurred were only symptomatic of the whole condition; that a very large +per cent of the people were in sympathy with the insurrection; that a +general explosion was probable at any time, in which case he feared that +the 40,000 or more American residents in Mexico might be assailed, and that +the very large American investments might be injured or destroyed. + +After a conference with the Secretary of War and the Secretary of the Navy, +I thought it wise to assemble an Army division of full strength at San +Antonio, Tex., a brigade of three regiments at Galveston, a brigade of +Infantry in the Los Angeles district of southern California, together with +a squadron of battleships and cruisers and transports at Galveston, and a +small squadron of ships at San Diego. At the same time, through our +representative at the City of Mexico, I expressed to President Diaz the +hope that no apprehensions might result from unfounded conjectures as to +these military maneuvers, and assured him that they had no significance +which should cause concern to his Government. + +The mobilization was effected with great promptness, and on the 15th of +March, through the Secretary of War and the Secretary of the Navy, in a +letter addressed to the Chief of Staff, I issued the following +instructions: It seems my duty as Commander in Chief to place troops in +sufficient number where, if Congress shall direct that they enter Mexico to +save American lives and property, an effective movement may be promptly +made. Meantime, the movement of the troops to Texas and elsewhere near the +boundary, accompanied with sincere assurances of the utmost goodwill toward +the present Mexican Government and with larger and more frequent patrols +along the border to prevent insurrectionary expeditions from American soil, +will hold up the hands of the existing Government and will have a healthy +moral effect to prevent attacks upon Americans and their property in any +subsequent general internecine strife. Again, the sudden mobilization of a +division of troops has been a great test of our Army and full of useful +instruction, while the maneuvers that are thus made possible can occupy the +troops and their officers to great advantage. + +The assumption by the press that I contemplate intervention on Mexican soil +to protect American lives or property is of course gratuitous, because I +seriously doubt whether I have such authority under any circumstances, and +if I had I would not exercise it without express congressional approval. +Indeed, as you know, I have already declined, without Mexican consent, to +order a troop of Cavalry to protect the breakwater we are constructing just +across the border in Mexico at the mouth of the Colorado River to save the +Imperial Valley, although the insurrectos had scattered the Mexican troops +and were taking our horses and supplies and frightening our workmen away. +My determined purpose, however, is to be in a position so that when danger +to American lives and property in Mexico threatens and the existing +Government is rendered helpless by the insurrection, I can promptly execute +congressional orders to protect them, with effect. + +Meantime, I send you this letter, through the Secretary, to call your +attention to some things in connection with the presence of the division in +the Southwest which have doubtless occurred to you, but which I wish to +emphasize. + +In the first place, I want to make the mobilization a first-class training +for the Army, and I wish you would give your time and that of the War +College to advising and carrying out maneuvers of a useful character, and +plan to continue to do this during the next three months. By that time we +may expect that either Ambassador Wilson's fears will have been realized +and chaos and its consequences have ensued, or that the present Government +of Mexico will have so readjusted matters as to secure tranquillity-a +result devoutly to be wished. The troops can then be returned to their +posts. I understood from you in Washington that Gen. Aleshire said that you +could probably meet all the additional expense of this whole movement out +of the present appropriations if the troops continue in Texas for three +months. I sincerely hope this is so. I observe from the newspapers that you +have no blank cartridges, but I presume that this is an error, or that it +will be easy to procure those for use as soon as your maneuvers begin. + +Second. Texas is a State ordinarily peaceful, but you can not put 20,000 +troops into it without running some risk of a collision between the people +of that State, and especially the Mexicans who live in Texas near the +border and who sympathize with the insurrectos, and the Federal soldiers. +For that reason I beg you to be as careful as you can to prevent friction +of any kind. We were able in Cuba, with the army of pacification there of +something more than 5,000 troops, to maintain them for a year without any +trouble, and I hope you can do the same thing in Texas. Please give your +attention to this, and advise all the officers in command of the necessity +for very great circumspection in this regard. + +Third. One of the great troubles in the concentration of troops is the +danger of disease, and I suppose that you have adopted the most modern +methods for preventing and, if necessary, for stamping out epidemics. That +is so much a part of a campaign that it hardly seems necessary for me to +call attention to it. + +Finally, I wish you to examine the question of the patrol of the border and +put as many troops on that work as is practicable, and more than are now +engaged in it, in order to prevent the use of our borderland for the +carrying out of the insurrection. I have given assurances to the Mexican +ambassador on this point. + +I sincerely hope that this experience will always be remembered by the Army +and Navy as a useful means of education, and I should be greatly +disappointed if it resulted in any injury or disaster to our forces from +any cause. I have taken a good deal of responsibility in ordering this +mobilization, but I am ready to answer for it if only you and those under +you use the utmost care to avoid the difficulties which I have pointed +out. + +You may have a copy of this letter made and left with Gen. Carter and such +other generals in command as you may think wise and necessary to guide them +in their course, but to be regarded as confidential. I am more than happy +to here record the fact that all apprehensions as to the effect of the +presence of so large a military force in Texas proved groundless; no +disturbances occurred; the conduct of the troops was exemplary and the +public reception and treatment of them was all that could have been +desired, and this notwithstanding the presence of a large number of Mexican +refugees in the border territory. + +From time to time communications were received from Ambassador Wilson, who +had returned to Mexico, confirming the view that the massing of American +troops in the neighborhood had had good effect. By dispatch of April 3, +1911, the ambassador said: The continuing gravity of the situation here and +the chaos that would ensue should the constitutional authorities be +eventually overthrown, thus greatly increasing the danger to which American +lives and property are already subject, confirm the wisdom of the President +in taking those military precautions which, making every allowance for the +dignity and the sovereignty of a friendly state, are due to our nationals +abroad. + +Charged as I am with the responsibility of safeguarding these lives and +property, I am bound to say to the department that our military +dispositions on the frontier have produced an effective impression on the +Mexican mind and may, at any moment, prove to be the only guaranties for +the safety of our nationals and their property. If it should eventuate that +conditions here require more active measures by the President and Congress, +sporadic attacks might be made upon the lives and property of our +nationals, but the ultimate result would be order and adequate protection. +The insurrection continued and resulted In engagements between the regular +Mexican troops and the insurgents, and this along the border, so that in +several instances bullets from the contending forces struck American +citizens engaged in their lawful occupations on American soil. + +Proper protests were made against these invasions of American rights to the +Mexican authorities. On April 17, 1911, I received the following telegram +from the governor of Arizona: As a result of to-day's fighting across the +international line, but within gunshot range of the heart of Douglas, five +Americans wounded on this side of the line. Everything points to repetition +of these casualties on to-morrow, and while the Federals seem disposed to +keep their agreement not to fire into Douglas, the position of the +insurrectionists is such that when fighting occurs on the east and +southeast of the intrenchments people living in Douglas are put in danger +of their lives. In my judgment radical measures are needed to protect our +innocent people, and if anything can be done to stop the fighting at Agua +Prieta the situation calls for such action. It is impossible to safeguard +the people of Douglas unless the town be vacated. Can anything be done to +relieve situation, now acute? After a conference with the Secretary of +State, the following telegram was sent to Governor Sloan, on April IS, 1911 +9 11, and made public: Your dispatch received. Have made urgent demand upon +Mexican Government to issue instructions to prevent firing across border by +Mexican federal troops, and am waiting reply. Meantime I have sent direct +warning to the Mexican and insurgent forces near Douglas. I infer from your +dispatch that both parties attempt to heed the warning, but that in the +strain and exigency of the contest wild bullets still find their way into +Douglas. The situation might justify me in ordering our troops to cross the +border and attempt to stop the fighting, or to fire upon both combatants +from the American side. But if I take this step, I must face the +possibility of resistance and greater bloodshed, and also the danger of +having our motives misconstrued and misrepresented, and of thus inflaming +Mexican popular indignation against many thousand Americans now in Mexico +and jeopardizing their lives and property. The pressure for general +intervention under such conditions it might not be practicable to resist. +It is impossible to foresee or reckon the consequences of such a course, +and we must use the greatest self-restraint to avoid it. Pending my urgent +representation to the Mexican Government, I can not therefore order the +troops at Douglas to cross the border, but I must ask you and the local +authorities, in case the same danger recurs, to direct the people of +Douglas to place themselves where bullets can not reach them and thus avoid +casualty. I am loath to endanger Americans in Mexico, where they are +necessarily exposed, by taking a radical step to prevent injury to +Americans on our side of the border who can avoid it by a temporary +inconvenience. I am glad to say that no further invasion of American rights +of any substantial character occurred. + +The presence of a large military and naval force available for prompt +action, near the Mexican border, proved to be most fortunate under the +somewhat trying conditions presented by this invasion of American rights +Had no movement theretofore taken place, and because of these events it had +been necessary then to bring about the mobilization, it must have had +sinister significance. On the other hand, the presence of the troops before +and at the time of the unfortunate killing and wounding of American +citizens at Douglas, made clear that the restraint exercised by our +Government in regard to this Occurrence was not due to lack of force or +power to deal with it promptly and aggressively, but was due to a real +desire to use every means possible to avoid direct intervention in the +affairs of our neighbor whose friendship we valued and were most anxious to +retain. + +The policy and action of this Government were based upon an earnest +friendliness for the Mexican people as a whole, and it is a matter of +gratification to note that this attitude of strict impartiality as to all +factions in Mexico and of sincere friendship for the neighboring nation, +without regard for party allegiance, has been generally recognized and has +resulted in an even closer and more sympathetic understanding between the +two Republics and a warmer regard one for the other. Action to suppress +violence and restore tranquillity throughout the Mexican Republic was of +peculiar interest to this Government, in that it concerned the safeguarding +of American life and property in that country. The Government of the United +States had occasion to accord permission for the passage of a body of +Mexican rurales through Douglas, Arizona, to Tia Juana, Mexico, for the +suppression of general lawlessness which had for some time existed in the +region of northern Lower California. On May 25, 1911, President Diaz +resigned, Senor de la Barra was chosen provisional President. Elections for +President and Vice President were thereafter held throughout the Republic, +and Senor Francisco I. Madero was formally declared elected on October 15 +to the chief magistracy. On November 6 President Madero entered upon the +duties of his office. + +Since the inauguration of President Madero a plot has been unearthed +against the present Government, to begin a new insurrection. Pursuing the +same consistent policy which this administration has adopted from the +beginning, it directed an investigation into the conspiracy charged, and +this investigation has resulted in the indictment of Gen. Bernardo Reyes +and others and the seizure of a number of officers and men and horses and +accoutrements assembled upon the soil of Texas for the purpose of invading +Mexico. Similar proceedings had been taken during the insurrection against +the Diaz Government resulting in the indictments and prosecution of persons +found to be engaged in violating the neutrality laws of the United States +in aid of that uprising. + +The record of this Government in respect of the recognition of constituted +authority in Mexico therefore is clear. + +CENTRAL AMERICA-HONDURAS AND NICARAGUA TREATIES PROPOSED. + +As to the situation in Central America, I have taken occasion in the past +to emphasize most strongly the importance that should be attributed to the +consummation of the conventions between the Republics of Nicaragua and of +Honduras and this country, and I again earnestly recommend that the +necessary advice and consent of the Senate be accorded to these treaties, +which will make it possible for these Central American Republics to enter +upon an era of genuine economic national development. The Government of +Nicaragua which has already taken favorable action on the convention, has +found it necessary, pending the exchange of final ratifications, to enter +into negotiations with American bankers for the purpose of securing a +temporary loan to relieve the present financial tension. III connection +with this temporary loan and in the hope of consummating, through the +ultimate operation of the convention, a complete and lasting economic +regeneration, the Government of Nicaragua has also decided to engage an +American citizen as collector general of customs. The claims commission on +which the services of two American citizens have been sought, and the work +of the American financial adviser should accomplish a lasting good of +inestimable benefit to the prosperity, commerce, and peace of the Republic. +In considering the ratification of the conventions with Nicaragua and +Honduras, there rests with the United States the heavy responsibility of +the fact that their rejection here might destroy the progress made and +consign the Republics concerned to still deeper submergence in bankruptcy, +revolution, and national jeopardy. PANAMA. + +Our relations with the Republic of Panama, peculiarly important, due to +mutual obligations and the vast interests created by the canal, have +continued in the usual friendly manner, and we have been glad to make +appropriate expression of our attitude of sympathetic interest in the +endeavors of our neighbor in undertaking the development of the rich +resources of the country. With reference to the internal political affairs +of the Republic, our obvious concern is in the maintenance of public peace +and constitutional order, and the fostering of the general interests +created by the actual relations of the two countries, without the +manifestation of any preference for the success of either of the political +parties. + +THE PAN AMERICAN UNION. + +The Pan American Union, formerly known as the Bureau of American Republics, +maintained by the joint contributions of all the American nations, has +during the past year enlarged its practical work as an international +organization, and continues to prove its usefulness as an agency for the +mutual development of commerce, better acquaintance, and closer intercourse +between the United States and her sister American republics. + +THE FAR EAST. + +THE CHINESE LOANS. + +The past year has been marked in our relations with China by the conclusion +of two important international loans, one for the construction of the +Hukuang railways, the other for carrying out of the currency reform to +which China was pledged by treaties with the United States, Great Britain, +and Japan, of which mention was made in my last annual message. + +It will be remembered that early in 1909 an agreement was consummated among +British, French, and German financial groups whereby they proposed to lend +the Chinese Government funds for the construction of railways in the +Provinces of Hunan and Hupeh, reserving for their nationals the privilege +of engineering the construction of the lines and of furnishing the +materials required for the work. After negotiations with the Governments +and groups concerned an agreement was reached whereby American, British, +French, and German nationals should participate upon equal terms in this +important and useful undertaking. Thereupon the financial groups, supported +by their respective Governments, began negotiations with the Chinese +Government which terminated in a loan to China Of $30,000,000, with the +privilege of increasing the amount to $50,000,000. The cooperative +construction of these trunk lines should be of immense advantage, +materially and otherwise, to China and should greatly facilitate the +development of the bountiful resources of the Empire. On the other hand, a +large portion of these funds is to be expended for materials, American +products having equal preference with those of the other three lending +nations, and as the contract provides for branches and extensions +subsequently to be built on the same terms the opportunities for American +materials will reach considerable proportions. + +Knowing the interest of the United States in the reform of Chinese +currency, the Chinese Government, in the autumn of 1910 sought the +assistance of the American Government to procure funds with which to +accomplish that all-important reform. In the course of the subsequent +negotiations there was combined with the proposed currency loan one for +certain industrial developments in Manchuria, the two loans aggregating the +sum Of $50,000,000. While this was originally to be solely an American +enterprise, the American Government, consistently with its desire to secure +a sympathetic and practical cooperation of the great powers toward +maintaining the principle of equality of opportunity and the administrative +integrity of China, urged the Chinese Government to admit to participation +in the currency loan the associates of the American group in the Hukuang +loan. While of immense importance in itself, the reform contemplated in +making this loan is but preliminary to other and more comprehensive fiscal +reforms which will be of incalculable benefit to China and foreign +interests alike, since they will strengthen the Chinese Empire and promote +the rapid development of international trade. + +NEUTRAL FINANCIAL ADVISER. + +When these negotiations were begun, it was understood that a financial +adviser was to be employed by China in connection with the reform, and in +order that absolute equality in all respects among the lending nations +might be scrupulously observed, the American Government proposed the +nomination of a neutral adviser, which was agreed to by China and the other +Governments concerned. On September 28, 1911, Dr. Vissering, president of +the Dutch Java Bank and a financier of wide experience in the Orient, was +recommended to the Chinese Government for the post of monetary adviser. + +Especially important at the present, when the ancient Chinese Empire is +shaken by civil war incidental to its awakening to the many influences and +activities of modernization, are the cooperative policy of good +understanding which has been fostered by the international projects +referred to above and the general sympathy of view among all the Powers +interested in the Far East. While safeguarding the interests of our +nationals, this Government is using its best efforts in continuance of its +traditional policy of sympathy and friendship toward the Chinese Empire and +its people, with the confident hope for their economic and administrative +development, and with the constant disposition to contribute to their +welfare in all proper ways consistent with an attitude of strict +impartiality as between contending factions. + +For the first time in the history of the two countries, a Chinese cruiser, +the Haichi, under the command of Admiral Ching, recently visited New York, +where the officers and men were given a cordial welcome. + +NEW JAPANESE TREATY. + +The treaty of commerce and navigation between the United States and Japan, +signed in 1894, would by a strict interpretation of its provisions have +terminated on July 17, 1912. Japan's general treaties with the other +powers, however, terminated in 1911, and the Japanese Government expressed +an earnest desire to conduct the negotiations for a new treaty with the +United States simultaneously with its negotiations with the other powers. +There were a number of important questions involved in the treaty, +including the immigration of laborers, revision of the customs tariff, and +the right of Americans to hold real estate in Japan. The United States +consented to waive all technicalities and to enter at once upon +negotiations for a new treaty on the understanding that there should be a +continuance throughout the, life of the treaty of the same effective +measures for the restriction of immigration of laborers to American +territory which had been in operation with entire satisfaction to both +Governments since 1908. The Japanese Government accepted this basis of +negotiation, and a new treaty was quickly concluded, resulting in a highly +satisfactory settlement of the other questions referred to. + +A satisfactory adjustment has also been effected of the questions growing +out of the annexation of Korea by Japan. + +The recent visit of Admiral Count Togo to the United States as the Nation's +guest afforded a welcome opportunity to demonstrate the friendly feeling so +happily existing between the two countries. SIAM. + +There has been a change of sovereigns in Siam and the American minister at +Bangkok was accredited in a special capacity to represent the United States +at the coronation ceremony of the new King. + +EUROPE AND THE NEAR EAST. + +In Europe and the Near East, during the past twelve-month, there has been +at times considerable political unrest. The Moroccan question, which for +some months was the cause of great anxiety, happily appears to have reached +a stage at which it need no longer be regarded with concern. The Ottoman +Empire was occupied for a period by strife in Albania and is now at war +with Italy. In Greece and the Balkan countries the disquieting +potentialities of this situation have been more or less felt. Persia has +been the scene of a long internal struggle. These conditions have been the +cause of uneasiness in European diplomacy, but thus far without direct +political concern to the United States. + +In the war which unhappily exists between Italy and Turkey this Government +has no direct political interest, and I took occasion at the suitable time +to issue a proclamation of neutrality in that conflict. At the same time +all necessary steps have been taken to safeguard the personal interests of +American citizens and organizations in so far as affected by the war. + +COMMERCE WITH THE NEAR EAST. + +In spite of the attendant economic uncertainties and detriments to +commerce, the United States has gained markedly in its commercial standing +with certain of the nations of the Near East. Turkey, especially, is +beginning to come into closer relations with the United States through the +new interest of American manufacturers and exporters in the possibilities +of those regions, and it is hoped that foundations are being laid for a +large and mutually beneficial exchange of commodities between the two +countries. This new interest of Turkey in American goods is indicated by +the fact that a party of prominent merchants from a large city in Turkey +recently visited the United States to study conditions of manufacture and +export here, and to get into personal touch with American merchants, with a +view to cooperating more intelligently in opening up the markets of Turkey +and the adjacent countries to our manufactures. Another indication of this +new interest of America in the commerce of the Near East is the recent +visit of a large party of American merchants and manufacturers to central +and eastern Europe, where they were entertained by prominent officials and +organizations of the large cities, and new bonds of friendship and +understanding were established which can not but lead to closer and greater +commercial interchange. + +CORONATION OF KING GEORGE V. + +The 22d of June of the present year marked the coronation of His Britannic +Majesty King George V. In honor of this auspicious occasion I sent a +special embassy to London. The courteous and cordial welcome extended to +this Government's representatives by His Majesty and the people of Great +Britain has further emphasized the strong bonds of friendship happily +existing between the two nations. + +SETTLEMENT OF LONG-STANDING DIFFERENCES WITH GREAT BRITAIN. + +As the result of a determined effort on the part of both Great Britain and +the United States to settle all of their outstanding differences a number +of treaties have been entered into between the two countries in recent +years, by which nearly all of the unsettled questions between them of any +importance have either been adjusted by agreement or arrangements made for +their settlement by arbitration. A number of the unsettled questions +referred to consist of pecuniary claims presented by each country against +the other, and in order that as many of these claims as possible should be +settled by arbitration a special agreement for that purpose was entered +into between the two Governments on the 18th day of August, 1910, in +accordance with Article 11 of the general arbitration treaty with Great +Britain of April 4, 19o8. Pursuant to the provisions of this special +agreement a schedule of claims has already been agreed upon, and the +special agreement, together with this schedule, received the approval of +the Senate when submitted to it for that purpose at the last session of +Congress. Negotiations between the two Governments for the preparation of +an additional schedule of claims are already well advanced, and it is my +intention to submit such schedule as soon as it is agreed upon to the +Senate for its approval, in order that the arbitration proceedings may be +undertaken at an early date. In this connection the attention of Congress +is particularly called to the necessity for an appropriation +to cover the expense incurred in submitting these claims to arbitration. + +PRESENTATION TO GERMANY OF REPLICA OF VON STEUBEN STATUE. + +In pursuance of the act of Congress, approved June 23, 1910, the Secretary +of State and the joint Committee on the Library entered into a contract +with the sculptor, Albert Jaegers, for the execution of a bronze replica of +the statue of Gen. von Steuben erected in Washington, for presentation to +His Majesty the German Emperor and the German nation in recognition of the +gift of the statue of Frederick the Great made by the Emperor to the people +of the United States. + +The presentation was made on September 2 last by representatives whom I +commissioned as the special mission of this Government for the purpose. + +The German Emperor has conveyed to me by telegraph, on his own behalf and +that of the German people, an expression of appreciative thanks for this +action of Congress. RUSSIA. + +By direction of the State Department, our ambassador to Russia has recently +been having a series of conferences with the minister of foreign affairs of +Russia, with a view to securing a clearer understanding and construction of +the treaty of 1832 between Russia and the United States and the +modification of any existing Russian regulations which may be found to +interfere in any way with the full recognition of the rights of American +citizens under this treaty. I believe that the Government of Russia is +addressing itself seriously to the need of changing the present practice +under the treaty and that sufficient progress has been made to warrant the +continuance of these conferences in the hope that there may soon be removed +any justification of the complaints of treaty violation now prevalent in +this country. + +I expect that immediately after the Christmas recess I shall be able to +make a further communication to Congress on this subject. LIBERIA. + +Negotiations for the amelioration of conditions found to exist in Liberia +by the American commission, undertaken through the Department of State, +have been concluded and it is only necessary for certain formalities to be +arranged in securing the loan which it is hoped will place that republic on +a practical financial and economic footing. + +RECOGNITION OF PORTUGUESE REPUBLIC. + +The National Constituent Assembly, regularly elected by the vote of the +Portuguese people, having on June 19 last unanimously proclaimed a +republican form of government, the official recognition of the Government +of the United States was given to the new Republic in the afternoon of the +same day. + +SPITZBERGEN ISLANDS. + +Negotiations for the betterment of conditions existing in the Spitzbergen +Islands and the adjustment of conflicting claims of American citizens and +Norwegian subjects to lands in that archipelago are still in progress. + +INTERNATIONAL CONVENTIONS AND CONFERENCES. + +INTERNATIONAL PRIZE COURT. + +The supplementary protocol to The he Hague convention for the establishment +of an international prize court, mentioned in my last annual message, +embodying stipulations providing for an alternative procedure which would +remove the constitutional objection to that part of The Hague convention +which provides that there may be an appeal to the proposed court from the +decisions of national courts, has received the signature of the governments +parties to the original convention and has been ratified by the Government +of the United States, together with the prize court convention. + +The deposit of the ratifications with the Government of the Netherlands +awaits action by the powers on the declaration, signed at London on +February 26, 1909 of the rules of international law to be recognized within +the meaning of article 7 of The Hague convention for the establishment of +an International Prize Court. + +FUR-SEAL TREATY. + +The fur-seal controversy, which for nearly twenty-five years has been the +source of serious friction between the United States and the powers +bordering upon the north Pacific Ocean, whose subjects have been permitted +to engage in pelagic sealing against the fur-seal herds having their +breeding grounds within the jurisdiction of the United States, has at last +been satisfactorily adjusted by the conclusion of the north Pacific sealing +convention entered into between the United States, Great Britain, Japan, +and Russia on the 7th of July last. This convention is a conservation +measure of very great importance, and if it is carried out in the spirit of +reciprocal concession and advantage upon which it is based, there is every +reason to believe that not only will it result in preserving the fur-seal +herds of the north Pacific Ocean and restoring them to their former value +for the purposes of commerce, but also that it will afford a permanently +satisfactory settlement of a question the only other solution of which +seemed to be the total destruction of the fur seals. In another aspect, +also, this convention is of importance in that it furnishes an illustration +of the feasibility of securing a general international game law for the +protection of other mammals of the sea, the preservation of which is of +importance to all the nations of the world. + +LEGISLATION NECESSARY. + +The attention of Congress is especially called to the necessity for +legislation on the part of the United States for the purpose of fulfilling +the obligations assumed under this convention, to which the Senate gave its +advice and consent on the 24th day of July last. + +PROTECTION OF INDUSTRIAL PROPERTY UNION. + +The conference of the International Union for the Protection of Industrial +Property, which, under the authority of Congress, convened at Washington on +May 16, 1911, closed its labors on June 2, 1911, by the signature of three +acts, as follows: + +(I) A convention revising the Paris convention of March 20, 1883, for the +protection of industrial property, as modified by the additional act signed +at Brussels on December 14, 1900; + +(2) An arrangement to replace the arrangement signed at Madrid on April 14, +1891 for the international registration of trade-marks, and the additional +act with regard thereto signed at Brussels on December 14, 1900; and + +(3) An arrangement to replace the arrangement signed at Madrid on April 14, +1891, relating to the repression of false indication of production of +merchandise. + +The United States is a signatory of the first convention only, and this +will be promptly submitted to the Senate. + +INTERNATIONAL OPIUM COMMISSION. + +In a special message transmitted to the Congress on the 11th of January, +1911, in which I concurred in the recommendations made by the Secretary of +State in regard to certain needful legislation for the control of our +interstate and foreign traffic in opium and other menacing drugs, I quoted +from my annual message of December 7, 1909, in which I announced that the +results of the International Opium Commission held at Shanghai in February, +1909, at the invitation of the United States, had been laid before this +Government; that the report of that commission showed that China was making +remarkable progress and admirable efforts toward the eradication of the +opium evil; that the interested governments had not permitted their +commercial interests to prevent their cooperation in this reform; and, as a +result of collateral investigations of the opium question in this country, +I recommended that the manufacture, sale, and use of opium in the United +States should be more rigorously controlled by legislation. + +Prior to that time and in continuation of the policy of this Government to +secure the cooperation of the interested nations, the United States +proposed an international opium conference with full powers for the purpose +of clothing with the force of international law the resolutions adopted by +the above-mentioned commission, together with their essential corollaries. +The other powers concerned cordially responded to the proposal of this +Government, and, I am glad to be able to announce, representatives of all +the powers assembled in conference at The Hague on the first of this +month. + +Since the passage of the opium-exclusion act, more than twenty States have +been animated to modify their pharmacy laws and bring them in accord with +the spirit of that act, thus stamping out, to a measure, the intrastate +traffic in opium and other habit-forming drugs. But, although I have urged +on the Congress the passage of certain measures for Federal control of the +interstate and foreign traffic in these drugs, no action has yet been +taken. In view of the fact that there is now sitting at The Hague so +important a conference, which has under review the municipal laws of the +different nations for the mitigation of their opium and other allied evils, +a conference which will certainly deal with the international aspects of +these evils, it seems to me most essential that the Congress should take +immediate action on the anti-narcotic legislation to which I have already +called attention by a special message. + +BUENOS AIRES CONVENTIONS. + +The four important conventions signed at the Fourth Pan American Conference +at Buenos Aires, providing for the regulation of trademarks, patents, and +copyrights, and for the arbitration of pecuniary claims, have, with the +advice and consent of the Senate, been ratified on the part of the United +States and the ratifications have been deposited with the Government of the +Argentine Republic in accordance with the requirements of the conventions. +I am not advised that similar action has been taken by any other of the +signatory governments. + +INTERNATIONAL ARRANGEMENT TO SUPPRESS OBSCENE PUBLICATIONS. + +One of the notable advances in international morality accomplished in +recent years was an arrangement entered into on April 13th of the present +year between the United States and other powers for the repression of the +circulation of obscene publications. + +FOREIGN TRADE RELATIONS OF THE UNITED STATES. + +In my last annual message I referred to the tariff negotiations of the +Department of State with foreign countries in connection with the +application, by a series of proclamations, of the minimum tariff of the +United States to importations from the several countries, and I stated +that, in its general operation, section 2 of the new tariff law had proved +a guaranty of continued commercial peace, although there were, +unfortunately, instances where foreign governments dealt arbitrarily with +American interests within their jurisdiction in a manner injurious and +inequitable. During the past year some instances of discriminatory +treatment have been removed, but I regret to say that there remain a few +cases of differential treatment adverse to the commerce of the United +States. While none of these instances now appears to amount to undue +discrimination in the sense of section 2 Of the tariff law of August 5, +1909, they are all exceptions to that complete degree of equality of tariff +treatment that the Department of State has consistently sought to obtain +for American commerce abroad. + +While the double tariff feature of the tariff law of 1909 has been amply +justified by the results achieved in removing former and preventing new, +undue discriminations against American commerce it is believed that the +time has come for the amendment of this feature of the law in such way as +to provide a graduated means of meeting varying degrees of discriminatory +treatment of American commerce in foreign countries as well as to protect +the financial interests abroad of American citizens against arbitrary and +injurious treatment on the part of foreign governments through either +legislative or administrative measures. + +It would seem desirable that the maximum tariff of the United States should +embrace within its purview the free list, which is not the case at the +present time, in order that it might have reasonable significance to the +governments of those countries from which the importations into the United +States are confined virtually to articles on the free list. + +RECORD OF HIGHEST AMOUNT OF FOREIGN TRADE. + +The fiscal year ended June 30, 1911, shows great progress in the +development of American trade. It was noteworthy as marking the highest +record of exports of American products to foreign countries, the valuation +being in excess of $2,000,000,000. These exports showed a gain over the +preceding year of more than $300,000,000. + +FACILITIES FOR FOREIGN TRADE FURNISHED BY JOINT ACTION OF DEPARTMENT OF +STATE AND OF COMMERCE AND LABOR. + +There is widespread appreciation expressed by the business interests of the +country as regards the practical value of the facilities now offered by the +Department of State and the Department of Commerce and Labor for the +furtherance of American commerce. Conferences with their officers at +Washington who have an expert knowledge of trade conditions in foreign +countries and with consular officers and commercial agents of the +Department of Commerce and Labor who, while on leave of absence, visit the +principal industrial centers of the United States, have been found of great +value. These trade conferences are regarded as a particularly promising +method of governmental aid in foreign trade promotion. The Department of +Commerce and Labor has arranged to give publicity to the expected arrival +and the itinerary of consular officers and commercial agents while on leave +in the United States, in order that trade organizations may arrange for +conferences with them. + +As I have indicated, it is increasingly clear that to obtain and maintain +that equity and substantial equality of treatment essential to the +flourishing foreign trade, which becomes year by year more important to the +industrial and commercial welfare of the United States, we should have a +flexibility of tariff sufficient for the give and take of negotiation by +the Department of State on behalf of our commerce and industry. + +CRYING NEED FOR AMERICAN MERCHANT MARINE. + +I need hardly reiterate the conviction that there should speedily be built +up an American merchant marine. This is necessary to assure favorable +transportation facilities to our great ocean-borne commerce as well as to +supplement the Navy with an adequate reserve of ships and men It would have +the economic advantage of keeping at home part of the vast sums now paid +foreign shipping for carrying American goods. All the great commercial +nations pay heavy subsidies to their merchant marine so that it is obvious +that without some wise aid from the Congress the United States must lag +behind in the matter of merchant marine in its present anomalous position. + +EXTENSION OF AMERICAN BANKING TO FOREIGN COUNTRIES. + +Legislation to facilitate the extension of American banks to foreign +countries is another matter in which our foreign trade needs assistance. + +CHAMBERS OF FOREIGN COMMERCE SUGGESTED. + +The interests of our foreign commerce are nonpartisan, and as a factor in +prosperity are as broad as the land. In the dissemination of useful +information and in the coordination of effort certain unofficial +associations have done good work toward the promotion of foreign commerce. +It is cause for regret, however, that the great number of such associations +and the comparative lack of cooperation between them fails to secure an +efficiency commensurate with the public interest. Through the agency of the +Department of Commerce and Labor, and in some cases directly, the +Department of State transmits to reputable business interests information +of commercial opportunities, supplementing the regular published consular +reports. Some central organization in touch with associations and chambers +of commerce throughout the country and able to keep purely American +interests in closer touch with different phases of commercial affairs +would, I believe, be of great value. Such organization might be managed by +a committee composed of a small number of those now actively carrying on +the work of some of the larger associations, and there might be added to +the committee, as members ex officio, one or two officials of the +Department of State and one or two officials from the Department of +Commerce and Labor and representatives of the appropriate committees of +Congress. The authority and success of such an organization would evidently +be enhanced if the Congress should see fit to prescribe its scope and +organization through legislation which would give to it some such official +standing as that, for example, of the National Red Cross. + +With these factors and the continuance of the foreign-service establishment +(departmental, diplomatic, and consular) upon the high plane where it has +been placed by the recent reorganization this Government would be abreast +of the times in fostering the interests of its foreign trade, and the rest +must be left to the energy and enterprise of our business men. + +IMPROVEMENT OF THE FOREIGN SERVICE. + +The entire foreign-service organization is being improved and developed +with especial regard to the requirements of the commercial interests of the +country. The rapid growth of our foreign trade makes it of the utmost +importance that governmental agencies through which that trade is to be +aided and protected should possess a high degree of efficiency. Not only +should the foreign representatives be maintained upon a generous scale in +so far as salaries and establishments are concerned, but the selection and +advancement of officers should be definitely and permanently regulated by +law so that the service shall not fail to attract men of high character and +ability. The experience of the past few years with a partial application of +civil-service rules to the Diplomatic and Consular Service leaves no doubt +in my mind of the wisdom of a wider and more permanent extension of those +principles to both branches of the foreign service. The men selected for +appointment by means of the existing executive regulations have been of a +far higher average of intelligence and ability than the men appointed +before the regulations were promulgated. Moreover, the feeling that under +the existing rules there is reasonable hope for permanence of tenure during +good behavior and for promotion for meritorious service has served to bring +about a zealous activity in the interests of the country, which never +before existed or could exist. It is my earnest conviction that the +enactment into law of the general principles of the existing regulations +can not fail to effect further improvement in both branches of the foreign +service by providing greater inducement for young men of character and +ability to seek a career abroad in the service of the Government, and an +incentive to those already in the service to put forth greater efforts to +attain the high standards which the successful conduct of our international +relations and commerce requires. + +I therefore again commend to the favorable action of the Congress the +enactment of a law applying to the diplomatic and consular service the +principles embodied in section 1753 of the Revised Statutes of the United +States, in the civil-service act of January 16, 1883, and the Executive +orders of June 27, 1906, and of November 26, 1909. In its consideration of +this important subject I desire to recall to the attention of the Congress +the very favorable report made on the Lowden bill for the improvement of +the foreign service by the Foreign Affairs Committee of the House of +Representatives. Available statistics show the strictness with which the +merit system has been applied to the foreign service during recent years +and the absolute nonpartisan selection of consuls and diplomatic-service +secretaries who, indeed, far from being selected with any view to political +consideration, have actually been chosen to a disproportionate extent from +States which would have been unrepresented in the foreign service under the +system which it is to be hoped is now permanently obsolete. Some +legislation for the perpetuation of the present system of examinations and +promotions upon merit and efficiency would be of greatest value to our +commercial and international interests. + +PART III. + +THE WHITE HOUSE, December 20, 1911. To the Senate and House of +Representatives: + +In my annual message to Congress, December, 1909, I stated that under +section 2 of the act of August 5, 1909, I had appointed a Tariff Board of +three members to cooperate with the State Department in the administration +of the maximum and minimum clause of that act, to make a glossary or +encyclopedia of the existing tariff so as to render its terms intelligible +to the ordinary reader, and then to investigate industrial conditions and +costs of production at home and abroad with a view to determining to what +extent existing tariff rates actually exemplify the protective principle, +viz., that duties should be made adequate, and only adequate, to equalize +the difference in cost of production at home and abroad. + +I further stated that I believed these investigations would be of great +value as a basis for accurate legislation, and that I should from time to +time recommend to Congress the revision of certain schedules in accordance +with the findings of the Board. + +In the last session of the Sixty-first Congress a bill creating a permanent +Tariff Board of five members, of whom not more than three should be of the +same political party, passed each House, but failed of enactment because of +slight differences on which agreement was not reached before adjournment. +An appropriation act provided that the permanent Tariff Board, if created +by statute, should report to Congress on Schedule K in December, 1911. + +Therefore, to carry out so far as lay within my power the purposes of this +bill for a permanent Tariff Board, I appointed in March, 1911, a board of +five, adding two members of such party affiliation as would have fulfilled +the statutory requirement, and directed them to make a report to me on +Schedule K of the tariff act in December of this year. + +In my message of August 17, 1911, accompanying the veto of the wool bill, I +said that, in my judgment, Schedule K should be revised and the rates +reduced. My veto was based on the ground that, since the Tariff Board would +make, in December, a detailed report on wool and wool manufactures, with +special reference to the relation of the existing rates of duties to +relative costs here and abroad, public policy and a fair regard to the +interests of the producers and the manufacturers on the one hand and of the +consumers on the other demanded that legislation should not be hastily +enacted in the absence of such information; that I was not myself possessed +at that time of adequate knowledge of the facts to determine whether or not +the proposed act was in accord with my pledge to support a fair and +reasonable protective policy; that such legislation might prove only +temporary and inflict upon a great industry the evils of continued +uncertainty. + +I now herewith submit a report of the Tariff Board on Schedule K. The board +is unanimous in its findings. On the basis of these findings I now +recommend that the Congress proceed to a consideration of this schedule +with a view to its revision and a general reduction of its rates. + +The report shows that the present method of assessing the duty on raw +Wool--this is, by a specific rate on the grease pound (i. e., unscoured) +--operates to exclude wools of high shrinkage in scouring but fine quality +from the American market and thereby lessens the range of wools available +to the domestic manufacturer; that the duty on scoured wool Of 33 cents per +pound is prohibitory and operates to exclude the importation of clean, +low-priced foreign wools of inferior grades, which are nevertheless +valuable material for manufacturing, and which can not be imported in the +grease because of their heavy shrinkage. Such wools, if imported, might be +used to displace the cheap substitutes now in use. + +To make the preceding paragraph a little plainer, take the instance of a +hundred pounds of first-class wool imported under the present duty, which +is 11 cents a pound. That would make the duty on the hundred pounds $11. +The merchantable part of the wool thus imported is the weight of the wool +of this hundred pounds after scouring. If the wool shrinks 80 per cent, as +some wools do, then the duty in such a case would amount to $11 $11 on 20 +pounds of scoured wool. This, of course, would be prohibitory. If the wool +shrinks only 50 per cent, it would be $11 on 50 pounds of wool, and this is +near to the average of the great bulk of wools that are imported from +Australia, which is the principal source of our imported wool. + +These discriminations could be overcome by assessing a duty in ad valorem +terms, but this method is open to the objection, first, that it increases +administrative difficulties and tends to decrease revenue through +undervaluation; and, second, that as prices advance, the ad valorem rate +increases the duty per pound at the time when the consumer most needs +relief and the producer can best stand competition; while if prices decline +the duty is decreased at the time when the consumer is least burdened by +the price and the producer most needs protection. + +Another method of meeting the difficulty of taxing the grease pound is to +assess a specific duty on grease wool in terms of its scoured content. This +obviates the chief evil of the present system, namely, the discrimination +due to different shrinkages, and thereby tends greatly to equalize the +duty. The board reports that this method is feasible in practice and could +be administered without great expense. The scoured content of the wool is +the basis on which users of wool make their calculations, and a duty of +this kind would fit the usages of the trade. One effect of this method of +assessment would be that, regardless of the rate of duty, there would be +an increase in the supply and variety of wool by making available to the +American market wools of both low and fine quality now excluded. + +The report shows in detail the difficulties involved in attempting to state +in categorical terms the cost of wool production and the great differences +in cost as between different regions and different types of wool. It is +found, however, that, taking all varieties in account, the average cost of +production for the whole American clip is higher than the cost in the chief +competing country by an amount somewhat less than the present duty. + +The report shows that the duties on wools, wool wastes, and shoddy, which +are adjusted to the rate Of 33 cents on scoured wool are prohibitory in the +same measure that the duty on scoured wool is prohibitory. In general, they +are assessed at rates as high as, or higher than, the duties paid on the +clean content of wools actually imported. They should be reduced and so +adjusted to the rate on wool as to bear their proper proportion to the real +rate levied on the actual wool imports. + +The duties on many classes of wool manufacture are prohibitory and greatly +in excess of the difference in cost of production here and abroad. + +This is true of tops, of yarns (with the exception of worsted yarns of a +very high grade), and of low and medium grade cloth of heavy weight. + +On tops up to 52 cents a pound in value, and on yarns of 65 cents in value, +the rate is 100 per cent with correspondingly higher rates for lower +values. On cheap and medium grade cloths, the existing rates frequently run +to 150 per cent and on some cheap goods to over 200 per cent. This is +largely due to that part of the duty which is levied ostensibly to +compensate the manufacturer for the enhanced cost of his raw material due +to the duty on wool. As a matter of fact, this compensatory duty, for +numerous classes of goods, is much in excess of the amount needed for +strict compensation. + +On the other hand, the findings show that the duties which run to such high +ad valorem equivalents are prohibitory, since the goods are not imported, +but that the prices of domestic fabrics are not raised by the full amount +of duty. On a set of 1-yard samples of 16 English fabrics, which are +completely excluded by the present tariff rates, it was found that the +total foreign value was $41.84; the duties which would have been assessed +had these fabrics been imported, $76.90; the foreign value plus the amount +of the duty, $118.74; or a nominal duty of 183 per cent. In fact, however, +practically identical fabrics of domestic make sold at the same time at +$69.75, showing an enhanced price over the foreign market value of but 67 +per cent. + +Although these duties do not increase prices of domestic goods by anything +like their full amount, it is none the less true that such prohibitive +duties eliminate the possibility of foreign competition, even in time of +scarcity; that they form a temptation to monopoly and conspiracies to +control domestic prices; that they are much in excess of the difference in +cost of production here and abroad, and that they should be reduced to a +point which accords with this principle. + +The findings of the board show that in this industry the actual +manufacturing cost, aside from the question of the price of materials, is +much higher in this country than it is abroad; that in the making of yarn +and cloth the domestic woolen or worsted manufacturer has in general no +advantage in the form of superior machinery or more efficient labor to +offset the higher wages paid in this country The findings show that the +cost of turning wool into yarn in this country is about double that in the +leading competing country, and that the cost of turning yarn into cloth is +somewhat more than double. Under the protective policy a great industry, +involving the welfare of hundreds of thousands of people, has been +established despite these handicaps. + +In recommending revision and reduction, I therefore urge that action be +taken with these facts in mind, to the end that an important and +established industry may not be jeopardized. + +The Tariff Board reports that no equitable method has been found to, levy +purely specific duties on woolen and worsted fabrics and that, excepting +for a compensatory duty, the rate must be ad valorem on such manufactures. +It is important to realize, however, that no flat ad valorem rate on such +fabrics can be made to work fairly and effectively. Any single rate which +is high enough to equalize the difference in manufacturing cost at home and +abroad on highly finished goods involving such labor would be prohibitory +on cheaper goods, in which the labor cost is a smaller proportion of the +total value. Conversely, a rate only adequate to equalize this difference +on cheaper goods would remove protection from the fine-goods manufacture, +the increase in which has been one of the striking features of the trade's +development in recent years. I therefore recommend that in any revision the +importance of a graduated scale of ad valorem duties on cloths be carefully +considered and applied. + +I venture to say that no legislative body has ever had presented to it a +more complete and exhaustive report than this on so difficult and +complicated a subject as the relative costs of wool and woolens the world +over. It is a monument to the thoroughness, industry, impartiality, and +accuracy of the men engaged in its making. They were chosen from both +political parties but have allowed no partisan spirit to prompt or control +their inquiries. They are unanimous in their findings. I feel sure that +after the report has been printed and studied the value of such a +compendium of exact knowledge in respect to this schedule of the tariff +will convince all of the wisdom of making such a board permanent in order +that it may treat each schedule of the tariff as it has treated this, and +then keep its bureau of information up to date with current changes in the +economic world. + +It is no part of the function of the Tariff Board to propose rates of duty. +Their function is merely to present findings of fact on which rates of duty +may be fairly determined in the light of adequate knowledge in accord with +the economic policy to be followed. This is what the present report does. + +The findings of fact by the board show ample reason for the revision +downward of Schedule K, in accord with the protective principle, and +present the data as to relative costs and prices from which may be +determined what rates will fairly equalize the difference in production +costs. I recommend that such revision be proceeded with at once. + +PART IV. + +THE WHITE HOUSE, December 21, 1911. To the Senate and House of +Representatives: + +The financial condition of the Government, as shown at the close of the +last fiscal year, June 30, 1911, was very satisfactory. The ordinary +receipts into the general fund, excluding postal revenues, amounted to +$701,372,374.99, and the disbursements from the general fund for current +expenses and capital outlays, excluding postal and Panama Canal +disbursements, including the interest on the public debt, amounted to +$654,137,907-89, leaving a surplus Of $47,234,377.10. + +The postal revenue receipts amounted to $237,879,823,60, while the payments +made for the postal service from the postal revenues amounted to +$237,660,705.48, which left a surplus of postal receipts over disbursements +Of $219,118.12, the first time in 27 years in which a surplus occurred. + +The interest-bearing debt of the United States June 30, 1911, amounted to +$915,353,190. The debt on which interest had ceased amounted to +$1,879,830.26, and the debt bearing no interest, including greenbacks, +national bank notes to be redeemed, and fractional currency, amounted to +$386,751,917-43, or a total of interest and noninterest bearing debt +amounting to $1,303,984,937.69. + +The actual disbursements, exclusive of those for the Panama Canal and for +the postal service for the year ending June 30, 1911, were $654,137,997.89. +The actual disbursements for the year ending June 30, 1910, exclusive of +the Panama Canal and the postal service disbursements, were +$659,705,391.08, making a decrease Of $5,567,393.19 in yearly expenditures +in the year 1911 under that of 1910. For the year ending June 30, 1912, the +estimated receipts, exclusive of the postal revenues, are $666,000,000, +while the total estimates, exclusive of those for the Panama Canal and the +postal expenditures payable from the postal revenues, amount to +$645,842,799.34. This is a decrease in the 1912 estimates from that of the +1911 estimates of $1,534,367-22. + +For the year ending June 30, 1913, the estimated receipts, exclusive of the +postal revenues, are $667,000,000, while the total estimated +appropriations, exclusive of the Panama Canal and postal disbursements +payable from postal revenues, will amount to $637,920,803.35. This is a +decrease in the 1913 estimates from that of the 1912 estimates of +$7,921,995.99. + +As to the postal revenues, the expansion of the business in that +department, the normal increase in the Post Office and the extension of the +service, will increase the outlay to the sum Of $260,938,463; but as the +department was self-sustaining this year the Postmaster General is assured +that next year the receipts will at least equal the expenditures, and +probably exceed them by more than the surplus of this year. It is fair and +equitable, therefore, in determining the economy with which the Government +has been run, to exclude the transactions of a department like the Post +Office Department, which relies for its support upon its receipts. In +calculations heretofore made for comparison of economy in each year, it has +been the proper custom only to include in the statement the deficit in the +Post Office Department which was paid out of the Treasury. + +A calculation of the actual increase in the expenses of Government arising +from the increase in the population and the general expansion of +governmental functions, except those of the Post Office, for a number of +years shows a normal increase of about 4 per cent a year. By directing the +exercise of great care to keep down the expenses and the estimates we have +succeeded in reducing the total disbursements each year. + +THE CREDIT OF THE UNITED STATES. + +The credit of this Government was shown to be better than that of any other +Government by the sale of the Panama Canal 3 per cent bonds. These bonds +did not give their owners the privilege of using them as a basis for +bank-note circulation, nor was there any other privilege extended to them +which would affect their general market value. Their sale, therefore, +measured the credit of the Government. The premium which was realized upon +the bonds made the actual interest rate of the transaction 2.909 per cent. + +EFFICIENCY AND ECONOMY IN THE TREASURY DEPARTMENT. + +I In the Treasury Department the efficiency and economy work has been kept +steadily up. Provision is made for the elimination of 134 positions during +the coming year. Two hundred and sixty-seven statutory positions were +eliminated during the last year in the office of the Treasury in +Washington, and 141 positions in the year 1910, making an elimination Of +542 statutory positions since March 4, 1909; and this has been done without +the discharge of anybody, because the normal resignations and deaths have +been equal to the elimination of the places, a system of transfers having +taken care of the persons whose positions were dropped out. In the field +service if the department, too, 1,259 positions have been eliminated down +to the present time, making a total net reduction of all Treasury positions +to the number of 1,801. Meantime the efficiency of the work of the +department has increased. + +MONETARY REFORM. + +A matter of first importance that will come before Congress for action at +this session is monetary reform. The Congress has itself arranged an early +introduction of this great question through the report of its Monetary +Commission. This commission was appointed to recommend a solution of the +banking and currency problems so long confronting the Nation and to furnish +the facts and data necessary to enable the Congress to take action. The +commission was appointed when an impressive and urgent popular demand for +legislative relief suddenly arose out of the distressing situation of the +people caused by the deplorable panic of 1907. The Congress decided that +while it could not give immediately the relief required, it would provide a +commission to furnish the means for prompt action at a later date. + +In order to do its work with thoroughness and precision this commission has +taken some time to make its report. The country is undoubtedly hoping for +as prompt action on the report as the convenience of the Congress can +permit. The recognition of the gross imperfections and marked inadequacy of +our banking and currency system even in our most quiet financial periods is +of long standing; and later there has matured a recognition of the fact +that our system is responsible for the extraordinary devastation, waste, +and business paralysis of our recurring periods of panic. Though the +members of the Monetary Commission have for a considerable time been +working in the open, and while large numbers of the people have been openly +working with them, and while the press has largely noted and discussed this +work as it has proceeded, so that the report of the commission promises to +represent a national movement, the details of the report are still being +considered. I can not, therefore, do much more at this time than commend +the immense importance of monetary reform, urge prompt consideration and +action when the commission's report is received, and express my +satisfaction that the plan to be proposed promises to embrace main features +that, having met the approval of a great preponderance of the practical and +professional opinion of the country, are likely to meet equal approval in +Congress. + +It is exceedingly fortunate that the wise and undisputed policy of +maintaining unchanged the main features of our banking system rendered it +at once impossible to introduce a central bank; for a central bank would +certainly have been resisted, and a plan into which it could have been +introduced would probably have been defeated. But as a central bank could +not be a part of the only plan discussed or considered, that troublesome +question is eliminated. And ingenious and novel as the proposed National +Reserve Association appears, it simply is a logical outgrowth of what is +best in our present system, and is, in fact, the fulfillment of that +system. + +Exactly how the management of that association should be organized is a +question still open. It seems to be desirable that the banks which would +own the association should in the main manage it, It will be an agency of +the banks to act for them, and they can be trusted better than anybody else +chiefly to conduct it. It is mainly bankers' work. But there must be some +form of Government supervision and ultimate control, and I favor a +reasonable representation of the Government in the management. I entertain +no fear of the introduction of politics or of any undesirable influences +from a properly measured Government representation. + +I trust that all banks of the country possessing the requisite standards +will be placed upon a footing of perfect equality of opportunity. Both the +National system and the State system should be fairly recognized, leaving +them eventually to coalesce if that shall prove to be their tendency. But +such evolution can not develop impartially if the banks of one system are +given or permitted any advantages of opportunity over those of the other +system. And I trust also that the new legislation will carefully and +completely protect and assure the individuality and the independence of +each bank, to the end that any tendency there may ever be toward a +consolidation of the money or banking power of the Nation shall be +defeated. + +It will always be possible, of course, to correct any features of the new +law which may in practice prove to be unwise; so that while this law is +sure to be enacted under conditions of unusual knowledge and authority, it +also will include, it is well to remember, the possibility of future +amendment. + +With the present prospects of this long-awaited reform encouraging us, it +would be singularly unfortunate if this monetary question should by any +chance become a party issue. And I sincerely hope it will not. The +exceeding amount of consideration it has received from the people of the +Nation has been wholly nonpartisan; and the Congress set its nonpartisan +seal upon it when the Monetary Commission was appointed. In commending the +question to the favorable consideration of Congress, I speak for, and in +the spirit of, the great number of my fellow citizens who without any +thought of party or partisanship feel with remarkable earnestness that this +reform is necessary to the interests of all the people. + +THE WAR DEPARTMENT. + +There is now before Congress a Dill, the purpose of which is to increase +the efficiency and decrease the expense of the Army. It contains four +principal features: First, a consolidation of the General Staff with the +Adjutant General's and the Inspector General's Departments; second, a +consolidation of the Quartermaster's Department with the Subsistence and +the Pay Departments; third, the creation of an Army Service Corps; and +fourth, an extension of the enlistment period from three to five years. + +With the establishment of an Army Service Corps, as proposed in the bill, I +am thoroughly in accord and am convinced that the establishment of such a +corps will result in a material economy and a very great increase of +efficiency in the Army. It has repeatedly been recommended by me and my +predecessors. I also believe that a consolidation of the Staff Corps can be +made with a resulting increase in efficiency and economy, but not along the +lines provided in the bill under consideration. + +I am opposed to any plan the result of which would be to break up or +interfere with the essential principles of the detail system in the Staff +Corps established by the act of February 2, 1901, and I am opposed to any +plan the result of which would be to give to the officer selected as Chief +of Staff or to any other member of the General Staff Corps greater +permanency of office than he now has. Under the existing law neither the +Chief. of Staff nor any other member of the General Staff Corps can remain +in office for a period of more than four years, and there must be an +interval of two years between successive tours of duty. + +The bill referred to provides that certain persons shall become permanent +members of the General Staff Corps, and that certain others are subject to +re-detail without an interval of two years. Such provision is fraught with +danger to the welfare of the Army, and would practically nullify the main +purpose of the law creating the [missing text]. + +In making the consolidations no reduction should be made in the total +number of officers of the Army, of whom there are now too few to perform +the duties imposed by law. I have in the past recommended an increase in +the number of officers by 600 in order to provide sufficient officers to +perform all classes of staff duty and to reduce the number of line officers +detached from their commands. Congress at the last session increased the +total number of officers by 200, but this is not enough. Promotion in the +line of the Army is too slow. Officers do not attain command rank at an age +early enough properly to exercise it. It would be a mistake further to +retard this already slow promotion by throwing back into the line of the +Arm a number of high-ranking officers to be absorbed as is provided in the +[missing text]. + +Another feature of the bill which I believe to be a mistake is the proposed +increase in the term of enlistment from three to five ears I believe it +would be better to enlist men for six years, release them at the end of +three years from active service, and put them in reserve for the remaining +three years. Reenlistments should be largely confined to the +noncommissioned officers and other enlisted men in the skilled grades. This +plan by the payment of a comparatively small compensation during the three +years of reserve, would keep a large body of men at the call of the +Government, trained and ready for [missing text]. + +The Army of the United States is in good condition. It showed itself able +to meet an emergency in the successful mobilization of an army division of +from 15,000 to 20,000 men, which took place along the border of Mexico +during the recent disturbances in that country. The marvelous freedom from +the ordinary camp diseases of typhoid fever and measles is referred to in +the report of the Secretary of War and shows such an effectiveness in the +sanitary regulations and treatment of the Medical Corps, and in the +discipline of the Army itself, as to invoke the highest commendation. + +MEMORIAL AMPHITHEATER AT ARLINGTON. + +I beg to renew my recommendation of last year that the Congress appropriate +for a memorial amphitheater at Arlington, Va., the funds required to +construct it upon the plans already approved. + +THE PANAMA CANAL. + +The very satisfactory progress made on the Panama Canal last year has +continued, and there is every reason to believe that the canal +will be completed as early as the 1st of July, 1913, unless something +unforeseen occurs. This is about 18 months before the time promised by the +engineers. + +We are now near enough the completion of the canal to make it imperatively +necessary that legislation should be enacted to fix the method by which the +canal shall be maintained and controlled and the zone governed. The fact is +that to-day there is no statutory law by authority of which the President +is maintaining the government of the zone. Such authority was given in an +amendment to the Spooner Act, which expired by the terms of its own +limitation some years ago. Since that time the government has continued, +under the advice of the Attorney General that in the absence of action by +Congress, there is necessarily an implied authority on the part of the +Executive to maintain a government in a territory in which he has to see +that the laws are executed. The fact that we have been able thus to get +along during the important days of construction without legislation +expressly formulating the government of the zone, or delegating the +creation of it to the President, is not a reason for supposing that we may +continue the same kind of a government after the construction is finished. +The implied authority of the President to maintain a civil government in +the zone may be derived from the mandatory direction given him in the +original Spooner Act, by which he was commanded to build the canal; but +certainly, now that the canal is about to be completed and to be put under +a permanent management, there ought to be specific statutory authority for +its regulation and control and for the government of the zone, which we +hold for the chief and main purpose of operating the canal. + +I fully concur with the Secretary of War that the problem is simply the +management of a great public work, and not the government of a local +republic; that every provision must be directed toward the successful +maintenance of the canal as an avenue of commerce, and that all provisions +for the government of those who live within the zone should be subordinate +to the main purpose. + +The zone is 40 miles long and 10 miles wide. Now, it has a population Of +50,000 or 60,000, but as soon as the work of construction is completed, the +towns which make up this population will be deserted, and only +comparatively few natives will continue their residence there. The control +of them ought to approximate a military government. One judge and two +justices of the peace will be sufficient to attend to all the judicial and +litigated business there is. With a few fundamental laws of Congress, the +zone should be governed by the orders of the President, issued through the +War Department, as it is today. Provisions can be made for the guaranties +of life, liberty, and property, but beyond those, the government should be +that of a military reservation, managed in connection with this great +highway of trade. + +FURNISHING SUPPLIES AND REPAIRS. + +In my last annual message I discussed at length the reasons for the +Government's assuming the task of furnishing to all ships that use the +canal, whether our own naval vessels or others, the supplies of coal and +oil and other necessities with which they must be replenished either before +or after passing through the canal, together with the dock facilities and +repairs of every character. This it is thought wise to do through the +Government, because the Government must establish for itself, for its own +naval vessels, large depots and dry docks and warehouses, and these may +easily be enlarged so as to secure to the world public using the canal +reasonable prices and a certainty that there will be no discrimination +between those who wish to avail themselves of such facilities. TOLLS. + +I renew my recommendation with respect to the tolls of the canal that +within limits, which shall seem wise to Congress, the power of fixing tolls +be given to the President. In order to arrive at a proper conclusion, there +must be some experimenting, and this can not be done if Congress does not +delegate the power to one who can act expeditiously. + +POWER EXISTS TO RELIEVE AMERICAN SHIPPING. + +I am very confident that the United States has the power to relieve from +the payment of tolls any part of our shipping that Congress deems wise. We +own the canal. It was our money that built it. We have the right to charge +tolls for its use. Those tolls must be the same to everyone; but when we +are dealing with our own ships, the practice of many Governments of +subsidizing their own merchant vessels is so well established in general +that a subsidy equal to the tolls, an equivalent remission of tolls, can +not be held to be a discrimination in the use of the canal. The practice in +the Suez Canal makes this clear. The experiment in tolls to be made by the +President would doubtless disclose how great a burden of tolls the +coastwise trade between the Atlantic and the Pacific coast could bear +without preventing its usefulness in competition with the transcontinental +railroads. One of the chief reasons for building the canal was to set up +this competition and to bring the two shores closer together as a practical +trade problem. It may be that the tolls will have to be wholly remitted. I +do not think this is the best principle, because I believe that the cost of +such a Government work as the Panama Canal ought to be imposed gradually +but certainly upon the trade which it creates and makes possible. So far as +we can, consistent with the development of the world's trade through the +canal, and the benefit which it was intended to secure to the east and west +coastwise trade, we ought to labor to secure from the canal tolls a +sufficient amount ultimately to meet the debt which we have assumed and to +pay the interest. + +THE PHILIPPINE ISLANDS. + +In respect to the Philippines, I urgently join in the recommendation of the +Secretary of War that the act of February 6, 1905, limiting the +indebtedness that may be incurred by the Philippine Government for the +construction of public works, be increased from $5,000,000 to $15,000,000. +The finances of that Government are in excellent condition. The maximum sum +mentioned is quite low as compared with the amount of indebtedness of other +governments with similar resources, and the success which has attended the +expenditure of the $5,000,000 in the useful improvements of the harbors and +other places in the Islands justifies and requires additional expenditures +for like purposes. NATURALIZATION. + +I also join in the recommendation that the legislature of the Philippine +Islands be authorized to provide for the naturalization of Filipinos and +others who by the present law are treated as aliens, so as to enable them +to become citizens of the Philippine Islands. + +FRIARS' LANDS. + +Pending an investigation by Congress at its last session, through one of +its committees, into the disposition of the friars' lands, Secretary +Dickinson directed that the friars' lands should not be sold in excess of +the limits fixed for the public lands until Congress should pass upon the +subject or should have concluded its investigation. This order has been an +obstruction to the disposition of the lands, and I expect to direct the +Secretary of War to return to the practice under the opinion of the +Attorney General which will enable us to dispose of the lands much more +promptly, and to prepare a sinking fund with which to meet the $7,000,000 +of bonds issued for the purchase of the lands. I have no doubt whatever +that the Attorney General's construction was a proper one, and that it is +in the interest of everyone that the land shall be promptly disposed of. +The danger of creating a monopoly of ownership in lands under the statutes +as construed is nothing. There are only two tracts of 60,000 acres each +unimproved and in remote Provinces that are likely to be disposed of in +bulk, and the rest of the lands are subject to the limitation that they +shall be first offered to the present tenants and lessors who hold them in +small tracts. + +RIVERS AND HARBORS. + +The estimates for the river and harbor improvements reach $32,000,000 for +the coming year. I wish to urge that whenever a project has been adopted by +Congress as one to be completed, the more money which can be economically +expended in its construction in each year, the greater the ultimate +economy. This has especial application to the improvement of the +Mississippi River and its large branches. It seems to me that an increase +in the amount of money now being annually expended in the improvement of +the Ohio River which has been formally adopted by Congress would be in the +interest of the public. A similar change ought to be made during the +present Congress, in the amount to be appropriated for the Missouri River. +The engineers say that the cost of the improvement of the Missouri River +from Kansas City to St. Louis, in order to secure 6 feet as a permanent +channel, will reach $20,000,000. There have been at least three +recommendations from the Chief of Engineers that if the improvement be +adopted, $2,000,000 should be expended upon it annually. This particular +improvement is especially entitled to the attention of Congress, because a +company has been organized in Kansas City, with a capital of $1,000,000, +which has built steamers and barges, and is actually using the river for +transportation in order to show what can be done in the way of affecting +rates between Kansas City and St. Louis, and in order to manifest their +good faith and confidence in respect of the improvement. I urgently +recommend that the appropriation for this improvement be increased from +$600,000, as recommended now in the completion of a contract, to $2,000,000 +annually, so that the work may be done in 10 years. + +WATERWAY FROM THE LAKES TO THE GULF. + +The project for a navigable waterway from Lake Michigan to the mouth of the +Illinois River, and thence via the Mississippi to the Gulf of Mexico, is +one of national importance. In view of the work already accomplished by the +Sanitary District of Chicago, an agency of the State of Illinois, which has +constructed the most difficult and costly stretch of this waterway and made +it an asset of the Nation, and in view of the fact that the people of +Illinois have authorized the expenditure Of $20,000,000 to carry this +waterway 62 miles farther to Utica, I feel that it is fitting that this +work should be supplemented by the Government, and that the expenditures +recommended by the special board of engineers on the waterway from Utica to +the mouth of the Illinois River be made upon lines which while providing a +waterway for the Nation should otherwise benefit that State to the fullest +extent. I recommend that the term of service of said special board of +engineers be continued, and that it be empowered to reopen the question of +the treatment of the lower Illinois River, and to negotiate with a properly +constituted commission representing the State of Illinois, and to agree +upon a plan for the improvement of the lower Illinois River and upon the +extent to which the United States may properly cooperate with the State of +Illinois in securing the construction of a navigable waterway from Lockport +to the mouth of the Illinois River in conjunction with the development of +water power by that State between Lockport and Utica. + +THE DEPARTMENT OF JUSTICE. + +Removal of clerks of Federal courts. + +The report of the Attorney General shows that he has subjected to close +examination the accounts of the clerks of the Federal courts; that he has +found a good many which disclose irregularities or dishonesty; but that he +has had considerable difficulty in securing an effective prosecution or +removal of the clerks thus derelict. I am certainly not unduly prejudiced +against the Federal courts, but the fact is that the long and confidential +relations which grow out of the tenure for life on the part of the judge +and the practical tenure for life on the part of the clerk are not +calculated to secure the strictness of dealing by the judge with the clerk +in respect to his fees and accounts which assures in the clerk's conduct a +freedom from overcharges and carelessness. The relationship between the +judge and the clerk makes it ungracious for members of the bar to complain +of the clerk or for department examiners to make charges against him to be +heard by the court, and an order of removal of a clerk and a judgment for +the recovery of fees are in some cases reluctantly entered by the judge. +For this reason I recommend an amendment to the law whereby the President +shall be given power to remove the clerks for cause. This provision need +not interfere with the right of the judge to appoint his clerk or to remove +him. + +French spoliation awards. + +In my last message, I recommended to Congress that it authorize the payment +of the findings or judgments of the Court of Claims in the matter of the +French spoliation cases. There has been no appropriation to pay these +judgments since 1905. The findings and awards were obtained after a very +bitter fight, the Government succeeding in about 75 per cent of the cases. +The amount of the awards ought, as a matter of good faith on the part of +the Government, to be paid. + +EMPLOYERS' LIABILITY AND WORKMEN'S COMPENSATION COMMISSION. + +The limitation of the liability of the master to his servant for personal +injuries to such as are occasioned by his fault has been abandoned in most +civilized countries and provision made whereby the employee injured in the +course of his employment is compensated for his loss of working ability +irrespective of negligence. The principle upon which such provision +proceeds is that accidental injuries to workmen in modern industry, with +its vast complexity and inherent dangers arising from complicated machinery +and the use of the great forces of steam and electricity, should be +regarded as risks of the industry and the loss borne in some equitable +proportion by those who for their own profit engage therein. In recognition +of this the last Congress authorized the appointment of a commission to +investigate the subject of employers' liability and workmen's compensation +and to report the result of their investigations, through the President, to +Congress. This commission was appointed and has been at work, holding +hearings, gathering data, and considering the subject, and it is expected +will be able to report by the first of the year, in accordance with the +provisions of the law. It is hoped and expected that the commission will +suggest legislation which will enable us to put in the place of the present +wasteful and sometimes unjust system of employers' liability a plan of +compensation which will afford some certain and definite relief to all +employees who are injured in the course of their employment in those +industries which are subject to the regulating power of Congress. + +MEASURES TO PREVENT DELAY AND UNNECESSARY COST OF LITIGATION. + +In promotion of the movement for the prevention of delay and unnecessary +cost, in litigation, I am glad to say that the Supreme Court has taken +steps to reform the present equity rules of the Federal courts, and that we +may in the near future expect a revision of them which will be a long step +in the right direction. + +The American Bar Association has recommended to Congress several bills +expediting procedure, one of which has already passed the House +unanimously, February 6, 1911. This directs that no judgment should be set +aside or reversed, or new trial granted, unless it appears to the court, +after an examination of the entire cause, that the error complained of has +injuriously affected the substantial rights of the parties, and also +provides for the submission of issues of fact to a jury, reserving +questions of law for subsequent argument and decision. I hope this bill +will pass the Senate and become law, for it will simplify the procedure at +law. + +Another bill 11 to amend chapter II of the judicial Code, in order to +avoid errors in pleading, was presented by the same association, and one. +enlarging the jurisdiction of the Supreme Court so as to permit that court +to examine, upon a writ of error, all cases in which any right or title is +claimed under the Constitution, or any statute or treaty of the United +States, whether the decision in the court below has been against the right +or title or in its favor. Both these measures are in the interest of +justice and should be passed. + +POST OFFICE. + +At the beginning of the present administration in 1909 the postal service +was in arrears to the extent Of $17,479,770.47. It was very much the +largest deficit on record. In the brief space of two years this has been +turned into a surplus Of $220,000, which has been accomplished without +curtailment of the postal facilities, as may be seen by the fact that there +have been established 3,744 new post offices; delivery by carrier has been +added to the service in 186 cities; 2,516 new rural routes have been +established, covering 60,000 miles; the force of postal employees has been +increased in these two years by more than 8,000, and their average annual +salary has had a substantial increase. + +POSTAL-SAVINGS SYSTEM. + +On January 3, 1911, postal-savings depositories were established +experimentally in 48 States and Territories. After three months' successful +operation the system was extended as rapidly as feasible to the 7,500 Post +offices of the first, second, and third classes constituting the +presidential grade. By the end of the year practically all of these will +have been designated and then the system will be extended to all +fourth-class post offices doing a money-order business. + +In selecting post offices for depositories consideration was given to the +efficiency of the postmasters and only those offices where the ratings were +satisfactory to the department have been designated. Withholding +designation from postmasters with unsatisfactory ratings has had a salutary +effect on the service. + +The deposits have kept pace with the extension of the system. Amounting to +only $60,652 at the end of the first month's operation in the experimental +offices, they increased to $679,310 by July, and now after 11 months of +operation have reached a total of $11,000,000. This sum is distributed +among 2,710 banks and protected tinder the law by bonds deposited with the +Treasurer of the United States. + +Under the method adopted for the conduct of the system certificates are +issued as evidence of deposits, and accounts with depositors are kept by +the post offices instead of by the department. Compared with the practice +in other countries of entering deposits in pass books and keeping at the +central office a ledger account with each depositor, the use of the +certificate has resulted in great economy of administration. + +The depositors thus far number approximately 150,000. They include 40 +nationalities, native Americans largely predominating and English and +Italians coming next. + +The first conversion of deposits into United States bonds bearing interest +at the rate of 2.5 per cent occurred on July 1, 1911, the amount of +deposits exchanged being $41,900, or a little more than 6 per cent of the +total outstanding certificates of deposit on June 30. Of this issue, bonds +to the value of $6,120 were in coupon form and $35,780 in registered form. + +PARCEL POST. + +Steps should be taken immediately for the establishment of a rural parcel +post. In the estimates of appropriations needed for the maintenance of the +postal service for the ensuing fiscal year an item of $150,000 has been +inserted to cover the preliminary expense of establishing a parcel post on +rural mail routes, as well as to cover an investigation having for its +object the final establishment of a general parcel post on all railway and +steamboat transportation routes. The department believes that after the +initial expenses of establishing the system are defrayed and the parcel +post is in full operation on the rural routes it will not only bring in +sufficient revenue to meet its cost, but also a surplus that can be +utilized in paying the expenses of a parcel post in the City Delivery +Service. + +It is hoped that Congress will authorize the immediate establishment of a +limited parcel post on such rural routes as may be selected, providing for +the delivery along the routes of parcels not exceeding eleven pounds, which +is the weight limit for the international parcel post, or at the post +office from which such route emanates, or on another route emanating from +the same office. Such preliminary service will prepare the way for the more +thorough and comprehensive inquiry contemplated in asking for the +appropriation mentioned, enable the department to gain definite information +concerning the practical operation of a general system, and at the same +time extend the benefit of the service to a class of people who, above all +others, are specially in need of it. + +The suggestion that we have a general parcel post has awakened great +opposition on the part of some who think that it will have the effect to +destroy the business of the country storekeeper. Instead of doing this, I +think the change will greatly increase business for the benefit of all. The +reduction in the cost of living it will bring about ought to make its +coming certain. + +THE NAVY DEPARTMENT. + +On the 2d of November last, I reviewed the fighting fleet of battleships +and other vessels assembled in New York Harbor, consisting of 24 +battleships, 2 armored cruisers, 2 cruisers, 22 destroyers, 12 torpedo +boats, 8 submarines, and other attendant vessels, making 98 vessels of all +classes, of a tonnage Of 576,634 tons. Those who saw the fleet were struck +with its preparedness and with its high military efficiency. All Americans +should be proud of its personnel. + +The fleet was deficient in the number of torpedo destroyers, in cruisers, +and in colliers, as well as in large battleship cruisers, which are now +becoming a very important feature of foreign navies, notably the British, +German, and Japanese. + +The building plan for this year contemplates two battleships and two +colliers. This is because the other and smaller vessels can be built much +more rapidly in case of emergency than the battleships, and we certainly +ought to continue the policy of two battleships a year until after the +Panama Canal is finished and until in our first line and in our reserve +line we can number 40 available vessels of proper armament and size. + +The reorganization of the Navy and the appointment of four aids to the +Secretary have continued to demonstrate their usefulness. It would be +difficult now to administer the affairs of the Navy without the expert +counsel and advice of these aids, and I renew the recommendation which I +made last year, that the aids be recognized by statute. + +It is certain that the Navy, with its present size, should have admirals in +active command higher than rear admirals. The recognized grades in order +are: Admiral of the fleet, admiral, vice admiral, and rear admiral. Our +great battleship fleet is commanded by a rear admiral, with four other rear +admirals under his orders. This is not as it should be, and when questions +of precedence arise between our naval officers and those of European +navies, the American rear admiral, though in command of ten times the force +of a foreign vice admiral, must yield precedence to the latter. Such an +absurdity ought not to prevail, and it can be avoided by the creation of +two or three positions of flag rank above that of rear admiral. + +I attended the opening of the new training school at North Chicago, Ill., +and am glad to note the opportunity which this gives for drawing upon young +men of the country from the interior, from farms, stores, shops, and +offices, which insures a high average of intelligence and character among +them, and which they showed in the very wonderful improvement in discipline +and drill which only a few short weeks' presence at the naval station had +made. + +I invite your attention to the consideration of the new system of detention +and of punishment for Army and Navy enlisted men which has obtained in +Great Britain, and which has made greatly for the better control of the. +men. We should adopt a similar system here. + +Like the Treasury Department and the War Department, the Navy Department +has given much attention to economy in administration, and has cut down a +number of unnecessary expenses and reduced its estimates except for +construction and the increase that that involves. + +I urge upon Congress the necessity for an immediate increase of 2,000 men +in the enlisted strength of the Navy, provided for in the estimates. Four +thousand more are now needed to man all the available vessels. + +There are in the service to-day about 47,750 enlisted men of all ratings. + +Careful computation shows that in April, 1912, 49,166 men will be required +for vessels in commission, and 3,000 apprentice seamen should be kept under +training at all times. + +ABOLITION OF NAVY YARDS. + +The Secretary of the Navy has recommended the abolition of certain of the +smaller and unnecessary navy yards, and in order to furnish a complete and +comprehensive report has referred the question of all navy yards to the +joint board of the Army and Navy. This board will shortly make its report +and the Secretary of the Navy advises me that his recommendations on the +subject will be presented early in the coming year. The measure of economy +contained in a proper handling of this subject is so great and so important +to the interests of the Nation that I shall present it to Congress as a +separate subject apart from my annual message. Concentration of the +necessary work for naval vessels in a few navy yards on each coast is a +vital necessity if proper economy in Government expenditures is to be +attained. + +AMALGAMATION OF STAFF CORPS IN THE NAVY. + +The Secretary of the Navy is striving to unify the various corps of the +Navy to the extent possible and thereby stimulate a Navy spirit as +distinguished from a corps spirit. In this he has my warm support. + +All officers are to be naval officers first and specialists afterwards. +This means that officers will take up at least one specialty, such as +ordnance, construction, or engineering. This is practically what is done +now, only some of the specialists, like the pay officers and naval +constructors, are not of the line. It is proposed to make them all of the +line. + +All combatant corps should obviously be of the line. This necessitates +amalgamating the pay officers and also those engaged in the technical work +of producing the finished ship. This is at present the case with the single +exception of the naval constructors, whom it is now proposed to amalgamate +with the line. + +COUNCIL OF NATIONAL DEFENSE. + +I urge again upon Congress the desirability of establishing the council of +national defense. The bill to establish this council was before Congress +last winter, and it is hoped that this legislation will pass during the +present session. The purpose of the council is to determine the general +policy of national defense and to recommend to Congress and to the +President such measures relating to it as it shall deem necessary and +expedient. + +No such machinery is now provided by which the readiness of the Army and +Navy may be improved and the programs of military and naval requirements +shall be coordinated and properly scrutinized with a view of the +necessities of the whole Nation rather than of separate departments. + +DEPARTMENTS OF AGRICULTURE AND COMMERCE AND LABOR. + +For the consideration of matters which are pending or have been disposed of +in the Agricultural Department and in the Department of Commerce and Labor, +I refer to the very excellent reports of the Secretaries of those +departments. I shall not be able to submit to Congress until after the +Christmas holidays the question of conservation of our resources arising in +Alaska and the West and the question of the rate for second-class mail +matter in the Post Office Department. + +COMMISSION ON EFFICIENCY AND ECONOMY. + +The law does not require the submission of the reports of the Commission on +Economy and Efficiency until the 31st of December. I shall therefore not be +able to submit a report of the work of that commission until the assembling +of Congress after the holidays. + +CIVIL RETIREMENT AND CONTRIBUTORY PENSION SYSTEM. + +I have already advocated, in my last annual message, the adoption of a +civil-service retirement system, with a contributory feature to it so as to +reduce to a minimum the cost to the Government of the pensions to be paid. +After considerable reflection, I am very much opposed to a pension system +that involves no contribution from the employees. I think the experience of +other governments justifies this view; but the crying necessity for some +such contributory system, with possibly a preliminary governmental outlay, +in order to cover the initial cost and to set the system going at once +while the contributions are accumulating, is manifest on every side. +Nothing will so much promote the economy and efficiency of the Government +as such a system. + +ELIMINATION OF ALL LOCAL OFFICES FROM POLITICS. + +I wish to renew again my recommendation that all the local offices +throughout the country, including collectors of internal revenue, +collectors of customs, postmasters of all four classes, immigration +commissioners and marshals, should be by law covered into the classified +service, the necessity for confirmation by the Senate be removed, and the +President and the others, whose time is now taken up in distributing this +patronage under the custom that has prevailed since the beginning of the +Government in accordance with the recommendation of the Senators and +Congressmen of the majority party, should be relieved from this burden. I +am confident that such a change would greatly reduce the cost of +administering the Government, and that it would add greatly to its +efficiency. It would take away the power to use the patronage of the +Government for political purposes. When officers are recommended by +Senators and Congressmen from political motives and for political services +rendered, it is impossible to expect that while in office the appointees +will not regard their tenure as more or less dependent upon continued +political service for their patrons, and no regulations, however stiff or +rigid, will prevent this, because such regulations, in view of the method +and motive for selection, are plainly inconsistent and deemed hardly worthy +of respect. + +*** + +State of the Union Address +William H. Taft +December 3, 1912 + +Jump to Part II | Part III + +To the Senate and House of Representatives: + +The foreign relations of the United States actually and potentially affect +the state of the Union to a degree not widely realized and hardly surpassed +by any other factor in the welfare of the whole Nation. The position of the +United States in the moral, intellectual, and material relations of the +family of nations should be a matter of vital interest to every patriotic +citizen. The national prosperity and power impose upon us duties which we +can not shirk if we are to be true to our ideals. The tremendous growth of +the export trade of the United States has already made that trade a very +real factor in the industrial and commercial prosperity of the country. +With the development of our industries the foreign commerce of the United +States must rapidly become a still more essential factor in its economic +welfare. Whether we have a farseeing and wise diplomacy and are not +recklessly plunged into unnecessary wars, and whether our foreign policies +are based upon an intelligent grasp of present-day world conditions and a +clear view of the potentialities of the future, or are governed by a +temporary and timid expediency or by narrow views befitting an infant +nation, are questions in the alternative consideration of which must +convince any thoughtful citizen that no department of national polity +offers greater opportunity for promoting the interests of the whole people +on the one hand, or greater chance on the other of permanent national +injury, than that which deals with the foreign relations of the United +States. + +The fundamental foreign policies of the United States should be raised high +above the conflict of partisanship and wholly dissociated from differences +as to domestic policy. In its foreign affairs the United States should +present to the world a united front. The intellectual, financial, and +industrial interests of the country and the publicist, the wage earner, the +farmer, and citizen of whatever occupation must cooperate in a spirit of +high patriotism to promote that national solidarity which is indispensable +to national efficiency and to the attainment of national ideals. + +The relations of the United States with all foreign powers remain upon a +sound basis of peace, harmony, and friendship. A greater insistence upon +justice to American citizens or interests wherever it may have been denied +and a stronger emphasis of the need of mutuality in commercial and other +relations have only served to strengthen our friendships with foreign +countries by placing those friendships upon a firm foundation of realities +as well as aspirations. + +Before briefly reviewing the more important events of the last year in our +foreign relations, which it is my duty to do as charged with their conduct +and because diplomatic affairs are not of a nature to make it appropriate +that the Secretary of State make a formal annual report, I desire to touch +upon some of the essentials to the safe management of the foreign relations +of the United States and to endeavor, also, to define clearly certain +concrete policies which are the logical modern corollaries of the +undisputed and traditional fundamentals of the foreign policy of the United +States. + +REORGANIZATION OF THE STATE DEPARTMENT + +At the beginning of the present administration the United States, having +fully entered upon its position as a world power, with the responsibilities +thrust upon it by the results of the Spanish-American War, and already +engaged in laying the groundwork of a vast foreign trade upon which it +should one day become more and more dependent, found itself without the +machinery for giving thorough attention to, and taking effective action +upon, a mass of intricate business vital to American interests in every +country in the world. + +The Department of State was an archaic and inadequate machine lacking most +of the attributes of the foreign office of any great modern power. With an +appropriation made upon my recommendation by the Congress on August 5, +1909, the Department of State was completely reorganized. There were +created Divisions of Latin American Affairs and of Far Eastern, Near +Eastern, and Western European Affairs. To these divisions were called from +the foreign service diplomatic and consular officers possessing experience +and knowledge gained by actual service in different parts of the world and +thus familiar with political and commercial conditions in the regions +concerned. The work was highly specialized. The result is that where +previously this Government from time to time would emphasize in its foreign +relations one or another policy, now American interests in every quarter of +the globe are being cultivated with equal assiduity. This principle of +politico-geographical division possesses also the good feature of making +possible rotation between the officers of the departmental, the diplomatic, +and the consular branches of the foreign service, and thus keeps the whole +diplomatic and consular establishments tinder the Department of State in +close touch and equally inspired with the aims and policy of the +Government. Through the newly created Division of Information the foreign +service is kept fully informed of what transpires from day to day in the +international relations of the country, and contemporary foreign comment +affecting American interests is promptly brought to the attention of the +department. The law offices of the department were greatly strengthened. +There were added foreign trade advisers to cooperate with the diplomatic and +consular bureaus and the politico-geographical divisions in the innumerable +matters where commercial diplomacy or consular work calls for such special +knowledge. The same officers, together with the rest of the new +organization, are able at all times to give to American citizens accurate +information as to conditions in foreign countries with which they have +business and likewise to cooperate more effectively with the Congress and +also with the other executive departments. + +MERIT SYSTEM IN CONSULAR AND DIPLOMATIC CORPS + +Expert knowledge and professional training must evidently be the essence of +this reorganization. Without a trained foreign service there would not be +men available for the work in the reorganized Department of State. +President Cleveland had taken the first step toward introducing the merit +system in the foreign service. That had been followed by the application of +the merit principle, with excellent results, to the entire consular branch. +Almost nothing, however, had been done in this direction with regard to the +Diplomatic Service. In this age of commercial diplomacy it was evidently of +the first importance to train an adequate personnel in that branch of the +service. Therefore, on November 26, 1909, by an Executive order I placed +the Diplomatic Service up to the grade of secretary of embassy, inclusive, +upon exactly the same strict nonpartisan basis of the merit system, rigid +examination for appointment and promotion only for efficiency, as had been +maintained without exception in the Consular Service. + +STATISTICS AS TO MERIT AND NONPARTISAN CHARACTER OF APPOINTMENTS + +How faithful to the merit system and how nonpartisan has been the conduct +of the Diplomatic and Consular Services in the last four years may be +judged from the following: Three ambassadors now serving held their present +rank at the beginning of my administration. Of the ten ambassadors whom I +have appointed, five were by promotion from the rank of minister. Nine +ministers now serving held their present rank at the beginning of my +administration. Of the thirty ministers whom I have appointed, eleven were +promoted from the lower grades of the foreign service or from the +Department of State. Of the nineteen missions in Latin America, where our +relations are close and our interest is great, fifteen chiefs of mission +are service men, three having entered the service during this +administration. Thirty-seven secretaries of embassy or legation who have +received their initial appointments after passing successfully the required +examination were chosen for ascertained fitness, without regard to +political affiliations. A dearth of candidates from Southern and Western +States has alone made it impossible thus far completely to equalize all the +States' representations in the foreign service. In the effort to equalize +the representation of the various States in the Consular Service I have +made sixteen of the twenty-nine new appointments as consul which have +occurred during my administration from the Southern States. This is 55 per +cent. Every other consular appointment made, including the promotion of +eleven young men from the consular assistant and student interpreter corps, +has been by promotion or transfer, based solely upon efficiency shown in +the service. + +In order to assure to the business and other interests of the United States +a continuance of the resulting benefits of this reform, I earnestly renew +my previous recommendations of legislation making it permanent along some +such lines as those of the measure now Pending in Congress. + +LARGER PROVISION FOR EMBASSIES AND LEGATIONS AND FOR OTHER EXPENSES OF OUR +FOREIGN REPRESENTATIVES RECOMMENDED + +In connection with legislation for the amelioration of the foreign service, +I wish to invite attention to the advisability of placing the salary +appropriations upon a better basis. I believe that the best results would +be obtained by a moderate scale of salaries, with adequate funds for the +expense of proper representation, based in each case upon the scale and +cost of living at each post, controlled by a system of accounting, and +under the general direction of the Department of State. + +In line with the object which I have sought of placing our foreign service +on a basis of permanency, I have at various times advocated provision by +Congress for the acquisition of Government-owned buildings for the +residence and offices of our diplomatic officers, so as to place them more +nearly on an equality with similar officers of other nations and to do away +with the discrimination which otherwise must necessarily be made, in some +cases, in favor of men having large private fortunes. The act of Congress +which I approved on February 17, 1911, was a right step in this direction. +The Secretary of State has already made the limited recommendations +permitted by the act for any one year, and it is my hope that the bill +introduced in the House of Representatives to carry out these +recommendations will be favorably acted on by the Congress during its +present session. + +In some Latin-American countries the expense of government-owned legations +will be less than elsewhere, and it is certainly very urgent that in such +countries as some of the Republics of Central America and the Caribbean, +where it is peculiarly difficult to rent suitable quarters, the +representatives of the United States should be justly and adequately +provided with dignified and suitable official residences. Indeed, it is +high time that the dignity and power of this great Nation should be +fittingly signalized by proper buildings for the occupancy of the Nation's +representatives everywhere abroad. + +DIPLOMACY A HAND MAID OF COMMERCIAL INTERCOURSE AND PEACE + +The diplomacy of the present administration has sought to respond to modern +ideas of commercial intercourse. This policy has been characterized as +substituting dollars for bullets. It is one that appeals alike to +idealistic humanitarian sentiments, to the dictates of sound policy and +strategy, and to legitimate commercial aims. It I is an effort frankly +directed to the increase of American trade upon the axiomatic principle +that the Government of the United States shall extend all proper support to +every legitimate and beneficial American enterprise abroad. How great have +been the results of this diplomacy, coupled with the maximum and minimum +provision of the tariff law, will be seen by some consideration of the +wonderful increase in the export trade of the United States. Because +modern diplomacy is commercial, there has been a disposition in some +quarters to attribute to it none but materialistic aims. How strikingly +erroneous is such an impression may be seen from a study of the results by +which the diplomacy of the United States can be judged. + +SUCCESSFUL EFFORTS IN PROMOTION OF PEACE + +In the field of work toward the ideals of peace this Government negotiated, +but to my regret was unable to consummate, two arbitration treaties which +set the highest mark of the aspiration of nations toward the substitution +of arbitration and reason for war in the settlement of international +disputes. Through the efforts of American diplomacy several wars have been +prevented or ended. I refer to the successful tripartite mediation of the +Argentine Republic, Brazil, and the United States between Peru and Ecuador; +the bringing of the boundary dispute between Panama and Costa Rica to +peaceful arbitration; the staying of warlike preparations when Haiti and +the Dominican Republic were on the verge of hostilities; the stopping of a +war in Nicaragua; the halting of internecine strife in Honduras. The +Government of the United States was thanked for its influence toward the +restoration of amicable relations between the Argentine Republic and +Bolivia. The diplomacy of the United States is active in seeking to assuage +the remaining ill-feeling between this country and the Republic of +Colombia. In the recent civil war in China the United States successfully +joined with the other interested powers in urging an early cessation of +hostilities. An agreement has been reached between the Governments of Chile +and Peru whereby the celebrated Tacna-Arica dispute, which has so long +embittered international relations on the west coast of South America, has +at last been adjusted. Simultaneously came the news that the boundary +dispute between Peru and Ecuador had entered upon a stage of amicable +settlement. The position of the United States in reference to the +Tacna-Arica dispute between Chile and Peru has been one of nonintervention, +but one of friendly influence and pacific counsel throughout the period +during which the dispute in question has been the subject of interchange of +views between this Government and the two Governments immediately +concerned. In the general easing of international tension on the west coast +of South America the tripartite mediation, to which I have referred, has +been a most potent and beneficent factor. + +CHINA + +In China the policy of encouraging financial investment to enable that +country to help itself has had the result of giving new life and practical +application to the open-door policy. The consistent purpose of the present +administration has been to encourage the use of American capital in the +development of China by the promotion of those essential reforms to which +China is pledged by treaties with the United States and other powers. The +hypothecation to foreign bankers in connection with certain industrial +enterprises, such as the Hukuang railways, of the national revenues upon +which these reforms depended, led the Department of State early in the +administration to demand for American citizens participation in such +enterprises, in order that the United States might have equal rights and an +equal voice in all questions pertaining to the disposition of the public +revenues concerned. The same policy of promoting international accord among +the powers having similar treaty rights as ourselves in the matters of +reform, which could not be put into practical effect without the common +consent of all, was likewise adopted in the case of the loan desired by +China for the reform of its currency. The principle of international +cooperation in matters of common interest upon which our policy had already +been based in all of the above instances has admittedly been a great factor +in that concert of the powers which has been so happily conspicuous during +the perilous period of transition through which the great Chinese nation +has been passing. + +CENTRAL AMERICA NEEDS OUR HELP IN DEBT ADJUSTMENT + +In Central America the aim has been to help such countries as Nicaragua and +Honduras to help themselves. They are the immediate beneficiaries. The +national benefit to the United States is twofold. First, it is obvious +that the Monroe doctrine is more vital in the neighborhood of the Panama +Canal and the zone of the Caribbean than anywhere else. There, too, the +maintenance of that doctrine falls most heavily upon the United States. It +is therefore essential that the countries within that sphere shall be +removed from the jeopardy involved by heavy foreign debt and chaotic +national finances and from the ever-present danger of international +complications due to disorder at home. Hence the United States has been +glad to encourage and support American bankers who were willing to lend a +helping hand to the financial rehabilitation of such countries because this +financial rehabilitation and the protection of their customhouses from +being the prey of would be dictators would remove at one stroke the menace +of foreign creditors and the menace of revolutionary disorder. + +The second advantage of the United States is one affecting chiefly all the +southern and Gulf ports and the business and industry of the South. The +Republics of Central America and the Caribbean possess great natural +wealth. They need only a measure of stability and the means of financial +regeneration to enter upon an era of peace and prosperity, bringing profit +and happiness to themselves and at the same time creating conditions sure +to lead to a flourishing interchange of trade with this country. + +I wish to call your especial attention to the recent occurrences in +Nicaragua, for I believe the terrible events recorded there during the +revolution of the past summer-the useless loss of life, the devastation of +property, the bombardment of defenseless cities, the killing and wounding +of women and children, the torturing of noncombatants to exact +contributions, and the suffering of thousands of human beings-might have +been averted had the Department of State, through approval of the loan +convention by the Senate, been permitted to carry out its now +well-developed policy of encouraging the extending of financial aid to weak +Central American States with the primary objects of avoiding just such +revolutions by assisting those Republics to rehabilitate their finances, to +establish their currency on a stable basis, to remove the customhouses from +the danger of revolutions by arranging for their secure administration, and +to establish reliable banks. + +During this last revolution in Nicaragua, the Government of that Republic +having admitted its inability to protect American life and property against +acts of sheer lawlessness on the part of the malcontents, and having +requested this Government to assume that office, it became necessary to +land over 2,000 marines and bluejackets in Nicaragua. Owing to their +presence the constituted Government of Nicaragua was free to devote its +attention wholly to its internal troubles, and was thus enabled to stamp +out the rebellion in a short space of time. When the Red Cross supplies +sent to Granada had been exhausted, 8,000 persons having been given food in +one day upon the arrival of the American forces, our men supplied other +unfortunate, needy Nicaraguans from their own haversacks. I wish to +congratulate the officers and men of the United States navy and Marine +Corps who took part in reestablishing order in Nicaragua upon their +splendid conduct, and to record with sorrow the death of seven American +marines and bluejackets. Since the reestablishment of peace and order, +elections have been held amid conditions of quiet and tranquility. Nearly +all the American marines have now been withdrawn. The country should soon +be on the road to recovery. The only apparent danger now threatening +Nicaragua arises from the shortage of funds. Although American bankers have +already rendered assistance, they may naturally be loath to advance a loan +adequate to set the country upon its feet without the support of some such +convention as that of June, 1911, upon which the Senate has not yet acted. + +ENFORCEMENT OF NEUTRALITY LAWS + +In the general effort to contribute to the enjoyment of peace by those +Republics which are near neighbors of the United States, the administration +has enforced the so-called neutrality statutes with a new vigor, and those +statutes were greatly strengthened in restricting the exportation of arms +and munitions by the joint resolution of last March. It is still a +regrettable fact that certain American ports are made the rendezvous of +professional revolutionists and others engaged in intrigue against the +peace of those Republics. It must be admitted that occasionally a +revolution in this region is justified as a real popular movement to throw +off the shackles of a vicious and tyrannical government. Such was the +Nicaraguan revolution against the Zelaya regime. A nation enjoying our +liberal institutions can not escape sympathy with a true popular movement, +and one so well justified. In very many cases, however, revolutions in the +Republics in question have no basis in principle, but are due merely to the +machinations of conscienceless and ambitious men, and have no effect but to +bring new suffering and fresh burdens to an already oppressed people. The +question whether the use of American ports as foci of revolutionary +intrigue can be best dealt with by a further amendment to the neutrality +statutes or whether it would be safer to deal with special cases by special +laws is one worthy of the careful consideration of the Congress. + +VISIT OF SECRETARY KNOX TO CENTRAL AMERICA AND THE CARIBBEAN + +Impressed with the particular importance of the relations between the +United States and the Republics of Central America and the Caribbean +region, which of necessity must become still more intimate by reason of the +mutual advantages which will be presented by the opening of the Panama +Canal, I directed the Secretary of State last February to visit these +Republics for the purpose of giving evidence of the sincere friendship and +good will which the Government and people of the United States bear toward +them. Ten Republics were visited. Everywhere he was received with a +cordiality of welcome and a generosity of hospitality such as to impress me +deeply and to merit our warmest thanks. The appreciation of the Governments +and people of the countries visited, which has been appropriately shown in +various ways, leaves me no doubt that his visit will conduce to that closer +union and better understanding between the United States and those +Republics which I have had it much at heart to promote. + +OUR MEXICAN POLICY + +For two years revolution and counter-revolution has distraught the +neighboring Republic of Mexico. Brigandage has involved a great deal of +depredation upon foreign interests. There have constantly recurred +questions of extreme delicacy. On several occasions very difficult +situations have arisen on our frontier. Throughout this trying period, the +policy of the United States has been one of patient nonintervention, +steadfast recognition of constituted authority in the neighboring nation, +and the exertion of every effort to care for American interests. I +profoundly hope that the Mexican nation may soon resume the path of order, +prosperity, and progress. To that nation in its sore troubles, the +sympathetic friendship of the United States has been demonstrated to a high +degree. There were in Mexico at the beginning of the revolution some thirty +or forty thousand American citizens engaged in enterprises contributing +greatly to the prosperity of that Republic and also benefiting the +important trade between the two countries. The investment of American +capital in Mexico has been estimated at $1,000,000,000. The responsibility +of endeavoring to safeguard those interests and the dangers inseparable +from propinquity to so turbulent a situation have been great, but I am +happy to have been able to adhere to the policy above outlined-a policy +which I hope may be soon justified by the complete success of the Mexican +people in regaining the blessings of peace and good order. + +AGRICULTURAL CREDITS + +A most important work, accomplished in the past year by the American +diplomatic officers in Europe, is the investigation of the agricultural +credit system in the European countries. Both as a means to afford relief +to the consumers of this country through a more thorough development of +agricultural resources and as a means of more sufficiently maintaining the +agricultural population, the project to establish credit facilities for the +farmers is a concern of vital importance to this Nation. No evidence of +prosperity among well-established farmers should blind us to the fact that +lack of capital is preventing a development of the Nation's agricultural +resources and an adequate increase of the land under cultivation; that +agricultural production is fast falling behind the increase in population; +and that, in fact, although these well-established farmers are maintained +in increasing prosperity because of the natural increase in population, we +are not developing the industry of agriculture. We are not breeding in +proportionate numbers a race of independent and independence-loving +landowners, for a lack of which no growth of cities can compensate. Our +farmers have been our mainstay in times of crisis, and in future it must +still largely be upon their stability and common sense that this democracy +must rely to conserve its principles of self-government. + +The need of capital which American farmers feel to-day had been experienced +by the farmers of Europe, with their centuries-old farms, many years ago. +The problem had been successfully solved in the Old World and it was +evident that the farmers of this country might profit by a study of their +systems. I therefore ordered, through the Department of State, an +investigation to be made by the diplomatic officers in Europe, and I have +laid the results of this investigation before the governors of the various +States with the hope that they will be used to advantage in their +forthcoming meeting. + +INCREASE OF FOREIGN TRADE + +In my last annual message I said that the fiscal year ended June 30, 1911, +was noteworthy as marking the highest record of exports of American +products to foreign countries. The fiscal year 1912 shows that this rate of +advance has been maintained, the total domestic exports having a valuation +approximately Of $2,200,000,000, as compared with a fraction over +$2,000,000,000 the previous year. It is also significant that manufactured +and partly manufactured articles continue to be the chief commodities +forming the volume of our augmented exports, the demands of our own people +for consumption requiring that an increasing proportion of our abundant +agricultural products be kept at home. In the fiscal year 1911 the exports +of articles in the various stages of manufacture, not including foodstuffs +partly or wholly manufactured, amounted approximately to $907,500,000. In +the fiscal year 1912 the total was nearly $1,022,000,000, a gain Of +$114,000,000. + +ADVANTAGE OF MAXIMUM AND MINIMUM TARIFF PROVISION + +The importance which our manufactures have assumed in the commerce of the +world in competition with the manufactures of other countries again draws +attention to the duty of this Government to use its utmost endeavors to +secure impartial treatment for American products in all markets. Healthy +commercial rivalry in international intercourse is best assured by the +possession of proper means for protecting and promoting our foreign trade. +It is natural that competitive countries should view with some concern this +steady expansion of our commerce. If in some instance the measures taken by +them to meet it are not entirely equitable, a remedy should be found. In +former messages I have described the negotiations of the Department of +State with foreign Governments for the adjustment of the maximum and +minimum tariff as provided in section 2 of the tariff law of 1909. The +advantages secured by the adjustment of our trade relations under this law +have continued during the last year, and some additional cases of +discriminatory treatment of which we had reason to complain have been +removed. The Department of State has for the first time in the history of +this country obtained substantial most-favored-nation treatment from all +the countries of the world. There are, however, other instances which, +while apparently not constituting undue discrimination in the sense of +section 2, are nevertheless exceptions to the complete equity of tariff +treatment for American products that the Department of State consistently +has sought to obtain for American commerce abroad. + +NECESSITY FOR SUPPLEMENTARY LEGISLATION + +These developments confirm the opinion conveyed to you in my annual message +of 1911, that while the maximum and minimum provision of the tariff law of +1909 has been fully justified by the success achieved in removing +previously existing undue discriminations against American products, yet +experience has shown that this feature of the law should be amended in such +way as to provide a fully effective means of meeting the varying degrees of +discriminatory treatment of American commerce in foreign countries still +encountered, as well as to protect against injurious treatment on the part +of foreign Governments, through either legislative or administrative +measures, the financial interests abroad of American citizens whose +enterprises enlarge the market for American commodities. + +I can not too strongly recommend to the Congress the passage of some such +enabling measure as the bill which was recommended by the Secretary of +State in his letter of December 13, 1911. The object of the proposed +legislation is, in brief, to enable the Executive to apply, as the case may +require, to any or all commodities, whether or not on the free list from a +country which discriminates against the United States, a graduated scale of +duties up to the maximum Of 25 per cent ad valorem provided in the present +law. Flat tariffs are out of date. Nations no longer accord equal tariff +treatment to all other nations irrespective of the treatment from them +received. Such a flexible power at the command of the Executive would +serve to moderate any unfavorable tendencies on the part of those countries +from which the importations into the United States are substantially +confined to articles on the free list as well as of the countries which +find a lucrative market in the United States for their products under +existing customs rates. It is very necessary that the American Government +should be equipped with weapons of negotiation adapted to modern economic +conditions, in order that we may at all times be in a position to gain not +only technically just but actually equitable treatment for our trade, and +also for American enterprise and vested interests abroad. + +BUSINESS SECURED TO OUR COUNTRY BY DIRECT OFFICIAL EFFORT + +As illustrating the commercial benefits of the Nation derived from the new +diplomacy and its effectiveness upon the material as well as the more ideal +side, it may be remarked that through direct official efforts alone there +have been obtained in the course of this administration, contracts from +foreign Governments involving an expenditure of $50,000,000 in the +factories of the United States. Consideration of this fact and some +reflection upon the necessary effects of a scientific tariff system and a +foreign service alert and equipped to cooperate with the business men of +America carry the conviction that the gratifying increase in the export +trade of this country is, in substantial amount, due to our improved +governmental methods of protecting and stimulating it. It is germane to +these observations to remark that in the two years that have elapsed since +the successful negotiation of our new treaty with Japan, which at the time +seemed to present so many practical difficulties, our export trade to that +country has increased at the rate of over $1,000,000 a month. Our exports +to Japan for the year ended June 30, 1910, were $21,959,310, while for the +year ended June 30, 1912, the exports were $53,478,046, a net increase in +the sale of American products of nearly 150 per cent. + +SPECIAL CLAIMS ARBITRATION WITH GREAT BRITAIN + +Under the special agreement entered into between the United States and +Great Britain on August 18, 1910, for the arbitration of outstanding +pecuniary claims, a schedule of claims and the terms of submission have +been agreed upon by the two Governments, and together with the special +agreement were approved by the Senate on July 19, 1911, but in accordance +with the terms of the agreement they did not go into effect until confirmed +by the two Governments by an exchange of notes, which was done on April 26 +last. Negotiations, are still in progress for a supplemental schedule of +claims to be submitted to arbitration under this agreement, and meanwhile +the necessary preparations for the arbitration of the claims included in +the first schedule have been undertaken and are being carried on under the +authority of an appropriation made for that purpose at the last session of +Congress. It is anticipated that the two Governments will be prepared to +call upon the arbitration tribunal, established under this agreement, to +meet at Washington early next year to proceed with this arbitration. + +FUR SEAL TREATY AND NEED FOR AMENDMENT OF OUR STATUTE + +The act adopted at the last session of Congress to give effect to the +fur-seal convention Of July 7, 1911, between Great Britain, Japan, Russia, +and the United States provided for the suspension of all land killing of +seals on the Pribilof Islands for a period of five years, and an objection +has now been presented to this provision by the other parties in interest, +which raises the issue as to whether or not this prohibition of land +killing is inconsistent with the spirit, if not the letter, of the treaty +stipulations. The justification of establishing this close season depends, +under the terms of the convention, upon how far, if at all, it is necessary +for protecting and preserving the American fur-seal herd and for increasing +its number. This is a question requiring examination of the present +condition of the herd and the treatment which it needs in the light of +actual experience and scientific investigation. A careful examination of +the subject is now being made, and this Government will soon be in +possession of a considerable amount of new information about the American +seal herd, which has been secured during the past season and will be of +great value in determining this question; and if it should appear that +there is any uncertainty as to the real necessity for imposing a close +season at this time I shall take an early opportunity to address a special +message to Congress on this subject, in the belief that this Government +should yield on this point rather than give the slightest ground for the +charge that we have been in any way remiss in observing our treaty +obligations. + +FINAL SETTLEMENT OF NORTH ATLANTIC FISHERIES DISPUTE + +On the 20th of July last an agreement was concluded between the United +States and Great Britain adopting, with certain modifications, the rules +and method of procedure recommended in the award rendered by the North +Atlantic Coast Fisheries Arbitration Tribunal on September 7, 1910, for the +settlement hereafter, in accordance with the principles laid down in the +award, of questions arising with reference to the exercise of the American +fishing liberties under Article I of the treaty of October 20, 1818, +between the United States and Great Britain. This agreement received the +approval of the Senate on August I and was formally ratified by the two +Governments on November 15 last. The rules and a method of procedure +embodied in the award provided for determining by an impartial tribunal the +reasonableness of any new fishery regulations on the treaty coasts of +Newfoundland and Canada before such regulations could be enforced against +American fishermen exercising their treaty liberties on those coasts, and +also for determining the delimitation of bays on such coasts more than 10 +miles wide, in accordance with the definition adopted by the tribunal of +the meaning of the word "bays" as used in the treaty. In the subsequent +negotiations between the two Governments, undertaken for the purpose of +giving practical effect to these rules and methods of procedure, it was +found that certain modifications therein were desirable from the point of +view of both Governments, and these negotiations have finally resulted in +the agreement above mentioned by which the award recommendations as +modified by mutual consent of the two Governments are finally adopted and +made effective, thus bringing this century-old controversy to a final +conclusion, which is equally beneficial and satisfactory to both +Governments. + +IMPERIAL VALLEY AND MEXICO + +In order to make possible the more effective performance of the work +necessary for the confinement in their present channel of the waters of the +lower Colorado River, and thus to protect the people of the Imperial +Valley, as well as in order to reach with the Government of Mexico an +understanding regarding the distribution of the waters of the Colorado +River, in which both Governments are much interested, negotiations are +going forward with a view to the establishment of a preliminary Colorado +River commission, which shall have the powers necessary to enable it to do +the needful work and with authority to study the question of the equitable +distribution of the waters. There is every reason to believe that an +understanding upon this point will be reached and that an agreement will be +signed in the near future. + +CHAMIZAL DISPUTE + +In the interest of the people and city of El Paso this Government has been +assiduous in its efforts to bring to an early settlement the long-standing +Chamizal dispute with Mexico. Much has been accomplished, and while the +final solution of the dispute is not immediate, the favorable attitude +lately assumed by the Mexican Government encourages the hope that this +troublesome question will be satisfactorily and definitively settled at an +early day. + +INTERNATIONAL COMMISSION OF JURISTS + +In pursuance of the convention of August 23, 1906, signed at the Third Pan +American Conference, held at Rio de Janeiro, the International Commission +of jurists met at that capital during the month of last June. At this +meeting 16 American Republics were represented, including the United +States, and comprehensive plans for the future work of the commission were +adopted. At the next meeting fixed for June, 1914, committees already +appointed are instructed to I report regarding topics assigned to them. + +OPIUM CONFERENCE-UNFORTUNATE FAILURE OF OUR GOVERNMENT TO ENACT RECOMMENDED +LEGISLATION + +In my message on foreign relations communicated to the two Houses of +Congress December 7, 1911, I called especial attention to the assembling of +the Opium Conference at The Hague, to the fact that that conference was to +review all pertinent municipal laws relating to the opium and allied evils, +and certainly all international rules regarding these evils, and to the +-fact that it seemed to me most essential that the Congress should take +immediate action on the anti-narcotic legislation before the Congress, to +which I had previously called attention by a special message. + +The international convention adopted by the conference conforms almost +entirely to the principles contained in the proposed anti-narcotic +legislation which has been before the last two Congresses. It was most +unfortunate that this Government, having taken the initiative in the +international action which eventuated in the important international opium +convention, failed to do its share in the great work by neglecting to pass +the necessary legislation to correct the deplorable narcotic evils in the +United States as well as to redeem international pledges upon which it +entered by virtue of the above-mentioned convention. The Congress at its +present session should enact into law those bills now before it which have +been so carefully drawn up in collaboration between the Department of State +and the other executive departments, and which have behind them not only +the moral sentiment of the country, but the practical support of all the +legitimate trade interests likely to be affected. Since the international +convention was signed, adherence to it has been made by several European +States not represented at the conference at The Hague and also by seventeen +Latin-American Republics. + +EUROPE AND THE NEAR EAST + +The war between Italy and Turkey came to a close in October last by the +signature of a treaty of peace, subsequently to which the Ottoman Empire +renounced sovereignty over Cyrenaica and Tripolitania in favor of Italy. +During the past year the Near East has unfortunately been the theater of +constant hostilities. Almost simultaneously with the conclusion of peace +between Italy and Turkey and their arrival at an adjustment of the complex +questions at issue between them, war broke out between Turkey on the one +hand and Bulgaria, Greece, Montenegro, and Servia on the other. The United +States has happily been involved neither directly nor indirectly with the +causes or questions incident to any of these hostilities and has maintained +in regard to them an attitude of absolute neutrality and of complete +political disinterestedness. In the second war in which the Ottoman Empire +has been engaged the loss of life and the consequent distress on both sides +have been appalling, and the United States has found occasion, in the +interest of humanity, to carry out the charitable desires of the American +people, to extend a measure of relief to the sufferers on either side +through the impartial medium of the Red Cross. Beyond this the chief care +of the Government of the United States has been to make due provision for +the protection of its national resident in belligerent territory. In the +exercise of my duty in this matter I have dispatched to Turkish waters a +special-service squadron, consisting of two armored cruisers, in order that +this Government may if need be bear its part in such measures as it may be +necessary for the interested nations to adopt for the safeguarding of +foreign lives and property in the Ottoman Empire in the event that a +dangerous situation should develop. In the meanwhile the several interested +European powers have promised to extend to American citizens the benefit of +such precautionary or protective measures as they might adopt, in the same +manner in which it has been the practice of this Government to extend its +protection to all foreign residents in those countries of the Western +Hemisphere in which it has from time to time been the task of the United +States to act in the interest of peace and good order. The early appearance +of a large fleet of European warships in the Bosphorus apparently assured +the protection of foreigners in that quarter, where the presence of the +American stationnaire the U. S. S. Scorpion sufficed, tinder the +circumstances, to represent the United States. Our cruisers were thus left +free to act if need be along the Mediterranean coasts should any unexpected +contingency arise affecting the numerous American interests in the +neighborhood of Smyrna and Beirut. + +SPITZBERGEN + +The great preponderance of American material interests in the sub-arctic +island of Spitzbergen, which has always been regarded politically as "no +man's land," impels this Government to a continued and lively interest in +the international dispositions to be made for the political governance and +administration of that region. The conflict of certain claims of American +citizens and others is in a fair way to adjustment, while the settlement of +matters of administration, whether by international conference of the +interested powers or otherwise, continues to be the subject of exchange of +views between the Governments concerned. + +LIBERIA + +As a result of the efforts of this Government to place the Government of +Liberia in position to pay its outstanding indebtedness and to maintain a +stable and efficient government, negotiations for a loan of $1,700,000 have +been successfully concluded, and it is anticipated that the payment of the +old loan and the issuance of the bonds of the 1912 loan for the +rehabilitation of the finances of Liberia will follow at an early date, +when the new receivership will go into active operation. The new +receivership will consist of a general receiver of customs designated by +the Government of the United States and three receivers of customs +designated by the Governments of Germany, France, and Great Britain, which +countries have commercial interests in the Republic of Liberia. + +In carrying out the understanding between the Government of Liberia and +that of the United States, and in fulfilling the terms of the agreement +between the former Government and the American bankers, three competent +ex-army officers are now effectively employed by the Liberian Government in +reorganizing the police force of the Republic, not only to keep in order +the native tribes in the hinterland but to serve as a necessary police +force along the frontier. It is hoped that these measures will assure not +only the continued existence but the prosperity and welfare of the Republic +of Liberia. Liberia possesses fertility of soil and natural resources, +which should insure to its people a reasonable prosperity. It was the duty +of the United States to assist the Republic of Liberia in accordance with +our historical interest and moral guardianship of a community founded by +American citizens, as it was also the duty of the American Government to +attempt to assure permanence to a country of much sentimental and perhaps +future real interest to a large body of our citizens. + +MOROCCO + +The legation at Tangier is now in charge of our consul general, who is +acting as charge d'affaires, as well as caring for our commercial interests +in that country. In view of the fact that many of the foreign powers are +now represented by charges d'affaires it has not been deemed necessary to +appoint at the present time a minister to fill a vacancy occurring in that +post. + +THE FAR EAST + +The political disturbances in China in the autumn and winter of 1911-12 +resulted in the abdication of the Manchu rulers on February 12, followed by +the formation of a provisional republican government empowered to conduct +the affairs of the nation until a permanent government might be regularly +established. The natural sympathy of the American people with the +assumption of republican principles by the Chinese people was appropriately +expressed in a concurrent resolution of Congress on April 17, 1912. A +constituent assembly, composed of representatives duly chosen by the people +of China in the elections that are now being held, has been called to meet +in January next to adopt a permanent constitution and organize the +Government of the nascent Republic. During the formative constitutional +stage and pending definite action by the assembly, as expressive of the +popular will, and the hoped-for establishment of a stable republican form +of government, capable of fulfilling its international obligations, the +United States is, according to precedent, maintaining full and friendly de +facto relations with the provisional Government. + +The new condition of affairs thus created has presented many serious and +complicated problems, both of internal rehabilitation and of international +relations, whose solution it was realized would necessarily require much +time and patience. From the beginning of the upheaval last autumn it was +felt by the United States, in common with the other powers having large +interests in China, that independent action by the foreign Governments in +their own individual interests would add further confusion to a situation +already complicated. A policy of international cooperation was accordingly +adopted in an understanding, reached early in the disturbances, to act +together for the protection of the lives and property of foreigners if +menaced, to maintain an attitude of strict impartiality as between the +contending factions, and to abstain from any endeavor to influence the +Chinese in their organization of a new form of government. In view of the +seriousness of the disturbances and their general character, the American +minister at Peking was instructed at his discretion to advise our nationals +in the affected districts to concentrate at such centers as were easily +accessible to foreign troops or men of war. Nineteen of our naval vessels +were stationed at various Chinese ports, and other measures were promptly +taken for the adequate protection of American interests. + +It was further mutually agreed, in the hope of hastening an end to +hostilities, that none of the interested powers would approve the making of +loans by its nationals to either side. As soon, however, as a united +provisional Government of China was assured, the United States joined in a +favorable consideration of that Government's request for advances needed +for immediate administrative necessities and later for a loan to effect a +permanent national reorganization. The interested Governments had already, +by common consent, adopted, in respect to the purposes, expenditure, and +security of any loans to China made by their nationals, certain conditions +which were held to be essential, not only to secure reasonable protection +for the foreign investors, but also to safeguard and strengthen China's +credit by discouraging indiscriminate borrowing and by insuring the +application of the funds toward the establishment of the stable and +effective government necessary to China's welfare. In June last +representative banking groups of the United States, France, Germany, Great +Britain, Japan, and Russia formulated, with the general sanction of their +respective Governments, the guaranties that would be expected in relation +to the expenditure and security of the large reorganization loan desired by +China, which, however, have thus far proved unacceptable to the provisional +Government. + +SPECIAL MISSION OF CONDOLENCE TO JAPAN + +In August last I accredited the Secretary of State as special ambassador to +Japan, charged with the mission of bearing to the imperial family, the +Government, and the people of that Empire the sympathetic message of the +American Commonwealth oil the sad occasion of the death of His Majesty the +Emperor Mutsuhito, whose long and benevolent reign was the greater part of +Japan's modern history. The kindly reception everywhere accorded to +Secretary Knox showed that his mission was deeply appreciated by the +Japanese nation and emphasized strongly the friendly relations that have +for so many years existed between the two peoples. + +SOUTH AMERICA + +Our relations with the Argentine Republic are most friendly and cordial. +So, also, are our relations with Brazil, whose Government has accepted the +invitation of the United States to send two army officers to study at the +Coast Artillery School at Fort Monroe. The long-standing Alsop claim, which +had been the only hindrance to the healthy growth of the most friendly +relations between the United States and Chile, having been eliminated +through the submission of the question to His Britannic Majesty King George +V as "amiable compositeur," it is a cause of much gratification to me that +our relations with Chile are now established upon a firm basis of growing +friendship. The Chilean Government has placed an officer of the United +States Coast Artillery in charge of the Chilean Coast Artillery School, and +has shown appreciation of American methods by confiding to an American firm +important work for the Chilean coast defenses. + +Last year a revolution against the established Government of Ecuador broke +out at the principal port of that Republic. Previous to this occurrence the +chief American interest in Ecuador, represented by the Guayaquil & Quito +Railway Co., incorporated in the United States, had rendered extensive +transportation and other services on account to the Ecuadorian Government, +the amount of which ran into a sum which was steadily increasing and which +the Ecuadorian Government had made no provision to pay, thereby threatening +to crush out the very existence of this American enterprise. When +tranquillity had been restored to Ecuador as a result of the triumphant +progress of the Government forces from Quito, this Government interposed +its good offices to the end that the American interests in Ecuador might be +saved from complete extinction. As a part of the arrangement which was +reached between the parties, and at the request of the Government of +Ecuador, I have consented to name an arbitrator, who, acting under the +terms of the railroad contract, with an arbitrator named by the Ecuadorian +Government, will pass upon the claims that have arisen since the +arrangement reached through the action of a similar arbitral tribunal in +1908. + +In pursuance of a request made some time ago by the Ecuadorian Government, +the Department of State has given much attention to the problem of the +proper sanitation of Guayaquil. As a result a detail of officers of the +Canal Zone will be sent to Guayaquil to recommend measures that will lead +to the complete permanent sanitation of this plague and fever infected +region of that Republic, which has for so long constituted a menace to +health conditions on the Canal Zone. It is hoped that the report which this +mission will furnish will point out a way whereby the modicum of assistance +which the United States may properly lend the Ecuadorian Government may be +made effective in ridding the west coast of South America of a focus of +contagion to the future commercial current passing through the Panama +Canal. + +In the matter of the claim of John Celestine Landreau against the +Government of Peru, which claim arises out of certain contracts and +transactions in connection with the discovery and exploitation of guano, +and which has been under discussion between the two Governments since 1874, +I am glad to report that as the result of prolonged negotiations, which +have been characterized by the utmost friendliness and good will on both +sides, the Department of State has succeeded in securing the consent of +Peru to the arbitration of the claim, and that the negotiations attending +the drafting and signature of a protocol submitting the claim to an +arbitral tribunal are proceeding with due celerity. + +An officer of the American Public Health Service and an American sanitary +engineer are now on the way to Iquitos, in the employ of the Peruvian +Government, to take charge of the sanitation of that river port. Peru is +building a number of submarines in this country, and continues to show +every desire to have American capital invested in the Republic. + +In July the United States sent undergraduate delegates to the Third +International Students Congress held at Lima, American students having been +for the first time invited to one of these meetings. + +The Republic of Uruguay has shown its appreciation of American agricultural +and other methods by sending a large commission to this country and by +employing many American experts to assist in building up agricultural and +allied industries in Uruguay. + +Venezuela is paying off the last of the claims the settlement of which was +provided for by the Washington protocols, including those of American +citizens. Our relations with Venezuela are most cordial, and the trade of +that Republic with the United States is now greater than with any other +country. + +CENTRAL AMERICA AND THE CARIBBEAN + +During the past summer the revolution against the administration which +followed the assassination of President Caceres a year ago last November +brought the Dominican Republic to the verge of administrative chaos, +without offering any guaranties of eventual stability in the ultimate +success of either party. In pursuance of the treaty relations of the United +States with the Dominican Republic, which were threatened by the necessity +of suspending the operation under American administration of the +customhouses on the Haitian frontier, it was found necessary to dispatch +special commissioners to the island to reestablish the customhouses and +with a guard sufficient to insure needed protection to the customs +administration. The efforts which have been made appear to have resulted in +the restoration of normal conditions throughout the Republic. The good +offices which the commissioners were able to exercise were instrumental in +bringing the contending parties together and in furnishing a basis of +adjustment which it is hoped will result in permanent benefit to the +Dominican people. + +Mindful of its treaty relations, and owing to the position of the +Government of the United States as mediator between the Dominican Republic +and Haiti in their boundary dispute, and because of the further fact that +the revolutionary activities on the Haitian-Dominican frontier had become +so active as practically to obliterate the line of demarcation that had +been heretofore recognized pending the definitive settlement of the +boundary in controversy, it was found necessary to indicate to the two +island Governments a provisional de facto boundary line. This was done +without prejudice to the rights or obligations of either country in a final +settlement to be reached by arbitration. The tentative line chosen was one +which, under the circumstances brought to the knowledge of this Government, +seemed to conform to the best interests of the disputants. The border +patrol which it had been found necessary to reestablish for customs +purposes between the two countries was instructed provisionally to observe +this line. + +The Republic of Cuba last May was in the throes of a lawless uprising that +for a time threatened the destruction of a great deal of valuable +property-much of it owned by Americans and other foreigners-as well as the +existence of the Government itself. The armed forces of Cuba being +inadequate to guard property from attack and at the same time properly to +operate against the rebels, a force of American marines was dispatched from +our naval station at Guantanamo into the Province of Oriente for the +protection of American and other foreign life and property. The Cuban +Government was thus able to use all its forces in putting down the +outbreak, which it succeeded in doing in a period of six weeks. The +presence of two American warships in the harbor of Habana during the most +critical period of this disturbance contributed in great measure to allay +the fears of the inhabitants, including a large foreign colony. + +There has been under discussion with the Government of Cuba for some time +the question of the release by this Government of its leasehold rights at +Bahia Honda, on the northern coast of Cuba, and the enlargement, in +exchange therefor, of the naval station which has been established at +Guantanamo Bay, on the south. As the result of the negotiations thus +carried on an agreement has been reached between the two Governments +providing for the suitable enlargement of the Guantanamo Bay station upon +terms which are entirely fair and equitable to all parties concerned. + +At the request alike of the Government and both political parties in +Panama, an American commission undertook supervision of the recent +presidential election in that Republic, where our treaty relations, and, +indeed, every geographical consideration, make the maintenance of order and +satisfactory conditions of peculiar interest to the Government of the +United States. The elections passed without disorder, and the new +administration has entered upon its functions. + +The Government of Great Britain has asked the support of the United States +for the protection of the interests of British holders of the foreign +bonded debt of Guatemala. While this Government is hopeful of an +arrangement equitable to the British bondholders, it is naturally unable to +view the question apart from its relation to the broad subject of financial +stability in Central America, in which the policy of the United States does +not permit it to escape a vital interest. Through a renewal of negotiations +between the Government of Guatemala and American bankers, the aim of which +is a loan for the rehabilitation of Guatemalan finances, a way appears to +be open by which the Government of Guatemala could promptly satisfy any +equitable and just British claims, and at the same time so improve its +whole financial position as to contribute greatly to the increased +prosperity of the Republic and to redound to the benefit of foreign +investments and foreign trade with that country. Failing such an +arrangement, it may become impossible for the Government of the United +States to escape its obligations in connection with such measures as may +become necessary to exact justice to legitimate foreign claims. + +In the recent revolution in Nicaragua, which, it was generally admitted, +might well have resulted in a general Central American conflict but for the +intervention of the United States, the Government of Honduras was +especially menaced; but fortunately peaceful conditions were maintained +within the borders of that Republic. The financial condition of that +country remains unchanged, no means having been found for the final +adjustment of pressing outstanding foreign claims. This makes it the more +regrettable that the financial convention between the United States and +Honduras has thus far failed of ratification. The Government of the United +States continues to hold itself ready to cooperate with the Government of +Honduras, which it is believed, can not much longer delay the meeting of +its foreign obligations, and it is hoped at the proper time American +bankers will be willing to cooperate for this purpose. + +NECESSITY FOR GREATER GOVERNMENTAL EFFORT IN RETENTION AND EXPANSION OF OUR +FOREIGN TRADE + +It is not possible to make to the Congress a communication upon the present +foreign relations of the United States so detailed as to convey an adequate +impression of the enormous increase in the importance and activities of +those relations. If this Government is really to preserve to the American +people that free opportunity in foreign markets which will soon be +indispensable to our prosperity, even greater efforts must be made. +Otherwise the American merchant, manufacturer, and exporter will find many +a field in which American trade should logically predominate preempted +through the more energetic efforts of other governments and other +commercial nations. + +There are many ways in which through hearty cooperation the legislative and +executive branches of this Government can do much. The absolute essential +is the spirit of united effort and singleness of purpose. I will allude +only to a very few specific examples of action which ought then to result. +America can not take its proper place in the most important fields for its +commercial activity and enterprise unless we have a merchant marine. +American commerce and enterprise can not be effectively fostered in those +fields unless we have good American banks in the countries referred to. We +need American newspapers in those countries and proper means for public +information about them. We need to assure the permanency of a trained +foreign service. We need legislation enabling the members of the foreign +service to be systematically brought in direct contact with the industrial, +manufacturing, and exporting interests of this country in order that +American business men may enter the foreign field with a clear perception +of the exact conditions to be dealt with and the officers themselves may +prosecute their work with a clear idea of what American industrial and +manufacturing interests require. + +CONCLUSION + +Congress should fully realize the conditions which obtain in the world as +we find ourselves at the threshold of our middle age as a Nation. We have +emerged full grown as a peer in the great concourse of nations. We have +passed through various formative periods. We have been self-centered in the +struggle to develop our domestic resources and deal with our domestic +questions. The Nation is now too matured to continue in its foreign +relations those temporary expedients natural to a people to whom domestic +affairs are the sole concern. In the past our diplomacy has often +consisted, in normal times, in a mere assertion of the right to +international existence. We are now in a larger relation with broader +rights of our own and obligations to others than ourselves. A number of +great guiding principles were laid down early in the history of this +Government. The recent task of our diplomacy has been to adjust those +principles to the conditions of to-day, to develop their corollaries, to +find practical applications of the old principles expanded to meet new +situations. Thus are being evolved bases upon which can rest the +superstructure of policies which must grow with the destined progress of +this Nation. The successful conduct of our foreign relations demands a +broad and a modern view. We can not meet new questions nor build for the +future if we confine ourselves to outworn dogmas of the past and to the +perspective appropriate at our emergence from colonial times and +conditions. The opening of the Panama Canal will mark a new era in our +international life and create new and worldwide conditions which, with +their vast correlations and consequences, will obtain for hundreds of years +to come. We must not wait for events to overtake us unawares. With +continuity of purpose we must deal with the problems of our external +relations by a diplomacy modern, resourceful, magnanimous, and fittingly +expressive of the high ideals of a great nation. + +Part II.[On Fiscal, judicial, Military and Insular Affairs.] THE WHITE +HOUSE, December 6, 1912. To the Senate and House of Representatives: + +On the 3d of December I sent a message to the Congress, which was confined +to our foreign relations. The Secretary of State makes no report to the +President or to Congress, and a review of the history of the transactions +of the State Department in one year must therefore be included by the +President in his annual message or Congress will not be fully informed of +them. A full discussion of all the transactions of the Government, with a +view to informing the Congress of the important events of the year and +recommending new legislation, requires more space than one message of +reasonable length affords. I have therefore adopted the course of sending +three or four messages during the first ten days of the session, so as to +include reference to the more important matters that should be brought to +the attention of the Congress. + +BUSINESS CONDITIONS + +The condition of the country with reference to business could hardly be +better. While the four years of the administration now drawing to a close +have not developed great speculative expansion or a wide field of new +investment, the recovery and progress made from the depressing conditions +following the panic of 1907 have been steady and the improvement has been +clear and easily traced in the statistics. The business of the country is +now on a solid basis. Credits are not unduly extended, and every phase of +the situation seems in a state of preparedness for a period of unexampled +prosperity. Manufacturing concerns are running at their full capacity and +the demand for labor was never so constant and growing. The foreign trade +of the country for this year will exceed $4,000,000,000, while the balance +in our favor-that of the excess of exports over imports-will exceed +$500,000,000. More than half our exports are manufactures or partly +manufactured material, while our exports of farm products do not show the +same increase because of domestic consumption. It is a year of bumper +crops; the total money value of farm products will exceed $9,500,000,000. +It is a year when the bushel or unit price of agricultural products has +gradually fallen, and yet the total value of the entire crop is greater by +over $1,000,000,000 than we have known in our history. + +CONDITION OF THE TREASURY + +The condition of the Treasury is very satisfactory. The total +interest-bearing debt is $963,777,770, of which $134,631,980 constitute the +Panama Canal loan. The noninterest-bearing debt is $378,301,284.90, +including $346,681,016 of greenbacks. We have in the Treasury $150,000,000 +in gold coin as a reserve against the outstanding greenbacks; and in +addition we have a cash balance in the Treasury as a general fund of +$167,152,478.99, or an increase of $26,975,552 over the general fund last +year. + +RECEIPTS AND EXPENDITURES + +For three years the expenditures of the Government have decreased under the +influence of an effort to economize. This year presents an apparent +exception. The estimate by the Secretary of the Treasury of the ordinary +receipts, exclusive of postal revenues, for the year ending June 30, 1914, +indicates that they will amount to $710,000,000. The sum of the estimates +of the expenditures for that same year, exclusive of Panama Canal +disbursements and postal disbursements payable from postal revenues, is +$732,000,000, indicating a deficit Of $22,000,000. For the year ending June +30, 1913, similarly estimated receipts were $667,000,000, while the total +corresponding estimate of expenditures for that year, submitted through the +Secretary of the Treasury to Congress, amounted to $656,000,000. This shows +an increase of $76,000,000 in the estimates for 1914 over the total +estimates of 1913. This is due to an increase Of $25,000,000 in the +estimate for rivers and harbors for the next year on projects and surveys +authorized by Congress; to an increase under the new pension bill Of +$32,500,000; and to an increase in the estimates for expenses of the Navy +Department Of $24,000,000. The estimate for the Navy Department for the +year 1913 included two battleships. Congress made provision for only one +battleship, and therefore the Navy Department has deemed it necessary and +proper to make an estimate which includes the first year's expenditure for +three battleships in addition to the amount required for work on the +uncompleted ships now under construction. In addition to the natural +increase in the expenditures for the uncompleted ships, and the additional +battleship estimated for, the other increases are due to the pay +required for 4,000 or more additional enlisted men in the Navy; and to this +must be added the additional cost of construction imposed by the change in +the eight-hour law which makes it applicable to ships built in private +shipyards. + +With the exceptions of these three items, the estimates show a reduction +this year below the total estimates for 1913 of more than $5,000,000. + +The estimates for Panama Canal construction for 1914 are $17,000,000 less +than for 1913. + +OUR BANKING AND CURRENCY SYSTEM + +A time when panics seem far removed is the best time for us to prepare our +financial system to withstand a storm. The most crying need this country +has is a proper banking and currency system. The existing one is +inadequate, and everyone who has studied the question admits it. + +It is the business of the National Government to provide a medium, +automatically contracting and expanding in volume, to meet the needs of +trade. Our present system lacks the indispensable quality of elasticity. + +The only part of our monetary medium that has elasticity is the bank-note +currency. The peculiar provisions of the law requiring national banks to +maintain reserves to meet the call of the depositors operates to increase +the money stringency when it arises rather than to expand the supply of +currency and relieve it. It operates upon each bank and furnishes a motive +for the withdrawal of currency from the channels of trade by each bank to +save itself, and offers no inducement whatever for the use of the reserve +to expand the supply of currency to meet the exceptional demand. + +After the panic of 1907 Congress realized that the present system was not +adapted to the country's needs and that under it panics were possible that +might properly be avoided by legislative provision. Accordingly a monetary +commission was appointed which made a report in February, 1912. The system +which they recommended involved a National Reserve Association, which was, +in certain of its faculties and functions, a bank, and which was given +through its governing authorities the power, by issuing circulating notes +for approved commercial paper, by fixing discounts, and by other methods of +transfer of currency, to expand the supply of the monetary medium where it +was most needed to prevent the export or hoarding of gold and generally to +exercise such supervision over the supply of money in every part of the +country as to prevent a stringency and a panic. The stock in this +association was to be distributed to the banks of the whole United States, +State and National, in a mixed proportion to bank units and to capital +stock paid in. The control of the association was vested in a board of +directors to be elected by representatives of the banks, except certain +ex-officio directors, three Cabinet officers, and the Comptroller of the +Currency. The President was to appoint the governor of the association from +three persons to be selected by the directors, while the two deputy +governors were to be elected by the board of directors. The details of the +plan were worked out with great care and ability, and the plan in general +seems to me to furnish the basis for a proper solution of our present +difficulties. I feel that the Government might very properly be given a +greater voice in the executive committee of the board of directors without +danger of injecting politics into its management, but I think the +federation system of banks is a good one, provided proper precautions are +taken to prevent banks of large capital from absorbing power through +ownership of stock in other banks. The objections to a central bank it +seems to me are obviated if the ownership of the reserve association is +distributed among all the banks of a country in which banking is free. The +earnings of the reserve association are limited in percentage tit a +reasonable and fixed amount, and the profits over and above this are to be +turned into the Government Treasury. It is quite probable that still +greater security against control by money centers may be worked into the +plan. + +Certain it is, however, that the objections which were made in the past +history of this country to a central bank as furnishing a monopoly of +financial power to private individuals, would not apply to an association +whose ownership and control is so widely distributed and is divided between +all the banks of the country, State and National, on the one hand, and the +Chief Executive through three department heads and his Comptroller of the +Currency, on the other. The ancient hostility to a national bank, with its +branches, in which is concentrated the privilege of doing a banking +business and carrying on the financial transactions of the Government, has +prevented the establishment of such a bank since it was abolished in the +Jackson Administration. Our present national banking law has obviated +objections growing out of the same cause by providing a free banking system +in which any set of stockholders can establish a national bank if they +comply with the conditions of law. It seems to me that the National Reserve +Association meets the same objection in a similar way; that is, by giving +to each bank, State and National, in accordance with its size, a certain +share in the stock of the reserve association, nontransferable and only to +be held by the bank while it performs its functions as a partner in the +reserve association. + +The report of the commission recommends provisions for the imposition of a +graduated tax on the expanded currency of such a character as to furnish a +motive for reducing the issue of notes whenever their presence in the money +market is not required by the exigencies of trade. In other words, the +whole system has been worked out with the greatest care. Theoretically it +presents a plan that ought to command support. Practically it may require +modification in various of its provisions in order to make the security +against, abuses by combinations among the banks impossible. But in the face +of the crying necessity that there is for improvement in our present +system, I urgently invite the attention of Congress to the proposed plan +and the report of the commission, with the hope that an earnest +consideration may suggest amendments and changes within the general plan +which will lead to its adoption for the benefit of the country. There is no +class in the community more interested in a safe and sane banking and +currency system, one which will prevent panics and automatically furnish in +each trade center the currency needed in the carrying on of the business at +that center, than the wage earner. There is no class in the community whose +experience better qualifies them to make suggestions as to the sufficiency +of a currency and banking system than the bankers and business men. Ought +we, therefore, to ignore their recommendations and reject their financial +judgment as to the proper method of reforming our financial system merely +because of the suspicion which exists against them in the minds of many of +our fellow citizens? Is it not the duty of Congress to take up the plan +suggested, examine it from all standpoints, give impartial consideration to +the testimony of those whose experience ought to fit them to give the best +advice on the subject, and then to adopt some plan which will secure the +benefits desired? + +A banking and currency system seems far away from the wage earner and the +farmer, but the fact is that they are vitally interested in a safe system +of currency which shall graduate its volume to the amount needed and which +shall prevent times of artificial stringency that frighten capital, stop +employment, prevent the meeting of the pay roll, destroy local markets, and +produce penury and want. + +THE TARIFF + +I have regarded it as my duty in former messages to the Congress to urge +the revision of the tariff upon principles of protection. It was my +judgment that the customs duties ought to be revised downward, but that the +reduction ought not to be below a rate which would represent the difference +in the cost of production between the article in question at home and +abroad, and for this and other reasons I vetoed several bills which were +presented to me in the last session of this Congress. Now that a new +Congress has been elected on a platform of a tariff for revenue only rather +than a protective tariff, and is to revise the tariff on that basis, it is +needless for me to occupy the time of this Congress with arguments or +recommendations in favor of a protective tariff. + +Before passing from the tariff law, however, known as the Payne tariff law +of August 5, 1909, I desire to call attention to section 38 of that act, +assessing a special excise tax on corporations. It contains a provision +requiring the levy of an additional 50 per cent to the annual tax in cases +of neglect to verify the prescribed return or to file it before the time +required by law. This additional charge of 50 per cent operates in some +cases as a harsh penalty for what may have been a mere inadvertence or +unintentional oversight, and the law should be so amended as to mitigate +the severity of the charge in such instances. Provision should also be made +for the refund of additional taxes heretofore collected because of such +infractions in those cases where the penalty imposed has been so +disproportionate to the offense as equitably to demand relief. + +BUDGET + +The estimates for the next fiscal year have been assembled by the Secretary +of the Treasury and by him transmitted to Congress. I purpose at a later +day to submit to Congress a form of budget prepared for me and recommended +by the President's Commission on Economy and Efficiency, with a view of +suggesting the useful and informing character of a properly framed budget. + +WAR DEPARTMENT + +The War Department combines within its jurisdiction functions which in +other countries usually occupy three departments. It not only has the +management of the Army and the coast defenses, but its jurisdiction extends +to the government of the Philippines and of Porto Rico and the control of +the receivership of the customs revenues of the Dominican Republic; it also +includes the recommendation of all plans for the improvement of harbors and +waterways and their execution when adopted; and, by virtue of an Executive +order, the supervision of the construction of the Panama Canal. + +ARMY REORGANIZATION + +Our small Army now consists of 83,809 men, excluding the 5,000 Philippine +scouts. Leaving out of consideration the Coast Artillery force, whose +position is fixed in our various seacoast defenses, and the present +garrisons of our various insular possessions, we have to-day within the +continental United States a mobile Army of only about 35,000 men. This +little force must be still further drawn upon to supply the new garrisons +for the great naval base which is being established at Pearl Harbor, in the +Hawaiian Islands, and to protect the locks now rapidly approaching +completion at Panama. The forces remaining in the United States are now +scattered in nearly 50 Posts, situated for a variety of historical reasons +in 24 States. These posts contain only fractions of regiments, averaging +less than 700 men each. In time of peace it has been our historical policy +to administer these units separately by a geographical organization. In +other words, our Army in time of peace has never been a united organization +but merely scattered groups of companies, battalions, and regiments, and +the first task in time of war has been to create out of these scattered +units an Army fit for effective teamwork and cooperation. + +To the task of meeting these patent defects, the War Department has been +addressing itself during the past year. For many years we had no officer or +division whose business it was to study these problems and plan remedies +for these defects. With the establishment of the General Staff nine years +ago a body was created for this purpose. It has, necessarily, required time +to overcome, even in its own personnel, the habits of mind engendered by a +century of lack of method, but of late years its work has become systematic +and effective, and it has recently been addressing itself vigorously to +these problems. + +A comprehensive plan of Army reorganization was prepared by the War College +Division of the General Staff. This plan was thoroughly discussed last +summer at a series of open conferences held by the Secretary of War and +attended by representatives from all branches of the Army and from +Congress. In printed form it has been distributed to Members of Congress +and throughout the Army and the National Guard, and widely through +institutions of learning and elsewhere in the United States. In it, for the +first time, we have a tentative chart for future progress. + +Under the influence of this study definite and effective steps have been +taken toward Army reorganization so far as such reorganization lies within +the Executive power. Hitherto there has been no difference of policy in the +treatment of the organization of our foreign garrisons from those of troops +within the United States. The difference of situation is vital, and the +foreign garrison should be prepared to defend itself at an instant's notice +against a foe who may command the sea. Unlike the troops in the United +States, it can not count upon reinforcements or recruitment. It is an +outpost upon which will fall the brunt of the first attack in case of war. +The historical policy of the United States of carrying its regiments during +time of peace at half strength has no application to our foreign garrisons. +During the past year this defect has been remedied as to the Philippines +garrison. The former garrison of 12 reduced regiments has been replaced by +a garrison of 6 regiments at full strength, giving fully the same number of +riflemen at an estimated economy in cost of maintenance of over $1,000,000 +per year. This garrison is to be permanent. Its regimental units, instead +of being transferred periodically back and forth from the United States, +will remain in the islands. The officers and men composing these units +will, however, serve a regular tropical detail as usual, thus involving no +greater hardship upon the personnel and greatly increasing the +effectiveness of the garrison. A similar policy is proposed for the +Hawaiian and Panama garrisons as fast as the barracks for them are +completed. I strongly urge upon Congress that the necessary appropriations +for this purpose should be promptly made. It is, in my opinion, of first +importance that these national outposts, upon which a successful home +defense will, primarily, depend, should be finished and placed in effective +condition at the earliest possible day. + +THE HOME ARMY + +Simultaneously with the foregoing steps the War Department has been +proceeding with the reorganization of the Army at home. The formerly +disassociated units are being united into a tactical organization of three +divisions, each consisting of two or three brigades of Infantry and, so far +as practicable, a proper proportion of divisional Cavalry and Artillery. Of +course, the extent to which this reform can be carried by the Executive is +practically limited to a paper organization. The scattered units can be +brought under a proper organization, but they will remain physically +scattered until Congress supplies the necessary funds for grouping them in +more concentrated posts. Until that is done the present difficulty of +drilling our scattered groups together, and thus training them for the +proper team play, can not be removed. But we shall, at least, have an Army +which will know its own organization and will be inspected by its proper +commanders, and to which, as a unit, emergency orders can be issued in time +of war or other emergency. Moreover, the organization, which in many +respects is necessarily a skeleton, will furnish a guide for future +development. The separate regiments and companies will know the brigades +and divisions to which they belong. They will be maneuvered together +whenever maneuvers are established by Congress, and the gaps in their +organization will show the pattern into which can be filled new troops as +the Nation grows and a larger Army is provided. + +REGULAR ARMY RESERVE + +One of the most important reforms accomplished during the past year has +been the legislation enacted in the Army appropriation bill of last summer, +providing for a Regular Army reserve. Hitherto our national policy has +assumed that at the outbreak of war our regiments would be immediately +raised to full strength. But our laws have provided no means by which this +could be accomplished, or by which the losses of the regiments when once +sent to the front could be repaired. In this respect we have neglected the +lessons learned by other nations. The new law provides that the soldier, +after serving four years with colors, shall pass into a reserve for three +years. At his option he may go into the reserve at the end of three years, +remaining there for four years. While in the reserve he can be called to +active duty only in case of war or other national emergency, and when so +called and only in such case will receive a stated amount of pay for all of +the period in which he has been a member of the reserve. The legislation is +imperfect, in my opinion, in certain particulars, but it is a most +important step in the right direction, and I earnestly hope that it will be +carefully studied and perfected by Congress. + +THE NATIONAL GUARD + +Under existing law the National Guard constitutes, after the Regular Army, +the first line of national defense. Its organization, discipline, training, +and equipment, under recent legislation, have been assimilated, as far as +possible, to those of the Regular Army, and its practical efficiency, under +the effect of this training, has very greatly increased. Our citizen +soldiers under present conditions have reached a stage of development +beyond which they can not reasonably be asked to go without further direct +assistance in the form of pay from the Federal Government. On the other +hand, such pay from the National Treasury would not be justified unless it +produced a proper equivalent in additional efficiency on the part of the +National Guard. The Organized Militia to-day can not be ordered outside of +the limits of the United States, and thus can not lawfully be used for +general military purposes. The officers and men are ambitious and eager to +make themselves thus available and to become an efficient national reserve +of citizen soldiery. They are the only force of trained men, other than the +Regular Army, upon which we can rely. The so-called militia pay bill, in +the form agreed on between the authorities of the War Department and the +representatives of the National Guard, in my opinion adequately meets these +conditions and offers a proper return for the pay which it is proposed to +give to the National Guard. I believe that its enactment into law would be +a very long step toward providing this Nation with a first line of citizen +soldiery, upon which its main reliance must depend in case of any national +emergency. Plans for the organization of the National Guard into tactical +divisions, on the same lines as those adopted for the Regular Army, are +being formulated by the War College Division of the General Staff. + +NATIONAL VOLUNTEERS + +The National Guard consists of only about 110,000 men. In any serious war +in the past it has always been necessary, and in such a war in the future +it doubtless will be necessary, for the Nation to depend, in addition to +the Regular Army and the National Guard, upon a large force of volunteers. +There is at present no adequate provision of law for the raising of such a +force. There is now pending in Congress, however, a bill which makes such +provision, and which I believe is admirably adapted to meet the exigencies +which would be presented in case of war. The passage of the bill would not +entail a dollar's expense upon the Government at this time or in the future +until war comes. But if war comes the methods therein directed are in +accordance with the best military judgment as to what they ought to be, and +the act would prevent the necessity for a discussion of any legislation and +the delays incident to its consideration and adoption. I earnestly urge its +passage. + +CONSOLIDATION OF THE SUPPLY CORPS + +The Army appropriation act of 191:2 also carried legislation for the +consolidation of the Quartermaster's Department, the Subsistence +Department, and the Pay Corps into a single supply department, to be known +as the Quartermaster's Corps. It also provided for the organization of a +special force of enlisted men, to be known as the Service Corps, gradually +to replace many of the civilian employees engaged in the manual labor +necessary in every army. I believe that both of these enactments will +improve the administration of our military establishment. The consolidation +of the supply corps has already been effected, and the organization of the +service corps is being put into effect. + +All of the foregoing reforms are in the direction of economy and +efficiency. Except for the slight increase necessary to garrison our +outposts in Hawaii and Panama, they do not call for a larger Army, but they +do tend to produce a much more efficient one. The only substantial new +appropriations required are those which, as I have pointed out, are +necessary to complete the fortifications and barracks at our naval bases +and outposts beyond the sea. + +PORTO RICO + +Porto Rico continues to show notable progress, both commercially and in the +spread of education. Its external commerce has increased 17 per cent over +the preceding year, bringing the total value up to $92,631,886, or more +than five times the value of the commerce of the island in 1901. During the +year 160,657 Pupils were enrolled in the public schools, as against 145,525 +for the preceding year, and as compared with 26,000 for the first year of +American administration. Special efforts are under way for the promotion of +vocational and industrial training, the need of which is particularly +pressing in the island. When the bubonic plague broke out last June, the +quick and efficient response of the people of Porto Rico to the demands of +modern sanitation was strikingly shown by the thorough campaign which was +instituted against the plague and the hearty public opinion which supported +the Government's efforts to check its progress and to prevent its +recurrence. + +The failure thus far to grant American citizenship continues to be the only +ground of dissatisfaction. The bill conferring such citizenship has passed +the House of Representatives and is now awaiting the action of the Senate. +I am heartily in favor of the passage of this bill. I believe that the +demand for citizenship is just, and that it is amply earned by sustained +loyalty on the part of the inhabitants of the island. But it should be +remembered that the demand must be, and in the minds of most Porto Ricans +is, entirely disassociated from any thought of statehood. I believe that no +substantial approved public opinion in the United States or in Porto Rico +contemplates statehood for the island as the ultimate form of relations +between us. I believe that the aim to be striven for is the fullest +possible allowance of legal and fiscal self-government, with American +citizenship as to the bond between us; in other words, a relation analogous +to the present relation between Great Britain and such self-governing +colonies as Canada and Australia. This would conduce to the fullest and +most self-sustaining development of Porto Rico, while at the same time it +would grant her the economic and political benefits of being under the +American flag. + +PHILIPPINES + +A bill is pending in Congress which revolutionizes the carefully worked out +scheme of government under which the Philippine Islands are now governed +and which proposes to render them virtually autonomous at once and +absolutely independent in eight years. Such a proposal can only be founded +on the assumption that we have now discharged our trusteeship to the +Filipino people and our responsibility for them to the world, and that they +are now prepared for self-government as well as national sovereignty. A +thorough and unbiased knowledge of the facts clearly shows that these +assumptions are absolutely without justification. As to this, I believe +that there is no substantial difference of opinion among any of those who +have had the responsibility of facing Philippine problems in the +administration of the islands, and I believe that no one to whom the future +of this people is a responsible concern can countenance a policy fraught +with the direst consequences to those on whose behalf it is ostensibly +urged. + +In the Philippine Islands we have embarked upon an experiment unprecedented +in dealing with dependent people. We are developing there conditions +exclusively for their own welfare. We found an archipelago containing 24 +tribes and races, speaking a great variety of languages, and with a +population over 80 per cent of which could neither read nor write. Through +the unifying forces of a common education, of commercial and economic +development, and of gradual participation in local self-government we are +endeavoring to evolve a homogeneous people fit to determine, when the time +arrives, their own destiny. We are seeking to arouse a national spirit and +not, as under the older colonial theory, to suppress such a spirit. The +character of the work we have been doing is keenly recognized in the +Orient, and our success thus far followed with not a little envy by those +who, initiating the same policy, find themselves hampered by conditions +grown up in earlier days and under different theories of administration. +But our work is far from done. Our duty to the Filipinos is far from +discharged. Over half a million Filipino students are now in the Philippine +schools helping to mold the men of the future into a homogeneous people, +but there still remain more than a million Filipino children of school age +yet to be reached. Freed from American control the integrating forces of a +common education and a common language will cease and the educational +system now well started will slip back into inefficiency and disorder. + +An enormous increase in the commercial development of the islands has been +made since they were virtually granted full access to our markets three +years ago, with every prospect of increasing development and diversified +industries. Freed from American control such development is bound to +decline. Every observer speaks of the great progress in public works for +the benefit of the Filipinos, of harbor improvements, of roads and +railways, of irrigation and artesian wells, public buildings, and better +means of communication. But large parts of the islands are still unreached, +still even unexplored, roads and railways are needed in many parts, +irrigation systems are still to be installed, and wells to be driven. Whole +villages and towns are still without means of communication other than +almost impassable roads and trails. Even the great progress in sanitation, +which has successfully suppressed smallpox, the bubonic plague, and Asiatic +cholera, has found the cause of and a cure for beriberi, has segregated the +lepers, has helped to make Manila the most healthful city in the Orient, +and to free life throughout the whole archipelago from its former dread +diseases, is nevertheless incomplete in many essentials of permanence in +sanitary policy. Even more remains to be accomplished. If freed from +American control sanitary progress is bound to be arrested and all that has +been achieved likely to be lost. + +Concurrent with the economic, social, and industrial development of the +islands has been the development of the political capacity of the people. +By their progressive participation in government the Filipinos are being +steadily and hopefully trained for self-government. Under Spanish control +they shared in no way in the government. Under American control they have +shared largely and increasingly. Within the last dozen years they have +gradually been given complete autonomy in the municipalities, the right to +elect two-thirds of the provincial governing boards and the lower house of +the insular legislature. They have four native members out of nine members +of the commission, or upper house. The chief justice and two justices of +the supreme court, about one-half of the higher judicial positions, and all +of the justices of the peach are natives. In the classified civil service +the proportion of Filipinos increased from 51 per cent in 1904 to 67 per +cent in 1911. Thus to-day all the municipal employees, over go per cent of +the provincial employees, and 60 per cent of the officials and employees of +the central government are Filipinos. The ideal which has been kept in mind +in our political guidance of the islands has been real popular +self-government and not mere paper independence. I am happy to say that the +Filipinos have done well enough in the places they have filled and in the +discharge of the political power with which they have been intrusted to +warrant the belief that they can be educated and trained to complete +self-government. But the present satisfactory results are due to constant +support and supervision at every step by Americans. + +If the task we have undertaken is higher than that assumed by other +nations, its accomplishment must demand even more patience. We must not +forget that we found the Filipinos wholly untrained in government. Up to +our advent all other experience sought to repress rather than encourage +political power. It takes long time and much experience to ingrain +political habits of steadiness and efficiency. Popular self-government +ultimately must rest upon common habits of thought and upon a reasonably +developed public opinion. No such foundations for self-government, let alone +independence are now present in the Philippine Islands. Disregarding even +their racial heterogeneity and the lack of ability to think as a nation, it +is sufficient to point out that under liberal franchise privileges only +about 3 per cent of the Filipinos vote and only 5 per cent of the people +are said to read the public press. To confer independence upon the +Filipinos now is, therefore, to subject the great mass of their people to +the dominance of an oligarchical and, probably, exploiting minority. Such a +course will be as cruel to those people as it would be shameful to us. + +Our true course is to pursue steadily and courageously the path we have +thus far followed; to guide the Filipinos into self-sustaining pursuits; to +continue the cultivation of sound political habits through education and +political practice; to encourage the diversification of industries, and to +realize the advantages of their industrial education by conservatively +approved cooperative methods, at once checking the dangers of concentrated +wealth and building up a sturdy, independent citizenship. We should do all +this with a disinterested endeavor to secure for the Filipinos economic +independence and to fit them for complete self-government, with the power +to decide eventually, according to their own largest good, whether such +self-government shall be accompanied by independence. A present declaration +even of future independence would retard progress by the dissension and +disorder it would arouse. On our part it would be a disingenuous attempt, +under the guise of conferring a benefit on them, to relieve ourselves from +the heavy and difficult burden which thus far we have been bravely and +consistently sustaining. It would be a disguised policy of scuttle. It +would make the helpless Filipino the football of oriental politics, tinder +the protection of a guaranty of their independence, which we would be +powerless to enforce. + +REGULATION OF WATER POWER + +There are pending before Congress a large number of bills proposing to +grant privileges of erecting dams for the purpose of creating water power +in our navigable rivers. The pendency of these bills has brought out an +important defect in the existing general dam act. That act does not, in my +opinion, grant sufficient power to the Federal Government in dealing with +the construction of such dams to exact protective conditions in the +interest of navigation. It does not permit the Federal Government, as a +condition of its permit, to require that a part of the value thus created +shall be applied to the further general improvement and protection of the +stream. I believe this to be one of the most important matters of internal +improvement now confronting the Government. Most of the navigable rivers of +this country are comparatively long and shallow. In order that they may be +made fully useful for navigation there has come into vogue a method of +improvement known as canalization, or the slack-water method, which +consists in building a series of dams and locks, each of which will create +a long pool of deep navigable water. At each of these dams there is usually +created also water power of commercial value. If the water power thus +created can be made available for the further improvement of navigation in +the stream, it is manifest that the improvement will be much more quickly +effected on the one hand, and, on the other, that the burden on the general +taxpayers of the country will be very much reduced. Private interests +seeking permits to build water-power dams in navigable streams usually urge +that they thus improve navigation, and that if they do not impair +navigation they should be allowed to take for themselves the entire profits +of the water-power development. Whatever they may do by way of relieving +the Government of the expense of improving navigation should be given due +consideration, but it must be apparent that there may be a profit beyond a +reasonably liberal return upon the private investment which is a potential +asset of the Government in carrying out a comprehensive policy of waterway +development. It is no objection to the retention and use of such an asset +by the Government that a comprehensive waterway policy will include the +protection and development of the other public uses of water, which can not +and should not be ignored in making and executing plans for the protection +and development of navigation. It is also equally clear that inasmuch as +the water power thus created is or may be an incident of a general scheme +of waterway improvement within the constitutional jurisdiction of the +Federal Government, the regulation of such water power lies also within +that jurisdiction. In my opinion constructive statesmanship requires that +legislation should be enacted which will permit the development of +navigation in these great rivers to go hand in hand with the utilization of +this by-product of water power, created in the course of the same +improvement, and that the general dam act should be so amended as to make +this possible. I deem it highly important that the Nation should adopt a +consistent and harmonious treatment of these water-power projects, which +will preserve for this purpose their value to the Government, whose right +it is to grant the permit. Any other policy is equivalent to throwing away +a most valuable national asset. + +THE PANAMA CANAL + +During the past year the work of construction upon the canal has progressed +most satisfactorily. About 87 per cent of the excavation work has been +completed, and more than 93 per cent of the concrete for all the locks is +in place. In view of the great interest which has been manifested as to +some slides in the Culebra Cut, I am glad to say that the report of Col. +Goethals should allay any apprehension on this point. It is gratifying to +note that none of the slides which occurred during this year would have +interfered with the passage of the ships had the canal, in fact, been in +operation, and when the slope pressures will have been finally adjusted and +the growth of vegetation will minimize erosion in the banks of the cut, the +slide problem will be practically solved and an ample stability assured for +the Culebra Cut. + +Although the official date of the opening has been set for January 1, 1915, +the canal will, in fact, from present indications, be opened for shipping +during the latter half of 1913. No fixed date can as yet be set, but +shipping interests will be advised as soon as assurances can be given that +vessels can pass through without unnecessary delay. + +Recognizing the administrative problem in the management of the canal, +Congress in the act of August 24, 1912, has made admirable provisions for +executive responsibility in the control of the canal and the government of +the Canal Zone. The problem of most efficient organization is receiving +careful consideration, so that a scheme of organization and control best +adapted to the conditions of the canal may be formulated and put in +operation as expeditiously as possible. Acting tinder the authority +conferred on me by Congress, I have, by Executive proclamation, promulgated +the following schedule of tolls for ships passing through the canal, based +upon the thorough report of Emory R. Johnson, special commissioner on +traffic and tolls: + +I. On merchant vessels carrying passengers or cargo, $1.20 per net vessel +ton-each 100 cubic feet-of actual earning capacity. 2. On vessels in +ballast without passengers or cargo, 40 per cent less than the rate of +tolls for vessels with passengers or cargo. 3. Upon naval vessels, other +than transports, colliers, hospital ships, and supply ships, 50 cents per +displacement ton. 4. Upon Army and Navy transports, colliers, hospital +ships, and supply ships, $1.20 per net ton, the vessels to be measured by +the same rules as are employed in determining the net tonnage of merchant +vessels. Rules for the determination of the tonnage upon which toll charges +are based are now in course of preparation and will be promulgated in due +season. + +PANAMA CANAL TREATY + +The proclamation which I have issued in respect to the Panama Canal tolls +is in accord with the Panama Canal act passed by this Congress August 24, +1912. We have been advised that the British Government has prepared a +protest against the act and its enforcement in so far as it relieves from +the payment of tolls American ships engaged in the American coastwise trade +on the ground that it violates British rights tinder the Hay-Pauncefote +treaty concerning the Panama Canal. When the protest is presented, it will +be promptly considered and an effort made to reach a satisfactory +adjustment of any differences there may be between the two Governments. + +WORKMEN'S COMPENSATION ACT + +The promulgation of an efficient workmen's compensation act, adapted to the +particular conditions of the zone, is awaiting adequate appropriation by +Congress for the payment of claims arising thereunder. I urge that speedy +provision be made in order that we may install upon the zone a system of +settling claims for injuries in best accord with modern humane, social, and +industrial theories. + +PROMOTION FOR COL. GOETHALS + +As the completion of the canal grows nearer, and as the wonderful executive +work of Col. Goethals becomes more conspicuous in the eyes of the country +and of the world, it seems to me wise and proper to make provision by law +for such reward to him as may be commensurate with the service that he has +rendered to his country. I suggest that this reward take the form of an +appointment of Col. Goethals as a major general in the Army of the United +States, and that the law authorizing such appointment be accompanied with a +provision permitting his designation as Chief of Engineers upon the +retirement of the present incumbent of that office. + +NAVY DEPARTMENT + +The Navy of the United States is in a greater state of efficiency and is +more powerful than it has ever been before, but in the emulation which +exists between different countries in respect to the increase of naval and +military armaments this condition is not a permanent one. In view of the +many improvements and increases by foreign Governments the slightest halt +on our part in respect to new construction throws us back and reduces us +from a naval power of the first rank and places us among the nations of the +second rank. In the past 15 years the Navy has expanded rapidly and yet far +less rapidly than our country. From now on reduced expenditures in the Navy +means reduced military strength. The world's history has shown the +importance of sea power both for adequate defense and for the support of +important and definite policies. + +I had the pleasure of attending this autumn a mobilization of the Atlantic +Fleet, and was glad to observe and note the preparedness of the fleet for +instant action. The review brought before the President and the Secretary +of the Navy a greater and more powerful collection of vessels than had ever +been gathered in American waters. The condition of the fleet and of the +officers and enlisted men and of the equipment of the vessels entitled +those in authority to the greatest credit. + +I again commend to Congress the giving of legislative sanction to the +appointment of the naval aids to the Secretary of the Navy. These aids and +the council of aids appointed by the Secretary of the Navy to assist him in +the conduct of his department have proven to be of the highest utility. +They have furnished an executive committee of the most skilled naval +experts, who have coordinated the action of the various bureaus in the +Navy, and by their advice have enabled the Secretary to give an +administration at the same time economical and most efficient. Never before +has the United States had a Navy that compared in efficiency with its +present one, but never before have the requirements with respect to naval +warfare been higher and more exacting than now. A year ago Congress refused +to appropriate for more than one battleship. In this I think a great +mistake of policy was made, and I urgently recommend that this Congress +make up for the mistake of the last session by appropriations authorizing +the construction of three battleships, in addition to destroyers, fuel +ships, and the other auxiliary vessels as shown in the building program of +the general board. We are confronted by a condition in respect to the +navies of the world which requires us, if we would maintain our Navy as an +insurance of peace, to augment our naval force by at least two battleships +a year and by battle cruisers, gunboats, torpedo destroyers, and submarine +boats in a proper proportion. We have no desire for war. We would go as far +as any nation in the world to avoid war, but we are a world power. Our +population, our wealth, our definite policies, our responsibilities in the +Pacific and the Atlantic, our defense of the Panama Canal, together with +our enormous world trade and our missionary outposts on the frontiers of +civilization, require us to recognize our position as one of the foremost +in the family of nations, and to clothe ourselves with sufficient naval +power to give force to our reasonable demands, and to give weight to our +influence in those directions of progress that a powerful Christian nation +should advocate. + +I observe that the Secretary of the Navy devotes some space to a change in +the disciplinary system in vogue in that branch of the service. I think +there is nothing quite so unsatisfactory to either the Army or the Navy as +the severe punishments necessarily inflicted by court-martial for +desertions and purely military offenses, and I am glad to hear that the +British have solved this important and difficult matter in a satisfactory +way. I commend to the consideration of Congress the details of the new +disciplinary system, and recommend that laws be passed putting the same +into force both in the Army and the Navy. + +I invite the attention of Congress to that part of the report of the +Secretary of the Navy in which he recommends the formation of a naval +reserve by the organization of the ex-sailors of the Navy. + +I repeat my recommendation made last year that proper provision should be +made for the rank of the commander in chief of the squadrons and fleets of +the Navy. The inconvenience attending the necessary precedence that most +foreign admirals have over our own whenever they meet in official functions +ought to be avoided. It impairs the prestige of our Navy and is a defect +that can be very easily removed. + +DEPARTMENT OF JUSTICE + +This department has been very active in the enforcement of the law. It has +been better organized and with a larger force than ever before in the +history of the Government. The prosecutions which have been successfully +concluded and which are now pending testify to the effectiveness of the +departmental work. + +The prosecution of trusts under the Sherman antitrust law has gone on +without restraint or diminution, and decrees similar to those entered in +the Standard Oil and the Tobacco cases have been entered in other suits, +like the suits against the Powder Trust and the Bathtub Trust. I am very +strongly convinced that a steady, consistent course in this regard, with a +continuing of Supreme Court decisions upon new phases of the trust question +not already finally decided is going to offer a solution of this +much-discussed and troublesome issue in a quiet, calm, and judicial way, +without any radical legislation changing the governmental policy in regard +to combinations now denounced by the Sherman antitrust law. I have already +recommended as an aid in this matter legislation which would declare +unlawful certain well-known phases of unfair competition in interstate +trade, and I have also advocated voluntary national incorporation for the +larger industrial enterprises, with provision for a closer supervision by +the Bureau of Corporations, or a board appointed for the purpose, so as to +make more certain compliance with the antitrust law on the one hand and to +give greater security to the stockholders against possible prosecutions on +the other. I believe, however, that the orderly course of litigation in the +courts and the regular prosecution of trusts charged with the violation of +the antitrust law is producing among business men a clearer and clearer +perception of the line of distinction between business that is to be +encouraged and business that is to be condemned, and that in this quiet way +the question of trusts can be settled and competition retained as an +economic force to secure reasonableness in prices and freedom and +independence in trade. + +REFORM OF COURT PROCEDURE + +I am glad to bring to the attention of Congress the fact that the Supreme +Court has radically altered the equity rules governing the procedure on the +equity side of all Federal courts, and though, as these changes have not +been yet put in practice so as to enable us to state from actual results +what the reform will accomplish, they are of such a character that we can +reasonably prophesy that they will greatly reduce the time and cost of +litigation in such courts. The court has adopted many of the shorter +methods of the present English procedure, and while it may take a little +while for the profession to accustom itself to these methods, it is certain +greatly to facilitate litigation. The action of the Supreme Court has been +so drastic and so full of appreciation of the necessity for a great reform +in court procedure that I have no hesitation in following up this action +with a recommendation which I foreshadowed in my message of three years +ago, that the sections of the statute governing the procedure in the +Federal courts on the common-law side should be so amended as to give to +the Supreme Court the same right to make rules of procedure in common law +as they have, since the beginning of the court, exercised in equity. I do +not doubt that a full consideration of the subject will enable the court +while giving effect to the substantial differences in right and remedy +between the system of common law and the system of equity so to unite the +two procedures into the form of one civil action and to shorten the +procedure in such civil action as to furnish a model to all the State +courts exercising concurrent jurisdiction with the Federal courts of first +instance. + +Under the statute now in force the common-law procedure in each Federal +court is made to conform to the procedure in the State in which the court +is held. In these days, when we should be making progress in court +procedure, such a conformity statute makes the Federal method too dependent +upon the action of State legislatures. I can but think it a great +opportunity for Congress to intrust to the highest tribunal in this +country, evidently imbued with a strong spirit in favor of a reform of +procedure, the power to frame a model code of procedure, which, while +preserving all that is valuable and necessary of the rights and remedies at +common law and in equity, shall lessen the burden of the poor litigant to a +minimum in the expedition and cheapness with which his cause can be fought +or defended through Federal courts to final judgment. + +WORKMAN'S COMPENSATION ACT + +The workman's compensation act reported by the special commission appointed +by Congress and the Executive, which passed the Senate and is now pending +in the House, the passage of which I have in previous messages urged upon +Congress, I venture again to call to its attention. The opposition to it +which developed in the Senate, but which was overcome by a majority in that +body, seemed to me to grow out rather of a misapprehension of its effect +than of opposition to its principle. I say again that I think no act can +have a better effect directly upon the relations between the employer and +employee than this act applying to railroads and common carriers of an +interstate character, and I am sure that the passage of the act would +greatly relieve the courts of the heaviest burden of litigation that they +have, and would enable them to dispatch other business with a speed never +before attained in courts of justice in this country. + +THE WHITE HOUSE, December 19, 1912. To the Senate and House of +Representatives: + +This is the third of a series of messages in which I have brought to the +attention of the Congress the important transactions of the Government in +each of its departments during the last year and have discussed needed +reforms. + +HEADS OF DEPARTMENTS SHOULD HAVE SEATS ON THE FLOOR OF CONGRESS + +I recommend the adoption of legislation which shall make it the duty of +heads of departments--the members of the President's Cabinet--at convenient +times to attend the session of the House and the Senate, which shall +provide seats for them in each House, and give them the opportunity to take +part in all discussions and to answer questions of which they have had due +notice. The rigid holding apart of the executive and the legislative +branches of this Government has not worked for the great advantage of +either. There has been much lost motion in the machinery, due to the lack +of cooperation and interchange of views face to face between the +representatives of the Executive and the Members of the two legislative +branches of the Government. It was never intended that they should be +separated in the sense of not being in constant effective touch and +relationship to each other. The legislative and the executive each performs +its own appropriate function, but these functions must be coordinated. Time +and time again debates have arisen in each House upon issues which the +information of a particular department head would have enabled him, if +present, to end at once by a simple explanation or statement. Time and time +again a forceful and earnest presentation of facts and arguments by the +representative of the Executive whose duty it is to enforce the law would +have brought about a useful reform by amendment, which in the absence of +such a statement has failed of passage. I do not think I am mistaken in +saying that the presence of the members of the Cabinet on the floor of each +House would greatly contribute to the enactment of beneficial legislation. +Nor would this in any degree deprive either the legislative or the +executive of the independence which separation of the two branches has been +intended to promote. It would only facilitate their cooperation in the +public interest. + +On the other hand, I am sure that the necessity and duty imposed upon +department heads of appearing in each house and in answer to searching +questions, of rendering upon their feet an account of what they have done, +or what has been done by the administration, will spur each member of the +Cabinet to closer attention to the details of his department, to greater +familiarity with its needs, and to greater care to avoid the just criticism +which the answers brought out in questions put and discussions arising +between the Members of either House and the members of the Cabinet may +properly evoke. + +Objection is made that the members of the administration having no vote +could exercise no power on the floor of the House, and could not assume +that attitude of authority and control which the English parliamentary +Government have and which enables them to meet the responsibilities the +English system thrusts upon them. I agree that in certain respects it would +be more satisfactory if members of the Cabinet could at the same time be +Members of both Houses, with voting power, but this is impossible under our +system; and while a lack of this feature may detract from the influence of +the department chiefs, it will not prevent the good results which I have +described above both in the matter of legislation and in the matter of +administration. The enactment of such a law would be quite within the power +of Congress without constitutional amendment, and it has such possibilities +of usefulness that we might well make the experiment, and if we are +disappointed the misstep can be easily retraced by a repeal of the enabling +legislation. + +This is not a new proposition. In the House of Representatives, in the +Thirty-eighth Congress, the proposition was referred to a select committee +of seven Members. The committee made an extensive report, and urged the +adoption of the reform. The report showed that our history had not been +without illustration of the necessity and the examples of the practice by +pointing out that in early days Secretaries were repeatedly called to the +presence of either Rouse for consultation, advice, and information. It also +referred to remarks of Mr. justice Story in his Commentaries on the +Constitution, in which he urgently presented the wisdom of such a change. +This report is to be found in Volume I of the Reports of Committees of the +First Session of the Thirty-eighth Congress, April 6, 1864. + +Again, on February 4, 1881, a select committee of the Senate recommended +the passage of a similar bill, and made a report, In which, while approving +the separation of the three branches, the executive, legislative, and +judicial, they point out as a reason for the proposed change that, although +having a separate existence, the branches are "to cooperate, each with the +other, as the different members of the human body must cooperate, with each +other in order to form the figure and perform the duties of a perfect +man." + +The report concluded as follows: This system will require the selection of +the strongest men to be heads of departments and will require them to be +well equipped with the knowledge of their offices. It will also require the +strongest men to be the leaders of Congress and participate in debate. It +will bring these strong men in contact, perhaps into conflict, to advance +the public weal, and thus stimulate their abilities and their efforts, and +will thus assuredly result to the good of the country. + +If it should appear by actual experience that the heads of departments in +fact have not time to perform the additional duty imposed on them by this +bill, the force in their offices should be increased or the duties +devolving on them personally should be diminished. An undersecretary should +be appointed to whom could be confided that routine of administration which +requires only order and accuracy. The principal officers could then confine +their attention to those duties which require wise discretion and +intellectual activity. Thus they would have abundance of time for their +duties under this bill. Indeed, your committee believes that the public +interest would be subserved if the Secretaries were relieved of the +harassing cares of distributing clerkships and closely supervising the mere +machinery of the departments. Your committee believes that the adoption of +this bill and the effective execution of its provisions will be the first +step toward a sound civil-service reform which will secure a larger wisdom +in the adoption of policies and a better system in their execution.(Signed) +GEO. H. PENDLETON. W. B. ALLISON. D. W. VOORHEES. J. G. BLAINE. M. C. +BUTLER. JOHN J. INGALLS. O. H. PLATT. J. T. FARLEY. It would be difficult +to mention the names of higher authority in the practical knowledge of our +Government than those which are appended to this report. + +POSTAL SAVINGS BANK SYSTEM + +The Postal Savings Bank System has been extended so that it now includes +4,004 fourth-class post offices', as well as 645 branch offices and +stations in the larger cities. There are now 12,812 depositories at which +patrons of the system may open accounts. The number of depositors is +300,000 and the amount of their deposits is approximately $28,000,000, not +including $1,314,140 which has been with drawn by depositors for the +purpose of buying postal savings bonds. Experience demonstrates the value +of dispensing with the pass-book and introducing in its place a certificate +of deposit. The gross income of the postal savings system for the fiscal +year ending June 30, 1913, will amount to $700,000 and the interest payable +to depositors to $300,000. The cost of supplies, equipment, and salaries is +$700,000. It thus appears that the system lacks $300,000 a year of paying +interest and expenses. It is estimated, however, that when the deposits +have reached the sum Of $50,000,000, which at the present rate they soon +will do, the system will be self-sustaining. By law the postal savings +funds deposited at each post office are required to be redeposited in local +banks. State and national banks to the number of 7,357 have qualified as +depositories for these funds. Such deposits are secured by bonds +aggregating $54,000,000. Of this amount, $37,000,000 represent municipal +bonds. + +PARCEL POST + +In several messages I have favored and recommended the adoption of a system +of parcel post. In the postal appropriation act of last year a general +system was provided and its installation was directed by the 1st of +January. This has entailed upon the Post Office Department a great deal of +very heavy labor, but the Postmaster General informs me that on the date +selected, to wit, the 1st of January, near at hand, the department will be +in readiness to meet successfully the requirements of the public. + +CLASSIFICATION OF POSTMASTERS + +A trial, during the past three years, of the system of classifying +fourth-class postmasters in that part of the country lying between the +Mississippi River on the west, Canada on the north, the Atlantic Ocean on +the east, and Mason and Dixon's line on the south has been sufficiently +satisfactory to justify the postal authorities in recommending the +extension of the order to include all the fourth-class postmasters in the +country. In September, 1912, upon the suggestion of the Postmaster General, +I directed him to prepare an order which should put the system in effect, +except in Alaska, Guam, Hawaii, Porto Rico, and Samoa. Under date of +October 15 I issued such an order which affected 36,000 postmasters. By the +order the post offices were divided into groups A and B. Group A includes +all postmasters whose compensation is $500 or more, and group B those whose +compensation is less than that sum. Different methods are pursued in the +selection of the postmasters for group A and group, B. Criticism has been +made of this order on the ground that the motive for it was political. +Nothing could be further from the truth. The order was made before the +election and in the interest of efficient public service. I have several +times requested Congress to give me authority to put first-, second-, and +third-class postmasters, and all other local officers, including +internal-revenue officers, customs officers, United States marshals, and +the local agents of the other departments under the classification of the +civil-service law by taking away the necessity for confirming such +appointments by the Senate. I deeply regret the failure of Congress to +follow these recommendations. The change would have taken out of politics +practically every local officer and would have entirely cured the evils +growing out of what under the present law must always remain a remnant of +the spoils system. + +COMPENSATION TO RAILWAYS FOR CARRYING MAILS + +It is expected that the establishment of a parcel post on January 1st will +largely increase the amount of mail matter to be transported by the +railways, and Congress should be prompt to provide a way by which they may +receive the additional compensation to which they will be entitled. The +Postmaster General urges that the department's plan for a complete +readjustment of the system of paying the railways for carrying the mails be +adopted, substituting space for weight as the principal factor in fixing +compensation. Under this plan it will be possible to determine without +delay what additional payment should be made on account of the parcel post. +The Postmaster General's recommendation is based on the results of a +far-reaching investigation begun early in the administration with the +object of determining what it costs the railways to carry the mails. The +statistics obtained during the course of the inquiry show that while many +of the railways, and particularly the large systems, were making profits +from mail transportations, certain of the lines were actually carrying the +mails at a loss. As a result of the investigation the department, after +giving the subject careful consideration, decided to urge the abandonment +of the present plan of fixing compensation on the basis of the weight of +the mails carried, a plan that has proved to be exceedingly expensive and +in other respects unsatisfactory. Under the method proposed the railway +companies will annually submit to the department reports showing what it +costs them to carry the mails, and this cost will be apportioned on the +basis of the car space engaged, payment to be allowed at the rate thus +determined in amounts that will cover the cost and a reasonable profit. If +a railway is not satisfied with the manner in which the department +apportions the cost in fixing compensation, it is to have the right, tinder +the new plan, of appealing to the Interstate Commerce Commission. This +feature of the proposed law would seem to insure a fair treatment of the +railways. It is hoped that Congress will give the matter immediate +attention and that the method of compensation recommended by the department +or some other suitable plan will be promptly authorized. + +DEPARTMENT OF THE INTERIOR + +The Interior Department, in the problems of administration included within +its jurisdiction, presents more difficult questions than any other. This +has been due perhaps to temporary causes of a political character, but more +especially to the inherent difficulty in the performance of some of the +functions which are assigned to it. Its chief duty is the guardianship of +the public domain and the disposition of that domain to private ownership +under homestead, mining, and other laws, by which patents from the +Government to the individual are authorized on certain conditions. During +the last decade the public seemed to become suddenly aware that a very +large part of its domain had passed from its control into private +ownership, under laws not well adapted to modern conditions, and also that +in the doing of this the provisions of existing law and regulations adopted +in accordance with law had not been strictly observed, and that in the +transfer of title much fraud had intervened, to the pecuniary benefit of +dishonest persons. There arose thereupon a demand for conservation of the +public domain, its protection against fraudulent diminution, and the +preservation of that part of it from private acquisition which it seemed +necessary to keep for future public use. The movement, excellent in the +intention which prompted it, and useful in its results, has nevertheless +had some bad effects, which the western country has recently been feeling +and in respect of which there is danger of a reaction toward older abuses +unless we can attain the golden mean, which consists in the prevention of +the mere exploitation of the public domain for private purposes while at +the same, time facilitating its development for the benefit of the local +public. + +The land laws need complete revision to secure proper conservation on the +one hand of land that ought to be kept in public use and, on the other +hand, prompt disposition of those lands which ought to be disposed in +private ownership or turned over to private use by properly guarded leases. +In addition to this there are not enough officials in our Land Department +with legal knowledge sufficient promptly to make the decisions which are +called for. The whole land-laws system should be reorganized, and not until +it is reorganized, will decisions be made as promptly as they ought, or +will men who have earned title to public land under the statute receive +their patents within a reasonably short period. The present administration +has done what it could in this regard, but the necessity for reform and +change by a revision of the laws and an increase and reorganization of the +force remains, and I submit to Congress the wisdom of a full examination of +this subject, in order that a very large and important part of our people +in the West may be relieved from a just cause of irritation. + +I invite your attention to the discussion by the Secretary of the Interior +of the need for legislation with respect to mining claims, leases of coal +lands in this country and in Alaska, and for similar disposition of oil, +phosphate, and potash lands, and also to his discussion of the proper use +to be made of water-power sites held by the Government. Many of these lands +are now being withheld from use by the public under the general withdrawal +act which was passed by the last Congress. That act was not for the purpose +of disposing of the question, but it was for the purpose of preserving the +lands until the question could be solved. I earnestly urge that the matter +is of the highest importance to our western fellow citizens and ought to +command the immediate attention of the legislative branch of the +Government. + +Another function which the Interior Department has to perform is that of +the guardianship of Indians. In spite of everything which has been said in +criticism of the policy of our Government toward the Indians, the amount of +wealth which is now held by it for these wards per capita shows that the +Government has been generous; but the management of so large an estate, +with the great variety of circumstances that surround each tribe and each +case, calls for the exercise of the highest business discretion, and the +machinery provided in the Indian Bureau for the discharge of this function +is entirely inadequate. The position of Indian commissioner demands the +exercise of business ability of the first order, and it is difficult to +secure such talent for the salary provided. + +The condition of health of the Indian and the prevalence in the tribes of +curable diseases has been exploited recently in the press. In a message to +Congress at its last session I brought this subject to its attention and +invited a special appropriation, in order that our facilities for +overcoming diseases among the Indians might be properly increased, but no +action was then taken by Congress on the subject, nor has such +appropriation been made since. + +The commission appointed by authority of the Congress to report on proper +method of securing railroad development in Alaska is formulating its +report, and I expect to have an opportunity before the end of this session +to submit its recommendations. + +DEPARTMENT OF AGRICULTURE + +The far-reaching utility of the educational system carried on by the +Department of Agriculture for the benefit of the farmers of our country +calls for no elaboration. Each year there is a growth in the variety of +facts which it brings out for the benefit of the farmer, and each year +confirms the wisdom of the expenditure of the appropriations made for that +department. + +PURE-FOOD LAW + +The Department of Agriculture is charged with the execution of the +pure-food law. The passage of this encountered much opposition from +manufacturers and others who feared the effect upon their business of the +enforcement of its provisions. The opposition aroused the just indignation +of the public, and led to an intense sympathy with the severe and rigid +enforcement of the provisions of the new law. It had to deal in many +instances with the question whether or not products of large business +enterprises, in the form of food preparations, were deleterious to the +public health; and while in a great majority of instances this issue was +easily determinable, there were not a few cases in which it was hard to +draw the line between a useful and a harmful food preparation. In cases +like this when a decision involved the destruction of great business +enterprises representing the investment of large capital and the +expenditure of great energy and ability, the danger of serious injustice +was very considerable in the enforcement of a new law under the spur of +great public indignation. The public officials charged with executing the +law might do injustice in heated controversy through unconscious pride of +opinion and obstinacy of conclusion. For this reason President Roosevelt +felt justified in creating a board of experts, known as the Remsen Board, +to whom in cases of much importance an appeal might be taken and a review +had of a decision of the Bureau of Chemistry in the Agricultural +Department. I heartily agree that it was wise to create this board in order +that injustice might not be done. The questions which arise are not +generally those involving palpable injury to health, but they are upon the +narrow and doubtful line in respect of which it is better to be in some +error not dangerous than to be radically destructive. I think that the time +has come for Congress to recognize the necessity for some such tribunal of +appeal and to make specific statutory provision for it. While we are +struggling to suppress an evil of great proportions like that of impure +food, we must provide machinery in the law itself to prevent its becoming +an instrument of oppression, and we ought to enable those whose business is +threatened with annihilation to have some tribunal and some form of appeal +in which they have a complete day in court. + +AGRICULTURAL CREDITS + +I referred in my first message to the question of improving the system of +agricultural credits. The Secretary of Agriculture has made an +investigation into the matter of credits in this country, and I commend a +consideration of the information which through his agents he has been able +to collect. It does not in any way minimize the importance of the proposal, +but it gives more accurate information upon some of the phases of the +question than we have heretofore had. + +DEPARTMENT OF COMMERCE AND LABOR + +I commend to Congress an examination of the report of the Secretary of +Commerce and Labor, and especially that part in which he discusses the +office of the Bureau of Corporations, the value to commerce of a proposed +trade commission, and the steps which he has taken to secure the +organization of a national chamber of commerce. I heartily commend his view +that the plan of a trade commission which looks to the fixing of prices is +altogether impractical and ought not for a moment to be considered as a +possible solution of the trust question. + +The trust question in the enforcement of the Sherman antitrust law is +gradually solving itself, is maintaining the principle and restoring the +practice of competition, and if the law is quietly but firmly enforced, +business will adjust itself to the statutory requirements, and the unrest +in commercial circles provoked by the trust discussion will disappear. + +PANAMA-PACIFIC INTERNATIONAL EXPOSITION + +In conformity with a joint resolution of Congress, an Executive +proclamation was issued last February, inviting the nations of the world to +participate in the Panama-Pacific International Exposition to be held at +San Francisco to celebrate the construction of the Panama, Canal. A +sympathetic response was immediately forthcoming, and several nations have +already selected the sites for their buildings. In furtherance of my +invitation, a special commission visited European countries during the past +summer, and received assurance of hearty cooperation in the task of +bringing together a universal industrial, military, and naval display on an +unprecedented scale. It is evident that the exposition will be an accurate +mirror of the world's activities as they appear 400 years after the date of +the discovery of the Pacific Ocean. + +It is the duty of the United States to make the nations welcome at San +Francisco and to facilitate such acquaintance between them and ourselves as +will promote the expansion of commerce and familiarize the world with the +new trade route through the Panama Canal. The action of the State +governments and individuals assures a comprehensive exhibit of the +resources of this country and of the progress of the people. This +participation by State and individuals should be supplemented by an +adequate showing of the varied and unique activities of the National +Government. The United States can not with good grace invite foreign +governments to erect buildings and make expensive exhibits while itself +refusing to participate. Nor would it be wise to forego the opportunity to +join with other nations in the inspiring interchange of ideas tending to +promote intercourse, friendship, and commerce. It is the duty of the +Government to foster and build up commerce through the canal, just as it +was the duty of the Government to construct it. + +I earnestly recommend the appropriation at this session of such a sum as +will enable the United States to construct a suitable building, install a +governmental exhibit, and otherwise participate in the Panama-Pacific +International Exposition in a manner commensurate with the dignity of a +nation whose guests are to be the people of the world. I recommend also +such legislation as will facilitate the entry of material intended for +exhibition and protect foreign exhibitors against infringement of patents +and the unauthorized copying of patterns and designs. All aliens sent to +San Francisco to construct and care for foreign buildings and exhibits +should be admitted without restraint or embarrassment. + +THE DISTRICT OF COLUMBIA AND THE CITY OF WASHINGTON + +The city of Washington is a beautiful city, with a population of 352,936, +of whom 98,667 are colored. The annual municipal budget is about +$14,000,000. The presence of the National Capital and other governmental +structures constitutes the chief beauty and interest of the city. The +public grounds are extensive, and the opportunities for improving the city +and making it still more attractive are very great. Under a plan adopted +some years ago, one half the cost of running the city is paid by taxation +upon the property, real and personal, of the citizens and residents, and +the other half is borne by the General Government. The city is expanding at +a remarkable rate, and this can only be accounted for by the coming here +from other parts of the country of well-to-do people who, having finished +their business careers elsewhere, build and make this their permanent place +of residence. + +On the whole, the city as a municipality is very well governed. It is well +lighted, the water supply is good, the streets are well paved, the police +force is well disciplined, crime is not flagrant, and while it has purlieus +and centers of vice, like other large cities, they are not exploited, they +do not exercise any influence or control in the government of the city, and +they are suppressed in as far as it has been found practicable. Municipal +graft is inconsiderable. There are interior courts in the city that are +noisome and centers of disease and the refuge of criminals, but Congress +has begun to clean these out, and progress has been made in the case of the +most notorious of these, which is known as "Willow Tree Alley." This +movement should continue. + +The mortality for the past year was at the rate Of 17.80 per 1,000 of both +races; among the whites it was 14.61 per thousand, and among the blacks +26.12 per thousand. These are the lowest mortality rates ever recorded in +the District. + +One of the most crying needs in the government of the District is a +tribunal or public authority for the purpose of supervising the +corporations engaged in the operation of public utilities. Such a bill is +pending in Congress and ought to pass. Washington should show itself under +the direction of Congress to be a city with a model form of government, but +as long as such authority over public utilities is withheld from the +municipal government, it must always be defective. + +Without undue criticism of the present street railway accommodations, it +can be truly said that under the spur of a public utilities commission they +might be substantially improved. + +While the school system of Washington perhaps might be bettered in the +economy of its management and the distribution of its buildings, its +usefulness has nevertheless greatly increased in recent years, and it now +offers excellent facilities for primary and secondary education. + +From time to time there is considerable agitation in Washington in favor of +granting the citizens of the city the franchise and constituting an +elective government. I am strongly opposed to this change. The history of +Washington discloses a number of experiments of this kind, which have +always been abandoned as unsatisfactory. The truth is this is a city +governed by a popular body, to wit, the Congress of the United States, +selected from the people of the United States, who own Washington. The +people who come here to live do so with the knowledge of the origin of the +city and the restrictions, and therefore voluntarily give up the privilege +of living in a municipality governed by popular vote. Washington is so +unique in its origin and in its use for housing and localizing the +sovereignty of the Nation that the people who live here must regard its +peculiar character and must be content to subject themselves to the control +of a body selected by all the people of the Nation. I agree that there are +certain inconveniences growing out of the government of a city by a +national legislature like Congress, and it would perhaps be possible to +lessen these by the delegation by Congress to the District Commissioners of +greater legislative power for the enactment of local laws than they now +possess, especially those of a police character. + +Every loyal American has a personal pride in the beauty of Washington and +in its development and growth. There is no one with a proper appreciation +of our Capital City who would favor a niggardly policy in respect to +expenditures from the National Treasury to add to the attractiveness of +this city, which belongs to every citizen of the entire country, and which +no citizen visits without a sense of pride of ownership. We have had +restored by a Commission of Fine Arts, at the instance of a committee of +the Senate, the original plan of the French engineer L'Enfant for the city +of Washington, and we know with great certainty the course which the +improvement of Washington should take. Why should there be delay in making +this improvement in so far as it involves the extension of the parking +system and the construction of greatly needed public buildings? +Appropriate buildings for the State Department, the Department of justice, +and the Department of Commerce and Labor have been projected, plans have +been approved, and nothing is wanting but the appropriations for the +beginning and completion of the structures. A hall of archives is also +badly needed, but nothing has been done toward its construction, although +the land for it has long been bought and paid for. Plans have been made for +the union of Potomac Park with the valley of Rock Creek and Rock Creek +Park, and the necessity for the connection between the Soldiers' Home and +Rock Creek Park calls for no comment. I ask again why there should be delay +in carrying out these plans We have the money in the Treasury, the plans +are national in their scope, and the improvement should be treated as a +national project. The plan will find a hearty approval throughout the +country. I am quite sure, from the information which I have, that, at +comparatively small expense, from that part of the District of Columbia +which was retroceded to Virginia, the portion including the Arlington +estate, Fort Myer, and the palisades of the Potomac can be acquired by +purchase and the jurisdiction of the State of Virginia over this land ceded +to the Nation. This ought to be done. + +The construction of the Lincoln Memorial and of a memorial bridge from the +base of the Lincoln Monument to Arlington would be an appropriate and +symbolic expression of the union of the North and the South at the Capital +of the Nation. I urge upon Congress the appointment of a commission to +undertake these national improvements, and to submit a plan for their +execution; and when the plan has been submitted and approved, and the work +carried out, Washington will really become what it ought to be--the most +beautiful city in the world. + + + + + + + + + + +End of the Project Gutenberg EBook of State of the Union Addresses of +William H. Taft, by William H. Taft + +*** END OF THIS PROJECT GUTENBERG EBOOK STATE OF THE UNION ADDRESSES *** + +***** This file should be named 5033.txt or 5033.zip ***** +This and all associated files of various formats will be found in: + http://www.gutenberg.org/5/0/3/5033/ + +Produced by James Linden. 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TAFT *** + + + + +This eBook was produced by James Linden. + +The addresses are separated by three asterisks: *** + +Dates of addresses by William H. Taft in this eBook: + December 7, 1909 + December 6, 1910 + December 5, 1911 + December 3, 1912 + + + +*** + +State of the Union Address +William H. Taft +December 7, 1909 + +The relations of the United States with all foreign governments have +continued upon the normal basis of amity and good understanding, and are +very generally satisfactory. EUROPE. + +Pursuant to the provisions of the general treaty of arbitration concluded +between the United States and Great Britain, April 4, 1908, a special +agreement was entered into between the two countries on January 27, 1909, +for the submission of questions relating to the fisheries on the North +Atlantic Coast to a tribunal to be formed from members of the Permanent +Court of Arbitration at The Hague. + +In accordance with the provisions of the special agreement the printed case +of each Government was, on October 4 last, submitted to the other and to +the Arbitral Tribunal at The Hague, and the counter case of the United +States is now in course of preparation. + +The American rights under the fisheries article of the Treaty of 1818 have +been a cause of difference between the United States and Great Britain for +nearly seventy years. The interests involved are of great importance to the +American fishing industry, and the final settlement of the controversy will +remove a source of constant irritation and complaint. This is the first +case involving such great international questions which has been submitted +to the Permanent Court of Arbitration at The Hague. + +The treaty between the United States and Great Britain concerning the +Canadian International boundary, concluded April 11, 1908, authorizes the +appointment of two commissioners to define and mark accurately the +international boundary line between the United States and the Dominion of +Canada in the waters of the Passamaquoddy Bay, and provides for the +exchange of briefs within the period of six months. The briefs were duly +presented within the prescribed period, but as the commissioners failed to +agree within six months after the exchange of the printed statements, as +required by the treaty, it has now become necessary to resort to the +arbitration provided for in the article. + +The International Fisheries Commission appointed pursuant to and under the +authority of the Convention of April 11, 1908, between the United States +and Great Britain, has completed a system of uniform and common +international regulations for the protection and preservation of the food +fishes in international boundary waters of the United States and Canada. + +The regulations will be duly submitted to Congress with a view to the +enactment of such legislation as will be necessary under the convention to +put them into operation. + +The Convention providing for the settlement of international differences +between the United States and Canada, including the apportionment between +the two countries of certain of the boundary waters and the appointment of +commissioners to adjust certain other questions, signed on the 11th day of +January, 1909, and to the ratification of which the Senate gave its advice +and consent on March 3, 1909, has not yet been ratified on the part of +Great Britain. + +Commissioners have been appointed on the part of the United States to act +jointly with Commissioners on the part of Canada in examining into the +question of obstructions in the St. John River between Maine and New +Brunswick, and to make recommendations for the regulation of the uses +thereof, and are now engaged in this work. + +Negotiations for an international conference to consider and reach an +arrangement providing for the preservation and protection of the fur seals +in the North Pacific are in progress with the Governments of Great Britain, +Japan, and Russia. The attitude of the Governments interested leads me to +hope for a satisfactory settlement of this question as the ultimate outcome +of the negotiations. + +The Second Peace Conference recently held at The Hague adopted a convention +for the establishment of an International Prize Court upon the joint +proposal of delegations of the United States, France, Germany and Great +Britain. The law to be observed by the Tribunal in the decision of prize +cases was, however, left in an uncertain and therefore unsatisfactory +state. Article 7 of the Convention provided that the Court was to be +governed by the provisions of treaties existing between the belligerents, +but that "in the absence of such provisions, the court shall apply the +rules of international law. If no generally recognized rule exists, the +court shall give judgment in accordance with the general principles of +justice and equity." As, however, many questions in international maritime +law are understood differently and therefore interpreted differently in +various countries, it was deemed advisable not to intrust legislative +powers to the proposed court, but to determine the rules of law properly +applicable in a Conference of the representative maritime nations. Pursuant +to an invitation of Great Britain a conference was held at London from +December 2, 1908, to February 26, 1909, in which the following Powers +participated: the United States, Austria-Hungary, France, Germany, Great +Britain, Italy, Japan, the Netherlands, Russia and Spain. The conference +resulted in the Declaration of London, unanimously agreed to and signed by +the participating Powers, concerning among other matters, the highly +important subjects of blockade, contraband, the destruction of neutral +prizes, and continuous voyages. The declaration of London is an eminently +satisfactory codification of the international maritime law, and it is +hoped that its reasonableness and fairness will secure its general +adoption, as well as remove one of the difficulties standing in the way of +the establishment of an International Prize Court. + +Under the authority given in the sundry civil appropriation act, approved +March 4, 1909, the United States was represented at the International +Conference on Maritime Law at Brussels. The Conference met on the 28th of +September last and resulted in the signature ad referendum of a convention +for the unification of certain regulations with regard to maritime +assistance and salvage and a convention for the unification of certain +rules with regard to collisions at sea. Two new projects of conventions +which have not heretofore been considered in a diplomatic conference, +namely, one concerning the limitation of the responsibility of shipowners, +and the other concerning marine mortgages and privileges, have been +submitted by the Conference to the different governments. + +The Conference adjourned to meet again on April 11, 1910. + +The International Conference for the purpose of promoting uniform +legislation concerning letters of exchange, which was called by the +Government of the Netherlands to meet at The Hague in September, 1909, has +been postponed to meet at that capital in June, 1910. The United States +will be appropriately represented in this Conference under the provision +therefor already made by Congress. + +The cordial invitation of Belgium to be represented by a fitting display of +American progress in the useful arts and inventions at the World's Fair to +be held at Brussels in 1910 remains to be acted upon by the Congress. +Mindful of the advantages to accrue to our artisans and producers in +competition with their Continental rivals, I renew the recommendation +heretofore made that provision be made for acceptance of the invitation and +adequate representation in the Exposition. The question arising out of the +Belgian annexation of the Independent State of the Congo, which has so long +and earnestly preoccupied the attention of this Government and enlisted the +sympathy of our best citizens, is still open, but in a more hopeful stage. +This Government was among the foremost in the great work of uplifting the +uncivilized regions of Africa and urging the extension of the benefits of +civilization, education, and fruitful open commerce to that vast domain, +and is a party to treaty engagements of all the interested powers designed +to carry out that great duty to humanity. The way to better the original +and adventitious conditions, so burdensome to the natives and so +destructive to their development, has been pointed out, by observation and +experience, not alone of American representatives, but by cumulative +evidence from all quarters and by the investigations of Belgian Agents. The +announced programmes of reforms, striking at many of the evils known to +exist, are an augury of better things. The attitude of the United States is +one of benevolent encouragement, coupled with a hopeful trust that the good +work, responsibly undertaken and zealously perfected to the accomplishment +of the results so ardently desired, will soon justify the wisdom that +inspires them and satisfy the demands of humane sentiment throughout the +world. + +A convention between the United States and Germany, under which the +nonworking provisions of the German patent law are made inapplicable to the +patents of American citizens, was concluded on February 23, 1909, and is +now in force. Negotiations for similar conventions looking to the placing +of American inventors on the same footing as nationals have recently been +initiated with other European governments whose laws require the local +working of foreign patents. + +Under an appropriation made at the last session of the Congress, a +commission was sent on American cruisers to Monrovia to investigate the +interests of the United States and its citizens in Liberia. Upon its +arrival at Monrovia the commission was enthusiastically received, and +during its stay in Liberia was everywhere met with the heartiest +expressions of good will for the American Government and people and the +hope was repeatedly expressed on all sides that this Government might see +its way clear to do something to relieve the critical position of the +Republic arising in a measure from external as well as internal and +financial embarrassments. The Liberian Government afforded every facility +to the Commission for ascertaining the true state of affairs. The +Commission also had conferences with representative citizens, interested +foreigners and the representatives of foreign governments in Monrovia. +Visits were made to various parts of the Republic and to the neighboring +British colony of Sierra Leone, where the Commission was received by and +conferred with the Governor. + +It will be remembered that the interest of the United States in the +Republic of Liberia springs from the historical fact of the foundation of +the Republic by the colonization of American citizens of the African race. +In an early treaty with Liberia there is a provision under which the United +States may be called upon for advice or assistance. Pursuant to this +provision and in the spirit of the moral relationship of the United States +to Liberia, that Republic last year asked this Government to lend +assistance in the solution of certain of their national problems, and hence +the Commission was sent. + +The report of our commissioners has just been completed and is now under +examination by the Department of State. It is hoped that there may result +some helpful measures, in which case it may be my duty again to invite your +attention to this subject. + +The Norwegian Government, by a note addressed on January 26, 1909, to the +Department of State, conveyed an invitation to the Government of the United +States to take part in a conference which it is understood will be held in +February or March, 1910, for the purpose of devising means to remedy +existing conditions in the Spitzbergen Islands. + +This invitation was conveyed under the reservation that the question of +altering the status of the islands as countries belonging to no particular +State, and as equally open to the citizens and subjects of all States, +should not be raised. + +The European Powers invited to this Conference by the Government of Norway +were Belgium, Denmark, France, Germany, Great Britain, Russia, Sweden and +the Netherlands. + +The Department of State, in view of proofs filed with it in 1906, showing +the American possession, occupation, and working of certain coal-bearing +lands in Spitzbergen, accepted the invitation under the reservation above +stated, and under the further reservation that all interests in those +islands already vested should be protected and that there should be +equality of opportunity for the future. It was further pointed out that +membership in the Conference on the part of the United States was qualified +by the consideration that this Government would not become a signatory to +any conventional arrangement concluded by the European members of the +Conference which would imply contributory participation by the United +States in any obligation or responsibility for the enforcement of any +scheme of administration which might be devised by the Conference for the +islands. + +THE NEAR EAST. + +His Majesty Mehmed V, Sultan of Turkey, recently sent to this country a +special embassy to announce his accession. The quick transition of the +Government of the Ottoman Empire from one of retrograde tendencies to a +constitutional government with a Parliament and with progressive modern +policies of reform and public improvement is one of the important phenomena +of our times. Constitutional government seems also to have made further +advance in Persia. These events have turned the eyes of the world upon the +Near East. In that quarter the prestige of the United States has spread +widely through the peaceful influence of American schools, universities and +missionaries. There is every reason why we should obtain a greater share of +the commerce of the Near East since the conditions are more favorable now +than ever before. + +LATIN AMERICA. + +One of the happiest events in recent Pan-American diplomacy was the +pacific, independent settlement by the Governments of Bolivia and Peru of a +boundary difference between them, which for some weeks threatened to cause +war and even to entrain embitterments affecting other republics less +directly concerned. From various quarters, directly or indirectly +concerned, the intermediation of the United States was sought to assist in +a solution of the controversy. Desiring at all times to abstain from any +undue mingling in the affairs of sister republics and having faith in the +ability of the Governments of Peru and Bolivia themselves to settle their +differences in a manner satisfactory to themselves which, viewed with +magnanimity, would assuage all embitterment, this Government steadily +abstained from being drawn into the controversy and was much gratified to +find its confidence justified by events. + +On the 9th of July next there will open at Buenos Aires the Fourth +Pan-American Conference. This conference will have a special meaning to the +hearts of all Americans, because around its date are clustered the +anniversaries of the independence of so many of the American republics. It +is not necessary for me to remind the Congress of the political, social and +commercial importance of these gatherings. You are asked to make liberal +appropriation for our participation. If this be granted, it is my purpose +to appoint a distinguished and representative delegation, qualified +fittingly to represent this country and to deal with the problems of +intercontinental interest which will there be discussed. + +The Argentine Republic will also hold from May to November, 1910, at Buenos +Aires, a great International Agricultural Exhibition in which the United +States has been invited to participate. Considering the rapid growth of the +trade of the United States with the Argentine Republic and the cordial +relations existing between the two nations, together with the fact that it +provides an opportunity to show deference to a sister republic on the +occasion of the celebration of its national independence, the proper +Departments of this Government are taking steps to apprise the interests +concerned of the opportunity afforded by this Exhibition, in which +appropriate participation by this country is so desirable. The designation +of an official representative is also receiving consideration. + +To-day, more than ever before, American capital is seeking investment in +foreign countries, and American products are more and more generally +seeking foreign markets. As a consequence, in all countries there are +American citizens and American interests to be protected, on occasion, by +their Government. These movements of men, of capital, and of commodities +bring peoples and governments closer together and so form bonds of peace +and mutual dependency, as they must also naturally sometimes make passing +points of friction. The resultant situation inevitably imposes upon this +Government vastly increased responsibilities. This Administration, through +the Department of State and the foreign service, is lending all proper +support to legitimate and beneficial American enterprises in foreign +countries, the degree of such support being measured by the national +advantages to be expected. A citizen himself can not by contract or +otherwise divest himself of the right, nor can this Government escape the +obligation, of his protection in his personal and property rights when +these are unjustly infringed in a foreign country. To avoid ceaseless +vexations it is proper that in considering whether American enterprise +should be encouraged or supported in a particular country, the Government +should give full weight not only to the national, as opposed to the +individual benefits to accrue, but also to the fact whether or not the +Government of the country in question is in its administration and in its +diplomacy faithful to the principles of moderation, equity and justice upon +which alone depend international credit, in diplomacy as well as in +finance. + +The Pan-American policy of this Government has long been fixed in its +principles and remains unchanged. With the changed circumstances of the +United States and of the Republics to the south of us, most of which have +great natural resources, stable government and progressive ideals, the +apprehension which gave rise to the Monroe Doctrine may be said to have +nearly disappeared, and neither the doctrine as it exists nor any other +doctrine of American policy should be permitted to operate for the +perpetuation of irresponsible government, the escape of just obligations, +or the insidious allegation of dominating ambitions on the part of the +United States. + +Beside the fundamental doctrines of our Pan-American policy there have +grown up a realization of political interests, community of institutions +and ideals, and a flourishing commerce. All these bonds will be greatly +strengthened as time goes on and increased facilities, such as the great +bank soon to be established in Latin America, supply the means for building +up the colossal intercontinental commerce of the future. + +My meeting with President Diaz and the greeting exchanged on both American +and Mexican soil served, I hope, to signalize the close and cordial +relations which so well bind together this Republic and the great Republic +immediately to the south, between which there is so vast a network of +material interests. + +I am happy to say that all but one of the cases which for so long vexed our +relations with Venezuela have been settled within the past few months and +that, under the enlightened regime now directing the Government of +Venezuela, provision has been made for arbitration of the remaining case +before The Hague Tribunal. On July 30, 1909, the Government of Panama +agreed, after considerable negotiation, to indemnify the relatives of the +American officers and sailors who were brutally treated, one of them +having, indeed, been killed by the Panaman police this year. + +The sincere desire of the Government of Panama to do away with a situation +where such an accident could occur is manifest in the recent request in +compliance with which this Government has lent the services of an officer +of the Army to be employed by the Government of Panama as Instructor of +Police. + +The sanitary improvements and public works undertaken in Cuba prior to the +present administration of that Government, in the success of which the +United States is interested under the treaty, are reported to be making +good progress and since the Congress provided for the continuance of the +reciprocal commercial arrangement between Cuba and the United States +assurance has been received that no negotiations injuriously affecting the +situation will be undertaken without consultation. The collection of the +customs of the Dominican Republic through the general receiver of customs +appointed by the President of the United States in accordance with the +convention of February 8, 1907, has proceeded in an uneventful and +satisfactory manner. The customs receipts have decreased owing to disturbed +political and economic conditions and to a very natural curtailment of +imports in view of the anticipated revision of the Dominican tariff +schedule. The payments to the fiscal agency fund for the service of the +bonded debt of the Republic, as provided by the convention, have been +regularly and promptly made, and satisfactory progress has been made in +carrying out the provisions of the convention looking towards the +completion of the adjustment of the debt and the acquirement by the +Dominican Government of certain concessions and monopolies which have been +a burden to the commerce of the country. In short, the receivership has +demonstrated its ability, even under unfavorable economic and political +conditions, to do the work for which it was intended. + +This Government was obliged to intervene diplomatically to bring about +arbitration or settlement of the claim of the Emery Company against +Nicaragua, which it had long before been agreed should be arbitrated. A +settlement of this troublesome case was reached by the signature of a +protocol on September 18, 1909. + +Many years ago diplomatic intervention became necessary to the protection +of the interests in the American claim of Alsop and Company against the +Government of Chile. The Government of Chile had frequently admitted +obligation in the case and had promised this Government to settle. There +had been two abortive attempts to do so through arbitral commissions, which +failed through lack of jurisdiction. Now, happily, as the result of the +recent diplomatic negotiations, the Governments of the United States and of +Chile, actuated by the sincere desire to free from any strain those cordial +and friendly relations upon which both set such store, have agreed by a +protocol to submit the controversy to definitive settlement by His +Britannic Majesty, Edward VII. + +Since the Washington Conventions of 1907 were communicated to the +Government of the United States as a consulting and advising party, this +Government has been almost continuously called upon by one or another, and +in turn by all the five Central American Republics, to exert itself for the +maintenance of the Conventions. Nearly every complaint has been against the +Zelaya Government of Nicaragua, which has kept Central America in constant +tension or turmoil. The responses made to the representations of Central +American Republics, as due from the United States on account of its +relation to the Washington Conventions, have been at all times conservative +and have avoided, so far as possible, any semblance of interference, +although it is very apparent that the considerations of geographic +proximity to the Canal Zone and of the very substantial American interests +in Central America give to the United States a special position in the zone +of these Republics and the Caribbean Sea. + +I need not rehearse here the patient efforts of this Government to promote +peace and welfare among these Republics, efforts which are fully +appreciated by the majority of them who are loyal to their true interests. +It would be no less unnecessary to rehearse here the sad tale of +unspeakable barbarities and oppression alleged to have been committed by +the Zelaya Government. Recently two Americans were put to death by order of +President Zelaya himself. They were reported to have been regularly +commissioned officers in the organized forces of a revolution which had +continued many weeks and was in control of about half of the Republic, and +as such, according to the modern enlightened practice of civilized nations, +they were entitled to be dealt with as prisoners of war. + +At the date when this message is printed this Government has terminated +diplomatic relations with the Zelaya Government, for reasons made public in +a communication to the former Nicaraguan charge' d'affaires, and is +intending to take such future steps as may be found most consistent with +its dignity, its duty to American interests, and its moral obligations to +Central America and to civilization. It may later be necessary for me to +bring this subject to the attention of the Congress in a special message. + +The International Bureau of American Republics has carried on an important +and increasing work during the last year. In the exercise of its peculiar +functions as an international agency, maintained by all the American +Republics for the development of Pan-American commerce and friendship, it +has accomplished a great practical good which could be done in the same way +by no individual department or bureau of one government, and is therefore +deserving of your liberal support. The fact that it is about to enter a new +building, erected through the munificence of an American philanthropist and +the contributions of all the American nations, where both its efficiency of +administration and expense of maintenance will naturally be much augmented, +further entitles it to special consideration. + +THE FAR EAST. + +In the Far East this Government preserves unchanged its policy of +supporting the principle of equality of opportunity and scrupulous respect +for the integrity of the Chinese Empire, to which policy are pledged the +interested Powers of both East and West. + +By the Treaty of 1903 China has undertaken the abolition of likin with a +moderate and proportionate raising of the customs tariff along with +currency reform. These reforms being of manifest advantage to foreign +commerce as well as to the interests of China, this Government is +endeavoring to facilitate these measures and the needful acquiescence of +the treaty Powers. When it appeared that Chinese likin revenues were to be +hypothecated to foreign bankers in connection with a great railway project, +it was obvious that the Governments whose nationals held this loan would +have a certain direct interest in the question of the carrying out by China +of the reforms in question. Because this railroad loan represented a +practical and real application of the open door policy through cooperation +with China by interested Powers as well as because of its relations to the +reforms referred to above, the Administration deemed American participation +to be of great national interest. Happily, when it was as a matter of broad +policy urgent that this opportunity should not be lost, the indispensable +instrumentality presented itself when a group of American bankers, of +international reputation and great resources, agreed at once to share in +the loan upon precisely such terms as this Government should approve. The +chief of those terms was that American railway material should be upon an +exact equality with that of the other nationals joining in the loan in the +placing of orders for this whole railroad system. After months of +negotiation the equal participation of Americans seems at last assured. It +is gratifying that Americans will thus take their share in this extension +of these great highways of trade, and to believe that such activities will +give a real impetus to our commerce and will prove a practical corollary to +our historic policy in the Far East. + +The Imperial Chinese Government in pursuance of its decision to devote +funds from the portion of the indemnity remitted by the United States to +the sending of students to this country has already completed arrangements +for carrying out this purpose, and a considerable body of students have +arrived to take up their work in our schools and universities. No one can +doubt the happy effect that the associations formed by these representative +young men will have when they return to take up their work in the +progressive development of their country. + +The results of the Opium Conference held at Shanghai last spring at the +invitation of the United States have been laid before the Government. The +report shows that China is making remarkable progress and admirable efforts +toward the eradication of the opium evil and that the Governments concerned +have not allowed their commercial interests to interfere with a helpful +cooperation in this reform. Collateral investigations of the opium question +in this country lead me to recommend that the manufacture, sale and use of +opium and its derivatives in the United States should be so far as possible +more rigorously controlled by legislation. + +In one of the Chinese-Japanese Conventions of September 4 of this year +there was a provision which caused considerable public apprehension in that +upon its face it was believed in some quarters to seek to establish a +monopoly of mining privileges along the South Manchurian and Antung-Mukden +Railroads, and thus to exclude Americans from a wide field of enterprise, +to take part in which they were by treaty with China entitled. After a +thorough examination of the Conventions and of the several contextual +documents, the Secretary of State reached the conclusion that no such +monopoly was intended or accomplished. However, in view of the widespread +discussion of this question, to confirm the view it had reached, this +Government made inquiry of the Imperial Chinese and Japanese Governments +and received from each official assurance that the provision had no purpose +inconsistent with the policy of equality of opportunity to which the +signatories, in common with the United States, are pledged. + +Our traditional relations with the Japanese Empire continue cordial as +usual. As the representative of Japan, His Imperial Highness Prince Kuni +visited the Hudson-Fulton Celebration. The recent visit of a delegation of +prominent business men as guests of the chambers of commerce of the Pacific +slope, whose representatives had been so agreeably received in Japan, will +doubtless contribute to the growing trade across the Pacific, as well as to +that mutual understanding which leads to mutual appreciation. The +arrangement of 1908 for a cooperative control of the coming of laborers to +the United States has proved to work satisfactorily. The matter of a +revision of the existing treaty between the United States and Japan which +is terminable in 1912 is already receiving the study of both countries. + +The Department of State is considering the revision in whole or in part, of +the existing treaty with Siam, which was concluded in 1856, and is now, in +respect to many of its provisions, out of date. + +THE DEPARTMENT OF STATE. + +I earnestly recommend to the favorable action of the Congress the estimates +submitted by the Department of State and most especially the legislation +suggested in the Secretary of State's letter of this date whereby it will +be possible to develop and make permanent the reorganization of the +Department upon modern lines in a manner to make it a thoroughly efficient +instrument in the furtherance of our foreign trade and of American +interests abroad. The plan to have Divisions of Latin-American and Far +Eastern Affairs and to institute a certain specialization in business with +Europe and the Near East will at once commend itself. These +politico-geographical divisions and the detail from the diplomatic or +consular service to the Department of a number of men, who bring to the +study of complicated problems in different parts of the world practical +knowledge recently gained on the spot, clearly is of the greatest advantage +to the Secretary of State in foreseeing conditions likely to arise and in +conducting the great variety of correspondence and negotiation. It should +be remembered that such facilities exist in the foreign offices of all the +leading commercial nations and that to deny them to the Secretary of State +would be to place this Government at a great disadvantage in the rivalry of +commercial competition. + +The consular service has been greatly improved under the law of April 5, +1906, and the Executive Order of June 27, 1906, and I commend to your +consideration the question of embodying in a statute the principles of the +present Executive Order upon which the efficiency of our consular service +is wholly dependent. + +In modern times political and commercial interests are interrelated, and in +the negotiation of commercial treaties, conventions and tariff agreements, +the keeping open of opportunities and the proper support of American +enterprises, our diplomatic service is quite as important as the consular +service to the business interests of the country. Impressed with this idea +and convinced that selection after rigorous examination, promotion for +merit solely and the experience only to be gained through the continuity of +an organized service are indispensable to a high degree of efficiency in +the diplomatic service, I have signed an Executive Order as the first step +toward this very desirable result. Its effect should be to place all +secretaries in the diplomatic service in much the same position as consular +officers are now placed and to tend to the promotion of the most efficient +to the grade of minister, generally leaving for outside appointments such +posts of the grade of ambassador or minister as it may be expedient to fill +from without the service. It is proposed also to continue the practice +instituted last summer of giving to all newly appointed secretaries at +least one month's thorough training in the Department of State before they +proceed to their posts. This has been done for some time in regard to the +consular service with excellent results. + +Under a provision of the Act of August 5, 1909, I have appointed three +officials to assist the officers of the Government in collecting +information necessary to a wise administration of the tariff act of August +5, 1909. As to questions of customs administration they are cooperating +with the officials of the Treasury Department and as to matters of the +needs and the exigencies of our manufacturers and exporters, with the +Department of Commerce and Labor, in its relation to the domestic aspect of +the subject of foreign commerce. In the study of foreign tariff treatment +they will assist the Bureau of Trade Relations of the Department of State. +It is hoped thus to coordinate and bring to bear upon this most important +subject all the agencies of the Government which can contribute anything to +its efficient handling. + +As a consequence of Section 2 of the tariff act of August 5, 1909, it +becomes the duty of the Secretary of State to conduct as diplomatic +business all the negotiations necessary to place him in a position to +advise me as to whether or not a particular country unduly discriminates +against the United States in the sense of the statute referred to. The +great scope and complexity of this work, as well as the obligation to lend +all proper aid to our expanding commerce, is met by the expansion of the +Bureau of Trade Relations as set forth in the estimates for the Department +of State. + +OTHER DEPARTMENTS. + +I have thus in some detail described the important transactions of the +State Department since the beginning of this Administration for the reason +that there is no provision either by statute or custom for a formal report +by the Secretary of State to the President or to Congress, and a +Presidential message is the only means by which the condition of our +foreign relations is brought to the attention of Congress and the public. + +In dealing with the affairs of the other Departments, the heads of which +all submit annual reports, I shall touch only those matters that seem to me +to call for special mention on my part without minimizing in any way the +recommendations made by them for legislation affecting their respective +Departments, in all of which I wish to express my general concurrence. + +GOVERNMENT EXPENDITURES AND REVENUES. + +Perhaps the most important question presented to this Administration is +that of economy in expenditures and sufficiency of revenue. The deficit of +the last fiscal year, and the certain deficit of the current year, prompted +Congress to throw a greater responsibility on the Executive and the +Secretary of the Treasury than had heretofore been declared by statute. +This declaration imposes upon the Secretary of the Treasury the duty of +assembling all the estimates of the Executive Departments, bureaus, and +offices, of the expenditures necessary in the ensuing fiscal year, and of +making an estimate of the revenues of the Government for the same period; +and if a probable deficit is thus shown, it is made the duty of the +President to recommend the method by which such deficit can be met. + +The report of the Secretary shows that the ordinary expenditures for the +current fiscal year ending June 30, 1910, will exceed the estimated +receipts by $34,075,620. If to this deficit is added the sum to be +disbursed for the Panama Canal, amounting to $38,000,000, and $1,000,000 to +be paid on the public debt, the deficit of ordinary receipts and +expenditures will be increased to a total deficit of $73,075,620. This +deficit the Secretary proposes to meet by the proceeds of bonds issued to +pay the cost of constructing the Panama Canal. I approve this proposal. + +The policy of paying for the construction of the Panama Canal, not out of +current revenue, but by bond issues, was adopted in the Spooner Act of +1902, and there seems to be no good reason for departing from the principle +by which a part at least of the burden of the cost of the canal shall fall +upon our posterity who are to enjoy it; and there is all the more reason +for this view because the actual cost to date of the canal, which is now +half done and which will be completed January 1, 1915, shows that the cost +of engineering and construction will be $297,766,000, instead of +$139,705,200, as originally estimated. In addition to engineering and +construction, the other expenses, including sanitation and government, and +the amount paid for the properties, the franchise, and the privilege of +building the canal, increase the cost by $75,435,000, to a total of +$375,201,000. The increase in the cost of engineering and construction is +due to a substantial enlargement of the plan of construction by widening +the canal 100 feet in the Culebra cut and by increasing the dimensions of +the locks, to the underestimate of the quantity of the work to be done +under the original plan, and to an underestimate of the cost of labor and +materials both of which have greatly enhanced in price since the original +estimate was made. + +In order to avoid a deficit for the ensuing fiscal year, I directed the +heads of Departments in the preparation of their estimates to make them as +low as possible consistent with imperative governmental necessity. The +result has been, as I am advised by the Secretary of the Treasury, that the +estimates for the expenses of the Government for the next fiscal year +ending June 30, 1911, are less than the appropriations for this current +fiscal year by $42,818,000. So far as the Secretary of the Treasury is able +to form a judgment as to future income, and compare it with the +expenditures for the next fiscal year ending June 30, 1911, and excluding +payments on account of the Panama Canal, which will doubtless be taken up +by bonds, there will be a surplus of $35,931,000. + +In the present estimates the needs of the Departments and of the Government +have been cut to the quick, so to speak, and any assumption on the part of +Congress, so often made in times past, that the estimates have been +prepared with the expectation that they may be reduced, will result in +seriously hampering proper administration. + +The Secretary of the Treasury points out what should be carefully noted in +respect to this reduction in governmental expenses for the next fiscal +year, that the economies are of two kinds--first, there is a saving in the +permanent administration of the Departments, bureaus, and offices of the +Government; and, second, there is a present reduction in expenses by a +postponement of projects and improvements that ultimately will have to be +carried out but which are now delayed with the hope that additional revenue +in the future will permit their execution without producing a deficit. + +It has been impossible in the preparation of estimates greatly to reduce +the cost of permanent administration. This can not be done without a +thorough reorganization of bureaus, offices, and departments. For the +purpose of securing information which may enable the executive and the +legislative branches to unite in a plan for the permanent reduction of the +cost of governmental administration, the Treasury Department has instituted +an investigation by one of the most skilled expert accountants in the +United States. The result of his work in two or three bureaus, which, if +extended to the entire Government, must occupy two or more years, has been +to show much room for improvement and opportunity for substantial +reductions in the cost and increased efficiency of administration. The +object of the investigation is to devise means to increase the average +efficiency of each employee. There is great room for improvement toward +this end, not only by the reorganization of bureaus and departments and in +the avoidance of duplication, but also in the treatment of the individual +employee. + +Under the present system it constantly happens that two employees receive +the same salary when the work of one is far more difficult and important +and exacting than that of the other. Superior ability is not rewarded or +encouraged. As the classification is now entirely by salary, an employee +often rises to the highest class while doing the easiest work, for which +alone he may be fitted. An investigation ordered by my predecessor resulted +in the recommendation that the civil service he reclassified according to +the kind of work, so that the work requiring most application and knowledge +and ability shall receive most compensation. I believe such a change would +be fairer to the whole force and would permanently improve the personnel of +the service. + +More than this, every reform directed toward the improvement in the average +efficiency of government employees must depend on the ability of the +Executive to eliminate from the government service those who are +inefficient from any cause, and as the degree of efficiency in all the +Departments is much lessened by the retention of old employees who have +outlived their energy and usefulness, it is indispensable to any proper +system of economy that provision be made so that their separation from the +service shall be easy and inevitable. It is impossible to make such +provision unless there is adopted a plan of civil pensions. Most of the +great industrial organizations, and many of the well-conducted railways of +this country, are coming to the conclusion that a system of pensions for +old employees, and the substitution therefor of younger and more energetic +servants, promotes both economy and efficiency of administration. + +I am aware that there is a strong feeling in both Houses of Congress, and +possibly in the country, against the establishment of civil pensions, and +that this has naturally grown out of the heavy burden of military pensions, +which it has always been the policy of our Government to assume; but I am +strongly convinced that no other practical solution of the difficulties +presented by the superannuation of civil servants can be found than that of +a system of civil pensions. + +The business and expenditures of the Government have expanded enormously +since the Spanish war, but as the revenues have increased in nearly the +same proportion as the expenditures until recently, the attention of the +public, and of those responsible for the Government, has not been fastened +upon the question of reducing the cost of administration. We can not, in +view of the advancing prices of living, hope to save money by a reduction +in the standard of salaries paid. Indeed, if any change is made in that +regard, an increase rather than a decrease will be necessary; and the only +means of economy will be in reducing the number of employees and in +obtaining a greater average of efficiency from those retained in the +service. + +Close investigation and study needed to make definite recommendations in +this regard will consume at least two years. I note with much satisfaction +the organization in the Senate of a Committee on Public Expenditures, +charged with the duty of conducting such an investigation, and I tender to +that committee all the assistance which the executive branch of the +Government can possibly render. + +FRAUDS IN THE COLLECTION OF CUSTOMS. + +I regret to refer to the fact of the discovery of extensive frauds in the +collections of the customs revenue at New York City, in which a number of +the subordinate employees in the weighing and other departments were +directly concerned, and in which the beneficiaries were the American Sugar +Refining Company and others. The frauds consisted in the payment of duty on +underweights of sugar. The Government has recovered from the American Sugar +Refining Company all that it is shown to have been defrauded of. The sum +was received in full of the amount due, which might have been recovered by +civil suit against the beneficiary of the fraud, but there was an express +reservation in the contract of settlement by which the settlement should +not interfere with, or prevent the criminal prosecution of everyone who was +found to be subject to the same. + +Criminal prosecutions are now proceeding against a number of the Government +officers. The Treasury Department and the Department of Justice are +exerting every effort to discover all the wrongdoers, including the +officers and employees of the companies who may have been privy to the +fraud. It would seem to me that an investigation of the frauds by Congress +at present, pending the probing by the Treasury Department and the +Department of Justice, as proposed, might by giving immunity and otherwise +prove an embarrassment in securing conviction of the guilty parties. + +MAXIMUM AND MINIMUM CLAUSE IN TARIFF ACT. + +Two features of the new tariff act call for special reference. By virtue of +the clause known as the "Maximum and Minimum" clause, it is the duty of the +Executive to consider the laws and practices of other countries with +reference to the importation into those countries of the products and +merchandise of the United States, and if the Executive finds such laws and +practices not to be unduly discriminatory against the United States, the +minimum duties provided in the bill are to go into force. + +Unless the President makes such a finding, then the maximum duties provided +in the bill, that is, an increase of twenty-five per cent. ad valorem over +the minimum duties, are to be in force. Fear has been expressed that this +power conferred and duty imposed on the Executive is likely to lead to a +tariff war. I beg to express the hope and belief that no such result need +be anticipated. + +The discretion granted to the Executive by the terms "unduly +discriminatory" is wide. In order that the maximum duty shall be charged +against the imports from a country, it is necessary that he shall find on +the part of that country not only discriminations in its laws or the +practice under them against the trade of the United States, but that the +discriminations found shall be undue; that is, without good and fair +reason. I conceive that this power was reposed in the President with the +hope that the maximum duties might never be applied in any case, but that +the power to apply them would enable the President and the State Department +through friendly negotiation to secure the elimination from the laws and +the practice under them of any foreign country of that which is unduly +discriminatory. No one is seeking a tariff war or a condition in which the +spirit of retaliation shall be aroused. + +USES OF THE NEW TARIFF BOARD. + +The new tariff law enables me to appoint a tariff board to assist me in +connection with the Department of State in the administration of the +minimum and maximum clause of the act and also to assist officers of the +Government in the administration of the entire law. An examination of the +law and an understanding of the nature of the facts which should be +considered in discharging the functions imposed upon the Executive show +that I have the power to direct the tariff board to make a comprehensive +glossary and encyclopedia of the terms used and articles embraced in the +tariff law, and to secure information as to the cost of production of such +goods in this country and the cost of their production in foreign +countries. I have therefore appointed a tariff board consisting of three +members and have directed them to perform all the duties above described. +This work will perhaps take two or three years, and I ask from Congress a +continuing annual appropriation equal to that already made for its +prosecution. I believe that the work of this board will be of prime utility +and importance whenever Congress shall deem it wise again to readjust the +customs duties. If the facts secured by the tariff board are of such a +character as to show generally that the rates of duties imposed by the +present tariff law are excessive under the principles of protection as +described in the platform of the successful party at the late election, I +shall not hesitate to invite the attention of Congress to this fact and to +the necessity for action predicated thereon. Nothing, however, halts +business and interferes with the course of prosperity so much as the +threatened revision of the tariff, and until the facts are at hand, after +careful and deliberate investigation, upon which such revision can properly +be undertaken, it seems to me unwise to attempt it. The amount of +misinformation that creeps into arguments pro and con in respect to tariff +rates is such as to require the kind of investigation that I have directed +the tariff board to make, an investigation undertaken by it wholly without +respect to the effect which the facts may have in calling for a +readjustment of the rates of duty. + +WAR DEPARTMENT. + +In the interest of immediate economy and because of the prospect of a +deficit, I have required a reduction in the estimates of the War Department +for the coming fiscal year, which brings the total estimates down to an +amount forty-five millions less than the corresponding estimates for last +year. This could only be accomplished by cutting off new projects and +suspending for the period of one year all progress in military matters. For +the same reason I have directed that the Army shall not be recruited up to +its present authorized strength. These measures can hardly be more than +temporary--to last until our revenues are in better condition and until the +whole question of the expediency of adopting a definite military policy can +be submitted to Congress, for I am sure that the interests of the military +establishment are seriously in need of careful consideration by Congress. +The laws regulating the organization of our armed forces in the event of +war need to be revised in order that the organization can be modified so as +to produce a force which would be more consistently apportioned throughout +its numerous branches. To explain the circumstances upon which this opinion +is based would necessitate a lengthy discussion, and I postpone it until +the first convenient opportunity shall arise to send to Congress a special +message upon this subject. + +The Secretary of War calls attention to a number of needed changes in the +Army in all of which I concur, but the point upon which I place most +emphasis is the need for an elimination bill providing a method by which +the merits of officers shall have some effect upon their advancement and by +which the advancement of all may be accelerated by the effective +elimination of a definite proportion of the least efficient. There are in +every army, and certainly in ours, a number of officers who do not violate +their duty in any such way as to give reason for a court-martial or +dismissal, but who do not show such aptitude and skill and character for +high command as to justify their remaining in the active service to be +Promoted. Provision should be made by which they may be retired on a +certain proportion of their pay, increasing with their length of service at +the time of retirement. There is now a personnel law for the Navy which +itself needs amendment and to which I shall make further reference. Such a +law is needed quite as much for the Army. + +The coast defenses of the United States proper are generally all that could +be desired, and in some respects they are rather more elaborate than under +present conditions are needed to stop an enemy's fleet from entering the +harbors defended. There is, however, one place where additional defense is +badly needed, and that is at the mouth of Chesapeake Bay, where it is +proposed to make an artificial island for a fort which shall prevent an +enemy's fleet from entering this most important strategical base of +operations on the whole Atlantic and Gulf coasts. I hope that appropriate +legislation will be adopted to secure the construction of this defense. + +The military and naval joint board have unanimously agreed that it would be +unwise to make the large expenditures which at one time were contemplated +in the establishment of a naval base and station in the Philippine Islands, +and have expressed their judgment, in which I fully concur, in favor of +making an extensive naval base at Pearl Harbor, near Honolulu, and not in +the Philippines. This does not dispense with the necessity for the +comparatively small appropriations required to finish the proper coast +defenses in the Philippines now under construction on the island of +Corregidor and elsewhere or to complete a suitable repair station and +coaling supply station at Olongapo, where is the floating dock "Dewey." I +hope that this recommendation of the joint board will end the discussion as +to the comparative merits of Manila Bay and Olongapo as naval stations, and +will lead to prompt measures for the proper equipment and defense of Pearl +Harbor. + +THE NAVY. + +The return of the battle-ship fleet from its voyage around the world, in +more efficient condition than when it started, was a noteworthy event of +interest alike to our citizens and the naval authorities of the world. +Besides the beneficial and far-reaching effect on our personal and +diplomatic relations in the countries which the fleet visited, the marked +success of the ships in steaming around the world in all weathers on +schedule time has increased respect for our Navy and has added to our +national prestige. + +Our enlisted personnel recruited from all sections of the country is young +and energetic and representative of the national spirit. It is, moreover, +owing to its intelligence, capable of quick training into the modern +man-of-warsman. Our officers are earnest and zealous in their profession, +but it is a regrettable fact that the higher officers are old for the +responsibilities of the modern navy, and the admirals do not arrive at flag +rank young enough to obtain adequate training in their duties as flag +officers. This need for reform in the Navy has been ably and earnestly +presented to Congress by my predecessor, and I also urgently recommend the +subject for consideration. + +Early in the coming session a comprehensive plan for the reorganization of +the officers of all corps of the Navy will be presented to Congress, and I +hope it will meet with action suited to its urgency. + +Owing to the necessity for economy in expenditures, I have directed the +curtailment of recommendations for naval appropriations so that they are +thirty-eight millions less than the corresponding estimates of last year, +and the request for new naval construction is limited to two first-class +battle ships and one repair vessel. + +The use of a navy is for military purposes, and there has been found need +in the Department of a military branch dealing directly with the military +use of the fleet. The Secretary of the Navy has also felt the lack of +responsible advisers to aid him in reaching conclusions and deciding +important matters between coordinate branches of the Department. To secure +these results he has inaugurated a tentative plan involving certain changes +in the organization of the Navy Department, including the navy-yards, all +of which have been found by the Attorney-General to be in accordance with +law. I have approved the execution of the plan proposed because of the +greater efficiency and economy it promises. + +The generosity of Congress has provided in the present Naval Observatory +the most magnificent and expensive astronomical establishment in the world. +It is being used for certain naval purposes which might easily and +adequately be subserved by a small division connected with the Naval +Department at only a fraction of the cost of the present Naval Observatory. +The official Board of Visitors established by Congress and appointed in +1901 expressed its conclusion that the official head of the observatory +should be an eminent astronomer appointed by the President by and with the +advice and consent of the Senate, holding his place by a tenure at least as +permanent as that of the Superintendent of the Coast Survey or the head of +the Geological Survey, and not merely by a detail of two or three years' +duration. I fully concur in this judgment, and urge a provision by law for +the appointment of such a director. + +It may not be necessary to take the observatory out of the Navy Department +and put it into another department in which opportunity for scientific +research afforded by the observatory would seem to be more appropriate, +though I believe such a transfer in the long run is the best policy. I am +sure, however, I express the desire of the astronomers and those learned in +the kindred sciences when I urge upon Congress that the Naval Observatory +be now dedicated to science under control of a man of science who can, if +need be, render all the service to the Navy Department which this +observatory now renders, and still furnish to the world the discoveries in +astronomy that a great astronomer using such a plant would be likely to +make. + +DEPARTMENT OF JUSTICE.EXPEDITION IN LEGAL PROCEDURE + +The deplorable delays in the administration of civil and criminal law have +received the attention of committees of the American Bar Association and of +many State Bar Associations, as well as the considered thought of judges +and jurists. In my judgment, a change in judicial procedure, with a view to +reducing its expense to private litigants in civil cases and facilitating +the dispatch of business and final decision in both civil and criminal +cases, constitutes the greatest need in our American institutions. I do not +doubt for one moment that much of the lawless violence and cruelty +exhibited in lynchings is directly due to the uncertainties and injustice +growing out of the delays in trials, judgments, and the executions thereof +by our courts. Of course these remarks apply quite as well to the +administration of justice in State courts as to that in Federal courts, and +without making invidious distinction it is perhaps not too much to say +that, speaking generally, the defects are less in the Federal courts than +in the State courts. But they are very great in the Federal courts. The +expedition with which business is disposed of both on the civil and the +criminal side of English courts under modern rules of procedure makes the +delays in our courts seem archaic and barbarous. The procedure in the +Federal courts should furnish an example for the State courts. I presume it +is impossible, without an amendment to the Constitution, to unite under one +form of action the proceedings at common law and proceedings in equity in +the Federal courts, but it is certainly not impossible by a statute to +simplify and make short and direct the procedure both at law and in equity +in those courts. It is not impossible to cut down still more than it is cut +down, the jurisdiction of the Supreme Court so as to confine it almost +wholly to statutory and constitutional questions. Under the present +statutes the equity and admiralty procedure in the Federal courts is under +the control of the Supreme Court, but in the pressure of business to which +that court is subjected, it is impossible to hope that a radical and proper +reform of the Federal equity procedure can be brought about. I therefore +recommend legislation providing for the appointment by the President of a +commission with authority to examine the law and equity procedure of the +Federal courts of first instance, the law of appeals from those courts to +the courts of appeals and to the Supreme Court, and the costs imposed in +such procedure upon the private litigants and upon the public treasury and +make recommendation with a view to simplifying and expediting the procedure +as far as possible and making it as inexpensive as may be to the litigant +of little means. + +INJUNCTIONS WITHOUT NOTICE. + +The platform of the successful party in the last election contained the +following: "The Republican party will uphold at all times the authority and +integrity of the courts, State and Federal, and will ever insist that their +powers to enforcetheir process and to protect life, liberty, and property +shall be preserved inviolate. We believe, however, that the rules of +procedure in the Federal courts with respectto the issuance of the writ of +injunction should be more accurately defined by statute, and that no +injunction or temporary restraining order should be issued withoutnotice, +except where irreparable injury would result from delay, in which case a +speedy hearing thereafter should be granted." I recommend that in +compliance with the promise thus made, appropriate legislation be adopted. +The ends of justice will best be met and the chief cause of complaint +against ill-considered injunctions without notice will be removed by the +enactment of a statute forbidding hereafter the issuing of any injunction +or restraining order, whether temporary or permanent, by any Federal court, +without previous notice and a reasonable opportunity to he heard on behalf +of the parties to be enjoined; unless it shall appear to the satisfaction +of the court that the delay necessary to give such notice and hearing would +result in irreparable injury to the complainant and unless also the court +shall from the evidence make a written finding, which shall be spread upon +the court minutes, that immediate and irreparable injury is likely to ensue +to the complainant, and shall define the injury, state why it is +irreparable, and shall also endorse on the order issued the date and the +hour of the issuance of the order. Moreover, every such injunction or +restraining order issued without previous notice and opportunity by the +defendant to be heard should by force of the statute expire and be of no +effect after seven days from the issuance thereof or within any time less +than that period which the court may fix, unless within such seven days or +such less period, the injunction or order is extended or renewed after +previous notice and opportunity to be heard. + +My judgment is that the passage of such an act which really embodies the +best practice in equity and is very like the rule now in force in some +courts will prevent the issuing of ill-advised orders of injunction without +notice and will render such orders when issued much less objectionable by +the short time in which they may remain effective. + +ANTI-TRUST AND INTERSTATE COMMERCE LAWS. + +The jurisdiction of the General Government over interstate commerce has led +to the passage of the so-called "Sherman Anti-trust Law" and the +"Interstate Commerce Law" and its amendments. The developments in the +operation of those laws, as shown by indictments, trials, judicial +decisions, and other sources of information, call for a discussion and some +suggestions as to amendments. These I prefer to embody in a special message +instead of including them in the present communication, and I shall avail +myself of the first convenient opportunity to bring these subjects to the +attention of Congress. + +JAIL OF THE DISTRICT OF COLUMBIA. + +My predecessor transmitted to the Congress a special message on January 11, +1909, accompanying the report of Commissioners theretofore appointed to +investigate the jail, workhouse, etc., in the District of Columbia, in +which he directed attention to the report as setting forth vividly, "the +really outrageous conditions in the workhouse and jail." + +The Congress has taken action in pursuance of the recommendations of that +report and of the President, to the extent of appropriating funds and +enacting the necessary legislation for the establishment of a workhouse and +reformatory. No action, however, has been taken by the Congress with +respect to the jail, the conditions of which are still antiquated and +insanitary. I earnestly recommend the passage of a sufficient appropriation +to enable a thorough remodeling of that institution to be made without +delay. It is a reproach to the National Government that almost under the +shadow of the Capitol Dome prisoners should be confined in a building +destitute of the ordinary decent appliances requisite to cleanliness and +sanitary conditions. + +POST-OFFICE DEPARTMENT.SECOND-CLASS MAIL MATTER. + +The deficit every year in the Post-Office Department is largely caused by +the low rate of postage of 1 cent a pound charged on second-class mail +matter, which includes not only newspapers, but magazines and miscellaneous +periodicals. The actual loss growing out of the transmission of this +second-class mail matter at 1 cent a pound amounts to about $63,000,000 a +year. The average cost of the transportation of this matter is more than 9 +cents a pound. + +It appears that the average distance over which newspapers are delivered to +their customers is 291 miles, while the average haul of magazines is 1,049, +and of miscellaneous periodicals 1,128 miles. Thus, the average haul of the +magazine is three and one-half times and that of the miscellaneous +periodical nearly four times the haul of the daily newspaper, yet all of +them pay the same postage rate of 1 cent a pound. The statistics of 1907 +show that second-class mail matter constituted 63.91 per cent. of the +weight of all the mail, and yielded only 5.19 per cent. of the revenue. + +The figures given are startling, and show the payment by the Government of +an enormous subsidy to the newspapers, magazines, and periodicals, and +Congress may well consider whether radical steps should not be taken to +reduce the deficit in the Post-Office Department caused by this discrepancy +between the actual cost of transportation and the compensation exacted +therefor. + +A great saving might be made, amounting to much more than half of the loss, +by imposing upon magazines and periodicals a higher rate of postage. They +are much heavier than newspapers, and contain a much higher proportion of +advertising to reading matter, and the average distance of their +transportation is three and a half times as great. + +The total deficit for the last fiscal year in the Post-Office Department +amounted to $17,500,000. The branches of its business which it did at a +loss were the second-class mail service, in which the loss, as already +said, was $63,000,000, and the free rural delivery, in which the loss was +$28,000,000. These losses were in part offset by the profits of the letter +postage and other sources of income. It would seem wise to reduce the loss +upon second-class mail matter, at least to the extent of preventing a +deficit in the total operations of the Post-Office. + +I commend the whole subject to Congress, not unmindful of the spread of +intelligence which a low charge for carrying newspapers and periodicals +assists. I very much doubt, however, the wisdom of a policy which +constitutes so large a subsidy and requires additional taxation to meet +it. + +POSTAL SAVINGS BANKS. + +The second subject worthy of mention in the Post-Office Department is the +real necessity and entire practicability of establishing postal savings +banks. The successful party at the last election declared in favor of +postal savings banks, and although the proposition finds opponents in many +parts of the country, I am convinced that the people desire such banks, and +am sure that when the banks are furnished they will be productive of the +utmost good. The postal savings banks are not constituted for the purpose +of creating competition with other banks. The rate of interest upon +deposits to which they would be limited would be so small as to prevent +their drawing deposits away from other banks. + +I believe them to be necessary in order to offer a proper inducement to +thrift and saving to a great many people of small means who do not now have +banking facilities, and to whom such a system would offer an opportunity +for the accumulation of capital. They will furnish a satisfactory +substitute, based on sound principle and actual successful trial in nearly +all the countries of the world, for the system of government guaranty of +deposits now being adopted in several western States, which with deference +to those who advocate it seems to me to have in it the seeds of +demoralization to conservative banking and certain financial disaster. The +question of how the money deposited in postal savings banks shall be +invested is not free from difficulty, but I believe that a satisfactory +provision for this purpose was inserted as an amendment to the bill +considered by the Senate at its last session. It has been proposed to delay +the consideration of legislation establishing a postal savings bank until +after the report of the Monetary Commission. This report is likely to be +delayed, and properly so, cause of the necessity for careful deliberation +and close investigation. I do not see why the one should be tied up with +the other. It is understood that the Monetary Commission have looked into +the systems of banking which now prevail abroad, and have found that by a +control there exercised in respect to reserves and the rates of exchange by +some central authority panics are avoided. It is not apparent that a system +of postal savings banks would in any way interfere with a change to such a +system here. Certainly in most of the countries of Europe where control is +thus exercised by a central authority, postal savings banks exist and are +not thought to be inconsistent with a proper financial and banking system. + +SHIP SUBSIDY. + +Following the course of my distinguished predecessor, I earnestly recommend +to Congress the consideration and passage of a ship subsidy bill, looking +to the establishment of lines between our Atlantic seaboard and the eastern +coast of South America, as well as lines from the west coast of the United +States to South America. China, Japan, and the Philippines. The profits on +foreign mails are perhaps a sufficient measure of the expenditures which +might first be tentatively applied to this method of inducing American +capital to undertake the establishment of American lines of steamships in +those directions in which we now feel it most important that we should have +means of transportation controlled in the interest of the expansion of our +trade. A bill of this character has once passed the House and more than +once passed the Senate, and I hope that at this session a bill framed on +the same lines and with the same purposes may become a law. + +INTERIOR DEPARTMENT.NEW MEXICO AND ARIZONA. + +The successful party in the last election in its national platform declared +in favor of the admission as separate States of New Mexico and Arizona, and +I recommend that legislation appropriate to this end be adopted. I urge, +however, that care be exercised in the preparation of the legislation +affecting each Territory to secure deliberation in the selection of persons +as members of the convention to draft a constitution for the incoming +State, and I earnestly advise that such constitution after adoption by the +convention shall be submitted to the people of the Territory for their +approval at an election in which the sole issue shall be the merits of the +proposed constitution, and if the constitution is defeated by popular vote +means shall be provided in the enabling act for a new convention and the +drafting of a new constitution. I think it vital that the issue as to the +merits of the constitution should not be mixed up with the selection of +State officers, and that no election of State officers should be had until +after the constitution has been fully approved and finally settled upon. +ALASKA. + +With respect to the Territory of Alaska, I recommend legislation which +shall provide for the appointment by the President of a governor and also +of an executive council, the members of which shall during their term of +office reside in the Territory, and which shall have legislative powers +sufficient to enable it to give to the Territory local laws adapted to its +present growth. I strongly deprecate legislation looking to the election of +a Territorial legislature in that vast district. The lack of permanence of +residence of a large part of the present population and the small number of +the people who either permanently or temporarily reside in the district as +compared with its vast expanse and the variety of the interests that have +to be subserved, make it altogether unfitting in my judgment to provide for +a popular election of a legislative body. The present system is not +adequate and does not furnish the character of local control that ought to +be there. The only compromise it seems to me which may give needed local +legislation and secure a conservative government is the one I propose. + +CONSERVATION OF NATIONAL RESOURCES. + +In several Departments there is presented the necessity for legislation +looking to the further conservation of our national resources, and the +subject is one of such importance as to require a more detailed and +extended discussion than can be entered upon in this communication. For +that reason I shall take an early opportunity to send a special message to +Congress on the subject of the improvement of our waterways, upon the +reclamation and irrigation of arid, semiarid, and swamp lands; upon the +preservation of our forests and the reforesting of suitable areas; upon the +reclassification of the public domain with a view of separating from +agricultural settlement mineral, coal, and phosphate lands and sites +belonging to the Government bordering on streams suitable for the +utilization of water power. + +DEPARTMENT OF AGRICULTURE. + +I commend to your careful consideration the report of the Secretary of +Agriculture as showing the immense sphere of usefulness which that +Department now fills and the wonderful addition to the wealth of the nation +made by the farmers of this country in the crops of the current year. + +DEPARTMENT OF COMMERCE AND LABOR.THE LIGHT-HOUSE BOARD. + +The Light-House Board now discharges its duties under the Department of +Commerce and Labor. For upwards of forty years this Board has been +constituted of military and naval officers and two or three men of science, +with such an absence of a duly constituted executive head that it is +marvelous what work has been accomplished. In the period of construction +the energy and enthusiasm of all the members prevented the inherent defects +of the system from interfering greatly with the beneficial work of the +Board, but now that the work is chiefly confined to maintenance and repair, +for which purpose the country is divided into sixteen districts, to which +are assigned an engineer officer of the Army and an inspector of the Navy, +each with a light-house tender and the needed plant for his work, it has +become apparent by the frequent friction that arises, due to the absence of +any central independent authority, that there must be a complete +reorganization of the Board. I concede the advantage of keeping in the +system the rigidity of discipline that the presence of naval and military +officers in charge insures, but unless the presence of such officers in the +Board can be made consistent with a responsible executive head that shall +have proper authority, I recommend the transfer of control over the +light-houses to a suitable civilian bureau. This is in accordance with the +judgment of competent persons who are familiar with the workings of the +present system. I am confident that a reorganization can be effected which +shall avoid the recurrence of friction between members, instances of which +have been officially brought to my attention, and that by such +reorganization greater efficiency and a substantial reduction in the +expense of operation can be brought about. + +CONSOLIDATION OF BUREAUS. + +I request Congressional authority to enable the Secretary of Commerce and +Labor to unite the Bureaus of Manufactures and Statistics. This was +recommended by a competent committee appointed in the previous +administration for the purpose of suggesting changes in the interest of +economy and efficiency, and is requested by the Secretary. + +THE WHITE SLAVE TRADE. + +I greatly regret to have to say that the investigations made in the Bureau +of Immigration and other sources of information lead to the view that there +is urgent necessity for additional legislation and greater executive +activity to suppress the recruiting of the ranks of prostitutes from the +streams of immigration into this country--an evil which, for want of a +better name, has been called "The White Slave Trade." I believe it to be +constitutional to forbid, under penalty, the transportation of persons for +purposes of prostitution across national and state lines; and by +appropriating a fund of $50,000 to be used by the Secretary of Commerce and +Labor for the employment of special inspectors it will be possible to bring +those responsible for this trade to indictment and conviction under a +federal law. + +BUREAU OF HEALTH + +For a very considerable period a movement has been gathering strength, +especially among the members of the medical profession, in favor of a +concentration of the instruments of the National Government which have to +do with the promotion of public health. In the nature of things, the +Medical Department of the Army and the Medical Department of the Navy must +be kept separate. But there seems to be no reason why all the other bureaus +and offices in the General Government which have to do with the public +health or subjects akin thereto should not be united in a bureau to be +called the "Bureau of Public Health." This would necessitate the transfer +of the Marine-Hospital Service to such a bureau. I am aware that there is +wide field in respect to the public health committed to the States in which +the Federal Government can not exercise jurisdiction, but we have seen in +the Agricultural Department the expansion into widest usefulness of a +department giving attention to agriculture when that subject is plainly one +over which the States properly exercise direct jurisdiction. The +opportunities offered for useful research and the spread of useful +information in regard to the cultivation of the soil and the breeding of +stock and the solution of many of the intricate problems in progressive +agriculture have demonstrated the wisdom of establishing that department. +Similar reasons, of equal force, can be given for the establishment of a +bureau of health that shall not only exercise the police jurisdiction of +the Federal Government respecting quarantine, but which shall also afford +an opportunity for investigation and research by competent experts into +questions of health affecting the whole country, or important sections +thereof, questions which, in the absence of Federal governmental work, are +not likely to be promptly solved. + +CIVIL SERVICE COMMISSION. + +The work of the United States Civil Service Commission has been performed +to the general satisfaction of the executive officers with whom the +Commission has been brought into official communication. The volume of that +work and its variety and extent have under new laws, such as the Census +Act, and new Executive orders, greatly increased. The activities of the +Commission required by the statutes have reached to every portion of the +public domain. + +The accommodations of the Commission are most inadequate for its needs. I +call your attention to its request for increase in those accommodations as +will appear from the annual report for this year. + +POLITICAL CONTRIBUTIONS. + +I urgently recommend to Congress that a law be passed requiring that +candidates in elections of Members of the House of Representatives, and +committees in charge of their candidacy and campaign, file in a proper +office of the United States Government a statement of the contributions +received and of the expenditures incurred in the campaign for such +elections and that similar legislation be enacted in respect to all other +elections which are constitutionally within the control of Congress + +FREEDMAN'S SAVINGS AND TRUST COMPANY. + +Recommendations have been made by my predecessors that Congress appropriate +a sufficient sum to pay the balance--about 38 per cent.--of the amounts due +depositors in the Freedman's Savings and Trust Company. I renew this +recommendation, and advise also that a proper limitation be prescribed +fixing a period within which the claims may be presented, that assigned +claims be not recognized, and that a limit be imposed on the amount of fees +collectible for services in presenting such claims. + +SEMI-CENTENNIAL OF NEGRO FREEDOM. + +The year 1913 will mark the fiftieth anniversary of the issuance of the +Emancipation Proclamation granting freedom to the negroes. It seems fitting +that this event should be properly celebrated. Already a movement has been +started by prominent Negroes, encouraged by prominent white people and the +press. The South especially is manifesting its interest in this movement. + +It is suggested that a proper form of celebration would be an exposition to +show the progress the Negroes have made, not only during their period of +freedom, but also from the time of their coming to this country. + +I heartily indorse this proposal, and request that the Executive be +authorized to appoint a preliminary commission of not more than seven +persons to consider carefully whether or not it is wise to hold such an +exposition, and if so, to outline a plan for the enterprise. I further +recommend that such preliminary commission serve without salary, except as +to their actual expenses, and that an appropriation be made to meet such +expenses. CONCLUSION. + +I have thus, in a message compressed as much as the subjects will permit, +referred to many of the legislative needs of the country, with the +exceptions already noted. Speaking generally, the country is in a high +state of prosperity. There is every reason to believe that we are on the +eve of a substantial business expansion, and we have just garnered a +harvest unexampled in the market value of our agricultural products. The +high prices which such products bring mean great prosperity for the farming +community, but on the other hand they mean a very considerably increased +burden upon those classes in the community whose yearly compensation does +not expand with the improvement in business and the general prosperity. +Various reasons are given for the high prices. The proportionate increase +in the output of gold, which to-day is the chief medium of exchange and is +in some respects a measure of value, furnishes a substantial explanation of +at least a part of the increase in prices. The increase in population and +the more expensive mode of living of the people, which have not been +accompanied by a proportionate increase in acreage production, may furnish +a further reason. It is well to note that the increase in the cost of +living is not confined to this country, but prevails the world over, and +that those who would charge increases in prices to the existing protective +tariff must meet the fact that the rise in prices has taken place almost +wholly in those products of the factory and farm in respect to which there +has been either no increase in the tariff or in many instances a very +considerable reduction. + +*** + +State of the Union Address +William H. Taft +December 6, 1910 + +To the Senate and House of Representatives: + +During the past year the foreign relations of the United States have +continued upon a basis of friendship and good understanding. ARBITRATION. + +The year has been notable as witnessing the pacific settlement of two +important international controversies before the Permanent Court of The +Hague. + +The arbitration of the Fisheries dispute between the United States and +Great Britain, which has been the source of nearly continuous diplomatic +correspondence since the Fisheries Convention of 1818, has given an award +which is satisfactory to both parties. This arbitration is particularly +noteworthy not only because of the eminently just results secured, but also +because it is the first arbitration held under the general arbitration +treaty of April 4, 1908, between the United States and Great Britain, and +disposes of a controversy the settlement of which has resisted every other +resource of diplomacy, and which for nearly ninety years has been the cause +of friction between two countries whose common interest lies in maintaining +the most friendly and cordial relations with each other. + +The United States was ably represented before the tribunal. The complicated +history of the questions arising made the issue depend, more than +ordinarily in such cases, upon the care and skill with which our case was +presented, and I should be wanting in proper recognition of a great +patriotic service if I did not refer to the lucid historical analysis of +the facts and the signal ability and force of the argument --six days in +length--presented to the Court in support of our case by Mr. Elihu Root. As +Secretary of State, Mr. Root had given close study to the intricate facts +bearing on the controversy, and by diplomatic correspondence had helped to +frame the issues. At the solicitation of the Secretary of State and myself, +Mr. Root, though burdened by his duties as Senator from New York, undertook +the preparation of the case as leading counsel, with the condition imposed +by himself that, in view of his position as Senator, he should not receive +any compensation. + +The Tribunal constituted at The Hague by the Governments of the United +States and Venezuela has completed its deliberations and has rendered an +award in the case of the Orinoco Steamship Company against Venezuela. The +award may be regarded as satisfactory since it has, pursuant to the +contentions of the United States, recognized a number of important +principles making for a judicial attitude in the determining of +international disputes. + +In view of grave doubts which had been raised as to the constitutionality +of The Hague Convention for the establishment of an International Prize +Court, now before the Senate for ratification, because of that provision of +the Convention which provides that there may be an appeal to the proposed +Court from the decisions of national courts, this government proposed in an +Identic Circular Note addressed to those Powers who had taken part in the +London Maritime Conference, that the powers signatory to the Convention, if +confronted with such difficulty, might insert a reservation to the effect +that appeals to the International Prize Court in respect to decisions of +its national tribunals, should take the form of a direct claim for +compensation; that the proceedings thereupon to be taken should be in the +form of a trial de novo, and that judgment of the Court should consist of +compensation for the illegal capture, irrespective of the decision of the +national court whose judgment had thus been internationally involved. As +the result of an informal discussion it was decided to provide such +procedure by means of a separate protocol which should be ratified at the +same time as the Prize Court Convention itself. + +Accordingly, the Government of the Netherlands, at the request of this +Government, proposed under date of May 24, 1910, to the powers signatory to +The Hague Convention, the negotiation of a supplemental protocol embodying +stipulations providing for this alternative procedure. It is gratifying to +observe that this additional protocol is being signed without objection, by +the powers signatory to the original convention, and there is every reason +to believe that the International Prize Court will be soon established. + +The Identic Circular Note also proposed that the International Prize Court +when established should be endowed with the functions of an Arbitral Court +of Justice under and pursuant to the recommendation adopted by the last +Hague Conference. The replies received from the various powers to this +proposal inspire the hope that this also may be accomplished within the +reasonably near future. + +It is believed that the establishment of these two tribunals will go a long +way toward securing the arbitration of many questions which have heretofore +threatened and, at times, destroyed the peace of nations. + +PEACE COMMISSION. + +Appreciating these enlightened tendencies of modern times, the Congress at +its last session passed a law providing for the appointment of a commission +of five members "to be appointed by the President of the United States to +consider the expediency of utilizing existing international agencies for +the purpose of limiting the armaments of the nations of the world by +international agreement, and of constituting the combined navies of the +world an international force for the preservation of universal peace, and +to consider and report upon any other means to diminish the expenditures of +government for military purposes and to lessen the probabilities of war." + +I have not as yet made appointments to this Commission because I have +invited and am awaiting the expressions of foreign governments as to their +willingness to cooperate with us in the appointment of similar commissions +or representatives who would meet with our commissioners and by joint +action seek to make their work effective. + +GREAT BRITAIN AND CANADA. + +Several important treaties have been negotiated with Great Britain in the +past twelve months. A preliminary diplomatic agreement has been reached +regarding the arbitration of pecuniary claims which each Government has +against the other. This agreement, with the schedules of claims annexed, +will, as soon as the schedules are arranged, be submitted to the Senate for +approval. + +An agreement between the United States and Great Britain with regard to the +location of the international boundary line between the United States and +Canada in Passamaquoddy Bay and to the middle of Grand Manan Channel was +reached in a Treaty concluded May 21, 1910, which has been ratified by both +Governments and proclaimed, thus making unnecessary the arbitration +provided for in the previous treaty of April 11, 1908. + +The Convention concluded January 11, 1909, between the United States and +Great Britain providing for the settlement of international differences +between the United States and Canada including the apportionment between +the two countries of certain of the boundary waters and the appointment of +Commissioners to adjust certain other questions has been ratified by both +Governments and proclaimed. + +The work of the International Fisheries Commission appointed in 1908, under +the treaty of April 11, 1908, between Great Britain and the United States, +has resulted in the formulation and recommendation of uniform regulations +governing the fisheries of the boundary waters of Canada and the United +States for the purpose of protecting and increasing the supply of food fish +in such waters. In completion of this work, the regulations agreed upon +require congressional legislation to make them effective and for their +enforcement in fulfillment of the treaty stipulations. PORTUGAL. + +In October last the monarchy in Portugal was overthrown, a provisional +Republic was proclaimed, and there was set up a de facto Government which +was promptly recognized by the Government of the United States for purposes +of ordinary intercourse pending formal recognition by this and other Powers +of the Governmental entity to be duly established by the national +sovereignty. LIBERIA. + +A disturbance among the native tribes of Liberia in a portion of the +Republic during the early part of this year resulted in the sending, under +the Treaty of 1862, of an American vessel of war to the disaffected +district, and the Liberian authorities, assisted by the good offices of the +American Naval Officers, were able to restore order. The negotiations which +have been undertaken for the amelioration of the conditions found in +Liberia by the American Commission, whose report I transmitted to Congress +on March 25 last, are being brought to conclusion, and it is thought that +within a short time practical measures of relief may be put into effect +through the good offices of this Government and the cordial cooperation of +other governments interested in Liberia's welfare. + +THE NEAR EAST. TURKEY. + +To return the visit of the Special Embassy announcing the accession of His +Majesty Mehemet V, Emperor of the Ottomans, I sent to Constantinople a +Special Ambassador who, in addition to this mission of ceremony, was +charged with the duty of expressing to the Ottoman Government the value +attached by the Government of the United States to increased and more +important relations between the countries and the desire of the United +States to contribute to the larger economic and commercial development due +to the new regime in Turkey. + +The rapid development now beginning in that ancient empire and the marked +progress and increased commercial importance of Bulgaria, Roumania, and +Servia make it particularly opportune that the possibilities of American +commerce in the Near East should receive due attention. MONTENEGRO. + +The National Skoupchtina having expressed its will that the Principality of +Montenegro be raised to the rank of Kingdom, the Prince of Montenegro on +August 15 last assumed the title of King of Montenegro. It gave me pleasure +to accord to the new kingdom the recognition of the United States. + +THE FAR EAST. + +The center of interest in Far Eastern affairs during the past year has +again been China. + +It is gratifying to note that the negotiations for a loan to the Chinese +Government for the construction of the trunk railway lines from Hankow +southward to Canton and westward through the Yangtse Valley, known as the +Hukuang Loan, were concluded by the representatives of the various +financial groups in May last and the results approved by their respective +governments. The agreement, already initialed by the Chinese Government, is +now awaiting formal ratification. The basis of the settlement of the terms +of this loan was one of exact equality between America, Great Britain, +France, and Germany in respect to financing the loan and supplying +materials for the proposed railways and their future branches. + +The application of the principle underlying the policy of the United States +in regard to the Hukuang Loan, viz., that of the internationalization of +the foreign interest in such of the railways of China as may be financed by +foreign countries, was suggested on a broader scale by the Secretary of +State in a proposal for internationalization and commercial neutralization +of all the railways of Manchuria. While the principle which led to the +proposal of this Government was generally admitted by the powers to whom it +was addressed, the Governments of Russia and Japan apprehended practical +difficulties in the execution of the larger plan which prevented their +ready adherence. The question of constructing the Chinchow-Aigun railway by +means of an international loan to China is, however, still the subject of +friendly discussion by the interested parties. + +The policy of this Government in these matters has been directed by a +desire to make the use of American capital in the development of China an +instrument in the promotion of China's welfare and material prosperity +without prejudice to her legitimate rights as an independent political +power. + +This policy has recently found further exemplification in the assistance +given by this Government to the negotiations between China and a group of +American bankers for a loan of $50,000,000 to be employed chiefly in +currency reform. The confusion which has from ancient times existed in the +monetary usages of the Chinese has been one of the principal obstacles to +commercial intercourse with that people. The United States in its Treaty of +1903 with China obtained a pledge from the latter to introduce a uniform +national coinage, and the following year, at the request of China, this +Government sent to Peking a member of the International Exchange +Commission, to discuss with the Chinese Government the best methods of +introducing the reform. In 1908 China sent a Commissioner to the United +States to consult with American financiers as to the possibility of +securing a large loan with which to inaugurate the new currency system, but +the death of Their Majesties, the Empress Dowager and the Emperor of China, +interrupted the negotiations, which were not resumed until a few months +ago, when this Government was asked to communicate to the bankers concerned +the request of China for a loan of $50,000,000 for the purpose under +review. A preliminary agreement between the American group and China has +been made covering the loan. + +For the success of this loan and the contemplated reforms which are of the +greatest importance to the commercial interests of the United States and +the civilized world at large, it is realized that an expert will be +necessary, and this Government has received assurances from China that such +an adviser, who shall be an American, will be engaged. + +It is a matter of interest to Americans to note the success which is +attending the efforts of China to establish gradually a system of +representative government. The provincial assemblies were opened in +October, 1909, and in October of the present year a consultative body, the +nucleus of the future national parliament, held its first session at +Peking. + +The year has further been marked by two important international agreements +relating to Far Eastern affairs. In the Russo-Japanese Agreement relating +to Manchuria, signed July 4, 1910, this Government was gratified to note an +assurance of continued peaceful conditions in that region and the +reaffirmation of the policies with respect to China to which the United +States together with all other interested powers are alike solemnly +committed. + +The treaty annexing Korea to the Empire of Japan, promulgated August 29, +1910, marks the final step in a process of control of the ancient empire by +her powerful neighbor that has been in progress for several years past. In +communicating the fact of annexation the Japanese Government gave to the +Government of the United States assurances of the full protection of the +rights of American citizens in Korea under the changed conditions. + +Friendly visits of many distinguished persons from the Far East have been +made during the year. Chief among these were Their Imperial Highnesses +Princes Tsai-tao and Tsai-Hsun of China; and His Imperial Highness Prince +Higashi Fushimi, and Prince Tokugawa, President of the House of Peers of +Japan. The Secretary of War has recently visited Japan and China in +connection with his tour to the Philippines, and a large delegation of +American business men are at present traveling in China. This exchange of +friendly visits has had the happy effect of even further strengthening our +friendly international relations. + +LATIN AMERICA. + +During the past year several of our southern sister Republics celebrated +the one hundredth anniversary of their independence. In honor of these +events, special embassies were sent from this country to Argentina, Chile, +and Mexico, where the gracious reception and splendid hospitality extended +them manifested the cordial relations and friendship existing between those +countries and the United States, relations which I am happy to believe have +never before been upon so high a plane and so solid a basis as at present. + +The Congressional commission appointed under a concurrent resolution to +attend the festivities celebrating the centennial anniversary of Mexican +independence, together with a special ambassador, were received with the +highest honors and with the greatest cordiality, and returned with the +report of the bounteous hospitality and warm reception of President Diaz +and the Mexican people, which left no doubt of the desire of the +immediately neighboring Republic to continue the mutually beneficial and +intimate relations which I feel sure the two governments will ever +cherish. + +At the Fourth Pan-American Conference which met in Buenos Aires during July +and August last, after seven weeks of harmonious deliberation, three +conventions were signed providing for the regulation of trade-marks, +patents, and copyrights, which when ratified by the different Governments, +will go far toward furnishing to American authors, patentees, and owners of +trade-marks the protection needed in localities where heretofore it has +been either lacking or inadequate. Further, a convention for the +arbitration of pecuniary claims was signed and a number of important +resolutions passed. The Conventions will in due course be transmitted to +the Senate, and the report of the Delegation of the United States will be +communicated to the Congress for its information. The special cordiality +between representative men from all parts of America which was shown at +this Conference cannot fail to react upon and draw still closer the +relations between the countries which took part in it. + +The International Bureau of American Republics is doing a broad and useful +work for Pan American commerce and comity. Its duties were much enlarged by +the International Conference of American States at Buenos Aires and its +name was shortened to the more practical and expressive term of Pan +American Union. Located now in its new building, which was specially +dedicated April 26 of this year to the development of friendship, trade and +peace among the American nations, it has improved instrumentalities to +serve the twenty-two republics of this hemisphere. + +I am glad to say that the action of the United States in its desire to +remove imminent danger of war between Peru and Ecuador growing out of a +boundary dispute, with the cooperation of Brazil and the Argentine Republic +as joint mediators with this Government, has already resulted successfully +in preventing war. The Government of Chile, while not one of the mediators, +lent effective aid in furtherance of a preliminary agreement likely to lead +on to an amicable settlement, and it is not doubted that the good offices +of the mediating Powers and the conciliatory cooperation of the Governments +directly interested will finally lead to a removal of this perennial cause +of friction between Ecuador and Peru. The inestimable value of cordial +cooperation between the sister republics of America for the maintenance of +peace in this hemisphere has never been more clearly shown than in this +mediation, by which three American Governments have given to this +hemisphere the honor of first invoking the most far-reaching provisions of +The Hague Convention for the pacific settlement of international disputes. + +There has been signed by the representatives of the United States and +Mexico a protocol submitting to the United States-Mexican Boundary +Commission (whose membership for the purpose of this case is to be +increased by the addition of a citizen of Canada) the question of +sovereignty over the Chamizal Tract which lies within the present physical +boundaries of the city of E1 Paso, Tex. The determination of this question +will remove a source of no little annoyance to the two Governments. + +The Republic of Honduras has for many years been burdened with a heavy +bonded debt held in Europe, the interest on which long ago fell in arrears. +Finally conditions were such that it became imperative to refund the debt +and place the finances of the Republic upon a sound basis. Last year a +group of American bankers undertook to do this and to advance funds for +railway and other improvements contributing directly to the country's +prosperity and commerce--an arrangement which has long been desired by this +Government. Negotiations to this end have been under way for more than a +year and it is now confidently believed that a short time will suffice to +conclude an arrangement which will be satisfactory to the foreign +creditors, eminently advantageous to Honduras, and highly creditable to the +judgment and foresight of the Honduranean Government. This is much to be +desired since, as recognized by the Washington Conventions, a strong +Honduras would tend immensely to the progress and prosperity of Central +America. + +During the past year the Republic of Nicaragua has been the scene of +internecine struggle. General Zelaya, for seventeen years the absolute +ruler of Nicaragua, was throughout his career the disturber of Central +America and opposed every plan for the promotion of peace and friendly +relations between the five republics. When the people of Nicaragua were +finally driven into rebellion by his lawless exactions, he violated the +laws of war by the unwarranted execution of two American citizens who had +regularly enlisted in the ranks of the revolutionists. This and other +offenses made it the duty of the American Government to take measures with +a view to ultimate reparation and for the safeguarding of its interests. +This involved the breaking off of all diplomatic relations with the Zelaya +Government for the reasons laid down in a communication from the Secretary +of State, which also notified the contending factions in Nicaragua that +this Government would hold each to strict accountability for outrages on +the rights of American citizens. American forces were sent to both coasts +of Nicaragua to be in readiness should occasion arise to protect Americans +and their interests, and remained there until the war was over and peace +had returned to that unfortunate country. These events, together with +Zelaya's continued exactions, brought him so clearly to the bar of public +opinion that he was forced to resign and to take refuge abroad. + +In the above-mentioned communication of the Secretary of State to the +Charge' d'Affaires of the Zelaya Government, the opinion was expressed that +the revolution represented the wishes of the majority of the Nicaraguan +people. This has now been proved beyond doubt by the fact that since the +complete overthrow of the Madriz Government and the occupation of the +capital by the forces of the revolution, all factions have united to +maintain public order and as a result of discussion with an Agent of this +Government, sent to Managua at the request of the Provisional Government, +comprehensive plans are being made for the future welfare of Nicaragua, +including the rehabilitation of public credit. The moderation and +conciliatory spirit shown by the various factions give ground for the +confident hope that Nicaragua will soon take its rightful place among the +law-abiding and progressive countries of the world. + +It gratifies me exceedingly to announce that the Argentine Republic some +months ago placed with American manufacturers a contract for the +construction of two battle-ships and certain additional naval equipment. +The extent of this work and its importance to the Argentine Republic make +the placing of the bid an earnest of friendly feeling toward the United +States. + +TARIFF NEGOTIATIONS. + +The new tariff law, in section 2, respecting the maximum and minimum +tariffs of the United States, which provisions came into effect on April 1, +1910, imposed upon the President the responsibility of determining prior to +that date whether or not any undue discrimination existed against the +United States and its products in any country of the world with which we +sustained commercial relations. + +In the case of several countries instances of apparent undue discrimination +against American commerce were found to exist. These discriminations were +removed by negotiation. Prior to April 1, 1910, when the maximum tariff was +to come into operation with respect to importations from all those +countries in whose favor no proclamation applying the minimum tariff should +be issued by the President, one hundred and thirty-four such proclamations +were issued. This series of proclamations embraced the entire commercial +world, and hence the minimum tariff of the United States has been given +universal application, thus testifying to the satisfactory character of our +trade relations with foreign countries. + +Marked advantages to the commerce of the United States were obtained +through these tariff settlements. Foreign nations are fully cognizant of +the fact that under section 2 of the tariff act the President is required, +whenever he is satisfied that the treatment accorded by them to the +products of the United States is not such as to entitle them to the +benefits of the minimum tariff of the United States, to withdraw those +benefits by proclamation giving ninety days' notice, after which the +maximum tariff will apply to their dutiable products entering the United +States. In its general operation this section of the tariff law has thus +far proved a guaranty of continued commercial peace, although there are +unfortunately instances where foreign governments deal arbitrarily with +American interests within their jurisdiction in a manner injurious and +inequitable. + +The policy of broader and closer trade relations with the Dominion of +Canada which was initiated in the adjustment of the maximum and minimum +provisions of the Tariff Act of August, 1909, has proved mutually +beneficial. It justifies further efforts for the readjustment of the +commercial relations of the two countries so that their commerce may follow +the channels natural to contiguous countries and be commensurate with the +steady expansion of trade and industry on both sides of the boundary line. +The reciprocation on the part of the Dominion Government of the sentiment +which was expressed by this Government was followed in October by the +suggestion that it would be glad to have the negotiations, which had been +temporarily suspended during the summer, resumed. In accordance with this +suggestion the Secretary of State, by my direction, dispatched two +representatives of the Department of State as special commissioners to +Ottawa to confer with representatives of the Dominion Government. They were +authorized to take such steps for formulating a reciprocal trade agreement +as might be necessary and to receive and consider any propositions which +the Dominion Government might care to submit. + +Pursuant to the instructions issued conferences were held by these +commissioners with officials of the Dominion Government at Ottawa in the +early part of November. + +The negotiations were conducted on both sides in a spirit of mutual +accommodation. The discussion of the common commercial interests of the two +countries had for its object a satisfactory basis for a trade arrangement +which offers the prospect of a freer interchange for the products of the +United States and of Canada. The conferences were adjourned to be resumed +in Washington in January, when it is hoped that the aspiration of both +Governments for a mutually advantageous measure of reciprocity will be +realized. + +FOSTERING FOREIGN TRADE. + +All these tariff negotiations, so vital to our commerce and industry, and +the duty of jealously guarding the equitable and just treatment of our +products, capital, and industry abroad devolve upon the Department of +State. + +The Argentine battle-ship contracts, like the subsequent important one for +Argentine railway equipment, and those for Cuban Government vessels, were +secured for our manufacturers largely through the good offices of the +Department of State. + +The efforts of that Department to secure for citizens of the United States +equal opportunities in the markets of the world and to expand American +commerce have been most successful. The volume of business obtained in new +fields of competition and upon new lines is already very great and Congress +is urged to continue to support the Department of State in its endeavors +for further trade expansion. + +Our foreign trade merits the best support of the Government and the most +earnest endeavor of our manufacturers and merchants, who, if they do not +already in all cases need a foreign market, are certain soon to become +dependent on it. Therefore, now is the time to secure a strong position in +this field. + +AMERICAN BRANCH BANKS ABROAD. + +I cannot leave this subject without emphasizing the necessity of such +legislation as will make possible and convenient the establishment of +American banks and branches of American banks in foreign countries. Only by +such means can our foreign trade be favorably financed, necessary credits +be arranged, and proper avail be made of commercial opportunities in +foreign countries, and most especially in Latin America. + +AID TO OUR FOREIGN MERCHANT MARINE. + +Another instrumentality indispensable to the unhampered and natural +development of American commerce is merchant marine. All maritime and +commercial nations recognize the importance of this factor. The greatest +commercial nations, our competitors, jealously foster their merchant +marine. Perhaps nowhere is the need for rapid and direct mail, passenger +and freight communication quite so urgent as between the United States and +Latin America. We can secure in no other quarter of the world such +immediate benefits in friendship and commerce as would flow from the +establishment of direct lines Of communication with the countries of Latin +America adequate to meet the requirements of a rapidly increasing +appreciation of the reciprocal dependence of the countries of the Western +Hemisphere upon each other's products, sympathies and assistance. + +I alluded to this most important subject in my last annual message; it has +often been before you and I need not recapitulate the reasons for its +recommendation. Unless prompt action be taken the completion of the Panama +Canal will find this the only great commercial nation unable to avail in +international maritime business of this great improvement in the means of +the world's commercial intercourse. + +Quite aside from the commercial aspect, unless we create a merchant marine, +where can we find the seafaring population necessary as a natural naval +reserve and where could we find, in case of war, the transports and +subsidiary vessels without which a naval fleet is arms without a body? For +many reasons I cannot too strongly urge upon the Congress the passage of a +measure by mail subsidy or other subvention adequate to guarantee the +establishment and rapid development of an American merchant marine, and the +restoration of the American flag to its ancient place upon the seas. + +Of course such aid ought only to be given under conditions of publicity of +each beneficiary's business and accounts which would show that the aid +received was needed to maintain the trade and was properly used for that +purpose. + +FEDERAL PROTECTION TO ALIENS. + +With our increasing international intercourse, it becomes incumbent upon me +to repeat more emphatically than ever the recommendation which I made in my +Inaugural Address that Congress shall at once give to the Courts of the +United States jurisdiction to punish as a crime the violation of the rights +of aliens secured by treaty with the United States, in order that the +general government of the United States shall be able, when called upon by +a friendly nation, to redeem its solemn promise by treaty to secure to the +citizens or subjects of that nation resident in the United States, freedom +from violence and due process of law in respect to their life, liberty and +property. + +MERIT SYSTEM FOR DIPLOMATIC AND CONSULAR SERVICE. + +I also strongly commend to the favorable action of the Congress the +enactment of a law applying to the diplomatic and consular service the +principles embodied in Section 1753 of the Revised Statutes of the United +States, in the Civil Service Act of January 16, 1883, and the Executive +Orders of June 27, 1906, and of November 26, 1909. The excellent results +which have attended the partial application of Civil Service principles to +the diplomatic and consular services are an earnest of the benefit to be +wrought by a wider and more permanent extension of those principles to both +branches of the foreign service. The marked improvement in the consular +service during the four years since the principles of the Civil Service Act +were applied to that service in a limited way, and the good results already +noticeable from a similar application of civil service principles to the +diplomatic service a year ago, convince me that the enactment into law of +the general principles of the existing executive regulations could not fail +to effect further improvement of both branches of the foreign service, +offering as it would by its assurance of permanency of tenure and promotion +on merit, an inducement for the entry of capable young men into the service +and an incentive to those already in to put forth their best efforts to +attain and maintain that degree of efficiency which the interests of our +international relations and commerce demand. + +GOVERNMENT OWNERSHIP OF OUR EMBASSY AND LEGATION PREMISES. + +During many years past appeals have been made from time to time to Congress +in favor of Government ownership of embassy and legation premises abroad. +The arguments in favor of such ownership have been many and oft repeated +and are well known to the Congress. The acquisition by the Government of +suitable residences and offices for its diplomatic officers, especially in +the capitals of the Latin-American States and of Europe, is so important +and necessary to an improved diplomatic service that I have no hesitation +in urging upon the Congress the passage of some measure similar to that +favorably reported by the House Committee on Foreign Affairs on February +14, 1910 (Report No. 438), that would authorize the gradual and annual +acquisition of premises for diplomatic use. + +The work of the Diplomatic Service is devoid of partisanship; its +importance should appeal to every American citizen and should receive the +generous consideration of the Congress. + +TREASURY DEPARTMENT. + +ESTIMATES FOR NEXT YEAR'S EXPENSES. + +Every effort has been made by each department chief to reduce the estimated +cost of his department for the ensuing fiscal year ending June 30, 1912. I +say this in order that Congress may understand that these estimates thus +made present the smallest sum which will maintain the departments, bureaus, +and offices of the Government and meet its other obligations under existing +law, and that a cut of these estimates would result in embarrassing the +executive branch of the Government in the performance of its duties. This +remark does not apply to the river and harbor estimates, except to those +for expenses of maintenance and the meeting of obligations under authorized +contracts, nor does it apply to the public building bill nor to the navy +building program. Of course, as to these Congress could withhold any part +or all of the estimates for them without interfering with the discharge of +the ordinary obligations of the Government or the performance of the +functions of its departments, bureaus, and offices. + +A FIFTY-TWO MILLION CUT. + +The final estimates for the year ending June 30, 1912, as they have been +sent to the Treasury, on November 29 of this year, for the ordinary +expenses of the Government, including those for public buildings, rivers +and harbors, and the navy building program, amount to $630,494,013.12. This +is $52,964,887.36 less than the appropriations for the fiscal year ending +June 30, 1911. It is $16,883,153.44 less than the total estimates, +including supplemental estimates submitted to Congress by the Treasury for +the year 1911, and is $5,574,659.39 less than the original estimates +submitted by the Treasury for 1911. + +These figures do not include the appropriations for the Panama Canal, the +policy in respect to which ought to be, and is, to spend as much each year +as can be economically and effectively expended in order to complete the +Canal as promptly as possible, and, therefore, the ordinary motive for +cutting down the expense of the Government does not apply to appropriations +for this purpose. It will be noted that the estimates for the Panama Canal +for the ensuing year are more than fifty-six millions of dollars, an +increase of twenty millions over the amount appropriated for this year--a +difference due to the fact that the estimates for 1912 include something +over nineteen millions for the fortification of the Canal. Against the +estimated expenditures of $630,494,013.12, the Treasury has estimated +receipts for next year $680,000,000, making a probable surplus of ordinary +receipts over ordinary expenditures of about $50,000,000. + +A table showing in detail the estimates and the comparisons referred to +follows. + +TYPICAL ECONOMIES. + +The Treasury Department is one of the original departments of the +Government. With the changes in the monetary system made from time to time +and with the creation of national banks, it was thought necessary to +organize new bureaus and divisions which were added in a somewhat haphazard +way and resulted in a duplication of duties which might well now be ended. +This lack of system and economic coordination has attracted the attention +of the head of that Department who has been giving his time for the last +two years, with the aid of experts and by consulting his bureau chiefs, to +its reformation. He has abolished four hundred places in the civil service +without at all injuring its efficiency. Merely to illustrate the character +of the reforms that are possible, I shall comment on some of the specific +changes that are being made, or ought to be made by legislative aid. + +AUDITING SYSTEM. + +The auditing system in vogue is as old as the Government and the methods +used are antiquated. There are six Auditors and seven Assistant Auditors +for the nine departments, and under the present system the only function +which the Auditor of a department exercises is to determine, on accounts +presented by disbursing officers, that the object of the expenditure was +within the law and the appropriation made by Congress for the purpose on +its face, and that the calculations in the accounts are correct. He does +not examine the merits of the transaction or determine the reasonableness +of the price paid for the articles purchased, nor does he furnish any +substantial check upon disbursing officers and the heads of departments or +bureaus with sufficient promptness to enable the Government to recoup +itself in full measure for unlawful expenditure. A careful plan is being +devised and will be presented to Congress with the recommendation that the +force of auditors and employees under them be greatly reduced, thereby +effecting substantial economy. But this economy will be small compared with +the larger economy that can be effected by consolidation and change of +methods. The possibilities in this regard have been shown in the reduction +of expenses and the importance of methods and efficiency in the office of +the Auditor for the Post Office Department, who, without in the slightest +degree impairing the comprehensiveness and efficiency of his work, has cut +down the expenses of his office $120,000 a year. + +Statement of estimates of appropriations for the fiscal years 1912 and +1911, and of appropriations for 1911, showing increases and decreases. - +Final Estimates for 1912 as of November 29 - Original Estimates submitted +by the Treasury for 1911 - Total Estimates for 1911 including supplementals +- Appropriations for 1911 - Increase (+) and decrease (-), 1912 estimates +against 1911 total estimates - Increase (+) and decrease (-), 1912 +estimates against 1911 total appropriations - Increase (+) and decrease +(-), 1911 estimates against 1911 total appropriations + +Legislature - $13,426,805.73 - $13,169,679.70 - $13,169,679.70 - +$12,938,048.00 - + $257,126.03 - + $488,757.73 - + $231,631.70 + +Executive - 998,170.00 - 472,270.00 - 722,270.00 - 870,750.00 - + +275,900.00 - + 127,420.00 - - 148,480.00 + +State Department: - 4,875,576.41 - 4,875,301.41 - 4,749,801.41 - +5,046,701.41 - + 125,775.00 - - 171,125.00 - - 296,900.00 + +TREASURY DEPARTMENT:Treasury Department proper - 68,735,451.00 - +69,865,240.00 - 70,393,543.75 - 69,973,434.61 - - 1,658,092.75 - - +1,237,983.61 - + 420,109.14 + +Public buildings and works - 11,864,545.60 - 6,198,365.60 - 7,101,465.60 - +5,565,164.00 - + 4,763,080.00 - + 6,299,381.60 - + 1,536,301.60 + +Territorial governments - 202,150.00 - 287,350.00 - 292,350.00 - 282,600.00 +- - 90,200.00 - - 80,450.00 - + 9,750.00 + +Independent offices - 2,638,695.12 - 2,400,695.12 - 2,492,695.12 - +2,128,695.12 - + 146,000.00 - + 510,000.00 - + 364,000.00 + +District of Columbia - 13,602,785.90 - 11,884,928.49 - 12,108,878.49 - +11,440,346.99 - + 1,492,907.41 - + 2,162,439.91 - + 668,532.50 + +WAR DEPARTMENT:War Department proper - 120,104,260.12 - 124,165,656.28 - +125,717,204.77 - 122,322,178.12 - - 5,612,944.65 - - 2,217,918.00 - + +3,395,026.65 + +Rivers and harbors - 28,232,438.00 - 28,232,465.00 - 28,232,465.00 - +49,390,541.50 - - 27.00 - -21,158,103.50 - -21,158,076.50 + +NAVY DEPARTMENT:Navy Department proper - 116,101,730.24 - 117,029,914.38 - +119,768,860.83 - 119,596,870.46 - - 3,667,130.59 - - 3,495,140.22 - + +171,990.37 + +New navy building program - 12,840,428.00 - 12,844,122.00 - 12,844,122.00 - +14,790,122.00 - - 3,694.00 - - 1,949,694.00 - - 1,946,000.00 + +Interior Department - 189,151,875.00 - 191,224,182.90 - 193,948,582.02 - +214,754,278.00 - - 4,796,707.02 - -25,602,403.00 - -20,805,698.98 + +Post-Office Department proper - 1,697,490.00 - 1,695,690.00 - 1,695,690.00 +- 2,085,005.33 - + 1,800.00 - - 387,515.33 - - 389,315.33 + +Deficiency in postal revenues - --------------- - 10,634,122.63 - +10,634,122.63 - 10,634,122.63 - -10,634,122.65 - -10,634,122.63 - +----------------- + +Department of Agriculture - 19,681,066.00 - 17,681,136.00 - 17,753,931.24 - +17,821,836.00 - + 1,927,134.76 - + 1,859,230.00 - - 67,904.76 + +Department of Commerce and + +Labor - 16,276,970.00 - 14,187,913.00 - 15,789,271.00 - 14,169,969.32 - + +487,699.00 - + 2,107,000.68 - + 1,619,301.68 + +Department of Justice - 10,063,576.00 - 9,518,640.00 - 9,962,233.00 - +9,648,237.99 - + 101,343.00 - + 415,338.01 - + 313,995.01 - + +*** + +State of the Union Address +William H. Taft +December 5, 1911 + +Jump to Part II | Part III | Part IV + +This message is the first of several which I shall send to Congress during +the interval between the opening of its regular session and its adjournment +for the Christmas holidays. The amount of information to be communicated as +to the operations of the Government, the number of important subjects +calling for comment by the Executive, and the transmission to Congress of +exhaustive reports of special commissions, make it impossible to include in +one message of a reasonable length a discussion of the topics that ought to +be brought to the attention of the National Legislature at its first +regular session. + +THE ANTI-TRUST LAW-THE SUPREME COURT DECISIONS. + +In May last the Supreme Court handed down decisions in the suits in equity +brought by the United States to enjoin the further maintenance of the +Standard Oil Trust and of the American Tobacco Trust, and to secure their +dissolution. The decisions are epoch-making and serve to advise the +business world authoritatively of the scope and operation of the anti-trust +act of 1890. The decisions do not depart in any substantial way from the +previous decisions of the court in construing and applying this important +statute, but they clarify those decisions by further defining the already +admitted exceptions to the literal construction of the act. By the decrees, +they furnish a useful precedent as to the proper method of dealing with the +capital and property of illegal trusts. These decisions suggest the need +and wisdom of additional or supplemental legislation to make it easier for +the entire business community to square with the rule of action and +legality thus finally established and to preserve the benefit, freedom, and +spur of reasonable competition without loss of real efficiency or +progress. + +NO CHANGE IN THE RULE OF DECISION-MERELY IN ITS FORM OF EXPRESSION. + +The statute in its first section declares to be illegal "every contract, +combination in the form of trust or otherwise, or conspiracy, in restraint +of trade or commerce among the several States or with foreign nations," and +in the second, declares guilty of a misdemeanor "every person who shall +monopolize or attempt to monopolize or combine or conspire with any other +person to monopolize any part of the trade or commerce of the several +States or with foreign nations." + +In two early cases, where the statute was invoked to enjoin a +transportation rate agreement between interstate railroad companies, it was +held that it was no defense to show that the agreement as to rates +complained of was reasonable at common law, because it was said that the +statute was directed against all contracts and combinations in restraint of +trade whether reasonable at common law or not. It was plain from the +record, however, that the contracts complained of in those cases would not +have been deemed reasonable at common law. In subsequent cases the court +said that the statute should be given a reasonable construction and refused +to include within its inhibition, certain contractual restraints of trade +which it denominated as incidental or as indirect. + +These cases of restraint of trade that the court excepted from the +operation of the statute were instances which, at common law, would have +been called reasonable. In the Standard Oil and Tobacco cases, therefore, +the court merely adopted the tests of the common law, and in defining +exceptions to the literal application of the statute, only substituted for +the test of being incidental or indirect, that of being reasonable, and +this, without varying in the slightest the actual scope and effect of the +statute. In other words, all the cases under the statute which have now +been decided would have been decided the same way if the court had +originally accepted in its construction the rule at common law. + +It has been said that the court, by introducing into the construction of +the statute common-law distinctions, has emasculated it. This is obviously +untrue. By its judgment every contract and combination in restraint of +interstate trade made with the purpose or necessary effect of controlling +prices by stifling competition, or of establishing in whole or in part a +monopoly of such trade, is condemned by the statute. The most extreme +critics can not instance a case that ought to be condemned under the +statute which is not brought within its terms as thus construed. + +The suggestion is also made that the Supreme Court by its decision in the +last two cases has committed to the court the undefined and unlimited +discretion to determine whether a case of restraint of trade is within the +terms of the statute. This is wholly untrue. A reasonable restraint of +trade at common law is well understood and is clearly defined. It does not +rest in the discretion of the court. It must be limited to accomplish the +purpose of a lawful main contract to which, in order that it shall be +enforceable at all, it must be incidental. If it exceed the needs of that +contract, it is void. + +The test of reasonableness was never applied by the court at common law to +contracts or combinations or conspiracies in restraint of trade whose +purpose was or whose necessary effect would be to stifle competition, to +control prices, or establish monopolies. The courts never assumed power to +say that such contracts or combinations or conspiracies might be lawful if +the parties to them were only moderate in the use of the power thus secured +and did not exact from the public too great and exorbitant prices. It is +true that many theorists, and others engaged in business violating the +statute, have hoped that some such line could be drawn by courts; but no +court of authority has ever attempted it. Certainly there is nothing in the +decisions of the latest two cases from which such a dangerous theory of +judicial discretion in enforcing this statute can derive the slightest +sanction. + +FORCE AND EFFECTIVENESS OF STATUTE A MATTER OF GROWTH. + +We have been twenty-one years making this statute effective for the +purposes for which it was enacted. The Knight case was discouraging and +seemed to remit to the States the whole available power to attack and +suppress the evils of the trusts. Slowly, however, the error of that +judgment was corrected, and only in the last three or four years has the +heavy hand of the law been laid upon the great illegal combinations that +have exercised such an absolute dominion over many of our industries. +Criminal prosecutions have been brought and a number are pending, but +juries have felt averse to convicting for jail sentences, and judges have +been most reluctant to impose such sentences on men of respectable standing +in society whose offense has been regarded as merely statutory. Still, as +the offense becomes better understood and the committing of it partakes +more of studied and deliberate defiance of the law, we can be confident +that juries will convict individuals and that jail sentences will be +imposed. + +THE REMEDY IN EQUITY BY DISSOLUTION. + +In the Standard Oil case the Supreme and Circuit Courts found the +combination to be a monopoly of the interstate business of refining, +transporting, and marketing petroleum and its products, effected and +maintained through thirty-seven different corporations, the stock of which +was held by a New Jersey company. It in effect commanded the dissolution of +this combination, directed the transfer and pro rata distribution by the +New Jersey company of the stock held by it in the thirty-seven corporations +to and among its stockholders; and the corporations and individual +defendants were enjoined from conspiring or combining to restore such +monopoly; and all agreements between the subsidiary corporations tending to +produce or bring about further violations of the act were enjoined. + +In the Tobacco case, the court found that the individual defendants, +twenty-nine in number, had been engaged in a successful effort to acquire +complete dominion over the manufacture, sale, and distribution of tobacco +in this country and abroad, and that this had been done by combinations +made with a purpose and effect to stifle competition, control prices, and +establish a monopoly, not only in the manufacture of tobacco, but also of +tin-foil and licorice used in its manufacture and of its products of +cigars, cigarettes, and snuffs. The ' tobacco suit presented a far more +complicated and difficult case than the Standard Oil suit for a decree +which would effectuate the will of the court and end the violation of the +statute. There was here no single holding company as in the case of the +Standard Oil Trust. The main company was the American Tobacco Company, a +manufacturing, selling, and holding company. The plan adopted to destroy +the combination and restore competition involved the redivision of the +capital and plants of the whole trust between some of the companies +constituting the trust and new companies organized for the purposes of the +decree and made parties to it, and numbering, new and old, fourteen. + +SITUATION AFTER READJUSTMENT. + +The American Tobacco Company (old), readjusted capital, $92, 000,000; the +Liggett & Meyers Tobacco Company (new), capital, $67,000,000; the P. +Lorillard Company (new), capital, $47,000,000; and the R. J. Reynolds +Tobacco Company (old), capital, $7,525,000, are chiefly engaged in the +manufacture and sale of chewing and smoking tobacco and cigars. The former +one tinfoil company is divided into two, one of $825,000 capital and the +other of $400,000. The one snuff company is divided into three companies, +one with a capital Of $15,000,000, another with a capital of $8,000,000, +and a third with a capital of $8,000,000. The licorice companies are two +one with a capital Of $5,758,300 and another with a capital of $200,000. +There is, also, the British-American Tobacco Company, a British +corporation, doing business abroad with a capital Of $26,000,000, the Porto +Rican Tobacco Company, with a capital of $1,800,000, and the corporation of +United Cigar Stores, with a capital of $9,000,000. + +Under this arrangement, each of the different kinds of business will be +distributed between two or more companies with a division of the prominent +brands in the same tobacco products, so as to make competition not only +possible but necessary. Thus the smoking-tobacco business of the country is +divided so that the present independent companies have 21-39 per cent, +while the American Tobacco Company will have 33-08 per cent, the Liggett & +Meyers 20.05 per cent, the Lorillard Company 22.82 per cent, and the +Reynolds Company 2.66 per cent. The stock of the other thirteen companies, +both preferred and common, has been taken from the defendant American +Tobacco Company and has been distributed among its stockholders. All +covenants restricting competition have been declared null and further +performance of them has been enjoined. The preferred stock of the different +companies has now been given voting power which was denied it under the old +organization. The ratio of the preferred stock to the common was as 78 to +40. This constitutes a very decided change in the character of the +ownership and control of each company. + +In the original suit there were twenty-nine defendants who were charged +with being the conspirators through whom the illegal combination acquired +and exercised its unlawful dominion. Under the decree these defendants. +will hold amounts of stock in the various distributee companies ranging +from 41 per cent as a maximum to 28.5 per cent as a minimum, except in the +case of one small company, the Porto Rican Tobacco Company, in which they +will hold 45 per cent. The twenty-nine individual defendants are enjoined +for three years from buying any stock except from each other, and the group +is thus prevented from extending its control during that period. All +parties to the suit, and the new companies who are made parties are +enjoined perpetually from in any way effecting any combination between any +of the companies in violation of the statute by way of resumption of the +old trust. Each of the fourteen companies is enjoined from acquiring stock +in any of the others. All these companies are enjoined from having common +directors or officers, or common buying or selling agents, or common +offices, or lending money to each other. + +SIZE OF NEW COMPANIES. + +Objection was made by certain independent tobacco companies that this +settlement was unjust because it left companies with very large capital in +active business, and that the settlement that would be effective to put all +on an equality would be a division of the capital and plant of the trust +into small fractions in amount more nearly equal to that of each of the +independent companies. This contention results from a misunderstanding of +the anti-trust law and its purpose. It is not intended thereby to prevent +the accumulation of large capital in business enterprises in which such a +combination can secure reduced cost of production, sale, and distribution. +It is directed against such an aggregation of capital only when its purpose +is that of stifling competition, enhancing or controlling prices, and +establishing a monopoly. If we shall have by the decree defeated these +purposes and restored competition between the large units into which the +capital and plant have been divided, we shall have accomplished the useful +purpose of the statute. + +CONFISCATION NOT THE PURPOSE OF THE STATUTE. + +It is not the purpose of the statute to confiscate the property and capital +of the offending trusts. Methods of punishment by fine or imprisonment of +the individual offenders, by fine of the corporation or by forfeiture of +its goods in transportation, are provided, but the proceeding in equity is +a specific remedy to stop the operation of the trust by injunction and +prevent the future use of the plant and capital in violation of the +statute. + +EFFECTIVENESS OF DECREE. + +I venture to say that not in the history of American law has a decree more +effective for such a purpose been entered by a court than that against the +Tobacco Trust. As Circuit judge Noyes said in his judgment approving the +decree: + +" The extent to which it has been necessary to tear apart this combination +and force it into new forms with the attendant burdens ought to demonstrate +that the Federal anti-trust statute is a drastic statute which accomplishes +effective results; which so long as it stands on the statute books must be +obeyed, and which can not be disobeyed without incurring far-reaching +penalties. And, on the other hand, the successful reconstruction of this +organization should teach that the effect of enforcing this statute is not +to destroy, but to reconstruct; not to demolish, but to re-create in +accordance with the conditions which the Congress has declared shall exist +among the people of the United States." + +COMMON STOCK OWNERSHIP. + +It has been assumed that the present pro rata and common ownership in all +these companies by former stockholders of the trust would insure a +continuance of the same old single control of all the companies into which +the trust has by decree been disintegrated. This is erroneous and is based +upon the assumed inefficacy and innocuousness of judicial injunctions. The +companies are enjoined from cooperation or combination; they have different +managers, directors, purchasing and sales agents. If all or many of the +numerous stockholders, reaching into the thousands, attempt to secure +concerted action of the companies with a view to the control of the market, +their number is so large that such an attempt could not well be concealed, +and its prime movers and all its participants would be at once subject to +contempt proceedings and imprisonment of a summary character. The immediate +result of the present situation will necessarily be activity by all the +companies under different managers, and then competition must follow, or +there will be activity by one company and stagnation by another. Only a +short time will inevitably lead to a change in ownership of the stock, as +all opportunity for continued cooperation must disappear. Those critics who +speak of this dis + +integration in the trust as a mere change of garments have not given +consideration to the inevitable working of the decree and understand little +the personal danger of attempting to evade or set at naught the solemn +injunction of a court whose object is made plain by the decree and whose +inhibitions are set forth with a detail and comprehensiveness + +VOLUNTARY REORGANIZATIONS OF OTHER TRUSTS AT HAND. + +The effect of these two decisions has led to decrees dissolving the +combination of manufacturers of electric lamps, a southern wholesale +grocers' association, an interlocutory decree against the Powder Trust with +directions by the circuit court compelling dissolution, and other +combinations of a similar history are now negotiating with the Department +of justice looking to a disintegration by decree and reorganization in +accordance with law. It seems possible to bring about these reorganizations +without general business disturbance. + +MOVEMENT FOR REPEAL OF THE ANTI-TRUST LAW. + +But now that the anti-trust act is seen to be effective for the +accomplishment of the purpose of its enactment, we are met by a cry from +many different quarters for its repeal. It is said to be obstructive of +business progress . to be an attempt to restore old-fashioned methods of +destructive competition between small units, and to make impossible those +useful combinations of capital and the reduction of the cost of production +that are essential to continued prosperity and normal growth. + +In the recent decisions the Supreme Court makes clear that there is nothing +in the statute which condemns combinations of capital or mere bigness of +plant organized to secure economy in production and a reduction of its +cost. It is only when the purpose or necessary effect of the organization +and maintenance of the combination or the aggregation of immense size are +the stifling of competition, actual and potential, and the enhancing of +prices and establishing a monopoly, that the statute is violated. Mere size +is no sin against the law. The merging of two or more business plants +necessarily eliminates competition between the units thus combined, but +this elimination is in contravention of the statute only when the +combination is made for purpose of ending this particular competition in +order to secure control of, and enhance, prices and create a monopoly. + +LACK OF DEFINITENESS IN THE STATUTE. + +The complaint is made of the statute that it is not sufficiently definite +in its description of that which is forbidden, to enable business men to +avoid its violation. The suggestion is, that we may have a combination of +two corporations, which may run on for years, and that subsequently the +Attorney General may conclude that it wa's a violation of the statute, and +that which was supposed by the combiners to be innocent then turns out to +be a combination in violation of the statute. The answer to this +hypothetical case is that when men attempt to amass such stupendous capital +as will enable them to suppress competition, control prices and establish a +monopoly, they know the purpose of their acts. Men do not do such a thing +without having it clearly in mind. If what they do is merely for the +purpose of reducing the cost of production, without the thought of +suppressing competition by use of the bigness of the plant they are +creating, then they can not be convicted at the time the union is made, nor +can they be convicted later, unless it happen that later on they conclude +to suppress competition and take the usual methods for doing so, and thus +establish for themselves a monopoly. They can, in such a case, hardly +complain if the motive which subsequently is disclosed is attributed by the +court to the original combination. + +NEW REMEDIES SUGGESTED. + +Much is said of the repeal of this statute and of constructive legislation +intended to accomplish the purpose and blaze a clear path for honest +merchants and business men to follow. It may be that such a plan will be +evolved, but I submit that the discussions which have been brought out in +recent days by the fear of the continued execution of the anti-trust law +have produced nothing but glittering generalities and have offered no line +of distinction or rule of action as definite and as clear as that which the +Supreme Court itself lays down in enforcing the statute. + +SUPPLEMENTAL LEGISLATION NEEDED--NOT REPEAL OR AMENDMENT. + +I see no objection-and indeed I can see decided advantages-in the enactment +of a law which shall describe and denounce methods of competition which are +unfair and are badges of the unlawful purpose denounced in the anti-trust +law. The attempt and purpose to suppress a competitor by underselling him +at a price so unprofitable as to drive him out of business, or the making +of exclusive contracts with customers under which they are required to give +up association with other manufacturers, and numerous kindred methods for +stifling competition and effecting monopoly, should be described with +sufficient accuracy in a criminal statute on the one hand to enable the +Government to shorten its task by prosecuting single misdemeanors instead +of an entire conspiracy, and, on the other hand, to serve the purpose of +pointing out more in detail to the business community what must be +avoided. + +FEDERAL INCORPORATION RECOMMENDED. + +In a special message to Congress on January 7, 1910, I ventured to point +out the disturbance to business that would probably attend the dissolution +of these offending trusts. I said: + +"But such an investigation and possible prosecution of corporations whose +prosperity or destruction affects the comfort not only of stockholders but +of millions of wage earners, employees, and associated tradesmen must +necessarily tend to disturb the confidence of the business community, to +dry up the now flowing sources of capital from its places of hoarding, and +produce a halt in our present prosperity that will cause suffering and +strained circumstances among the innocent many for the faults of the guilty +few. The question which I wish in this message to bring clearly to the +consideration and discussion of Congress is whether, in order to avoid such +a possible business danger, something can not be done by which these +business combinations may be offered a means, without great financial +disturbance, of changing the character, organization, and extent of their +business into one within the lines of the law under Federal control and +supervision, securing compliance with the anti-trust statute. + +"Generally, in the industrial combinations called 'trusts,' the principal +business is the sale of goods in many States and in foreign markets; in +other words, the interstate and foreign business far exceeds the business +done in any one State. This fact will justify the Federal Government in +granting a Federal charter to such a combination to make and sell in +interstate and foreign commerce the products of useful manufacture under +such limitations as will secure a compliance with the anti-trust law. It is +possible so to frame a statute that while it offers protection to a Federal +company against harmful, vexatious, and unnecessary invasion by the States, +it shall subject it to reasonable taxation and control by the States with +respect to its purely local business. * * * + +"Corporations organized under this act should be prohibited from acquiring +and holding stock in other corporations (except for special reasons, upon +approval by the proper Federal authority), thus avoiding the creation under +national auspices of the holding company with subordinate corporations in +different States, which has been such an effective agency in the creation +of the great trusts and monopolies. + +"If the prohibition of the anti-trust act against combinations in restraint +of trade is to be effectively enforced, it is essential that the National +Government shall provide for the creation of national corporations to carry +on a legitimate business throughout the United States. The conflicting laws +of the different States of the Union with respect to foreign corporations +make it difficult, if not impossible, for one corporation to comply with +their requirements so as to carry on business in a number of different +States." + +I renew the recommendation of the enactment of a general law providing for +the voluntary formation of corporations to engage in trade and commerce +among the States and with foreign nations. Every argument which was then +advanced for such a law, and every explanation which was at that time +offered to possible objections, have been confirmed by our experience since +the enforcement of the antitrust, statute has resulted in the actual +dissolution of active commercial organizations. + +It is even more manifest now than it was then that the denunciation of +conspiracies in restraint of trade should not and does not mean the denial +of organizations large enough to be intrusted with our interstate and +foreign trade. It has been made more clear now than it was then that a +purely negative statute like the anti-trust law may well be supplemented by +specific provisions for the building up and regulation of legitimate +national and foreign commerce. + +GOVERNMENT ADMINISTRATIVE EXPERTS NEEDED TO AID COURTS IN TRUST +DISSOLUTIONS. + +The drafting of the decrees in the dissolution of the present trusts, with +a view to their reorganization into legitimate corporations, has made it +especially apparent that the courts are not provided with the +administrative machinery to make the necessary inquiries preparatory to +reorganization, or to pursue such inquiries, and they should be empowered +to invoke the aid of the Bureau of Corporations in determining the suitable +reorganization of the disintegrated parts. The circuit court and the +Attorney General were greatly aided in framing the decree in the Tobacco +Trust dissolution by an expert from the Bureau of Corporations. + +FEDERAL CORPORATION COMMISSION PROPOSED. + +I do not set forth in detail the terms and sections of a statute which +might supply the constructive legislation permitting and aiding the +formation of combinations of capital into Federal corporations. They should +be subject to rigid rules as to their organization and procedure, including +effective publicity, and to the closest supervision as to the issue of +stock and bonds by an executive bureau or commission in the Department of +Commerce and Labor, to which in times of doubt they might well submit their +proposed plans for future business. It must be distinctly understood that +incorporation under Federal law could not exempt the company thus formed +and its incorporators and managers from prosecution under the anti-trust +law for subsequent illegal conduct, but the publicity of its procedure and +the opportunity for frequent consultation with the bureau or commission in +charge of the incorporation as to the legitimate purpose of its +transactions would offer it as great security against successful +prosecutions for violations of the law as would be practical or wise. + +Stich a bureau or commission might well be invested also with the duty +already referred to, of aiding courts in the dissolution and recreation of +trusts within the law. it should be an executive tribunal of the dignity +and power of the Comptroller of the Currency or the Interstate Commerce +Commission, which now exercise supervisory power over important classes of +corporations under Federal regulation. + +The drafting of such a Federal incorporation law would offer ample +opportunity to prevent many manifest evils in corporate management to-day, +including irresponsibility of control in the hands of the few who are not +the real owners. + +INCORPORATION VOLUNTARY. + +I recommend that the Federal charters thus to be granted shall be +voluntary, at least until experience justifies mandatory provisions. The +benefit to be derived from the operation of great businesses under the +protection of such a charter would attract all who are anxious to keep +within the lines of the law. Other large combinations that fail to take +advantage of the Federal incorporation will not have a right to complain if +their failure is ascribed to unwillingness to submit their transactions to +the careful official. scrutiny, competent supervision, and publicity +attendant upon the enjoyment of such a charter. + +ONLY SUPPLEMENTAL LEGISLATION NEEDED. + +The opportunity thus suggested for Federal incorporation, it seems tome, is +suitable constructive legislation needed to facilitate the squaring Of +great industrial enterprises to the rule of action laid down by the +anti-trust law. This statute as construed by the Supreme Court must +continue to be the line of distinction for legitimate business. It must be +enforced, unless we are to banish individualism from all business and +reduce it to one common system of regulation or control of prices like that +which now prevails with respect to public utilities, and which when applied +to all business would be a long step toward State socialism. + +IMPORTANCE OF THE ANTI-TRUST ACT. + +The anti-trust act is the expression of the effort of a freedomloving +people to preserve equality of opportunity. It is the result of the +confident determination of such a people to maintain their future growth by +preserving uncontrolled and unrestricted the enterprise of the individual, +his industry, his ingenuity, his intelligence, and his independent +courage. + +For twenty years or more this statute has been upon the statute book. All +knew its general purpose and approved. Many of its violators were cynical +over its assumed impotence. It seemed impossible of enforcement. Slowly the +mills of the courts ground, and only gradually did the majesty of the law +assert itself. Many of its statesmen-authors died before it became a living +force, and they and others saw the evil grow which they had hoped to +destroy. Now its efficacy is seen; now its power is heavy; now its object +is near achievement. Now we hear the call for its repeal on the plea that +it interferes with business prosperity, and we are advised in most general +terms, how by some other statute and in some other way the evil we are just +stamping out can be cured, if we only abandon this work of twenty years and +try another experiment for another term of years. + +It is said that the act has not done good. Can this be said in the face of +the effect of the Northern Securities decree? That decree was in no way so +drastic or inhibitive in detail as either the Standard Oil decree or the +Tobacco decree; but did it not stop for all time the then powerful movement +toward the control of all the railroads of the country in a single hand? +Such a one-man power could not have been a healthful influence in the +Republic, even though exercised under the general supervision of an +interstate commission. + +Do we desire to make such ruthless combinations and monopolies lawful? When +all energies are directed, not toward the reduction of the cost of +production for the public benefit by a healthful competition, but toward +new ways and means for making permanent in a few hands the absolute control +of the conditions and prices prevailing in the whole field of industry, +then individual enterprise and effort will be paralyzed and the spirit of +commercial freedom will be dead. + +PART II. + +The relations of the United States with other countries have continued +during the past twelve months upon a basis of the usual good will and +friendly intercourse. ARBITRATION. + +The year just passed marks an important general movement on the part of the +Powers for broader arbitration. In the recognition of the manifold benefits +to mankind in the extension of the policy of the settlement of +international disputes by arbitration rather than by war, and in response +to a widespread demand for an advance in that direction on the part of the +people of the United States and of Great Britain and of France, new +arbitration treaties were negotiated last spring with Great Britain and +France, the terms of which were de signed, as expressed in the preamble of +these treaties, to extend the scope and obligations of the policy of +arbitration adopted in our present treaties with those Governments To pave +the way for this treat with the United States, Great Britain negotiated an +important modification in its alliance with Japan, and the French +Government also expedited the negotiations with signal good will. The new +treaties have been submitted to the Senate and are awaiting its advice and +consent to their ratification. All the essentials of these important +treaties have long been known, and it is my earnest hope that they will +receive prompt and favorable action. + +CLAIM OF ALSOP & CO. SETTLED. + +I am glad to report that on July 5 last the American claim of Alsop & Co. +against the Government of Chile was finally disposed of by the decision of +His Britannic Majesty George V, to whom, as amiable compositeur, the matter +had been referred for determination. His Majesty made an award of nearly +$1,000,000 to the claimants, which was promptly paid by Chile. The +settlement of this controversy has happily eliminated from the relations +between the Republic of Chile and the United States the only question which +for two decades had given the two foreign offices any serious concern and +makes possible the unobstructed development of the relations of friendship +which it has been the aim of this Government in every possible way to +further and cultivate. + +ARBITRATIONS-PANAMA AND COSTA RICA-COLOMBIA AND HAITI. + +In further illustration of the practical and beneficent application of the +principle of arbitration and the underlying broad spirit of conciliation, I +am happy to advert to the part of the United States in facilitating +amicable settlement of disputes which menaced the peace between Panama and +Costa Rica and between Haiti and the Dominican Republic. + +Since the date of their independence, Colombia and Costa Rica had been +seeking a solution of a boundary dispute, which came as an heritage from +Colombia to the new Republic of Panama, upon its beginning life as an +independent nation. Although the disputants had submitted this question for +decision to the President of France under the terms of an arbitration +treaty, the exact interpretation of the provisions of the award rendered +had been a matter of serious disagreement between the two countries, both +contending for widely different lines even under the terms of the decision. +Subsequently and since T903 this boundary question bad been the subject of +fruitless diplomatic negotiations between the parties. In January, 1910, at +the request of both Governments the agents representing them met in +conference at the Department of State and subsequently concluded a protocol +submitting this long-pending controversy to the arbitral judgment of the +Chief justice of the United States, who consented to act in this capacity. +A boundary commission, according to the international agreement, has now +been appointed, and it is expected that the arguments will shortly proceed +and that this long-standing dispute will be honorably and satisfactorily +terminated. + +Again, a few months ago it appeared that the Dominican Republic and Haiti +were about to enter upon hostilities because of complications growing out +of an acrimonious boundary dispute which the efforts of many years had +failed to solve. The Government of the United States, by a friendly +interposition of good offices, succeeded in prevailing upon the parties to +place their reliance upon some form of pacific settlement. Accordingly, on +the friendly suggestion of this Government, the two Governments empowered +commissioners to meet at Washington in conference at the State Department +in order to arrange the terms of submission to arbitration of the boundary +controversy. + +CHAMIZAL ARBITRATION NOT SATISFACTORY. + +Our arbitration of the Chamizal boundary question with Mexico was +unfortunately abortive, but with the earnest efforts on the part of both +Governments which its importance commands, it is felt that an early +practical adjustment should prove possible. + +LATIN AMERICA. VENEZUELA. + +During the past year the Republic of Venezuela celebrated the one hundredth +anniversary of its independence. The United States sent, in honor of this +event, a special embassy to Caracas, where the cordial reception and +generous hospitality shown it were most gratifying as a further proof of +the good relations and friendship existing between that country and the +United States. MEXICO. + +The recent political events in Mexico received attention from this +Government because of the exceedingly delicate and difficult situation +created along our southern border and the necessity for taking measures +properly to safeguard American interests. The Government of the United +States, in its desire to secure a proper observance and enforcement of the +so-called neutrality statutes of the Federal Government, issued directions +to the appropriate officers to exercise a diligent and vigilant regard for +the requirements of such rules and laws. Although a condition of actual +armed conflict existed, there was no official recognition of belligerency +involving the technical neutrality obligations of international law. + +On the 6th of March last, in the absence of the Secretary of State, I had a +personal interview with Mr. Wilson, the ambassador of the United States to +Mexico, in which he reported to me that the conditions in Mexico were much +more critical than the press dispatches disclosed; that President Diaz was +on a volcano of popular uprising; that the small outbreaks which had +occurred were only symptomatic of the whole condition; that a very large +per cent of the people were in sympathy with the insurrection; that a +general explosion was probable at any time, in which case he feared that +the 40,000 or more American residents in Mexico might be assailed, and that +the very large American investments might be injured or destroyed. + +After a conference with the Secretary of War and the Secretary of the Navy, +I thought it wise to assemble an Army division of full strength at San +Antonio, Tex., a brigade of three regiments at Galveston, a brigade of +Infantry in the Los Angeles district of southern California, together with +a squadron of battleships and cruisers and transports at Galveston, and a +small squadron of ships at San Diego. At the same time, through our +representative at the City of Mexico, I expressed to President Diaz the +hope that no apprehensions might result from unfounded conjectures as to +these military maneuvers, and assured him that they had no significance +which should cause concern to his Government. + +The mobilization was effected with great promptness, and on the 15th of +March, through the Secretary of War and the Secretary of the Navy, in a +letter addressed to the Chief of Staff, I issued the following +instructions: It seems my duty as Commander in Chief to place troops in +sufficient number where, if Congress shall direct that they enter Mexico to +save American lives and property, an effective movement may be promptly +made. Meantime, the movement of the troops to Texas and elsewhere near the +boundary, accompanied with sincere assurances of the utmost goodwill toward +the present Mexican Government and with larger and more frequent patrols +along the border to prevent insurrectionary expeditions from American soil, +will hold up the hands of the existing Government and will have a healthy +moral effect to prevent attacks upon Americans and their property in any +subsequent general internecine strife. Again, the sudden mobilization of a +division of troops has been a great test of our Army and full of useful +instruction, while the maneuvers that are thus made possible can occupy the +troops and their officers to great advantage. + +The assumption by the press that I contemplate intervention on Mexican soil +to protect American lives or property is of course gratuitous, because I +seriously doubt whether I have such authority under any circumstances, and +if I had I would not exercise it without express congressional approval. +Indeed, as you know, I have already declined, without Mexican consent, to +order a troop of Cavalry to protect the breakwater we are constructing just +across the border in Mexico at the mouth of the Colorado River to save the +Imperial Valley, although the insurrectos had scattered the Mexican troops +and were taking our horses and supplies and frightening our workmen away. +My determined purpose, however, is to be in a position so that when danger +to American lives and property in Mexico threatens and the existing +Government is rendered helpless by the insurrection, I can promptly execute +congressional orders to protect them, with effect. + +Meantime, I send you this letter, through the Secretary, to call your +attention to some things in connection with the presence of the division in +the Southwest which have doubtless occurred to you, but which I wish to +emphasize. + +In the first place, I want to make the mobilization a first-class training +for the Army, and I wish you would give your time and that of the War +College to advising and carrying out maneuvers of a useful character, and +plan to continue to do this during the next three months. By that time we +may expect that either Ambassador Wilson's fears will have been realized +and chaos and its consequences have ensued, or that the present Government +of Mexico will have so readjusted matters as to secure tranquillity-a +result devoutly to be wished. The troops can then be returned to their +posts. I understood from you in Washington that Gen. Aleshire said that you +could probably meet all the additional expense of this whole movement out +of the present appropriations if the troops continue in Texas for three +months. I sincerely hope this is so. I observe from the newspapers that you +have no blank cartridges, but I presume that this is an error, or that it +will be easy to procure those for use as soon as your maneuvers begin. + +Second. Texas is a State ordinarily peaceful, but you can not put 20,000 +troops into it without running some risk of a collision between the people +of that State, and especially the -Mexicans who live in Texas near the +border and who sympathize with the insurrectos, and the Federal soldiers. +For that reason I beg you to be as careful as you can to prevent friction +of any kind. We were able in Cuba, with the army of pacification there of +something more than 5,000 troops, to maintain them for a year without any +trouble, and I hope you can do the same thing in Texas. Please give your +attention to this, and advise all the officers in command of the necessity +for very great circumspection in this regard. + +Third. One of the great troubles in the concentration of troops is the +danger of disease, and I suppose that you have adopted the most modern +methods for preventing and, if necessary, for stamping out epidemics. That +is so much a part of a campaign that it hardly seems necessary for me to +call attention to it. + +Finally, I wish you to examine the question of the patrol of the border and +put as many troops on that work as is practicable, and more than are now +engaged in it, in order to prevent the use of our borderland for the +carrying out of the insurrection. I have given assurances to the Mexican +ambassador on this point. + +I sincerely hope that this experience will always be remembered by the Army +and Navy as a useful means of education, and I should be greatly +disappointed if it resulted in any injury or disaster to our forces from +any cause. I have taken a good deal of responsibility in ordering this +mobilization, but I am ready to answer for it if only you and those under +you use the utmost care to avoid the difficulties which I have pointed +out. + +You may have a copy of this letter made and left with Gen. Carter and such +other generals in command as you may think wise and necessary to guide them +in their course, but to be regarded as confidential. I am more than happy +to here record the fact that all apprehensions as to the effect of the +presence of so large a military force in Texas proved groundless; no +disturbances occurred; the conduct of the troops was exemplary and the +public reception and treatment of them was all that could have been +desired, and this notwithstanding the presence of a large number of Mexican +refugees in the border territory. + +From time to time communications were received from Ambassador Wilson, who +had returned to Mexico, confirming the view that the massing of American +troops in the neighborhood had had good effect. By dispatch of April 3, +1911, the ambassador said: The continuing gravity of the situation here and +the chaos that would ensue should the constitutional authorities be +eventually overthrown, thus greatly increasing the danger to which American +lives and property are already subject, confirm the wisdom of the President +in taking those military precautions which, making every allowance for the +dignity and the sovereignty of a friendly state, are due to our nationals +abroad. + +Charged as I am with the responsibility of safeguarding these lives and +property, I am bound to say to the department that our military +dispositions on the frontier have produced an effective impression on the +Mexican mind and may, at any moment, prove to be the only guaranties for +the safety of our nationals and their property. If it should eventuate that +conditions here require more active measures by the President and Congress, +sporadic attacks might be made upon the lives and property of our +nationals, but the ultimate result would be order and adequate protection. +The insurrection continued and resulted In engagements between the regular +Mexican troops and the insurgents, and this along the border, so that in +several instances bullets from the contending forces struck American +citizens engaged in their lawful occupations on American soil. + +Proper protests were made against these invasions of American rights to the +Mexican authorities. On April 17, 1911, 1 received the following telegram +from the governor of Arizona: As a result of to-day's fighting across the +international line, but within gunshot range of the heart of Douglas, five +Americans wounded on this side of the line. Everything points to repetition +of these casualties on to-morrow, and while the Federals seem disposed to +keep their agreement not to fire into Douglas, the position of the +insurrectionists is such that when fighting occurs on the east and +southeast of the intrenchments people living in Douglas are put in danger +of their lives. In my judgment radical measures are needed to protect our +innocent people, and if anything can be done to stop the fighting at Agua +Prieta the ,ittiation calls for such action. It is impossible to safeguard +the people of Douglas unless the town be vacated. Can anything be done to +relieve situation, now acute? After a conference with the Secretary of +State, the following telegram was sent to Governor Sloan, on April IS, 1911 +9 11, and made public: Your dispatch received. Have made urgent demand upon +Mexican Government to issue instructions to prevent firing across border by +Mexican federal troops, and am waiting reply. Meantime I have sent direct +warning to the Mexican and insurgent forces near Douglas. I infer from your +dispatch that both parties attempt to heed the warning, but that in the +strain and exigency of the contest wild bullets still find their way into +Douglas. The situation might justify me in ordering our troops to cross the +border and attempt to stop the fighting, or to fire upon both combatants +from the American side. But if I take this step, I must face the +possibility of resistance and greater bloodshed, and also the danger of +having our motives misconstrued and misrepresented, and of thus inflaming +Mexican popular indignation against many thousand Americans now in Mexico +and jeopardizing their lives and property. The pressure for general +intervention under such conditions it might not be practicable to resist. +It is impossible to foresee or reckon the consequences of such a course, +and we must use the greatest self-restraint to avoid it. Pending my urgent +representation to the Mexican Government, I can not therefore order the +troops at Douglas to cross the border, but I must ask you and the local +authorities, in case the same danger recurs, to direct the people of +Douglas to place themselves where bullets can not reach them and thus avoid +casualty. I am loath to endanger Americans in 'Mexico, where they are +necessarily exposed, by taking a radical step to prevent injury to +Americans on our side of the border who can avoid it by a temporary +inconvenience. I am glad to say that no further invasion of American rights +of any substantial character occurred. + +The presence of a large military and naval force available for prompt +action, near the Mexican border, proved to be most fortunate under the +somewhat trying conditions presented by this invasion of American rights +Had no movement theretofore taken place, and because of these events it had +been necessary then to bring about the mobilization, it must have bad +sinister significance. On the other hand, the presence of the troops before +and at the time of the unfortunate killing and wounding of American +citizens at Douglas, made clear that the restraint exercised by our +Government in regard to this Occurrence was not due to lack of force or +power to deal with it promptly and aggressively, but was due to a real +desire to use every means possible to avoid direct intervention in the +affairs of our neighbor whose friendship we valued and were most anxious to +retain. + +The policy and action of this Government were based upon an earnest +friendliness for the Mexican people as a whole, and it is a matter of +gratification to note that this attitude of strict impartiality as to all +factions in Mexico and of sincere friendship for the neighboring nation, +without regard for party allegiance, has been generally recognized and has +resulted in an even closer and more sympathetic understanding between the +two Republics and a warmer regard one for the other. Action to suppress +violence and restore tranquillity throughout the Mexican Republic was of +peculiar interest to this Government, in that it concerned the safeguarding +of American life and property in that country. The Government of the United +States had occasion to accord permission for the passage of a body of +Mexican rurales through Douglas, Arizona, to Tia Juana, Mexico, for the +suppression of general lawlessness which bad for some time existed in the +region of northern Lower California. On May 25, 1911, President Diaz +resigned, Senor de la Barra was chosen provisional President. Elections for +President and Vice President were thereafter held throughout the Republic, +and Senor Francisco 1. Madero was formally declared elected on October 15 +to the chief magistracy. On November 6 President Madero entered upon the +duties of his office. + +Since the inauguration of President Madero a plot has been unearthed +against the present Government, to begin a new insurrection. Pursuing the +same consistent policy which this administration has adopted from the +beginning, it directed an investigation into the conspiracy charged, and +this investigation has resulted in the indictment of Gen. Bernardo Reyes +and others and the seizure of a number of officers and men and horses and +accoutrements assembled upon the soil of Texas for the purpose of invading +Mexico. Similar proceedings had been taken during the insurrection against +the Diaz Government resulting in the indictments and prosecution of persons +found to be engaged in violating the neutrality laws of the United States +in aid of that uprising. + +The record of this Government in respect of the recognition of constituted +authority in Mexico therefore is clear. + +CENTRAL AMERICA-HONDURAS AND NICARAGUA TREATIES PROPOSED. + +As to the situation in Central America, I have taken occasion in the past +to emphasize most strongly the importance that should be attributed to the +consummation of the conventions between the Republics of Nicaragua and of +Honduras and this country, and I again earnestly recommend that the +necessary advice and consent of the Senate be accorded to these treaties, +which will make it possible for these Central American Republics to enter +upon an era of genuine economic national development. The Government of +Nicaragua which has already taken favorable action on the convention, has +found it necessary, pending the exchange of final ratifications, to enter +into negotiations with American bankers for the purpose of securing a +temporary loan to relieve the present financial tension. III connection +with this temporary loan and in the hope of consummating, through the +ultimate operation of the convention, a complete and lasting economic +regeneration, the Government of Nicaragua has also decided to engage an +American citizen as collector general of customs. The claims commission on +which the services of two American citizens have been sought, and the work +of the American financial adviser should accomplish a lasting good of +inestimable benefit to the prosperity, commerce, and peace of the Republic. +In considering the ratification of the conventions with Nicaragua and +Honduras, there rests with the United States the heavy responsibility of +the fact that their rejection here might destroy the progress made and +consign the Republics concerned to still deeper submergence in bankruptcy, +revolution, and national jeopardy. PANAMA. + +Our relations with the Republic of Panama, peculiarly important, due to +mutual obligations and the vast interests created by the canal, have +continued in the usual friendly manner, and we have been glad to make +appropriate expression of our attitude of sympathetic interest in the +endeavors of our neighbor in undertaking the development of the rich +resources of the country. With reference to the internal political affairs +of the Republic, our obvious concern is in the maintenance of public peace +and constitutional order, and the fostering of the general interests +created by the actual relations of the two countries, without the +manifestation of any preference for the success of either of the political +parties. + +THE PAN AMERICAN UNION. + +The Pan American Union, formerly known as the Bureau of American Republics, +maintained by the joint contributions of all the American nations, has +during the past year enlarged its practical work as an international +organization, and continues to prove its usefillness as an agency for the +mutual development of commerce, better acquaintance, and closer intercourse +between the United States and her sister American republics. + +THE FAR EAST. + +THE CHINESE LOANS. + +The past year has been marked in our relations with China by the conclusion +of two important international loans, one for the construction of the +Hukuang railways, the other for carrying out of the currency reform to +which China was pledged by treaties with the United States, Great Britain, +and Japan, of which mention was made in my last annual message. + +It will be remembered that early in 1909 an agreement was consummated among +British, French, and German financial groups whereby they proposed to lend +the Chinese Government funds for the construction of railways in the +Provinces of Hunan and Hupeh, reserving for their nationals the privilege +of engineering the construction of the lines and of furnishing the +materials required for the work. After negotiations with the Governments +and groups concerned an agreement was reached whereby American, British, +French, and German nationals should participate upon equal terms in this +important and useful undertaking. Thereupon the financial groups, supported +by their respective Governments, began negotiations with the Chinese +Government which terminated in a loan to China Of $30,000,000, with the +privilege of increasing the amount to $50,000,000. The cooperative +construction of these trunk lines should be of immense advantage, +materially and otherwise, to China and should greatly facilitate the +development of the bountiful resources of the Empire. On the other hand, a +large portion of these funds is to be expended for materials, American +products having equal preference with those of the other three lending +nations, and as the contract provides for branches and extensions +subsequently to be built on the same terms the opportunities for American +materials will reach considerable proportions. + +Knowing the interest of the United States in the reform of Chinese +currency, the Chinese Government, in the autumn of 1910 sought the +assistance of the American Government to procure funds with which to +accomplish that all-important reform. In the course of the subsequent +negotiations there was combined with the proposed currency loan one for +certain industrial developments in Manchuria, the two loans aggregating the +sum Of $50,000,000. While this was originally to be solely an American +enterprise, the American Government, consistently with its desire to secure +a sympathetic and practical cooperation of the great powers toward +maintaining the principle of equality of opportunity and the administrative +integrity of China, urged the Chinese Government to admit to participation +in the currency loan the associates of the American group in the Hukuang +loan. While of immense importance in itself, the reform contemplated in +making this loan is but preliminary to other and more comprehensive fiscal +reforms which will be of incalculable benefit to China and foreign +interests alike, since they will strengthen the Chinese Empire and promote +the rapid development of international trade. + +NEUTRAL FINANCIAL ADVISER. + +When these negotiations were begun, it was understood that a financial +adviser was to be employed by China in connection with the reform, and in +order that absolute equality in all respects among the lending nations +might be scrupulously observed, the American Government proposed the +nomination of a neutral adviser, which was agreed to by China and the other +Governments concerned. On September 28, 1911, Dr. Vissering, president of +the Dutch Java Bank and a financier of wide experience in the Orient, was +recommended to the Chinese Government for the post of monetary adviser. + +Especially important at the present, when the ancient Chinese Empire is +shaken by civil war incidental to its awakening to the many influences and +activities of modernization, are the cooperative policy of good +understanding which has been fostered by the international projects +referred to above and the general sympathy of view among all the Powers +interested in the Far East. While safeguarding the interests of our +nationals, this Government is using its best efforts in continuance of its +traditional policy of sympathy and friendship toward the Chinese Empire and +its people, with the confident hope for their economic and administrative +development, and with the constant disposition to contribute to their +welfare in all proper ways consistent with an attitude of strict +impartiality as between contending factions. + +For the first time in the history of the two countries, a Chinese cruiser, +the Haichi, under the command of Admiral Ching, recently visited New York, +where the officers and men were given a cordial welcome. + +NEW JAPANESE TREATY. + +The treaty of commerce and navigation between the United States and Japan, +signed in 1894, would by a strict interpretation of its provisions have +terminated on July 17, 1912. Japan's general treaties with the other +powers, however, terminated in 1911, and the Japanese Government expressed +an earnest desire to conduct the negotiations for a new treaty with the +United States simultaneously with its negotiations with the other powers. +There were a number of important questions involved in the treaty, +including the immigration of laborers, revision of the customs tariff, and +the right of Americans to hold real estate in Japan. The United States +consented to waive all technicalities and to enter at once upon +negotiations for a new treaty on the understanding that there should be a +continuance throughout the, life of the treaty of the same effective +measures for the restriction of immigration of laborers to American +territory which had been in operation with entire satisfaction to both +Governments since 1908. The Japanese Government accepted this basis of +negotiation, and a new treaty was quickly concluded, resulting in a highly +satisfactory settlement of the other questions referred to. + +A satisfactory adjustment has also been effected of the questions growing +out of the annexation of Korea by Japan. + +The recent visit of Admiral Count Togo to the United States as the Nation's +guest afforded a welcome opportunity to demonstrate the friendly feeling so +happily existing between the two countries. SIAM. + +There has been a change of sovereigns in Siam and the American minister at +Bangkok was accredited in a special capacity to represent the United States +at the coronation ceremony of the new King. + +EUROPE AND THE NEAR EAST. + +In Europe and the Near East, during the past twelve-month, there has been +at times considerable political unrest. The Moroccan question, which for +some months was the cause of great anxiety, happily appears to have reached +a stage at which it need no longer be regarded with concern. The Ottoman +Empire was occupied for a period by strife in Albania and is now at war +with Italy. In Greece and the Balkan countries the disquieting +potentialities of this situation have been more or less felt. Persia has +been the scene of a long internal struggle. These conditions have been the +cause of uneasiness in European diplomacy, but thus far without direct +political concern to the United States. + +In the war which unhappily exists between Italy and Turkey this Government +has no direct political interest, and I took occasion at the suitable time +to issue a proclamation of neutrality in that conflict. At the same time +all necessary steps have been taken to safeguard the personal interests of +American citizens and organizations in so far as affected by the war. + +COMMERCE WITH THE NEAR EAST. + +In spite of the attendant economic uncertainties and detriments to +commerce, the United States has gained markedly in its commercial standing +with certain of the nations of the Near East. Turkey, especially, is +beginning to come into closer relations with the United States through the +new interest of American manufacturers and exporters in the possibilities +of those regions, and it is hoped that foundations are being laid for a +large and mutually beneficial exchange of commodities between the two +countries. This new interest of Turkey in American goods is indicated by +the fact that a party of prominent merchants from a large city in Turkey +recently visited the United States to study conditions of manufacture and +export here, and to get into personal touch with American merchants, with a +view to cooperating more intelligently in opening up the markets of Turkey +and the adjacent countries to our manufactures. Another indication of this +new interest of America in the commerce of the Near East is the recent +visit of a large party of American merchants and manufacturers to central +and eastern Europe, where they were entertained by prominent officials and +organizations of the large cities, and new bonds of friendship and +understanding were established which can not but lead to closer and greater +commercial interchange. + +CORONATION OF KING GEORGE V. + +The 22d of June of the present year marked the coronation of His Britannic +Majesty King George V. In honor of this auspicious occasion I sent a +special embassy to London. The courteous and cordial welcome extended to +this Government's representatives by His Majesty and the people of Great +Britain has further emphasized the strong bonds of friendship happily +existing between the two nations. + +SETTLEMENT OF LONG-STANDING DIFFERENCES WITH GREAT BRITAIN. + +As the result of a determined effort on the part of both Great Britain and +the United States to settle all of their outstanding differences a number +of treaties have been entered into between the two countries in recent +years, by which nearly all of the unsettled questions between them of any +importance have either been adjusted by agreement or arrangements made for +their settlement by arbitration. A number of the unsettled questions +referred to consist of pecuniary claims presented by each country against +the other, and in order that as many of these claims as possible should be +settled by arbitration a special agreement for that purpose was entered +into between the two Governments on the 18th day of August, 1910, in +accordance with Article 11 of the general arbitration treaty with Great +Britain of April 4, 19o8. Pursuant to the provisions of this special +agreement a schedule of claims has already been agreed upon, and the +special agreement, together with this schedule, received the approval of +the Senate when submitted to it for that purpose at the last session of +Congress. Negotiations between the two Governments for the preparation of +an additional schedule of claims are already well advanced, and it is my +intention to submit such schedule as soon as it is agreed upon to the +Senate for its approval, in order that the arbitration proceedings may be +undertaken at an early date. In this connection the attention of Congress +is particularly called to the necessity for an appropriation + +to cover the expense incurred in submitting these claims to arbitration. + +PRESENTATION TO GERMANY OF REPLICA OF VON STEUBEN STATUE. + +In pursuance of the act of Congress, approved June 23, 1910, the Secretary +of State and the joint Committee on the Library entered into a contract +with the sculptor, Albert Jaegers, for the execution of a bronze replica of +the statue of Gen. von Steuben erected in Washington, for presentation to +His Majesty the German Emperor and the German nation in recognition of the +gift of the statue of Frederick the Great made by the Emperor to the people +of the United States. + +The presentation was made on September 2 last by representatives whom I +commissioned as the special mission of this Government for the purpose. + +The German Emperor has conveyed to me by telegraph, on his own behalf and +that of the German people, an expression of appreciative thanks for this +action of Congress. RUSSIA. + +By direction of the State Department, our ambassador to Russia has recently +been having a series of conferences with the minister of foreign affairs of +Russia, with a view to securing a clearer understanding and construction of +the treaty of 1832 between Russia and the United States and the +modification of any existing Russian regulations which may be found to +interfere in any way with the full recognition of the rights of American +citizens under this treaty. I believe that the Government of Russia is +addressing itself seriously to the need of changing the present practice +under the treaty and that sufficient progress has been made to warrant the +continuance of these conferences in the hope that there may soon be removed +any justification of the complaints of treaty violation now prevalent in +this country. + +I expect that immediately after the Christmas recess I shall be able to +make a further communication to Congress on this subject. LIBERIA. + +Negotiations for the amelioration of conditions found to exist in Liberia +by the American commission, undertaken through the Department of State, +have been concluded and it is only necessary for certain formalities to be +arranged in securing the loan which it is hoped will place that republic on +a practical financial and economic footing. + +RECOGNITION OF PORTUGUESE REPUBLIC. + +The National Constituent Assembly, regularly elected by the vote of the +Portuguese people, having on June 19 last unanimously proclaimed a +republican form of government, the official recognition of the Government +of the United States was given to the new Republic in the afternoon of the +same day. + +SPITZBERGEN ISLANDS. + +Negotiations for the betterment of conditions existing in the Spitzbergen +Islands and the adjustment of conflicting claims of American citizens and +Norwegian subjects to lands in that archipelago are still in progress. + +INTERNATIONAL CONVENTIONS AND CONFERENCES. + +INTERNATIONAL PRIZE COURT. + +The supplementary protocol to The he Hague convention for the establishment +of an international prize court, mentioned in my last annual message, +embodying stipulations providing for an alternative procedure which would +remove the constitutional objection to that part of The Hague convention +which provides that there may be an appeal to the proposed court from the +decisions of national courts, has received the signature of the governments +parties to the original convention and has been ratified by the Government +of the United States, together with the prize court convention. + +The deposit of the ratifications with the Government of the Netherlands +awaits action by the powers on the declaration, signed at London on +February 26, 1909 of the rules of international law to be recognized within +the meaning of article 7 of The Hague convention for the establishment of +an International Prize Court. + +FUR-SEAL TREATY. + +The fur-seal controversy, which for nearly twenty-five years has been the +source of serious friction between the United States and the powers +bordering upon the north Pacific Ocean, whose subjects have been permitted +to engage in pelagic sealing against the fur-seal herds having their +breeding grounds within the jurisdiction of the United States, has at last +been satisfactorily adjusted by the conclusion of the north Pacific sealing +convention entered into between the United States, Great Britain, Japan, +and Russia on the 7th of July last. This convention is a conservation +measure of very great importance, and if it is carried out in the spirit of +reciprocal concession and advantage upon which it is based, there is every +reason to believe that not only will it result in preserving the furseal +herds of the north Pacific Ocean and restoring them to their former value +for the purposes of commerce, but also that it will afford a permanently +satisfactory settlement of a question the only other solution of which +seemed to be the total destruction of the fur seals. In another aspect, +also, this convention is of importance in that it furnishes an illustration +of the feasibility of securing a general international game law for the +protection of other mammals of the sea, the preservation of which is of +importance to all the nations of the world. + +LEGISLATION NECESSARY. + +The attention of Congress is especially called to the necessity for +legislation on the part of the United States for the purpose of fulfilling +the obligations assumed under this convention, to which the Senate gave its +advice and consent on the 24th day of July last. + +PROTECTION OF INDUSTRIAL PROPERTY UNION. + +The conference of the International Union for the Protection of Industrial +Property, which, under the authority of Congress, convened at Washington on +May 16, 1911, closed its labors on June 2, 1911, by the signature of three +acts, as follows: + +(I) A convention revising the Paris convention of March 20, 1883, for the +protection of industrial property, as modified by the additional act signed +at Brussels on December 14, 1900; + +(2) An arrangement to replace the arrangement signed at Madrid on April 14, +1891 for the international registration of trade-marks, and the additional +act with regard thereto signed at Brussels on December 14, 1900; and + +(3) An arrangement to replace the arrangement signed at Madrid on April 14, +18gi, relating to the repression of false indication of production of +merchandise. + +The United States is a signatory of the first convention only, and this +will be promptly submitted to the Senate. + +INTERNATIONAL OPIUM COMMISSION. + +In a special message transmitted to the Congress on the 11th of January, +19ii, in which I concurred in the recommendations made by the Secretary of +State in regard to certain needful legislation for the control of our +interstate and foreign traffic in opium and other menacing drugs, I quoted +from my annual message of December 7, 1909, in which I announced that the +results of the International Opium Commission held at Shanghai in February, +1909, at the invitation of the United States, had been laid before this +Government; that the report of that commission showed that China was making +remarkable progress and admirable efforts toward the eradication of the +opium evil; that the interested governments had not permitted their +commercial interests to prevent their cooperation in this reform; and, as a +result of collateral investigations of the opium question in this country, +I recommended that the manufacture, sale, and use of opium in the United +States should be more rigorously controlled by legislation + +Prior to that time and in continuation of the policy of this Government to +secure the cooperation of the interested nations, the United States +proposed an international opium conference with full powers for the purpose +of clothing with the force of international law the resolutions adopted by +the above-mentioned commission, together with their essential corollaries. +The other powers concerned cordially responded to the proposal of this +Government, and, I am glad to be able to announce, representatives of all +the powers assembled in conference at The Hague on the first of this +month. + +Since the passage of the opium-exclusion act, more than twenty States have +been animated to modify their pharmacy laws and bring them in accord with +the spirit of that act, thus stamping out, to a measure, the intrastate +traffic in opium and other habit-forming drugs. But, although I have urged +on the Congress the passage of certain measures for Federal control of the +interstate and foreign traffic in these drugs, no action has yet been +taken. In view of the fact that there is now sitting at The Hague so +important a conference, which has under review the municipal laws of the +different nations for the mitigation of their opium and other allied evils, +a conference which will certainly deal with the international aspects of +these evils, it seems to me most essential that the Congress should take +immediate action on the anti-narcotic legislation to which I have already +called attention by a special message. + +BUENOS AIRES CONVENTIONS. + +The four important conventions signed at the Fourth Pan American Conference +at Buenos Aires, providing for the regulation of trademarks, patents, and +copyrights, and for the arbitration of pecuniary claims, have, with the +advice and consent of the Senate, been ratified on the part of the United +States and the ratifications have been deposited with the Government of the +Argentine Republic in accordance with the requirements of the conventions. +I am not advised that similiar action has been taken by any other of the +signatory governments. + +INTERNATIONAL ARRANGEMENT TO SUPPRESS OBSCENE PUBLICATIONS. + +One of the notable advances in international morality accomplished in +recent years was an arrangement entered into on April 13th of the present +year between the United States and other powers for the repression of the +circulation of obscene publications. + +FOREIGN TRADE RELATIONS OF TYTE UNITED STATES. + +In my last annual message I referred to the tariff negotiations of the +Department of State with foreign countries in connection with the +application, by a series of proclamations, of the minimum tariff of the +United States to importations from the several countries, and I stated +that, in its general operation, section 2 of the new tariff law had proved +a guaranty of continued commercial peace, although there were, +unfortunately, instances where foreign governments dealt arbitrarily with +American interests within their jurisdiction in a manner injurious and +inequitable. During the past year some instances of discriminatory +treatment have been removed, but I regret to say that there remain a few +cases of differential treatment adverse to the commerce of the United +States. While none of these instances now appears to amount to undue +discrimination in the sense of section 2 Of the tariff law of August 5, +1909, they are all exceptions to that complete degree of equality of tariff +treatment that the Department of State has consistently sought to obtain +for American commerce abroad. + +While the double tariff feature of the tariff law of 1909 has been amply +justified by the results achieved in removing former and preventing new, +undue discriminations against American commerce it is believed that the +time has come for the amendment of this feature of the law in such way as +to provide a graduated means of meeting varying degrees of discriminatory +treatment of American commerce in foreign countries as well as to protect +the financial interests abroad of American citizens against arbitrary and +injurious treatment on the part of foreign governments through either +legislative or administrative measures. + +It would seem desirable that the maximum tariff of the United States should +embrace within its purview the free list, which is not the case at the +present time, in order that it might have reasonable significance to the +governments of those countries from which the importations into the United +States are confined virtually to articles on the free list. + +RECORD OF HIGHEST AMOUNT OF FOREIGN TRADE. + +The fiscal year ended June 30, 1911, shows great progress in the +development of American trade. It was noteworthy as marking the highest +record of exports of American products to foreign countries, the valuation +being in excess of $2,000,000,000. These exports showed a gain over the +preceding year of more than $300,000,000. + +FACILITIES FOR FOREIGN TRADE FURNISHED BY JOINT ACTION OF DEPARTMENT OF +STATE AND OF COMMERCE AND LABOR. + +There is widespread appreciation expressed by the business interests of the +country as regards the practical value of the facilities now offered by the +Department of State and the Department of Commerce and Labor for the +furtherance of American commerce. Conferences with their officers at +Washington who have an expert knowledge of trade conditions in foreign +countries and with consular officers and commercial agents of the +Department of Commerce and Labor who, while on leave of absence, visit the +principal industrial centers of the United States, have been found of great +value. These trade conferences are regarded as a particularly promising +method of governmental aid in foreign trade promotion. The Department of +Commerce and Labor has arranged to give publicity to the expected arrival +and the itinerary of consular officers and commercial agents while on leave +in the United States, in order that trade organizations may arrange for +conferences with them. + +As I have indicated, it is increasingly clear that to obtain and maintain +that equity and substantial equality of treatment essential to the +flourishing foreign trade, which becomes year by year more important to the +industrial and commercial welfare of the United States, we should have a +flexibility of tariff sufficient for the give and take of negotiation by +the Department of State on behalf of our commerce and industry. + +CRYING NEED FOR AMERICAN MERCHANT MARINE. + +I need hardly reiterate the conviction that there should speedily be built +up an American merchant marine. This is necessary to assure favorable +transportation facilities to our great ocean-borne commerce as well as to +supplement the Navy with an adequate reserve of ships and men It would have +the economic advantage of keeping at home part of the vast sums now paid +foreign shipping for carrying American goods. All the great commercial +nations pay heavy subsidies to their merchant marine so that it is obvious +that without some wise aid from the Congress the United States must lag +behind in the matter of merchant marine in its present anomalous position. + +EXTENSION OF AMERICAN BANKING TO FOREIGN COUNTRIES. + +Legislation to facilitate the extension of American banks to foreign +countries is another matter in which our foreign trade needs assistance. + +CHAMBERS OF FOREIGN COMMERCE SUGGESTED. + +The interests of our foreign commerce are nonpartisan, and as a factor in +prosperity are as broad as the land. In the dissemination of useful +information and in the coordination of effort certain unofficial +associations have done good work toward the promotion of foreign commerce. +It is cause for regret, however, that the great number of such associations +and the comparative lack of cooperation between them fails to secure an +efficiency commensurate with the public interest. Through the agency of the +Department of Commerce and Labor, and in some cases directly, the +Department of State transmits to reputable business interests information +of commercial opportunities, supplementing the regular published consular +reports. Some central organization in touch with associations and chambers +of commerce throughout the country and able to keep purely American +interests in closer touch with different phases of commercial affairs +would, I believe, be of great value. Such organization might be managed by +a committee composed of a small number of those now actively carrying on +the work of some of the larger associations, and there might be added to +the committee, as members ex officio, one or two officials of the +Department of State and one or two officials from the Department of +Commerce and Labor and representatives of the appropriate committees of +Congress. The authority and success of such an organization would evidently +be enhanced if the Congress should see fit to prescribe its scope and +organization through legislation which would give to it some such official +standing as that, for example, of the National Red Cross. + +With these factors and the continuance of the foreign-service establishment +(departmental, diplomatic, and consular) upon the high plane where it has +been placed by the recent reorganization this Government would be abreast +of the times in fostering the interests of its foreign trade, and the rest +must be left to the energy and enterprise of our business men. + +IMPROVEMENT OF THE FOREIGN SERVICE. + +The entire foreign-service organization is being improved and developed +with especial regard to the requirements of the commercial interests of the +country. The rapid growth of our foreign trade makes it of the utmost +importance that governmental agencies through which that trade is to be +aided and protected should possess a high degree of efficiency. Not only +should the foreign representatives be maintained upon a generous scale in +so far as salaries and establishments are concerned, but the selection and +advancement of officers should be definitely and permanently regulated by +law so that the service shall not fail to attract men of high character and +ability. The experience of the past few years with a partial application of +civil-service rules to the Diplomatic and Consular Service leaves no doubt +in my mind of the wisdom of a wider and more permanent extension of those +principles to both branches of the foreign service. The men selected for +appointment by means of the existing executive regulations have been of a +far higher average of intelligence and ability than the men appointed +before the regulations were promulgated. Moreover, the feeling that under +the existing rules there is reasonable hope for permanence of tenure during +good behavior and for promotion for meritorious service has served to bring +about a zealous activity in the interests of the country, which never +before existed or could exist. It is my earnest conviction that the +enactment into law of the general principles of the existing regulations +can not fail to effect further improvement in both branches of the foreign +service by providing greater inducement for young men of character and +ability to seek a career abroad in the service of the Government, and an +incentive to those already in the service to put forth greater efforts to +attain the high standards which the successful conduct of our international +relations and commerce requires. + +I therefore again commend to the favorable action of the Congress the +enactment of a law applying to the diplomatic and consular service the +principles embodied in section 1753 of the Revised Statutes of the United +States, in the civil-service act of January 16, 1883, and the Executive +orders of June 27, 1906, and of November 26, 1909. In its consideration of +this important subject I desire to recall to the attention of the Congress +the very favorable report made on the Lowden bill for the improvement of +the foreign service by the Foreign Affairs Committee of the House of +Representatives. Available statistics show the strictness with which the +merit system has been applied to the foreign service during recent years +and the absolute nonpartisan selection of consuls and diplomatic-service +secretaries who, indeed, far from being selected with any view to political +consideration, have actually been chosen to a disproportionate extent from +States which would have been unrepresented in the foreign service under the +system which it is to be hoped is now permanently obsolete. Some +legislation for the perpetuation of the present system of examinations and +promotions upon merit and efficiency would be of greatest value to our +commerical and international interests. + +PART III. + +THE WHITE HOUSE, December 20, 1911.To the Senate and House of +Representatives: + +In my annual message to Congress, December, 1909, I stated that under +section 2 of the act of August 5, 1909, I had appointed a Tariff Board of +three members to cooperate with the State Department in the administration +of the maximum and minimum clause of that act, to make a glossary or +encyclopedia of the existing tariff so as to render its terms intelligible +to the ordinary reader, and then to investigate industrial conditions and +costs of production at home and abroad with a view to determining to what +extent existing tariff rates actually exemplify the protective principle, +viz., that duties should be made adequate, and only adequate, to equalize +the difference in cost of production at home and abroad. + +I further stated that I believed these investigations would be of great +value as a basis for accurate legislation, and that I should from time to +time recommend to Congress the revision of certain schedules in accordance +with the findings of the Board. + +In the last session of the Sixty-first Congress a bill creating a permanent +Tariff Board of five members, of whom not more than three should be of the +same political party, passed each House, but failed of enactment because of +slight differences on which agreement was not reached before adjournment. +An appropriation act provided that the permanent Tariff Board, if created +by statute, should report to Congress on Schedule K in December, 1911. + +Therefore, to carry out so far as lay within my power the purposes of this +bill for a permanent Tariff Board, I appointed in March, 19li, a board of +five, adding two members of such party affiliation as would have fulfilled +the statutory requirement, and directed them to make a report to me on +Schedule K of the tariff act in December of this year. + +In my message of August 17, 1911, accompanying the veto of the wool bill, I +said that, in my judgment, Schedule K should be revised and the rates +reduced. My veto was based on the ground that, since the Tariff Board would +make, in December, a detailed report on wool and wool manufactures, with +special reference to the relation of the existing rates of duties to +relative costs here and abroad, public policy and a fair regard to the +interests of the producers and the manufacturers on the one hand and of the +consumers on the other demanded that legislation should not be hastily +enacted in the absence of such information; that I was not myself possessed +at that time of adequate knowledge of the facts to determine whether or not +the proposed act was in accord with my pledge to support a fair and +reasonable protective policy; that such legislation might prove only +temporary and inflict upon a great industry the evils of continued +uncertainty. + +I now herewith submit a report of the Tariff Board on Schedule K. The board +is unanimous in its findings. On the basis of these findings I now +recommend that the Congress proceed to a consideration of this schedule +with a view to its revision and a general reduction of its rates. + +The report shows that the present method of assessing the duty on raw +wool-this is, by a specific rate on the grease pound (i. e., unscoured) +-operates to exclude wools of high shrinkage in scouring but fine quality +from the American market and thereby lessens the range of wools available +to the domestic manufacturer; that the duty on scoured wool Of 33 cents per +pound is prohibitory and operates to exclude the importation of clean, +low-priced foreign wools of inferior grades, which are nevertheless +valuable material for manufacturing, and which can not be imported in the +grease because of their heavy shrinkage. Such wools, if imported, might be +used to displace the cheap substitutes now in use. + +To make the preceding paragraph a little plainer, take the instance of a +hundred pounds of first-class wool imported under the present duty, which +is 11 11 cents a pound. That would make the duty on the hundred pounds $11. +The merchantable part of the wool thus imported is the weight of the wool +of this hundred pounds after scouring. If the wool shrinks 80 per cent, as +some wools do, then the duty in such a case would amount to $11 $11 on 20 +pounds of scoured wool. This, of course, would be prohibitory. If the wool +shrinks only 50 per cent, it would be $11 on 50 pounds of wool, and this is +near to the average of the great bulk of wools that are imported from +Australia, which is the principal source of our imported wool. + +These discriminations could be overcome by assessing a duty in ad valorem +terms, but this method is open to the objection, first, that it increases +administrative difficulties and tends to decrease revenue through +undervaluation; and, second, that as prices advance, the ad valorem rate +increases the duty per pound at the time when the consumer most needs +relief and the producer can best stand competition; while if prices decline +the duty is decreased at the time when the consumer is least burdened by +the price and the producer most needs protection. + +Another method of meeting the difficulty of taxing the grease pound is to +assess a specific duty on grease wool in terms of its scoured content. This +obviates the chief evil of the present system, namely, the discrimination +due to different shrinkages, and thereby tends greatly to equalize the +duty. The board reports that this method is feasible in practice and could +be administered without great expense. The scoured content of the wool is +the basis on which users of wool make their calculations, and a duty of +this kind would fit the usages of the trade. One effect of this method of +assessment would be that , regardless of the rate of duty, there would be +an increase in the supply and variety of wool by making available to the +American market wools of both low and fine quality now excluded. + +The report shows in detail the difficulties involved in attempting to state +in categorical terms the cost of wool production and the great differences +in cost as between different regions and different types of wool. It is +found, however, that, taking all varieties in account, the average cost of +production for the whole American clip is higher than the cost in the chief +competing country by an amount somewhat less than the present duty. + +The report shows that the duties on noils, wool wastes, and shoddy, which +are adjusted to the rate Of 33 cents on scoured wool are prohibitory in the +same measure that the duty on scoured wool is prohibitory. In general, they +are assessed at rates as high as, or higher than, the duties paid on the +clean content of wools actually imported. They should be reduced and so +adjusted to the rate on wool as to bear their proper proportion to the real +rate levied on the actual wool imports. + +The duties on many classes of wool manufacture are prohibitory and greatly +in excess of the difference in cost of production here and abroad. + +This is true of tops, of yarns (with the exception of worsted yarns of a +very high grade), and of low and medium grade cloth of heavy weight. + +On tops up to 52 cents a pound in value, and on yarns of 65 cents in value, +the rate is 100 per cent with correspondingly higher rates for lower +values. On cheap and medium grade cloths, the existing rates frequently run +to 150 per cent and on some cheap goods to over 200 per cent. This is +largely due to that part of the duty which is levied ostensibly to +compensate the manufacturer for the enhanced cost of his raw material due +to the duty on wool. As a matter of fact, this compensatory duty, for +numerous classes of goods, is much in excess of the amount needed for +strict compensation. + +On the other hand, the findings show that the duties which run to such high +ad valorem equivalents are prohibitory, since the goods are not imported, +but that the prices of domestic fabrics are not raised by the full amount +of duty. On a set of 1-yard samples of 16 English fabrics, which are +completely excluded by the present tariff rates, it was found that the +total foreign value was $41.84; the duties which would have been assessed +had these fabrics been imported, $76.90; the foreign value plus the amount +of the duty, $118.74; or a nominal duty of 183 per cent. In fact, however, +practically identical fabrics of domestic make sold at the same time at +$69.75, showing an enhanced price over the foreign market value of but 67 +per cent. + +Although these duties do not increase prices of domestic goods by anything +like their full amount, it is none the less true that such prohibitive +duties eliminate the possibility of foreign competition, even in time of +scarcity; that they form a temptation to monopoly and conspiracies to +control domestic prices; that they are much in excess of the difference in +cost of production here and abroad, and that they should be reduced to a +point which accords with this principle. + +The findings of the board show that in this industry the actual +manufacturing cost, aside from the question of the price of materials, is +much higher in this country than it is abroad; that in the making of yarn +and cloth the domestic woolen or worsted manufacturer has in general no +advantage in the form of superior machinery or more efficient labor to +offset the higher wages paid in this country The findings show that the +cost of turning wool into yarn in this country is about double that in the +leading competing country, and that the cost of turning yarn into cloth is +somewhat more than double. Under the protective policy a great industry, +involving the welfare of hundreds of thousands of people, has been +established despite these handicaps. + +In recommending revision and reduction, I therefore urge that action be +taken with these facts in mind, to the end that an important and +established industry may not be jeopardized. + +The Tariff Board reports that no equitable method has been found to, levy +purely specific duties on woolen and worsted fabrics and that, excepting +for a compensatory duty, the rate must be ad valorem on such manufactures. +It is important to realize, however, that no flat ad valorem rate on such +fabrics can be made to work fairly and effectively. Any single rate which +is high enough to equalize the difference in manufacturing cost at home and +abroad on highly finished goods involving such labor would be prohibitory +on cheaper goods, in which the labor cost is a smaller proportion of the +total value. Conversely, a rate only adequate to equalize this difference +on cheaper goods would remove protection from the fine-goods manufacture, +the increase in which has been one of the striking features of the trade's +development in recent years. I therefore recommend that in any revision the +importance of a graduated scale of ad valorem duties on cloths be carefully +considered and applied. + +I venture to say that no legislative -body has ever had presented to it a +more complete and exhaustive report than this on so difficult and +complicated a subject as the relative costs of wool and woolens the world +over. It is a monument to the thoroughness, industry, impartiality, and +accuracy of the men engaged in its making. They were chosen from both +political parties but have allowed no partisan spirit to prompt or control +their inquiries. They are unanimous in their findings. I feel sure that +after the report has been printed and studied the value of such a +compendium of exact knowledge in respect to this schedule of the tariff +will convince all of the wisdom of making such a board permanent in order +that it may treat each schedule of the tariff as it has treated this, and +then keep its bureau of information up to date with current changes in the +economic world. + +It is no part of the function of the Tariff Board to propose rates of duty. +Their function is merely to present findings of fact on which rates of duty +may be fairly determined in the light of adequate knowledge in accord with +the economic policy to be followed. This is what the present report does. + +The findings of fact by the board show ample reason for the revision +downward of Schedule K, in accord with the protective principle, and +present the data as to relative costs and prices from which may be +determined what rates will fairly equalize the difference in production +costs. I recommend that such revision be proceeded with at once. + +PART IV. + +THE WHITE HOUSE, December 21, 1911.To the Senate and House of +Representatives: + +The financial condition of the Government, as shown at the close of the +last fiscal year, June 30, 1911, was very satisfactory. The ordinary +receipts into the general fund, excluding postal revenues, amounted to +$701,372,374.99, and the disbursements from the general fund for current +expenses and capital outlays, excluding postal and Panama Canal +disbursements, including the interest on the public debt, amounted to +$654,137,907-89, leaving a surplus Of $47,234,377.10. + +The postal revenue receipts amounted to $237,879,823,60, while the payments +made for the postal service from the postal revenues amounted to +$237,660,705.48, which left a surplus of postal receipts over disbursements +Of $219,118.12, the first time in 27 years in which a surplus occurred. + +The interest-bearing debt of the United States June 30, 1911, amounted to +$915,353,igo. The debt on which interest had ceased amounted to +$1,879,830.26, and the debt bearing no interest, including greenbacks, +national bank notes to be redeemed, and fractional currency, amounted to +$386,751,917-43, or a total of interest and noninterest bearing debt +amounting to $1,303,984,937.69. + +The actual disbursements, exclusive of those for the Panama Canal and for +the postal service for the year ending June 30, 1911, were $654,137,997.89. +The actual disbursements for the year ending June 30, 1910, exclusive of +the Panama Canal and the postal service disbursements, were +$659,705,391.08, making a decrease Of $5,567,393.19 in yearly expenditures +in the year 1911 under that of 1910. For the year ending June 30, 1912, the +estimated receipts, exclusive of the postal revenues, are $666,000,000, +while the total estimates, exclusive of those for the Panama Canal and the +postal expenditures payable from the postal revenues, amount to +$645,842,799.34. This is a decrease in the 1912 estimates from that of the +1911 estimates of $1,534,367-22. + +For the year ending June 30, 1913, the estimated receipts, exclusive of the +postal revenues, are $667,000,000, while the total estimated +appropriations, exclusive of the Panama Canal and postal disbursements +payable from postal revenues, will amount to $637,920,803.35. This is a +decrease in the 1913 estimates from that of the 1912 estimates of +$7,921,995.99. + +As to the postal revenues, the expansion of the business in that +department, the normal increase in the Post Office and the extension of the +service, will increase the outlay to the SUM Of $260,938,463 ; but as the +department was self-sustaining this year the Postmaster General is assured +that next year the receipts will at least equal the expenditures, and +probably exceed them by more than the surplus of this year. It is fair and +equitable, therefore, in determining the economy with which the Government +has been run, to exclude the transactions of a department like the Post +Office Department, which relies for its support upon its receipts. In +calculations heretofore made for comparison of economy in each year, it has +been the proper custom only to include in the statement the deficit in the +Post Office Department which was paid out of the Treasury. + +A calculation of the actual increase in the expenses of Government arising +from the increase in the population and the general expansion of +governmental functions, except those of the Post Office, for a number of +years shows a normal increase of about 4 per cent a year. By directing the +exercise of great care to keep down the expenses and the estimates we have +succeeded in reducing the total disbursements each year. + +THE CREDIT OF THE UNITED STATES. + +The credit of this Government was shown to be better than that of any other +Government by the sale of the Panama Canal 3 per cent bonds. These bonds +did not give their owners the privilege of using them as a basis for +bank-note circulation, nor was there any other privilege extended to them +which would affect their general market value. Their sale, therefore, +measured the credit of the Government. The premium which was realized upon +the bonds made the actual interest rate of the transaction 2.909 per cent. + +EFFICIENCY AND ECONOMY IN THE TREASURY DEPARTMENT. + +I In the Treasury Department the efficiency and economy work has been kept +steadily up. Provision is made for the elimination of 134 positions during +the coming year. Two hundred and sixty-seven statutory positions were +eliminated during the last year in the office of the Treasury in +Washington, and 141 positions in the year 1910, making an elimination Of +542 statutory positions since March 4, 1909; and this has been done without +the discharge of anybody, because the normal resignations and deaths have +been equal to the elimination of the places, a system of transfers having +taken care of the persons whose positions were dropped out. In the field +service if the department, too, 1,259 positions have been eliminated down +to the present time, making a total net reduction of all Treasury positions +to the number of 1,801. Meantime the efficiency of the work of the +departmeat has increased. + +MONETARY REFORM. + +A matter of first importance that will come before Congress for action at +this session is monetary reform. The Congress has itself arranged an early +introduction of this great question through the report of its Monetary +Commission. This commission was appointed to recommend a solution of the +banking and currency problems so long confronting the Nation and to furnish +the facts and data necessary to enable the Congress to take action. The +commission was appointed when an impressive and urgent popular demand for +legislative relief suddenly arose out of the distressing situation of the +people caused by the deplorable panic of 1907. The Congress decided that +while it could not give immediately the relief required, it would provide a +commission to furnish the means for prompt action at a later date. + +In order to do its work with thoroughness and precision this commission has +taken some time to make its report. The country is undoubtedly hoping for +as prompt action on the report as the convenience of the Congress can +permit. The recognition of the gross imperfections and marked inadequacy of +our banking and currency system even in our most quiet financial periods is +of long standing; and later there has matured a recognition of the fact +that our system is responsible for the extraordinary devastation, waste, +and business paralysis of our recurring periods of panic. Though the +members of the Monetary Commission have for a considerable time been +working in the open, and while large numbers of the people have been openly +working with them, and while the press has largely noted and discussed this +work as it has proceeded, so that the report of the commission promises to +represent a national movement, the details of the report are still being +considered. I can not, therefore, do much more at this time than commend +the immense importance of monetary reform, urge prompt consideration and +action when the commission's report is received, and express my +satisfaction that the plan to be proposed promises to embrace main features +that, having met the approval of a great preponderance of the practical and +professional opinion of the country, are likely to meet equal approval in +Congress. + +It is exceedingly fortunate that the wise and undisputed policy of +maintaining unchanged the main features of our banking system rendered it +at once impossible to introduce a central bank; for a central bank would +certainly have been resisted, and a plan into which it could have been +introduced would probably have been defeated. But as a central bank could +not be a part of the only plan discussed or considered, that troublesome +question is eliminated. And ingenious and novel as the proposed National +Reserve Association appears, it simply is a logical outgrowth of what is +best in our present system, and is, in fact, the fulfillment of that +system. + +Exactly how the management of that association should be organized is a +question still open. It seems to be desirable that the banks which would +own the association should in the main manage it, It will be an agency of +the banks to act for them, and they can be trusted better than anybody else +chiefly to conduct it. It is mainly bankers' work. But there must be some +form of Government supervision and ultimate control, and I favor a +reasonable representation of the Government in the management. I entertain +no fear of the introduction of politics or of any undesirable influences +from a properly measured Government representation. + +I trust that all banks of the country possessing the requisite standards +will be placed upon a footing of perfect equality of opportunity. Both the +National system and the State system should be fairly recognized, leaving +them eventually to coalesce if that shall prove to be their tendency. But +such evolution can not develop impartially if the banks of one system are +given or permitted any advantages of opportunity over those of the other +system. And I trust also that the new legislation will carefully and +completely protect and assure the individuality and the independence of +each bank, to the end that any tendency there may ever be toward a +consolidation of the money or banking power of the Nation shall be +defeated. + +It will always be possible, of course, to correct any features of the new +law which may in practice prove to be unwise; so that while this law is +sure to be enacted under conditions of unusual knowledge and authority, it +also will include, it is well to remember, the possibility of future +amendment. + +With the present prospects of this long-awaited reform encouraging us, it +would be singularly unfortunate if this monetary question should by any +chance become a party issue. And I sincerely hope it will not. The +exceeding amount of consideration it has received from the people of the +Nation has been wholly nonpartisan; and the Congress set its nonpartisan +seal upon it when the Monetary Commission was appointed. In commending the +question to the favorable consideration of Congress, I speak for, and in +the spirit of, the great number of my fellow citizens who without any +thought of party or partisanship feel with remarkable earnestness that this +reform is necessary to the interests of all the people. + +THE WAR DEPARTMENT. + +There is now before Congress a Dill, the purpose of which is to increase +the efficiency and decrease the expense of the Army. It contains four +principal features: First, a consolidation of the General Staff with the +Adjutant General's and the Inspector General's Departments; second, a +consolidation of the Quartermaster's Department with the Subsistence and +the Pay Departments; third, the creation of an Army Service Corps; and +fourth, an extension of the enlistment period from three to five years. + +With the establishment of an Army Service Corps, as proposed in the bill, I +am thoroughly in accord and am convinced that the establishment of such a +corps will result in a material economy and a very great increase of +efficiency in the Army. It has repeatedly been recommended by me and my +predecessors. I also believe that a consolidation of the Staff Corps can be +made with a resulting increase in efficiency and economy, but not along the +lines provided in the bill under consideration. + +I am opposed to any plan the result of which would be to break up or +interfere with the essential principles of the detail system in the Staff +Corps established by the act of February 2, 1901, and I am opposed to any +plan the result of which would be to give to the officer selected as Chief +of Staff or to any other member of the General Staff Corps greater +permanency of office than he now has. Under the existing law neither the +Chief. of Staff nor any other member of the General Staff Corps can remain +in office for a period of more than four years, and there must be an +interval of two years between successive tours of duty. + +The bill referred to provides that certain persons shall become permanent +members of the General Staff Corps, and that certain others are subject to +redetail without an interval of two years. Such provision is fraught with +danger to the welfare of the Army, and + +would practically nullify the main purpose of the law creating the + +In making the consolidations no reduction should be made in the total +number of officers of the Army, of whom there are now too few to perform +the duties imposed by law. I have in the past recommended an increase in +the number of officers by 6oo in order to provide sufficient officers to +perform all classes of staff duty and tc reduce the number of line officers +detached from their commands. Congress at the last session increased the +total number of officers by 2oo, but this is not enough. Promotion in the +line of the Army is too slow. Officers do not attain command rank at an age +early enough properly to exercise it. It would be a mistake further to +retard this already slow promotion by throwing back into the line of the +Arm a number of high-ranking officers to be absorbed as is rovided in the + +Another feature of the bill which I believe to be a mistake is the proposed +increase in the term of enlistment from three to five ears I believe it +would be better to enlist men for six years, release them at the end of +three years from active service, and put them in reserve for the remaining +three years. Reenlistments should be largely confined to the +noncommissioned officers and other enlisted men in the skilled grades. This +plan by the payment of a comparatively small compensation during the three +years of reserve, would keep a large bodv of men at the call of the +Government, trained and ready for + +The Army of the United States is in good condition. It showed itself able +to meet an emergency in the successful mobilization of an army division of +from i5,ooo to :2o,ooo men, which took place along the border of Mexico +during the recent disturbances in that country. The marvelous freedom from +the ordinary camp diseases of typhoid fever and measles is referred to in +the report of the Secretary of War and shows such an effectiveness in the +sanitary regulations and treatment of the Medical Corps, and in the +discipline of the Army itself, as to invoke the highest commendation. + +MEMORIAL AMPHITHEATER AT ARLINGTON. + +I beg to renew my recommendation of last year that the Congress appropriate +for a memorial amphitheater at Arlington, Va., the funds required to +construct it upon the plans already approved. + +THE PANAMA CANAL. + +The very satisfactory progress made on the Panama Canal last year has +continued, and there is every reason to believe that the canal + +will be completed as early as the 1st of July, 1913, unless something +unforeseen occurs. This is about 18 months before the time promised by the +engineers. + +We are now near enough the completion of the canal to make it imperatively +necessary that legislation should be enacted to fix the method by which the +canal shall be maintained and controlled and the zone governed. The fact is +that to-day there is no statutory law by authority of which the President +is maintaining the government of the zone. Such authority was given in an +amendment to the Spooner Act, which expired by the terms of its own +limitation some years ago. Since that time the government has continued, +under the advice of the Attorney General that in the absence of action by +Congress, there is necessarily an implied authority on the part of the +Executive to maintain a government in a territory in which he has to see +that the laws are executed. The fact that we have been able thus to get +along during the important days of construction without legislation +expressly formulating the government of the zone, or delegating the +creation of it to the President, is not a reason for supposing that we may +continue the same kind of a government after the construction is finished. +The implied authority of the President to maintain a civil government in +the zone may be derived from the mandatory direction given him in the +original Spooner Act, by which he was commanded to build the canal; but +certainly, now that the canal is about to be completed and to be put under +a permanent management, there ought to be specific statutory authority for +its regulation and control and for the government of the zone, which we +hold for the chief and main purpose of operating the canal. + +I fully concur with the Secretary of War that the problem is simply the +management of a great public work, and not the government of a local +republic; that every provision must be directed toward the successful +maintenance of the canal as an avenue of commerce, and that all provisions +for the government of those who live within the zone should be subordinate +to the main purpose. + +The zone is 40 miles long and 10 miles wide. Now, it has a population Of +50,000 or 60,000, but as soon as the work of construction is completed, the +towns which make up this population will be deserted, and only +comparatively few natives will continue their residence there. The control +of them ought to approximate a military government. One judge and two +justices of the peace will be sufficient to attend to all the judicial and +litigated business there is. With a few fundamental laws of Congress, the +zone should be governed by the orders of the President, issued through the +War Department, as it is today. Provisions can be made for the guaranties +of life, liberty, and property, but beyond those, the government should be +that of a military reservation, managed in connection with this great +highway of trade. + +FURNISHING SUPPLIES AND REPAIRS. + +In my last annual message I discussed at length the reasons for the +Government's assuming the task of furnishing to all ships that use the +canal, whether our own naval vessels or others, the supplies of coal and +oil and other necessities with which they must be replenished either before +or after passing through the canal, together with the dock facilities and +repairs of every character. This it is thought wise to do through the +Government, because the Government must establish for itself, for its own +naval vessels, large depots and dry docks and warehouses, and these may +easily be enlarged so as to secure to the world public using the canal +reasonable prices and a certainty that there will be no discrimination +between those who wish to avail themselves of such facilities. TOLLS. + +I renew my recommendation with respect to the tolls of the canal that +within limits, which shall seem wise to Congress, the power of fixing tolls +be given to the President. In order to arrive at a proper conclusion, there +must be some experimenting, and this can not be done if Congress does not +delegate the power to one who can act expeditiously. + +POWER EXISTS TO RELIEVE AMERICAN SHIPPING. + +I am very confident that the United States has the power to relieve from +the payment of tolls any part of our shipping that Congress deems wise. We +own the canal. It was our money that built it. We have the right to charge +tolls for its use. Those tolls must be the same to everyone; but when we +are dealing with our own ships, the practice of many Governments of +subsidizing their own merchant vessels is so well established in general +that a subsidy equal to the tolls, an equivalent remission of tolls, can +not be held to be a discrimination in the use of the canal. The practice in +the Suez Canal makes this clear. The experiment in tolls to be made by the +President would doubtless disclose how great a burden of tolls the +coastwise trade between the Atlantic and the Pacific coast could bear +without preventing its usefulness in competition with the transcontinental +railroads. One of the chief reasons for building the canal was to set up +this competition and to bring the two shores closer together as a practical +trade problem. It may be that the tolls will have to be wholly remitted. I +do not think this is the best principle, because I believe that the cost of +such a Government work as the Panama Canal ought to be imposed gradually +but certainly upon the trade which it creates and makes possible. So far as +we can, consistent with the development of the world's trade through the +canal, and the benefit which it was intended to secure to the east and west +coastwise trade, we ought to labor to secure from the canal tolls a +sufficient amount ultimately to meet the debt which we have assumed and to +pay the interest. + +THE PHILIPPINE ISLANDS. + +In respect to the Philippines, I urgently join in the recommendation of the +Secretary of War that the act of February 6, 1905, limiting the +indebtedness that may be incurred by the Philippine Government for the +construction of public works, be increased from $5,000,000 to $15,ooo,ooo. +The finances of that Government are in excellent condition. The maximum sum +mentioned is quite low as compared with the amount of indebtedness of other +governments with similar resources, and the success which has attended the +expenditure of the $5,000,000 in the useful improvements of the harbors and +other places in the Islands justifies and requires additional expenditures +for like purposes. NATURALIZATION. + +I also join in the recommendation that the legislature of the Philippine +Islands be authorized to provide for the naturalization of Filipinos and +others who by the present law are treated as aliens, so as to enable them +to become citizens of the Philippine Islands. + +FRIARS' LANDS. + +Pending an investigation by Congress at its last session, through one of +its committees, into the disposition of the friars' lands, Secretary +Dickinson directed that the friars' lands should not be sold in excess of +the limits fixed for the public lands until Congress should pass upon the +subject or should have concluded its investigation. This order has been an +obstruction to the disposition of the lands, and I expect to direct the +Secretary of War to return to the practice under the opinion of the +Attorney General which will enable us to dispose of the lands much more +promptly, and to prepare a sinking fund with which to meet the $7,000,000 +of bonds issued for the purchase of the lands. I have no doubt whatever +that the Attorney General's construction was a proper one, and that it is +in the interest of everyone that the land shall be promptly disposed of. +The danger of creating a monopoly of ownership in lands under the statutes +as construed is nothing. There are only two tracts of 60,000 acres each +unimproved and in remote Provinces that are likely to be disposed of in +bulk, and the rest of the lands are subject to the limitation that they +shall be first offered to the present tenants and lessors who hold them in +small tracts. + +RIVERS AND HARBORS. + +The estimates for the river and harbor improvements reach $32,000,000 for +the coming year. I wish to urge that whenever a project has been adopted by +Congress as one to be completed, the more money which can be economically +expended in its construction in each year, the greater the ultimate +economy. This has especial application to the improvement of the +Mississippi River and its large branches. It seems to me that an increase +in the amount- of money now being annually expended in the improvement of +the Ohio River which has been formally adopted by Congress would be in the +interest of the public. A similar change ought to be made during the +present Congress, in the amount to be appropriated for the Missouri River. +The engineers say that the cost of the improvement of the Missouri River +from Kansas City to St. Louis, in order to secure 6 feet as a permanent +channel, will reach $20,000,000. There have been at least three +recommendations from the Chief of Engineers that if the improvement be +adopted, $2,000,000 should be expended upon it annually. This particular +improvement is especially entitled to the attention of Congress, because a +company has been organized in Kansas City, with a capital of $1,000,000, +which has built steamers and barges, and is actually using the river for +transportation in order to show what can be done in the way of affecting +rates between Kansas City and St. Louis, and in order to manifest their +good faith and confidence in respect of the improvement. I urgently +recommend that the appropriation for this improvement be increased from +$600,000, as recommended now in the completion of a contract, to $2,000,000 +annually, so that the work may be done in 10 years. + +WATERWAY FROM THE LAKES TO THE GULF. + +The project for a navigable waterway from Lake Michigan to the mouth of the +Illinois River, and thence via the Mississippi to the Gulf of Mexico, is +one of national importance. In view of the work already accomplished by the +Sanitary District of Chicago, an agency of the State of Illinois, which has +constructed the most difficult and costly stretch of this waterway and made +it an asset of the Nation, and in view of the fact that the people of +Illinois have authorized the expenditure Of $20,000,000 to carry this +waterway 62 miles farther to Utica, I feel that it is fitting that this +work should be supplemented by the Government, and that the expenditures +recommended by the special board of engineers on the waterway from Utica to +the mouth of the Illinois River be made upon lines which while providing a +waterway for the Nation should otherwise benefit that State to the fullest +extent. I recommend that the term of service of said special board of +engineers be continued, and that it be empowered to reopen the question of +the treatment of the lower Illinois River, and to negotiate with a properly +constituted commission representing the State of Illinois, and to agree +upon a plan for the improvement of the lower Illinois River and upon the +extent to which the United States may properly cooperate with the State of +Illinois in securing the construction of a navigable waterway from Lockport +to the mouth of the Illinois River in conjunction with the development of +water power by that State between Lockport and Utica. + +THE DEPARTMENT OF JUSTICE. + +Removal of clerks of Federal courts. + +The report of the Attorney General shows that he has subjected to close +examination the accounts of the clerks of the Federal courts; that he has +found a good many which disclose irregularities or dishonesty; but that he +has had considerable difficulty in securing an effective prosecution or +removal of the clerks thus derelict. I am certainly not unduly prejudiced +against the Federal courts, but the fact is that the long and confidential +relations which grow out of the tenure for life on the part of the judge +and the practical tenure for life on the part of the clerk are not +calculated to secure the strictness of dealing by the judge with the clerk +in respect to his fees and accounts which assures in the clerk's conduct a +freedom from overcharges and carelessness. The relationship between the +judge and the clerk makes it ungracious for members of the bar to complain +of the clerk or for department examiners to make charges against him to be +heard by the court, and an order of removal of a clerk and a judgment for +the recovery of fees are in some cases reluctantly entered by the judge. +For this reason I recommend an amendment to the law whereby the President +shall be given power to remove the clerks for cause. This provision need +not interfere with the right of the judge to appoint his clerk or to remove +him. + +French spoliation awards. + +In my last message, I recommended to Congress that it authorize the payment +of the findings or judgments of the Court of Claims in the matter of the +French spoliation cases. There has been no appropriation to pay these +judgments since 1905. The findings and awards were obtained after a very +bitter fight, the Government succeeding in about 75 per cent of the cases. +The amount of the awards ought, as a matter of good faith on the part of +the Government, to be paid. + +EMPLOYERS' LIABILITY AND WORKMEN'S COMPENSATION COMMISSION. + +The limitation of the liability of the master to his servant for personal +injuries to such as are occasioned by his fault has been abandoned in most +civilized countries and provision made whereby the employee injured in the +course of his employment is compensated for his loss of working ability +irrespective of negligence. The principle upon which such provision +proceeds is that accidental injuries to workmen in modern industry, with +its vast complexity and inherent dangers arising from complicated machinery +and the use of the great forces of steam and electricity, should be +regarded as risks of the industry and the loss borne in some equitable +proportion by those who for their own profit engage therein. In recognition +of this the last Congress authorized the appointment of a commission to +investigate the subject of employers' liability and workmen's compensation +and to report the result of their investigations, through the President, to +Congress. This commission was appointed and has been at work, holding +hearings, gathering data, and considering the subject, and it is expected +will be able to report by the first of the year, in accordance with the +provisions of the law. It is hoped and expected that the commission will +suggest legislation which will enable us to put in the place of the present +wasteful and sometimes unjust system of employers' liability a plan of +compensation which will afford some certain and definite relief to all +employees who are injured in the course of their employment in those +industries which are subject to the regulating power of Congress. + +MEASURES TO PREVENT DELAY AND UNNECESSARY COST OF LITIGATION. + +In promotion of the movement for the prevention of delay and unnecessary +cost, in litigation, I am glad to say that the Supreme Court has taken +steps to reform the present equity rules of the Federal courts, and that we +may in the near future expect a revision of them which will be a long step +in the right direction. + +The American Bar Association has recommended to Congress several bills +expediting procedure, one of which has already passed the House +unanimously, February 6, 1911. This directs that no judgment should be set +aside or reversed, or new trial granted, unless it appears to the court, +after an examination of the entire cause, that the error complained of has +injuriously affected the substantial rights of the parties, and also +provides for the submission of issues of fact to a jury, reserving +questions of law for subsequent argument and decision. I hope this bill +will pass the Senate and become law, for it will simplify the procedure at +law. + +Another bill 11 to amend chapter I I of the judicial Code, in order to +avoid errors in pleading, was presented by the same association, and one. +enlarging the jurisdiction of the Supreme Court so as to permit that court +to examine, upon a writ of error, all cases in which any right or title is +claimed under the Constitution, or any statute or treaty of the United +States, whether the decision in the court below has been against the right +or title or in its favor. Both these measures are in the interest of +justice and should be passed. + +POST OFFICE. + +At the beginning of the present administration in 1909 the postal service +was in arrears to the extent Of $17,479,770.47. It was very much the +largest deficit on record. In the brief space of two years this has been +turned into a surplus Of $220,000, which has been accomplished without +curtailment of the postal facilities, as may be seen by the fact that there +have been established 3,744 new post offices; delivery by carrier has been +added to the service in 186 cities; 2,516 new rural routes have been +established, covering 60,000 miles; the force of postal employees has been +increased in these two years by more than 8,000, and their average annual +salary has had a substantial increase. + +POSTAL-SAVINGS SYSTEM. + +On January 3, 1911, postal-savings depositories were established +experimentally in 48 States and Territories. After three months' successful +operation the system was extended as rapidly as feasible to the 7,500 Post +offices of the first, second, and third classes constituting the +presidential grade. By the end of the year practically all of these will +have been designated and then the system will be extended to all +fourth-class post offices doing a money-order business. + +In selecting post offices for depositories consideration was given to the +efficiency of the postmasters and only those offices where the ratings were +satisfactory to the department have been designated. Withholding +designation from postmasters with unsatisfactory ratings has had a salutary +effect on the service. + +The deposits have kept pace with the extension of the system. Amounting to +only $60,652 at the end of the first month's operation in the experimental +offices, they increased to $679,310 by July, and now after 11 months of +operation have reached a total of $ 11,000,000. This sum is distributed +among 2,71o banks and protected tinder the law by bonds deposited with the +Treasurer of the United States. + +Under the method adopted for the conduct of the system certificates are +issued as evidence of deposits, and accounts with depositors are kept by +the post offices instead of by the department. Compared with the practice +in other countries of entering deposits in pass books and keeping at the +central office a ledger account with each depositor, the use of the +certificate has resulted in great economy of administration. + +The depositors thus far number approximately 150,000. They include 40 +nationalities, native Americans largely predominating and English and +Italians coming next. + +The first conversion of deposits into United States bonds bearing interest +at the rate of 2.5 per cent occurred on July 1, 1911, the amount of +deposits exchanged being $41,900, or a little more than 6 per cent of the +total outstanding certificates of deposit on June 30. Of this issue, bonds +to the value of $6,120 were in coupon form and $35,780 in registered form. + +PARCEL POST. + +Steps should be taken immediately for the establishment of a rural parcel +post. In the estimates of appropriations needed for the maintenance of the +postal service for the ensuing fiscal year an item of $150,000 has been +inserted to cover the preliminary expense of establishing a parcel post on +rural mail routes, as well as to cover an investigation having for its +object the final establishment of a general parcel post on all railway and +steamboat transportation routes. The department believes that after the +initial expenses of establishing the system are defrayed and the parcel +post is in full operation on the rural routes it will not only bring in +sufficient revenue to meet its cost, but also a surplus that can be +utilized in paying the expenses of a parcel post in the City Delivery +Service. + +It is hoped that Congress will authorize the immediate establishment of a +limited parcel post on such rural routes as may be selected, providing for +the delivery along the routes of parcels not exceeding eleven pounds, which +is the weight limit for the international parcel post, or at the post +office from which such route emanates, or on another route emanating from +the same office. Such preliminary service will prepare the way for the more +thorough and comprehensive inquiry contemplated in asking for the +appropriation mentioned, enable the department to gain definite information +concerning the practical operation of a general system, and at the same +time extend the benefit of the service to a class of people who, above all +others, are specially in need of it. + +The suggestion that we have a general parcel post has awakened great +opposition on the part of some who think that it will have the effect to +destroy the business of the country storekeeper. Instead of doing this, I +think the change will greatly increase business for the benefit of all. The +reduction in the cost of living it will bring about ought to make its +coming certain. + +THE NAVY DEPARTMENT. + +On the 2d of November last, I reviewed the fighting fleet of battleships +and other vessels assembled in New York Harbor, consisting of 24 +battleships, 2 armored cruisers, 2 cruisers, 22 destroyers, 12 torpedo +boats, 8 submarines, and other attendant vessels, making 98 vessels of all +classes, of a tonnage Of 576,634 tons. Those who saw the fleet were struck +with its preparedness and with its high military efficiency. All Americans +should be proud of its personnel. + +The fleet was deficient in the number of torpedo destroyers, in cruisers, +and in colliers, as well as in large battleship cruisers, which are now +becoming a very important feature of foreign navies, notably the British, +German, and Japanese. + +The building plan for this year contemplates two battleships and two +colliers. This is because the other and smaller vessels can be built much +more rapidly in case of emergency than the battleships, and we certainly +ought to continue the policy of two battleships a year until after the +Panama Canal is finished and until in our first line and in our reserve +line we can number 40 available vessels of proper armament and size. + +The reorganization of the Navy and the appointment of four aids to the +Secretary have continued to demonstrate their usefulness. It would be +difficult now to administer the affairs of the Navy without the expert +counsel and advice of these aids, and I renew the recommendation which I +made last year, that the aids be recognized by statute. + +It is certain that the Navy, with its present size, should have admirals in +active command higher than rear admirals. The recognized grades in order +are: Admiral of the fleet, admiral, vice admiral, and rear admiral. Our +great battleship fleet is commanded by a rear admiral, with four other rear +admirals under his orders. This is not as it should be, and when questions +of precedence arise between our naval officers and those of European +navies, the American rear admiral, though in command of ten times the force +of a foreign vice admiral, must yield precedence to the latter. Such an +absurdity ought not to prevail, and it can be avoided by the creation of +two or three positions of flag rank above that of rear admiral. + +I attended the opening of the new training school at North Chicago, Ill., +and am glad to note the opportunity which this gives for drawing upon young +men of the country from the interior, from farms, stores, shops, and +offices, which insures a high average of intelligence and character among +them, and which they showed in the very wonderful improvement in discipline +and drill which only a few short weeks' presence at the naval station had +made. + +I invite your attention to the consideration of the new system of detention +and of punishment for Army and Navy enlisted men which has obtained in +Great Britain, and which has made greatly for the better control of the. +men. We should adopt a similar system here. + +Like the Treasury Department and the War Department, the Navy Department +has given much attention to economy in administration, and has cut down a +number of unnecessary expenses and reduced its estimates except for +construction and the increase that that involves. + +I urge upon Congress the necessity for an immediate increase of 2,000 men +in the enlisted strength of the Navy, provided for in the estimates. Four +thousand more are now needed to man all the available vessels. + +There are in the service to-day about 47,750 enlisted men of all ratings. + +Careful computation shows that in April, 1912, 49,166 men will be required +for vessels in commission, and 3,000 apprentice seamen should be kept under +training at all times. + +ABOLITION OF NAVY YARDS. + +The Secretary of the Navy has recommended the abolition of certain of the +smaller and unnecessary navy yards, and in order to furnish a complete and +comprehensive report has referred the question of all navy yards to the +joint board of the Army and Navy. This board will shortly make its report +and the Secretary of the Navy advises me that his recommendations on the +subject will be presented early in the coming year. The measure of economy +contained in a proper handling of this subject is so great and so important +to the interests of the Nation that I shall present it to Congress as a +separate subject apart from my annual message. Concentration of the +necessary work for naval vessels in a few navy yards on each coast is a +vital necessity if proper economy in Government expenditures is to be +attained. + +AMALGAMATION OF STAFF CORPS IN THE NAVY. + +The Secretary of the Navy is striving to unify the various corps of the +Navy to the extent possible and thereby stimulate a Navy spirit as +distinguished from a corps spirit. In this he has my warm support. + +All officers are to be naval officers first and specialists afterwards. +This means that officers will take up at least one specialty, such as +ordnance, construction, or engineering. This is practically what is done +now, only some of the specialists, like the pay officers and naval +constructors, are not of the line. It is proposed to make them all of the +line. + +All combatant corps should obviously be of the line. This necessitates +amalgamating the pay officers and also those engaged in the technical work +of producing the finished ship. This is at present the case with the single +exception of the naval constructors, whom it is now proposed to amalgamate +with the line. + +COUNCIL OF NATIONAL DEFENSE. + +I urge again upon Congress the desirability of establishing the council of +national defense. The bill to establish this council was before Congress +last winter, and it is hoped that this legislation will pass during the +present session. The purpose of the council is to determine the general +policy of national defense and to recommend to Congress and to the +President such measures relating to it as it shall deem necessary and +expedient. + +No such machinery is now provided by which the readiness of the Army and +Navy may be improved and the programs of military and naval requirements +shall be coordinated and properly scrutinized with a view of the +necessities of the whole Nation rather than of separate departments. + +DEPARTMENTS OF AGRICULTURE AND COMMERCE AND LABOR. + +For the consideration of matters which are pending or have been disposed of +in the Agricultural Department and in the Department of Commerce and Labor, +I refer to the very excellent reports of the Secretaries of those +departments. I shall not be able to submit to Congress until after the +Christmas holidays the question of conservation of our resources arising in +Alaska and the West and the question of the rate for second-class mail +matter in the Post Office Department. + +COMMISSION ON EFFICIENCY AND ECONOMY. + +The law does not require the submission of the reports of the Commission on +Economy and Efficiency until the 31st of December. I shall therefore not be +able to submit a report of the work of that commission until the assembling +of Congress after the holidays. + +CIVIL RETIREMENT AND CONTRIBUTORY PENSION SYSTEM. + +I have already advocated, in my last annual message, the adoption of a +civil-service retirement system, with a contributory feature to it so as to +reduce to a minimum the cost to the Government of the pensions to be paid. +After considerable reflection, I am very much opposed to a pension system +that involves no contribution from the employees. I think the experience of +other governments justifies this view; but the crying necessity for some +such contributory system, with possibly a preliminary governmental outlay, +in order to cover the initial cost and to set the system going at once +while the contributions are accumulating, is manifest on every side. +Nothing will so much promote the economy and efficiency of the Government +as such a system. + +ELIMINATION OF ALL LOCAL OFFICES FROM POLITICS. + +I wish to renew again my recommendation that all the local offices +throughout the country, including collectors of internal revenue, +collectors of customs, postmasters of all four classes, immigration +commissioners and marshals, should be by law covered into the classified +service, the necessity for confirmation by the Senate be removed, and the +President and the others, whose time is now taken up in distributing this +patronage under the custom that has prevailed since the beginning of the +Government in accordance with the recommendation of the Senators and +Congressmen of the majority party, should be relieved from this burden. I +am confident that such a change would greatly reduce the cost of +administering the Government, and that it would add greatly to its +efficiency. It would take away the power to use the patronage of the +Government for political purposes. When officers are recommended by +Senators and Congressmen from political motives and for political services +rendered, it is impossible to expect that while in office the appointees +will not regard their tenure as more or less dependent upon continued +political service for their patrons, and no regulations, however stiff or +rigid, will prevent this, because such regulations, in view of the method +and motive for selection, are plainly inconsistent and deemed hardly worthy +of respect. + +*** + +State of the Union Address +William H. Taft +December 3, 1912 + +Jump to Part II | Part III + +To the Senate and House of Representatives: + +The foreign relations of the United States actually and potentially affect +the state of the Union to a degree not widely realized and hardly surpassed +by any other factor in the welfare of the whole Nation. The position of the +United States in the moral,intellectual, and material relations of the +family of nations should be a matter of vital interest to every patriotic +citizen. The national prosperity and power impose upon us duties which we +can not shirk if we are to be true to our ideals. The tremendous growth of +the export trade of the United States has already made that trade a very +real factor in the industrial and commercial prosperity of the country. +With the development of our industries the foreign commerce of the United +States must rapidly become a still more essential factor in its economic +welfare. Whether we have a farseeing and wise diplomacy and are not +recklessly plunged into unnecessary wars, and whether our foreign policies +are based upon an intelligent grasp of present-day world conditions and a +clear view of the potentialities of the future, or are governed by a +temporary and timid expediency or by narrow views befitting an infant +nation, are questions in the alternative consideration of which must +convince any thoughtful citizen that no department of national polity +offers greater opportunity for promoting the interests of the whole people +on the one hand, or greater chance on the other of permanent national +injury, than that which deals with the foreign relations of the United +States. + +The fundamental foreign policies of the United States should be raised high +above the conflict of partisanship and wholly dissociated from differences +as to domestic policy. In its foreign affairs the United States should +present to the world a united front. The intellectual, financial, and +industrial interests of the country and the publicist, the wage earner, the +farmer, and citizen of whatever occupation must cooperate in a spirit of +high patriotism to promote that national solidarity which is indispensable +to national efficiency and to the attainment of national ideals. + +The relations of the United States with all foreign powers remain upon a +sound basis of peace, harmony, and friendship. A greater insistence upon +justice to American citizens or interests wherever it may have been denied +and a stronger emphasis of the need of mutuality in commercial and other +relations have only served to strengthen our friendships with foreign +countries by placing those friendships upon a firm foundation of realities +as well as aspirations. + +Before briefly reviewing the more important events of the last year in our +foreign relations, which it is my duty to do as charged with their conduct +and because diplomatic affairs are not of a nature to make it appropriate +that the Secretary of State make a formal annual report, I desire to touch +upon some of the essentials to the safe management of the foreign relations +of the United States and to endeavor, also, to define clearly certain +concrete policies which are the logical modern corollaries of the +undisputed and traditional fundamentals of the foreign policy of the United +States. + +REORGANIZATION OF THE STATE DEPARTMENT + +At the beginning of the present administration the United States, having +fully entered upon its position as a world power, with the responsibilities +thrust upon it by the results of the Spanish-American War, and already +engaged in laying the groundwork of a vast foreign trade upon which it +should one day become more and more dependent, found itself without the +machinery for giving thorough attention to, and taking effective action +upon, a mass of intricate business vital to American interests in every +country in the world. + +The Department of State was an archaic and inadequate machine lacking most +of the attributes of the foreign office of any great modern power. With an +appropriation made upon my recommendation by the Congress on August 5, +1909, the Department of State was completely reorganized. There were +created Divisions of LatinAmerican Affairs and of Far Eastern, Near +Eastern, and Western European Affairs. To these divisions were called from +the foreign service diplomatic and consular officers possessing experience +and knowledge gained by actual service in different parts of the world and +thus familiar with political and commercial conditions in the regions +concerned. The work was highly specialized. The result is that where +previously this Government from time to time would emphasize in its foreign +relations one or another policy, now American interests in every quarter of +the globe are being cultivated with equal assiduity. This principle of +politico-geographical division possesses also the good feature of making +possible rotation between the officers of the departmental, the diplomatic, +and the consular branches of the foreign service, and thus keeps the whole +diplomatic and consular establishments tinder the Department of State in +close touch and equally inspired with the aims and policy of the +Government. Through the newly created Division of Information the foreign +service is kept fully informed of what transpires from day to day in the +international relations of the country, and contemporary foreign comment +affecting American interests is promptly brought to the attention of the +department. The law offices of the department were greatly strengthened. +There were added foreigntrade advisers to cooperate with the diplomatic and +consular bureaus and the politico-geographical divisions in the innumerable +matters where commercial diplomacy or consular work calls for such special +knowledge. The same officers, together with the rest of the new +organization, are able at all times to give to American citizens accurate +information as to conditions in foreign countries with which they have +business and likewise to cooperate more effectively with the Congress and +also with the other executive departments. + +MERIT SYSTEM IN CONSULAR AND DIPLOMATIC CORPS + +Expert knowledge and professional training must evidently be the essence of +this reorganization. Without a trained foreign service there would not be +men available for the work in the reorganized Department of State. +President Cleveland had taken the first step toward introducing the merit +system in the foreign service. That had been followed by the application of +the merit principle, with excellent results, to the entire consular branch. +Almost nothing, however, had been done in this direction with regard to the +Diplomatic Service. In this age of commercial diplomacy it was evidently of +the first importance to train an adequate personnel in that branch of the +service. Therefore, on November 26, 1909, by an Executive order I placed +the Diplomatic Service up to the grade of secretary of embassy, inclusive, +upon exactly the same strict nonpartisan basis of the merit system, rigid +examination for appointment and promotion only for efficiency, as had been +maintained without exception in the Consular Service. + +STATISTICS AS TO MERIT AND NONPARTISAN CHARACTER OF APPOINTMENTS + +How faithful to the merit system and how nonpartisan has been the conduct +of the Diplomatic and Consular Services in the last four years may be +judged from the following: Three ambassadors now serving held their present +rank at the beginning of my administration. Of the ten ambassadors whom I +have appointed, five were by promotion from the rank of minister. Nine +ministers now serving held their present rank at the beginning of my +administration. Of the thirty ministers whom I have appointed, eleven were +promoted from the lower grades of the foreign service or from the +Department of State. Of the nineteen missions in Latin America, where our +relations are close and our interest is great, fifteen chiefs of mission +are service men, three having entered the service during this +administration. Thirty-seven secretaries of embassy or legation who have +received their initial appointments after passing successfully the required +examination were chosen for ascertained fitness, without regard to +political affiliations. A dearth of candidates from Southern and Western +States has alone made it impossible thus far completely to equalize all the +States' representations in the foreign service. In the effort to equalize +the representation of the various States in the Consular Service 1 have +made sixteen of the twenty-nine new appointments as consul which have +occurred during my administration from the Southern States. This is 55 per +cent. Every other consular appointment made, including the promotion of +eleven young men from the consular assistant and student interpreter corps, +has been by promotion or transfer, based solely upon efficiency shown in +the service. + +In order to assure to the business and other interests of the United States +a continuance of the resulting benefits of this reform, I earnestly renew +my previous recommendations of legislation making it permanent along some +such lines as those of the measure now Pending in Congress. + +LARGER PROVISION FOR EMBASSIES AND LEGATIONS AND FOR OTHER EXPENSES OF OUR +FOREIGN REPRESENTATIVES RECOMMENDED + +In connection with legislation for the amelioration of the foreign service, +I wish to invite attention to the advisability of placing the salary +appropriations upon a better basis. I believe that the best results would +be obtained by a moderate scale of salaries, with adequate funds for the +expense of proper representation, based in each case upon the scale and +cost of living at each post, controlled by a system of accounting, and +under the general direction of the Department of State. + +In line with the object which I have sought of placing our foreign service +on a basis of permanency, I have at various times advocated provision by +Congress for the acquisition of Government-owned buildings for the +residence and offices of our diplomatic officers, so as to place them more +nearly on an equality with similar officers of other nations and to do away +with the discrimination which otherwise must necessarily be made, in some +cases, in favor of men having large private fortunes. The act of Congress +which I approved on February 17, 1911, was a right step in this direction. +The Secretary of State has already made the limited recommendations +permitted by the act for any one year, and it is my hope that the bill +introduced in the House of Representatives to carry out these +recommendations will be favorably acted on by the Congress during its +present session. + +In some Latin-American countries the expense of governmentowned legations +will be less than elsewhere, and it is certainly very urgent that in such +countries as some of the Republics of Central America and the Caribbean, +where it is peculiarly difficult to rent suitable quarters, the +representatives of the United States should be justly and adequately +provided with dignified and suitable official residences. Indeed, it is +high time that the dignity and power of this great Nation should be +fittingly signalized by proper buildings for the occupancy of the Nation's +representatives everywhere abroad. + +DIPLOMACY A HAND MAID OF COMMERCIAL INTERCOURSE AND PEACE + +The diplomacy of the present administration has sought to respond to modern +ideas of commercial intercourse. This policy has been characterized as +substituting dollars for bullets. It is one that appeals alike to +idealistic humanitarian sentiments, to the dictates of sound policy and +strategy, and to legitimate commercial aims. It I is an effort frankly +directed to the increase of American trade upon the axiomatic principle +that the Government of the United States shall extend all proper support to +every legitimate and beneficial American enterprise abroad. How great have +been the results of this diplomacy, coupled with the maximum and minimum +provision of the tariff law, will be seen by some consideration of the +wonder ful increase in the export trade of the United States. Because +modern diplomacy is commercial, there has been a disposition in some +quarters to attribute to it none but materialistic aims. How strikingly +erroneous is such an impression may be seen from a study of the results by +which the diplomacy of the United States can be judged. + +SUCCESSFUL EFFORTS IN PROMOTION OF PEACE + +In the field of work toward the ideals of peace this Government negotiated, +but to my regret was unable to consummate, two arbitration treaties which +set the highest mark of the aspiration of nations toward the substitution +of arbitration and reason for war in the settlement of international +disputes. Through the efforts of American diplomacy several wars have been +prevented or ended. I refer to the successful tripartite mediation of the +Argentine Republic, Brazil, and the United States between Peru and Ecuador; +the bringing of the boundary dispute between Panama and Costa Rica to +peaceful arbitration; the staying of warlike preparations when Haiti and +the Dominican Republic were on the verge of hostilities; the stopping of a +war in Nicaragua; the halting of internecine strife in Honduras. The +Government of the United States was thanked for its influence toward the +restoration of amicable relations between the Argentine Republic and +Bolivia. The diplomacy of the United States is active in seeking to assuage +the remaining ill-feeling between this country and the Republic of +Colombia. In the recent civil war in China the United States successfully +joined with the other interested powers in urging an early cessation of +hostilities. An agreement has been reached between the Governments of Chile +and Peru whereby the celebrated TacnaArica dispute, which has so long +embittered international relations on the west coast of South America, has +at last been adjusted. Simultaneously came the news that the boundary +dispute between Peru and Ecuador had entered upon a stage of amicable +settlement. The position of the United States in reference to the +Tacna-Arica dispute between Chile and Peru has been one of nonintervention, +but one of friendly influence and pacific counsel throughout the period +during which the dispute in question has been the subject of interchange of +views between this Government and the two Governments immediately +concerned. In the general easing of international tension on the west coast +of South America the tripartite mediation, to which I have referred, has +been a most potent and beneficent factor. CHINA + +In China the policy of encouraging financial investment to enable that +country to help itself has had the result of giving new life and practical +application to the open-door policy. The consistent purpose of the present +administration has been to encourage the use of American capital in the +development of China by the promotion of those essential reforms to which +China is pledged by treaties with the United States and other powers. The +hypothecation to foreign bankers in connection with certain industrial +enterprises, such as the Hukuang railways, of the national revenues upon +which these reforms depended, led the Department of State early in the +administration to demand for American citizens participation in such +enterprises, in order that the United States might have equal rights and an +equal voice in all questions pertaining to the disposition of the public +revenues concerned. The same policy of promoting international accord among +the powers having similar treaty rights as ourselves in the matters of +reform, which could not be put into practical effect without the common +consent of all, was likewise adopted in the case of the loan desired by +China for the reform of its currency. The principle of international +cooperation in matters of common interest upon which our policy had already +been based in all of the above instances has admittedly been a great factor +in that concert of the powers which has been so happily conspicuous during +the perilous period of transition through which the great Chinese nation +has been passing. + +CENTRAL AMERICA NEEDS OUR HELP IN DEBT ADJUSTMENT + +In Central America the aim has been to help such countries as Nicaragua and +Honduras to help themselves. They are the immediate beneficiaries. The +national benefit to the United States is twofold. First,. it is obvious +that the Monroe doctrine is more vital in the neighborhood of the Panama +Canal and the zone of the Caribbean than anywhere else. There, too, the +maintenance of that doctrine falls most heavily upon the United States. It +is therefore essential that the countries within that sphere shall be +removed from the jeopardy involved by heavy foreign debt and chaotic +national finances and from the ever-present danger of international +complications due to disorder at home. Hence the United States has been +glad to encourage and support American bankers who were willing to lend a +helping hand to the financial rehabilitation of such countries because this +financial rehabilitation and the protection of their customhouses from +being the prey of wouldbe dictators would remove at one stroke the menace +of foreign creditors and the menace of revolutionary disorder. + +The second advantage of the United States is one affecting chiefly all the +southern and Gulf ports and the business and industry of the South. The +Republics of Central America and the Caribbean possess great natural +wealth. They need only a measure of stability and the means of financial +regeneration to enter upon an era of peace and prosperity, bringing profit +and happiness to themselves and at the same time creating conditions sure +to lead to a flourishing interchange of trade with this country. + +I wish to call your especial attention to the recent occurrences in +Nicaragua, for I believe the terrible events recorded there during the +revolution of the past summer-the useless loss of life, the devastation of +property, the bombardment of defenseless cities, the killing and wounding +of women and children, the torturing of noncombatants to exact +contributions, and the suffering of thousands of human beings-might have +been averted had the Department of State, through approval of the loan +convention by the Senate, been permitted to carry out its now +well-developed policy of encouraging the extending of financial aid to weak +Central American States with the primary objects of avoiding just such +revolutions by assisting those Republics to rehabilitate their finances, to +establish their currency on a stable basis, to remove the customhouses from +the danger of revolutions by arranging for their secure administration, and +to establish reliable banks. + +During this last revolution in Nicaragua, the Government of that Republic +having admitted its inability to protect American life and property against +acts of sheer lawlessness on the part of the malcontents, and having +requested this Government to assume that office, it became necessary to +land over 2,000 marines and bluejackets in Nicaragua. Owing to their +presence the constituted Government of Nicaragua was free to devote its +attention wholly to its internal troubles, and was thus enabled to stamp +out the rebellion in a short space of time. When the Red Cross supplies +sent to Granada had been exhausted, 8,000 persons having been given food in +one day upon the arrival of the American forces, our men supplied other +unfortunate, needy Nicaraguans from their own haversacks. I wish to +congratulate the officers and men of the United States navy and Marine +Corps who took part in reestablishing order in Nicaragua upon their +splendid conduct, and to record with sorrow the death of seven American +marines and bluejackets. Since the reestablishment of peace and order, +elections have been held amid conditions of quiet and tranquility. Nearly +all the American marines have now been withdrawn. The country should soon +be on the road to recovery. The only apparent danger now threatening +Nicaragua arises from the shortage of funds. Although American bankers have +already rendered assistance, they may naturally be loath to advance a loan +adequate to set the country upon its feet without the support of some such +convention as that of June, 1911, upon which the Senate has not yet acted. + +ENFORCEMENT OF NEUTRALITY LAWS + +In the general effort to contribute to the enjoyment of peace by those +Republics which are near neighbors of the United States, the administration +has enforced the so-called neutrality statutes with a new vigor, and those +statutes were greatly strengthened in restricting the exportation of arms +and munitions by the joint resolution of last March. It is still a +regrettable fact that certain American ports are made the rendezvous of +professional revolutionists and others engaged in intrigue against the +peace of those Republics. It must be admitted that occasionally a +revolution in this region is justified as a real popular movement to throw +off the shackles of a vicious and tyrannical government. Such was the +Nicaraguan revolution against the Zelaya regime. A nation enjoying our +liberal institutions can not escape sympathy with a true popular movement, +and one so well justified. In very many cases, however, revolutions in the +Republics in question have no basis in principle, but are due merely to the +machinations of conscienceless and ambitious men, and have no effect but to +bring new suffering and fresh burdens to an already oppressed people. The +question whether the use of American ports as foci of revolutionary +intrigue can be best dealt with by a further amendment to the neutrality +statutes or whether it would be safer to deal with special cases by special +laws is one worthy of the careful consideration of the Congress. + +VISIT OF SECRETARY KNOX TO CENTRAL AMERICA AND THE CARIBBEAN + +Impressed with the particular importance of the relations between the +United States and the Republics of Central America and the Caribbean +region, which of necessity must become still more intimate by reason of the +mutual advantages which will be presented by the opening of the Panama +Canal, I directed the Secretary of State last February to visit these +Republics for the purpose of giving evidence of the sincere friendship and +good will which the Government and people of the United States bear toward +them. Ten Republics were visited. Everywhere he was received with a +cordiality of welcome and a generosity of hospitality such as to impress me +deeply and to merit our warmest thanks. The appreciation of the Governments +and people of the countries visited, which has been appropriately shown in +various ways, leaves me no doubt that his visit will conduce to that closer +union and better understanding between the United States and those +Republics which I have had it much at heart to promote. + +OUR MEXICAN POLICY + +For two years revolution and counter-revolution has distraught the +neighboring Republic of Mexico. Brigandage has involved a great deal of +depredation upon foreign interests. There have constantly recurred +questions of extreme delicacy. On several occasions very difficult +situations have arisen on our frontier. Throughout this trying period, the +policy of the United States has been one of patient nonintervention, +steadfast recognition of constituted authority in the neighboring nation, +and the exertion of every effort to care for American interests. I +profoundly hope that the Mexican nation may soon resume the path of order, +prosperity, and progress. To that nation in its sore troubles, the +sympathetic friendship of the United States has been demonstrated to a high +degree. There were in Mexico at the beginning of the revolution some thirty +or forty thousand American citizens engaged in enterprises contributing +greatly to the prosperity of that Republic and also benefiting the +important trade between the two countries. The investment of American +capital in Mexico has been estimated at $1,000,000,000. The responsibility +of endeavoring to safeguard those interests and the dangers inseparable +from propinquity to so turbulent a situation have been great, but I am +happy to have been able to adhere to the policy above outlined-a policy +which I hope may be soon justified by the complete success of the Mexican +people in regaining the blessings of peace and good order. + +AGRICULTURAL CREDITS + +A most important work, accomplished in the past year by the American +diplomatic officers in Europe, is the investigation of the agricultural +credit system in the European countries. Both as a means to afford relief +to the consumers of this country through a more thorough development of +agricultural resources and as a means of more sufficiently maintaining the +agricultural population, the project to establish credit facilities for the +farmers is a concern of vital importance to this Nation. No evidence of +prosperity among well-established farmers should blind us to the fact that +lack of capital is preventing a development of the Nation's agricultural +resources and an adequate increase of the land under cultivation; that +agricultural production is fast falling behind the increase in population; +and that, in fact, although these well-established farmers are maintained +in increasing prosperity because of the natural increase in population, we +are not developing the industry of agriculture. We are not breeding in +proportionate numbers a race of independent and independence-loving +landowners, for a lack of which no growth of cities can compensate. Our +farmers have been our mainstay in times of crisis, and in future it must +still largely be upon their stability and common sense that this democracy +must rely to conserve its principles of self-government. + +The need of capital which American farmers feel to-day had been experienced +by the farmers of Europe, with their centuries-old farms, many years ago. +The problem had been successfully solved in the Old World and it was +evident that the farmers of this country might profit by a study of their +systems. I therefore ordered, through the Department of State, an +investigation to be made by the diplomatic officers in Europe, and I have +laid the results of this investigation before the governors of the various +States with the hope that they will be used to advantage in their +forthcoming meeting. + +INCREASE OF FOREIGN TRADE + +In my last annual message I said that the fiscal year ended June 30, 1911, +was noteworthy as marking the highest record of exports of American +products to foreign countries. The fiscal year 1912 shows that this rate of +advance has been maintained, the total domestic exports having a valuation +approximately Of $2,200,000,000, as compared with a fraction over +$2,000,000,000 the previous year. It is also significant that manufactured +and partly manufactured articles continue to be the chief commodities +forming the volume of our augmented exports, the demands of our own people +for consumption requiring that an increasing proportion of our abundant +agricultural products be kept at home. In the fiscal year 1911 the exports +of articles in the various stages of manufacture, not including foodstuffs +partly or wholly manufactured, amounted approximately to $907,500,000. In +the fiscal year 1912 the total was nearly $1,022,000,000, a gain Of +$114,000,000. + +ADVANTAGE OF MAXIMUM AND MINIMUM TARIFF PROVISION + +The importance which our manufactures have assumed in the commerce of the +world in competition with the manufactures of other countries again draws +attention to the duty of this Government to use its utmost endeavors to +secure impartial treatment for American products in all markets. Healthy +commercial rivalry in international intercourse is best assured by the +possession of proper means for protecting and promoting our foreign trade. +It is natural that competitive countries should view with some concern this +steady expansion of our commerce. If in some instance the measures taken by +them to meet it are not entirely equitable, a remedy should be found. In +former messages I have described the negotiations of the Department of +State with foreign Governments for the adjustment of the maximum and +minimum tariff as provided in section 2 of the tariff law of 1909. The +advantages secured by the adjustment of our trade relations under this law +have continued during the last year, and some additional cases of +discriminatory treatment of which we had reason to complain have been +removed. The Department of State has for the first time in the history of +this country obtained substantial most- favored-nation treatment from all +the countries of the world. There are, however, other instances which, +while apparently not constituting undue discrimination in the sense of +section 2, are nevertheless exceptions to the complete equity of tariff +treatment for American products that the Department of State consistently +has sought to obtain for American commerce abroad. + +NECESSITY FOR SUPPLEMENTARY LEGISLATION + +These developments confirm the opinion conveyed to you in my annual message +of 1911, that while the maximum and minimum provision of the tariff law of +1909 has been fully justified by the success achieved in removing +previously existing undue discriminations against American products, yet +experience has shown that this feature of the law should be amended in such +way as to provide a fully effective means of meeting the varying degrees of +discriminatory treatment of American commerce in foreign countries still +encountered, as well as to protect against injurious treatment on the part +of foreign Governments, through either legislative or administrative +measures, the financial interests abroad of American citizens whose +enterprises enlarge the market for American commodities. + +I can not too strongly recommend to the Congress the passage of some Stich +enabling measure as the bill which was recommended by the Secretary of +State in his letter of December 13, 1911. The object of the proposed +legislation is, in brief, to enable the Executive to apply, as the case may +require, to any or all commodities, whether or not on the free list from a +country which discriminates against the United States, a graduated scale of +duties tip to the maximum Of 25 per cent ad valorem provided in the present +law. Flat tariffs are out of date. Nations no longer accord equal tariff +treatment to all other nations irrespective of the treatment from them +received. Stich a flexible power at the command of the Executive would +serve to moderate any unfavorable tendencies on the part of those countries +from which the importations into the United States are substantially +confined to articles on the free list as well as of the countries which +find a lucrative market in the United States for their products under +existing customs rates. It is very necessary that the American Government +should be equipped with weapons of negotiation adapted to modern economic +conditions, in order that we may at all times be in a position to gain not +only technically just but actually equitable treatment for our trade, and +also for American enterprise and vested interests abroad. + +BUSINESS SECURED TO OUR COUNTRY BY DIRECT OFFICIAL EFFORT + +As illustrating the commercial benefits of the Nation derived from the new +diplomacy and its effectiveness upon the material as well as the more ideal +side, it may be remarked that through direct official efforts alone there +have been obtained in the course of this administration, contracts from +foreign Governments involving an expenditure of $50,000,000 in the +factories of the United States. Consideration of this fact and some +reflection upon the necessary effects of a scientific tariff system and a +foreign service alert and equipped to cooperate with the business men of +America carry the conviction that the gratifying increase in the export +trade of this country is, in substantial amount, due to our improved +governmental methods of protecting and stimulating it. It is germane to +these observations to remark that in the two years that have elapsed since +the successful negotiation of our new treaty with Japan, which at the time +seemed to present so many practical difficulties, our export trade to that +country has increased at the rate of over $1,000,000 a month. Our exports +to Japan for the year ended June 30, 1910, were $21,959,310, while for the +year ended June 30, 1912, the exports were $53,478,046, a net increase in +the sale of American products of nearly 150 per cent. + +SPECIAL CLAIMS ARBITRATION WITH GREAT BRITAIN + +Under the special agreement entered into between the United States and +Great Britain on August 18, 1910, for the arbitration of outstanding +pecuniary claims, a schedule of claims and the terms of submission have +been agreed upon by the two Governments, and together with the special +agreement were approved by the Senate on July 19, 1911, but in accordance +with the terms of the agreement they did not go into effect until confirmed +by the two Governments by an exchange of notes, which was done on April 26 +last. Negotiations, are still in progress for a supplemental schedule of +claims to be submitted to arbitration under this agreement, and meanwhile +the necessary preparations for the arbitration of the claims included in +the first schedule have been undertaken and are being carried on under the +authority of an appropriation made for that purpose at the last session of +Congress. It is anticipated that the two Governments will be prepared to +call upon the arbitration tribunal, established under this agreement, to +meet at Washington early next year to proceed with this arbitration. + +FUR SEAL TREATY AND NEED FOR AMENDMENT OF OUR STATUTE + +The act adopted at the last session of Congress to give effect to the +fur-seal convention Of July 7, 1911, between Great Britain, Japan, Russia, +and the United States provided for the suspension of all land killing of +seals on the Pribilof Islands for a period of five years, and an objection +has now been presented to this provision by the other parties in interest, +which raises the issue as to whether or not this prohibition of land +killing is inconsistent with the spirit, if not the letter, of the treaty +stipulations. The justification of establishing this close season depends, +under the terms of the convention, upon how far, if at all, it is necessary +for protecting and preserving the American fur-seal herd and for increasing +its number. This is a question requiring examination of the present +condition of the herd and the treatment which it needs in the light of +actual experience and scientific investigation. A careful examination of +the subject is now being made, and this Government will soon be in +possession of a considerable amount of new information about the American +seal herd, which has been secured during the past season and will be of +great value in determining this question; and if it should appear that +there is any uncertainty as to the real necessity for imposing a close +season at this time I shall take an early opportunity to address a special +message to Congress on this subject, in the belief that this Government +should yield on this point rather than give the slightest ground for the +charge that we have been in any way remiss in observing our treaty +obligations. + +FINAL SETTLEMENT OF NORTH ATLANTIC FISHERIES DISPUTE + +On the 20th of July last an agreement was concluded between the United +States and Great Britain adopting, with certain modifications, the rules +and method of procedure recommended in the award rendered by the North +Atlantic Coast Fisheries Arbitration Tribunal on September 7, 1910, for the +settlement hereafter, in accordance with the principles laid down in the +award, of questions arising with reference to the exercise of the American +fishing liberties under Article I of the treaty of October 20, 1818, +between the United States and Great Britain. This agreement received the +approval of the Senate on August I and was formally ratified by the two +Governments on November 15 last. The rules and a method of procedure +embodied in the award provided for determining by an impartial tribunal the +reasonableness of any new fishery regulations on the treaty coasts of +Newfoundland and Canada before such regulations could be enforced against +American fishermen exercising their treaty liberties on those coasts, and +also for determining the delimitation of bays on such coasts more than 10 +miles wide, in accordance with the definition adopted by the tribunal of +the meaning of the word " bays " as used in the treaty. In the subsequent +negotiations between the two Governments, undertaken for the purpose of +giving practical effect to these rules and methods of procedure, it was +found that certain modifications therein were desirable from the point of +view of both Govern, ments, and these negotiations have finally resulted in +the agreement above mentioned by which the award recommendations as +modified by mutual consent of the two Governments are finally adopted and +made effective, thus bringing this century-old controversy to a final +conclusion, which is equally beneficial and satisfactory to both +Governments. + +IMPERIAL VALLEY AND MEXICO + +In order to make possible the more effective performance of the work +necessary for the confinement in their present channel of the waters of the +lower Colorado River, and thus to protect the people of the Imperial +Valley, as well as in order to reach with the Government of Mexico an +understanding regarding the distribution of the waters of the Colorado +River, in which both Governments are much interested, negotiations are +going forward with a view to the establishment of a preliminary Colorado +River commission, which shall have the powers necessary to enable it to do +the needful work and with authority to study the question of the equitable +distribution of the waters. There is every reason to believe that an +understanding upon this point will be reached and that an agreement will be +signed in the near future. + +CHAMIZAL DISPUTE + +In the interest of the people and city of El Paso this Government has been +assiduous in its efforts to bring to an early settlement the long-standing +Chamizal dispute with Mexico. Much has been ac- complished, and while the +final solution of the dispute is not imme- diate, the favorable attitude +lately assumed by the Mexican Government encourages the hope that this +troublesome question will be satisfactorily and definitively settled at an +early day. + +INTERNATIONAL COMMISSION OF JURISTS + +In pursuance of the convention of August 23, 1906, signed at the Third Pan +American Conference, held at Rio de Janeiro, the International Commission +of jurists met at that capital during the month of last June. At this +meeting 16 American Republics were represented, including the United +States, and comprehensive plans for the future work of the commission were +adopted. At the next meeting fixed for June, 1914, committees already +appointed are instructed to I report regarding topics assigned to them. + +OPIUM CONFERENCE-UNFORTUNATE FAILURE OF OUR GOVERNMENT TO ENACT RECOMMENDED +LEGISLATION + +In my message on foreign relations communicated to the two Houses of +Congress December 7, 1911, 1 called especial attention to the assembling of +the Opium Conference at The Hague, to the fact that that conference was to +review all pertinent municipal laws relating to the opium and allied evils, +and certainly all international rules regarding these evils, and to the +-fact that it seemed to me most essential that the Congress should take +immediate action on the antinarcotic legislation before the Congress, to +which I had previously called attention by a special message. + +The international convention adopted by the conference conforms almost +entirely to the principles contained in the proposed antinarcotic +legislation which has been before the last two Congresses. It was most +unfortunate that this Government, having taken the initiative in the +international action which eventuated in the important international opium +convention, failed to do its share in the great work by neglecting to pass +the necessary legislation to correct the deplorable narcotic evils in the +United States as well as to redeem international pledges upon which it +entered by virtue of the abovementioned convention. The Congress at its +present session should enact into law those bills now before it which have +been so carefully drawn up in collaboration between the Department of State +and the other executive departments, and which have behind them not only +the moral sentiment of the country, but the practical support of all the +legitimate trade interests likely to be affected. Since the international +convention was signed, adherence to it has been made by several European +States not represented at the conference at The Hague and also by seventeen +Latin-American Republics. + +EUROPE AND THE NEAR EAST + +The war between Italy and Turkey came to a close in October last by the +signature of a treaty of peace, subsequently to which the Ottoman Empire +renounced sovereignty over Cyrenaica and Tripolitania in favor of Italy. +During the past year the Near East has unfortunately been the theater of +constant hostilities. Almost simultaneously with the conclusion of peace +between Italy and Turkey and their arrival at an adjustment of the complex +questions at issue between them, war broke out between Turkey on the one +hand and Bulgaria, Greece, Montenegro, and Servia on the other. The United +States has happily been involved neither directly nor indirectly with the +causes or questions incident to any of these hostilities and has maintained +in regard to them an attitude of absolute neutrality and of complete +political disinterestedness. In the second war in which the Ottoman Empire +has been engaged the loss of life and the consequent distress on both sides +have been appalling, and the United States has found occasion, in the +interest of humanity, to carry out the charitable desires of the American +people, to extend a measure of relief to the sufferers on either side +through the impartial medium of the Red Cross. Beyond this the chief care +of the Government of the United States has been to make due provision for +the protection of its national resident in belligerent territory. In the +exercise of my duty in this matter I have dispatched to Turkish waters a +specialservice squadron, consisting of two armored cruisers, in order that +this Government may if need be bear its part in such measures as it may be +necessary for the interested nations to adopt for the safeguarding of +foreign lives and property in the Ottoman Empire in the event that a +dangerous situation should develop. In the meanwhile the several interested +European powers have promised to extend to American citizens the benefit of +such precautionary or protective measures as they might adopt, in the same +manner in which it has been the practice of this Government to extend its +protection to all foreign residents in those countries of the Western +Hemisphere in which it has from time to time been the task of the United +States to act in the interest of peace and good order. The early appearance +of a + +large fleet of European warships in the Bosphorus apparently assured the +protection of foreigners in that quarter, where the presence of the +American stationnaire the U. S. S. Scorpion sufficed, tinder the +circumstances, to represent the United States. Our cruisers were thus left +free to act if need be along the Mediterranean coasts should any unexpected +contingency arise affecting the numerous American interests in the +neighborhood of Smyrna and Beirut. SPITZBERGEN + +The great preponderance of American material interests in the subarctic +island of Spitzbergen, which has always been regarded politically as " no +man's land," impels this Government to a continued and lively interest in +the international dispositions to be made for the political governance and +administration of that region. The conflict of certain claims of American +citizens and others is in a fair way to adjustment, while the settlement of +matters of administration, whether by international conference of the +interested powers or otherwise, continues to be the subject of exchange of +views between the Governments concerned. LIBERIA + +As a result of the efforts of this Government to place the Government of +Liberia in position to pay its outstanding indebtedness and to maintain a +stable and efficient government, negotiations for a loan of $1,700,000 have +been successfully concluded, and it is anticipated that the payment of the +old loan and the issuance of the bonds of the 1912 loan for the +rehabilitation of the finances of Liberia will follow at an early date, +when the new receivership will go into active operation. The new +receivership will consist of a general receiver of customs designated by +the Government of the United States and three receivers of customs +designated by the Governments of Germany, France, and Great Britain, which +countries have commercial interests in the Republic of Liberia. + +In carrying out the understanding between the Government of Liberia and +that of the United States, and in fulfilling the terms of the agreement +between the former Government and the American bankers, three competent +exarmy officers are now effectively employed by the Liberian Government in +reorganizing the police force of the Republic, not only to keep in order +the native tribes in the hinterland but to serve as a necessary police +force along the frontier. It is hoped that these measures will assure not +only the continued existence but the prosperity and welfare of the Republic +of Liberia. Liberia possesses fertility of soil and natural resources, +which should insure to its people a reasonable prosperity. It was the duty +of the United States to assist the Republic of Liberia in accordance with +our historical interest and moral guardianship of a community founded by +American citizens, as it was also the duty of the American Government to +attempt to assure permanence to a country of much sentimental and perhaps +future real interest to a large body of our citizens. MOROCCO + +The legation at Tangier is now in charge of our consul general, who is +acting as charge d'affaires, as well as caring for our commercial interests +in that country. In view of the fact that many of the foreign powers are +now represented by charges d'affaires it has not been deemed necessary to +appoint at the present time a minister to fill a vacancy occurring in that +post. + +THE FAR EAST + +The political disturbances in China in the autumn and winter of 1911-12 +resulted in the abdication of the Manchu rulers on February 12, followed by +the formation of a provisional republican government empowered to conduct +the affairs of the nation until a permanent government might be regularly +established. The natural sympathy of the American people with the +assumption of republican principles by the Chinese people was appropriately +expressed in a concurrent resolution of Congress on April 17, 1912. A +constituent assembly, composed of representatives duly chosen by the people +of China in the elections that are now being held, has been called to meet +in January next to adopt a permanent constitution and organize the +Government of the nascent Republic. During the formative constitutional +stage and pending definite action by the assembly, as expressive of the +popular will, and the hoped-for establishment of a stable republican form +of government, capable of fulfilling its international obligations, the +United States is, according to precedent, maintaining full and friendly de +facto relations with the provisional Government. + +The new condition of affairs thus created has presented many serious and +complicated problems, both of internal rehabilitation and of international +relations, whose solution it was realized would necessarily require much +time and patience. From the beginning of the upheaval last autumn it was +felt by the United States, in common with the other powers having large +interests in China, that independent action by the foreign Governments in +their own individual interests would add further confusion to a situation +already complicated. A policy of international cooperation was accordingly +adopted in an understanding, reached early in the disturbances, to act +together for the protection of the lives and property of foreigners if +menaced, to maintain an attitude of strict impartiality as between the +contending factions, and to abstain from any endeavor to influence the +Chinese in their organization of a new form of government. In view of the +seriousness of the disturbances and their general character, the American +minister at Peking was instructed at his discretion to advise our nationals +in the affected districts to concentrate at such centers as were easily +accessible to foreign troops or men of war. Nineteen of our naval vessels +were stationed at various Chinese ports, and other measures were promptly +taken for the adequate protection of American interests. + +It was further mutually agreed, in the hope of hastening an end to +hostilities, that none of the interested powers would approve the making of +loans by its nationals to either side. As soon, however, as a united +provisional Government of China was assured, the United States joined in a +favorable consideration of that Government's request for advances needed +for immediate administrative necessities and later for a loan to effect a +permanent national reorganization. The interested Governments had already, +by common consent, adopted, in respect to the purposes, expenditure, and +security of any loans to China made by their nationals, certain conditions +which were held to be essential, not only to secure reasonable protection +for the foreign investors, but also to safeguard and strengthen China's +credit by discouraging indiscriminate borrowing and by insuring the +application of the funds toward the establishment of the stable and +effective government necessary to China's welfare. In June last +representative banking groups of the United States, France, Germany, Great +Britain, Japan, and Russia formulated, with the general sanction of their +respective Governments, the guaranties that would be expected in relation +to the expenditure and security of the large reorganization loan desired by +China, which, however, have thus far proved unacceptable to the provisional +Government. + +SPECIAL MISSION OF CONDOLENCE TO JAPAN + +In August last I accredited the Secretary of State as special ambassador to +Japan, charged with the mission of bearing to the imperial family, the +Government, and the people of that Empire the sympathetic message of the +American Commonwealth oil the sad occasion of the death of His Majesty the +Emperor Mutsuhito, whose long and benevolent reign was the greater part of +Japan's modern history. The kindly reception everywhere accorded to +Secretary Knox showed that his mission was deeply appreciated by the +Japanese nation and emphasized strongly the friendly relations that have +for so many years existed between the two peoples. + +SOUTH AMERICA + +Our relations with the Argentine Republic are most friendly and cordial. +So, also, are our relations with Brazil, whose Government has accepted the +invitation of the United States to send two army officers to study at the +Coast Artillery School at Fort Monroe. The long-standing Alsop claim, which +had been the only hindrance to the healthy growth of the most friendly +relations between the United States and Chile, having been eliminated +through the submission of the question to His Britannic Majesty King George +V as "amiable compositeur," it is a cause of much gratification to me that +our relations with Chile are now established upon a firm basis of growing +friendship. The Chilean Government has placed an officer of the United +States Coast Artillery in charge of the Chilean Coast Artillery School, and +has shown appreciation of American methods by confiding to an American firm +important work for the Chilean coast defenses. + +Last year a revolution against the established Government of Ecuador broke +out at the pricipal port of that Republic. Previous to this occurrence the +chief American interest in Ecuador, represented by the Guayaquil & Quito +Railway Co., incorporated in the United States, bad rendered extensive +transportation and other services on account to the Ecuadorian Government, +the amount of which ran into a sum which was steadily increasing and which +the Ecuadorian Government had made no provision to pay, thereby threatening +to crush out the very existence of this American enterprise. When +tranquillity had been restored to Ecuador as a result of the triumphant +progress of the Government forces from Quito, this Government interposed +its good offices to the end that the American interests in Ecuador might be +saved from complete extinction. As a part of the arrangement which was +reached between the parties, and at the request of the Government of +Ecuador, I have consented to name an arbitrator, who, acting under the +terms of the railroad contract, with an arbitrator named by the Ecuadorian +Government, will pass upon the claims that have arisen since the +arrangement reached through the action of a similar arbitral tribunal in +1908. + +In pursuance of a request made some time ago by the Ecuadorian Government, +the Department of State has given much attention to the problem of the +proper sanitation of Guayaquil. As a result a detail of officers of the +Canal Zone will be sent to Guayaquil to recommend measures that will lead +to the complete permanent sanitation of this plague and fever infected +region of that Republic, which has for so long constituted a menace to +health conditions on the Canal Zone. It is hoped that the report which this +mission will furnish will point out a way whereby the modicum of assistance +which the United States may properly lend the Ecuadorian Government may be +made effective in ridding the west coast of South America of a focus of +contagion to the future commercial current passing through the Panama +Canal. + +In the matter of the claim of John Celestine Landreau against the +Government of Peru, which claim arises out of certain contracts and +transactions in connection with the discovery and exploitation of guano, +and which has been under discussion between the two Governments since 1874, +1 am glad to report that as the result of prolonged negotiations, which +have been characterized by the utmost friendliness and good will on both +sides, the Department of State has succeeded in securing the consent of +Peru to the arbitration of the claim, and that the negotiations attending +the drafting and signature of a protocol submitting the claim to an +arbitral tribunal are proceeding with due celerity. + +An officer of the American Public Health Service and an American sanitary +engineer are now on the way to Iquitos, in the employ of the Peruvian +Government, to take charge of the sanitation of that river port. Peru is +building a number of submarines in this country, and continues to show +every desire to have American capital invested in the Republic. + +In July the United States sent undergraduate delegates to the Third +International Students Congress held at Lima, American students having been +for the first time invited to one of these meetings. + +The Republic of Uruguay has shown its appreciation of American agricultural +and other methods by sending a large commission to this country and by +employing many American experts to assist in building up agricultural and +allied industries in Uruguay. + +Venezuela is paying off the last of the claims the settlement of which was +provided for by the Washington protocols, including those of American +citizens. Our relations with Venezuela are most cordial, and the trade of +that Republic with the United States is now greater than with any other +country. + +CENTRAL AMERICA AND THE CARIBBEAN + +During the past summer the revolution against the administration which +followed the assassination of President Caceres a year ago last November +brought the Dominican Republic to the verge of administrative chaos, +without offering any guaranties of eventual stability in the ultimate +success of either party. In pursuance of the treaty relations of the United +States with the Dominican Republic, which were threatened by the necessity +of suspending the operation under American administration of the +customhouses on the Haitian frontier, it was found necessary to dispatch +special commissioners to the island to reestablish the customhouses and +with a guard sufficient to insure needed protection to the customs +administration. The efforts which have been made appear to have resulted in +the restoration of normal conditions throughout the Republic. The good +offices which the commissioners were able to exercise were instrumental in +bringing the contending parties together and in furnishing a basis of +adjustment which it is hoped will result in permanent benefit to the +Dominican people. + +Mindful of its treaty relations, and owing to the position of the +Government of the United States as mediator between the Dominican Republic +and Haiti in their boundary dispute, and because of the further fact that +the revolutionary activities on the Haitian-Dominican frontier had become +so active as practically to obliterate the line of demarcation that had +been heretofore recognized pending the definitive settlement of the +boundary in controversy, it was found necessary to indicate to the two +island Governments a provisional de facto boundary line. This was done +without prejudice to the rights or obligations of either country in a final +settlement to be reached by arbitration. The tentative line chosen was one +which, under the circumstances brought to the knowledge of this Government, +seemed to conform to the best interests of the disputants. The border +patrol which it had been found necessary to reestablish for customs +purposes between the two countries was instructed provisionally to observe +this line. + +The Republic of Cuba last May was in the throes of a lawless uprising that +for a time threatened the destruction of a great deal of valuable +property-much of it owned by Americans and other foreigners-as well as the +existence of the Government itself. The armed forces of Cuba being +inadequate to guard property from attack and at the same time properly to +operate against the rebels, a force of American marines was dispatched from +our naval station at Guantanamo into the Province of Oriente for the +protection of American and other foreign life and property. The Cuban +Government was thus able to use all its forces in putting down the +outbreak, which it succeeded in doing in a period of six weeks. The +presence of two American warships in the harbor of Habana during the most +critical period of this disturbance contributed in great measure to allay +the fears of the inhabitants, including a large foreign colony. + +There has been under discussion with the Government of Cuba for some time +the question of the release by this Government of its leasehold rights at +Bahia Honda, on the northern coast of Cuba, and the enlargement, in +exchange therefor, of the naval station which has been established at +Guantanamo Bay, on the south. As the result of the negotiations thus +carried on an agreement has been reached between the two Governments +providing for the suitable enlargement of the Guantanamo Bay station upon +terms which are entirely fair and equitable to all parties concerned. + +At the request alike of the Government and both political parties in +Panama, an American commission undertook supervision of the recent +presidential election in that Republic, where our treaty relations, and, +indeed, every geographical consideration, make the maintenance of order and +satisfactory conditions of peculiar interest to the Government of the +United States. The elections passed without disorder, and the new +administration has entered upon its functions. + +The Government of Great Britain has asked the support of the United States +for the protection of the interests of British holders of the foreign +bonded debt of Guatemala. While this Government is hopeful of an +arrangement equitable to the British bondholders, it is naturally unable to +view the question apart from its relation to the broad subject of financial +stability in Central America, in which the policy of the United States does +not permit it to escape a vital interest. Through a renewal of negotiations +between the Government of Guatemala and American bankers, the aim of which +is a loan for the rehabilitation of Guatemalan finances, a way appears to +be open by which the Government of Guatemala could promptly satisfy any +equitable and just British claims, and at the same time so improve its +whole financial position as to contribute greatly to the increased +prosperity of the Republic and to redound to the benefit of foreign +investments and foreign trade with that country. Failing such an +arrangement, it may become impossible for the Government of the United +States to escape its obligations in connection with such measures as may +become necessary to exact justice to legitimate foreign claims. + +In the recent revolution in Nicaragua, which, it was generally admitted, +might well have resulted in a general Central American conflict but for the +intervention of the United States, the Government of Honduras was +especially menaced; but fortunately peaceful conditions were maintained +within the borders of that Republic. The financial condition of that +country remains unchanged, no means having been found for the final +adjustment of pressing outstanding foreign claims. This makes it the more +regrettable that the financial convention between the United States and +Honduras has thus far failed of ratification. The Government of the United +States continues to hold itself ready to cooperate with the Government of +Honduras, which it is believed, can not much longer delay the meeting of +its foreign obligations, and it is hoped at the proper time American +bankers will be willing to cooperate for this purpose. + +NECESSITY FOR GREATER GOVERNMENTAL EFFORT IN RETENTION AND EXPANSION OF OUR +FOREIGN TRADE + +It is not possible to make to the Congress a communication upon the present +foreign relations of the United States so detailed as to convey an adequate +impression of the enormous increase in the importance and activities of +those relations. If this Government is really to preserve to the American +people that free opportunity in foreign markets which will soon be +indispensable to our prosperity, even greater efforts must be made. +Otherwise the American merchant, manufacturer, and exporter will find many +a field in which American trade should logically predominate preempted +through the more energetic efforts of other governments and other +commercial nations. + +There are many ways in which through hearty cooperation the legislative and +executive branches of this Government can do much. The absolute essential +is the spirit of united effort and singleness of purpose. I will allude +only to a very few specific examples of action which ought then to result. +America can not take its proper place in the most important fields for its +commercial activity and enterprise unless we have a merchant marine. +American commerce and enterprise can not be effectively fostered in those +fields unless we have good American banks in the countries referred to. We +need American newspapers in those countries and proper means for public +information about them. We need to assure the permanency of a trained +foreign service. We need legislation enabling the members of the foreign +service to be systematically brought in direct contact with the industrial, +manufacturing, and exporting interests of this country in order that +American business men may enter the foreign field with a clear perception +of the exact conditions to be dealt with and the officers themselves may +prosecute their work with a clear idea of what American industrial and +manufacturing interests require. CONCLUSION + +Congress should fully realize the conditions which obtain in the world as +we find ourselves at the threshold of our middle age as a Nation. We have +emerged full grown as a peer in the great concourse of nations. We have +passed through various formative periods. We have been self-centered in the +struggle to develop our domestic resources and deal with our domestic +questions. The Nation is now too matured to continue in its foreign +relations those temporary expedients natural to a people to whom domestic +affairs are the sole concern. In the past our diplomacy has often +consisted, in normal times, in a mere assertion of the right to +international existence. We are now in a larger relation with broader +rights of our own and obligations to others than ourselves. A number of +great guiding principles were laid down early in the history of this +Government. The recent task of our diplomacy has been to adjust those +principles to the conditions of to-day, to develop their corollaries, to +find practical applications of the old principles expanded to meet new +situations. Thus are being evolved bases upon which can rest the +superstructure of policies which must grow with the destined progress of +this Nation. The successful conduct of our foreign relations demands a +broad and a modern view. We can not meet new questions nor build for the +future if we confine ourselves to outworn dogmas of the past and to the +perspective appropriate at our emergence from colonial times and +conditions. The opening of the Panama Canal will mark a new era in our +international life and create new and worldwide conditions which, with +their vast correlations and consequences, will obtain for hundreds of years +to come. We must not wait for events to overtake us unawares. With +continuity of purpose we must deal with the problems of our external +relations by a diplomacy modern, resourceful, magnanimous, and fittingly +expressive of the high ideals of a great nation. + +Part II.[On Fiscal, judicial, Military and Insular Affairs.] THE WHITE +HOUSE, December 6, 1912.To the Senate and House of Representatives: + +On the 3d of December I sent a message to the Congress, which was confined +to our foreign relations. The Secretary of State makes no report to the +President or to Congress, and a review of the history of the transactions +of the State Department in one year must therefore be included by the +President in his annual message or Congress will not be fully informed of +them. A full discussion of all the transactions of the Government, with a +view to informing the Congress of the important events of the year and +recommending new legislation, requires more space than one message of +reasonable length affords. I have therefore adopted the course of sending +three or four messages during the first ten days of the session, so as to +include reference to the more important matters that should be brought to +the attention of the Congress. + +BUSINESS CONDITIONS + +The condition of the country with reference to business could hardly be +better. While the four years of the administration now drawing to a close +have not developed great speculative expansion or a wide field of new +investment, the recovery and progress made from the depressing conditions +following the panic of 1907 have been steady and the improvement has been +clear and easily traced in the statistics. The business of the country is +now on a solid basis. Credits are not unduly extended, and every phase of +the situation seems in a state of preparedness for a period of unexampled +prosperity. Manufacturing concerns are running at their full capacity and +the demand for labor was never so constant and growing. The foreign trade +of the country for this year will exceed $4,000,000,000, while the balance +in our favor-that of the excess of exports over imports-will exceed +$500,000,000. More than half our exports are manufactures or partly +manufactured material, while our exports of farm products do not show the +same increase because of domestic consumption. It is a year of bumper +crops; ; the total money value of farm products will exceed $9,500,000,000. +It is a year when the bushel or unit price of agricultural products has +gradually fallen, and yet the total value of the entire crop is greater by +over $1,000,000,000 than we have known in our history. + +CONDITION OF THE TREASURY + +The condition of the Treasury is very satisfactory. The total +interest-bearing debt is $963,777,770, of which $134,631,980 constitute the +Panama Canal loan. The noninterest-bearing debt is $378,301,284.90, +including $346,681,016 of greenbacks. We have in the Treasury $150,000,000 +in gold coin as a reserve against the outstanding greenbacks; and in +addition we have a cash balance in the Treasury as a general fund of +$167,152,478.99, or an increase of $26,975,552 over the general fund last +year. + +RECEIPTS AND EXPENDITURES + +For three years the expenditures of the Government have decreased under the +influence of an effort to economize. This year presents an apparent +exception. The estimate by the Secretary of the Treasury of the ordinary +receipts, exclusive of postal revenues, for the year ending June 30, 1914, +indicates that they will amount to $710,000,000. The sum of the estimates +of the expenditures for that same year, exclusive of Panama Canal +disbursements and postal disbursements payable from postal revenues, is +$732,000,000, indicating a deficit Of $22,000,000. For the year ending June +30, 1913, similarly estimated receipts were $667,000,000, while the total +corresponding estimate of expenditures for that year, submitted through the +Secretary of the Treasury to Congress, amounted to $656,000,000. This shows +an increase of $76,000,000 in the estimates for 1914 over the total +estimates of 1913. This is due to an increase Of $25,000,000 in the +estimate for rivers and harbors for the next year on projects and surveys +authorized by Congress; to an increase under the new pension bill Of +$32,500,000; and to an increase in the estimates for expenses of the Navy +Department Of $24,000,000. The estimate for the Navy Department for the +year 1913 included two battleships. Congress made provision for only one +battleship, and therefore the Navy Department has deemed it necessary and +proper to make an estimate which includes the first year's expenditure for +three battleships in addition to the amount required for work on the +uncompleted ships now under construction. In addition to the natural +increase in the expenditures for the uncompleted ships, and the ad. +ditional battleship estimated for, the other increases are due to the pay +required for 4,000 or more additional enlisted men in the Navy; and to this +must be added the additional cost of construction imposed by the change in +the eight-hour law which makes it applicable to ships built in private +shipyards. + +With the exceptions of these three items, the estimates show a reduction +this year below the total estimates for 1913 of more than $5,000,000. + +The estimates for Panama Canal construction for 1914 are $17,000,000 less +than for 1913 + +OUR BANKING AND CURRENCY SYSTEM + +A time when panics seem far removed is the best time for us to prepare our +financial system to withstand a storm. The most crying need this country +has is a proper banking and currency system. The existing one is +inadequate, and everyone who has studied the question admits it. + +It is the business of the National Government to provide a medium, +automatically contracting and expanding in volume, to meet the needs of +trade. Our present system lacks the indispensable quality of elasticity. + +The only part of our monetary medium that has elasticity is the bank-note +currency. The peculiar provisions of the law requiring national banks to +maintain reserves to meet the call of the depositors operates to increase +the money stringency when it arises rather than to expand the supply of +currency and relieve it. It operates upon each bank and furnishes a motive +for the withdrawal of currency from the channels of trade by each bank to +save itself, and offers no inducement whatever for the use of the reserve +to expand the supply of currency to meet the exceptional demand. + +After the panic of 1907 Congress realized that the present system was not +adapted to the country's needs and that under it panics were possible that +might properly be avoided by legislative provision. Accordingly a monetary +commission was appointed which made a report in February, 1912. The system +which they recommended involved a National Reserve Association, which was, +in certain of its faculties and functions, a bank, and which was given +through its governing authorities the power, by issuing circulating notes +for approved commercial paper, by fixing discounts, and by other methods of +transfer of currency, to expand the supply of the monetary medium where it +was most needed to prevent the export or hoarding of gold and generally to +exercise such supervision over the supply of money in every part of the +country as to prevent a stringency and a panic. The stock in this +association was to be distributed to the banks of the whole United States, +State and National, in a mixed proportion to bank units and to capital +stock paid in. The control of the association was vested in a board of +directors to be elected by representatives of the banks, except certain +ex-officio directors, three Cabinet officers, and the Comptroller of the +Currency. The President was to appoint the governor of the association from +three persons to be selected by the directors, while the two deputy +governors were to be elected by the board of directors. The details of the +plan were worked out with great care and ability, and the plan in general +seems to me to furnish the basis for a proper solution of our present +difficulties. I feel that the Government might very properly be given a +greater voice in the executive committee of the board of directors without +danger of injecting politics into its management, but I think the +federation system of banks is a good one, provided proper precautions are +taken to prevent banks of large capital from absorbing power through +ownership of stock in other banks. The objections to a central bank it +seems to me are obviated if the ownership of the reserve association is +distributed among all the banks of a country in which banking is free. The +earnings of the reserve association are limited in percentage tit a +reasonable and fixed amount, and the profits over and above this are to be +turned into the Government Treasury. It is quite probable that still +greater security against control by money centers may be worked into the +plan. + +Certain it is, however, that the objections which were made in the past +history of this country to a central bank as furnishing a monopoly of +financial power to private individuals, would not apply to an association +whose ownership and control is so widely distributed and is divided between +all the banks of the country, State and National, on the one hand, and the +Chief Executive through three department heads and his Comptroller of the +Currency, on the other. The ancient hostility to a national bank, with its +branches, in which is concentrated the privilege of doing a banking +business and carrying on the financial transactions of the Government, has +prevented the establishment of such a bank since it was abolished in the +Jackson Administration. Our present national banking law has obviated +objections growing out of the same cause by providing a free banking system +in which any set of stockholders can establish a national bank if they +comply with the conditions of law. It seems to me that the National Reserve +Association meets the same objection in a similar way; that is, by giving +to each bank, State and National, in accordance with its size, a certain +share in the stock of the reserve association, nontransferable and only to +be held by the bank while it performs its functions as a partner in the +reserve association. + +The report of the commission recommends provisions for the imposition of a +graduated tax on the expanded currency of such a character as to furnish a +motive for reducing the issue of notes whenever their presence in the money +market is not required by the exigencies of trade. In other words, the +whole system has been worked out with the greatest care. Theoretically it +presents a plan that ought to command support. Practically it may require +modification in various of its provisions in order to make the security +against, abuses by combinations among the banks impossible. But in the face +of the crying necessity that there is for improvement in our present +system, I urgently invite the attention of Congress to the proposed plan +and the report of the commission, with the hope that an earnest +consideration may suggest amendments and changes within the general plan +which will lead to its adoption for the benefit of the country. There is no +class in the community more interested in a safe and sane banking and +currency system, one which will prevent panics and automatically furnish in +each trade center the currency needed in the carrying on of the business at +that center, than the wage earner. There is no class in the community whose +experience better qualifies them to make suggestions as to the sufficiency +of a currency and banking system than the bankers and business men. Ought +we, therefore, to ignore their recommendations and reject their financial +judgment as to the proper method of reforming our financial system merely +because of the suspicion which exists against them in the minds of many of +our fellow citizens? Is it not the duty of Congress to take up the plan +suggested, examine it from all standpoints, give impartial consideration to +the testimony of those whose experience ought to fit them to give the best +advice on the subject, and then to adopt some plan which will secure the +benefits desired? + +A banking and currency system seems far away from the wage earner and the +farmer, but the fact is that they are vitally interested in a safe system +of currency which shall graduate its volume to the amount needed and which +shall prevent times of artificial stringency that frighten capital, stop +employment, prevent the meeting of the pay roll, destroy local markets, and +produce penury and want. + +THE TARIFF + +I have regarded it as my duty in former messages to the Congress to urge +the revision of the tariff upon principles of protection. It was my +judgment that the customs duties ought to be revised downward, but that the +reduction ought not to be below a rate which would represent the difference +in the cost of production between the article in question at home and +abroad, and for this and other reasons I vetoed several bills which were +presented to me in the last session of this Congress. Now that a new +Congress has been elected on a platform of a tariff for revenue only rather +than a protective tariff, and is to revise the tariff on that basis, it is +needless for me to occupy the time of this Congress with arguments or +recommendations in favor of a protective tariff. + +Before passing from the tariff law, however, known as the Payne tariff law +of August 5, 1909, 1 desire to call attention to section 38 of that act, +assessing a special excise tax on corporations. It contains a provision +requiring the levy of an additional 50 per cent to the annual tax in cases +of neglect to verify the prescribed return or to file it before the time +required by law. This additional charge of 50 per cent operates in some +cases as a harsh penalty for what may have been a mere inadvertence or +unintentional oversight, and the law should be so amended as to mitigate +the severity of the charge in such instances. Provision should also be made +for the refund of additional taxes heretofore collected because of such +infractions in those cases where the penalty imposed has been so +disproportionate to the offense as equitably to demand relief. BUDGET + +The estimates for the next fiscal year have been assembled by the Secretary +of the Treasury and by him transmitted to Congress. I purpose at a later +day to submit to Congress a form of budget prepared for me and recommended +by the President's Commission on Economy and Efficiency, with a view of +suggesting the useful and informing character of a properly framed budget. + +WAR DEPARTMENT + +The War Department combines within its jurisdiction functions which in +other countries usually occupy three departments. It not only has the +management of the Army and the coast defenses, but its jurisdiction extends +to the government of the Philippines and of Porto Rico and the control of +the receivership of the customs revenues of the Dominican Republic; it also +includes the recommendation of all plans for the improvement of harbors and +waterways and their execution when adopted; and, by virtue of an Executive +order, the supervision of the construction of the Panama Canal. + +ARMY REORGANIZATION + +Our small Army now consists of 83,809 men, excluding the 5,000 Philippine +scouts. Leaving out of consideration the Coast Artillery force, whose +position is fixed in our various seacoast defenses, and the present +garrisons of our various insular possessions, we have to-day within the +continental United States a mobile Army of only about 35,000 men. This +little force must be still further drawn upon to supply the new garrisons +for the great naval base which is being established at Pearl Harbor, in the +Hawaiian Islands, and to protect the locks now rapidly approaching +completion at Panama. The forces remaining in the United States are now +scattered in nearly 50 Posts, situated for a variety of historical reasons +in 24 States. These posts contain only fractions of regiments, averaging +less than 700 men each. In time of peace it has been our historical policy +to administer these units separately by a geographical organization. In +other words, our Army in time of peace has never been a united organization +but merely scattered groups of companies, battalions, and regiments, and +the first task in time of war has been to create out of these scattered +units an Army fit for effective teamwork and cooperation. + +To the task of meeting these patent defects, the War Department has been +addressing itself during the past year. For many years we had no officer or +division whose business it was to study these problems and plan remedies +for these defects. With the establishment of the General Staff nine years +ago a body was created for this purpose. It has, necessarily, required time +to overcome, even in its own personnel, the habits of mind engendered by a +century of lack of method, but of late years its work has become systematic +and effective, and it has recently been addressing itself vigorously to +these problems. + +A comprehensive plan of Army reorganization was prepared by the War College +Division of the General Staff. This plan was thoroughly discussed last +summer at a series of open conferences held by the Secretary of War and +attended by representatives from all branches of the Army and from +Congress. In printed form it has been distributed to Members of Congress +and throughout the Army and the National Guard, and widely through +institutions of learning and elsewhere in the United States. In it, for the +first time, we have a tentative chart for future progress. + +Under the influence of this study definite and effective steps have been +taken toward Army reorganization so far as such reorganization lies within +the Executive power. Hitherto there has been no difference of policy in the +treatment of the organization of our foreign garrisons from those of troops +within the United States. The difference of situation is vital, and the +foreign garrison should be prepared to defend itself at an instant's notice +against a foe who may command the sea. Unlike the troops in the United +States, it can not count upon reinforcements or recruitment. It is an +outpost upon which will fall the brunt of the first attack in case of war. +The historical policy of the United States of carrying its regiments during +time of peace at half strength has no application to our foreign garrisons. +During the past year this defect has been remedied as to the Philippines +garrison. The former garrison of 12 reduced regiments has been replaced by +a garrison of 6 regiments at full strength, giving fully the same number of +riflemen at an estimated economy in cost of maintenance of over $1,000,000 +per year. This garrison is to be permanent. Its regimental units, instead +of being transferred periodically back and forth from the United States, +will remain in the islands. The officers and men composing these units +will, however, serve a regular tropical detail as usual, thus involving no +greater hardship upon the personnel and greatly increasing the +effectiveness of the garrison. A similar policy is proposed for the +Hawaiian and Panama garrisons as fast as the barracks for them are +completed. I strongly urge upon Congress that the necessary appropriations +for this purpose should be promptly made. It is, in my opinion, of first +importance that these national outposts, upon which a successful home +defense will, primarily, depend, should be finished and placed in effective +condition at the earliest possible day. + +THE HOME ARMY + +Simultaneously with the foregoing steps the War Department has been +proceeding with the reorganization of the Army at home. The formerly +disassociated units are being united into a tactical organization of three +divisions, each consisting of two or three brigades of Infantry and, so far +as practicable, a proper proportion of divisional Cavalry and Artillery. Of +course, the extent to which this reform can be carried by the Executive is +practically limited to a paper organization. The scattered units can be +brought under a proper organization, but they will remain physically +scattered until Congress supplies the necessary funds for grouping them in +more concentrated posts. Until that is done the present difficulty of +drilling our scattered groups together, and thus training them for the +proper team play, can not be removed. But we shall, at least, have an Army +which will know its own organization and will be inspected by its proper +commanders, and to which, as a unit, emergency orders can be issued in time +of war or other emergency. Moreover, the organization, which in many +respects is necessarily a skeleton, will furnish a guide for future +development. The separate regiments and companies will know the brigades +and divisions to which they belong. They will be maneuvered together +whenever maneuvers are established by Congress, and the gaps in their +organization will show the pattern into which can be filled new troops as +the Nation grows and a larger Army is provided. + +REGULAR ARMY RESERVE + +One of the most important reforms accomplished during the past year has +been the legislation enacted in the Army appropriation bill of last summer, +providing for a Regular Army reserve. Hitherto our national policy has +assumed that at the outbreak of war our regiments would be immediately +raised to full strength. But our laws have provided no means by which this +could be accomplished, or by which the losses of the regiments when once +sent to the front could be repaired. In this respect we have neglected the +lessons learned by other nations. The new law provides that the soldier, +after serving four years with colors, shall pass into a reserve for three +years. At his option he may go 'into the reserve at the end of three years, +remaining there for four years. While in the reserve he can be called to +active duty only in case of war or other national emergency, and when so +called and only in such case will receive a stated amount of pay for all of +the period in which he has been a member of the reserve. The legislation is +imperfect, in my opinion, in certain particulars, but it is a most +important step in the right direction, and I earnestly hope that it will be +carefully studied and perfected by Congress. + +THE NATIONAL GUARD + +Under existing law the National Guard constitutes, after the Regular Army, +the first line of national defense. Its organization, discipline, training, +and equipment, under recent legislation, have been assimilated, as far as +possible, to those of the Regular Army, and its practical efficiency, under +the effect of this training, has very greatly increased. Our citizen +soldiers under present conditions have reached a stage of development +beyond which they can not reasonably be asked to go without further direct +assistance in the form of pay from the Federal Government. On the other +hand, such pay from the National Treasury would not be justified unless it +produced a proper equivalent in additional efficiency on the part of the +National Guard. The Organized Militia to-day can not be ordered outside of +the limits of the United States, and thus can not lawfully be used for +general military purposes. The officers and men are ambitious and eager to +make themselves thus available and to become an efficient national reserve +of citizen soldiery. They are the only force of trained men, other than the +Regular Army, upon which we can rely. The so-called militia pay bill, in +the form agreed on between the authorities of the War Department and the +representatives of the National Guard, in my opinion adequately meets these +conditions and offers a proper return for the pay which it is proposed to +give to the National Guard. I believe that its enactment into law would be +a very long step toward providing this Nation with a first line of citizen +soldiery, upon which its main reliance must depend in case of any national +emergency. Plans for the organization of the National Guard into tactical +divisions, on the same lines as those adopted for the Regular Army, are +being formulated by the War College Division of the General Staff. + +NATIONAL VOLUNTEERS + +The National Guard consists of only about 110,000 men. In any serious war +in the past it has always been necessary, and in such a war in the future +it doubtless will be necessary, for the Nation to depend, in addition to +the Regular Army and the National Guard, upon a large force of volunteers. +There is at present no adequate provision of law for the raising of such a +force. There is now pending in Congress, however, a bill which makes such +provision, and which I believe is admirably adapted to meet the exigencies +which would be presented in case of war. The passage of the bill would not +entail a dollar's expense upon the Government at this time or in the future +until war comes. But if war comes the methods therein directed are in +accordance with the best military judgment as to what they ought to be, and +the act would prevent the necessity for a discussion of any legislation and +the delays incident to its consideration and adoption. I earnestly urge its +passage. + +CONSOLIDATION OF THE SUPPLY CORPS + +The Army appropriation act of 191:2 also carried legislation for the +consolidation of the Quartermaster's Department, the Subsistence +Department, and the Pay Corps into a single supply department, to be known +as the Quartermaster's Corps. It also provided for the organization of a +special force of enlisted men, to be known as the Service Corps, gradually +to replace many of the civilian employees engaged in the manual labor +necessary in every army. I believe that both of these enactments will +improve the administration of our military establishment. The consolidation +of the supply corps has already been effected, and the organization of the +service corps is being put into effect. + +All of the foregoing reforms are in the direction of economy and +efficiency. Except for the slight increase necessary to garrison our +outposts in Hawaii and Panama, they do not call for a larger Army, but they +do tend to produce a much more efficient one. The only substantial new +appropriations required are those which, as I have pointed out, are +necessary to complete the fortifications and barracks at our naval bases +and outposts beyond the sea. + +PORTO RICO + +Porto Rico continues to show notable progress, both commercially and in the +spread of education. Its external commerce has increased 17 per cent over +the preceding year, bringing the total value up to $92,631,886, or more +than five times the value of the commerce of the island in 1901. During the +year 16o,657 Pupils were enrolled in the public schools, as against 145,525 +for the preceding year, and as compared with 26,000 for the first year of +American administration. Special efforts are under way for the promotion of +vocational and industrial training, the need of which is particularly +pressing in the island. When the bubonic plague broke out last June, the +quick and efficient response of the people of Porto Rico to the demands of +modern sanitation was strikingly shown by the thorough campaign which was +instituted against the plague and the hearty public opinion which supported +the Government's efforts to check its progress and to prevent its +recurrence. + +The failure thus far to grant American citizenship continues to be the only +ground of dissatisfaction. The bill conferring such citizenship has passed +the House of Representatives and is now awaiting the action of the Senate. +I am heartily in favor of the passage of this bill. I believe that the +demand for citizenship is just, and that it is amply earned by sustained +loyalty on the part of the inhabitants of the island. But it should be +remembered that the demand must be, and in the minds of most Porto Ricans +is, entirely disassociated from any thought of statehood. I believe that no +substantial approved public opinion in the United States or in Porto Rico +contemplates statehood for the island as the ultimate form of relations +between us. I believe that the aim to be striven for is the fullest +possible allowance of legal and fiscal self-government, with American +citizenship as to the bond between us; in other words, a relation analogous +to the present relation between Great Britain and such self-governing +colonies as Canada and Australia. This would conduce to the fullest and +most self-sustaining development of Porto Rico, while at the same time it +would grant her the economic and political benefits of being under the +American flag. PHILIPPINES + +A bill is pending in Congress which revolutionizes the carefully worked out +scheme of government under which the Philippine Islands are now governed +and which proposes to render them virtually autonomous at once and +absolutely independent in eight years. Stich a proposal can only be founded +on the assumption that we have now discharged our trusteeship to the +Filipino people and our responsibility for them to the world, and that they +are now prepared for selfgovernment as well as national sovereignty. A +thorough and unbiased knowledge of the facts clearly shows that these +assumptions are absolutely without justification. As to this, I believe +that there is no substantial difference of opinion among any of those who +have had the responsibility of facing Philippine problems in the +administration of the islands, and I believe that no one to whom the future +of this people is a responsible concern can countenance a policy fraught +with the direst consequences to those on whose behalf it is ostensibly +urged. + +In the Philippine Islands we have embarked upon an experiment unprecedented +in dealing with dependent people. We are developing there conditions +exclusively for their own welfare. We found an archipelago containing 24 +tribes and races, speaking a great variety of languages, and with a +population over 80 per cent of which could neither read nor write. Through +the unifying forces of a common education, of commercial and economic +development, and of gradual participation in local self-government we are +endeavoring to evolve a homogeneous people fit to determine, when the time +arrives, their own destiny. We are seeking to arouse a national spirit and +not, as under the older colonial theory, to suppress such a spirit. The +character of the work we have been doing is keenly recognized in the +Orient, and our success thus far followed with not a little envy by those +who, initiating the same policy, find themselves hampered by conditions +grown up in earlier days and under different theories of administration. +But our work is far from done. Our duty to the Filipinos is far from +discharged. Over half a million Filipino students are now in the Philippine +schools helping to mold the men of the future into a homogeneous people, +but there still remain more than a million Filipino children of school age +yet to be reached. Freed from American control the integrating forces of a +common education and a common language will cease and the educational +system now well started will slip back into inefficiency and disorder. + +An enormous increase in the commercial development of the islands has been +made since they were virtually granted full access to our markets three +years ago, with every prospect of increasing development and diversified +industries. Freed from American control such development is bound to +decline. Every observer speaks of the great progress in public works for +the benefit of the Filipinos, of harbor improvements, of roads and +railways, of irrigation and artesian wells, public buildings, and better +means of communication. But large parts of the islands are still unreached, +still even unexplored, roads and railways are needed in many parts, +irrigation systems are still to be installed, and wells to be driven. Whole +villages and towns are still without means of communication other than +almost impassable roads and trails. Even the great progress in sanitation, +which has successfully suppressed smallpox, the bubonic plague, and Asiatic +cholera, has found the cause of and a cure for beriberi, has segregated the +lepers, has helped to make Manila the most healthful city in the Orient, +and to free life throughout the whole archipelago from its former dread +diseases, is nevertheless incomplete in many essentials of permanence in +sanitary policy. Even more remains to be accomplished. If freed from +American control sanitary progress is bound to be arrested and all that has +been achieved likely to be lost. + +Concurrent with the economic, social, and industrial development of the +islands has been the development of the political capacity of the people. +By their progressive participation in government the Filipinos are being +steadily and hopefully trained for self-government. Under Spanish control +they shared in no way in the government. Under American control they have +shared largely and increasingly. Within the last dozen years they have +gradually been given complete autonomy in the municipalities, the right to +elect two-thirds of the provincial governing boards and the lower house of +the insular legislature. They have four native members out of nine members +of the commission, or upper house. The chief justice and two justices of +the supreme court, about one-half of the higher judicial positions, and all +of the justices of the peach are natives. In the classified civil service +the proportion of Filipinos increased from 51 per cent in 1904 to 67 per +cent in 1911. Thus to-day all the municipal employees, over go per cent of +the provincial employees, and 60 per cent of the officials and employees of +the central government are Filipinos. The ideal which has been kept in mind +in our political guidance of the islands has been real popular +self-government and not mere paper independence. I am happy to say that the +Filipinos have done well enough in the places they have filled and in the +discharge of the political power with which they have been intrusted to +warrant the belief that they can be educated and trained to complete +self-government. But the present satisfactory results are due to constant +support and supervision at every step by Americans. + +If the task we have undertaken is higher than that assumed by other +nations, its accomplishment must demand even more patience. We must not +forget that we found the Filipinos wholly untrained in government. Up to +our advent all other experience sought to repress rather than encourage +political power. It takes long time and much experience to ingrain +political habits of steadiness and efficiency. Popular self-government +ultimately must rest upon common habits of thought and upon a reasonably +developed public opinion. No such foundations for selfgovernment, let alone +independence are now present in the Philippine Islands. Disregarding even +their racial heterogeneity and the lack of ability to think as a nation, it +is sufficient to point out that under liberal franchise privileges only +about 3 per cent of the Filipinos vote and only 5 per cent of the people +are said to read the public press. To confer independence upon the +Filipinos now is, therefore, to subject the great mass of their people to +the dominance of an oligarchical and, probably, exploiting minority. Such a +course will be as cruel to those people as it would be shameful to us. + +Our true course is to pursue steadily and courageously the path we have +thus far followed; to guide the Filipinos into self-sustaining pursuits; to +continue the cultivation of sound political habits through education and +political practice; to encourage the diversification of industries, and to +realize the advantages of their industrial education by conservatively +approved cooperative methods, at once checking the dangers of concentrated +wealth and building up a sturdy, independent citizenship. We should do all +this with a disinterested endeavor to secure for the Filipinos economic +independence and to fit them for complete self-government, with the power +to decide eventually, according to their own largest good, whether such +self-government shall be accompanied by independence. A present declaration +even of future independence would retard progress by the dissension and +disorder it would arouse. On our part it would be a disingenuous attempt, +under the guise of conferring a benefit on them, to relieve ourselves from +the heavy and difficult burden which thus far we have been bravely and +consistently sustaining. It would be a disguised policy of scuttle. It +would make the helpless Filipino the football of oriental politics, tinder +the protection of a guaranty of their independence, which we would be +powerless to enforce. + +REGULATION OF WATER POWER + +There are pending before Congress a large number of bills proposing to +grant privileges of erecting dams for the purpose of creating water power +in our navigable rivers. The pendency of these bills has brought out an +important defect in the existing general dam act. That act does not, in my +opinion, grant sufficient power to the Federal Government in dealing with +the construction of such dams to exact protective conditions in the +interest of navigation. It does not permit the Federal Government, as a +condition of its permit, to require that a part of the value thus created +shall be applied to the further general improvement and protection of the +stream. I believe this to be one of the most important matters of internal +improvement now confronting the Government. Most of the navigable rivers of +this country are comparatively long and shallow. In order that they may be +made fully useful for navigation there has come into vogue a method of +improvement known as canalization, or the slack-water method, which +consists in building a series of dams and locks, each of which will create +a long pool of deep navigable water. At each of these dams there is usually +created also water power of commercial value. If the water power thus +created can be made available for the further improvement of navigation in +the stream, it is manifest that the improvement will be much more quickly +effected on the one hand, and, on the other, that the burden on the general +taxpayers of the country will be very much reduced. Private interests +seeking permits to build water-power dams in navigable streams usually urge +that they thus improve navigation, and that if they do not impair +navigation they should be allowed to take for themselves the entire profits +of the water-power development. Whatever they may do by way of relieving +the Government of the expense of improving navigation should be given due +consideration, but it must be apparent that there may be a profit beyond a +reasonably liberal return upon the private investment which is a potential +asset of the Government in carrying out a comprehensive policy of waterway +development. It is no objection to the retention and use of such an asset +by the Government that a comprehensive waterway policy will include the +protection and development of the other public uses of water, which can not +and should not be ignored in making and executing plans for the protection +and development of navigation. It is also equally clear that inasmuch as +the water power thus created is or may be an incident of a general scheme +of waterway improvement within the constitutional jurisdiction of the +Federal Government, the regulation of such water power lies also within +that jurisdiction. In my opinion constructive statesmanship requires that +legislation should be enacted which will permit the development of +navigation in these great rivers to go hand in hand with the utilization of +this by-product of water power, created in the course of the same +improvement, and that the general dam act should be so amended as to make +this possible. I deem it highly important that the Nation should adopt a +consistent and harmonious treatment of these water-power projects, which +will preserve for this purpose their value to the Government, whose right +it is to grant the permit. Any other policy is equivalent to throwing away +a most valuable national asset. + +THE PANAMA CANAL + +During the past year the work of construction upon the canal has progressed +most satisfactorily. About 87 per cent of the excavation work has been +completed, and more than 93 per cent of the concrete for all the locks is +in place. In view of the great interest which has been manifested as to +some slides in the Culebra Cut, I am glad to say that the report of Col. +Goethals should allay any apprehension on this point. It is gratifying to +note that none of the slides which occurred during this year would have +interfered with the passage of the ships had the canal, in fact, been in +operation, and when the slope pressures will have been finally adjusted and +the growth of vegetation will minimize erosion in the banks of the cut, the +slide problem will be practically solved and an ample stability assured for +the Culebra Cut. + +Although the official date of the opening has been set for January 1, 1915, +the canal will, in fact, from present indications, be opened for shipping +during the latter half of 1913. No fixed date can as yet be set, but +shipping interests will be advised as soon as assurances can be given that +vessels can pass through without unnecessary delay. + +Recognizing the administrative problem in the management of the canal, +Congress in the act of August 24, 1912, has made admirable provisions for +executive responsibility in the control of the canal and the government of +the Canal Zone. The problem of most efficient organization is receiving +careful consideration, so that a scheme of organization and control best +adapted to the conditions of the canal may be formulated and put in +operation as expeditiously as possible. Acting tinder the authority +conferred on me by Congress, I have, by Executive proclamation, promulgated +the following schedule of tolls for ships passing through the canal, based +upon the thorough report of Emory R. Johnson, special commissioner on +traffic and tolls: + +I. On merchant vessels carrying passengers or cargo, $1.20 per net vessel +ton-each 100 cubic feet-of actual earning capacity. 2. On vessels in +ballast without passengers or cargo, 40 per cent less than the rate of +tolls for vessels with passengers or cargo. 3. Upon naval vessels, other +than transports, colliers, hospital ships, and supply ships, 50 cents per +displacement ton. 4. Upon Army and Navy transports, colliers, hospital +ships, and supply ships, $1.20 per net ton, the vessels to be measured by +the same rules as are employed in determining the net tonnage of merchant +vessels. Rules for the determination of the tonnage upon which toll charges +are based are now in course of preparation and will be promulgated in due +season. + +PANAMA CANAL TREATY + +The proclamation which I have issued in respect to the Panama Canal tolls +is in accord with the Panama Canal act passed by this Congress August 24, +1912. We have been advised that the British Government has prepared a +protest against the act and its enforcement in so far as it relieves from +the payment of tolls American ships engaged in the American coastwise trade +on the ground that it violates British rights tinder the Hay-Pauncefote +treaty concerning the Panama Canal. When the protest is presented, it will +be promptly considered and an effort made to reach a satisfactory +adjustment of any differ. ences there may be between the two Governments. + +WORKMEN'S COMPENSATION ACT + +The promulgation of an efficient workmen's compensation act, adapted to the +particular conditions of the zone, is awaiting adequate appropriation by +Congress for the payment of claims arising thereunder. I urge that speedy +provision be made in order that we may install upon the zone a system of +settling claims for injuries in best accord with modern humane, social, and +industrial theories. + +PROMOTION FOR COL. GOETHALS + +As the completion of the canal grows nearer, and as the wonderful executive +work of Col. Goethals becomes more conspicuous in the eyes of the country +and of the world, it seems to me wise and proper to make provision by law +for such reward to him as may be commensurate with the service that he has +rendered to his country. I suggest that this reward take the form of an +appointment of Col. Goethals as a major general in the Army of the United +States, and that the law authorizing such appointment be accompanied with a +provision permitting his designation as Chief of Engineers upon the +retirement of the present incumbent of that office. + +NAVY DEPARTMENT + +The Navy of the United States is in a greater state of efficiency and is +more powerful than it has ever been before, but in the emulation which +exists between different countries in respect to the increase of naval and +military armaments this condition is not a permanent one. In view of the +many improvements and increases by foreign Governments the slightest halt +on our part in respect to new construction throws us back and reduces us +from a naval power of the first rank and places us among the nations of the +second rank. In the past 15 years the Navy has expanded rapidly and yet far +less rapidly than our country. From now on reduced expenditures in the Navy +means reduced military strength. The world's history has shown the +importance of sea power both for adequate defense and for the support of +important and definite policies. + +I had the pleasure of attending this autumn a mobilization of the Atlantic +Fleet, and was glad to observe and note the preparedness of the fleet for +instant action. The review brought before the President and the Secretary +of the Navy a greater and more powerful collection of vessels than had ever +been gathered in American waters. The condition of the fleet and of the +officers and enlisted men and of the equipment of the vessels entitled +those in authority to the greatest credit. + +I again commend to Congress the giving of legislative sanction to the +appointment of the naval aids to the Secretary of the Navy. These aids and +the council of aids appointed by the Secretary of the Navy to assist him in +the conduct of his department have proven to be. of the highest utility. +They have furnished an executive com mittee of the most skilled naval +experts, who have coordinated the action of the various bureaus in the +Navy, and by their advice have enabled the Secretary to give an +administration at the same time economical and most efficient. Never before +has the United States had a Navy that compared in efficiency with its +present one, but never before have the requirements with respect to naval +warfare been higher and more exacting than now. A year ago Congress refused +to appropriate for more than one battleship. In this I think a great +mistake of policy was made, and I urgently recommend that this Congress +make tip for the mistake of the last session by appropriations authorizing +the construction of three battleships, in addition to destroyers, fuel +ships, and the other auxiliary vessels as shown in the building program of +the general board. We are confronted by a condition in respect to the +navies of the world which requires us, if we would maintain our Navy as an +insurance of peace, to augment our naval force by at least two battleships +a year and by battle cruisers, gunboats, torpedo destroyers, and submarine +boats in a proper proportion. We have no desire for war. We would go as far +as any nation in the world to avoid war, but we are a world power. Our +population, our wealth, our definite policies, our responsibilities in the +Pacific and the Atlantic, our defense of the Panama Canal, together with +our enormous world trade and our missionary outposts on the frontiers of +civilization, require us to recognize our position as one of the foremost +in the family of nations, and to clothe ourselves with sufficient naval +power to give force to our reasonable demands, and to give weight to our +influence in those directions of progress that a powerful Christian nation +should advocate. + +I observe that the Secretary of the Navy devotes some space to a change in +the disciplinary system in vogue in that branch of the service. I think +there is nothing quite so unsatisfactory to either the Army or the Navy as +the severe punishments necessarily inflicted by court-martial for +desertions and purely military offenses, and I am glad to hear that the +British have solved this important and difficult matter in a satisfactory +way. I commend to the consideration of Congress the details of the new +disciplinary system, and recommend that laws be passed putting the same +into force both in the Army and the Navy. + +I invite the attention of Congress to that part of the report of the +Secretary of the Navy in which he recommends the formation of a naval +reserve by the organization of the ex-sailors of the Navy. + +I repeat my recommendation made last year that proper provision should be +made for the rank of the commander in chief of the squadrons and fleets of +the Navy. The inconvenience attending the necessary precedence that most +foreign admirals have over our own whenever they meet in official functions +ought to be avoided. It impairs the prestige of our Navy and is a defect +that can be very easily removed. + +DEPARTMENT OF JUSTICE + +This department has been very active in the enforcement of the law. It has +been better organized and with a larger force than ever before in the +history of the Government. The prosecutions which have been successfully +concluded and which are now pending testify to the effectiveness of the +departmental work. + +The prosecution of trusts under the Sherman antitrust law has gone on +without restraint or diminution, and decrees similar to those entered in +the Standard Oil and the Tobacco cases have been entered in other suits, +like the suits against the Powder Trust and the Bathtub Trust. I am very +strongly convinced that a steady, consistent course in this regard, with a +continuing of Supreme Court decisions upon new phases of the trust question +not already finally decided is going to offer a solution of this +much-discussed and troublesome issue in a quiet, calm, and judicial way, +without any radical legislation changing the governmental policy in regard +to combinations now denounced by the Sherman antitrust law. I have already +recommended as an aid in this matter legislation which would declare +unlawful certain well-known phases of unfair competition in interstate +trade, and I have also advocated voluntary national incorporation for the +larger industrial enterprises, with provision for a closer supervision by +the Bureau of Corporations, or a board appointed for the purpose, so as to +make more certain compliance with the antitrust law on the one hand and to +give greater security to the stockholders against possible prosecutions on +the other. I believe, however, that the orderly course of litigation in the +courts and the regular prosecution of trusts charged with the violation of +the antitrust law is producing among business men a clearer and clearer +perception of the line of distinction between business that is to be +encouraged and business that is to be condemned, and that in this quiet way +the question of trusts can be settled and competition retained as an +economic force to secure reasonableness in prices and freedom and +independence in trade. + +REFORM OF COURT PROCEDURE + +I am glad to bring to the attention of Congress the fact that the Supreme +Court has radically altered the equity rules governing the procedure on the +equity side of all Federal courts, and though, as these changes have not +been yet put in practice so as to enable us to state from actual results +what the reform will accomplish, they are of such a character that we can +reasonably prophesy that they will greatly reduce the time and cost of +litigation in such courts. The court has adopted many of the shorter +methods of the present English procedure, and while it may take a little +while for the profession to accustom itself to these methods, it is certain +greatly to facilitate litigation. The action of the Supreme Court has been +so drastic and so full of appreciation of the necessity for a great reform +in court procedure that I have no hesitation in following tip this action +with a recommendation which I foreshadowed in my message of three years +ago, that the sections of the statute governing the procedure in the +Federal courts on the common-law side should be so amended as to give to +the Supreme Court the same right to make rules of procedure in common law +as they have, since the beginning of the court, exercised in equity. I do +not doubt that a full consideration of the subject will enable the court +while giving effect to the substantial differences in right and remedy +between the system of common law and the system of equity so to unite the +two procedures into the form of one civil action and to shorten the +procedure in such civil action as to furnish a model to all the State +courts exercising concurrent jurisdiction with the Federal courts of first +instance. + +Under the statute now in force the common-law procedure in each Federal +court is made to conform to the procedure in the State in which the court +is held. In these days, when we should be making progress in court +procedure, such a conformity statute makes the Federal method too dependent +upon the action of State legislatures. I can but think it a great +opportunity for Congress to intrust to the highest tribunal in this +country, evidently imbued with a strong spirit in favor of a reform of +procedure, the power to frame a model code of procedure, which, while +preserving all that is valuable and necessary of the rights and remedies at +common law and in equity, shall lessen the burden of the poor litigant to a +minimum in the expedition and cheapness with which his cause can be fought +or defended through Federal courts to final judgment. + +WORKMAN'S COMPENSATION ACT + +The workman's compensation act reported by the special commission appointed +by Congress and the Executive, which passed the Senate and is now pending +in the House, the passage of which I have in previous messages urged upon +Congress, I venture again to call to its attention. The opposition to it +which developed in the Senate, but which was overcome by a majority in that +body, seemed to me to grow out rather of a misapprehension of its effect +than of opposition to its principle. I say again that I think no act can +have a better effect directly upon the relations between the employer and +employee than this act applying to railroads and common carriers of an +interstate character, and I am sure that the passage of the act would +greatly relieve the courts of the heaviest burden of litigation that they +have, and would enable them to dispatch other business with a speed never +before attained in courts of justice in this country. + +THE WHITE HOUSE, December 19, 1912.To the Senate and House of +Representatives: + +This is the third of a series of messages in which I have brought to the +attention of the Congress the important transactions of the Government in +each of its departments during the last year and have discussed needed +reforms. + +HEADS OF DEPARTMENTS SHOULD HAVE SEATS ON THE FLOOR OF CONGRESS + +I recommend the adoption of legislation which shall make it the duty of +heads of departments-the members of the President's Cabinet -at convenient +times to attend the session of the House and the Senate, which shall +provide seats for them in each House, and give them the opportunity to take +part in all discussions and to answer questions of which they have had due +notice. The rigid holding apart of the executive and the legislative +branches of this Government has not worked for the great advantage of +either. There has been much lost motion in the machinery, due to the lack +of cooperation and interchange of views face to face between the +representatives of the Executive and the Members of the two legislative +branches of the Government. It was never intended that they should be +separated in the sense of not being in constant effective touch and +relationship to each other. The legislative and the executive each performs +its own appropriate function, but these functions must be coordinated. Time +and time again debates have arisen in each House upon issues which the +information of a particular department head would have enabled him, if +present, to end at once by a simple explanation or statement. Time and time +again a forceful and earnest presentation of facts and arguments by the +representative of the Executive whose duty it is to enforce the law would +have brought about a useful reform by amendment, which in the absence of +such a statement has failed of passage. I do not think I am mistaken in +saying that the presence of the members of the Cabinet on the floor of each +House would greatly contribute to the enactment of beneficial legislation. +Nor would this in any degree deprive either the legislative or the +executive of the independence which separation of the two branches has been +intended to promote. It would only facilitate their cooperation in the +public interest. + +On the other hand, I am sure that the necessity and duty imposed upon +department heads of appearing in each Ilouse and in answer to searching +questions, of rendering upon their feet an account of what they have done, +or what has been done by the administration, will spur each member of the +Cabinet to closer attention to the details of his department, to greater +familiarity with its needs, and to greater care to avoid the just criticism +which the answers brought out in questions put and discussions arising +between the Members of either House and the members of the Cabinet may +properly evoke. + +Objection is made that the members of the administration having no vote +could exercise no power on the floor of the House, and could not assume +that attitude of authority and control which the English parliamentary +Government have and which enables them to meet the responsibilities the +English system thrusts upon them. I agree that in certain respects it would +be more satisfactory if members of the Cabinet could at the same time be +Members of both Houses, with voting power, but this is impossible under our +system; and while a lack of this feature may detract from the influence of +the department chiefs, it will not prevent the good results which I have +described above both in the matter of legislation and in the matter of +administration. The enactment of such a law would be quite within the power +of Congress without constitutional amendment, and it has such possibilities +of usefulness that we might well make the experiment, and if we are +disappointed the misstep can be easily retraced by a repeal of the enabling +legislation. + +This is not a new proposition. In the House of Representatives, in the +Thirty-eighth Congress, the proposition was referred to a select committee +of seven Members. The committee made an extensive report, and urged the +adoption of the reform. The report showed that our history had not been +without illustration of the necessity and the examples of the practice by +pointing out that in early days Secretaries were repeatedly called to the +presence of either Rouse for consultation, advice, and information. It also +referred to remarks of Mr. justice Story in his Commentaries on the +Constitution, in which he urgently presented the wisdom of such a change. +This report is to be found in Volume I of the Reports of Committees of the +First Session of the Thirty-eighth Congress, April 6, 1864. + +Again, on February 4, 1881, a select committee of the Senate recommended +the passage of a similar bill, and made a report, In which, while approving +the separation of the three branches, the executive, legislative, and +judicial, they point out as a reason for the proposed change that, although +having a separate existence, the branches are "to cooperate, each with the +other, as the different members of the human body must cooperate, with each +other in order to form the figure and perform the duties of a perfect +man." + +The report concluded as follows: This system will require the selection of +the strongest men to be heads of departments and will requirethem to be +well equipped with the knowledge of their offices. It will also require the +strongest men to be the leaders ofCongress and participate in debate. It +will bring these strong men in contact, perhaps into conflict, to advance +the publicweal, and thus stimulate their abilities and their efforts, and +will thus assuredly result to the good of the country. + +If it should appear by actual experience that the heads of departments in +fact have not time to perform theadditional duty imposed on them by this +bill, the force in their offices should be increased or the duties +devolving onthem personally should be diminished. An undersecretary should +be appointed to whom could be confided that routine ofadministration which +requires only order and accuracy. The principal officers could then confine +their attention to thoseduties which require wise discretion and +intellectual activity. Thus they would have abundance of time for their +dutiesunder this bill. Indeed, your committee believes that the public +interest would be subserved if the Secretaries wererelieved of the +harassing cares of distributing clerkships and closely supervising the mere +machinery of the departments.Your committee believes that the adoption of +this bill and the effective execution of its provisions will be the first +steptoward a sound civil-service reform which will secure a larger wisdom +in the adoption of policies and a better system intheir execution.(Signed) +GEO. H. PENDLETON. W. B. ALLISON. D. W. VOORHEES. J. G. BLAINE. M. C. +BUTLER. JOHN J. INGALLS. 0. H. PLATT. J. T. FARLEY. It would be difficult +to mention the names of higher authority in the practical knowledge of our +Government than those which are appended to this report. + +POSTAL SAVINGS BANK SYSTEM + +The Postal Savings Bank System has been extended so that it now includes +4,004 fourth-class post offices', as well as 645 branch offices and +stations in the larger cities. There are now 12,812 depositories at which +patrons of the system may open accounts. The number of depositors is +300,000 and the amount of their deposits is approximately $28,000,000, not +including $1,314,140 which has been with drawn by depositors for the +purpose of buying postal savings bonds. Experience demonstrates the value +of dispensing with the pass-book and introducing in its place a certificate +of deposit. The gross income of the postal savings system for the fiscal +year ending June 30, 1913, will amount to $700,000 and the interest payable +to depositors to $300,000. The cost of supplies, equipment, and salaries is +$700,000. It thus appears that the system lacks $300,000 a year of paying +interest and expenses. It is estimated, however, that when the deposits +have reached the sum Of $50,000,000, which at the present rate they soon +will do, the system will be self-sustaining. By law the postal savings +funds deposited at each post office are required to be redeposited in local +banks. State and national banks to the number of 7,357 have qualified as +depositories for these funds. Such deposits are secured by bonds +aggregating $54,000,000. Of this amount, $37,000,000 represent municipal +bonds. + +PARCEL POST + +In several messages I have favored and recommended the adoption of a system +of parcel post. In the postal appropriation act of last year a general +system was provided and its installation was directed by the 1st of +January. This has entailed upon the Post Office Department a great deal of +very heavy labor, but the Postmaster General informs me that on the date +selected, to wit, the 1st of January, near at hand, the department will be +in readiness to meet successfully the requirements of the public. + +CLASSIFICATION OF POSTMASTERS + +A trial, during the past three years, of the system of classifying +fourth-class postmasters in that part of the country lying between the +Mississippi River on the west, Canada on the north, the Atlantic Ocean on +the east, and Mason and Dixon's line on the south has been sufficiently +satisfactory to justify the postal authorities in recommending the +extension of the order to include all the fourth-class postmasters in the +country. In September, 1912, upon the suggestion of the Postmaster General, +I directed him to prepare an order which should put the system in effect, +except in Alaska, Guam, Hawaii, Porto Rico, and Samoa. Under date of +October 15 1 issued such an order which affected 36,000 postmasters. By the +order the post offices were divided into groups A and B. Group A includes +all postmasters whose compensation is $500 or more, and group B those whose +compensation is less than that sum. Different methods are pursued in the +selection of the postmasters for group A and group, B. Criticism has been +made of this order on the ground that the motive for it was political. +Nothing could be further from the truth. The order was made before the +election and in the interest of efficient public service. I have several +times requested Congress to give me authority to put first-, second-, and +third-class postmasters, and all other local officers, including +internal-revenue officers, customs officers, United States marshals, and +the local agents of the other departments under the classification of the +civil-service law by taking away the necessity for confirming such +appointments by the Senate. I deeply regret the failure of Congress to +follow these recommendations. The change would have taken out of politics +practically every local officer and would have entirely cured the evils +growing out of what under the present law must always remain a remnant of +the spoils system. + +COMPENSATION TO RAILWAYS FOR CARRYING MAILS + +It is expected that the establishment of a parcel post on January 1st will +largely increase the amount of mail matter to be transported by the +railways, and Congress should be prompt to provide a way by which they may +receive the additional compensation to which they will be entitled. The +Postmaster General urges that the department's plan for a complete +readjustment of the system of paying the railways for carrying the mails be +adopted, substituting space for weight as the principal factor in fixing +compensation. Under this plan it will be possible to determine without +delay what additional payment should be made on account of the parcel post. +The Postmaster General's recommendation is based on the results of a +far-reaching investigation begun early in the administration with the +object of determining what it costs the railways to carry the mails. The +statistics obtained during the course of the inquiry show that while many +of the railways, and particularly the large systems, were making profits +from mail transportations, certain of the lines were actually carrying the +mails at a loss. As a result of the investigation the department, after +giving the subject careful consideration, decided to urge the abandonment +of the present plan of fixing compensation on the basis of the weight of +the mails carried, a plan that has proved to be exceedingly expensive and +in other respects unsatisfactory. Under the method proposed the railway +companies will annually submit to the department reports showing what it +costs them to carry the mails, and this cost will be apportioned on the +basis of the car space engaged, payment to be allowed at the rate thus +determined in amounts that will cover the cost and a reasonable profit. If +a railway is not satisfied with the manner in which the department +apportions the cost in fixing compensation, it is to have the right, tinder +the new plan, of appealing to the Interstate Commerce Commission. This +feature of the proposed law would seem to insure a fair treatment of the +railways. It is hoped that Congress will give the matter immediate +attention and that the method of compensation recommended by the department +or some other suitable plan will be promptly authorized. + +DEPARTMENT OF THE INTERIOR + +The Interior Department, in the problems of administration included within +its jurisdiction, presents more difficult questions than any other. This +has been due perhaps to temporary causes of a political character, but more +especially to the inherent difficulty in the performance of some of the +functions which are assigned to it. Its chief duty is the guardianship of +the public domain and the disposition of that domain to private ownership +under homestead, mining, and other laws, by which patents from the +Government to the individual are authorized on certain conditions. During +the last decade the public seemed to become suddenly aware that a very +large part of its domain had passed from its control into private +ownership, under laws not well adapted to modern conditions, and also that +in the doing of this the provisions of existing law and regulations adopted +in accordance with law had not been strictly observed, and that in the +transfer of title much fraud had intervened, to the pecuniary benefit of +dishonest persons. There arose thereupon a demand for conservation of the +public domain, its protection against fraudulent diminution, and the +preservation of that part of it from private acquisition which it seemed +necessary to keep for future public use. The movement, excellent in the +intention which prompted it, and useful in its results, has nevertheless +had some bad effects, which the western country has recently been feeling +and in respect of which there is danger of a reaction toward older abuses +unless we can attain the golden mean, which consists in the prevention of +the mere expIoitation of the public domain for private purposes while at +the same, time facilitating its development for the benefit of the local +public. + +The land laws need complete revision to secure proper conservation on the +one hand of land that ought to be kept in public use and, on the other +hand, prompt disposition of those lands which ought to be disposed in +private ownership or turned over to private use by properly guarded leases. +In addition to this there are not enough officials in our Land Department +with legal knowledge sufficient promptly to make the decisions which are +called for. The whole land-laws system should be reorganized, and not until +it is reorganized, will decisions be made as promptly as they ought, or +will men who have earned title to public land under the statute receive +their patents within a reasonably short period. The present administration +has done what it could in this regard, but the necessity for reform and +change by a revision of the laws and an increase and reorganization of the +force remains, and I submit to Congress the wisdom of a full examination of +this subject, in order that a very large and important part of our people +in the West may be relieved from a just cause of irritation. + +I invite your attention to the discussion by the Secretary of the Interior +of the need for legislation with respect to mining claims, leases of coal +lands in this country and in Alaska , and for similar disposition of oil, +phosphate, and potash lands, and also to his discussion of the proper use +to be made of water-power sites held by the Government. Many of these lands +are now being withheld from use by the public under the general withdrawal +act which was passed by the last Congress. That act was not for the purpose +of disposing of the question, but it was for the purpose of preserving the +lands until the question could be solved. I earnestly urge that the matter +is of the highest importance to our western fellow citizens and ought to +command the immediate attention of the legislative branch of the +Government. + +Another function which the Interior Department has to perform is that of +the guardianship of Indians. In spite of everything which has been said in +criticism of the policy of our Government toward the Indians, the amount of +wealth which is now held by it for these wards per capita shows that the +Government has been generous; but the management of so large an estate, +with the great variety of circumstances that surround each tribe and each +case, calls for the exercise of the highest business discretion, and the +machinery provided in the Indian Bureau for the discharge of this function +is entirely inadequate. The position of Indian commissioner demands the +exercise of business ability of the first order, and it is difficult to +secure such talent for the salary provided. + +The condition of health of the Indian and the prevalence in the tribes of +curable diseases has been exploited recently in the press. In a message to +Congress at its last session I brought this subject to its attention and +invited a special appropriation, in order that our facilities for +overcoming diseases among the Indians might be properlv increased, but no +action was then taken by Congress on the subject, nor has such +appropriation been made since. + +The commission appointed by authority of the Congress to report on proper +method of securing railroad development in Alaska is formulating its +report, and I expect to have an opportunity before the end of this session +to submit its recommendations. + +DEPARTMENT OF AGRICULTURE + +The far-reaching utility of the educational system carried on by the +Department of Agriculture for the benefit of the farmers of our country +calls for no elaboration. Each year there is a growth in the variety of +facts which it brings out for the benefit of the farmer, and each year +confirms the wisdom of the expenditure of the appropriations made for that +department. + +PURE-FOOD LAW + +The Department of Agriculture is charged with the execution of the +pure-food law. The passage of this encountered much opposition from +manufacturers and others who feared the effect upon their business of the +enforcement of its provisions. The opposition aroused the just indignation +of the public, and led to an intense sympathy with the severe and rigid +enforcement of the provisions of the new law. It had to deal in many +instances with the question whether or not products of large business +enterprises, in the form of food preparations, were deleterious to the +public health; and while in a great majority of instances this issue was +easily determinable, there were not a few cases in which it was hard to +draw the line between a useful and a harmful food preparation. In cases +like this when a decision involved the destruction of great business +enterprises representing the investment of large capital and the +expenditure of great energy and ability, the danger of serious injustice +was very considerable in the enforcement of a new law under the spur of +great public indignation. The public officials charged with executing the +law might do injustice in heated controversy through unconscious pride of +opinion and obstinacy of conclusion. For this reason President Roosevelt +felt justified in creating a board of experts, known as the Remsen Board, +to whom in cases of much importance an appeal might be taken and a review +had of a decision of the Bureau of Chemistry in the Agricultural +Department. I heartily agree that it was wise to create this board in order +that injustice might not be done. The questions which arise are not +generally those involving palpable injury to health, but they are upon the +narrow and doubtful line in respect of which it is better to be in some +error not dangerous than to be radically destructive. I think that the time +has come for Congress to recognize the necessity for some such tribunal of +appeal and to make specific statutory provision for it. While we are +struggling to suppress an evil of great proportions like that of impure +food, we must provide machinery in the law itself to prevent its becoming +an instrument of oppression, and we ought to enable those whose business is +threatened with annihilation to have some tribunal and some form of appeal +in which they have a complete day in court. + +AGRICULTURAL CREDITS + +I referred in my first message to the question of improving the system of +agricultural credits. The Secretary of Agriculture has made an +investigation into the matter of credits in this country, and I commend a +consideration of the information which through his agents he has been able +to collect. It does not in any way minimize the importance of the proposal, +but it gives more accurate information upon some of the phases of the +question than we have heretofore had. + +DEPARTMENT OF COMMERCE AND LABOR + +I commend to Congress an examination of the report of the Secretary of +Commerce and Labor, and especially that part in which he discusses the +office of the Bureau of Corporations, the value to commerce of a proposed +trade commission, and the steps which he has taken to secure the +organization of a national chamber of commerce. I heartily commend his view +that the plan of a trade commission which looks to the fixing of prices is +altogether impractical and ought not for a moment to be considered as a +possible solution of the trust question. + +The trust question in the enforcement of the Sherman antitrust law is +gradually solving itself, is maintaining the principle and restoring the +practice of competition, and if the law is quietly but firmly enforced, +business will adjust itself to the statutory requirements, and the unrest +in commercial circles provoked by the trust discussion will disappear. + +PANAMA-PACIFIC INTERNATIONAL EXPOSITION + +In conformity with a joint resolution of Congress, an Executive +proclamation was issued last February, inviting the nations of the world to +participate in the Panama-Pacific International Exposition to be held at +San Francisco to celebrate the construction of the Panama, Canal. A +sympathetic response was immediately forthcoming, and several nations have +already selected the sites for their buildings. In furtherance of my +invitation, a special commission visited European countries during the past +summer, and received assurance of hearty cooperation in the task of +bringing together a universal industrial, military, and naval display on an +unprecedented scale. It is evident that the exposition will be an accurate +mirror of the world's activities as they appear 400 years after the date of +the discovery of the Pacific Ocean. + +It is the duty of the United States to make the nations welcome at San +Francisco and to facilitate such acquaintance between them and ourselves as +will promote the expansion of commerce and familiarize the world with the +new trade route through the Panama Canal. The action of the State +governments and individuals assures a comprehensive exhibit of the +resources of this country and of the progress of the people. This +participation by State and individuals should be supplemented by an +adequate showing of the varied and unique activities of the National +Government. The United States can not with good grace invite foreign +governments to erect buildings and make expensive exhibits while itself +refusing to participate. Nor would it be wise to forego the opportunity to +join with other nations in the inspiring interchange of ideas tending to +promote intercourse, friendship, and commerce. It is the duty of the +Government to foster and build up commerce through the canal, just as it +was the duty of the Government to construct it. + +I earnestly recommend the appropriation at this session of such a sum as +will enable the United States to construct a suitable building, install a +governmental exhibit, and otherwise participate in the Panama-Pacific +International Exposition in a manner commensurate with the dignity of a +nation whose guests are to be the people of the world. I recommend also +such legislation as will facilitate the entry of material intended for +exhibition and protect foreign exhibitors against infringement of patents +and the unauthorized copying of patterns and designs. All aliens sent to +San Francisco to construct and care for foreign buildings and exhibits +should be admitted without restraint or embarrassment. + +THE DISTRICT OF COLUMBIA AND THE CITY OF WASHINGTON + +The city of Washington is a beautiful city, with a population of 352,936, +of whom 98,667 are colored. The annual municipal budget is about +$14,ooo,ooo. The presence of the National Capital and other governmental +structures constitutes the chief beauty and interest of the city. The +public grounds are extensive, and the opportunities for improving the city +and making it still more attractive are very great. Under a plan adopted +some years ago, one half the cost of running the city is paid by taxation +upon the property, real and personal, of the citizens and residents, and +the other half is borne by the General Government. The city is expanding at +a remarkable rate, and this can only be accounted for by the coming here +from other parts of the country of well-to-do people who, having finished +their business careers elsewhere, build and make this their permanent place +of residence. + +On the whole, the city as a municipality is very well governed. It is well +lighted, the water supply is good, the streets are well paved, the police +force is well disciplined, crime is not flagrant, and while it has purlieus +and centers of vice, like other large cities, they are not exploited, they +do not exercise any influence or control in the government of the city, and +they are suppressed in as far as it has been found practicable. Municipal +graft is inconsiderable. There are interior courts in the city that are +noisome and centers of disease and the refuge of criminals, but Congress +has begun to clean these out, and progress has been made in the case of the +most notorious of these, which is known as "Willow Tree Alley." This +movement should continue. + +The mortality for the past year was at the rate Of 17.80 per 1,000 of both +races; among the whites it was 14.61 per thousand, and among the blacks +26.12 per thousand. These are the lowest mortality rates ever recorded in +the District. + +One of the most crying needs in the government of the District is a +tribunal or public authority for the purpose of supervising the +corporations engaged in the operation of public utilities. Such a bill is +pending in Congress and ought to pass. Washington should show itself under +the direction of Congress to be a city with a model form of government, but +as long as such authority over public utilities is withheld from the +municipal government, it must always be de- fective. + +Without undue criticism of the present street railway accommodations, it +can be truly said that under the spur of a public utilities commission they +might be substantially improved. + +While the school system of Washington perhaps might be bettered in the +economy of its management and the distribution of its buildings, its +usefulness has nevertheless greatly increased in recent years, and it now +offers excellent facilities for primary and secondary education. + +From time to time there is considerable agitation in Washington in favor of +granting the citizens of the city the franchise and constituting an +elective government. I am strongly opposed to this change. The history of +Washington discloses a number of experiments of this kind, which have +always been abandoned as unsatisfactory. The truth is this is a city +governed by a popular body, to wit, the Congress of the United States, +selected from the people of the United States, who own Washington. The +people who come here to live do so with the knowledge of the origin of the +city and the restrictions, and therefore voluntarily give up the privilege +of living in a municipality governed by popular vote. Washington is so +unique in its origin and in its use for housing and localizing the +sovereignty of the Nation that the people who live here must regard its +peculiar character and must be content to subject themselves to the control +of a body selected by all the people of the Nation. I agree that there are +certain inconveniences growing out of the government of a city by a +national legislature like Congress, and it would perhaps be possible to +lessen these by the delegation by Congress to the District Commissioners of +greater legislative power for the enactment of local laws than they now +possess, especially those of a police character. + +Every loyal American has a personal pride in the beauty of Washington and +in its development and growth. There is no one with a proper appreciation +of our Capital City who would favor a niggardly policy in respect to +expenditures from the National Treasury to add to the attractiveness of +this city, which belongs to every citizen of the entire country, and which +no citizen visits without a sense of pride of ownership. We have had +restored by a Commission of Fine Arts, at the instance of a committee of +the Senate, the original plan of the French engineer L'Enfant for the city +of Washington, and we know with great certainty the course which the +improvement of Washington should take. Why should there be delay in making +this improvement in so far as it involves the extension of the parking +system and the construction of greatly needed public buildings ? +Appropriate buildings for the State Department, the Department of justice, +and the Department of Commerce and Labor have been projected, plans have +been approved, and nothing is wanting but the appropriations for the +beginning and completion of the structures. A hall of archives is also +badly needed, but nothing has been done toward its construction, although +the land for it has long been bought and paid for. Plans have been made for +the union of Potomac Park with the valley of Rock Creek and Rock Creek +Park, and the necessity for the connection between the Soldiers' Home and +Rock Creek Park calls for no comment. I ask again why there should be delay +in carrying out these plans We have the money in the Treasury, the plans +are national in their scope, and the improvement should be treated as a +national project. The plan will find a hearty approval throughout the +country. I am quite sure, from the information which I have, that, at +comparatively small expense, from that part of the District of Columbia +which was retroceded to Virginia, the portion including the Arlington +estate, Fort Myer, and the palisades of the Potomac can be acquired by +purchase and the jurisdiction of the State of Virginia over this land ceded +to the Nation. This ought to be done. + +The construction of the Lincoln Memorial and of a memorial bridge from the +base of the Lincoln Monument to Arlington would be an appropriate and +symbolic expression of the union of the North and the South at the Capital +of the Nation. I urge upon Congress the appointment of a commission to +undertake these national improvements, and to submit a plan for their +execution; and when the plan has been submitted and approved, and the work +carried out, Washington will really become what it ought to be-the most +beautiful city in the world. + + + +*** END OF THE PROJECT GUTENBERG EBOOK OF ADDRESSES BY WILLIAM H. 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Please do not remove it. Do not change or edit the +header without written permission. + +Please read the "legal small print," and other information about the +eBook and Project Gutenberg at the bottom of this file. Included is +important information about your specific rights and restrictions in +how the file may be used. You can also find out about how to make a +donation to Project Gutenberg, and how to get involved. + + +**Welcome To The World of Free Plain Vanilla Electronic Texts** + +**eBooks Readable By Both Humans and By Computers, Since 1971** + +*****These eBooks Were Prepared By Thousands of Volunteers!***** + + +Title: State of the Union Addresses of William H. Taft + +Author: William H. Taft + +Release Date: February, 2004 [EBook #5033] +[Yes, we are more than one year ahead of schedule] +[This file was first posted on April 11, 2002] +[Date last updated: December 16, 2004] + +Edition: 11 + +Language: English + +Character set encoding: ASCII + +*** START OF THE PROJECT GUTENBERG EBOOK OF ADDRESSES BY WILLIAM H. TAFT *** + + + + +This eBook was produced by James Linden. + +The addresses are separated by three asterisks: *** + +Dates of addresses by William H. Taft in this eBook: + December 7, 1909 + December 6, 1910 + December 5, 1911 + December 3, 1912 + + + +*** + +State of the Union Address +William H. Taft +December 7, 1909 + +The relations of the United States with all foreign governments have +continued upon the normal basis of amity and good understanding, and are +very generally satisfactory. EUROPE. + +Pursuant to the provisions of the general treaty of arbitration concluded +between the United States and Great Britain, April 4, 1908, a special +agreement was entered into between the two countries on January 27, 1909, +for the submission of questions relating to the fisheries on the North +Atlantic Coast to a tribunal to be formed from members of the Permanent +Court of Arbitration at The Hague. + +In accordance with the provisions of the special agreement the printed case +of each Government was, on October 4 last, submitted to the other and to +the Arbitral Tribunal at The Hague, and the counter case of the United +States is now in course of preparation. + +The American rights under the fisheries article of the Treaty of 1818 have +been a cause of difference between the United States and Great Britain for +nearly seventy years. The interests involved are of great importance to the +American fishing industry, and the final settlement of the controversy will +remove a source of constant irritation and complaint. This is the first +case involving such great international questions which has been submitted +to the Permanent Court of Arbitration at The Hague. + +The treaty between the United States and Great Britain concerning the +Canadian International boundary, concluded April 11, 1908, authorizes the +appointment of two commissioners to define and mark accurately the +international boundary line between the United States and the Dominion of +Canada in the waters of the Passamaquoddy Bay, and provides for the +exchange of briefs within the period of six months. The briefs were duly +presented within the prescribed period, but as the commissioners failed to +agree within six months after the exchange of the printed statements, as +required by the treaty, it has now become necessary to resort to the +arbitration provided for in the article. + +The International Fisheries Commission appointed pursuant to and under the +authority of the Convention of April 11, 1908, between the United States +and Great Britain, has completed a system of uniform and common +international regulations for the protection and preservation of the food +fishes in international boundary waters of the United States and Canada. + +The regulations will be duly submitted to Congress with a view to the +enactment of such legislation as will be necessary under the convention to +put them into operation. + +The Convention providing for the settlement of international differences +between the United States and Canada, including the apportionment between +the two countries of certain of the boundary waters and the appointment of +commissioners to adjust certain other questions, signed on the 11th day of +January, 1909, and to the ratification of which the Senate gave its advice +and consent on March 3, 1909, has not yet been ratified on the part of +Great Britain. + +Commissioners have been appointed on the part of the United States to act +jointly with Commissioners on the part of Canada in examining into the +question of obstructions in the St. John River between Maine and New +Brunswick, and to make recommendations for the regulation of the uses +thereof, and are now engaged in this work. + +Negotiations for an international conference to consider and reach an +arrangement providing for the preservation and protection of the fur seals +in the North Pacific are in progress with the Governments of Great Britain, +Japan, and Russia. The attitude of the Governments interested leads me to +hope for a satisfactory settlement of this question as the ultimate outcome +of the negotiations. + +The Second Peace Conference recently held at The Hague adopted a convention +for the establishment of an International Prize Court upon the joint +proposal of delegations of the United States, France, Germany and Great +Britain. The law to be observed by the Tribunal in the decision of prize +cases was, however, left in an uncertain and therefore unsatisfactory +state. Article 7 of the Convention provided that the Court was to be +governed by the provisions of treaties existing between the belligerents, +but that "in the absence of such provisions, the court shall apply the +rules of international law. If no generally recognized rule exists, the +court shall give judgment in accordance with the general principles of +justice and equity." As, however, many questions in international maritime +law are understood differently and therefore interpreted differently in +various countries, it was deemed advisable not to intrust legislative +powers to the proposed court, but to determine the rules of law properly +applicable in a Conference of the representative maritime nations. Pursuant +to an invitation of Great Britain a conference was held at London from +December 2, 1908, to February 26, 1909, in which the following Powers +participated: the United States, Austria-Hungary, France, Germany, Great +Britain, Italy, Japan, the Netherlands, Russia and Spain. The conference +resulted in the Declaration of London, unanimously agreed to and signed by +the participating Powers, concerning among other matters, the highly +important subjects of blockade, contraband, the destruction of neutral +prizes, and continuous voyages. The declaration of London is an eminently +satisfactory codification of the international maritime law, and it is +hoped that its reasonableness and fairness will secure its general +adoption, as well as remove one of the difficulties standing in the way of +the establishment of an International Prize Court. + +Under the authority given in the sundry civil appropriation act, approved +March 4, 1909, the United States was represented at the International +Conference on Maritime Law at Brussels. The Conference met on the 28th of +September last and resulted in the signature ad referendum of a convention +for the unification of certain regulations with regard to maritime +assistance and salvage and a convention for the unification of certain +rules with regard to collisions at sea. Two new projects of conventions +which have not heretofore been considered in a diplomatic conference, +namely, one concerning the limitation of the responsibility of shipowners, +and the other concerning marine mortgages and privileges, have been +submitted by the Conference to the different governments. + +The Conference adjourned to meet again on April 11, 1910. + +The International Conference for the purpose of promoting uniform +legislation concerning letters of exchange, which was called by the +Government of the Netherlands to meet at The Hague in September, 1909, has +been postponed to meet at that capital in June, 1910. The United States +will be appropriately represented in this Conference under the provision +therefor already made by Congress. + +The cordial invitation of Belgium to be represented by a fitting display of +American progress in the useful arts and inventions at the World's Fair to +be held at Brussels in 1910 remains to be acted upon by the Congress. +Mindful of the advantages to accrue to our artisans and producers in +competition with their Continental rivals, I renew the recommendation +heretofore made that provision be made for acceptance of the invitation and +adequate representation in the Exposition. The question arising out of the +Belgian annexation of the Independent State of the Congo, which has so long +and earnestly preoccupied the attention of this Government and enlisted the +sympathy of our best citizens, is still open, but in a more hopeful stage. +This Government was among the foremost in the great work of uplifting the +uncivilized regions of Africa and urging the extension of the benefits of +civilization, education, and fruitful open commerce to that vast domain, +and is a party to treaty engagements of all the interested powers designed +to carry out that great duty to humanity. The way to better the original +and adventitious conditions, so burdensome to the natives and so +destructive to their development, has been pointed out, by observation and +experience, not alone of American representatives, but by cumulative +evidence from all quarters and by the investigations of Belgian Agents. The +announced programmes of reforms, striking at many of the evils known to +exist, are an augury of better things. The attitude of the United States is +one of benevolent encouragement, coupled with a hopeful trust that the good +work, responsibly undertaken and zealously perfected to the accomplishment +of the results so ardently desired, will soon justify the wisdom that +inspires them and satisfy the demands of humane sentiment throughout the +world. + +A convention between the United States and Germany, under which the +nonworking provisions of the German patent law are made inapplicable to the +patents of American citizens, was concluded on February 23, 1909, and is +now in force. Negotiations for similar conventions looking to the placing +of American inventors on the same footing as nationals have recently been +initiated with other European governments whose laws require the local +working of foreign patents. + +Under an appropriation made at the last session of the Congress, a +commission was sent on American cruisers to Monrovia to investigate the +interests of the United States and its citizens in Liberia. Upon its +arrival at Monrovia the commission was enthusiastically received, and +during its stay in Liberia was everywhere met with the heartiest +expressions of good will for the American Government and people and the +hope was repeatedly expressed on all sides that this Government might see +its way clear to do something to relieve the critical position of the +Republic arising in a measure from external as well as internal and +financial embarrassments. The Liberian Government afforded every facility +to the Commission for ascertaining the true state of affairs. The +Commission also had conferences with representative citizens, interested +foreigners and the representatives of foreign governments in Monrovia. +Visits were made to various parts of the Republic and to the neighboring +British colony of Sierra Leone, where the Commission was received by and +conferred with the Governor. + +It will be remembered that the interest of the United States in the +Republic of Liberia springs from the historical fact of the foundation of +the Republic by the colonization of American citizens of the African race. +In an early treaty with Liberia there is a provision under which the United +States may be called upon for advice or assistance. Pursuant to this +provision and in the spirit of the moral relationship of the United States +to Liberia, that Republic last year asked this Government to lend +assistance in the solution of certain of their national problems, and hence +the Commission was sent. + +The report of our commissioners has just been completed and is now under +examination by the Department of State. It is hoped that there may result +some helpful measures, in which case it may be my duty again to invite your +attention to this subject. + +The Norwegian Government, by a note addressed on January 26, 1909, to the +Department of State, conveyed an invitation to the Government of the United +States to take part in a conference which it is understood will be held in +February or March, 1910, for the purpose of devising means to remedy +existing conditions in the Spitzbergen Islands. + +This invitation was conveyed under the reservation that the question of +altering the status of the islands as countries belonging to no particular +State, and as equally open to the citizens and subjects of all States, +should not be raised. + +The European Powers invited to this Conference by the Government of Norway +were Belgium, Denmark, France, Germany, Great Britain, Russia, Sweden and +the Netherlands. + +The Department of State, in view of proofs filed with it in 1906, showing +the American possession, occupation, and working of certain coal-bearing +lands in Spitzbergen, accepted the invitation under the reservation above +stated, and under the further reservation that all interests in those +islands already vested should be protected and that there should be +equality of opportunity for the future. It was further pointed out that +membership in the Conference on the part of the United States was qualified +by the consideration that this Government would not become a signatory to +any conventional arrangement concluded by the European members of the +Conference which would imply contributory participation by the United +States in any obligation or responsibility for the enforcement of any +scheme of administration which might be devised by the Conference for the +islands. + +THE NEAR EAST. + +His Majesty Mehmed V, Sultan of Turkey, recently sent to this country a +special embassy to announce his accession. The quick transition of the +Government of the Ottoman Empire from one of retrograde tendencies to a +constitutional government with a Parliament and with progressive modern +policies of reform and public improvement is one of the important phenomena +of our times. Constitutional government seems also to have made further +advance in Persia. These events have turned the eyes of the world upon the +Near East. In that quarter the prestige of the United States has spread +widely through the peaceful influence of American schools, universities and +missionaries. There is every reason why we should obtain a greater share of +the commerce of the Near East since the conditions are more favorable now +than ever before. + +LATIN AMERICA. + +One of the happiest events in recent Pan-American diplomacy was the +pacific, independent settlement by the Governments of Bolivia and Peru of a +boundary difference between them, which for some weeks threatened to cause +war and even to entrain embitterments affecting other republics less +directly concerned. From various quarters, directly or indirectly +concerned, the intermediation of the United States was sought to assist in +a solution of the controversy. Desiring at all times to abstain from any +undue mingling in the affairs of sister republics and having faith in the +ability of the Governments of Peru and Bolivia themselves to settle their +differences in a manner satisfactory to themselves which, viewed with +magnanimity, would assuage all embitterment, this Government steadily +abstained from being drawn into the controversy and was much gratified to +find its confidence justified by events. + +On the 9th of July next there will open at Buenos Aires the Fourth +Pan-American Conference. This conference will have a special meaning to the +hearts of all Americans, because around its date are clustered the +anniversaries of the independence of so many of the American republics. It +is not necessary for me to remind the Congress of the political, social and +commercial importance of these gatherings. You are asked to make liberal +appropriation for our participation. If this be granted, it is my purpose +to appoint a distinguished and representative delegation, qualified +fittingly to represent this country and to deal with the problems of +intercontinental interest which will there be discussed. + +The Argentine Republic will also hold from May to November, 1910, at Buenos +Aires, a great International Agricultural Exhibition in which the United +States has been invited to participate. Considering the rapid growth of the +trade of the United States with the Argentine Republic and the cordial +relations existing between the two nations, together with the fact that it +provides an opportunity to show deference to a sister republic on the +occasion of the celebration of its national independence, the proper +Departments of this Government are taking steps to apprise the interests +concerned of the opportunity afforded by this Exhibition, in which +appropriate participation by this country is so desirable. The designation +of an official representative is also receiving consideration. + +To-day, more than ever before, American capital is seeking investment in +foreign countries, and American products are more and more generally +seeking foreign markets. As a consequence, in all countries there are +American citizens and American interests to be protected, on occasion, by +their Government. These movements of men, of capital, and of commodities +bring peoples and governments closer together and so form bonds of peace +and mutual dependency, as they must also naturally sometimes make passing +points of friction. The resultant situation inevitably imposes upon this +Government vastly increased responsibilities. This Administration, through +the Department of State and the foreign service, is lending all proper +support to legitimate and beneficial American enterprises in foreign +countries, the degree of such support being measured by the national +advantages to be expected. A citizen himself can not by contract or +otherwise divest himself of the right, nor can this Government escape the +obligation, of his protection in his personal and property rights when +these are unjustly infringed in a foreign country. To avoid ceaseless +vexations it is proper that in considering whether American enterprise +should be encouraged or supported in a particular country, the Government +should give full weight not only to the national, as opposed to the +individual benefits to accrue, but also to the fact whether or not the +Government of the country in question is in its administration and in its +diplomacy faithful to the principles of moderation, equity and justice upon +which alone depend international credit, in diplomacy as well as in +finance. + +The Pan-American policy of this Government has long been fixed in its +principles and remains unchanged. With the changed circumstances of the +United States and of the Republics to the south of us, most of which have +great natural resources, stable government and progressive ideals, the +apprehension which gave rise to the Monroe Doctrine may be said to have +nearly disappeared, and neither the doctrine as it exists nor any other +doctrine of American policy should be permitted to operate for the +perpetuation of irresponsible government, the escape of just obligations, +or the insidious allegation of dominating ambitions on the part of the +United States. + +Beside the fundamental doctrines of our Pan-American policy there have +grown up a realization of political interests, community of institutions +and ideals, and a flourishing commerce. All these bonds will be greatly +strengthened as time goes on and increased facilities, such as the great +bank soon to be established in Latin America, supply the means for building +up the colossal intercontinental commerce of the future. + +My meeting with President Diaz and the greeting exchanged on both American +and Mexican soil served, I hope, to signalize the close and cordial +relations which so well bind together this Republic and the great Republic +immediately to the south, between which there is so vast a network of +material interests. + +I am happy to say that all but one of the cases which for so long vexed our +relations with Venezuela have been settled within the past few months and +that, under the enlightened regime now directing the Government of +Venezuela, provision has been made for arbitration of the remaining case +before The Hague Tribunal. On July 30, 1909, the Government of Panama +agreed, after considerable negotiation, to indemnify the relatives of the +American officers and sailors who were brutally treated, one of them +having, indeed, been killed by the Panaman police this year. + +The sincere desire of the Government of Panama to do away with a situation +where such an accident could occur is manifest in the recent request in +compliance with which this Government has lent the services of an officer +of the Army to be employed by the Government of Panama as Instructor of +Police. + +The sanitary improvements and public works undertaken in Cuba prior to the +present administration of that Government, in the success of which the +United States is interested under the treaty, are reported to be making +good progress and since the Congress provided for the continuance of the +reciprocal commercial arrangement between Cuba and the United States +assurance has been received that no negotiations injuriously affecting the +situation will be undertaken without consultation. The collection of the +customs of the Dominican Republic through the general receiver of customs +appointed by the President of the United States in accordance with the +convention of February 8, 1907, has proceeded in an uneventful and +satisfactory manner. The customs receipts have decreased owing to disturbed +political and economic conditions and to a very natural curtailment of +imports in view of the anticipated revision of the Dominican tariff +schedule. The payments to the fiscal agency fund for the service of the +bonded debt of the Republic, as provided by the convention, have been +regularly and promptly made, and satisfactory progress has been made in +carrying out the provisions of the convention looking towards the +completion of the adjustment of the debt and the acquirement by the +Dominican Government of certain concessions and monopolies which have been +a burden to the commerce of the country. In short, the receivership has +demonstrated its ability, even under unfavorable economic and political +conditions, to do the work for which it was intended. + +This Government was obliged to intervene diplomatically to bring about +arbitration or settlement of the claim of the Emery Company against +Nicaragua, which it had long before been agreed should be arbitrated. A +settlement of this troublesome case was reached by the signature of a +protocol on September 18, 1909. + +Many years ago diplomatic intervention became necessary to the protection +of the interests in the American claim of Alsop and Company against the +Government of Chile. The Government of Chile had frequently admitted +obligation in the case and had promised this Government to settle. There +had been two abortive attempts to do so through arbitral commissions, which +failed through lack of jurisdiction. Now, happily, as the result of the +recent diplomatic negotiations, the Governments of the United States and of +Chile, actuated by the sincere desire to free from any strain those cordial +and friendly relations upon which both set such store, have agreed by a +protocol to submit the controversy to definitive settlement by His +Britannic Majesty, Edward VII. + +Since the Washington Conventions of 1907 were communicated to the +Government of the United States as a consulting and advising party, this +Government has been almost continuously called upon by one or another, and +in turn by all the five Central American Republics, to exert itself for the +maintenance of the Conventions. Nearly every complaint has been against the +Zelaya Government of Nicaragua, which has kept Central America in constant +tension or turmoil. The responses made to the representations of Central +American Republics, as due from the United States on account of its +relation to the Washington Conventions, have been at all times conservative +and have avoided, so far as possible, any semblance of interference, +although it is very apparent that the considerations of geographic +proximity to the Canal Zone and of the very substantial American interests +in Central America give to the United States a special position in the zone +of these Republics and the Caribbean Sea. + +I need not rehearse here the patient efforts of this Government to promote +peace and welfare among these Republics, efforts which are fully +appreciated by the majority of them who are loyal to their true interests. +It would be no less unnecessary to rehearse here the sad tale of +unspeakable barbarities and oppression alleged to have been committed by +the Zelaya Government. Recently two Americans were put to death by order of +President Zelaya himself. They were reported to have been regularly +commissioned officers in the organized forces of a revolution which had +continued many weeks and was in control of about half of the Republic, and +as such, according to the modern enlightened practice of civilized nations, +they were entitled to be dealt with as prisoners of war. + +At the date when this message is printed this Government has terminated +diplomatic relations with the Zelaya Government, for reasons made public in +a communication to the former Nicaraguan charge d'affaires, and is +intending to take such future steps as may be found most consistent with +its dignity, its duty to American interests, and its moral obligations to +Central America and to civilization. It may later be necessary for me to +bring this subject to the attention of the Congress in a special message. + +The International Bureau of American Republics has carried on an important +and increasing work during the last year. In the exercise of its peculiar +functions as an international agency, maintained by all the American +Republics for the development of Pan-American commerce and friendship, it +has accomplished a great practical good which could be done in the same way +by no individual department or bureau of one government, and is therefore +deserving of your liberal support. The fact that it is about to enter a new +building, erected through the munificence of an American philanthropist and +the contributions of all the American nations, where both its efficiency of +administration and expense of maintenance will naturally be much augmented, +further entitles it to special consideration. + +THE FAR EAST. + +In the Far East this Government preserves unchanged its policy of +supporting the principle of equality of opportunity and scrupulous respect +for the integrity of the Chinese Empire, to which policy are pledged the +interested Powers of both East and West. + +By the Treaty of 1903 China has undertaken the abolition of likin with a +moderate and proportionate raising of the customs tariff along with +currency reform. These reforms being of manifest advantage to foreign +commerce as well as to the interests of China, this Government is +endeavoring to facilitate these measures and the needful acquiescence of +the treaty Powers. When it appeared that Chinese likin revenues were to be +hypothecated to foreign bankers in connection with a great railway project, +it was obvious that the Governments whose nationals held this loan would +have a certain direct interest in the question of the carrying out by China +of the reforms in question. Because this railroad loan represented a +practical and real application of the open door policy through cooperation +with China by interested Powers as well as because of its relations to the +reforms referred to above, the Administration deemed American participation +to be of great national interest. Happily, when it was as a matter of broad +policy urgent that this opportunity should not be lost, the indispensable +instrumentality presented itself when a group of American bankers, of +international reputation and great resources, agreed at once to share in +the loan upon precisely such terms as this Government should approve. The +chief of those terms was that American railway material should be upon an +exact equality with that of the other nationals joining in the loan in the +placing of orders for this whole railroad system. After months of +negotiation the equal participation of Americans seems at last assured. It +is gratifying that Americans will thus take their share in this extension +of these great highways of trade, and to believe that such activities will +give a real impetus to our commerce and will prove a practical corollary to +our historic policy in the Far East. + +The Imperial Chinese Government in pursuance of its decision to devote +funds from the portion of the indemnity remitted by the United States to +the sending of students to this country has already completed arrangements +for carrying out this purpose, and a considerable body of students have +arrived to take up their work in our schools and universities. No one can +doubt the happy effect that the associations formed by these representative +young men will have when they return to take up their work in the +progressive development of their country. + +The results of the Opium Conference held at Shanghai last spring at the +invitation of the United States have been laid before the Government. The +report shows that China is making remarkable progress and admirable efforts +toward the eradication of the opium evil and that the Governments concerned +have not allowed their commercial interests to interfere with a helpful +cooperation in this reform. Collateral investigations of the opium question +in this country lead me to recommend that the manufacture, sale and use of +opium and its derivatives in the United States should be so far as possible +more rigorously controlled by legislation. + +In one of the Chinese-Japanese Conventions of September 4 of this year +there was a provision which caused considerable public apprehension in that +upon its face it was believed in some quarters to seek to establish a +monopoly of mining privileges along the South Manchurian and Antung-Mukden +Railroads, and thus to exclude Americans from a wide field of enterprise, +to take part in which they were by treaty with China entitled. After a +thorough examination of the Conventions and of the several contextual +documents, the Secretary of State reached the conclusion that no such +monopoly was intended or accomplished. However, in view of the widespread +discussion of this question, to confirm the view it had reached, this +Government made inquiry of the Imperial Chinese and Japanese Governments +and received from each official assurance that the provision had no purpose +inconsistent with the policy of equality of opportunity to which the +signatories, in common with the United States, are pledged. + +Our traditional relations with the Japanese Empire continue cordial as +usual. As the representative of Japan, His Imperial Highness Prince Kuni +visited the Hudson-Fulton Celebration. The recent visit of a delegation of +prominent business men as guests of the chambers of commerce of the Pacific +slope, whose representatives had been so agreeably received in Japan, will +doubtless contribute to the growing trade across the Pacific, as well as to +that mutual understanding which leads to mutual appreciation. The +arrangement of 1908 for a cooperative control of the coming of laborers to +the United States has proved to work satisfactorily. The matter of a +revision of the existing treaty between the United States and Japan which +is terminable in 1912 is already receiving the study of both countries. + +The Department of State is considering the revision in whole or in part, of +the existing treaty with Siam, which was concluded in 1856, and is now, in +respect to many of its provisions, out of date. + +THE DEPARTMENT OF STATE. + +I earnestly recommend to the favorable action of the Congress the estimates +submitted by the Department of State and most especially the legislation +suggested in the Secretary of State's letter of this date whereby it will +be possible to develop and make permanent the reorganization of the +Department upon modern lines in a manner to make it a thoroughly efficient +instrument in the furtherance of our foreign trade and of American +interests abroad. The plan to have Divisions of Latin-American and Far +Eastern Affairs and to institute a certain specialization in business with +Europe and the Near East will at once commend itself. These +politico-geographical divisions and the detail from the diplomatic or +consular service to the Department of a number of men, who bring to the +study of complicated problems in different parts of the world practical +knowledge recently gained on the spot, clearly is of the greatest advantage +to the Secretary of State in foreseeing conditions likely to arise and in +conducting the great variety of correspondence and negotiation. It should +be remembered that such facilities exist in the foreign offices of all the +leading commercial nations and that to deny them to the Secretary of State +would be to place this Government at a great disadvantage in the rivalry of +commercial competition. + +The consular service has been greatly improved under the law of April 5, +1906, and the Executive Order of June 27, 1906, and I commend to your +consideration the question of embodying in a statute the principles of the +present Executive Order upon which the efficiency of our consular service +is wholly dependent. + +In modern times political and commercial interests are interrelated, and in +the negotiation of commercial treaties, conventions and tariff agreements, +the keeping open of opportunities and the proper support of American +enterprises, our diplomatic service is quite as important as the consular +service to the business interests of the country. Impressed with this idea +and convinced that selection after rigorous examination, promotion for +merit solely and the experience only to be gained through the continuity of +an organized service are indispensable to a high degree of efficiency in +the diplomatic service, I have signed an Executive Order as the first step +toward this very desirable result. Its effect should be to place all +secretaries in the diplomatic service in much the same position as consular +officers are now placed and to tend to the promotion of the most efficient +to the grade of minister, generally leaving for outside appointments such +posts of the grade of ambassador or minister as it may be expedient to fill +from without the service. It is proposed also to continue the practice +instituted last summer of giving to all newly appointed secretaries at +least one month's thorough training in the Department of State before they +proceed to their posts. This has been done for some time in regard to the +consular service with excellent results. + +Under a provision of the Act of August 5, 1909, I have appointed three +officials to assist the officers of the Government in collecting +information necessary to a wise administration of the tariff act of August +5, 1909. As to questions of customs administration they are cooperating +with the officials of the Treasury Department and as to matters of the +needs and the exigencies of our manufacturers and exporters, with the +Department of Commerce and Labor, in its relation to the domestic aspect of +the subject of foreign commerce. In the study of foreign tariff treatment +they will assist the Bureau of Trade Relations of the Department of State. +It is hoped thus to coordinate and bring to bear upon this most important +subject all the agencies of the Government which can contribute anything to +its efficient handling. + +As a consequence of Section 2 of the tariff act of August 5, 1909, it +becomes the duty of the Secretary of State to conduct as diplomatic +business all the negotiations necessary to place him in a position to +advise me as to whether or not a particular country unduly discriminates +against the United States in the sense of the statute referred to. The +great scope and complexity of this work, as well as the obligation to lend +all proper aid to our expanding commerce, is met by the expansion of the +Bureau of Trade Relations as set forth in the estimates for the Department +of State. + +OTHER DEPARTMENTS. + +I have thus in some detail described the important transactions of the +State Department since the beginning of this Administration for the reason +that there is no provision either by statute or custom for a formal report +by the Secretary of State to the President or to Congress, and a +Presidential message is the only means by which the condition of our +foreign relations is brought to the attention of Congress and the public. + +In dealing with the affairs of the other Departments, the heads of which +all submit annual reports, I shall touch only those matters that seem to me +to call for special mention on my part without minimizing in any way the +recommendations made by them for legislation affecting their respective +Departments, in all of which I wish to express my general concurrence. + +GOVERNMENT EXPENDITURES AND REVENUES. + +Perhaps the most important question presented to this Administration is +that of economy in expenditures and sufficiency of revenue. The deficit of +the last fiscal year, and the certain deficit of the current year, prompted +Congress to throw a greater responsibility on the Executive and the +Secretary of the Treasury than had heretofore been declared by statute. +This declaration imposes upon the Secretary of the Treasury the duty of +assembling all the estimates of the Executive Departments, bureaus, and +offices, of the expenditures necessary in the ensuing fiscal year, and of +making an estimate of the revenues of the Government for the same period; +and if a probable deficit is thus shown, it is made the duty of the +President to recommend the method by which such deficit can be met. + +The report of the Secretary shows that the ordinary expenditures for the +current fiscal year ending June 30, 1910, will exceed the estimated +receipts by $34,075,620. If to this deficit is added the sum to be +disbursed for the Panama Canal, amounting to $38,000,000, and $1,000,000 to +be paid on the public debt, the deficit of ordinary receipts and +expenditures will be increased to a total deficit of $73,075,620. This +deficit the Secretary proposes to meet by the proceeds of bonds issued to +pay the cost of constructing the Panama Canal. I approve this proposal. + +The policy of paying for the construction of the Panama Canal, not out of +current revenue, but by bond issues, was adopted in the Spooner Act of +1902, and there seems to be no good reason for departing from the principle +by which a part at least of the burden of the cost of the canal shall fall +upon our posterity who are to enjoy it; and there is all the more reason +for this view because the actual cost to date of the canal, which is now +half done and which will be completed January 1, 1915, shows that the cost +of engineering and construction will be $297,766,000, instead of +$139,705,200, as originally estimated. In addition to engineering and +construction, the other expenses, including sanitation and government, and +the amount paid for the properties, the franchise, and the privilege of +building the canal, increase the cost by $75,435,000, to a total of +$375,201,000. The increase in the cost of engineering and construction is +due to a substantial enlargement of the plan of construction by widening +the canal 100 feet in the Culebra cut and by increasing the dimensions of +the locks, to the underestimate of the quantity of the work to be done +under the original plan, and to an underestimate of the cost of labor and +materials both of which have greatly enhanced in price since the original +estimate was made. + +In order to avoid a deficit for the ensuing fiscal year, I directed the +heads of Departments in the preparation of their estimates to make them as +low as possible consistent with imperative governmental necessity. The +result has been, as I am advised by the Secretary of the Treasury, that the +estimates for the expenses of the Government for the next fiscal year +ending June 30, 1911, are less than the appropriations for this current +fiscal year by $42,818,000. So far as the Secretary of the Treasury is able +to form a judgment as to future income, and compare it with the +expenditures for the next fiscal year ending June 30, 1911, and excluding +payments on account of the Panama Canal, which will doubtless be taken up +by bonds, there will be a surplus of $35,931,000. + +In the present estimates the needs of the Departments and of the Government +have been cut to the quick, so to speak, and any assumption on the part of +Congress, so often made in times past, that the estimates have been +prepared with the expectation that they may be reduced, will result in +seriously hampering proper administration. + +The Secretary of the Treasury points out what should be carefully noted in +respect to this reduction in governmental expenses for the next fiscal +year, that the economies are of two kinds--first, there is a saving in the +permanent administration of the Departments, bureaus, and offices of the +Government; and, second, there is a present reduction in expenses by a +postponement of projects and improvements that ultimately will have to be +carried out but which are now delayed with the hope that additional revenue +in the future will permit their execution without producing a deficit. + +It has been impossible in the preparation of estimates greatly to reduce +the cost of permanent administration. This can not be done without a +thorough reorganization of bureaus, offices, and departments. For the +purpose of securing information which may enable the executive and the +legislative branches to unite in a plan for the permanent reduction of the +cost of governmental administration, the Treasury Department has instituted +an investigation by one of the most skilled expert accountants in the +United States. The result of his work in two or three bureaus, which, if +extended to the entire Government, must occupy two or more years, has been +to show much room for improvement and opportunity for substantial +reductions in the cost and increased efficiency of administration. The +object of the investigation is to devise means to increase the average +efficiency of each employee. There is great room for improvement toward +this end, not only by the reorganization of bureaus and departments and in +the avoidance of duplication, but also in the treatment of the individual +employee. + +Under the present system it constantly happens that two employees receive +the same salary when the work of one is far more difficult and important +and exacting than that of the other. Superior ability is not rewarded or +encouraged. As the classification is now entirely by salary, an employee +often rises to the highest class while doing the easiest work, for which +alone he may be fitted. An investigation ordered by my predecessor resulted +in the recommendation that the civil service he reclassified according to +the kind of work, so that the work requiring most application and knowledge +and ability shall receive most compensation. I believe such a change would +be fairer to the whole force and would permanently improve the personnel of +the service. + +More than this, every reform directed toward the improvement in the average +efficiency of government employees must depend on the ability of the +Executive to eliminate from the government service those who are +inefficient from any cause, and as the degree of efficiency in all the +Departments is much lessened by the retention of old employees who have +outlived their energy and usefulness, it is indispensable to any proper +system of economy that provision be made so that their separation from the +service shall be easy and inevitable. It is impossible to make such +provision unless there is adopted a plan of civil pensions. Most of the +great industrial organizations, and many of the well-conducted railways of +this country, are coming to the conclusion that a system of pensions for +old employees, and the substitution therefor of younger and more energetic +servants, promotes both economy and efficiency of administration. + +I am aware that there is a strong feeling in both Houses of Congress, and +possibly in the country, against the establishment of civil pensions, and +that this has naturally grown out of the heavy burden of military pensions, +which it has always been the policy of our Government to assume; but I am +strongly convinced that no other practical solution of the difficulties +presented by the superannuation of civil servants can be found than that of +a system of civil pensions. + +The business and expenditures of the Government have expanded enormously +since the Spanish war, but as the revenues have increased in nearly the +same proportion as the expenditures until recently, the attention of the +public, and of those responsible for the Government, has not been fastened +upon the question of reducing the cost of administration. We can not, in +view of the advancing prices of living, hope to save money by a reduction +in the standard of salaries paid. Indeed, if any change is made in that +regard, an increase rather than a decrease will be necessary; and the only +means of economy will be in reducing the number of employees and in +obtaining a greater average of efficiency from those retained in the +service. + +Close investigation and study needed to make definite recommendations in +this regard will consume at least two years. I note with much satisfaction +the organization in the Senate of a Committee on Public Expenditures, +charged with the duty of conducting such an investigation, and I tender to +that committee all the assistance which the executive branch of the +Government can possibly render. + +FRAUDS IN THE COLLECTION OF CUSTOMS. + +I regret to refer to the fact of the discovery of extensive frauds in the +collections of the customs revenue at New York City, in which a number of +the subordinate employees in the weighing and other departments were +directly concerned, and in which the beneficiaries were the American Sugar +Refining Company and others. The frauds consisted in the payment of duty on +underweights of sugar. The Government has recovered from the American Sugar +Refining Company all that it is shown to have been defrauded of. The sum +was received in full of the amount due, which might have been recovered by +civil suit against the beneficiary of the fraud, but there was an express +reservation in the contract of settlement by which the settlement should +not interfere with, or prevent the criminal prosecution of everyone who was +found to be subject to the same. + +Criminal prosecutions are now proceeding against a number of the Government +officers. The Treasury Department and the Department of Justice are +exerting every effort to discover all the wrongdoers, including the +officers and employees of the companies who may have been privy to the +fraud. It would seem to me that an investigation of the frauds by Congress +at present, pending the probing by the Treasury Department and the +Department of Justice, as proposed, might by giving immunity and otherwise +prove an embarrassment in securing conviction of the guilty parties. + +MAXIMUM AND MINIMUM CLAUSE IN TARIFF ACT. + +Two features of the new tariff act call for special reference. By virtue of +the clause known as the "Maximum and Minimum" clause, it is the duty of the +Executive to consider the laws and practices of other countries with +reference to the importation into those countries of the products and +merchandise of the United States, and if the Executive finds such laws and +practices not to be unduly discriminatory against the United States, the +minimum duties provided in the bill are to go into force. + +Unless the President makes such a finding, then the maximum duties provided +in the bill, that is, an increase of twenty-five per cent. ad valorem over +the minimum duties, are to be in force. Fear has been expressed that this +power conferred and duty imposed on the Executive is likely to lead to a +tariff war. I beg to express the hope and belief that no such result need +be anticipated. + +The discretion granted to the Executive by the terms "unduly +discriminatory" is wide. In order that the maximum duty shall be charged +against the imports from a country, it is necessary that he shall find on +the part of that country not only discriminations in its laws or the +practice under them against the trade of the United States, but that the +discriminations found shall be undue; that is, without good and fair +reason. I conceive that this power was reposed in the President with the +hope that the maximum duties might never be applied in any case, but that +the power to apply them would enable the President and the State Department +through friendly negotiation to secure the elimination from the laws and +the practice under them of any foreign country of that which is unduly +discriminatory. No one is seeking a tariff war or a condition in which the +spirit of retaliation shall be aroused. + +USES OF THE NEW TARIFF BOARD. + +The new tariff law enables me to appoint a tariff board to assist me in +connection with the Department of State in the administration of the +minimum and maximum clause of the act and also to assist officers of the +Government in the administration of the entire law. An examination of the +law and an understanding of the nature of the facts which should be +considered in discharging the functions imposed upon the Executive show +that I have the power to direct the tariff board to make a comprehensive +glossary and encyclopedia of the terms used and articles embraced in the +tariff law, and to secure information as to the cost of production of such +goods in this country and the cost of their production in foreign +countries. I have therefore appointed a tariff board consisting of three +members and have directed them to perform all the duties above described. +This work will perhaps take two or three years, and I ask from Congress a +continuing annual appropriation equal to that already made for its +prosecution. I believe that the work of this board will be of prime utility +and importance whenever Congress shall deem it wise again to readjust the +customs duties. If the facts secured by the tariff board are of such a +character as to show generally that the rates of duties imposed by the +present tariff law are excessive under the principles of protection as +described in the platform of the successful party at the late election, I +shall not hesitate to invite the attention of Congress to this fact and to +the necessity for action predicated thereon. Nothing, however, halts +business and interferes with the course of prosperity so much as the +threatened revision of the tariff, and until the facts are at hand, after +careful and deliberate investigation, upon which such revision can properly +be undertaken, it seems to me unwise to attempt it. The amount of +misinformation that creeps into arguments pro and con in respect to tariff +rates is such as to require the kind of investigation that I have directed +the tariff board to make, an investigation undertaken by it wholly without +respect to the effect which the facts may have in calling for a +readjustment of the rates of duty. + +WAR DEPARTMENT. + +In the interest of immediate economy and because of the prospect of a +deficit, I have required a reduction in the estimates of the War Department +for the coming fiscal year, which brings the total estimates down to an +amount forty-five millions less than the corresponding estimates for last +year. This could only be accomplished by cutting off new projects and +suspending for the period of one year all progress in military matters. For +the same reason I have directed that the Army shall not be recruited up to +its present authorized strength. These measures can hardly be more than +temporary--to last until our revenues are in better condition and until the +whole question of the expediency of adopting a definite military policy can +be submitted to Congress, for I am sure that the interests of the military +establishment are seriously in need of careful consideration by Congress. +The laws regulating the organization of our armed forces in the event of +war need to be revised in order that the organization can be modified so as +to produce a force which would be more consistently apportioned throughout +its numerous branches. To explain the circumstances upon which this opinion +is based would necessitate a lengthy discussion, and I postpone it until +the first convenient opportunity shall arise to send to Congress a special +message upon this subject. + +The Secretary of War calls attention to a number of needed changes in the +Army in all of which I concur, but the point upon which I place most +emphasis is the need for an elimination bill providing a method by which +the merits of officers shall have some effect upon their advancement and by +which the advancement of all may be accelerated by the effective +elimination of a definite proportion of the least efficient. There are in +every army, and certainly in ours, a number of officers who do not violate +their duty in any such way as to give reason for a court-martial or +dismissal, but who do not show such aptitude and skill and character for +high command as to justify their remaining in the active service to be +Promoted. Provision should be made by which they may be retired on a +certain proportion of their pay, increasing with their length of service at +the time of retirement. There is now a personnel law for the Navy which +itself needs amendment and to which I shall make further reference. Such a +law is needed quite as much for the Army. + +The coast defenses of the United States proper are generally all that could +be desired, and in some respects they are rather more elaborate than under +present conditions are needed to stop an enemy's fleet from entering the +harbors defended. There is, however, one place where additional defense is +badly needed, and that is at the mouth of Chesapeake Bay, where it is +proposed to make an artificial island for a fort which shall prevent an +enemy's fleet from entering this most important strategical base of +operations on the whole Atlantic and Gulf coasts. I hope that appropriate +legislation will be adopted to secure the construction of this defense. + +The military and naval joint board have unanimously agreed that it would be +unwise to make the large expenditures which at one time were contemplated +in the establishment of a naval base and station in the Philippine Islands, +and have expressed their judgment, in which I fully concur, in favor of +making an extensive naval base at Pearl Harbor, near Honolulu, and not in +the Philippines. This does not dispense with the necessity for the +comparatively small appropriations required to finish the proper coast +defenses in the Philippines now under construction on the island of +Corregidor and elsewhere or to complete a suitable repair station and +coaling supply station at Olongapo, where is the floating dock "Dewey." I +hope that this recommendation of the joint board will end the discussion as +to the comparative merits of Manila Bay and Olongapo as naval stations, and +will lead to prompt measures for the proper equipment and defense of Pearl +Harbor. + +THE NAVY. + +The return of the battle-ship fleet from its voyage around the world, in +more efficient condition than when it started, was a noteworthy event of +interest alike to our citizens and the naval authorities of the world. +Besides the beneficial and far-reaching effect on our personal and +diplomatic relations in the countries which the fleet visited, the marked +success of the ships in steaming around the world in all weathers on +schedule time has increased respect for our Navy and has added to our +national prestige. + +Our enlisted personnel recruited from all sections of the country is young +and energetic and representative of the national spirit. It is, moreover, +owing to its intelligence, capable of quick training into the modern +man-of-warsman. Our officers are earnest and zealous in their profession, +but it is a regrettable fact that the higher officers are old for the +responsibilities of the modern navy, and the admirals do not arrive at flag +rank young enough to obtain adequate training in their duties as flag +officers. This need for reform in the Navy has been ably and earnestly +presented to Congress by my predecessor, and I also urgently recommend the +subject for consideration. + +Early in the coming session a comprehensive plan for the reorganization of +the officers of all corps of the Navy will be presented to Congress, and I +hope it will meet with action suited to its urgency. + +Owing to the necessity for economy in expenditures, I have directed the +curtailment of recommendations for naval appropriations so that they are +thirty-eight millions less than the corresponding estimates of last year, +and the request for new naval construction is limited to two first-class +battle ships and one repair vessel. + +The use of a navy is for military purposes, and there has been found need +in the Department of a military branch dealing directly with the military +use of the fleet. The Secretary of the Navy has also felt the lack of +responsible advisers to aid him in reaching conclusions and deciding +important matters between coordinate branches of the Department. To secure +these results he has inaugurated a tentative plan involving certain changes +in the organization of the Navy Department, including the navy-yards, all +of which have been found by the Attorney-General to be in accordance with +law. I have approved the execution of the plan proposed because of the +greater efficiency and economy it promises. + +The generosity of Congress has provided in the present Naval Observatory +the most magnificent and expensive astronomical establishment in the world. +It is being used for certain naval purposes which might easily and +adequately be subserved by a small division connected with the Naval +Department at only a fraction of the cost of the present Naval Observatory. +The official Board of Visitors established by Congress and appointed in +1901 expressed its conclusion that the official head of the observatory +should be an eminent astronomer appointed by the President by and with the +advice and consent of the Senate, holding his place by a tenure at least as +permanent as that of the Superintendent of the Coast Survey or the head of +the Geological Survey, and not merely by a detail of two or three years' +duration. I fully concur in this judgment, and urge a provision by law for +the appointment of such a director. + +It may not be necessary to take the observatory out of the Navy Department +and put it into another department in which opportunity for scientific +research afforded by the observatory would seem to be more appropriate, +though I believe such a transfer in the long run is the best policy. I am +sure, however, I express the desire of the astronomers and those learned in +the kindred sciences when I urge upon Congress that the Naval Observatory +be now dedicated to science under control of a man of science who can, if +need be, render all the service to the Navy Department which this +observatory now renders, and still furnish to the world the discoveries in +astronomy that a great astronomer using such a plant would be likely to +make. + +DEPARTMENT OF JUSTICE EXPEDITION IN LEGAL PROCEDURE + +The deplorable delays in the administration of civil and criminal law have +received the attention of committees of the American Bar Association and of +many State Bar Associations, as well as the considered thought of judges +and jurists. In my judgment, a change in judicial procedure, with a view to +reducing its expense to private litigants in civil cases and facilitating +the dispatch of business and final decision in both civil and criminal +cases, constitutes the greatest need in our American institutions. I do not +doubt for one moment that much of the lawless violence and cruelty +exhibited in lynchings is directly due to the uncertainties and injustice +growing out of the delays in trials, judgments, and the executions thereof +by our courts. Of course these remarks apply quite as well to the +administration of justice in State courts as to that in Federal courts, and +without making invidious distinction it is perhaps not too much to say +that, speaking generally, the defects are less in the Federal courts than +in the State courts. But they are very great in the Federal courts. The +expedition with which business is disposed of both on the civil and the +criminal side of English courts under modern rules of procedure makes the +delays in our courts seem archaic and barbarous. The procedure in the +Federal courts should furnish an example for the State courts. I presume it +is impossible, without an amendment to the Constitution, to unite under one +form of action the proceedings at common law and proceedings in equity in +the Federal courts, but it is certainly not impossible by a statute to +simplify and make short and direct the procedure both at law and in equity +in those courts. It is not impossible to cut down still more than it is cut +down, the jurisdiction of the Supreme Court so as to confine it almost +wholly to statutory and constitutional questions. Under the present +statutes the equity and admiralty procedure in the Federal courts is under +the control of the Supreme Court, but in the pressure of business to which +that court is subjected, it is impossible to hope that a radical and proper +reform of the Federal equity procedure can be brought about. I therefore +recommend legislation providing for the appointment by the President of a +commission with authority to examine the law and equity procedure of the +Federal courts of first instance, the law of appeals from those courts to +the courts of appeals and to the Supreme Court, and the costs imposed in +such procedure upon the private litigants and upon the public treasury and +make recommendation with a view to simplifying and expediting the procedure +as far as possible and making it as inexpensive as may be to the litigant +of little means. + +INJUNCTIONS WITHOUT NOTICE. + +The platform of the successful party in the last election contained the +following: "The Republican party will uphold at all times the authority and +integrity of the courts, State and Federal, and will ever insist that their +powers to enforce their process and to protect life, liberty, and property +shall be preserved inviolate. We believe, however, that the rules of +procedure in the Federal courts with respect to the issuance of the writ of +injunction should be more accurately defined by statute, and that no +injunction or temporary restraining order should be issued without notice, +except where irreparable injury would result from delay, in which case a +speedy hearing thereafter should be granted." I recommend that in +compliance with the promise thus made, appropriate legislation be adopted. +The ends of justice will best be met and the chief cause of complaint +against ill-considered injunctions without notice will be removed by the +enactment of a statute forbidding hereafter the issuing of any injunction +or restraining order, whether temporary or permanent, by any Federal court, +without previous notice and a reasonable opportunity to be heard on behalf +of the parties to be enjoined; unless it shall appear to the satisfaction +of the court that the delay necessary to give such notice and hearing would +result in irreparable injury to the complainant and unless also the court +shall from the evidence make a written finding, which shall be spread upon +the court minutes, that immediate and irreparable injury is likely to ensue +to the complainant, and shall define the injury, state why it is +irreparable, and shall also endorse on the order issued the date and the +hour of the issuance of the order. Moreover, every such injunction or +restraining order issued without previous notice and opportunity by the +defendant to be heard should by force of the statute expire and be of no +effect after seven days from the issuance thereof or within any time less +than that period which the court may fix, unless within such seven days or +such less period, the injunction or order is extended or renewed after +previous notice and opportunity to be heard. + +My judgment is that the passage of such an act which really embodies the +best practice in equity and is very like the rule now in force in some +courts will prevent the issuing of ill-advised orders of injunction without +notice and will render such orders when issued much less objectionable by +the short time in which they may remain effective. + +ANTI-TRUST AND INTERSTATE COMMERCE LAWS. + +The jurisdiction of the General Government over interstate commerce has led +to the passage of the so-called "Sherman Anti-trust Law" and the +"Interstate Commerce Law" and its amendments. The developments in the +operation of those laws, as shown by indictments, trials, judicial +decisions, and other sources of information, call for a discussion and some +suggestions as to amendments. These I prefer to embody in a special message +instead of including them in the present communication, and I shall avail +myself of the first convenient opportunity to bring these subjects to the +attention of Congress. + +JAIL OF THE DISTRICT OF COLUMBIA. + +My predecessor transmitted to the Congress a special message on January 11, +1909, accompanying the report of Commissioners theretofore appointed to +investigate the jail, workhouse, etc., in the District of Columbia, in +which he directed attention to the report as setting forth vividly, "the +really outrageous conditions in the workhouse and jail." + +The Congress has taken action in pursuance of the recommendations of that +report and of the President, to the extent of appropriating funds and +enacting the necessary legislation for the establishment of a workhouse and +reformatory. No action, however, has been taken by the Congress with +respect to the jail, the conditions of which are still antiquated and +insanitary. I earnestly recommend the passage of a sufficient appropriation +to enable a thorough remodeling of that institution to be made without +delay. It is a reproach to the National Government that almost under the +shadow of the Capitol Dome prisoners should be confined in a building +destitute of the ordinary decent appliances requisite to cleanliness and +sanitary conditions. + +POST-OFFICE DEPARTMENT. SECOND-CLASS MAIL MATTER. + +The deficit every year in the Post-Office Department is largely caused by +the low rate of postage of 1 cent a pound charged on second-class mail +matter, which includes not only newspapers, but magazines and miscellaneous +periodicals. The actual loss growing out of the transmission of this +second-class mail matter at 1 cent a pound amounts to about $63,000,000 a +year. The average cost of the transportation of this matter is more than 9 +cents a pound. + +It appears that the average distance over which newspapers are delivered to +their customers is 291 miles, while the average haul of magazines is 1,049, +and of miscellaneous periodicals 1,128 miles. Thus, the average haul of the +magazine is three and one-half times and that of the miscellaneous +periodical nearly four times the haul of the daily newspaper, yet all of +them pay the same postage rate of 1 cent a pound. The statistics of 1907 +show that second-class mail matter constituted 63.91 per cent. of the +weight of all the mail, and yielded only 5.19 per cent. of the revenue. + +The figures given are startling, and show the payment by the Government of +an enormous subsidy to the newspapers, magazines, and periodicals, and +Congress may well consider whether radical steps should not be taken to +reduce the deficit in the Post-Office Department caused by this discrepancy +between the actual cost of transportation and the compensation exacted +therefor. + +A great saving might be made, amounting to much more than half of the loss, +by imposing upon magazines and periodicals a higher rate of postage. They +are much heavier than newspapers, and contain a much higher proportion of +advertising to reading matter, and the average distance of their +transportation is three and a half times as great. + +The total deficit for the last fiscal year in the Post-Office Department +amounted to $17,500,000. The branches of its business which it did at a +loss were the second-class mail service, in which the loss, as already +said, was $63,000,000, and the free rural delivery, in which the loss was +$28,000,000. These losses were in part offset by the profits of the letter +postage and other sources of income. It would seem wise to reduce the loss +upon second-class mail matter, at least to the extent of preventing a +deficit in the total operations of the Post-Office. + +I commend the whole subject to Congress, not unmindful of the spread of +intelligence which a low charge for carrying newspapers and periodicals +assists. I very much doubt, however, the wisdom of a policy which +constitutes so large a subsidy and requires additional taxation to meet +it. + +POSTAL SAVINGS BANKS. + +The second subject worthy of mention in the Post-Office Department is the +real necessity and entire practicability of establishing postal savings +banks. The successful party at the last election declared in favor of +postal savings banks, and although the proposition finds opponents in many +parts of the country, I am convinced that the people desire such banks, and +am sure that when the banks are furnished they will be productive of the +utmost good. The postal savings banks are not constituted for the purpose +of creating competition with other banks. The rate of interest upon +deposits to which they would be limited would be so small as to prevent +their drawing deposits away from other banks. + +I believe them to be necessary in order to offer a proper inducement to +thrift and saving to a great many people of small means who do not now have +banking facilities, and to whom such a system would offer an opportunity +for the accumulation of capital. They will furnish a satisfactory +substitute, based on sound principle and actual successful trial in nearly +all the countries of the world, for the system of government guaranty of +deposits now being adopted in several western States, which with deference +to those who advocate it seems to me to have in it the seeds of +demoralization to conservative banking and certain financial disaster. The +question of how the money deposited in postal savings banks shall be +invested is not free from difficulty, but I believe that a satisfactory +provision for this purpose was inserted as an amendment to the bill +considered by the Senate at its last session. It has been proposed to delay +the consideration of legislation establishing a postal savings bank until +after the report of the Monetary Commission. This report is likely to be +delayed, and properly so, cause of the necessity for careful deliberation +and close investigation. I do not see why the one should be tied up with +the other. It is understood that the Monetary Commission have looked into +the systems of banking which now prevail abroad, and have found that by a +control there exercised in respect to reserves and the rates of exchange by +some central authority panics are avoided. It is not apparent that a system +of postal savings banks would in any way interfere with a change to such a +system here. Certainly in most of the countries of Europe where control is +thus exercised by a central authority, postal savings banks exist and are +not thought to be inconsistent with a proper financial and banking system. + +SHIP SUBSIDY. + +Following the course of my distinguished predecessor, I earnestly recommend +to Congress the consideration and passage of a ship subsidy bill, looking +to the establishment of lines between our Atlantic seaboard and the eastern +coast of South America, as well as lines from the west coast of the United +States to South America. China, Japan, and the Philippines. The profits on +foreign mails are perhaps a sufficient measure of the expenditures which +might first be tentatively applied to this method of inducing American +capital to undertake the establishment of American lines of steamships in +those directions in which we now feel it most important that we should have +means of transportation controlled in the interest of the expansion of our +trade. A bill of this character has once passed the House and more than +once passed the Senate, and I hope that at this session a bill framed on +the same lines and with the same purposes may become a law. + +INTERIOR DEPARTMENT. NEW MEXICO AND ARIZONA. + +The successful party in the last election in its national platform declared +in favor of the admission as separate States of New Mexico and Arizona, and +I recommend that legislation appropriate to this end be adopted. I urge, +however, that care be exercised in the preparation of the legislation +affecting each Territory to secure deliberation in the selection of persons +as members of the convention to draft a constitution for the incoming +State, and I earnestly advise that such constitution after adoption by the +convention shall be submitted to the people of the Territory for their +approval at an election in which the sole issue shall be the merits of the +proposed constitution, and if the constitution is defeated by popular vote +means shall be provided in the enabling act for a new convention and the +drafting of a new constitution. I think it vital that the issue as to the +merits of the constitution should not be mixed up with the selection of +State officers, and that no election of State officers should be had until +after the constitution has been fully approved and finally settled upon. +ALASKA. + +With respect to the Territory of Alaska, I recommend legislation which +shall provide for the appointment by the President of a governor and also +of an executive council, the members of which shall during their term of +office reside in the Territory, and which shall have legislative powers +sufficient to enable it to give to the Territory local laws adapted to its +present growth. I strongly deprecate legislation looking to the election of +a Territorial legislature in that vast district. The lack of permanence of +residence of a large part of the present population and the small number of +the people who either permanently or temporarily reside in the district as +compared with its vast expanse and the variety of the interests that have +to be subserved, make it altogether unfitting in my judgment to provide for +a popular election of a legislative body. The present system is not +adequate and does not furnish the character of local control that ought to +be there. The only compromise it seems to me which may give needed local +legislation and secure a conservative government is the one I propose. + +CONSERVATION OF NATIONAL RESOURCES. + +In several Departments there is presented the necessity for legislation +looking to the further conservation of our national resources, and the +subject is one of such importance as to require a more detailed and +extended discussion than can be entered upon in this communication. For +that reason I shall take an early opportunity to send a special message to +Congress on the subject of the improvement of our waterways, upon the +reclamation and irrigation of arid, semiarid, and swamp lands; upon the +preservation of our forests and the reforesting of suitable areas; upon the +reclassification of the public domain with a view of separating from +agricultural settlement mineral, coal, and phosphate lands and sites +belonging to the Government bordering on streams suitable for the +utilization of water power. + +DEPARTMENT OF AGRICULTURE. + +I commend to your careful consideration the report of the Secretary of +Agriculture as showing the immense sphere of usefulness which that +Department now fills and the wonderful addition to the wealth of the nation +made by the farmers of this country in the crops of the current year. + +DEPARTMENT OF COMMERCE AND LABOR. THE LIGHT-HOUSE BOARD. + +The Light-House Board now discharges its duties under the Department of +Commerce and Labor. For upwards of forty years this Board has been +constituted of military and naval officers and two or three men of science, +with such an absence of a duly constituted executive head that it is +marvelous what work has been accomplished. In the period of construction +the energy and enthusiasm of all the members prevented the inherent defects +of the system from interfering greatly with the beneficial work of the +Board, but now that the work is chiefly confined to maintenance and repair, +for which purpose the country is divided into sixteen districts, to which +are assigned an engineer officer of the Army and an inspector of the Navy, +each with a light-house tender and the needed plant for his work, it has +become apparent by the frequent friction that arises, due to the absence of +any central independent authority, that there must be a complete +reorganization of the Board. I concede the advantage of keeping in the +system the rigidity of discipline that the presence of naval and military +officers in charge insures, but unless the presence of such officers in the +Board can be made consistent with a responsible executive head that shall +have proper authority, I recommend the transfer of control over the +light-houses to a suitable civilian bureau. This is in accordance with the +judgment of competent persons who are familiar with the workings of the +present system. I am confident that a reorganization can be effected which +shall avoid the recurrence of friction between members, instances of which +have been officially brought to my attention, and that by such +reorganization greater efficiency and a substantial reduction in the +expense of operation can be brought about. + +CONSOLIDATION OF BUREAUS. + +I request Congressional authority to enable the Secretary of Commerce and +Labor to unite the Bureaus of Manufactures and Statistics. This was +recommended by a competent committee appointed in the previous +administration for the purpose of suggesting changes in the interest of +economy and efficiency, and is requested by the Secretary. + +THE WHITE SLAVE TRADE. + +I greatly regret to have to say that the investigations made in the Bureau +of Immigration and other sources of information lead to the view that there +is urgent necessity for additional legislation and greater executive +activity to suppress the recruiting of the ranks of prostitutes from the +streams of immigration into this country--an evil which, for want of a +better name, has been called "The White Slave Trade." I believe it to be +constitutional to forbid, under penalty, the transportation of persons for +purposes of prostitution across national and state lines; and by +appropriating a fund of $50,000 to be used by the Secretary of Commerce and +Labor for the employment of special inspectors it will be possible to bring +those responsible for this trade to indictment and conviction under a +federal law. + +BUREAU OF HEALTH + +For a very considerable period a movement has been gathering strength, +especially among the members of the medical profession, in favor of a +concentration of the instruments of the National Government which have to +do with the promotion of public health. In the nature of things, the +Medical Department of the Army and the Medical Department of the Navy must +be kept separate. But there seems to be no reason why all the other bureaus +and offices in the General Government which have to do with the public +health or subjects akin thereto should not be united in a bureau to be +called the "Bureau of Public Health." This would necessitate the transfer +of the Marine-Hospital Service to such a bureau. I am aware that there is +wide field in respect to the public health committed to the States in which +the Federal Government can not exercise jurisdiction, but we have seen in +the Agricultural Department the expansion into widest usefulness of a +department giving attention to agriculture when that subject is plainly one +over which the States properly exercise direct jurisdiction. The +opportunities offered for useful research and the spread of useful +information in regard to the cultivation of the soil and the breeding of +stock and the solution of many of the intricate problems in progressive +agriculture have demonstrated the wisdom of establishing that department. +Similar reasons, of equal force, can be given for the establishment of a +bureau of health that shall not only exercise the police jurisdiction of +the Federal Government respecting quarantine, but which shall also afford +an opportunity for investigation and research by competent experts into +questions of health affecting the whole country, or important sections +thereof, questions which, in the absence of Federal governmental work, are +not likely to be promptly solved. + +CIVIL SERVICE COMMISSION. + +The work of the United States Civil Service Commission has been performed +to the general satisfaction of the executive officers with whom the +Commission has been brought into official communication. The volume of that +work and its variety and extent have under new laws, such as the Census +Act, and new Executive orders, greatly increased. The activities of the +Commission required by the statutes have reached to every portion of the +public domain. + +The accommodations of the Commission are most inadequate for its needs. I +call your attention to its request for increase in those accommodations as +will appear from the annual report for this year. + +POLITICAL CONTRIBUTIONS. + +I urgently recommend to Congress that a law be passed requiring that +candidates in elections of Members of the House of Representatives, and +committees in charge of their candidacy and campaign, file in a proper +office of the United States Government a statement of the contributions +received and of the expenditures incurred in the campaign for such +elections and that similar legislation be enacted in respect to all other +elections which are constitutionally within the control of Congress. + +FREEDMAN'S SAVINGS AND TRUST COMPANY. + +Recommendations have been made by my predecessors that Congress appropriate +a sufficient sum to pay the balance--about 38 per cent.--of the amounts due +depositors in the Freedman's Savings and Trust Company. I renew this +recommendation, and advise also that a proper limitation be prescribed +fixing a period within which the claims may be presented, that assigned +claims be not recognized, and that a limit be imposed on the amount of fees +collectible for services in presenting such claims. + +SEMI-CENTENNIAL OF NEGRO FREEDOM. + +The year 1913 will mark the fiftieth anniversary of the issuance of the +Emancipation Proclamation granting freedom to the negroes. It seems fitting +that this event should be properly celebrated. Already a movement has been +started by prominent Negroes, encouraged by prominent white people and the +press. The South especially is manifesting its interest in this movement. + +It is suggested that a proper form of celebration would be an exposition to +show the progress the Negroes have made, not only during their period of +freedom, but also from the time of their coming to this country. + +I heartily indorse this proposal, and request that the Executive be +authorized to appoint a preliminary commission of not more than seven +persons to consider carefully whether or not it is wise to hold such an +exposition, and if so, to outline a plan for the enterprise. I further +recommend that such preliminary commission serve without salary, except as +to their actual expenses, and that an appropriation be made to meet such +expenses. CONCLUSION. + +I have thus, in a message compressed as much as the subjects will permit, +referred to many of the legislative needs of the country, with the +exceptions already noted. Speaking generally, the country is in a high +state of prosperity. There is every reason to believe that we are on the +eve of a substantial business expansion, and we have just garnered a +harvest unexampled in the market value of our agricultural products. The +high prices which such products bring mean great prosperity for the farming +community, but on the other hand they mean a very considerably increased +burden upon those classes in the community whose yearly compensation does +not expand with the improvement in business and the general prosperity. +Various reasons are given for the high prices. The proportionate increase +in the output of gold, which to-day is the chief medium of exchange and is +in some respects a measure of value, furnishes a substantial explanation of +at least a part of the increase in prices. The increase in population and +the more expensive mode of living of the people, which have not been +accompanied by a proportionate increase in acreage production, may furnish +a further reason. It is well to note that the increase in the cost of +living is not confined to this country, but prevails the world over, and +that those who would charge increases in prices to the existing protective +tariff must meet the fact that the rise in prices has taken place almost +wholly in those products of the factory and farm in respect to which there +has been either no increase in the tariff or in many instances a very +considerable reduction. + +*** + +State of the Union Address +William H. Taft +December 6, 1910 + +To the Senate and House of Representatives: + +During the past year the foreign relations of the United States have +continued upon a basis of friendship and good understanding. ARBITRATION. + +The year has been notable as witnessing the pacific settlement of two +important international controversies before the Permanent Court of The +Hague. + +The arbitration of the Fisheries dispute between the United States and +Great Britain, which has been the source of nearly continuous diplomatic +correspondence since the Fisheries Convention of 1818, has given an award +which is satisfactory to both parties. This arbitration is particularly +noteworthy not only because of the eminently just results secured, but also +because it is the first arbitration held under the general arbitration +treaty of April 4, 1908, between the United States and Great Britain, and +disposes of a controversy the settlement of which has resisted every other +resource of diplomacy, and which for nearly ninety years has been the cause +of friction between two countries whose common interest lies in maintaining +the most friendly and cordial relations with each other. + +The United States was ably represented before the tribunal. The complicated +history of the questions arising made the issue depend, more than +ordinarily in such cases, upon the care and skill with which our case was +presented, and I should be wanting in proper recognition of a great +patriotic service if I did not refer to the lucid historical analysis of +the facts and the signal ability and force of the argument--six days in +length--presented to the Court in support of our case by Mr. Elihu Root. As +Secretary of State, Mr. Root had given close study to the intricate facts +bearing on the controversy, and by diplomatic correspondence had helped to +frame the issues. At the solicitation of the Secretary of State and myself, +Mr. Root, though burdened by his duties as Senator from New York, undertook +the preparation of the case as leading counsel, with the condition imposed +by himself that, in view of his position as Senator, he should not receive +any compensation. + +The Tribunal constituted at The Hague by the Governments of the United +States and Venezuela has completed its deliberations and has rendered an +award in the case of the Orinoco Steamship Company against Venezuela. The +award may be regarded as satisfactory since it has, pursuant to the +contentions of the United States, recognized a number of important +principles making for a judicial attitude in the determining of +international disputes. + +In view of grave doubts which had been raised as to the constitutionality +of The Hague Convention for the establishment of an International Prize +Court, now before the Senate for ratification, because of that provision of +the Convention which provides that there may be an appeal to the proposed +Court from the decisions of national courts, this government proposed in an +Identic Circular Note addressed to those Powers who had taken part in the +London Maritime Conference, that the powers signatory to the Convention, if +confronted with such difficulty, might insert a reservation to the effect +that appeals to the International Prize Court in respect to decisions of +its national tribunals, should take the form of a direct claim for +compensation; that the proceedings thereupon to be taken should be in the +form of a trial de novo, and that judgment of the Court should consist of +compensation for the illegal capture, irrespective of the decision of the +national court whose judgment had thus been internationally involved. As +the result of an informal discussion it was decided to provide such +procedure by means of a separate protocol which should be ratified at the +same time as the Prize Court Convention itself. + +Accordingly, the Government of the Netherlands, at the request of this +Government, proposed under date of May 24, 1910, to the powers signatory to +The Hague Convention, the negotiation of a supplemental protocol embodying +stipulations providing for this alternative procedure. It is gratifying to +observe that this additional protocol is being signed without objection, by +the powers signatory to the original convention, and there is every reason +to believe that the International Prize Court will be soon established. + +The Identic Circular Note also proposed that the International Prize Court +when established should be endowed with the functions of an Arbitral Court +of Justice under and pursuant to the recommendation adopted by the last +Hague Conference. The replies received from the various powers to this +proposal inspire the hope that this also may be accomplished within the +reasonably near future. + +It is believed that the establishment of these two tribunals will go a long +way toward securing the arbitration of many questions which have heretofore +threatened and, at times, destroyed the peace of nations. + +PEACE COMMISSION. + +Appreciating these enlightened tendencies of modern times, the Congress at +its last session passed a law providing for the appointment of a commission +of five members "to be appointed by the President of the United States to +consider the expediency of utilizing existing international agencies for +the purpose of limiting the armaments of the nations of the world by +international agreement, and of constituting the combined navies of the +world an international force for the preservation of universal peace, and +to consider and report upon any other means to diminish the expenditures of +government for military purposes and to lessen the probabilities of war." + +I have not as yet made appointments to this Commission because I have +invited and am awaiting the expressions of foreign governments as to their +willingness to cooperate with us in the appointment of similar commissions +or representatives who would meet with our commissioners and by joint +action seek to make their work effective. + +GREAT BRITAIN AND CANADA. + +Several important treaties have been negotiated with Great Britain in the +past twelve months. A preliminary diplomatic agreement has been reached +regarding the arbitration of pecuniary claims which each Government has +against the other. This agreement, with the schedules of claims annexed, +will, as soon as the schedules are arranged, be submitted to the Senate for +approval. + +An agreement between the United States and Great Britain with regard to the +location of the international boundary line between the United States and +Canada in Passamaquoddy Bay and to the middle of Grand Manan Channel was +reached in a Treaty concluded May 21, 1910, which has been ratified by both +Governments and proclaimed, thus making unnecessary the arbitration +provided for in the previous treaty of April 11, 1908. + +The Convention concluded January 11, 1909, between the United States and +Great Britain providing for the settlement of international differences +between the United States and Canada including the apportionment between +the two countries of certain of the boundary waters and the appointment of +Commissioners to adjust certain other questions has been ratified by both +Governments and proclaimed. + +The work of the International Fisheries Commission appointed in 1908, under +the treaty of April 11, 1908, between Great Britain and the United States, +has resulted in the formulation and recommendation of uniform regulations +governing the fisheries of the boundary waters of Canada and the United +States for the purpose of protecting and increasing the supply of food fish +in such waters. In completion of this work, the regulations agreed upon +require congressional legislation to make them effective and for their +enforcement in fulfillment of the treaty stipulations. PORTUGAL. + +In October last the monarchy in Portugal was overthrown, a provisional +Republic was proclaimed, and there was set up a de facto Government which +was promptly recognized by the Government of the United States for purposes +of ordinary intercourse pending formal recognition by this and other Powers +of the Governmental entity to be duly established by the national +sovereignty. LIBERIA. + +A disturbance among the native tribes of Liberia in a portion of the +Republic during the early part of this year resulted in the sending, under +the Treaty of 1862, of an American vessel of war to the disaffected +district, and the Liberian authorities, assisted by the good offices of the +American Naval Officers, were able to restore order. The negotiations which +have been undertaken for the amelioration of the conditions found in +Liberia by the American Commission, whose report I transmitted to Congress +on March 25 last, are being brought to conclusion, and it is thought that +within a short time practical measures of relief may be put into effect +through the good offices of this Government and the cordial cooperation of +other governments interested in Liberia's welfare. + +THE NEAR EAST. TURKEY. + +To return the visit of the Special Embassy announcing the accession of His +Majesty Mehemet V, Emperor of the Ottomans, I sent to Constantinople a +Special Ambassador who, in addition to this mission of ceremony, was +charged with the duty of expressing to the Ottoman Government the value +attached by the Government of the United States to increased and more +important relations between the countries and the desire of the United +States to contribute to the larger economic and commercial development due +to the new regime in Turkey. + +The rapid development now beginning in that ancient empire and the marked +progress and increased commercial importance of Bulgaria, Roumania, and +Servia make it particularly opportune that the possibilities of American +commerce in the Near East should receive due attention. MONTENEGRO. + +The National Skoupchtina having expressed its will that the Principality of +Montenegro be raised to the rank of Kingdom, the Prince of Montenegro on +August 15 last assumed the title of King of Montenegro. It gave me pleasure +to accord to the new kingdom the recognition of the United States. + +THE FAR EAST. + +The center of interest in Far Eastern affairs during the past year has +again been China. + +It is gratifying to note that the negotiations for a loan to the Chinese +Government for the construction of the trunk railway lines from Hankow +southward to Canton and westward through the Yangtse Valley, known as the +Hukuang Loan, were concluded by the representatives of the various +financial groups in May last and the results approved by their respective +governments. The agreement, already initialed by the Chinese Government, is +now awaiting formal ratification. The basis of the settlement of the terms +of this loan was one of exact equality between America, Great Britain, +France, and Germany in respect to financing the loan and supplying +materials for the proposed railways and their future branches. + +The application of the principle underlying the policy of the United States +in regard to the Hukuang Loan, viz., that of the internationalization of +the foreign interest in such of the railways of China as may be financed by +foreign countries, was suggested on a broader scale by the Secretary of +State in a proposal for internationalization and commercial neutralization +of all the railways of Manchuria. While the principle which led to the +proposal of this Government was generally admitted by the powers to whom it +was addressed, the Governments of Russia and Japan apprehended practical +difficulties in the execution of the larger plan which prevented their +ready adherence. The question of constructing the Chinchow-Aigun railway by +means of an international loan to China is, however, still the subject of +friendly discussion by the interested parties. + +The policy of this Government in these matters has been directed by a +desire to make the use of American capital in the development of China an +instrument in the promotion of China's welfare and material prosperity +without prejudice to her legitimate rights as an independent political +power. + +This policy has recently found further exemplification in the assistance +given by this Government to the negotiations between China and a group of +American bankers for a loan of $50,000,000 to be employed chiefly in +currency reform. The confusion which has from ancient times existed in the +monetary usages of the Chinese has been one of the principal obstacles to +commercial intercourse with that people. The United States in its Treaty of +1903 with China obtained a pledge from the latter to introduce a uniform +national coinage, and the following year, at the request of China, this +Government sent to Peking a member of the International Exchange +Commission, to discuss with the Chinese Government the best methods of +introducing the reform. In 1908 China sent a Commissioner to the United +States to consult with American financiers as to the possibility of +securing a large loan with which to inaugurate the new currency system, but +the death of Their Majesties, the Empress Dowager and the Emperor of China, +interrupted the negotiations, which were not resumed until a few months +ago, when this Government was asked to communicate to the bankers concerned +the request of China for a loan of $50,000,000 for the purpose under +review. A preliminary agreement between the American group and China has +been made covering the loan. + +For the success of this loan and the contemplated reforms which are of the +greatest importance to the commercial interests of the United States and +the civilized world at large, it is realized that an expert will be +necessary, and this Government has received assurances from China that such +an adviser, who shall be an American, will be engaged. + +It is a matter of interest to Americans to note the success which is +attending the efforts of China to establish gradually a system of +representative government. The provincial assemblies were opened in +October, 1909, and in October of the present year a consultative body, the +nucleus of the future national parliament, held its first session at +Peking. + +The year has further been marked by two important international agreements +relating to Far Eastern affairs. In the Russo-Japanese Agreement relating +to Manchuria, signed July 4, 1910, this Government was gratified to note an +assurance of continued peaceful conditions in that region and the +reaffirmation of the policies with respect to China to which the United +States together with all other interested powers are alike solemnly +committed. + +The treaty annexing Korea to the Empire of Japan, promulgated August 29, +1910, marks the final step in a process of control of the ancient empire by +her powerful neighbor that has been in progress for several years past. In +communicating the fact of annexation the Japanese Government gave to the +Government of the United States assurances of the full protection of the +rights of American citizens in Korea under the changed conditions. + +Friendly visits of many distinguished persons from the Far East have been +made during the year. Chief among these were Their Imperial Highnesses +Princes Tsai-tao and Tsai-Hsun of China; and His Imperial Highness Prince +Higashi Fushimi, and Prince Tokugawa, President of the House of Peers of +Japan. The Secretary of War has recently visited Japan and China in +connection with his tour to the Philippines, and a large delegation of +American business men are at present traveling in China. This exchange of +friendly visits has had the happy effect of even further strengthening our +friendly international relations. + +LATIN AMERICA. + +During the past year several of our southern sister Republics celebrated +the one hundredth anniversary of their independence. In honor of these +events, special embassies were sent from this country to Argentina, Chile, +and Mexico, where the gracious reception and splendid hospitality extended +them manifested the cordial relations and friendship existing between those +countries and the United States, relations which I am happy to believe have +never before been upon so high a plane and so solid a basis as at present. + +The Congressional commission appointed under a concurrent resolution to +attend the festivities celebrating the centennial anniversary of Mexican +independence, together with a special ambassador, were received with the +highest honors and with the greatest cordiality, and returned with the +report of the bounteous hospitality and warm reception of President Diaz +and the Mexican people, which left no doubt of the desire of the +immediately neighboring Republic to continue the mutually beneficial and +intimate relations which I feel sure the two governments will ever +cherish. + +At the Fourth Pan-American Conference which met in Buenos Aires during July +and August last, after seven weeks of harmonious deliberation, three +conventions were signed providing for the regulation of trade-marks, +patents, and copyrights, which when ratified by the different Governments, +will go far toward furnishing to American authors, patentees, and owners of +trade-marks the protection needed in localities where heretofore it has +been either lacking or inadequate. Further, a convention for the +arbitration of pecuniary claims was signed and a number of important +resolutions passed. The Conventions will in due course be transmitted to +the Senate, and the report of the Delegation of the United States will be +communicated to the Congress for its information. The special cordiality +between representative men from all parts of America which was shown at +this Conference cannot fail to react upon and draw still closer the +relations between the countries which took part in it. + +The International Bureau of American Republics is doing a broad and useful +work for Pan American commerce and comity. Its duties were much enlarged by +the International Conference of American States at Buenos Aires and its +name was shortened to the more practical and expressive term of Pan +American Union. Located now in its new building, which was specially +dedicated April 26 of this year to the development of friendship, trade and +peace among the American nations, it has improved instrumentalities to +serve the twenty-two republics of this hemisphere. + +I am glad to say that the action of the United States in its desire to +remove imminent danger of war between Peru and Ecuador growing out of a +boundary dispute, with the cooperation of Brazil and the Argentine Republic +as joint mediators with this Government, has already resulted successfully +in preventing war. The Government of Chile, while not one of the mediators, +lent effective aid in furtherance of a preliminary agreement likely to lead +on to an amicable settlement, and it is not doubted that the good offices +of the mediating Powers and the conciliatory cooperation of the Governments +directly interested will finally lead to a removal of this perennial cause +of friction between Ecuador and Peru. The inestimable value of cordial +cooperation between the sister republics of America for the maintenance of +peace in this hemisphere has never been more clearly shown than in this +mediation, by which three American Governments have given to this +hemisphere the honor of first invoking the most far-reaching provisions of +The Hague Convention for the pacific settlement of international disputes. + +There has been signed by the representatives of the United States and +Mexico a protocol submitting to the United States-Mexican Boundary +Commission (whose membership for the purpose of this case is to be +increased by the addition of a citizen of Canada) the question of +sovereignty over the Chamizal Tract which lies within the present physical +boundaries of the city of E1 Paso, Tex. The determination of this question +will remove a source of no little annoyance to the two Governments. + +The Republic of Honduras has for many years been burdened with a heavy +bonded debt held in Europe, the interest on which long ago fell in arrears. +Finally conditions were such that it became imperative to refund the debt +and place the finances of the Republic upon a sound basis. Last year a +group of American bankers undertook to do this and to advance funds for +railway and other improvements contributing directly to the country's +prosperity and commerce--an arrangement which has long been desired by this +Government. Negotiations to this end have been under way for more than a +year and it is now confidently believed that a short time will suffice to +conclude an arrangement which will be satisfactory to the foreign +creditors, eminently advantageous to Honduras, and highly creditable to the +judgment and foresight of the Honduranean Government. This is much to be +desired since, as recognized by the Washington Conventions, a strong +Honduras would tend immensely to the progress and prosperity of Central +America. + +During the past year the Republic of Nicaragua has been the scene of +internecine struggle. General Zelaya, for seventeen years the absolute +ruler of Nicaragua, was throughout his career the disturber of Central +America and opposed every plan for the promotion of peace and friendly +relations between the five republics. When the people of Nicaragua were +finally driven into rebellion by his lawless exactions, he violated the +laws of war by the unwarranted execution of two American citizens who had +regularly enlisted in the ranks of the revolutionists. This and other +offenses made it the duty of the American Government to take measures with +a view to ultimate reparation and for the safeguarding of its interests. +This involved the breaking off of all diplomatic relations with the Zelaya +Government for the reasons laid down in a communication from the Secretary +of State, which also notified the contending factions in Nicaragua that +this Government would hold each to strict accountability for outrages on +the rights of American citizens. American forces were sent to both coasts +of Nicaragua to be in readiness should occasion arise to protect Americans +and their interests, and remained there until the war was over and peace +had returned to that unfortunate country. These events, together with +Zelaya's continued exactions, brought him so clearly to the bar of public +opinion that he was forced to resign and to take refuge abroad. + +In the above-mentioned communication of the Secretary of State to the +Charge d'Affaires of the Zelaya Government, the opinion was expressed that +the revolution represented the wishes of the majority of the Nicaraguan +people. This has now been proved beyond doubt by the fact that since the +complete overthrow of the Madriz Government and the occupation of the +capital by the forces of the revolution, all factions have united to +maintain public order and as a result of discussion with an Agent of this +Government, sent to Managua at the request of the Provisional Government, +comprehensive plans are being made for the future welfare of Nicaragua, +including the rehabilitation of public credit. The moderation and +conciliatory spirit shown by the various factions give ground for the +confident hope that Nicaragua will soon take its rightful place among the +law-abiding and progressive countries of the world. + +It gratifies me exceedingly to announce that the Argentine Republic some +months ago placed with American manufacturers a contract for the +construction of two battle-ships and certain additional naval equipment. +The extent of this work and its importance to the Argentine Republic make +the placing of the bid an earnest of friendly feeling toward the United +States. + +TARIFF NEGOTIATIONS. + +The new tariff law, in section 2, respecting the maximum and minimum +tariffs of the United States, which provisions came into effect on April 1, +1910, imposed upon the President the responsibility of determining prior to +that date whether or not any undue discrimination existed against the +United States and its products in any country of the world with which we +sustained commercial relations. + +In the case of several countries instances of apparent undue discrimination +against American commerce were found to exist. These discriminations were +removed by negotiation. Prior to April 1, 1910, when the maximum tariff was +to come into operation with respect to importations from all those +countries in whose favor no proclamation applying the minimum tariff should +be issued by the President, one hundred and thirty-four such proclamations +were issued. This series of proclamations embraced the entire commercial +world, and hence the minimum tariff of the United States has been given +universal application, thus testifying to the satisfactory character of our +trade relations with foreign countries. + +Marked advantages to the commerce of the United States were obtained +through these tariff settlements. Foreign nations are fully cognizant of +the fact that under section 2 of the tariff act the President is required, +whenever he is satisfied that the treatment accorded by them to the +products of the United States is not such as to entitle them to the +benefits of the minimum tariff of the United States, to withdraw those +benefits by proclamation giving ninety days' notice, after which the +maximum tariff will apply to their dutiable products entering the United +States. In its general operation this section of the tariff law has thus +far proved a guaranty of continued commercial peace, although there are +unfortunately instances where foreign governments deal arbitrarily with +American interests within their jurisdiction in a manner injurious and +inequitable. + +The policy of broader and closer trade relations with the Dominion of +Canada which was initiated in the adjustment of the maximum and minimum +provisions of the Tariff Act of August, 1909, has proved mutually +beneficial. It justifies further efforts for the readjustment of the +commercial relations of the two countries so that their commerce may follow +the channels natural to contiguous countries and be commensurate with the +steady expansion of trade and industry on both sides of the boundary line. +The reciprocation on the part of the Dominion Government of the sentiment +which was expressed by this Government was followed in October by the +suggestion that it would be glad to have the negotiations, which had been +temporarily suspended during the summer, resumed. In accordance with this +suggestion the Secretary of State, by my direction, dispatched two +representatives of the Department of State as special commissioners to +Ottawa to confer with representatives of the Dominion Government. They were +authorized to take such steps for formulating a reciprocal trade agreement +as might be necessary and to receive and consider any propositions which +the Dominion Government might care to submit. + +Pursuant to the instructions issued conferences were held by these +commissioners with officials of the Dominion Government at Ottawa in the +early part of November. + +The negotiations were conducted on both sides in a spirit of mutual +accommodation. The discussion of the common commercial interests of the two +countries had for its object a satisfactory basis for a trade arrangement +which offers the prospect of a freer interchange for the products of the +United States and of Canada. The conferences were adjourned to be resumed +in Washington in January, when it is hoped that the aspiration of both +Governments for a mutually advantageous measure of reciprocity will be +realized. + +FOSTERING FOREIGN TRADE. + +All these tariff negotiations, so vital to our commerce and industry, and +the duty of jealously guarding the equitable and just treatment of our +products, capital, and industry abroad devolve upon the Department of +State. + +The Argentine battle-ship contracts, like the subsequent important one for +Argentine railway equipment, and those for Cuban Government vessels, were +secured for our manufacturers largely through the good offices of the +Department of State. + +The efforts of that Department to secure for citizens of the United States +equal opportunities in the markets of the world and to expand American +commerce have been most successful. The volume of business obtained in new +fields of competition and upon new lines is already very great and Congress +is urged to continue to support the Department of State in its endeavors +for further trade expansion. + +Our foreign trade merits the best support of the Government and the most +earnest endeavor of our manufacturers and merchants, who, if they do not +already in all cases need a foreign market, are certain soon to become +dependent on it. Therefore, now is the time to secure a strong position in +this field. + +AMERICAN BRANCH BANKS ABROAD. + +I cannot leave this subject without emphasizing the necessity of such +legislation as will make possible and convenient the establishment of +American banks and branches of American banks in foreign countries. Only by +such means can our foreign trade be favorably financed, necessary credits +be arranged, and proper avail be made of commercial opportunities in +foreign countries, and most especially in Latin America. + +AID TO OUR FOREIGN MERCHANT MARINE. + +Another instrumentality indispensable to the unhampered and natural +development of American commerce is merchant marine. All maritime and +commercial nations recognize the importance of this factor. The greatest +commercial nations, our competitors, jealously foster their merchant +marine. Perhaps nowhere is the need for rapid and direct mail, passenger +and freight communication quite so urgent as between the United States and +Latin America. We can secure in no other quarter of the world such +immediate benefits in friendship and commerce as would flow from the +establishment of direct lines Of communication with the countries of Latin +America adequate to meet the requirements of a rapidly increasing +appreciation of the reciprocal dependence of the countries of the Western +Hemisphere upon each other's products, sympathies and assistance. + +I alluded to this most important subject in my last annual message; it has +often been before you and I need not recapitulate the reasons for its +recommendation. Unless prompt action be taken the completion of the Panama +Canal will find this the only great commercial nation unable to avail in +international maritime business of this great improvement in the means of +the world's commercial intercourse. + +Quite aside from the commercial aspect, unless we create a merchant marine, +where can we find the seafaring population necessary as a natural naval +reserve and where could we find, in case of war, the transports and +subsidiary vessels without which a naval fleet is arms without a body? For +many reasons I cannot too strongly urge upon the Congress the passage of a +measure by mail subsidy or other subvention adequate to guarantee the +establishment and rapid development of an American merchant marine, and the +restoration of the American flag to its ancient place upon the seas. + +Of course such aid ought only to be given under conditions of publicity of +each beneficiary's business and accounts which would show that the aid +received was needed to maintain the trade and was properly used for that +purpose. + +FEDERAL PROTECTION TO ALIENS. + +With our increasing international intercourse, it becomes incumbent upon me +to repeat more emphatically than ever the recommendation which I made in my +Inaugural Address that Congress shall at once give to the Courts of the +United States jurisdiction to punish as a crime the violation of the rights +of aliens secured by treaty with the United States, in order that the +general government of the United States shall be able, when called upon by +a friendly nation, to redeem its solemn promise by treaty to secure to the +citizens or subjects of that nation resident in the United States, freedom +from violence and due process of law in respect to their life, liberty and +property. + +MERIT SYSTEM FOR DIPLOMATIC AND CONSULAR SERVICE. + +I also strongly commend to the favorable action of the Congress the +enactment of a law applying to the diplomatic and consular service the +principles embodied in Section 1753 of the Revised Statutes of the United +States, in the Civil Service Act of January 16, 1883, and the Executive +Orders of June 27, 1906, and of November 26, 1909. The excellent results +which have attended the partial application of Civil Service principles to +the diplomatic and consular services are an earnest of the benefit to be +wrought by a wider and more permanent extension of those principles to both +branches of the foreign service. The marked improvement in the consular +service during the four years since the principles of the Civil Service Act +were applied to that service in a limited way, and the good results already +noticeable from a similar application of civil service principles to the +diplomatic service a year ago, convince me that the enactment into law of +the general principles of the existing executive regulations could not fail +to effect further improvement of both branches of the foreign service, +offering as it would by its assurance of permanency of tenure and promotion +on merit, an inducement for the entry of capable young men into the service +and an incentive to those already in to put forth their best efforts to +attain and maintain that degree of efficiency which the interests of our +international relations and commerce demand. + +GOVERNMENT OWNERSHIP OF OUR EMBASSY AND LEGATION PREMISES. + +During many years past appeals have been made from time to time to Congress +in favor of Government ownership of embassy and legation premises abroad. +The arguments in favor of such ownership have been many and oft repeated +and are well known to the Congress. The acquisition by the Government of +suitable residences and offices for its diplomatic officers, especially in +the capitals of the Latin-American States and of Europe, is so important +and necessary to an improved diplomatic service that I have no hesitation +in urging upon the Congress the passage of some measure similar to that +favorably reported by the House Committee on Foreign Affairs on February +14, 1910 (Report No. 438), that would authorize the gradual and annual +acquisition of premises for diplomatic use. + +The work of the Diplomatic Service is devoid of partisanship; its +importance should appeal to every American citizen and should receive the +generous consideration of the Congress. + +TREASURY DEPARTMENT. + +ESTIMATES FOR NEXT YEAR'S EXPENSES. + +Every effort has been made by each department chief to reduce the estimated +cost of his department for the ensuing fiscal year ending June 30, 1912. I +say this in order that Congress may understand that these estimates thus +made present the smallest sum which will maintain the departments, bureaus, +and offices of the Government and meet its other obligations under existing +law, and that a cut of these estimates would result in embarrassing the +executive branch of the Government in the performance of its duties. This +remark does not apply to the river and harbor estimates, except to those +for expenses of maintenance and the meeting of obligations under authorized +contracts, nor does it apply to the public building bill nor to the navy +building program. Of course, as to these Congress could withhold any part +or all of the estimates for them without interfering with the discharge of +the ordinary obligations of the Government or the performance of the +functions of its departments, bureaus, and offices. + +A FIFTY-TWO MILLION CUT. + +The final estimates for the year ending June 30, 1912, as they have been +sent to the Treasury, on November 29 of this year, for the ordinary +expenses of the Government, including those for public buildings, rivers +and harbors, and the navy building program, amount to $630,494,013.12. This +is $52,964,887.36 less than the appropriations for the fiscal year ending +June 30, 1911. It is $16,883,153.44 less than the total estimates, +including supplemental estimates submitted to Congress by the Treasury for +the year 1911, and is $5,574,659.39 less than the original estimates +submitted by the Treasury for 1911. + +These figures do not include the appropriations for the Panama Canal, the +policy in respect to which ought to be, and is, to spend as much each year +as can be economically and effectively expended in order to complete the +Canal as promptly as possible, and, therefore, the ordinary motive for +cutting down the expense of the Government does not apply to appropriations +for this purpose. It will be noted that the estimates for the Panama Canal +for the ensuing year are more than fifty-six millions of dollars, an +increase of twenty millions over the amount appropriated for this year--a +difference due to the fact that the estimates for 1912 include something +over nineteen millions for the fortification of the Canal. Against the +estimated expenditures of $630,494,013.12, the Treasury has estimated +receipts for next year $680,000,000, making a probable surplus of ordinary +receipts over ordinary expenditures of about $50,000,000. + +A table showing in detail the estimates and the comparisons referred to +follows. + +TYPICAL ECONOMIES. + +The Treasury Department is one of the original departments of the +Government. With the changes in the monetary system made from time to time +and with the creation of national banks, it was thought necessary to +organize new bureaus and divisions which were added in a somewhat haphazard +way and resulted in a duplication of duties which might well now be ended. +This lack of system and economic coordination has attracted the attention +of the head of that Department who has been giving his time for the last +two years, with the aid of experts and by consulting his bureau chiefs, to +its reformation. He has abolished four hundred places in the civil service +without at all injuring its efficiency. Merely to illustrate the character +of the reforms that are possible, I shall comment on some of the specific +changes that are being made, or ought to be made by legislative aid. + +AUDITING SYSTEM. + +The auditing system in vogue is as old as the Government and the methods +used are antiquated. There are six Auditors and seven Assistant Auditors +for the nine departments, and under the present system the only function +which the Auditor of a department exercises is to determine, on accounts +presented by disbursing officers, that the object of the expenditure was +within the law and the appropriation made by Congress for the purpose on +its face, and that the calculations in the accounts are correct. He does +not examine the merits of the transaction or determine the reasonableness +of the price paid for the articles purchased, nor does he furnish any +substantial check upon disbursing officers and the heads of departments or +bureaus with sufficient promptness to enable the Government to recoup +itself in full measure for unlawful expenditure. A careful plan is being +devised and will be presented to Congress with the recommendation that the +force of auditors and employees under them be greatly reduced, thereby +effecting substantial economy. But this economy will be small compared with +the larger economy that can be effected by consolidation and change of +methods. The possibilities in this regard have been shown in the reduction +of expenses and the importance of methods and efficiency in the office of +the Auditor for the Post Office Department, who, without in the slightest +degree impairing the comprehensiveness and efficiency of his work, has cut +down the expenses of his office $120,000 a year. + +Statement of estimates of appropriations for the fiscal years 1912 and +1911, and of appropriations for 1911, showing increases and decreases. - +Final Estimates for 1912 as of November 29 - Original Estimates submitted +by the Treasury for 1911 - Total Estimates for 1911 including supplementals +- Appropriations for 1911 - Increase (+) and decrease (-), 1912 estimates +against 1911 total estimates - Increase (+) and decrease (-), 1912 +estimates against 1911 total appropriations - Increase (+) and decrease +(-), 1911 estimates against 1911 total appropriations + +Legislature - $13,426,805.73 - $13,169,679.70 - $13,169,679.70 - +$12,938,048.00 - + $257,126.03 - + $488,757.73 - + $231,631.70 + +Executive - 998,170.00 - 472,270.00 - 722,270.00 - 870,750.00 - + +275,900.00 - + 127,420.00 - - 148,480.00 + +State Department: - 4,875,576.41 - 4,875,301.41 - 4,749,801.41 - +5,046,701.41 - + 125,775.00 - - 171,125.00 - - 296,900.00 + +TREASURY DEPARTMENT: Treasury Department proper - 68,735,451.00 - +69,865,240.00 - 70,393,543.75 - 69,973,434.61 - - 1,658,092.75 - - +1,237,983.61 - + 420,109.14 + +Public buildings and works - 11,864,545.60 - 6,198,365.60 - 7,101,465.60 - +5,565,164.00 - + 4,763,080.00 - + 6,299,381.60 - + 1,536,301.60 + +Territorial governments - 202,150.00 - 287,350.00 - 292,350.00 - 282,600.00 +- - 90,200.00 - - 80,450.00 - + 9,750.00 + +Independent offices - 2,638,695.12 - 2,400,695.12 - 2,492,695.12 - +2,128,695.12 - + 146,000.00 - + 510,000.00 - + 364,000.00 + +District of Columbia - 13,602,785.90 - 11,884,928.49 - 12,108,878.49 - +11,440,346.99 - + 1,492,907.41 - + 2,162,439.91 - + 668,532.50 + +WAR DEPARTMENT: War Department proper - 120,104,260.12 - 124,165,656.28 - +125,717,204.77 - 122,322,178.12 - - 5,612,944.65 - - 2,217,918.00 - + +3,395,026.65 + +Rivers and harbors - 28,232,438.00 - 28,232,465.00 - 28,232,465.00 - +49,390,541.50 - - 27.00 - -21,158,103.50 - -21,158,076.50 + +NAVY DEPARTMENT: Navy Department proper - 116,101,730.24 - 117,029,914.38 - +119,768,860.83 - 119,596,870.46 - - 3,667,130.59 - - 3,495,140.22 - + +171,990.37 + +New navy building program - 12,840,428.00 - 12,844,122.00 - 12,844,122.00 - +14,790,122.00 - - 3,694.00 - - 1,949,694.00 - - 1,946,000.00 + +Interior Department - 189,151,875.00 - 191,224,182.90 - 193,948,582.02 - +214,754,278.00 - - 4,796,707.02 - -25,602,403.00 - -20,805,698.98 + +Post-Office Department proper - 1,697,490.00 - 1,695,690.00 - 1,695,690.00 +- 2,085,005.33 - + 1,800.00 - - 387,515.33 - - 389,315.33 + +Deficiency in postal revenues - --------------- - 10,634,122.63 - +10,634,122.63 - 10,634,122.63 - -10,634,122.65 - -10,634,122.63 - +----------------- + +Department of Agriculture - 19,681,066.00 - 17,681,136.00 - 17,753,931.24 - +17,821,836.00 - + 1,927,134.76 - + 1,859,230.00 - - 67,904.76 + +Department of Commerce and + +Labor - 16,276,970.00 - 14,187,913.00 - 15,789,271.00 - 14,169,969.32 - + +487,699.00 - + 2,107,000.68 - + 1,619,301.68 + +Department of Justice - 10,063,576.00 - 9,518,640.00 - 9,962,233.00 - +9,648,237.99 - + 101,343.00 - + 415,338.01 - + 313,995.01 - + +*** + +State of the Union Address +William H. Taft +December 5, 1911 + +Jump to Part II | Part III | Part IV + +This message is the first of several which I shall send to Congress during +the interval between the opening of its regular session and its adjournment +for the Christmas holidays. The amount of information to be communicated as +to the operations of the Government, the number of important subjects +calling for comment by the Executive, and the transmission to Congress of +exhaustive reports of special commissions, make it impossible to include in +one message of a reasonable length a discussion of the topics that ought to +be brought to the attention of the National Legislature at its first +regular session. + +THE ANTI-TRUST LAW-THE SUPREME COURT DECISIONS. + +In May last the Supreme Court handed down decisions in the suits in equity +brought by the United States to enjoin the further maintenance of the +Standard Oil Trust and of the American Tobacco Trust, and to secure their +dissolution. The decisions are epoch-making and serve to advise the +business world authoritatively of the scope and operation of the anti-trust +act of 1890. The decisions do not depart in any substantial way from the +previous decisions of the court in construing and applying this important +statute, but they clarify those decisions by further defining the already +admitted exceptions to the literal construction of the act. By the decrees, +they furnish a useful precedent as to the proper method of dealing with the +capital and property of illegal trusts. These decisions suggest the need +and wisdom of additional or supplemental legislation to make it easier for +the entire business community to square with the rule of action and +legality thus finally established and to preserve the benefit, freedom, and +spur of reasonable competition without loss of real efficiency or +progress. + +NO CHANGE IN THE RULE OF DECISION-MERELY IN ITS FORM OF EXPRESSION. + +The statute in its first section declares to be illegal "every contract, +combination in the form of trust or otherwise, or conspiracy, in restraint +of trade or commerce among the several States or with foreign nations," and +in the second, declares guilty of a misdemeanor "every person who shall +monopolize or attempt to monopolize or combine or conspire with any other +person to monopolize any part of the trade or commerce of the several +States or with foreign nations." + +In two early cases, where the statute was invoked to enjoin a +transportation rate agreement between interstate railroad companies, it was +held that it was no defense to show that the agreement as to rates +complained of was reasonable at common law, because it was said that the +statute was directed against all contracts and combinations in restraint of +trade whether reasonable at common law or not. It was plain from the +record, however, that the contracts complained of in those cases would not +have been deemed reasonable at common law. In subsequent cases the court +said that the statute should be given a reasonable construction and refused +to include within its inhibition, certain contractual restraints of trade +which it denominated as incidental or as indirect. + +These cases of restraint of trade that the court excepted from the +operation of the statute were instances which, at common law, would have +been called reasonable. In the Standard Oil and Tobacco cases, therefore, +the court merely adopted the tests of the common law, and in defining +exceptions to the literal application of the statute, only substituted for +the test of being incidental or indirect, that of being reasonable, and +this, without varying in the slightest the actual scope and effect of the +statute. In other words, all the cases under the statute which have now +been decided would have been decided the same way if the court had +originally accepted in its construction the rule at common law. + +It has been said that the court, by introducing into the construction of +the statute common-law distinctions, has emasculated it. This is obviously +untrue. By its judgment every contract and combination in restraint of +interstate trade made with the purpose or necessary effect of controlling +prices by stifling competition, or of establishing in whole or in part a +monopoly of such trade, is condemned by the statute. The most extreme +critics can not instance a case that ought to be condemned under the +statute which is not brought within its terms as thus construed. + +The suggestion is also made that the Supreme Court by its decision in the +last two cases has committed to the court the undefined and unlimited +discretion to determine whether a case of restraint of trade is within the +terms of the statute. This is wholly untrue. A reasonable restraint of +trade at common law is well understood and is clearly defined. It does not +rest in the discretion of the court. It must be limited to accomplish the +purpose of a lawful main contract to which, in order that it shall be +enforceable at all, it must be incidental. If it exceed the needs of that +contract, it is void. + +The test of reasonableness was never applied by the court at common law to +contracts or combinations or conspiracies in restraint of trade whose +purpose was or whose necessary effect would be to stifle competition, to +control prices, or establish monopolies. The courts never assumed power to +say that such contracts or combinations or conspiracies might be lawful if +the parties to them were only moderate in the use of the power thus secured +and did not exact from the public too great and exorbitant prices. It is +true that many theorists, and others engaged in business violating the +statute, have hoped that some such line could be drawn by courts; but no +court of authority has ever attempted it. Certainly there is nothing in the +decisions of the latest two cases from which such a dangerous theory of +judicial discretion in enforcing this statute can derive the slightest +sanction. + +FORCE AND EFFECTIVENESS OF STATUTE A MATTER OF GROWTH. + +We have been twenty-one years making this statute effective for the +purposes for which it was enacted. The Knight case was discouraging and +seemed to remit to the States the whole available power to attack and +suppress the evils of the trusts. Slowly, however, the error of that +judgment was corrected, and only in the last three or four years has the +heavy hand of the law been laid upon the great illegal combinations that +have exercised such an absolute dominion over many of our industries. +Criminal prosecutions have been brought and a number are pending, but +juries have felt averse to convicting for jail sentences, and judges have +been most reluctant to impose such sentences on men of respectable standing +in society whose offense has been regarded as merely statutory. Still, as +the offense becomes better understood and the committing of it partakes +more of studied and deliberate defiance of the law, we can be confident +that juries will convict individuals and that jail sentences will be +imposed. + +THE REMEDY IN EQUITY BY DISSOLUTION. + +In the Standard Oil case the Supreme and Circuit Courts found the +combination to be a monopoly of the interstate business of refining, +transporting, and marketing petroleum and its products, effected and +maintained through thirty-seven different corporations, the stock of which +was held by a New Jersey company. It in effect commanded the dissolution of +this combination, directed the transfer and pro rata distribution by the +New Jersey company of the stock held by it in the thirty-seven corporations +to and among its stockholders; and the corporations and individual +defendants were enjoined from conspiring or combining to restore such +monopoly; and all agreements between the subsidiary corporations tending to +produce or bring about further violations of the act were enjoined. + +In the Tobacco case, the court found that the individual defendants, +twenty-nine in number, had been engaged in a successful effort to acquire +complete dominion over the manufacture, sale, and distribution of tobacco +in this country and abroad, and that this had been done by combinations +made with a purpose and effect to stifle competition, control prices, and +establish a monopoly, not only in the manufacture of tobacco, but also of +tin-foil and licorice used in its manufacture and of its products of +cigars, cigarettes, and snuffs. The tobacco suit presented a far more +complicated and difficult case than the Standard Oil suit for a decree +which would effectuate the will of the court and end the violation of the +statute. There was here no single holding company as in the case of the +Standard Oil Trust. The main company was the American Tobacco Company, a +manufacturing, selling, and holding company. The plan adopted to destroy +the combination and restore competition involved the redivision of the +capital and plants of the whole trust between some of the companies +constituting the trust and new companies organized for the purposes of the +decree and made parties to it, and numbering, new and old, fourteen. + +SITUATION AFTER READJUSTMENT. + +The American Tobacco Company (old), readjusted capital, $92, 000,000; the +Liggett & Meyers Tobacco Company (new), capital, $67,000,000; the P. +Lorillard Company (new), capital, $47,000,000; and the R. J. Reynolds +Tobacco Company (old), capital, $7,525,000, are chiefly engaged in the +manufacture and sale of chewing and smoking tobacco and cigars. The former +one tinfoil company is divided into two, one of $825,000 capital and the +other of $400,000. The one snuff company is divided into three companies, +one with a capital Of $15,000,000, another with a capital of $8,000,000, +and a third with a capital of $8,000,000. The licorice companies are two +one with a capital Of $5,758,300 and another with a capital of $200,000. +There is, also, the British-American Tobacco Company, a British +corporation, doing business abroad with a capital Of $26,000,000, the Porto +Rican Tobacco Company, with a capital of $1,800,000, and the corporation of +United Cigar Stores, with a capital of $9,000,000. + +Under this arrangement, each of the different kinds of business will be +distributed between two or more companies with a division of the prominent +brands in the same tobacco products, so as to make competition not only +possible but necessary. Thus the smoking-tobacco business of the country is +divided so that the present independent companies have 21-39 per cent, +while the American Tobacco Company will have 33-08 per cent, the Liggett & +Meyers 20.05 per cent, the Lorillard Company 22.82 per cent, and the +Reynolds Company 2.66 per cent. The stock of the other thirteen companies, +both preferred and common, has been taken from the defendant American +Tobacco Company and has been distributed among its stockholders. All +covenants restricting competition have been declared null and further +performance of them has been enjoined. The preferred stock of the different +companies has now been given voting power which was denied it under the old +organization. The ratio of the preferred stock to the common was as 78 to +40. This constitutes a very decided change in the character of the +ownership and control of each company. + +In the original suit there were twenty-nine defendants who were charged +with being the conspirators through whom the illegal combination acquired +and exercised its unlawful dominion. Under the decree these defendants. +will hold amounts of stock in the various distributee companies ranging +from 41 per cent as a maximum to 28.5 per cent as a minimum, except in the +case of one small company, the Porto Rican Tobacco Company, in which they +will hold 45 per cent. The twenty-nine individual defendants are enjoined +for three years from buying any stock except from each other, and the group +is thus prevented from extending its control during that period. All +parties to the suit, and the new companies who are made parties are +enjoined perpetually from in any way effecting any combination between any +of the companies in violation of the statute by way of resumption of the +old trust. Each of the fourteen companies is enjoined from acquiring stock +in any of the others. All these companies are enjoined from having common +directors or officers, or common buying or selling agents, or common +offices, or lending money to each other. + +SIZE OF NEW COMPANIES. + +Objection was made by certain independent tobacco companies that this +settlement was unjust because it left companies with very large capital in +active business, and that the settlement that would be effective to put all +on an equality would be a division of the capital and plant of the trust +into small fractions in amount more nearly equal to that of each of the +independent companies. This contention results from a misunderstanding of +the anti-trust law and its purpose. It is not intended thereby to prevent +the accumulation of large capital in business enterprises in which such a +combination can secure reduced cost of production, sale, and distribution. +It is directed against such an aggregation of capital only when its purpose +is that of stifling competition, enhancing or controlling prices, and +establishing a monopoly. If we shall have by the decree defeated these +purposes and restored competition between the large units into which the +capital and plant have been divided, we shall have accomplished the useful +purpose of the statute. + +CONFISCATION NOT THE PURPOSE OF THE STATUTE. + +It is not the purpose of the statute to confiscate the property and capital +of the offending trusts. Methods of punishment by fine or imprisonment of +the individual offenders, by fine of the corporation or by forfeiture of +its goods in transportation, are provided, but the proceeding in equity is +a specific remedy to stop the operation of the trust by injunction and +prevent the future use of the plant and capital in violation of the +statute. + +EFFECTIVENESS OF DECREE. + +I venture to say that not in the history of American law has a decree more +effective for such a purpose been entered by a court than that against the +Tobacco Trust. As Circuit judge Noyes said in his judgment approving the +decree: + +"The extent to which it has been necessary to tear apart this combination +and force it into new forms with the attendant burdens ought to demonstrate +that the Federal anti-trust statute is a drastic statute which accomplishes +effective results; which so long as it stands on the statute books must be +obeyed, and which can not be disobeyed without incurring far-reaching +penalties. And, on the other hand, the successful reconstruction of this +organization should teach that the effect of enforcing this statute is not +to destroy, but to reconstruct; not to demolish, but to re-create in +accordance with the conditions which the Congress has declared shall exist +among the people of the United States." + +COMMON STOCK OWNERSHIP. + +It has been assumed that the present pro rata and common ownership in all +these companies by former stockholders of the trust would insure a +continuance of the same old single control of all the companies into which +the trust has by decree been disintegrated. This is erroneous and is based +upon the assumed inefficacy and innocuousness of judicial injunctions. The +companies are enjoined from cooperation or combination; they have different +managers, directors, purchasing and sales agents. If all or many of the +numerous stockholders, reaching into the thousands, attempt to secure +concerted action of the companies with a view to the control of the market, +their number is so large that such an attempt could not well be concealed, +and its prime movers and all its participants would be at once subject to +contempt proceedings and imprisonment of a summary character. The immediate +result of the present situation will necessarily be activity by all the +companies under different managers, and then competition must follow, or +there will be activity by one company and stagnation by another. Only a +short time will inevitably lead to a change in ownership of the stock, as +all opportunity for continued cooperation must disappear. Those critics who +speak of this disintegration in the trust as a mere change of garments have +not given consideration to the inevitable working of the decree and +understand little the personal danger of attempting to evade or set at +naught the solemn injunction of a court whose object is made plain by the +decree and whose inhibitions are set forth with a detail and +comprehensiveness. + +VOLUNTARY REORGANIZATIONS OF OTHER TRUSTS AT HAND. + +The effect of these two decisions has led to decrees dissolving the +combination of manufacturers of electric lamps, a southern wholesale +grocers' association, an interlocutory decree against the Powder Trust with +directions by the circuit court compelling dissolution, and other +combinations of a similar history are now negotiating with the Department +of justice looking to a disintegration by decree and reorganization in +accordance with law. It seems possible to bring about these reorganizations +without general business disturbance. + +MOVEMENT FOR REPEAL OF THE ANTI-TRUST LAW. + +But now that the anti-trust act is seen to be effective for the +accomplishment of the purpose of its enactment, we are met by a cry from +many different quarters for its repeal. It is said to be obstructive of +business progress to be an attempt to restore old-fashioned methods of +destructive competition between small units, and to make impossible those +useful combinations of capital and the reduction of the cost of production +that are essential to continued prosperity and normal growth. + +In the recent decisions the Supreme Court makes clear that there is nothing +in the statute which condemns combinations of capital or mere bigness of +plant organized to secure economy in production and a reduction of its +cost. It is only when the purpose or necessary effect of the organization +and maintenance of the combination or the aggregation of immense size are +the stifling of competition, actual and potential, and the enhancing of +prices and establishing a monopoly, that the statute is violated. Mere size +is no sin against the law. The merging of two or more business plants +necessarily eliminates competition between the units thus combined, but +this elimination is in contravention of the statute only when the +combination is made for purpose of ending this particular competition in +order to secure control of, and enhance, prices and create a monopoly. + +LACK OF DEFINITENESS IN THE STATUTE. + +The complaint is made of the statute that it is not sufficiently definite +in its description of that which is forbidden, to enable business men to +avoid its violation. The suggestion is, that we may have a combination of +two corporations, which may run on for years, and that subsequently the +Attorney General may conclude that it was a violation of the statute, and +that which was supposed by the combiners to be innocent then turns out to +be a combination in violation of the statute. The answer to this +hypothetical case is that when men attempt to amass such stupendous capital +as will enable them to suppress competition, control prices and establish a +monopoly, they know the purpose of their acts. Men do not do such a thing +without having it clearly in mind. If what they do is merely for the +purpose of reducing the cost of production, without the thought of +suppressing competition by use of the bigness of the plant they are +creating, then they can not be convicted at the time the union is made, nor +can they be convicted later, unless it happen that later on they conclude +to suppress competition and take the usual methods for doing so, and thus +establish for themselves a monopoly. They can, in such a case, hardly +complain if the motive which subsequently is disclosed is attributed by the +court to the original combination. + +NEW REMEDIES SUGGESTED. + +Much is said of the repeal of this statute and of constructive legislation +intended to accomplish the purpose and blaze a clear path for honest +merchants and business men to follow. It may be that such a plan will be +evolved, but I submit that the discussions which have been brought out in +recent days by the fear of the continued execution of the anti-trust law +have produced nothing but glittering generalities and have offered no line +of distinction or rule of action as definite and as clear as that which the +Supreme Court itself lays down in enforcing the statute. + +SUPPLEMENTAL LEGISLATION NEEDED--NOT REPEAL OR AMENDMENT. + +I see no objection-and indeed I can see decided advantages-in the enactment +of a law which shall describe and denounce methods of competition which are +unfair and are badges of the unlawful purpose denounced in the anti-trust +law. The attempt and purpose to suppress a competitor by underselling him +at a price so unprofitable as to drive him out of business, or the making +of exclusive contracts with customers under which they are required to give +up association with other manufacturers, and numerous kindred methods for +stifling competition and effecting monopoly, should be described with +sufficient accuracy in a criminal statute on the one hand to enable the +Government to shorten its task by prosecuting single misdemeanors instead +of an entire conspiracy, and, on the other hand, to serve the purpose of +pointing out more in detail to the business community what must be +avoided. + +FEDERAL INCORPORATION RECOMMENDED. + +In a special message to Congress on January 7, 1910, I ventured to point +out the disturbance to business that would probably attend the dissolution +of these offending trusts. I said: + +"But such an investigation and possible prosecution of corporations whose +prosperity or destruction affects the comfort not only of stockholders but +of millions of wage earners, employees, and associated tradesmen must +necessarily tend to disturb the confidence of the business community, to +dry up the now flowing sources of capital from its places of hoarding, and +produce a halt in our present prosperity that will cause suffering and +strained circumstances among the innocent many for the faults of the guilty +few. The question which I wish in this message to bring clearly to the +consideration and discussion of Congress is whether, in order to avoid such +a possible business danger, something can not be done by which these +business combinations may be offered a means, without great financial +disturbance, of changing the character, organization, and extent of their +business into one within the lines of the law under Federal control and +supervision, securing compliance with the anti-trust statute. + +"Generally, in the industrial combinations called 'trusts,' the principal +business is the sale of goods in many States and in foreign markets; in +other words, the interstate and foreign business far exceeds the business +done in any one State. This fact will justify the Federal Government in +granting a Federal charter to such a combination to make and sell in +interstate and foreign commerce the products of useful manufacture under +such limitations as will secure a compliance with the anti-trust law. It is +possible so to frame a statute that while it offers protection to a Federal +company against harmful, vexatious, and unnecessary invasion by the States, +it shall subject it to reasonable taxation and control by the States with +respect to its purely local business. * * * + +"Corporations organized under this act should be prohibited from acquiring +and holding stock in other corporations (except for special reasons, upon +approval by the proper Federal authority), thus avoiding the creation under +national auspices of the holding company with subordinate corporations in +different States, which has been such an effective agency in the creation +of the great trusts and monopolies. + +"If the prohibition of the anti-trust act against combinations in restraint +of trade is to be effectively enforced, it is essential that the National +Government shall provide for the creation of national corporations to carry +on a legitimate business throughout the United States. The conflicting laws +of the different States of the Union with respect to foreign corporations +make it difficult, if not impossible, for one corporation to comply with +their requirements so as to carry on business in a number of different +States." + +I renew the recommendation of the enactment of a general law providing for +the voluntary formation of corporations to engage in trade and commerce +among the States and with foreign nations. Every argument which was then +advanced for such a law, and every explanation which was at that time +offered to possible objections, have been confirmed by our experience since +the enforcement of the antitrust, statute has resulted in the actual +dissolution of active commercial organizations. + +It is even more manifest now than it was then that the denunciation of +conspiracies in restraint of trade should not and does not mean the denial +of organizations large enough to be intrusted with our interstate and +foreign trade. It has been made more clear now than it was then that a +purely negative statute like the anti-trust law may well be supplemented by +specific provisions for the building up and regulation of legitimate +national and foreign commerce. + +GOVERNMENT ADMINISTRATIVE EXPERTS NEEDED TO AID COURTS IN TRUST +DISSOLUTIONS. + +The drafting of the decrees in the dissolution of the present trusts, with +a view to their reorganization into legitimate corporations, has made it +especially apparent that the courts are not provided with the +administrative machinery to make the necessary inquiries preparatory to +reorganization, or to pursue such inquiries, and they should be empowered +to invoke the aid of the Bureau of Corporations in determining the suitable +reorganization of the disintegrated parts. The circuit court and the +Attorney General were greatly aided in framing the decree in the Tobacco +Trust dissolution by an expert from the Bureau of Corporations. + +FEDERAL CORPORATION COMMISSION PROPOSED. + +I do not set forth in detail the terms and sections of a statute which +might supply the constructive legislation permitting and aiding the +formation of combinations of capital into Federal corporations. They should +be subject to rigid rules as to their organization and procedure, including +effective publicity, and to the closest supervision as to the issue of +stock and bonds by an executive bureau or commission in the Department of +Commerce and Labor, to which in times of doubt they might well submit their +proposed plans for future business. It must be distinctly understood that +incorporation under Federal law could not exempt the company thus formed +and its incorporators and managers from prosecution under the anti-trust +law for subsequent illegal conduct, but the publicity of its procedure and +the opportunity for frequent consultation with the bureau or commission in +charge of the incorporation as to the legitimate purpose of its +transactions would offer it as great security against successful +prosecutions for violations of the law as would be practical or wise. + +Such a bureau or commission might well be invested also with the duty +already referred to, of aiding courts in the dissolution and recreation of +trusts within the law. It should be an executive tribunal of the dignity +and power of the Comptroller of the Currency or the Interstate Commerce +Commission, which now exercise supervisory power over important classes of +corporations under Federal regulation. + +The drafting of such a Federal incorporation law would offer ample +opportunity to prevent many manifest evils in corporate management to-day, +including irresponsibility of control in the hands of the few who are not +the real owners. + +INCORPORATION VOLUNTARY. + +I recommend that the Federal charters thus to be granted shall be +voluntary, at least until experience justifies mandatory provisions. The +benefit to be derived from the operation of great businesses under the +protection of such a charter would attract all who are anxious to keep +within the lines of the law. Other large combinations that fail to take +advantage of the Federal incorporation will not have a right to complain if +their failure is ascribed to unwillingness to submit their transactions to +the careful official scrutiny, competent supervision, and publicity +attendant upon the enjoyment of such a charter. + +ONLY SUPPLEMENTAL LEGISLATION NEEDED. + +The opportunity thus suggested for Federal incorporation, it seems tome, is +suitable constructive legislation needed to facilitate the squaring Of +great industrial enterprises to the rule of action laid down by the +anti-trust law. This statute as construed by the Supreme Court must +continue to be the line of distinction for legitimate business. It must be +enforced, unless we are to banish individualism from all business and +reduce it to one common system of regulation or control of prices like that +which now prevails with respect to public utilities, and which when applied +to all business would be a long step toward State socialism. + +IMPORTANCE OF THE ANTI-TRUST ACT. + +The anti-trust act is the expression of the effort of a freedom-loving +people to preserve equality of opportunity. It is the result of the +confident determination of such a people to maintain their future growth by +preserving uncontrolled and unrestricted the enterprise of the individual, +his industry, his ingenuity, his intelligence, and his independent +courage. + +For twenty years or more this statute has been upon the statute book. All +knew its general purpose and approved. Many of its violators were cynical +over its assumed impotence. It seemed impossible of enforcement. Slowly the +mills of the courts ground, and only gradually did the majesty of the law +assert itself. Many of its statesmen-authors died before it became a living +force, and they and others saw the evil grow which they had hoped to +destroy. Now its efficacy is seen; now its power is heavy; now its object +is near achievement. Now we hear the call for its repeal on the plea that +it interferes with business prosperity, and we are advised in most general +terms, how by some other statute and in some other way the evil we are just +stamping out can be cured, if we only abandon this work of twenty years and +try another experiment for another term of years. + +It is said that the act has not done good. Can this be said in the face of +the effect of the Northern Securities decree? That decree was in no way so +drastic or inhibitive in detail as either the Standard Oil decree or the +Tobacco decree; but did it not stop for all time the then powerful movement +toward the control of all the railroads of the country in a single hand? +Such a one-man power could not have been a healthful influence in the +Republic, even though exercised under the general supervision of an +interstate commission. + +Do we desire to make such ruthless combinations and monopolies lawful? When +all energies are directed, not toward the reduction of the cost of +production for the public benefit by a healthful competition, but toward +new ways and means for making permanent in a few hands the absolute control +of the conditions and prices prevailing in the whole field of industry, +then individual enterprise and effort will be paralyzed and the spirit of +commercial freedom will be dead. + +PART II. + +The relations of the United States with other countries have continued +during the past twelve months upon a basis of the usual good will and +friendly intercourse. ARBITRATION. + +The year just passed marks an important general movement on the part of the +Powers for broader arbitration. In the recognition of the manifold benefits +to mankind in the extension of the policy of the settlement of +international disputes by arbitration rather than by war, and in response +to a widespread demand for an advance in that direction on the part of the +people of the United States and of Great Britain and of France, new +arbitration treaties were negotiated last spring with Great Britain and +France, the terms of which were de signed, as expressed in the preamble of +these treaties, to extend the scope and obligations of the policy of +arbitration adopted in our present treaties with those Governments To pave +the way for this treat with the United States, Great Britain negotiated an +important modification in its alliance with Japan, and the French +Government also expedited the negotiations with signal good will. The new +treaties have been submitted to the Senate and are awaiting its advice and +consent to their ratification. All the essentials of these important +treaties have long been known, and it is my earnest hope that they will +receive prompt and favorable action. + +CLAIM OF ALSOP & CO. SETTLED. + +I am glad to report that on July 5 last the American claim of Alsop & Co. +against the Government of Chile was finally disposed of by the decision of +His Britannic Majesty George V, to whom, as amiable compositeur, the matter +had been referred for determination. His Majesty made an award of nearly +$1,000,000 to the claimants, which was promptly paid by Chile. The +settlement of this controversy has happily eliminated from the relations +between the Republic of Chile and the United States the only question which +for two decades had given the two foreign offices any serious concern and +makes possible the unobstructed development of the relations of friendship +which it has been the aim of this Government in every possible way to +further and cultivate. + +ARBITRATIONS--PANAMA AND COSTA RICA--COLOMBIA AND HAITI. + +In further illustration of the practical and beneficent application of the +principle of arbitration and the underlying broad spirit of conciliation, I +am happy to advert to the part of the United States in facilitating +amicable settlement of disputes which menaced the peace between Panama and +Costa Rica and between Haiti and the Dominican Republic. + +Since the date of their independence, Colombia and Costa Rica had been +seeking a solution of a boundary dispute, which came as an heritage from +Colombia to the new Republic of Panama, upon its beginning life as an +independent nation. Although the disputants had submitted this question for +decision to the President of France under the terms of an arbitration +treaty, the exact interpretation of the provisions of the award rendered +had been a matter of serious disagreement between the two countries, both +contending for widely different lines even under the terms of the decision. +Subsequently and since 1903 this boundary question had been the subject of +fruitless diplomatic negotiations between the parties. In January, 1910, at +the request of both Governments the agents representing them met in +conference at the Department of State and subsequently concluded a protocol +submitting this long-pending controversy to the arbitral judgment of the +Chief justice of the United States, who consented to act in this capacity. +A boundary commission, according to the international agreement, has now +been appointed, and it is expected that the arguments will shortly proceed +and that this long-standing dispute will be honorably and satisfactorily +terminated. + +Again, a few months ago it appeared that the Dominican Republic and Haiti +were about to enter upon hostilities because of complications growing out +of an acrimonious boundary dispute which the efforts of many years had +failed to solve. The Government of the United States, by a friendly +interposition of good offices, succeeded in prevailing upon the parties to +place their reliance upon some form of pacific settlement. Accordingly, on +the friendly suggestion of this Government, the two Governments empowered +commissioners to meet at Washington in conference at the State Department +in order to arrange the terms of submission to arbitration of the boundary +controversy. + +CHAMIZAL ARBITRATION NOT SATISFACTORY. + +Our arbitration of the Chamizal boundary question with Mexico was +unfortunately abortive, but with the earnest efforts on the part of both +Governments which its importance commands, it is felt that an early +practical adjustment should prove possible. + +LATIN AMERICA. VENEZUELA. + +During the past year the Republic of Venezuela celebrated the one hundredth +anniversary of its independence. The United States sent, in honor of this +event, a special embassy to Caracas, where the cordial reception and +generous hospitality shown it were most gratifying as a further proof of +the good relations and friendship existing between that country and the +United States. MEXICO. + +The recent political events in Mexico received attention from this +Government because of the exceedingly delicate and difficult situation +created along our southern border and the necessity for taking measures +properly to safeguard American interests. The Government of the United +States, in its desire to secure a proper observance and enforcement of the +so-called neutrality statutes of the Federal Government, issued directions +to the appropriate officers to exercise a diligent and vigilant regard for +the requirements of such rules and laws. Although a condition of actual +armed conflict existed, there was no official recognition of belligerency +involving the technical neutrality obligations of international law. + +On the 6th of March last, in the absence of the Secretary of State, I had a +personal interview with Mr. Wilson, the ambassador of the United States to +Mexico, in which he reported to me that the conditions in Mexico were much +more critical than the press dispatches disclosed; that President Diaz was +on a volcano of popular uprising; that the small outbreaks which had +occurred were only symptomatic of the whole condition; that a very large +per cent of the people were in sympathy with the insurrection; that a +general explosion was probable at any time, in which case he feared that +the 40,000 or more American residents in Mexico might be assailed, and that +the very large American investments might be injured or destroyed. + +After a conference with the Secretary of War and the Secretary of the Navy, +I thought it wise to assemble an Army division of full strength at San +Antonio, Tex., a brigade of three regiments at Galveston, a brigade of +Infantry in the Los Angeles district of southern California, together with +a squadron of battleships and cruisers and transports at Galveston, and a +small squadron of ships at San Diego. At the same time, through our +representative at the City of Mexico, I expressed to President Diaz the +hope that no apprehensions might result from unfounded conjectures as to +these military maneuvers, and assured him that they had no significance +which should cause concern to his Government. + +The mobilization was effected with great promptness, and on the 15th of +March, through the Secretary of War and the Secretary of the Navy, in a +letter addressed to the Chief of Staff, I issued the following +instructions: It seems my duty as Commander in Chief to place troops in +sufficient number where, if Congress shall direct that they enter Mexico to +save American lives and property, an effective movement may be promptly +made. Meantime, the movement of the troops to Texas and elsewhere near the +boundary, accompanied with sincere assurances of the utmost goodwill toward +the present Mexican Government and with larger and more frequent patrols +along the border to prevent insurrectionary expeditions from American soil, +will hold up the hands of the existing Government and will have a healthy +moral effect to prevent attacks upon Americans and their property in any +subsequent general internecine strife. Again, the sudden mobilization of a +division of troops has been a great test of our Army and full of useful +instruction, while the maneuvers that are thus made possible can occupy the +troops and their officers to great advantage. + +The assumption by the press that I contemplate intervention on Mexican soil +to protect American lives or property is of course gratuitous, because I +seriously doubt whether I have such authority under any circumstances, and +if I had I would not exercise it without express congressional approval. +Indeed, as you know, I have already declined, without Mexican consent, to +order a troop of Cavalry to protect the breakwater we are constructing just +across the border in Mexico at the mouth of the Colorado River to save the +Imperial Valley, although the insurrectos had scattered the Mexican troops +and were taking our horses and supplies and frightening our workmen away. +My determined purpose, however, is to be in a position so that when danger +to American lives and property in Mexico threatens and the existing +Government is rendered helpless by the insurrection, I can promptly execute +congressional orders to protect them, with effect. + +Meantime, I send you this letter, through the Secretary, to call your +attention to some things in connection with the presence of the division in +the Southwest which have doubtless occurred to you, but which I wish to +emphasize. + +In the first place, I want to make the mobilization a first-class training +for the Army, and I wish you would give your time and that of the War +College to advising and carrying out maneuvers of a useful character, and +plan to continue to do this during the next three months. By that time we +may expect that either Ambassador Wilson's fears will have been realized +and chaos and its consequences have ensued, or that the present Government +of Mexico will have so readjusted matters as to secure tranquillity-a +result devoutly to be wished. The troops can then be returned to their +posts. I understood from you in Washington that Gen. Aleshire said that you +could probably meet all the additional expense of this whole movement out +of the present appropriations if the troops continue in Texas for three +months. I sincerely hope this is so. I observe from the newspapers that you +have no blank cartridges, but I presume that this is an error, or that it +will be easy to procure those for use as soon as your maneuvers begin. + +Second. Texas is a State ordinarily peaceful, but you can not put 20,000 +troops into it without running some risk of a collision between the people +of that State, and especially the Mexicans who live in Texas near the +border and who sympathize with the insurrectos, and the Federal soldiers. +For that reason I beg you to be as careful as you can to prevent friction +of any kind. We were able in Cuba, with the army of pacification there of +something more than 5,000 troops, to maintain them for a year without any +trouble, and I hope you can do the same thing in Texas. Please give your +attention to this, and advise all the officers in command of the necessity +for very great circumspection in this regard. + +Third. One of the great troubles in the concentration of troops is the +danger of disease, and I suppose that you have adopted the most modern +methods for preventing and, if necessary, for stamping out epidemics. That +is so much a part of a campaign that it hardly seems necessary for me to +call attention to it. + +Finally, I wish you to examine the question of the patrol of the border and +put as many troops on that work as is practicable, and more than are now +engaged in it, in order to prevent the use of our borderland for the +carrying out of the insurrection. I have given assurances to the Mexican +ambassador on this point. + +I sincerely hope that this experience will always be remembered by the Army +and Navy as a useful means of education, and I should be greatly +disappointed if it resulted in any injury or disaster to our forces from +any cause. I have taken a good deal of responsibility in ordering this +mobilization, but I am ready to answer for it if only you and those under +you use the utmost care to avoid the difficulties which I have pointed +out. + +You may have a copy of this letter made and left with Gen. Carter and such +other generals in command as you may think wise and necessary to guide them +in their course, but to be regarded as confidential. I am more than happy +to here record the fact that all apprehensions as to the effect of the +presence of so large a military force in Texas proved groundless; no +disturbances occurred; the conduct of the troops was exemplary and the +public reception and treatment of them was all that could have been +desired, and this notwithstanding the presence of a large number of Mexican +refugees in the border territory. + +From time to time communications were received from Ambassador Wilson, who +had returned to Mexico, confirming the view that the massing of American +troops in the neighborhood had had good effect. By dispatch of April 3, +1911, the ambassador said: The continuing gravity of the situation here and +the chaos that would ensue should the constitutional authorities be +eventually overthrown, thus greatly increasing the danger to which American +lives and property are already subject, confirm the wisdom of the President +in taking those military precautions which, making every allowance for the +dignity and the sovereignty of a friendly state, are due to our nationals +abroad. + +Charged as I am with the responsibility of safeguarding these lives and +property, I am bound to say to the department that our military +dispositions on the frontier have produced an effective impression on the +Mexican mind and may, at any moment, prove to be the only guaranties for +the safety of our nationals and their property. If it should eventuate that +conditions here require more active measures by the President and Congress, +sporadic attacks might be made upon the lives and property of our +nationals, but the ultimate result would be order and adequate protection. +The insurrection continued and resulted In engagements between the regular +Mexican troops and the insurgents, and this along the border, so that in +several instances bullets from the contending forces struck American +citizens engaged in their lawful occupations on American soil. + +Proper protests were made against these invasions of American rights to the +Mexican authorities. On April 17, 1911, I received the following telegram +from the governor of Arizona: As a result of to-day's fighting across the +international line, but within gunshot range of the heart of Douglas, five +Americans wounded on this side of the line. Everything points to repetition +of these casualties on to-morrow, and while the Federals seem disposed to +keep their agreement not to fire into Douglas, the position of the +insurrectionists is such that when fighting occurs on the east and +southeast of the intrenchments people living in Douglas are put in danger +of their lives. In my judgment radical measures are needed to protect our +innocent people, and if anything can be done to stop the fighting at Agua +Prieta the situation calls for such action. It is impossible to safeguard +the people of Douglas unless the town be vacated. Can anything be done to +relieve situation, now acute? After a conference with the Secretary of +State, the following telegram was sent to Governor Sloan, on April IS, 1911 +9 11, and made public: Your dispatch received. Have made urgent demand upon +Mexican Government to issue instructions to prevent firing across border by +Mexican federal troops, and am waiting reply. Meantime I have sent direct +warning to the Mexican and insurgent forces near Douglas. I infer from your +dispatch that both parties attempt to heed the warning, but that in the +strain and exigency of the contest wild bullets still find their way into +Douglas. The situation might justify me in ordering our troops to cross the +border and attempt to stop the fighting, or to fire upon both combatants +from the American side. But if I take this step, I must face the +possibility of resistance and greater bloodshed, and also the danger of +having our motives misconstrued and misrepresented, and of thus inflaming +Mexican popular indignation against many thousand Americans now in Mexico +and jeopardizing their lives and property. The pressure for general +intervention under such conditions it might not be practicable to resist. +It is impossible to foresee or reckon the consequences of such a course, +and we must use the greatest self-restraint to avoid it. Pending my urgent +representation to the Mexican Government, I can not therefore order the +troops at Douglas to cross the border, but I must ask you and the local +authorities, in case the same danger recurs, to direct the people of +Douglas to place themselves where bullets can not reach them and thus avoid +casualty. I am loath to endanger Americans in Mexico, where they are +necessarily exposed, by taking a radical step to prevent injury to +Americans on our side of the border who can avoid it by a temporary +inconvenience. I am glad to say that no further invasion of American rights +of any substantial character occurred. + +The presence of a large military and naval force available for prompt +action, near the Mexican border, proved to be most fortunate under the +somewhat trying conditions presented by this invasion of American rights +Had no movement theretofore taken place, and because of these events it had +been necessary then to bring about the mobilization, it must have had +sinister significance. On the other hand, the presence of the troops before +and at the time of the unfortunate killing and wounding of American +citizens at Douglas, made clear that the restraint exercised by our +Government in regard to this Occurrence was not due to lack of force or +power to deal with it promptly and aggressively, but was due to a real +desire to use every means possible to avoid direct intervention in the +affairs of our neighbor whose friendship we valued and were most anxious to +retain. + +The policy and action of this Government were based upon an earnest +friendliness for the Mexican people as a whole, and it is a matter of +gratification to note that this attitude of strict impartiality as to all +factions in Mexico and of sincere friendship for the neighboring nation, +without regard for party allegiance, has been generally recognized and has +resulted in an even closer and more sympathetic understanding between the +two Republics and a warmer regard one for the other. Action to suppress +violence and restore tranquillity throughout the Mexican Republic was of +peculiar interest to this Government, in that it concerned the safeguarding +of American life and property in that country. The Government of the United +States had occasion to accord permission for the passage of a body of +Mexican rurales through Douglas, Arizona, to Tia Juana, Mexico, for the +suppression of general lawlessness which had for some time existed in the +region of northern Lower California. On May 25, 1911, President Diaz +resigned, Senor de la Barra was chosen provisional President. Elections for +President and Vice President were thereafter held throughout the Republic, +and Senor Francisco I. Madero was formally declared elected on October 15 +to the chief magistracy. On November 6 President Madero entered upon the +duties of his office. + +Since the inauguration of President Madero a plot has been unearthed +against the present Government, to begin a new insurrection. Pursuing the +same consistent policy which this administration has adopted from the +beginning, it directed an investigation into the conspiracy charged, and +this investigation has resulted in the indictment of Gen. Bernardo Reyes +and others and the seizure of a number of officers and men and horses and +accoutrements assembled upon the soil of Texas for the purpose of invading +Mexico. Similar proceedings had been taken during the insurrection against +the Diaz Government resulting in the indictments and prosecution of persons +found to be engaged in violating the neutrality laws of the United States +in aid of that uprising. + +The record of this Government in respect of the recognition of constituted +authority in Mexico therefore is clear. + +CENTRAL AMERICA-HONDURAS AND NICARAGUA TREATIES PROPOSED. + +As to the situation in Central America, I have taken occasion in the past +to emphasize most strongly the importance that should be attributed to the +consummation of the conventions between the Republics of Nicaragua and of +Honduras and this country, and I again earnestly recommend that the +necessary advice and consent of the Senate be accorded to these treaties, +which will make it possible for these Central American Republics to enter +upon an era of genuine economic national development. The Government of +Nicaragua which has already taken favorable action on the convention, has +found it necessary, pending the exchange of final ratifications, to enter +into negotiations with American bankers for the purpose of securing a +temporary loan to relieve the present financial tension. III connection +with this temporary loan and in the hope of consummating, through the +ultimate operation of the convention, a complete and lasting economic +regeneration, the Government of Nicaragua has also decided to engage an +American citizen as collector general of customs. The claims commission on +which the services of two American citizens have been sought, and the work +of the American financial adviser should accomplish a lasting good of +inestimable benefit to the prosperity, commerce, and peace of the Republic. +In considering the ratification of the conventions with Nicaragua and +Honduras, there rests with the United States the heavy responsibility of +the fact that their rejection here might destroy the progress made and +consign the Republics concerned to still deeper submergence in bankruptcy, +revolution, and national jeopardy. PANAMA. + +Our relations with the Republic of Panama, peculiarly important, due to +mutual obligations and the vast interests created by the canal, have +continued in the usual friendly manner, and we have been glad to make +appropriate expression of our attitude of sympathetic interest in the +endeavors of our neighbor in undertaking the development of the rich +resources of the country. With reference to the internal political affairs +of the Republic, our obvious concern is in the maintenance of public peace +and constitutional order, and the fostering of the general interests +created by the actual relations of the two countries, without the +manifestation of any preference for the success of either of the political +parties. + +THE PAN AMERICAN UNION. + +The Pan American Union, formerly known as the Bureau of American Republics, +maintained by the joint contributions of all the American nations, has +during the past year enlarged its practical work as an international +organization, and continues to prove its usefulness as an agency for the +mutual development of commerce, better acquaintance, and closer intercourse +between the United States and her sister American republics. + +THE FAR EAST. + +THE CHINESE LOANS. + +The past year has been marked in our relations with China by the conclusion +of two important international loans, one for the construction of the +Hukuang railways, the other for carrying out of the currency reform to +which China was pledged by treaties with the United States, Great Britain, +and Japan, of which mention was made in my last annual message. + +It will be remembered that early in 1909 an agreement was consummated among +British, French, and German financial groups whereby they proposed to lend +the Chinese Government funds for the construction of railways in the +Provinces of Hunan and Hupeh, reserving for their nationals the privilege +of engineering the construction of the lines and of furnishing the +materials required for the work. After negotiations with the Governments +and groups concerned an agreement was reached whereby American, British, +French, and German nationals should participate upon equal terms in this +important and useful undertaking. Thereupon the financial groups, supported +by their respective Governments, began negotiations with the Chinese +Government which terminated in a loan to China Of $30,000,000, with the +privilege of increasing the amount to $50,000,000. The cooperative +construction of these trunk lines should be of immense advantage, +materially and otherwise, to China and should greatly facilitate the +development of the bountiful resources of the Empire. On the other hand, a +large portion of these funds is to be expended for materials, American +products having equal preference with those of the other three lending +nations, and as the contract provides for branches and extensions +subsequently to be built on the same terms the opportunities for American +materials will reach considerable proportions. + +Knowing the interest of the United States in the reform of Chinese +currency, the Chinese Government, in the autumn of 1910 sought the +assistance of the American Government to procure funds with which to +accomplish that all-important reform. In the course of the subsequent +negotiations there was combined with the proposed currency loan one for +certain industrial developments in Manchuria, the two loans aggregating the +sum Of $50,000,000. While this was originally to be solely an American +enterprise, the American Government, consistently with its desire to secure +a sympathetic and practical cooperation of the great powers toward +maintaining the principle of equality of opportunity and the administrative +integrity of China, urged the Chinese Government to admit to participation +in the currency loan the associates of the American group in the Hukuang +loan. While of immense importance in itself, the reform contemplated in +making this loan is but preliminary to other and more comprehensive fiscal +reforms which will be of incalculable benefit to China and foreign +interests alike, since they will strengthen the Chinese Empire and promote +the rapid development of international trade. + +NEUTRAL FINANCIAL ADVISER. + +When these negotiations were begun, it was understood that a financial +adviser was to be employed by China in connection with the reform, and in +order that absolute equality in all respects among the lending nations +might be scrupulously observed, the American Government proposed the +nomination of a neutral adviser, which was agreed to by China and the other +Governments concerned. On September 28, 1911, Dr. Vissering, president of +the Dutch Java Bank and a financier of wide experience in the Orient, was +recommended to the Chinese Government for the post of monetary adviser. + +Especially important at the present, when the ancient Chinese Empire is +shaken by civil war incidental to its awakening to the many influences and +activities of modernization, are the cooperative policy of good +understanding which has been fostered by the international projects +referred to above and the general sympathy of view among all the Powers +interested in the Far East. While safeguarding the interests of our +nationals, this Government is using its best efforts in continuance of its +traditional policy of sympathy and friendship toward the Chinese Empire and +its people, with the confident hope for their economic and administrative +development, and with the constant disposition to contribute to their +welfare in all proper ways consistent with an attitude of strict +impartiality as between contending factions. + +For the first time in the history of the two countries, a Chinese cruiser, +the Haichi, under the command of Admiral Ching, recently visited New York, +where the officers and men were given a cordial welcome. + +NEW JAPANESE TREATY. + +The treaty of commerce and navigation between the United States and Japan, +signed in 1894, would by a strict interpretation of its provisions have +terminated on July 17, 1912. Japan's general treaties with the other +powers, however, terminated in 1911, and the Japanese Government expressed +an earnest desire to conduct the negotiations for a new treaty with the +United States simultaneously with its negotiations with the other powers. +There were a number of important questions involved in the treaty, +including the immigration of laborers, revision of the customs tariff, and +the right of Americans to hold real estate in Japan. The United States +consented to waive all technicalities and to enter at once upon +negotiations for a new treaty on the understanding that there should be a +continuance throughout the, life of the treaty of the same effective +measures for the restriction of immigration of laborers to American +territory which had been in operation with entire satisfaction to both +Governments since 1908. The Japanese Government accepted this basis of +negotiation, and a new treaty was quickly concluded, resulting in a highly +satisfactory settlement of the other questions referred to. + +A satisfactory adjustment has also been effected of the questions growing +out of the annexation of Korea by Japan. + +The recent visit of Admiral Count Togo to the United States as the Nation's +guest afforded a welcome opportunity to demonstrate the friendly feeling so +happily existing between the two countries. SIAM. + +There has been a change of sovereigns in Siam and the American minister at +Bangkok was accredited in a special capacity to represent the United States +at the coronation ceremony of the new King. + +EUROPE AND THE NEAR EAST. + +In Europe and the Near East, during the past twelve-month, there has been +at times considerable political unrest. The Moroccan question, which for +some months was the cause of great anxiety, happily appears to have reached +a stage at which it need no longer be regarded with concern. The Ottoman +Empire was occupied for a period by strife in Albania and is now at war +with Italy. In Greece and the Balkan countries the disquieting +potentialities of this situation have been more or less felt. Persia has +been the scene of a long internal struggle. These conditions have been the +cause of uneasiness in European diplomacy, but thus far without direct +political concern to the United States. + +In the war which unhappily exists between Italy and Turkey this Government +has no direct political interest, and I took occasion at the suitable time +to issue a proclamation of neutrality in that conflict. At the same time +all necessary steps have been taken to safeguard the personal interests of +American citizens and organizations in so far as affected by the war. + +COMMERCE WITH THE NEAR EAST. + +In spite of the attendant economic uncertainties and detriments to +commerce, the United States has gained markedly in its commercial standing +with certain of the nations of the Near East. Turkey, especially, is +beginning to come into closer relations with the United States through the +new interest of American manufacturers and exporters in the possibilities +of those regions, and it is hoped that foundations are being laid for a +large and mutually beneficial exchange of commodities between the two +countries. This new interest of Turkey in American goods is indicated by +the fact that a party of prominent merchants from a large city in Turkey +recently visited the United States to study conditions of manufacture and +export here, and to get into personal touch with American merchants, with a +view to cooperating more intelligently in opening up the markets of Turkey +and the adjacent countries to our manufactures. Another indication of this +new interest of America in the commerce of the Near East is the recent +visit of a large party of American merchants and manufacturers to central +and eastern Europe, where they were entertained by prominent officials and +organizations of the large cities, and new bonds of friendship and +understanding were established which can not but lead to closer and greater +commercial interchange. + +CORONATION OF KING GEORGE V. + +The 22d of June of the present year marked the coronation of His Britannic +Majesty King George V. In honor of this auspicious occasion I sent a +special embassy to London. The courteous and cordial welcome extended to +this Government's representatives by His Majesty and the people of Great +Britain has further emphasized the strong bonds of friendship happily +existing between the two nations. + +SETTLEMENT OF LONG-STANDING DIFFERENCES WITH GREAT BRITAIN. + +As the result of a determined effort on the part of both Great Britain and +the United States to settle all of their outstanding differences a number +of treaties have been entered into between the two countries in recent +years, by which nearly all of the unsettled questions between them of any +importance have either been adjusted by agreement or arrangements made for +their settlement by arbitration. A number of the unsettled questions +referred to consist of pecuniary claims presented by each country against +the other, and in order that as many of these claims as possible should be +settled by arbitration a special agreement for that purpose was entered +into between the two Governments on the 18th day of August, 1910, in +accordance with Article 11 of the general arbitration treaty with Great +Britain of April 4, 19o8. Pursuant to the provisions of this special +agreement a schedule of claims has already been agreed upon, and the +special agreement, together with this schedule, received the approval of +the Senate when submitted to it for that purpose at the last session of +Congress. Negotiations between the two Governments for the preparation of +an additional schedule of claims are already well advanced, and it is my +intention to submit such schedule as soon as it is agreed upon to the +Senate for its approval, in order that the arbitration proceedings may be +undertaken at an early date. In this connection the attention of Congress +is particularly called to the necessity for an appropriation +to cover the expense incurred in submitting these claims to arbitration. + +PRESENTATION TO GERMANY OF REPLICA OF VON STEUBEN STATUE. + +In pursuance of the act of Congress, approved June 23, 1910, the Secretary +of State and the joint Committee on the Library entered into a contract +with the sculptor, Albert Jaegers, for the execution of a bronze replica of +the statue of Gen. von Steuben erected in Washington, for presentation to +His Majesty the German Emperor and the German nation in recognition of the +gift of the statue of Frederick the Great made by the Emperor to the people +of the United States. + +The presentation was made on September 2 last by representatives whom I +commissioned as the special mission of this Government for the purpose. + +The German Emperor has conveyed to me by telegraph, on his own behalf and +that of the German people, an expression of appreciative thanks for this +action of Congress. RUSSIA. + +By direction of the State Department, our ambassador to Russia has recently +been having a series of conferences with the minister of foreign affairs of +Russia, with a view to securing a clearer understanding and construction of +the treaty of 1832 between Russia and the United States and the +modification of any existing Russian regulations which may be found to +interfere in any way with the full recognition of the rights of American +citizens under this treaty. I believe that the Government of Russia is +addressing itself seriously to the need of changing the present practice +under the treaty and that sufficient progress has been made to warrant the +continuance of these conferences in the hope that there may soon be removed +any justification of the complaints of treaty violation now prevalent in +this country. + +I expect that immediately after the Christmas recess I shall be able to +make a further communication to Congress on this subject. LIBERIA. + +Negotiations for the amelioration of conditions found to exist in Liberia +by the American commission, undertaken through the Department of State, +have been concluded and it is only necessary for certain formalities to be +arranged in securing the loan which it is hoped will place that republic on +a practical financial and economic footing. + +RECOGNITION OF PORTUGUESE REPUBLIC. + +The National Constituent Assembly, regularly elected by the vote of the +Portuguese people, having on June 19 last unanimously proclaimed a +republican form of government, the official recognition of the Government +of the United States was given to the new Republic in the afternoon of the +same day. + +SPITZBERGEN ISLANDS. + +Negotiations for the betterment of conditions existing in the Spitzbergen +Islands and the adjustment of conflicting claims of American citizens and +Norwegian subjects to lands in that archipelago are still in progress. + +INTERNATIONAL CONVENTIONS AND CONFERENCES. + +INTERNATIONAL PRIZE COURT. + +The supplementary protocol to The he Hague convention for the establishment +of an international prize court, mentioned in my last annual message, +embodying stipulations providing for an alternative procedure which would +remove the constitutional objection to that part of The Hague convention +which provides that there may be an appeal to the proposed court from the +decisions of national courts, has received the signature of the governments +parties to the original convention and has been ratified by the Government +of the United States, together with the prize court convention. + +The deposit of the ratifications with the Government of the Netherlands +awaits action by the powers on the declaration, signed at London on +February 26, 1909 of the rules of international law to be recognized within +the meaning of article 7 of The Hague convention for the establishment of +an International Prize Court. + +FUR-SEAL TREATY. + +The fur-seal controversy, which for nearly twenty-five years has been the +source of serious friction between the United States and the powers +bordering upon the north Pacific Ocean, whose subjects have been permitted +to engage in pelagic sealing against the fur-seal herds having their +breeding grounds within the jurisdiction of the United States, has at last +been satisfactorily adjusted by the conclusion of the north Pacific sealing +convention entered into between the United States, Great Britain, Japan, +and Russia on the 7th of July last. This convention is a conservation +measure of very great importance, and if it is carried out in the spirit of +reciprocal concession and advantage upon which it is based, there is every +reason to believe that not only will it result in preserving the fur-seal +herds of the north Pacific Ocean and restoring them to their former value +for the purposes of commerce, but also that it will afford a permanently +satisfactory settlement of a question the only other solution of which +seemed to be the total destruction of the fur seals. In another aspect, +also, this convention is of importance in that it furnishes an illustration +of the feasibility of securing a general international game law for the +protection of other mammals of the sea, the preservation of which is of +importance to all the nations of the world. + +LEGISLATION NECESSARY. + +The attention of Congress is especially called to the necessity for +legislation on the part of the United States for the purpose of fulfilling +the obligations assumed under this convention, to which the Senate gave its +advice and consent on the 24th day of July last. + +PROTECTION OF INDUSTRIAL PROPERTY UNION. + +The conference of the International Union for the Protection of Industrial +Property, which, under the authority of Congress, convened at Washington on +May 16, 1911, closed its labors on June 2, 1911, by the signature of three +acts, as follows: + +(I) A convention revising the Paris convention of March 20, 1883, for the +protection of industrial property, as modified by the additional act signed +at Brussels on December 14, 1900; + +(2) An arrangement to replace the arrangement signed at Madrid on April 14, +1891 for the international registration of trade-marks, and the additional +act with regard thereto signed at Brussels on December 14, 1900; and + +(3) An arrangement to replace the arrangement signed at Madrid on April 14, +1891, relating to the repression of false indication of production of +merchandise. + +The United States is a signatory of the first convention only, and this +will be promptly submitted to the Senate. + +INTERNATIONAL OPIUM COMMISSION. + +In a special message transmitted to the Congress on the 11th of January, +1911, in which I concurred in the recommendations made by the Secretary of +State in regard to certain needful legislation for the control of our +interstate and foreign traffic in opium and other menacing drugs, I quoted +from my annual message of December 7, 1909, in which I announced that the +results of the International Opium Commission held at Shanghai in February, +1909, at the invitation of the United States, had been laid before this +Government; that the report of that commission showed that China was making +remarkable progress and admirable efforts toward the eradication of the +opium evil; that the interested governments had not permitted their +commercial interests to prevent their cooperation in this reform; and, as a +result of collateral investigations of the opium question in this country, +I recommended that the manufacture, sale, and use of opium in the United +States should be more rigorously controlled by legislation. + +Prior to that time and in continuation of the policy of this Government to +secure the cooperation of the interested nations, the United States +proposed an international opium conference with full powers for the purpose +of clothing with the force of international law the resolutions adopted by +the above-mentioned commission, together with their essential corollaries. +The other powers concerned cordially responded to the proposal of this +Government, and, I am glad to be able to announce, representatives of all +the powers assembled in conference at The Hague on the first of this +month. + +Since the passage of the opium-exclusion act, more than twenty States have +been animated to modify their pharmacy laws and bring them in accord with +the spirit of that act, thus stamping out, to a measure, the intrastate +traffic in opium and other habit-forming drugs. But, although I have urged +on the Congress the passage of certain measures for Federal control of the +interstate and foreign traffic in these drugs, no action has yet been +taken. In view of the fact that there is now sitting at The Hague so +important a conference, which has under review the municipal laws of the +different nations for the mitigation of their opium and other allied evils, +a conference which will certainly deal with the international aspects of +these evils, it seems to me most essential that the Congress should take +immediate action on the anti-narcotic legislation to which I have already +called attention by a special message. + +BUENOS AIRES CONVENTIONS. + +The four important conventions signed at the Fourth Pan American Conference +at Buenos Aires, providing for the regulation of trademarks, patents, and +copyrights, and for the arbitration of pecuniary claims, have, with the +advice and consent of the Senate, been ratified on the part of the United +States and the ratifications have been deposited with the Government of the +Argentine Republic in accordance with the requirements of the conventions. +I am not advised that similar action has been taken by any other of the +signatory governments. + +INTERNATIONAL ARRANGEMENT TO SUPPRESS OBSCENE PUBLICATIONS. + +One of the notable advances in international morality accomplished in +recent years was an arrangement entered into on April 13th of the present +year between the United States and other powers for the repression of the +circulation of obscene publications. + +FOREIGN TRADE RELATIONS OF THE UNITED STATES. + +In my last annual message I referred to the tariff negotiations of the +Department of State with foreign countries in connection with the +application, by a series of proclamations, of the minimum tariff of the +United States to importations from the several countries, and I stated +that, in its general operation, section 2 of the new tariff law had proved +a guaranty of continued commercial peace, although there were, +unfortunately, instances where foreign governments dealt arbitrarily with +American interests within their jurisdiction in a manner injurious and +inequitable. During the past year some instances of discriminatory +treatment have been removed, but I regret to say that there remain a few +cases of differential treatment adverse to the commerce of the United +States. While none of these instances now appears to amount to undue +discrimination in the sense of section 2 Of the tariff law of August 5, +1909, they are all exceptions to that complete degree of equality of tariff +treatment that the Department of State has consistently sought to obtain +for American commerce abroad. + +While the double tariff feature of the tariff law of 1909 has been amply +justified by the results achieved in removing former and preventing new, +undue discriminations against American commerce it is believed that the +time has come for the amendment of this feature of the law in such way as +to provide a graduated means of meeting varying degrees of discriminatory +treatment of American commerce in foreign countries as well as to protect +the financial interests abroad of American citizens against arbitrary and +injurious treatment on the part of foreign governments through either +legislative or administrative measures. + +It would seem desirable that the maximum tariff of the United States should +embrace within its purview the free list, which is not the case at the +present time, in order that it might have reasonable significance to the +governments of those countries from which the importations into the United +States are confined virtually to articles on the free list. + +RECORD OF HIGHEST AMOUNT OF FOREIGN TRADE. + +The fiscal year ended June 30, 1911, shows great progress in the +development of American trade. It was noteworthy as marking the highest +record of exports of American products to foreign countries, the valuation +being in excess of $2,000,000,000. These exports showed a gain over the +preceding year of more than $300,000,000. + +FACILITIES FOR FOREIGN TRADE FURNISHED BY JOINT ACTION OF DEPARTMENT OF +STATE AND OF COMMERCE AND LABOR. + +There is widespread appreciation expressed by the business interests of the +country as regards the practical value of the facilities now offered by the +Department of State and the Department of Commerce and Labor for the +furtherance of American commerce. Conferences with their officers at +Washington who have an expert knowledge of trade conditions in foreign +countries and with consular officers and commercial agents of the +Department of Commerce and Labor who, while on leave of absence, visit the +principal industrial centers of the United States, have been found of great +value. These trade conferences are regarded as a particularly promising +method of governmental aid in foreign trade promotion. The Department of +Commerce and Labor has arranged to give publicity to the expected arrival +and the itinerary of consular officers and commercial agents while on leave +in the United States, in order that trade organizations may arrange for +conferences with them. + +As I have indicated, it is increasingly clear that to obtain and maintain +that equity and substantial equality of treatment essential to the +flourishing foreign trade, which becomes year by year more important to the +industrial and commercial welfare of the United States, we should have a +flexibility of tariff sufficient for the give and take of negotiation by +the Department of State on behalf of our commerce and industry. + +CRYING NEED FOR AMERICAN MERCHANT MARINE. + +I need hardly reiterate the conviction that there should speedily be built +up an American merchant marine. This is necessary to assure favorable +transportation facilities to our great ocean-borne commerce as well as to +supplement the Navy with an adequate reserve of ships and men It would have +the economic advantage of keeping at home part of the vast sums now paid +foreign shipping for carrying American goods. All the great commercial +nations pay heavy subsidies to their merchant marine so that it is obvious +that without some wise aid from the Congress the United States must lag +behind in the matter of merchant marine in its present anomalous position. + +EXTENSION OF AMERICAN BANKING TO FOREIGN COUNTRIES. + +Legislation to facilitate the extension of American banks to foreign +countries is another matter in which our foreign trade needs assistance. + +CHAMBERS OF FOREIGN COMMERCE SUGGESTED. + +The interests of our foreign commerce are nonpartisan, and as a factor in +prosperity are as broad as the land. In the dissemination of useful +information and in the coordination of effort certain unofficial +associations have done good work toward the promotion of foreign commerce. +It is cause for regret, however, that the great number of such associations +and the comparative lack of cooperation between them fails to secure an +efficiency commensurate with the public interest. Through the agency of the +Department of Commerce and Labor, and in some cases directly, the +Department of State transmits to reputable business interests information +of commercial opportunities, supplementing the regular published consular +reports. Some central organization in touch with associations and chambers +of commerce throughout the country and able to keep purely American +interests in closer touch with different phases of commercial affairs +would, I believe, be of great value. Such organization might be managed by +a committee composed of a small number of those now actively carrying on +the work of some of the larger associations, and there might be added to +the committee, as members ex officio, one or two officials of the +Department of State and one or two officials from the Department of +Commerce and Labor and representatives of the appropriate committees of +Congress. The authority and success of such an organization would evidently +be enhanced if the Congress should see fit to prescribe its scope and +organization through legislation which would give to it some such official +standing as that, for example, of the National Red Cross. + +With these factors and the continuance of the foreign-service establishment +(departmental, diplomatic, and consular) upon the high plane where it has +been placed by the recent reorganization this Government would be abreast +of the times in fostering the interests of its foreign trade, and the rest +must be left to the energy and enterprise of our business men. + +IMPROVEMENT OF THE FOREIGN SERVICE. + +The entire foreign-service organization is being improved and developed +with especial regard to the requirements of the commercial interests of the +country. The rapid growth of our foreign trade makes it of the utmost +importance that governmental agencies through which that trade is to be +aided and protected should possess a high degree of efficiency. Not only +should the foreign representatives be maintained upon a generous scale in +so far as salaries and establishments are concerned, but the selection and +advancement of officers should be definitely and permanently regulated by +law so that the service shall not fail to attract men of high character and +ability. The experience of the past few years with a partial application of +civil-service rules to the Diplomatic and Consular Service leaves no doubt +in my mind of the wisdom of a wider and more permanent extension of those +principles to both branches of the foreign service. The men selected for +appointment by means of the existing executive regulations have been of a +far higher average of intelligence and ability than the men appointed +before the regulations were promulgated. Moreover, the feeling that under +the existing rules there is reasonable hope for permanence of tenure during +good behavior and for promotion for meritorious service has served to bring +about a zealous activity in the interests of the country, which never +before existed or could exist. It is my earnest conviction that the +enactment into law of the general principles of the existing regulations +can not fail to effect further improvement in both branches of the foreign +service by providing greater inducement for young men of character and +ability to seek a career abroad in the service of the Government, and an +incentive to those already in the service to put forth greater efforts to +attain the high standards which the successful conduct of our international +relations and commerce requires. + +I therefore again commend to the favorable action of the Congress the +enactment of a law applying to the diplomatic and consular service the +principles embodied in section 1753 of the Revised Statutes of the United +States, in the civil-service act of January 16, 1883, and the Executive +orders of June 27, 1906, and of November 26, 1909. In its consideration of +this important subject I desire to recall to the attention of the Congress +the very favorable report made on the Lowden bill for the improvement of +the foreign service by the Foreign Affairs Committee of the House of +Representatives. Available statistics show the strictness with which the +merit system has been applied to the foreign service during recent years +and the absolute nonpartisan selection of consuls and diplomatic-service +secretaries who, indeed, far from being selected with any view to political +consideration, have actually been chosen to a disproportionate extent from +States which would have been unrepresented in the foreign service under the +system which it is to be hoped is now permanently obsolete. Some +legislation for the perpetuation of the present system of examinations and +promotions upon merit and efficiency would be of greatest value to our +commercial and international interests. + +PART III. + +THE WHITE HOUSE, December 20, 1911. To the Senate and House of +Representatives: + +In my annual message to Congress, December, 1909, I stated that under +section 2 of the act of August 5, 1909, I had appointed a Tariff Board of +three members to cooperate with the State Department in the administration +of the maximum and minimum clause of that act, to make a glossary or +encyclopedia of the existing tariff so as to render its terms intelligible +to the ordinary reader, and then to investigate industrial conditions and +costs of production at home and abroad with a view to determining to what +extent existing tariff rates actually exemplify the protective principle, +viz., that duties should be made adequate, and only adequate, to equalize +the difference in cost of production at home and abroad. + +I further stated that I believed these investigations would be of great +value as a basis for accurate legislation, and that I should from time to +time recommend to Congress the revision of certain schedules in accordance +with the findings of the Board. + +In the last session of the Sixty-first Congress a bill creating a permanent +Tariff Board of five members, of whom not more than three should be of the +same political party, passed each House, but failed of enactment because of +slight differences on which agreement was not reached before adjournment. +An appropriation act provided that the permanent Tariff Board, if created +by statute, should report to Congress on Schedule K in December, 1911. + +Therefore, to carry out so far as lay within my power the purposes of this +bill for a permanent Tariff Board, I appointed in March, 1911, a board of +five, adding two members of such party affiliation as would have fulfilled +the statutory requirement, and directed them to make a report to me on +Schedule K of the tariff act in December of this year. + +In my message of August 17, 1911, accompanying the veto of the wool bill, I +said that, in my judgment, Schedule K should be revised and the rates +reduced. My veto was based on the ground that, since the Tariff Board would +make, in December, a detailed report on wool and wool manufactures, with +special reference to the relation of the existing rates of duties to +relative costs here and abroad, public policy and a fair regard to the +interests of the producers and the manufacturers on the one hand and of the +consumers on the other demanded that legislation should not be hastily +enacted in the absence of such information; that I was not myself possessed +at that time of adequate knowledge of the facts to determine whether or not +the proposed act was in accord with my pledge to support a fair and +reasonable protective policy; that such legislation might prove only +temporary and inflict upon a great industry the evils of continued +uncertainty. + +I now herewith submit a report of the Tariff Board on Schedule K. The board +is unanimous in its findings. On the basis of these findings I now +recommend that the Congress proceed to a consideration of this schedule +with a view to its revision and a general reduction of its rates. + +The report shows that the present method of assessing the duty on raw +Wool--this is, by a specific rate on the grease pound (i. e., unscoured) +--operates to exclude wools of high shrinkage in scouring but fine quality +from the American market and thereby lessens the range of wools available +to the domestic manufacturer; that the duty on scoured wool Of 33 cents per +pound is prohibitory and operates to exclude the importation of clean, +low-priced foreign wools of inferior grades, which are nevertheless +valuable material for manufacturing, and which can not be imported in the +grease because of their heavy shrinkage. Such wools, if imported, might be +used to displace the cheap substitutes now in use. + +To make the preceding paragraph a little plainer, take the instance of a +hundred pounds of first-class wool imported under the present duty, which +is 11 cents a pound. That would make the duty on the hundred pounds $11. +The merchantable part of the wool thus imported is the weight of the wool +of this hundred pounds after scouring. If the wool shrinks 80 per cent, as +some wools do, then the duty in such a case would amount to $11 $11 on 20 +pounds of scoured wool. This, of course, would be prohibitory. If the wool +shrinks only 50 per cent, it would be $11 on 50 pounds of wool, and this is +near to the average of the great bulk of wools that are imported from +Australia, which is the principal source of our imported wool. + +These discriminations could be overcome by assessing a duty in ad valorem +terms, but this method is open to the objection, first, that it increases +administrative difficulties and tends to decrease revenue through +undervaluation; and, second, that as prices advance, the ad valorem rate +increases the duty per pound at the time when the consumer most needs +relief and the producer can best stand competition; while if prices decline +the duty is decreased at the time when the consumer is least burdened by +the price and the producer most needs protection. + +Another method of meeting the difficulty of taxing the grease pound is to +assess a specific duty on grease wool in terms of its scoured content. This +obviates the chief evil of the present system, namely, the discrimination +due to different shrinkages, and thereby tends greatly to equalize the +duty. The board reports that this method is feasible in practice and could +be administered without great expense. The scoured content of the wool is +the basis on which users of wool make their calculations, and a duty of +this kind would fit the usages of the trade. One effect of this method of +assessment would be that, regardless of the rate of duty, there would be +an increase in the supply and variety of wool by making available to the +American market wools of both low and fine quality now excluded. + +The report shows in detail the difficulties involved in attempting to state +in categorical terms the cost of wool production and the great differences +in cost as between different regions and different types of wool. It is +found, however, that, taking all varieties in account, the average cost of +production for the whole American clip is higher than the cost in the chief +competing country by an amount somewhat less than the present duty. + +The report shows that the duties on wools, wool wastes, and shoddy, which +are adjusted to the rate Of 33 cents on scoured wool are prohibitory in the +same measure that the duty on scoured wool is prohibitory. In general, they +are assessed at rates as high as, or higher than, the duties paid on the +clean content of wools actually imported. They should be reduced and so +adjusted to the rate on wool as to bear their proper proportion to the real +rate levied on the actual wool imports. + +The duties on many classes of wool manufacture are prohibitory and greatly +in excess of the difference in cost of production here and abroad. + +This is true of tops, of yarns (with the exception of worsted yarns of a +very high grade), and of low and medium grade cloth of heavy weight. + +On tops up to 52 cents a pound in value, and on yarns of 65 cents in value, +the rate is 100 per cent with correspondingly higher rates for lower +values. On cheap and medium grade cloths, the existing rates frequently run +to 150 per cent and on some cheap goods to over 200 per cent. This is +largely due to that part of the duty which is levied ostensibly to +compensate the manufacturer for the enhanced cost of his raw material due +to the duty on wool. As a matter of fact, this compensatory duty, for +numerous classes of goods, is much in excess of the amount needed for +strict compensation. + +On the other hand, the findings show that the duties which run to such high +ad valorem equivalents are prohibitory, since the goods are not imported, +but that the prices of domestic fabrics are not raised by the full amount +of duty. On a set of 1-yard samples of 16 English fabrics, which are +completely excluded by the present tariff rates, it was found that the +total foreign value was $41.84; the duties which would have been assessed +had these fabrics been imported, $76.90; the foreign value plus the amount +of the duty, $118.74; or a nominal duty of 183 per cent. In fact, however, +practically identical fabrics of domestic make sold at the same time at +$69.75, showing an enhanced price over the foreign market value of but 67 +per cent. + +Although these duties do not increase prices of domestic goods by anything +like their full amount, it is none the less true that such prohibitive +duties eliminate the possibility of foreign competition, even in time of +scarcity; that they form a temptation to monopoly and conspiracies to +control domestic prices; that they are much in excess of the difference in +cost of production here and abroad, and that they should be reduced to a +point which accords with this principle. + +The findings of the board show that in this industry the actual +manufacturing cost, aside from the question of the price of materials, is +much higher in this country than it is abroad; that in the making of yarn +and cloth the domestic woolen or worsted manufacturer has in general no +advantage in the form of superior machinery or more efficient labor to +offset the higher wages paid in this country The findings show that the +cost of turning wool into yarn in this country is about double that in the +leading competing country, and that the cost of turning yarn into cloth is +somewhat more than double. Under the protective policy a great industry, +involving the welfare of hundreds of thousands of people, has been +established despite these handicaps. + +In recommending revision and reduction, I therefore urge that action be +taken with these facts in mind, to the end that an important and +established industry may not be jeopardized. + +The Tariff Board reports that no equitable method has been found to, levy +purely specific duties on woolen and worsted fabrics and that, excepting +for a compensatory duty, the rate must be ad valorem on such manufactures. +It is important to realize, however, that no flat ad valorem rate on such +fabrics can be made to work fairly and effectively. Any single rate which +is high enough to equalize the difference in manufacturing cost at home and +abroad on highly finished goods involving such labor would be prohibitory +on cheaper goods, in which the labor cost is a smaller proportion of the +total value. Conversely, a rate only adequate to equalize this difference +on cheaper goods would remove protection from the fine-goods manufacture, +the increase in which has been one of the striking features of the trade's +development in recent years. I therefore recommend that in any revision the +importance of a graduated scale of ad valorem duties on cloths be carefully +considered and applied. + +I venture to say that no legislative body has ever had presented to it a +more complete and exhaustive report than this on so difficult and +complicated a subject as the relative costs of wool and woolens the world +over. It is a monument to the thoroughness, industry, impartiality, and +accuracy of the men engaged in its making. They were chosen from both +political parties but have allowed no partisan spirit to prompt or control +their inquiries. They are unanimous in their findings. I feel sure that +after the report has been printed and studied the value of such a +compendium of exact knowledge in respect to this schedule of the tariff +will convince all of the wisdom of making such a board permanent in order +that it may treat each schedule of the tariff as it has treated this, and +then keep its bureau of information up to date with current changes in the +economic world. + +It is no part of the function of the Tariff Board to propose rates of duty. +Their function is merely to present findings of fact on which rates of duty +may be fairly determined in the light of adequate knowledge in accord with +the economic policy to be followed. This is what the present report does. + +The findings of fact by the board show ample reason for the revision +downward of Schedule K, in accord with the protective principle, and +present the data as to relative costs and prices from which may be +determined what rates will fairly equalize the difference in production +costs. I recommend that such revision be proceeded with at once. + +PART IV. + +THE WHITE HOUSE, December 21, 1911. To the Senate and House of +Representatives: + +The financial condition of the Government, as shown at the close of the +last fiscal year, June 30, 1911, was very satisfactory. The ordinary +receipts into the general fund, excluding postal revenues, amounted to +$701,372,374.99, and the disbursements from the general fund for current +expenses and capital outlays, excluding postal and Panama Canal +disbursements, including the interest on the public debt, amounted to +$654,137,907-89, leaving a surplus Of $47,234,377.10. + +The postal revenue receipts amounted to $237,879,823,60, while the payments +made for the postal service from the postal revenues amounted to +$237,660,705.48, which left a surplus of postal receipts over disbursements +Of $219,118.12, the first time in 27 years in which a surplus occurred. + +The interest-bearing debt of the United States June 30, 1911, amounted to +$915,353,190. The debt on which interest had ceased amounted to +$1,879,830.26, and the debt bearing no interest, including greenbacks, +national bank notes to be redeemed, and fractional currency, amounted to +$386,751,917-43, or a total of interest and noninterest bearing debt +amounting to $1,303,984,937.69. + +The actual disbursements, exclusive of those for the Panama Canal and for +the postal service for the year ending June 30, 1911, were $654,137,997.89. +The actual disbursements for the year ending June 30, 1910, exclusive of +the Panama Canal and the postal service disbursements, were +$659,705,391.08, making a decrease Of $5,567,393.19 in yearly expenditures +in the year 1911 under that of 1910. For the year ending June 30, 1912, the +estimated receipts, exclusive of the postal revenues, are $666,000,000, +while the total estimates, exclusive of those for the Panama Canal and the +postal expenditures payable from the postal revenues, amount to +$645,842,799.34. This is a decrease in the 1912 estimates from that of the +1911 estimates of $1,534,367-22. + +For the year ending June 30, 1913, the estimated receipts, exclusive of the +postal revenues, are $667,000,000, while the total estimated +appropriations, exclusive of the Panama Canal and postal disbursements +payable from postal revenues, will amount to $637,920,803.35. This is a +decrease in the 1913 estimates from that of the 1912 estimates of +$7,921,995.99. + +As to the postal revenues, the expansion of the business in that +department, the normal increase in the Post Office and the extension of the +service, will increase the outlay to the sum Of $260,938,463; but as the +department was self-sustaining this year the Postmaster General is assured +that next year the receipts will at least equal the expenditures, and +probably exceed them by more than the surplus of this year. It is fair and +equitable, therefore, in determining the economy with which the Government +has been run, to exclude the transactions of a department like the Post +Office Department, which relies for its support upon its receipts. In +calculations heretofore made for comparison of economy in each year, it has +been the proper custom only to include in the statement the deficit in the +Post Office Department which was paid out of the Treasury. + +A calculation of the actual increase in the expenses of Government arising +from the increase in the population and the general expansion of +governmental functions, except those of the Post Office, for a number of +years shows a normal increase of about 4 per cent a year. By directing the +exercise of great care to keep down the expenses and the estimates we have +succeeded in reducing the total disbursements each year. + +THE CREDIT OF THE UNITED STATES. + +The credit of this Government was shown to be better than that of any other +Government by the sale of the Panama Canal 3 per cent bonds. These bonds +did not give their owners the privilege of using them as a basis for +bank-note circulation, nor was there any other privilege extended to them +which would affect their general market value. Their sale, therefore, +measured the credit of the Government. The premium which was realized upon +the bonds made the actual interest rate of the transaction 2.909 per cent. + +EFFICIENCY AND ECONOMY IN THE TREASURY DEPARTMENT. + +I In the Treasury Department the efficiency and economy work has been kept +steadily up. Provision is made for the elimination of 134 positions during +the coming year. Two hundred and sixty-seven statutory positions were +eliminated during the last year in the office of the Treasury in +Washington, and 141 positions in the year 1910, making an elimination Of +542 statutory positions since March 4, 1909; and this has been done without +the discharge of anybody, because the normal resignations and deaths have +been equal to the elimination of the places, a system of transfers having +taken care of the persons whose positions were dropped out. In the field +service if the department, too, 1,259 positions have been eliminated down +to the present time, making a total net reduction of all Treasury positions +to the number of 1,801. Meantime the efficiency of the work of the +department has increased. + +MONETARY REFORM. + +A matter of first importance that will come before Congress for action at +this session is monetary reform. The Congress has itself arranged an early +introduction of this great question through the report of its Monetary +Commission. This commission was appointed to recommend a solution of the +banking and currency problems so long confronting the Nation and to furnish +the facts and data necessary to enable the Congress to take action. The +commission was appointed when an impressive and urgent popular demand for +legislative relief suddenly arose out of the distressing situation of the +people caused by the deplorable panic of 1907. The Congress decided that +while it could not give immediately the relief required, it would provide a +commission to furnish the means for prompt action at a later date. + +In order to do its work with thoroughness and precision this commission has +taken some time to make its report. The country is undoubtedly hoping for +as prompt action on the report as the convenience of the Congress can +permit. The recognition of the gross imperfections and marked inadequacy of +our banking and currency system even in our most quiet financial periods is +of long standing; and later there has matured a recognition of the fact +that our system is responsible for the extraordinary devastation, waste, +and business paralysis of our recurring periods of panic. Though the +members of the Monetary Commission have for a considerable time been +working in the open, and while large numbers of the people have been openly +working with them, and while the press has largely noted and discussed this +work as it has proceeded, so that the report of the commission promises to +represent a national movement, the details of the report are still being +considered. I can not, therefore, do much more at this time than commend +the immense importance of monetary reform, urge prompt consideration and +action when the commission's report is received, and express my +satisfaction that the plan to be proposed promises to embrace main features +that, having met the approval of a great preponderance of the practical and +professional opinion of the country, are likely to meet equal approval in +Congress. + +It is exceedingly fortunate that the wise and undisputed policy of +maintaining unchanged the main features of our banking system rendered it +at once impossible to introduce a central bank; for a central bank would +certainly have been resisted, and a plan into which it could have been +introduced would probably have been defeated. But as a central bank could +not be a part of the only plan discussed or considered, that troublesome +question is eliminated. And ingenious and novel as the proposed National +Reserve Association appears, it simply is a logical outgrowth of what is +best in our present system, and is, in fact, the fulfillment of that +system. + +Exactly how the management of that association should be organized is a +question still open. It seems to be desirable that the banks which would +own the association should in the main manage it, It will be an agency of +the banks to act for them, and they can be trusted better than anybody else +chiefly to conduct it. It is mainly bankers' work. But there must be some +form of Government supervision and ultimate control, and I favor a +reasonable representation of the Government in the management. I entertain +no fear of the introduction of politics or of any undesirable influences +from a properly measured Government representation. + +I trust that all banks of the country possessing the requisite standards +will be placed upon a footing of perfect equality of opportunity. Both the +National system and the State system should be fairly recognized, leaving +them eventually to coalesce if that shall prove to be their tendency. But +such evolution can not develop impartially if the banks of one system are +given or permitted any advantages of opportunity over those of the other +system. And I trust also that the new legislation will carefully and +completely protect and assure the individuality and the independence of +each bank, to the end that any tendency there may ever be toward a +consolidation of the money or banking power of the Nation shall be +defeated. + +It will always be possible, of course, to correct any features of the new +law which may in practice prove to be unwise; so that while this law is +sure to be enacted under conditions of unusual knowledge and authority, it +also will include, it is well to remember, the possibility of future +amendment. + +With the present prospects of this long-awaited reform encouraging us, it +would be singularly unfortunate if this monetary question should by any +chance become a party issue. And I sincerely hope it will not. The +exceeding amount of consideration it has received from the people of the +Nation has been wholly nonpartisan; and the Congress set its nonpartisan +seal upon it when the Monetary Commission was appointed. In commending the +question to the favorable consideration of Congress, I speak for, and in +the spirit of, the great number of my fellow citizens who without any +thought of party or partisanship feel with remarkable earnestness that this +reform is necessary to the interests of all the people. + +THE WAR DEPARTMENT. + +There is now before Congress a Dill, the purpose of which is to increase +the efficiency and decrease the expense of the Army. It contains four +principal features: First, a consolidation of the General Staff with the +Adjutant General's and the Inspector General's Departments; second, a +consolidation of the Quartermaster's Department with the Subsistence and +the Pay Departments; third, the creation of an Army Service Corps; and +fourth, an extension of the enlistment period from three to five years. + +With the establishment of an Army Service Corps, as proposed in the bill, I +am thoroughly in accord and am convinced that the establishment of such a +corps will result in a material economy and a very great increase of +efficiency in the Army. It has repeatedly been recommended by me and my +predecessors. I also believe that a consolidation of the Staff Corps can be +made with a resulting increase in efficiency and economy, but not along the +lines provided in the bill under consideration. + +I am opposed to any plan the result of which would be to break up or +interfere with the essential principles of the detail system in the Staff +Corps established by the act of February 2, 1901, and I am opposed to any +plan the result of which would be to give to the officer selected as Chief +of Staff or to any other member of the General Staff Corps greater +permanency of office than he now has. Under the existing law neither the +Chief. of Staff nor any other member of the General Staff Corps can remain +in office for a period of more than four years, and there must be an +interval of two years between successive tours of duty. + +The bill referred to provides that certain persons shall become permanent +members of the General Staff Corps, and that certain others are subject to +re-detail without an interval of two years. Such provision is fraught with +danger to the welfare of the Army, and would practically nullify the main +purpose of the law creating the [missing text]. + +In making the consolidations no reduction should be made in the total +number of officers of the Army, of whom there are now too few to perform +the duties imposed by law. I have in the past recommended an increase in +the number of officers by 600 in order to provide sufficient officers to +perform all classes of staff duty and to reduce the number of line officers +detached from their commands. Congress at the last session increased the +total number of officers by 200, but this is not enough. Promotion in the +line of the Army is too slow. Officers do not attain command rank at an age +early enough properly to exercise it. It would be a mistake further to +retard this already slow promotion by throwing back into the line of the +Arm a number of high-ranking officers to be absorbed as is provided in the +[missing text]. + +Another feature of the bill which I believe to be a mistake is the proposed +increase in the term of enlistment from three to five ears I believe it +would be better to enlist men for six years, release them at the end of +three years from active service, and put them in reserve for the remaining +three years. Reenlistments should be largely confined to the +noncommissioned officers and other enlisted men in the skilled grades. This +plan by the payment of a comparatively small compensation during the three +years of reserve, would keep a large body of men at the call of the +Government, trained and ready for [missing text]. + +The Army of the United States is in good condition. It showed itself able +to meet an emergency in the successful mobilization of an army division of +from 15,000 to 20,000 men, which took place along the border of Mexico +during the recent disturbances in that country. The marvelous freedom from +the ordinary camp diseases of typhoid fever and measles is referred to in +the report of the Secretary of War and shows such an effectiveness in the +sanitary regulations and treatment of the Medical Corps, and in the +discipline of the Army itself, as to invoke the highest commendation. + +MEMORIAL AMPHITHEATER AT ARLINGTON. + +I beg to renew my recommendation of last year that the Congress appropriate +for a memorial amphitheater at Arlington, Va., the funds required to +construct it upon the plans already approved. + +THE PANAMA CANAL. + +The very satisfactory progress made on the Panama Canal last year has +continued, and there is every reason to believe that the canal +will be completed as early as the 1st of July, 1913, unless something +unforeseen occurs. This is about 18 months before the time promised by the +engineers. + +We are now near enough the completion of the canal to make it imperatively +necessary that legislation should be enacted to fix the method by which the +canal shall be maintained and controlled and the zone governed. The fact is +that to-day there is no statutory law by authority of which the President +is maintaining the government of the zone. Such authority was given in an +amendment to the Spooner Act, which expired by the terms of its own +limitation some years ago. Since that time the government has continued, +under the advice of the Attorney General that in the absence of action by +Congress, there is necessarily an implied authority on the part of the +Executive to maintain a government in a territory in which he has to see +that the laws are executed. The fact that we have been able thus to get +along during the important days of construction without legislation +expressly formulating the government of the zone, or delegating the +creation of it to the President, is not a reason for supposing that we may +continue the same kind of a government after the construction is finished. +The implied authority of the President to maintain a civil government in +the zone may be derived from the mandatory direction given him in the +original Spooner Act, by which he was commanded to build the canal; but +certainly, now that the canal is about to be completed and to be put under +a permanent management, there ought to be specific statutory authority for +its regulation and control and for the government of the zone, which we +hold for the chief and main purpose of operating the canal. + +I fully concur with the Secretary of War that the problem is simply the +management of a great public work, and not the government of a local +republic; that every provision must be directed toward the successful +maintenance of the canal as an avenue of commerce, and that all provisions +for the government of those who live within the zone should be subordinate +to the main purpose. + +The zone is 40 miles long and 10 miles wide. Now, it has a population Of +50,000 or 60,000, but as soon as the work of construction is completed, the +towns which make up this population will be deserted, and only +comparatively few natives will continue their residence there. The control +of them ought to approximate a military government. One judge and two +justices of the peace will be sufficient to attend to all the judicial and +litigated business there is. With a few fundamental laws of Congress, the +zone should be governed by the orders of the President, issued through the +War Department, as it is today. Provisions can be made for the guaranties +of life, liberty, and property, but beyond those, the government should be +that of a military reservation, managed in connection with this great +highway of trade. + +FURNISHING SUPPLIES AND REPAIRS. + +In my last annual message I discussed at length the reasons for the +Government's assuming the task of furnishing to all ships that use the +canal, whether our own naval vessels or others, the supplies of coal and +oil and other necessities with which they must be replenished either before +or after passing through the canal, together with the dock facilities and +repairs of every character. This it is thought wise to do through the +Government, because the Government must establish for itself, for its own +naval vessels, large depots and dry docks and warehouses, and these may +easily be enlarged so as to secure to the world public using the canal +reasonable prices and a certainty that there will be no discrimination +between those who wish to avail themselves of such facilities. TOLLS. + +I renew my recommendation with respect to the tolls of the canal that +within limits, which shall seem wise to Congress, the power of fixing tolls +be given to the President. In order to arrive at a proper conclusion, there +must be some experimenting, and this can not be done if Congress does not +delegate the power to one who can act expeditiously. + +POWER EXISTS TO RELIEVE AMERICAN SHIPPING. + +I am very confident that the United States has the power to relieve from +the payment of tolls any part of our shipping that Congress deems wise. We +own the canal. It was our money that built it. We have the right to charge +tolls for its use. Those tolls must be the same to everyone; but when we +are dealing with our own ships, the practice of many Governments of +subsidizing their own merchant vessels is so well established in general +that a subsidy equal to the tolls, an equivalent remission of tolls, can +not be held to be a discrimination in the use of the canal. The practice in +the Suez Canal makes this clear. The experiment in tolls to be made by the +President would doubtless disclose how great a burden of tolls the +coastwise trade between the Atlantic and the Pacific coast could bear +without preventing its usefulness in competition with the transcontinental +railroads. One of the chief reasons for building the canal was to set up +this competition and to bring the two shores closer together as a practical +trade problem. It may be that the tolls will have to be wholly remitted. I +do not think this is the best principle, because I believe that the cost of +such a Government work as the Panama Canal ought to be imposed gradually +but certainly upon the trade which it creates and makes possible. So far as +we can, consistent with the development of the world's trade through the +canal, and the benefit which it was intended to secure to the east and west +coastwise trade, we ought to labor to secure from the canal tolls a +sufficient amount ultimately to meet the debt which we have assumed and to +pay the interest. + +THE PHILIPPINE ISLANDS. + +In respect to the Philippines, I urgently join in the recommendation of the +Secretary of War that the act of February 6, 1905, limiting the +indebtedness that may be incurred by the Philippine Government for the +construction of public works, be increased from $5,000,000 to $15,000,000. +The finances of that Government are in excellent condition. The maximum sum +mentioned is quite low as compared with the amount of indebtedness of other +governments with similar resources, and the success which has attended the +expenditure of the $5,000,000 in the useful improvements of the harbors and +other places in the Islands justifies and requires additional expenditures +for like purposes. NATURALIZATION. + +I also join in the recommendation that the legislature of the Philippine +Islands be authorized to provide for the naturalization of Filipinos and +others who by the present law are treated as aliens, so as to enable them +to become citizens of the Philippine Islands. + +FRIARS' LANDS. + +Pending an investigation by Congress at its last session, through one of +its committees, into the disposition of the friars' lands, Secretary +Dickinson directed that the friars' lands should not be sold in excess of +the limits fixed for the public lands until Congress should pass upon the +subject or should have concluded its investigation. This order has been an +obstruction to the disposition of the lands, and I expect to direct the +Secretary of War to return to the practice under the opinion of the +Attorney General which will enable us to dispose of the lands much more +promptly, and to prepare a sinking fund with which to meet the $7,000,000 +of bonds issued for the purchase of the lands. I have no doubt whatever +that the Attorney General's construction was a proper one, and that it is +in the interest of everyone that the land shall be promptly disposed of. +The danger of creating a monopoly of ownership in lands under the statutes +as construed is nothing. There are only two tracts of 60,000 acres each +unimproved and in remote Provinces that are likely to be disposed of in +bulk, and the rest of the lands are subject to the limitation that they +shall be first offered to the present tenants and lessors who hold them in +small tracts. + +RIVERS AND HARBORS. + +The estimates for the river and harbor improvements reach $32,000,000 for +the coming year. I wish to urge that whenever a project has been adopted by +Congress as one to be completed, the more money which can be economically +expended in its construction in each year, the greater the ultimate +economy. This has especial application to the improvement of the +Mississippi River and its large branches. It seems to me that an increase +in the amount of money now being annually expended in the improvement of +the Ohio River which has been formally adopted by Congress would be in the +interest of the public. A similar change ought to be made during the +present Congress, in the amount to be appropriated for the Missouri River. +The engineers say that the cost of the improvement of the Missouri River +from Kansas City to St. Louis, in order to secure 6 feet as a permanent +channel, will reach $20,000,000. There have been at least three +recommendations from the Chief of Engineers that if the improvement be +adopted, $2,000,000 should be expended upon it annually. This particular +improvement is especially entitled to the attention of Congress, because a +company has been organized in Kansas City, with a capital of $1,000,000, +which has built steamers and barges, and is actually using the river for +transportation in order to show what can be done in the way of affecting +rates between Kansas City and St. Louis, and in order to manifest their +good faith and confidence in respect of the improvement. I urgently +recommend that the appropriation for this improvement be increased from +$600,000, as recommended now in the completion of a contract, to $2,000,000 +annually, so that the work may be done in 10 years. + +WATERWAY FROM THE LAKES TO THE GULF. + +The project for a navigable waterway from Lake Michigan to the mouth of the +Illinois River, and thence via the Mississippi to the Gulf of Mexico, is +one of national importance. In view of the work already accomplished by the +Sanitary District of Chicago, an agency of the State of Illinois, which has +constructed the most difficult and costly stretch of this waterway and made +it an asset of the Nation, and in view of the fact that the people of +Illinois have authorized the expenditure Of $20,000,000 to carry this +waterway 62 miles farther to Utica, I feel that it is fitting that this +work should be supplemented by the Government, and that the expenditures +recommended by the special board of engineers on the waterway from Utica to +the mouth of the Illinois River be made upon lines which while providing a +waterway for the Nation should otherwise benefit that State to the fullest +extent. I recommend that the term of service of said special board of +engineers be continued, and that it be empowered to reopen the question of +the treatment of the lower Illinois River, and to negotiate with a properly +constituted commission representing the State of Illinois, and to agree +upon a plan for the improvement of the lower Illinois River and upon the +extent to which the United States may properly cooperate with the State of +Illinois in securing the construction of a navigable waterway from Lockport +to the mouth of the Illinois River in conjunction with the development of +water power by that State between Lockport and Utica. + +THE DEPARTMENT OF JUSTICE. + +Removal of clerks of Federal courts. + +The report of the Attorney General shows that he has subjected to close +examination the accounts of the clerks of the Federal courts; that he has +found a good many which disclose irregularities or dishonesty; but that he +has had considerable difficulty in securing an effective prosecution or +removal of the clerks thus derelict. I am certainly not unduly prejudiced +against the Federal courts, but the fact is that the long and confidential +relations which grow out of the tenure for life on the part of the judge +and the practical tenure for life on the part of the clerk are not +calculated to secure the strictness of dealing by the judge with the clerk +in respect to his fees and accounts which assures in the clerk's conduct a +freedom from overcharges and carelessness. The relationship between the +judge and the clerk makes it ungracious for members of the bar to complain +of the clerk or for department examiners to make charges against him to be +heard by the court, and an order of removal of a clerk and a judgment for +the recovery of fees are in some cases reluctantly entered by the judge. +For this reason I recommend an amendment to the law whereby the President +shall be given power to remove the clerks for cause. This provision need +not interfere with the right of the judge to appoint his clerk or to remove +him. + +French spoliation awards. + +In my last message, I recommended to Congress that it authorize the payment +of the findings or judgments of the Court of Claims in the matter of the +French spoliation cases. There has been no appropriation to pay these +judgments since 1905. The findings and awards were obtained after a very +bitter fight, the Government succeeding in about 75 per cent of the cases. +The amount of the awards ought, as a matter of good faith on the part of +the Government, to be paid. + +EMPLOYERS' LIABILITY AND WORKMEN'S COMPENSATION COMMISSION. + +The limitation of the liability of the master to his servant for personal +injuries to such as are occasioned by his fault has been abandoned in most +civilized countries and provision made whereby the employee injured in the +course of his employment is compensated for his loss of working ability +irrespective of negligence. The principle upon which such provision +proceeds is that accidental injuries to workmen in modern industry, with +its vast complexity and inherent dangers arising from complicated machinery +and the use of the great forces of steam and electricity, should be +regarded as risks of the industry and the loss borne in some equitable +proportion by those who for their own profit engage therein. In recognition +of this the last Congress authorized the appointment of a commission to +investigate the subject of employers' liability and workmen's compensation +and to report the result of their investigations, through the President, to +Congress. This commission was appointed and has been at work, holding +hearings, gathering data, and considering the subject, and it is expected +will be able to report by the first of the year, in accordance with the +provisions of the law. It is hoped and expected that the commission will +suggest legislation which will enable us to put in the place of the present +wasteful and sometimes unjust system of employers' liability a plan of +compensation which will afford some certain and definite relief to all +employees who are injured in the course of their employment in those +industries which are subject to the regulating power of Congress. + +MEASURES TO PREVENT DELAY AND UNNECESSARY COST OF LITIGATION. + +In promotion of the movement for the prevention of delay and unnecessary +cost, in litigation, I am glad to say that the Supreme Court has taken +steps to reform the present equity rules of the Federal courts, and that we +may in the near future expect a revision of them which will be a long step +in the right direction. + +The American Bar Association has recommended to Congress several bills +expediting procedure, one of which has already passed the House +unanimously, February 6, 1911. This directs that no judgment should be set +aside or reversed, or new trial granted, unless it appears to the court, +after an examination of the entire cause, that the error complained of has +injuriously affected the substantial rights of the parties, and also +provides for the submission of issues of fact to a jury, reserving +questions of law for subsequent argument and decision. I hope this bill +will pass the Senate and become law, for it will simplify the procedure at +law. + +Another bill 11 to amend chapter II of the judicial Code, in order to +avoid errors in pleading, was presented by the same association, and one. +enlarging the jurisdiction of the Supreme Court so as to permit that court +to examine, upon a writ of error, all cases in which any right or title is +claimed under the Constitution, or any statute or treaty of the United +States, whether the decision in the court below has been against the right +or title or in its favor. Both these measures are in the interest of +justice and should be passed. + +POST OFFICE. + +At the beginning of the present administration in 1909 the postal service +was in arrears to the extent Of $17,479,770.47. It was very much the +largest deficit on record. In the brief space of two years this has been +turned into a surplus Of $220,000, which has been accomplished without +curtailment of the postal facilities, as may be seen by the fact that there +have been established 3,744 new post offices; delivery by carrier has been +added to the service in 186 cities; 2,516 new rural routes have been +established, covering 60,000 miles; the force of postal employees has been +increased in these two years by more than 8,000, and their average annual +salary has had a substantial increase. + +POSTAL-SAVINGS SYSTEM. + +On January 3, 1911, postal-savings depositories were established +experimentally in 48 States and Territories. After three months' successful +operation the system was extended as rapidly as feasible to the 7,500 Post +offices of the first, second, and third classes constituting the +presidential grade. By the end of the year practically all of these will +have been designated and then the system will be extended to all +fourth-class post offices doing a money-order business. + +In selecting post offices for depositories consideration was given to the +efficiency of the postmasters and only those offices where the ratings were +satisfactory to the department have been designated. Withholding +designation from postmasters with unsatisfactory ratings has had a salutary +effect on the service. + +The deposits have kept pace with the extension of the system. Amounting to +only $60,652 at the end of the first month's operation in the experimental +offices, they increased to $679,310 by July, and now after 11 months of +operation have reached a total of $11,000,000. This sum is distributed +among 2,710 banks and protected tinder the law by bonds deposited with the +Treasurer of the United States. + +Under the method adopted for the conduct of the system certificates are +issued as evidence of deposits, and accounts with depositors are kept by +the post offices instead of by the department. Compared with the practice +in other countries of entering deposits in pass books and keeping at the +central office a ledger account with each depositor, the use of the +certificate has resulted in great economy of administration. + +The depositors thus far number approximately 150,000. They include 40 +nationalities, native Americans largely predominating and English and +Italians coming next. + +The first conversion of deposits into United States bonds bearing interest +at the rate of 2.5 per cent occurred on July 1, 1911, the amount of +deposits exchanged being $41,900, or a little more than 6 per cent of the +total outstanding certificates of deposit on June 30. Of this issue, bonds +to the value of $6,120 were in coupon form and $35,780 in registered form. + +PARCEL POST. + +Steps should be taken immediately for the establishment of a rural parcel +post. In the estimates of appropriations needed for the maintenance of the +postal service for the ensuing fiscal year an item of $150,000 has been +inserted to cover the preliminary expense of establishing a parcel post on +rural mail routes, as well as to cover an investigation having for its +object the final establishment of a general parcel post on all railway and +steamboat transportation routes. The department believes that after the +initial expenses of establishing the system are defrayed and the parcel +post is in full operation on the rural routes it will not only bring in +sufficient revenue to meet its cost, but also a surplus that can be +utilized in paying the expenses of a parcel post in the City Delivery +Service. + +It is hoped that Congress will authorize the immediate establishment of a +limited parcel post on such rural routes as may be selected, providing for +the delivery along the routes of parcels not exceeding eleven pounds, which +is the weight limit for the international parcel post, or at the post +office from which such route emanates, or on another route emanating from +the same office. Such preliminary service will prepare the way for the more +thorough and comprehensive inquiry contemplated in asking for the +appropriation mentioned, enable the department to gain definite information +concerning the practical operation of a general system, and at the same +time extend the benefit of the service to a class of people who, above all +others, are specially in need of it. + +The suggestion that we have a general parcel post has awakened great +opposition on the part of some who think that it will have the effect to +destroy the business of the country storekeeper. Instead of doing this, I +think the change will greatly increase business for the benefit of all. The +reduction in the cost of living it will bring about ought to make its +coming certain. + +THE NAVY DEPARTMENT. + +On the 2d of November last, I reviewed the fighting fleet of battleships +and other vessels assembled in New York Harbor, consisting of 24 +battleships, 2 armored cruisers, 2 cruisers, 22 destroyers, 12 torpedo +boats, 8 submarines, and other attendant vessels, making 98 vessels of all +classes, of a tonnage Of 576,634 tons. Those who saw the fleet were struck +with its preparedness and with its high military efficiency. All Americans +should be proud of its personnel. + +The fleet was deficient in the number of torpedo destroyers, in cruisers, +and in colliers, as well as in large battleship cruisers, which are now +becoming a very important feature of foreign navies, notably the British, +German, and Japanese. + +The building plan for this year contemplates two battleships and two +colliers. This is because the other and smaller vessels can be built much +more rapidly in case of emergency than the battleships, and we certainly +ought to continue the policy of two battleships a year until after the +Panama Canal is finished and until in our first line and in our reserve +line we can number 40 available vessels of proper armament and size. + +The reorganization of the Navy and the appointment of four aids to the +Secretary have continued to demonstrate their usefulness. It would be +difficult now to administer the affairs of the Navy without the expert +counsel and advice of these aids, and I renew the recommendation which I +made last year, that the aids be recognized by statute. + +It is certain that the Navy, with its present size, should have admirals in +active command higher than rear admirals. The recognized grades in order +are: Admiral of the fleet, admiral, vice admiral, and rear admiral. Our +great battleship fleet is commanded by a rear admiral, with four other rear +admirals under his orders. This is not as it should be, and when questions +of precedence arise between our naval officers and those of European +navies, the American rear admiral, though in command of ten times the force +of a foreign vice admiral, must yield precedence to the latter. Such an +absurdity ought not to prevail, and it can be avoided by the creation of +two or three positions of flag rank above that of rear admiral. + +I attended the opening of the new training school at North Chicago, Ill., +and am glad to note the opportunity which this gives for drawing upon young +men of the country from the interior, from farms, stores, shops, and +offices, which insures a high average of intelligence and character among +them, and which they showed in the very wonderful improvement in discipline +and drill which only a few short weeks' presence at the naval station had +made. + +I invite your attention to the consideration of the new system of detention +and of punishment for Army and Navy enlisted men which has obtained in +Great Britain, and which has made greatly for the better control of the. +men. We should adopt a similar system here. + +Like the Treasury Department and the War Department, the Navy Department +has given much attention to economy in administration, and has cut down a +number of unnecessary expenses and reduced its estimates except for +construction and the increase that that involves. + +I urge upon Congress the necessity for an immediate increase of 2,000 men +in the enlisted strength of the Navy, provided for in the estimates. Four +thousand more are now needed to man all the available vessels. + +There are in the service to-day about 47,750 enlisted men of all ratings. + +Careful computation shows that in April, 1912, 49,166 men will be required +for vessels in commission, and 3,000 apprentice seamen should be kept under +training at all times. + +ABOLITION OF NAVY YARDS. + +The Secretary of the Navy has recommended the abolition of certain of the +smaller and unnecessary navy yards, and in order to furnish a complete and +comprehensive report has referred the question of all navy yards to the +joint board of the Army and Navy. This board will shortly make its report +and the Secretary of the Navy advises me that his recommendations on the +subject will be presented early in the coming year. The measure of economy +contained in a proper handling of this subject is so great and so important +to the interests of the Nation that I shall present it to Congress as a +separate subject apart from my annual message. Concentration of the +necessary work for naval vessels in a few navy yards on each coast is a +vital necessity if proper economy in Government expenditures is to be +attained. + +AMALGAMATION OF STAFF CORPS IN THE NAVY. + +The Secretary of the Navy is striving to unify the various corps of the +Navy to the extent possible and thereby stimulate a Navy spirit as +distinguished from a corps spirit. In this he has my warm support. + +All officers are to be naval officers first and specialists afterwards. +This means that officers will take up at least one specialty, such as +ordnance, construction, or engineering. This is practically what is done +now, only some of the specialists, like the pay officers and naval +constructors, are not of the line. It is proposed to make them all of the +line. + +All combatant corps should obviously be of the line. This necessitates +amalgamating the pay officers and also those engaged in the technical work +of producing the finished ship. This is at present the case with the single +exception of the naval constructors, whom it is now proposed to amalgamate +with the line. + +COUNCIL OF NATIONAL DEFENSE. + +I urge again upon Congress the desirability of establishing the council of +national defense. The bill to establish this council was before Congress +last winter, and it is hoped that this legislation will pass during the +present session. The purpose of the council is to determine the general +policy of national defense and to recommend to Congress and to the +President such measures relating to it as it shall deem necessary and +expedient. + +No such machinery is now provided by which the readiness of the Army and +Navy may be improved and the programs of military and naval requirements +shall be coordinated and properly scrutinized with a view of the +necessities of the whole Nation rather than of separate departments. + +DEPARTMENTS OF AGRICULTURE AND COMMERCE AND LABOR. + +For the consideration of matters which are pending or have been disposed of +in the Agricultural Department and in the Department of Commerce and Labor, +I refer to the very excellent reports of the Secretaries of those +departments. I shall not be able to submit to Congress until after the +Christmas holidays the question of conservation of our resources arising in +Alaska and the West and the question of the rate for second-class mail +matter in the Post Office Department. + +COMMISSION ON EFFICIENCY AND ECONOMY. + +The law does not require the submission of the reports of the Commission on +Economy and Efficiency until the 31st of December. I shall therefore not be +able to submit a report of the work of that commission until the assembling +of Congress after the holidays. + +CIVIL RETIREMENT AND CONTRIBUTORY PENSION SYSTEM. + +I have already advocated, in my last annual message, the adoption of a +civil-service retirement system, with a contributory feature to it so as to +reduce to a minimum the cost to the Government of the pensions to be paid. +After considerable reflection, I am very much opposed to a pension system +that involves no contribution from the employees. I think the experience of +other governments justifies this view; but the crying necessity for some +such contributory system, with possibly a preliminary governmental outlay, +in order to cover the initial cost and to set the system going at once +while the contributions are accumulating, is manifest on every side. +Nothing will so much promote the economy and efficiency of the Government +as such a system. + +ELIMINATION OF ALL LOCAL OFFICES FROM POLITICS. + +I wish to renew again my recommendation that all the local offices +throughout the country, including collectors of internal revenue, +collectors of customs, postmasters of all four classes, immigration +commissioners and marshals, should be by law covered into the classified +service, the necessity for confirmation by the Senate be removed, and the +President and the others, whose time is now taken up in distributing this +patronage under the custom that has prevailed since the beginning of the +Government in accordance with the recommendation of the Senators and +Congressmen of the majority party, should be relieved from this burden. I +am confident that such a change would greatly reduce the cost of +administering the Government, and that it would add greatly to its +efficiency. It would take away the power to use the patronage of the +Government for political purposes. When officers are recommended by +Senators and Congressmen from political motives and for political services +rendered, it is impossible to expect that while in office the appointees +will not regard their tenure as more or less dependent upon continued +political service for their patrons, and no regulations, however stiff or +rigid, will prevent this, because such regulations, in view of the method +and motive for selection, are plainly inconsistent and deemed hardly worthy +of respect. + +*** + +State of the Union Address +William H. Taft +December 3, 1912 + +Jump to Part II | Part III + +To the Senate and House of Representatives: + +The foreign relations of the United States actually and potentially affect +the state of the Union to a degree not widely realized and hardly surpassed +by any other factor in the welfare of the whole Nation. The position of the +United States in the moral, intellectual, and material relations of the +family of nations should be a matter of vital interest to every patriotic +citizen. The national prosperity and power impose upon us duties which we +can not shirk if we are to be true to our ideals. The tremendous growth of +the export trade of the United States has already made that trade a very +real factor in the industrial and commercial prosperity of the country. +With the development of our industries the foreign commerce of the United +States must rapidly become a still more essential factor in its economic +welfare. Whether we have a farseeing and wise diplomacy and are not +recklessly plunged into unnecessary wars, and whether our foreign policies +are based upon an intelligent grasp of present-day world conditions and a +clear view of the potentialities of the future, or are governed by a +temporary and timid expediency or by narrow views befitting an infant +nation, are questions in the alternative consideration of which must +convince any thoughtful citizen that no department of national polity +offers greater opportunity for promoting the interests of the whole people +on the one hand, or greater chance on the other of permanent national +injury, than that which deals with the foreign relations of the United +States. + +The fundamental foreign policies of the United States should be raised high +above the conflict of partisanship and wholly dissociated from differences +as to domestic policy. In its foreign affairs the United States should +present to the world a united front. The intellectual, financial, and +industrial interests of the country and the publicist, the wage earner, the +farmer, and citizen of whatever occupation must cooperate in a spirit of +high patriotism to promote that national solidarity which is indispensable +to national efficiency and to the attainment of national ideals. + +The relations of the United States with all foreign powers remain upon a +sound basis of peace, harmony, and friendship. A greater insistence upon +justice to American citizens or interests wherever it may have been denied +and a stronger emphasis of the need of mutuality in commercial and other +relations have only served to strengthen our friendships with foreign +countries by placing those friendships upon a firm foundation of realities +as well as aspirations. + +Before briefly reviewing the more important events of the last year in our +foreign relations, which it is my duty to do as charged with their conduct +and because diplomatic affairs are not of a nature to make it appropriate +that the Secretary of State make a formal annual report, I desire to touch +upon some of the essentials to the safe management of the foreign relations +of the United States and to endeavor, also, to define clearly certain +concrete policies which are the logical modern corollaries of the +undisputed and traditional fundamentals of the foreign policy of the United +States. + +REORGANIZATION OF THE STATE DEPARTMENT + +At the beginning of the present administration the United States, having +fully entered upon its position as a world power, with the responsibilities +thrust upon it by the results of the Spanish-American War, and already +engaged in laying the groundwork of a vast foreign trade upon which it +should one day become more and more dependent, found itself without the +machinery for giving thorough attention to, and taking effective action +upon, a mass of intricate business vital to American interests in every +country in the world. + +The Department of State was an archaic and inadequate machine lacking most +of the attributes of the foreign office of any great modern power. With an +appropriation made upon my recommendation by the Congress on August 5, +1909, the Department of State was completely reorganized. There were +created Divisions of Latin American Affairs and of Far Eastern, Near +Eastern, and Western European Affairs. To these divisions were called from +the foreign service diplomatic and consular officers possessing experience +and knowledge gained by actual service in different parts of the world and +thus familiar with political and commercial conditions in the regions +concerned. The work was highly specialized. The result is that where +previously this Government from time to time would emphasize in its foreign +relations one or another policy, now American interests in every quarter of +the globe are being cultivated with equal assiduity. This principle of +politico-geographical division possesses also the good feature of making +possible rotation between the officers of the departmental, the diplomatic, +and the consular branches of the foreign service, and thus keeps the whole +diplomatic and consular establishments tinder the Department of State in +close touch and equally inspired with the aims and policy of the +Government. Through the newly created Division of Information the foreign +service is kept fully informed of what transpires from day to day in the +international relations of the country, and contemporary foreign comment +affecting American interests is promptly brought to the attention of the +department. The law offices of the department were greatly strengthened. +There were added foreign trade advisers to cooperate with the diplomatic and +consular bureaus and the politico-geographical divisions in the innumerable +matters where commercial diplomacy or consular work calls for such special +knowledge. The same officers, together with the rest of the new +organization, are able at all times to give to American citizens accurate +information as to conditions in foreign countries with which they have +business and likewise to cooperate more effectively with the Congress and +also with the other executive departments. + +MERIT SYSTEM IN CONSULAR AND DIPLOMATIC CORPS + +Expert knowledge and professional training must evidently be the essence of +this reorganization. Without a trained foreign service there would not be +men available for the work in the reorganized Department of State. +President Cleveland had taken the first step toward introducing the merit +system in the foreign service. That had been followed by the application of +the merit principle, with excellent results, to the entire consular branch. +Almost nothing, however, had been done in this direction with regard to the +Diplomatic Service. In this age of commercial diplomacy it was evidently of +the first importance to train an adequate personnel in that branch of the +service. Therefore, on November 26, 1909, by an Executive order I placed +the Diplomatic Service up to the grade of secretary of embassy, inclusive, +upon exactly the same strict nonpartisan basis of the merit system, rigid +examination for appointment and promotion only for efficiency, as had been +maintained without exception in the Consular Service. + +STATISTICS AS TO MERIT AND NONPARTISAN CHARACTER OF APPOINTMENTS + +How faithful to the merit system and how nonpartisan has been the conduct +of the Diplomatic and Consular Services in the last four years may be +judged from the following: Three ambassadors now serving held their present +rank at the beginning of my administration. Of the ten ambassadors whom I +have appointed, five were by promotion from the rank of minister. Nine +ministers now serving held their present rank at the beginning of my +administration. Of the thirty ministers whom I have appointed, eleven were +promoted from the lower grades of the foreign service or from the +Department of State. Of the nineteen missions in Latin America, where our +relations are close and our interest is great, fifteen chiefs of mission +are service men, three having entered the service during this +administration. Thirty-seven secretaries of embassy or legation who have +received their initial appointments after passing successfully the required +examination were chosen for ascertained fitness, without regard to +political affiliations. A dearth of candidates from Southern and Western +States has alone made it impossible thus far completely to equalize all the +States' representations in the foreign service. In the effort to equalize +the representation of the various States in the Consular Service I have +made sixteen of the twenty-nine new appointments as consul which have +occurred during my administration from the Southern States. This is 55 per +cent. Every other consular appointment made, including the promotion of +eleven young men from the consular assistant and student interpreter corps, +has been by promotion or transfer, based solely upon efficiency shown in +the service. + +In order to assure to the business and other interests of the United States +a continuance of the resulting benefits of this reform, I earnestly renew +my previous recommendations of legislation making it permanent along some +such lines as those of the measure now Pending in Congress. + +LARGER PROVISION FOR EMBASSIES AND LEGATIONS AND FOR OTHER EXPENSES OF OUR +FOREIGN REPRESENTATIVES RECOMMENDED + +In connection with legislation for the amelioration of the foreign service, +I wish to invite attention to the advisability of placing the salary +appropriations upon a better basis. I believe that the best results would +be obtained by a moderate scale of salaries, with adequate funds for the +expense of proper representation, based in each case upon the scale and +cost of living at each post, controlled by a system of accounting, and +under the general direction of the Department of State. + +In line with the object which I have sought of placing our foreign service +on a basis of permanency, I have at various times advocated provision by +Congress for the acquisition of Government-owned buildings for the +residence and offices of our diplomatic officers, so as to place them more +nearly on an equality with similar officers of other nations and to do away +with the discrimination which otherwise must necessarily be made, in some +cases, in favor of men having large private fortunes. The act of Congress +which I approved on February 17, 1911, was a right step in this direction. +The Secretary of State has already made the limited recommendations +permitted by the act for any one year, and it is my hope that the bill +introduced in the House of Representatives to carry out these +recommendations will be favorably acted on by the Congress during its +present session. + +In some Latin-American countries the expense of government-owned legations +will be less than elsewhere, and it is certainly very urgent that in such +countries as some of the Republics of Central America and the Caribbean, +where it is peculiarly difficult to rent suitable quarters, the +representatives of the United States should be justly and adequately +provided with dignified and suitable official residences. Indeed, it is +high time that the dignity and power of this great Nation should be +fittingly signalized by proper buildings for the occupancy of the Nation's +representatives everywhere abroad. + +DIPLOMACY A HAND MAID OF COMMERCIAL INTERCOURSE AND PEACE + +The diplomacy of the present administration has sought to respond to modern +ideas of commercial intercourse. This policy has been characterized as +substituting dollars for bullets. It is one that appeals alike to +idealistic humanitarian sentiments, to the dictates of sound policy and +strategy, and to legitimate commercial aims. It I is an effort frankly +directed to the increase of American trade upon the axiomatic principle +that the Government of the United States shall extend all proper support to +every legitimate and beneficial American enterprise abroad. How great have +been the results of this diplomacy, coupled with the maximum and minimum +provision of the tariff law, will be seen by some consideration of the +wonderful increase in the export trade of the United States. Because +modern diplomacy is commercial, there has been a disposition in some +quarters to attribute to it none but materialistic aims. How strikingly +erroneous is such an impression may be seen from a study of the results by +which the diplomacy of the United States can be judged. + +SUCCESSFUL EFFORTS IN PROMOTION OF PEACE + +In the field of work toward the ideals of peace this Government negotiated, +but to my regret was unable to consummate, two arbitration treaties which +set the highest mark of the aspiration of nations toward the substitution +of arbitration and reason for war in the settlement of international +disputes. Through the efforts of American diplomacy several wars have been +prevented or ended. I refer to the successful tripartite mediation of the +Argentine Republic, Brazil, and the United States between Peru and Ecuador; +the bringing of the boundary dispute between Panama and Costa Rica to +peaceful arbitration; the staying of warlike preparations when Haiti and +the Dominican Republic were on the verge of hostilities; the stopping of a +war in Nicaragua; the halting of internecine strife in Honduras. The +Government of the United States was thanked for its influence toward the +restoration of amicable relations between the Argentine Republic and +Bolivia. The diplomacy of the United States is active in seeking to assuage +the remaining ill-feeling between this country and the Republic of +Colombia. In the recent civil war in China the United States successfully +joined with the other interested powers in urging an early cessation of +hostilities. An agreement has been reached between the Governments of Chile +and Peru whereby the celebrated Tacna-Arica dispute, which has so long +embittered international relations on the west coast of South America, has +at last been adjusted. Simultaneously came the news that the boundary +dispute between Peru and Ecuador had entered upon a stage of amicable +settlement. The position of the United States in reference to the +Tacna-Arica dispute between Chile and Peru has been one of nonintervention, +but one of friendly influence and pacific counsel throughout the period +during which the dispute in question has been the subject of interchange of +views between this Government and the two Governments immediately +concerned. In the general easing of international tension on the west coast +of South America the tripartite mediation, to which I have referred, has +been a most potent and beneficent factor. + +CHINA + +In China the policy of encouraging financial investment to enable that +country to help itself has had the result of giving new life and practical +application to the open-door policy. The consistent purpose of the present +administration has been to encourage the use of American capital in the +development of China by the promotion of those essential reforms to which +China is pledged by treaties with the United States and other powers. The +hypothecation to foreign bankers in connection with certain industrial +enterprises, such as the Hukuang railways, of the national revenues upon +which these reforms depended, led the Department of State early in the +administration to demand for American citizens participation in such +enterprises, in order that the United States might have equal rights and an +equal voice in all questions pertaining to the disposition of the public +revenues concerned. The same policy of promoting international accord among +the powers having similar treaty rights as ourselves in the matters of +reform, which could not be put into practical effect without the common +consent of all, was likewise adopted in the case of the loan desired by +China for the reform of its currency. The principle of international +cooperation in matters of common interest upon which our policy had already +been based in all of the above instances has admittedly been a great factor +in that concert of the powers which has been so happily conspicuous during +the perilous period of transition through which the great Chinese nation +has been passing. + +CENTRAL AMERICA NEEDS OUR HELP IN DEBT ADJUSTMENT + +In Central America the aim has been to help such countries as Nicaragua and +Honduras to help themselves. They are the immediate beneficiaries. The +national benefit to the United States is twofold. First, it is obvious +that the Monroe doctrine is more vital in the neighborhood of the Panama +Canal and the zone of the Caribbean than anywhere else. There, too, the +maintenance of that doctrine falls most heavily upon the United States. It +is therefore essential that the countries within that sphere shall be +removed from the jeopardy involved by heavy foreign debt and chaotic +national finances and from the ever-present danger of international +complications due to disorder at home. Hence the United States has been +glad to encourage and support American bankers who were willing to lend a +helping hand to the financial rehabilitation of such countries because this +financial rehabilitation and the protection of their customhouses from +being the prey of would be dictators would remove at one stroke the menace +of foreign creditors and the menace of revolutionary disorder. + +The second advantage of the United States is one affecting chiefly all the +southern and Gulf ports and the business and industry of the South. The +Republics of Central America and the Caribbean possess great natural +wealth. They need only a measure of stability and the means of financial +regeneration to enter upon an era of peace and prosperity, bringing profit +and happiness to themselves and at the same time creating conditions sure +to lead to a flourishing interchange of trade with this country. + +I wish to call your especial attention to the recent occurrences in +Nicaragua, for I believe the terrible events recorded there during the +revolution of the past summer-the useless loss of life, the devastation of +property, the bombardment of defenseless cities, the killing and wounding +of women and children, the torturing of noncombatants to exact +contributions, and the suffering of thousands of human beings-might have +been averted had the Department of State, through approval of the loan +convention by the Senate, been permitted to carry out its now +well-developed policy of encouraging the extending of financial aid to weak +Central American States with the primary objects of avoiding just such +revolutions by assisting those Republics to rehabilitate their finances, to +establish their currency on a stable basis, to remove the customhouses from +the danger of revolutions by arranging for their secure administration, and +to establish reliable banks. + +During this last revolution in Nicaragua, the Government of that Republic +having admitted its inability to protect American life and property against +acts of sheer lawlessness on the part of the malcontents, and having +requested this Government to assume that office, it became necessary to +land over 2,000 marines and bluejackets in Nicaragua. Owing to their +presence the constituted Government of Nicaragua was free to devote its +attention wholly to its internal troubles, and was thus enabled to stamp +out the rebellion in a short space of time. When the Red Cross supplies +sent to Granada had been exhausted, 8,000 persons having been given food in +one day upon the arrival of the American forces, our men supplied other +unfortunate, needy Nicaraguans from their own haversacks. I wish to +congratulate the officers and men of the United States navy and Marine +Corps who took part in reestablishing order in Nicaragua upon their +splendid conduct, and to record with sorrow the death of seven American +marines and bluejackets. Since the reestablishment of peace and order, +elections have been held amid conditions of quiet and tranquility. Nearly +all the American marines have now been withdrawn. The country should soon +be on the road to recovery. The only apparent danger now threatening +Nicaragua arises from the shortage of funds. Although American bankers have +already rendered assistance, they may naturally be loath to advance a loan +adequate to set the country upon its feet without the support of some such +convention as that of June, 1911, upon which the Senate has not yet acted. + +ENFORCEMENT OF NEUTRALITY LAWS + +In the general effort to contribute to the enjoyment of peace by those +Republics which are near neighbors of the United States, the administration +has enforced the so-called neutrality statutes with a new vigor, and those +statutes were greatly strengthened in restricting the exportation of arms +and munitions by the joint resolution of last March. It is still a +regrettable fact that certain American ports are made the rendezvous of +professional revolutionists and others engaged in intrigue against the +peace of those Republics. It must be admitted that occasionally a +revolution in this region is justified as a real popular movement to throw +off the shackles of a vicious and tyrannical government. Such was the +Nicaraguan revolution against the Zelaya regime. A nation enjoying our +liberal institutions can not escape sympathy with a true popular movement, +and one so well justified. In very many cases, however, revolutions in the +Republics in question have no basis in principle, but are due merely to the +machinations of conscienceless and ambitious men, and have no effect but to +bring new suffering and fresh burdens to an already oppressed people. The +question whether the use of American ports as foci of revolutionary +intrigue can be best dealt with by a further amendment to the neutrality +statutes or whether it would be safer to deal with special cases by special +laws is one worthy of the careful consideration of the Congress. + +VISIT OF SECRETARY KNOX TO CENTRAL AMERICA AND THE CARIBBEAN + +Impressed with the particular importance of the relations between the +United States and the Republics of Central America and the Caribbean +region, which of necessity must become still more intimate by reason of the +mutual advantages which will be presented by the opening of the Panama +Canal, I directed the Secretary of State last February to visit these +Republics for the purpose of giving evidence of the sincere friendship and +good will which the Government and people of the United States bear toward +them. Ten Republics were visited. Everywhere he was received with a +cordiality of welcome and a generosity of hospitality such as to impress me +deeply and to merit our warmest thanks. The appreciation of the Governments +and people of the countries visited, which has been appropriately shown in +various ways, leaves me no doubt that his visit will conduce to that closer +union and better understanding between the United States and those +Republics which I have had it much at heart to promote. + +OUR MEXICAN POLICY + +For two years revolution and counter-revolution has distraught the +neighboring Republic of Mexico. Brigandage has involved a great deal of +depredation upon foreign interests. There have constantly recurred +questions of extreme delicacy. On several occasions very difficult +situations have arisen on our frontier. Throughout this trying period, the +policy of the United States has been one of patient nonintervention, +steadfast recognition of constituted authority in the neighboring nation, +and the exertion of every effort to care for American interests. I +profoundly hope that the Mexican nation may soon resume the path of order, +prosperity, and progress. To that nation in its sore troubles, the +sympathetic friendship of the United States has been demonstrated to a high +degree. There were in Mexico at the beginning of the revolution some thirty +or forty thousand American citizens engaged in enterprises contributing +greatly to the prosperity of that Republic and also benefiting the +important trade between the two countries. The investment of American +capital in Mexico has been estimated at $1,000,000,000. The responsibility +of endeavoring to safeguard those interests and the dangers inseparable +from propinquity to so turbulent a situation have been great, but I am +happy to have been able to adhere to the policy above outlined-a policy +which I hope may be soon justified by the complete success of the Mexican +people in regaining the blessings of peace and good order. + +AGRICULTURAL CREDITS + +A most important work, accomplished in the past year by the American +diplomatic officers in Europe, is the investigation of the agricultural +credit system in the European countries. Both as a means to afford relief +to the consumers of this country through a more thorough development of +agricultural resources and as a means of more sufficiently maintaining the +agricultural population, the project to establish credit facilities for the +farmers is a concern of vital importance to this Nation. No evidence of +prosperity among well-established farmers should blind us to the fact that +lack of capital is preventing a development of the Nation's agricultural +resources and an adequate increase of the land under cultivation; that +agricultural production is fast falling behind the increase in population; +and that, in fact, although these well-established farmers are maintained +in increasing prosperity because of the natural increase in population, we +are not developing the industry of agriculture. We are not breeding in +proportionate numbers a race of independent and independence-loving +landowners, for a lack of which no growth of cities can compensate. Our +farmers have been our mainstay in times of crisis, and in future it must +still largely be upon their stability and common sense that this democracy +must rely to conserve its principles of self-government. + +The need of capital which American farmers feel to-day had been experienced +by the farmers of Europe, with their centuries-old farms, many years ago. +The problem had been successfully solved in the Old World and it was +evident that the farmers of this country might profit by a study of their +systems. I therefore ordered, through the Department of State, an +investigation to be made by the diplomatic officers in Europe, and I have +laid the results of this investigation before the governors of the various +States with the hope that they will be used to advantage in their +forthcoming meeting. + +INCREASE OF FOREIGN TRADE + +In my last annual message I said that the fiscal year ended June 30, 1911, +was noteworthy as marking the highest record of exports of American +products to foreign countries. The fiscal year 1912 shows that this rate of +advance has been maintained, the total domestic exports having a valuation +approximately Of $2,200,000,000, as compared with a fraction over +$2,000,000,000 the previous year. It is also significant that manufactured +and partly manufactured articles continue to be the chief commodities +forming the volume of our augmented exports, the demands of our own people +for consumption requiring that an increasing proportion of our abundant +agricultural products be kept at home. In the fiscal year 1911 the exports +of articles in the various stages of manufacture, not including foodstuffs +partly or wholly manufactured, amounted approximately to $907,500,000. In +the fiscal year 1912 the total was nearly $1,022,000,000, a gain Of +$114,000,000. + +ADVANTAGE OF MAXIMUM AND MINIMUM TARIFF PROVISION + +The importance which our manufactures have assumed in the commerce of the +world in competition with the manufactures of other countries again draws +attention to the duty of this Government to use its utmost endeavors to +secure impartial treatment for American products in all markets. Healthy +commercial rivalry in international intercourse is best assured by the +possession of proper means for protecting and promoting our foreign trade. +It is natural that competitive countries should view with some concern this +steady expansion of our commerce. If in some instance the measures taken by +them to meet it are not entirely equitable, a remedy should be found. In +former messages I have described the negotiations of the Department of +State with foreign Governments for the adjustment of the maximum and +minimum tariff as provided in section 2 of the tariff law of 1909. The +advantages secured by the adjustment of our trade relations under this law +have continued during the last year, and some additional cases of +discriminatory treatment of which we had reason to complain have been +removed. The Department of State has for the first time in the history of +this country obtained substantial most-favored-nation treatment from all +the countries of the world. There are, however, other instances which, +while apparently not constituting undue discrimination in the sense of +section 2, are nevertheless exceptions to the complete equity of tariff +treatment for American products that the Department of State consistently +has sought to obtain for American commerce abroad. + +NECESSITY FOR SUPPLEMENTARY LEGISLATION + +These developments confirm the opinion conveyed to you in my annual message +of 1911, that while the maximum and minimum provision of the tariff law of +1909 has been fully justified by the success achieved in removing +previously existing undue discriminations against American products, yet +experience has shown that this feature of the law should be amended in such +way as to provide a fully effective means of meeting the varying degrees of +discriminatory treatment of American commerce in foreign countries still +encountered, as well as to protect against injurious treatment on the part +of foreign Governments, through either legislative or administrative +measures, the financial interests abroad of American citizens whose +enterprises enlarge the market for American commodities. + +I can not too strongly recommend to the Congress the passage of some such +enabling measure as the bill which was recommended by the Secretary of +State in his letter of December 13, 1911. The object of the proposed +legislation is, in brief, to enable the Executive to apply, as the case may +require, to any or all commodities, whether or not on the free list from a +country which discriminates against the United States, a graduated scale of +duties up to the maximum Of 25 per cent ad valorem provided in the present +law. Flat tariffs are out of date. Nations no longer accord equal tariff +treatment to all other nations irrespective of the treatment from them +received. Such a flexible power at the command of the Executive would +serve to moderate any unfavorable tendencies on the part of those countries +from which the importations into the United States are substantially +confined to articles on the free list as well as of the countries which +find a lucrative market in the United States for their products under +existing customs rates. It is very necessary that the American Government +should be equipped with weapons of negotiation adapted to modern economic +conditions, in order that we may at all times be in a position to gain not +only technically just but actually equitable treatment for our trade, and +also for American enterprise and vested interests abroad. + +BUSINESS SECURED TO OUR COUNTRY BY DIRECT OFFICIAL EFFORT + +As illustrating the commercial benefits of the Nation derived from the new +diplomacy and its effectiveness upon the material as well as the more ideal +side, it may be remarked that through direct official efforts alone there +have been obtained in the course of this administration, contracts from +foreign Governments involving an expenditure of $50,000,000 in the +factories of the United States. Consideration of this fact and some +reflection upon the necessary effects of a scientific tariff system and a +foreign service alert and equipped to cooperate with the business men of +America carry the conviction that the gratifying increase in the export +trade of this country is, in substantial amount, due to our improved +governmental methods of protecting and stimulating it. It is germane to +these observations to remark that in the two years that have elapsed since +the successful negotiation of our new treaty with Japan, which at the time +seemed to present so many practical difficulties, our export trade to that +country has increased at the rate of over $1,000,000 a month. Our exports +to Japan for the year ended June 30, 1910, were $21,959,310, while for the +year ended June 30, 1912, the exports were $53,478,046, a net increase in +the sale of American products of nearly 150 per cent. + +SPECIAL CLAIMS ARBITRATION WITH GREAT BRITAIN + +Under the special agreement entered into between the United States and +Great Britain on August 18, 1910, for the arbitration of outstanding +pecuniary claims, a schedule of claims and the terms of submission have +been agreed upon by the two Governments, and together with the special +agreement were approved by the Senate on July 19, 1911, but in accordance +with the terms of the agreement they did not go into effect until confirmed +by the two Governments by an exchange of notes, which was done on April 26 +last. Negotiations, are still in progress for a supplemental schedule of +claims to be submitted to arbitration under this agreement, and meanwhile +the necessary preparations for the arbitration of the claims included in +the first schedule have been undertaken and are being carried on under the +authority of an appropriation made for that purpose at the last session of +Congress. It is anticipated that the two Governments will be prepared to +call upon the arbitration tribunal, established under this agreement, to +meet at Washington early next year to proceed with this arbitration. + +FUR SEAL TREATY AND NEED FOR AMENDMENT OF OUR STATUTE + +The act adopted at the last session of Congress to give effect to the +fur-seal convention Of July 7, 1911, between Great Britain, Japan, Russia, +and the United States provided for the suspension of all land killing of +seals on the Pribilof Islands for a period of five years, and an objection +has now been presented to this provision by the other parties in interest, +which raises the issue as to whether or not this prohibition of land +killing is inconsistent with the spirit, if not the letter, of the treaty +stipulations. The justification of establishing this close season depends, +under the terms of the convention, upon how far, if at all, it is necessary +for protecting and preserving the American fur-seal herd and for increasing +its number. This is a question requiring examination of the present +condition of the herd and the treatment which it needs in the light of +actual experience and scientific investigation. A careful examination of +the subject is now being made, and this Government will soon be in +possession of a considerable amount of new information about the American +seal herd, which has been secured during the past season and will be of +great value in determining this question; and if it should appear that +there is any uncertainty as to the real necessity for imposing a close +season at this time I shall take an early opportunity to address a special +message to Congress on this subject, in the belief that this Government +should yield on this point rather than give the slightest ground for the +charge that we have been in any way remiss in observing our treaty +obligations. + +FINAL SETTLEMENT OF NORTH ATLANTIC FISHERIES DISPUTE + +On the 20th of July last an agreement was concluded between the United +States and Great Britain adopting, with certain modifications, the rules +and method of procedure recommended in the award rendered by the North +Atlantic Coast Fisheries Arbitration Tribunal on September 7, 1910, for the +settlement hereafter, in accordance with the principles laid down in the +award, of questions arising with reference to the exercise of the American +fishing liberties under Article I of the treaty of October 20, 1818, +between the United States and Great Britain. This agreement received the +approval of the Senate on August I and was formally ratified by the two +Governments on November 15 last. The rules and a method of procedure +embodied in the award provided for determining by an impartial tribunal the +reasonableness of any new fishery regulations on the treaty coasts of +Newfoundland and Canada before such regulations could be enforced against +American fishermen exercising their treaty liberties on those coasts, and +also for determining the delimitation of bays on such coasts more than 10 +miles wide, in accordance with the definition adopted by the tribunal of +the meaning of the word "bays" as used in the treaty. In the subsequent +negotiations between the two Governments, undertaken for the purpose of +giving practical effect to these rules and methods of procedure, it was +found that certain modifications therein were desirable from the point of +view of both Governments, and these negotiations have finally resulted in +the agreement above mentioned by which the award recommendations as +modified by mutual consent of the two Governments are finally adopted and +made effective, thus bringing this century-old controversy to a final +conclusion, which is equally beneficial and satisfactory to both +Governments. + +IMPERIAL VALLEY AND MEXICO + +In order to make possible the more effective performance of the work +necessary for the confinement in their present channel of the waters of the +lower Colorado River, and thus to protect the people of the Imperial +Valley, as well as in order to reach with the Government of Mexico an +understanding regarding the distribution of the waters of the Colorado +River, in which both Governments are much interested, negotiations are +going forward with a view to the establishment of a preliminary Colorado +River commission, which shall have the powers necessary to enable it to do +the needful work and with authority to study the question of the equitable +distribution of the waters. There is every reason to believe that an +understanding upon this point will be reached and that an agreement will be +signed in the near future. + +CHAMIZAL DISPUTE + +In the interest of the people and city of El Paso this Government has been +assiduous in its efforts to bring to an early settlement the long-standing +Chamizal dispute with Mexico. Much has been accomplished, and while the +final solution of the dispute is not immediate, the favorable attitude +lately assumed by the Mexican Government encourages the hope that this +troublesome question will be satisfactorily and definitively settled at an +early day. + +INTERNATIONAL COMMISSION OF JURISTS + +In pursuance of the convention of August 23, 1906, signed at the Third Pan +American Conference, held at Rio de Janeiro, the International Commission +of jurists met at that capital during the month of last June. At this +meeting 16 American Republics were represented, including the United +States, and comprehensive plans for the future work of the commission were +adopted. At the next meeting fixed for June, 1914, committees already +appointed are instructed to I report regarding topics assigned to them. + +OPIUM CONFERENCE-UNFORTUNATE FAILURE OF OUR GOVERNMENT TO ENACT RECOMMENDED +LEGISLATION + +In my message on foreign relations communicated to the two Houses of +Congress December 7, 1911, I called especial attention to the assembling of +the Opium Conference at The Hague, to the fact that that conference was to +review all pertinent municipal laws relating to the opium and allied evils, +and certainly all international rules regarding these evils, and to the +-fact that it seemed to me most essential that the Congress should take +immediate action on the anti-narcotic legislation before the Congress, to +which I had previously called attention by a special message. + +The international convention adopted by the conference conforms almost +entirely to the principles contained in the proposed anti-narcotic +legislation which has been before the last two Congresses. It was most +unfortunate that this Government, having taken the initiative in the +international action which eventuated in the important international opium +convention, failed to do its share in the great work by neglecting to pass +the necessary legislation to correct the deplorable narcotic evils in the +United States as well as to redeem international pledges upon which it +entered by virtue of the above-mentioned convention. The Congress at its +present session should enact into law those bills now before it which have +been so carefully drawn up in collaboration between the Department of State +and the other executive departments, and which have behind them not only +the moral sentiment of the country, but the practical support of all the +legitimate trade interests likely to be affected. Since the international +convention was signed, adherence to it has been made by several European +States not represented at the conference at The Hague and also by seventeen +Latin-American Republics. + +EUROPE AND THE NEAR EAST + +The war between Italy and Turkey came to a close in October last by the +signature of a treaty of peace, subsequently to which the Ottoman Empire +renounced sovereignty over Cyrenaica and Tripolitania in favor of Italy. +During the past year the Near East has unfortunately been the theater of +constant hostilities. Almost simultaneously with the conclusion of peace +between Italy and Turkey and their arrival at an adjustment of the complex +questions at issue between them, war broke out between Turkey on the one +hand and Bulgaria, Greece, Montenegro, and Servia on the other. The United +States has happily been involved neither directly nor indirectly with the +causes or questions incident to any of these hostilities and has maintained +in regard to them an attitude of absolute neutrality and of complete +political disinterestedness. In the second war in which the Ottoman Empire +has been engaged the loss of life and the consequent distress on both sides +have been appalling, and the United States has found occasion, in the +interest of humanity, to carry out the charitable desires of the American +people, to extend a measure of relief to the sufferers on either side +through the impartial medium of the Red Cross. Beyond this the chief care +of the Government of the United States has been to make due provision for +the protection of its national resident in belligerent territory. In the +exercise of my duty in this matter I have dispatched to Turkish waters a +special-service squadron, consisting of two armored cruisers, in order that +this Government may if need be bear its part in such measures as it may be +necessary for the interested nations to adopt for the safeguarding of +foreign lives and property in the Ottoman Empire in the event that a +dangerous situation should develop. In the meanwhile the several interested +European powers have promised to extend to American citizens the benefit of +such precautionary or protective measures as they might adopt, in the same +manner in which it has been the practice of this Government to extend its +protection to all foreign residents in those countries of the Western +Hemisphere in which it has from time to time been the task of the United +States to act in the interest of peace and good order. The early appearance +of a large fleet of European warships in the Bosphorus apparently assured +the protection of foreigners in that quarter, where the presence of the +American stationnaire the U. S. S. Scorpion sufficed, tinder the +circumstances, to represent the United States. Our cruisers were thus left +free to act if need be along the Mediterranean coasts should any unexpected +contingency arise affecting the numerous American interests in the +neighborhood of Smyrna and Beirut. + +SPITZBERGEN + +The great preponderance of American material interests in the sub-arctic +island of Spitzbergen, which has always been regarded politically as "no +man's land," impels this Government to a continued and lively interest in +the international dispositions to be made for the political governance and +administration of that region. The conflict of certain claims of American +citizens and others is in a fair way to adjustment, while the settlement of +matters of administration, whether by international conference of the +interested powers or otherwise, continues to be the subject of exchange of +views between the Governments concerned. + +LIBERIA + +As a result of the efforts of this Government to place the Government of +Liberia in position to pay its outstanding indebtedness and to maintain a +stable and efficient government, negotiations for a loan of $1,700,000 have +been successfully concluded, and it is anticipated that the payment of the +old loan and the issuance of the bonds of the 1912 loan for the +rehabilitation of the finances of Liberia will follow at an early date, +when the new receivership will go into active operation. The new +receivership will consist of a general receiver of customs designated by +the Government of the United States and three receivers of customs +designated by the Governments of Germany, France, and Great Britain, which +countries have commercial interests in the Republic of Liberia. + +In carrying out the understanding between the Government of Liberia and +that of the United States, and in fulfilling the terms of the agreement +between the former Government and the American bankers, three competent +ex-army officers are now effectively employed by the Liberian Government in +reorganizing the police force of the Republic, not only to keep in order +the native tribes in the hinterland but to serve as a necessary police +force along the frontier. It is hoped that these measures will assure not +only the continued existence but the prosperity and welfare of the Republic +of Liberia. Liberia possesses fertility of soil and natural resources, +which should insure to its people a reasonable prosperity. It was the duty +of the United States to assist the Republic of Liberia in accordance with +our historical interest and moral guardianship of a community founded by +American citizens, as it was also the duty of the American Government to +attempt to assure permanence to a country of much sentimental and perhaps +future real interest to a large body of our citizens. + +MOROCCO + +The legation at Tangier is now in charge of our consul general, who is +acting as charge d'affaires, as well as caring for our commercial interests +in that country. In view of the fact that many of the foreign powers are +now represented by charges d'affaires it has not been deemed necessary to +appoint at the present time a minister to fill a vacancy occurring in that +post. + +THE FAR EAST + +The political disturbances in China in the autumn and winter of 1911-12 +resulted in the abdication of the Manchu rulers on February 12, followed by +the formation of a provisional republican government empowered to conduct +the affairs of the nation until a permanent government might be regularly +established. The natural sympathy of the American people with the +assumption of republican principles by the Chinese people was appropriately +expressed in a concurrent resolution of Congress on April 17, 1912. A +constituent assembly, composed of representatives duly chosen by the people +of China in the elections that are now being held, has been called to meet +in January next to adopt a permanent constitution and organize the +Government of the nascent Republic. During the formative constitutional +stage and pending definite action by the assembly, as expressive of the +popular will, and the hoped-for establishment of a stable republican form +of government, capable of fulfilling its international obligations, the +United States is, according to precedent, maintaining full and friendly de +facto relations with the provisional Government. + +The new condition of affairs thus created has presented many serious and +complicated problems, both of internal rehabilitation and of international +relations, whose solution it was realized would necessarily require much +time and patience. From the beginning of the upheaval last autumn it was +felt by the United States, in common with the other powers having large +interests in China, that independent action by the foreign Governments in +their own individual interests would add further confusion to a situation +already complicated. A policy of international cooperation was accordingly +adopted in an understanding, reached early in the disturbances, to act +together for the protection of the lives and property of foreigners if +menaced, to maintain an attitude of strict impartiality as between the +contending factions, and to abstain from any endeavor to influence the +Chinese in their organization of a new form of government. In view of the +seriousness of the disturbances and their general character, the American +minister at Peking was instructed at his discretion to advise our nationals +in the affected districts to concentrate at such centers as were easily +accessible to foreign troops or men of war. Nineteen of our naval vessels +were stationed at various Chinese ports, and other measures were promptly +taken for the adequate protection of American interests. + +It was further mutually agreed, in the hope of hastening an end to +hostilities, that none of the interested powers would approve the making of +loans by its nationals to either side. As soon, however, as a united +provisional Government of China was assured, the United States joined in a +favorable consideration of that Government's request for advances needed +for immediate administrative necessities and later for a loan to effect a +permanent national reorganization. The interested Governments had already, +by common consent, adopted, in respect to the purposes, expenditure, and +security of any loans to China made by their nationals, certain conditions +which were held to be essential, not only to secure reasonable protection +for the foreign investors, but also to safeguard and strengthen China's +credit by discouraging indiscriminate borrowing and by insuring the +application of the funds toward the establishment of the stable and +effective government necessary to China's welfare. In June last +representative banking groups of the United States, France, Germany, Great +Britain, Japan, and Russia formulated, with the general sanction of their +respective Governments, the guaranties that would be expected in relation +to the expenditure and security of the large reorganization loan desired by +China, which, however, have thus far proved unacceptable to the provisional +Government. + +SPECIAL MISSION OF CONDOLENCE TO JAPAN + +In August last I accredited the Secretary of State as special ambassador to +Japan, charged with the mission of bearing to the imperial family, the +Government, and the people of that Empire the sympathetic message of the +American Commonwealth oil the sad occasion of the death of His Majesty the +Emperor Mutsuhito, whose long and benevolent reign was the greater part of +Japan's modern history. The kindly reception everywhere accorded to +Secretary Knox showed that his mission was deeply appreciated by the +Japanese nation and emphasized strongly the friendly relations that have +for so many years existed between the two peoples. + +SOUTH AMERICA + +Our relations with the Argentine Republic are most friendly and cordial. +So, also, are our relations with Brazil, whose Government has accepted the +invitation of the United States to send two army officers to study at the +Coast Artillery School at Fort Monroe. The long-standing Alsop claim, which +had been the only hindrance to the healthy growth of the most friendly +relations between the United States and Chile, having been eliminated +through the submission of the question to His Britannic Majesty King George +V as "amiable compositeur," it is a cause of much gratification to me that +our relations with Chile are now established upon a firm basis of growing +friendship. The Chilean Government has placed an officer of the United +States Coast Artillery in charge of the Chilean Coast Artillery School, and +has shown appreciation of American methods by confiding to an American firm +important work for the Chilean coast defenses. + +Last year a revolution against the established Government of Ecuador broke +out at the principal port of that Republic. Previous to this occurrence the +chief American interest in Ecuador, represented by the Guayaquil & Quito +Railway Co., incorporated in the United States, had rendered extensive +transportation and other services on account to the Ecuadorian Government, +the amount of which ran into a sum which was steadily increasing and which +the Ecuadorian Government had made no provision to pay, thereby threatening +to crush out the very existence of this American enterprise. When +tranquillity had been restored to Ecuador as a result of the triumphant +progress of the Government forces from Quito, this Government interposed +its good offices to the end that the American interests in Ecuador might be +saved from complete extinction. As a part of the arrangement which was +reached between the parties, and at the request of the Government of +Ecuador, I have consented to name an arbitrator, who, acting under the +terms of the railroad contract, with an arbitrator named by the Ecuadorian +Government, will pass upon the claims that have arisen since the +arrangement reached through the action of a similar arbitral tribunal in +1908. + +In pursuance of a request made some time ago by the Ecuadorian Government, +the Department of State has given much attention to the problem of the +proper sanitation of Guayaquil. As a result a detail of officers of the +Canal Zone will be sent to Guayaquil to recommend measures that will lead +to the complete permanent sanitation of this plague and fever infected +region of that Republic, which has for so long constituted a menace to +health conditions on the Canal Zone. It is hoped that the report which this +mission will furnish will point out a way whereby the modicum of assistance +which the United States may properly lend the Ecuadorian Government may be +made effective in ridding the west coast of South America of a focus of +contagion to the future commercial current passing through the Panama +Canal. + +In the matter of the claim of John Celestine Landreau against the +Government of Peru, which claim arises out of certain contracts and +transactions in connection with the discovery and exploitation of guano, +and which has been under discussion between the two Governments since 1874, +I am glad to report that as the result of prolonged negotiations, which +have been characterized by the utmost friendliness and good will on both +sides, the Department of State has succeeded in securing the consent of +Peru to the arbitration of the claim, and that the negotiations attending +the drafting and signature of a protocol submitting the claim to an +arbitral tribunal are proceeding with due celerity. + +An officer of the American Public Health Service and an American sanitary +engineer are now on the way to Iquitos, in the employ of the Peruvian +Government, to take charge of the sanitation of that river port. Peru is +building a number of submarines in this country, and continues to show +every desire to have American capital invested in the Republic. + +In July the United States sent undergraduate delegates to the Third +International Students Congress held at Lima, American students having been +for the first time invited to one of these meetings. + +The Republic of Uruguay has shown its appreciation of American agricultural +and other methods by sending a large commission to this country and by +employing many American experts to assist in building up agricultural and +allied industries in Uruguay. + +Venezuela is paying off the last of the claims the settlement of which was +provided for by the Washington protocols, including those of American +citizens. Our relations with Venezuela are most cordial, and the trade of +that Republic with the United States is now greater than with any other +country. + +CENTRAL AMERICA AND THE CARIBBEAN + +During the past summer the revolution against the administration which +followed the assassination of President Caceres a year ago last November +brought the Dominican Republic to the verge of administrative chaos, +without offering any guaranties of eventual stability in the ultimate +success of either party. In pursuance of the treaty relations of the United +States with the Dominican Republic, which were threatened by the necessity +of suspending the operation under American administration of the +customhouses on the Haitian frontier, it was found necessary to dispatch +special commissioners to the island to reestablish the customhouses and +with a guard sufficient to insure needed protection to the customs +administration. The efforts which have been made appear to have resulted in +the restoration of normal conditions throughout the Republic. The good +offices which the commissioners were able to exercise were instrumental in +bringing the contending parties together and in furnishing a basis of +adjustment which it is hoped will result in permanent benefit to the +Dominican people. + +Mindful of its treaty relations, and owing to the position of the +Government of the United States as mediator between the Dominican Republic +and Haiti in their boundary dispute, and because of the further fact that +the revolutionary activities on the Haitian-Dominican frontier had become +so active as practically to obliterate the line of demarcation that had +been heretofore recognized pending the definitive settlement of the +boundary in controversy, it was found necessary to indicate to the two +island Governments a provisional de facto boundary line. This was done +without prejudice to the rights or obligations of either country in a final +settlement to be reached by arbitration. The tentative line chosen was one +which, under the circumstances brought to the knowledge of this Government, +seemed to conform to the best interests of the disputants. The border +patrol which it had been found necessary to reestablish for customs +purposes between the two countries was instructed provisionally to observe +this line. + +The Republic of Cuba last May was in the throes of a lawless uprising that +for a time threatened the destruction of a great deal of valuable +property-much of it owned by Americans and other foreigners-as well as the +existence of the Government itself. The armed forces of Cuba being +inadequate to guard property from attack and at the same time properly to +operate against the rebels, a force of American marines was dispatched from +our naval station at Guantanamo into the Province of Oriente for the +protection of American and other foreign life and property. The Cuban +Government was thus able to use all its forces in putting down the +outbreak, which it succeeded in doing in a period of six weeks. The +presence of two American warships in the harbor of Habana during the most +critical period of this disturbance contributed in great measure to allay +the fears of the inhabitants, including a large foreign colony. + +There has been under discussion with the Government of Cuba for some time +the question of the release by this Government of its leasehold rights at +Bahia Honda, on the northern coast of Cuba, and the enlargement, in +exchange therefor, of the naval station which has been established at +Guantanamo Bay, on the south. As the result of the negotiations thus +carried on an agreement has been reached between the two Governments +providing for the suitable enlargement of the Guantanamo Bay station upon +terms which are entirely fair and equitable to all parties concerned. + +At the request alike of the Government and both political parties in +Panama, an American commission undertook supervision of the recent +presidential election in that Republic, where our treaty relations, and, +indeed, every geographical consideration, make the maintenance of order and +satisfactory conditions of peculiar interest to the Government of the +United States. The elections passed without disorder, and the new +administration has entered upon its functions. + +The Government of Great Britain has asked the support of the United States +for the protection of the interests of British holders of the foreign +bonded debt of Guatemala. While this Government is hopeful of an +arrangement equitable to the British bondholders, it is naturally unable to +view the question apart from its relation to the broad subject of financial +stability in Central America, in which the policy of the United States does +not permit it to escape a vital interest. Through a renewal of negotiations +between the Government of Guatemala and American bankers, the aim of which +is a loan for the rehabilitation of Guatemalan finances, a way appears to +be open by which the Government of Guatemala could promptly satisfy any +equitable and just British claims, and at the same time so improve its +whole financial position as to contribute greatly to the increased +prosperity of the Republic and to redound to the benefit of foreign +investments and foreign trade with that country. Failing such an +arrangement, it may become impossible for the Government of the United +States to escape its obligations in connection with such measures as may +become necessary to exact justice to legitimate foreign claims. + +In the recent revolution in Nicaragua, which, it was generally admitted, +might well have resulted in a general Central American conflict but for the +intervention of the United States, the Government of Honduras was +especially menaced; but fortunately peaceful conditions were maintained +within the borders of that Republic. The financial condition of that +country remains unchanged, no means having been found for the final +adjustment of pressing outstanding foreign claims. This makes it the more +regrettable that the financial convention between the United States and +Honduras has thus far failed of ratification. The Government of the United +States continues to hold itself ready to cooperate with the Government of +Honduras, which it is believed, can not much longer delay the meeting of +its foreign obligations, and it is hoped at the proper time American +bankers will be willing to cooperate for this purpose. + +NECESSITY FOR GREATER GOVERNMENTAL EFFORT IN RETENTION AND EXPANSION OF OUR +FOREIGN TRADE + +It is not possible to make to the Congress a communication upon the present +foreign relations of the United States so detailed as to convey an adequate +impression of the enormous increase in the importance and activities of +those relations. If this Government is really to preserve to the American +people that free opportunity in foreign markets which will soon be +indispensable to our prosperity, even greater efforts must be made. +Otherwise the American merchant, manufacturer, and exporter will find many +a field in which American trade should logically predominate preempted +through the more energetic efforts of other governments and other +commercial nations. + +There are many ways in which through hearty cooperation the legislative and +executive branches of this Government can do much. The absolute essential +is the spirit of united effort and singleness of purpose. I will allude +only to a very few specific examples of action which ought then to result. +America can not take its proper place in the most important fields for its +commercial activity and enterprise unless we have a merchant marine. +American commerce and enterprise can not be effectively fostered in those +fields unless we have good American banks in the countries referred to. We +need American newspapers in those countries and proper means for public +information about them. We need to assure the permanency of a trained +foreign service. We need legislation enabling the members of the foreign +service to be systematically brought in direct contact with the industrial, +manufacturing, and exporting interests of this country in order that +American business men may enter the foreign field with a clear perception +of the exact conditions to be dealt with and the officers themselves may +prosecute their work with a clear idea of what American industrial and +manufacturing interests require. + +CONCLUSION + +Congress should fully realize the conditions which obtain in the world as +we find ourselves at the threshold of our middle age as a Nation. We have +emerged full grown as a peer in the great concourse of nations. We have +passed through various formative periods. We have been self-centered in the +struggle to develop our domestic resources and deal with our domestic +questions. The Nation is now too matured to continue in its foreign +relations those temporary expedients natural to a people to whom domestic +affairs are the sole concern. In the past our diplomacy has often +consisted, in normal times, in a mere assertion of the right to +international existence. We are now in a larger relation with broader +rights of our own and obligations to others than ourselves. A number of +great guiding principles were laid down early in the history of this +Government. The recent task of our diplomacy has been to adjust those +principles to the conditions of to-day, to develop their corollaries, to +find practical applications of the old principles expanded to meet new +situations. Thus are being evolved bases upon which can rest the +superstructure of policies which must grow with the destined progress of +this Nation. The successful conduct of our foreign relations demands a +broad and a modern view. We can not meet new questions nor build for the +future if we confine ourselves to outworn dogmas of the past and to the +perspective appropriate at our emergence from colonial times and +conditions. The opening of the Panama Canal will mark a new era in our +international life and create new and worldwide conditions which, with +their vast correlations and consequences, will obtain for hundreds of years +to come. We must not wait for events to overtake us unawares. With +continuity of purpose we must deal with the problems of our external +relations by a diplomacy modern, resourceful, magnanimous, and fittingly +expressive of the high ideals of a great nation. + +Part II.[On Fiscal, judicial, Military and Insular Affairs.] THE WHITE +HOUSE, December 6, 1912. To the Senate and House of Representatives: + +On the 3d of December I sent a message to the Congress, which was confined +to our foreign relations. The Secretary of State makes no report to the +President or to Congress, and a review of the history of the transactions +of the State Department in one year must therefore be included by the +President in his annual message or Congress will not be fully informed of +them. A full discussion of all the transactions of the Government, with a +view to informing the Congress of the important events of the year and +recommending new legislation, requires more space than one message of +reasonable length affords. I have therefore adopted the course of sending +three or four messages during the first ten days of the session, so as to +include reference to the more important matters that should be brought to +the attention of the Congress. + +BUSINESS CONDITIONS + +The condition of the country with reference to business could hardly be +better. While the four years of the administration now drawing to a close +have not developed great speculative expansion or a wide field of new +investment, the recovery and progress made from the depressing conditions +following the panic of 1907 have been steady and the improvement has been +clear and easily traced in the statistics. The business of the country is +now on a solid basis. Credits are not unduly extended, and every phase of +the situation seems in a state of preparedness for a period of unexampled +prosperity. Manufacturing concerns are running at their full capacity and +the demand for labor was never so constant and growing. The foreign trade +of the country for this year will exceed $4,000,000,000, while the balance +in our favor-that of the excess of exports over imports-will exceed +$500,000,000. More than half our exports are manufactures or partly +manufactured material, while our exports of farm products do not show the +same increase because of domestic consumption. It is a year of bumper +crops; the total money value of farm products will exceed $9,500,000,000. +It is a year when the bushel or unit price of agricultural products has +gradually fallen, and yet the total value of the entire crop is greater by +over $1,000,000,000 than we have known in our history. + +CONDITION OF THE TREASURY + +The condition of the Treasury is very satisfactory. The total +interest-bearing debt is $963,777,770, of which $134,631,980 constitute the +Panama Canal loan. The noninterest-bearing debt is $378,301,284.90, +including $346,681,016 of greenbacks. We have in the Treasury $150,000,000 +in gold coin as a reserve against the outstanding greenbacks; and in +addition we have a cash balance in the Treasury as a general fund of +$167,152,478.99, or an increase of $26,975,552 over the general fund last +year. + +RECEIPTS AND EXPENDITURES + +For three years the expenditures of the Government have decreased under the +influence of an effort to economize. This year presents an apparent +exception. The estimate by the Secretary of the Treasury of the ordinary +receipts, exclusive of postal revenues, for the year ending June 30, 1914, +indicates that they will amount to $710,000,000. The sum of the estimates +of the expenditures for that same year, exclusive of Panama Canal +disbursements and postal disbursements payable from postal revenues, is +$732,000,000, indicating a deficit Of $22,000,000. For the year ending June +30, 1913, similarly estimated receipts were $667,000,000, while the total +corresponding estimate of expenditures for that year, submitted through the +Secretary of the Treasury to Congress, amounted to $656,000,000. This shows +an increase of $76,000,000 in the estimates for 1914 over the total +estimates of 1913. This is due to an increase Of $25,000,000 in the +estimate for rivers and harbors for the next year on projects and surveys +authorized by Congress; to an increase under the new pension bill Of +$32,500,000; and to an increase in the estimates for expenses of the Navy +Department Of $24,000,000. The estimate for the Navy Department for the +year 1913 included two battleships. Congress made provision for only one +battleship, and therefore the Navy Department has deemed it necessary and +proper to make an estimate which includes the first year's expenditure for +three battleships in addition to the amount required for work on the +uncompleted ships now under construction. In addition to the natural +increase in the expenditures for the uncompleted ships, and the additional +battleship estimated for, the other increases are due to the pay +required for 4,000 or more additional enlisted men in the Navy; and to this +must be added the additional cost of construction imposed by the change in +the eight-hour law which makes it applicable to ships built in private +shipyards. + +With the exceptions of these three items, the estimates show a reduction +this year below the total estimates for 1913 of more than $5,000,000. + +The estimates for Panama Canal construction for 1914 are $17,000,000 less +than for 1913. + +OUR BANKING AND CURRENCY SYSTEM + +A time when panics seem far removed is the best time for us to prepare our +financial system to withstand a storm. The most crying need this country +has is a proper banking and currency system. The existing one is +inadequate, and everyone who has studied the question admits it. + +It is the business of the National Government to provide a medium, +automatically contracting and expanding in volume, to meet the needs of +trade. Our present system lacks the indispensable quality of elasticity. + +The only part of our monetary medium that has elasticity is the bank-note +currency. The peculiar provisions of the law requiring national banks to +maintain reserves to meet the call of the depositors operates to increase +the money stringency when it arises rather than to expand the supply of +currency and relieve it. It operates upon each bank and furnishes a motive +for the withdrawal of currency from the channels of trade by each bank to +save itself, and offers no inducement whatever for the use of the reserve +to expand the supply of currency to meet the exceptional demand. + +After the panic of 1907 Congress realized that the present system was not +adapted to the country's needs and that under it panics were possible that +might properly be avoided by legislative provision. Accordingly a monetary +commission was appointed which made a report in February, 1912. The system +which they recommended involved a National Reserve Association, which was, +in certain of its faculties and functions, a bank, and which was given +through its governing authorities the power, by issuing circulating notes +for approved commercial paper, by fixing discounts, and by other methods of +transfer of currency, to expand the supply of the monetary medium where it +was most needed to prevent the export or hoarding of gold and generally to +exercise such supervision over the supply of money in every part of the +country as to prevent a stringency and a panic. The stock in this +association was to be distributed to the banks of the whole United States, +State and National, in a mixed proportion to bank units and to capital +stock paid in. The control of the association was vested in a board of +directors to be elected by representatives of the banks, except certain +ex-officio directors, three Cabinet officers, and the Comptroller of the +Currency. The President was to appoint the governor of the association from +three persons to be selected by the directors, while the two deputy +governors were to be elected by the board of directors. The details of the +plan were worked out with great care and ability, and the plan in general +seems to me to furnish the basis for a proper solution of our present +difficulties. I feel that the Government might very properly be given a +greater voice in the executive committee of the board of directors without +danger of injecting politics into its management, but I think the +federation system of banks is a good one, provided proper precautions are +taken to prevent banks of large capital from absorbing power through +ownership of stock in other banks. The objections to a central bank it +seems to me are obviated if the ownership of the reserve association is +distributed among all the banks of a country in which banking is free. The +earnings of the reserve association are limited in percentage tit a +reasonable and fixed amount, and the profits over and above this are to be +turned into the Government Treasury. It is quite probable that still +greater security against control by money centers may be worked into the +plan. + +Certain it is, however, that the objections which were made in the past +history of this country to a central bank as furnishing a monopoly of +financial power to private individuals, would not apply to an association +whose ownership and control is so widely distributed and is divided between +all the banks of the country, State and National, on the one hand, and the +Chief Executive through three department heads and his Comptroller of the +Currency, on the other. The ancient hostility to a national bank, with its +branches, in which is concentrated the privilege of doing a banking +business and carrying on the financial transactions of the Government, has +prevented the establishment of such a bank since it was abolished in the +Jackson Administration. Our present national banking law has obviated +objections growing out of the same cause by providing a free banking system +in which any set of stockholders can establish a national bank if they +comply with the conditions of law. It seems to me that the National Reserve +Association meets the same objection in a similar way; that is, by giving +to each bank, State and National, in accordance with its size, a certain +share in the stock of the reserve association, nontransferable and only to +be held by the bank while it performs its functions as a partner in the +reserve association. + +The report of the commission recommends provisions for the imposition of a +graduated tax on the expanded currency of such a character as to furnish a +motive for reducing the issue of notes whenever their presence in the money +market is not required by the exigencies of trade. In other words, the +whole system has been worked out with the greatest care. Theoretically it +presents a plan that ought to command support. Practically it may require +modification in various of its provisions in order to make the security +against, abuses by combinations among the banks impossible. But in the face +of the crying necessity that there is for improvement in our present +system, I urgently invite the attention of Congress to the proposed plan +and the report of the commission, with the hope that an earnest +consideration may suggest amendments and changes within the general plan +which will lead to its adoption for the benefit of the country. There is no +class in the community more interested in a safe and sane banking and +currency system, one which will prevent panics and automatically furnish in +each trade center the currency needed in the carrying on of the business at +that center, than the wage earner. There is no class in the community whose +experience better qualifies them to make suggestions as to the sufficiency +of a currency and banking system than the bankers and business men. Ought +we, therefore, to ignore their recommendations and reject their financial +judgment as to the proper method of reforming our financial system merely +because of the suspicion which exists against them in the minds of many of +our fellow citizens? Is it not the duty of Congress to take up the plan +suggested, examine it from all standpoints, give impartial consideration to +the testimony of those whose experience ought to fit them to give the best +advice on the subject, and then to adopt some plan which will secure the +benefits desired? + +A banking and currency system seems far away from the wage earner and the +farmer, but the fact is that they are vitally interested in a safe system +of currency which shall graduate its volume to the amount needed and which +shall prevent times of artificial stringency that frighten capital, stop +employment, prevent the meeting of the pay roll, destroy local markets, and +produce penury and want. + +THE TARIFF + +I have regarded it as my duty in former messages to the Congress to urge +the revision of the tariff upon principles of protection. It was my +judgment that the customs duties ought to be revised downward, but that the +reduction ought not to be below a rate which would represent the difference +in the cost of production between the article in question at home and +abroad, and for this and other reasons I vetoed several bills which were +presented to me in the last session of this Congress. Now that a new +Congress has been elected on a platform of a tariff for revenue only rather +than a protective tariff, and is to revise the tariff on that basis, it is +needless for me to occupy the time of this Congress with arguments or +recommendations in favor of a protective tariff. + +Before passing from the tariff law, however, known as the Payne tariff law +of August 5, 1909, I desire to call attention to section 38 of that act, +assessing a special excise tax on corporations. It contains a provision +requiring the levy of an additional 50 per cent to the annual tax in cases +of neglect to verify the prescribed return or to file it before the time +required by law. This additional charge of 50 per cent operates in some +cases as a harsh penalty for what may have been a mere inadvertence or +unintentional oversight, and the law should be so amended as to mitigate +the severity of the charge in such instances. Provision should also be made +for the refund of additional taxes heretofore collected because of such +infractions in those cases where the penalty imposed has been so +disproportionate to the offense as equitably to demand relief. + +BUDGET + +The estimates for the next fiscal year have been assembled by the Secretary +of the Treasury and by him transmitted to Congress. I purpose at a later +day to submit to Congress a form of budget prepared for me and recommended +by the President's Commission on Economy and Efficiency, with a view of +suggesting the useful and informing character of a properly framed budget. + +WAR DEPARTMENT + +The War Department combines within its jurisdiction functions which in +other countries usually occupy three departments. It not only has the +management of the Army and the coast defenses, but its jurisdiction extends +to the government of the Philippines and of Porto Rico and the control of +the receivership of the customs revenues of the Dominican Republic; it also +includes the recommendation of all plans for the improvement of harbors and +waterways and their execution when adopted; and, by virtue of an Executive +order, the supervision of the construction of the Panama Canal. + +ARMY REORGANIZATION + +Our small Army now consists of 83,809 men, excluding the 5,000 Philippine +scouts. Leaving out of consideration the Coast Artillery force, whose +position is fixed in our various seacoast defenses, and the present +garrisons of our various insular possessions, we have to-day within the +continental United States a mobile Army of only about 35,000 men. This +little force must be still further drawn upon to supply the new garrisons +for the great naval base which is being established at Pearl Harbor, in the +Hawaiian Islands, and to protect the locks now rapidly approaching +completion at Panama. The forces remaining in the United States are now +scattered in nearly 50 Posts, situated for a variety of historical reasons +in 24 States. These posts contain only fractions of regiments, averaging +less than 700 men each. In time of peace it has been our historical policy +to administer these units separately by a geographical organization. In +other words, our Army in time of peace has never been a united organization +but merely scattered groups of companies, battalions, and regiments, and +the first task in time of war has been to create out of these scattered +units an Army fit for effective teamwork and cooperation. + +To the task of meeting these patent defects, the War Department has been +addressing itself during the past year. For many years we had no officer or +division whose business it was to study these problems and plan remedies +for these defects. With the establishment of the General Staff nine years +ago a body was created for this purpose. It has, necessarily, required time +to overcome, even in its own personnel, the habits of mind engendered by a +century of lack of method, but of late years its work has become systematic +and effective, and it has recently been addressing itself vigorously to +these problems. + +A comprehensive plan of Army reorganization was prepared by the War College +Division of the General Staff. This plan was thoroughly discussed last +summer at a series of open conferences held by the Secretary of War and +attended by representatives from all branches of the Army and from +Congress. In printed form it has been distributed to Members of Congress +and throughout the Army and the National Guard, and widely through +institutions of learning and elsewhere in the United States. In it, for the +first time, we have a tentative chart for future progress. + +Under the influence of this study definite and effective steps have been +taken toward Army reorganization so far as such reorganization lies within +the Executive power. Hitherto there has been no difference of policy in the +treatment of the organization of our foreign garrisons from those of troops +within the United States. The difference of situation is vital, and the +foreign garrison should be prepared to defend itself at an instant's notice +against a foe who may command the sea. Unlike the troops in the United +States, it can not count upon reinforcements or recruitment. It is an +outpost upon which will fall the brunt of the first attack in case of war. +The historical policy of the United States of carrying its regiments during +time of peace at half strength has no application to our foreign garrisons. +During the past year this defect has been remedied as to the Philippines +garrison. The former garrison of 12 reduced regiments has been replaced by +a garrison of 6 regiments at full strength, giving fully the same number of +riflemen at an estimated economy in cost of maintenance of over $1,000,000 +per year. This garrison is to be permanent. Its regimental units, instead +of being transferred periodically back and forth from the United States, +will remain in the islands. The officers and men composing these units +will, however, serve a regular tropical detail as usual, thus involving no +greater hardship upon the personnel and greatly increasing the +effectiveness of the garrison. A similar policy is proposed for the +Hawaiian and Panama garrisons as fast as the barracks for them are +completed. I strongly urge upon Congress that the necessary appropriations +for this purpose should be promptly made. It is, in my opinion, of first +importance that these national outposts, upon which a successful home +defense will, primarily, depend, should be finished and placed in effective +condition at the earliest possible day. + +THE HOME ARMY + +Simultaneously with the foregoing steps the War Department has been +proceeding with the reorganization of the Army at home. The formerly +disassociated units are being united into a tactical organization of three +divisions, each consisting of two or three brigades of Infantry and, so far +as practicable, a proper proportion of divisional Cavalry and Artillery. Of +course, the extent to which this reform can be carried by the Executive is +practically limited to a paper organization. The scattered units can be +brought under a proper organization, but they will remain physically +scattered until Congress supplies the necessary funds for grouping them in +more concentrated posts. Until that is done the present difficulty of +drilling our scattered groups together, and thus training them for the +proper team play, can not be removed. But we shall, at least, have an Army +which will know its own organization and will be inspected by its proper +commanders, and to which, as a unit, emergency orders can be issued in time +of war or other emergency. Moreover, the organization, which in many +respects is necessarily a skeleton, will furnish a guide for future +development. The separate regiments and companies will know the brigades +and divisions to which they belong. They will be maneuvered together +whenever maneuvers are established by Congress, and the gaps in their +organization will show the pattern into which can be filled new troops as +the Nation grows and a larger Army is provided. + +REGULAR ARMY RESERVE + +One of the most important reforms accomplished during the past year has +been the legislation enacted in the Army appropriation bill of last summer, +providing for a Regular Army reserve. Hitherto our national policy has +assumed that at the outbreak of war our regiments would be immediately +raised to full strength. But our laws have provided no means by which this +could be accomplished, or by which the losses of the regiments when once +sent to the front could be repaired. In this respect we have neglected the +lessons learned by other nations. The new law provides that the soldier, +after serving four years with colors, shall pass into a reserve for three +years. At his option he may go into the reserve at the end of three years, +remaining there for four years. While in the reserve he can be called to +active duty only in case of war or other national emergency, and when so +called and only in such case will receive a stated amount of pay for all of +the period in which he has been a member of the reserve. The legislation is +imperfect, in my opinion, in certain particulars, but it is a most +important step in the right direction, and I earnestly hope that it will be +carefully studied and perfected by Congress. + +THE NATIONAL GUARD + +Under existing law the National Guard constitutes, after the Regular Army, +the first line of national defense. Its organization, discipline, training, +and equipment, under recent legislation, have been assimilated, as far as +possible, to those of the Regular Army, and its practical efficiency, under +the effect of this training, has very greatly increased. Our citizen +soldiers under present conditions have reached a stage of development +beyond which they can not reasonably be asked to go without further direct +assistance in the form of pay from the Federal Government. On the other +hand, such pay from the National Treasury would not be justified unless it +produced a proper equivalent in additional efficiency on the part of the +National Guard. The Organized Militia to-day can not be ordered outside of +the limits of the United States, and thus can not lawfully be used for +general military purposes. The officers and men are ambitious and eager to +make themselves thus available and to become an efficient national reserve +of citizen soldiery. They are the only force of trained men, other than the +Regular Army, upon which we can rely. The so-called militia pay bill, in +the form agreed on between the authorities of the War Department and the +representatives of the National Guard, in my opinion adequately meets these +conditions and offers a proper return for the pay which it is proposed to +give to the National Guard. I believe that its enactment into law would be +a very long step toward providing this Nation with a first line of citizen +soldiery, upon which its main reliance must depend in case of any national +emergency. Plans for the organization of the National Guard into tactical +divisions, on the same lines as those adopted for the Regular Army, are +being formulated by the War College Division of the General Staff. + +NATIONAL VOLUNTEERS + +The National Guard consists of only about 110,000 men. In any serious war +in the past it has always been necessary, and in such a war in the future +it doubtless will be necessary, for the Nation to depend, in addition to +the Regular Army and the National Guard, upon a large force of volunteers. +There is at present no adequate provision of law for the raising of such a +force. There is now pending in Congress, however, a bill which makes such +provision, and which I believe is admirably adapted to meet the exigencies +which would be presented in case of war. The passage of the bill would not +entail a dollar's expense upon the Government at this time or in the future +until war comes. But if war comes the methods therein directed are in +accordance with the best military judgment as to what they ought to be, and +the act would prevent the necessity for a discussion of any legislation and +the delays incident to its consideration and adoption. I earnestly urge its +passage. + +CONSOLIDATION OF THE SUPPLY CORPS + +The Army appropriation act of 191:2 also carried legislation for the +consolidation of the Quartermaster's Department, the Subsistence +Department, and the Pay Corps into a single supply department, to be known +as the Quartermaster's Corps. It also provided for the organization of a +special force of enlisted men, to be known as the Service Corps, gradually +to replace many of the civilian employees engaged in the manual labor +necessary in every army. I believe that both of these enactments will +improve the administration of our military establishment. The consolidation +of the supply corps has already been effected, and the organization of the +service corps is being put into effect. + +All of the foregoing reforms are in the direction of economy and +efficiency. Except for the slight increase necessary to garrison our +outposts in Hawaii and Panama, they do not call for a larger Army, but they +do tend to produce a much more efficient one. The only substantial new +appropriations required are those which, as I have pointed out, are +necessary to complete the fortifications and barracks at our naval bases +and outposts beyond the sea. + +PORTO RICO + +Porto Rico continues to show notable progress, both commercially and in the +spread of education. Its external commerce has increased 17 per cent over +the preceding year, bringing the total value up to $92,631,886, or more +than five times the value of the commerce of the island in 1901. During the +year 160,657 Pupils were enrolled in the public schools, as against 145,525 +for the preceding year, and as compared with 26,000 for the first year of +American administration. Special efforts are under way for the promotion of +vocational and industrial training, the need of which is particularly +pressing in the island. When the bubonic plague broke out last June, the +quick and efficient response of the people of Porto Rico to the demands of +modern sanitation was strikingly shown by the thorough campaign which was +instituted against the plague and the hearty public opinion which supported +the Government's efforts to check its progress and to prevent its +recurrence. + +The failure thus far to grant American citizenship continues to be the only +ground of dissatisfaction. The bill conferring such citizenship has passed +the House of Representatives and is now awaiting the action of the Senate. +I am heartily in favor of the passage of this bill. I believe that the +demand for citizenship is just, and that it is amply earned by sustained +loyalty on the part of the inhabitants of the island. But it should be +remembered that the demand must be, and in the minds of most Porto Ricans +is, entirely disassociated from any thought of statehood. I believe that no +substantial approved public opinion in the United States or in Porto Rico +contemplates statehood for the island as the ultimate form of relations +between us. I believe that the aim to be striven for is the fullest +possible allowance of legal and fiscal self-government, with American +citizenship as to the bond between us; in other words, a relation analogous +to the present relation between Great Britain and such self-governing +colonies as Canada and Australia. This would conduce to the fullest and +most self-sustaining development of Porto Rico, while at the same time it +would grant her the economic and political benefits of being under the +American flag. + +PHILIPPINES + +A bill is pending in Congress which revolutionizes the carefully worked out +scheme of government under which the Philippine Islands are now governed +and which proposes to render them virtually autonomous at once and +absolutely independent in eight years. Such a proposal can only be founded +on the assumption that we have now discharged our trusteeship to the +Filipino people and our responsibility for them to the world, and that they +are now prepared for self-government as well as national sovereignty. A +thorough and unbiased knowledge of the facts clearly shows that these +assumptions are absolutely without justification. As to this, I believe +that there is no substantial difference of opinion among any of those who +have had the responsibility of facing Philippine problems in the +administration of the islands, and I believe that no one to whom the future +of this people is a responsible concern can countenance a policy fraught +with the direst consequences to those on whose behalf it is ostensibly +urged. + +In the Philippine Islands we have embarked upon an experiment unprecedented +in dealing with dependent people. We are developing there conditions +exclusively for their own welfare. We found an archipelago containing 24 +tribes and races, speaking a great variety of languages, and with a +population over 80 per cent of which could neither read nor write. Through +the unifying forces of a common education, of commercial and economic +development, and of gradual participation in local self-government we are +endeavoring to evolve a homogeneous people fit to determine, when the time +arrives, their own destiny. We are seeking to arouse a national spirit and +not, as under the older colonial theory, to suppress such a spirit. The +character of the work we have been doing is keenly recognized in the +Orient, and our success thus far followed with not a little envy by those +who, initiating the same policy, find themselves hampered by conditions +grown up in earlier days and under different theories of administration. +But our work is far from done. Our duty to the Filipinos is far from +discharged. Over half a million Filipino students are now in the Philippine +schools helping to mold the men of the future into a homogeneous people, +but there still remain more than a million Filipino children of school age +yet to be reached. Freed from American control the integrating forces of a +common education and a common language will cease and the educational +system now well started will slip back into inefficiency and disorder. + +An enormous increase in the commercial development of the islands has been +made since they were virtually granted full access to our markets three +years ago, with every prospect of increasing development and diversified +industries. Freed from American control such development is bound to +decline. Every observer speaks of the great progress in public works for +the benefit of the Filipinos, of harbor improvements, of roads and +railways, of irrigation and artesian wells, public buildings, and better +means of communication. But large parts of the islands are still unreached, +still even unexplored, roads and railways are needed in many parts, +irrigation systems are still to be installed, and wells to be driven. Whole +villages and towns are still without means of communication other than +almost impassable roads and trails. Even the great progress in sanitation, +which has successfully suppressed smallpox, the bubonic plague, and Asiatic +cholera, has found the cause of and a cure for beriberi, has segregated the +lepers, has helped to make Manila the most healthful city in the Orient, +and to free life throughout the whole archipelago from its former dread +diseases, is nevertheless incomplete in many essentials of permanence in +sanitary policy. Even more remains to be accomplished. If freed from +American control sanitary progress is bound to be arrested and all that has +been achieved likely to be lost. + +Concurrent with the economic, social, and industrial development of the +islands has been the development of the political capacity of the people. +By their progressive participation in government the Filipinos are being +steadily and hopefully trained for self-government. Under Spanish control +they shared in no way in the government. Under American control they have +shared largely and increasingly. Within the last dozen years they have +gradually been given complete autonomy in the municipalities, the right to +elect two-thirds of the provincial governing boards and the lower house of +the insular legislature. They have four native members out of nine members +of the commission, or upper house. The chief justice and two justices of +the supreme court, about one-half of the higher judicial positions, and all +of the justices of the peach are natives. In the classified civil service +the proportion of Filipinos increased from 51 per cent in 1904 to 67 per +cent in 1911. Thus to-day all the municipal employees, over go per cent of +the provincial employees, and 60 per cent of the officials and employees of +the central government are Filipinos. The ideal which has been kept in mind +in our political guidance of the islands has been real popular +self-government and not mere paper independence. I am happy to say that the +Filipinos have done well enough in the places they have filled and in the +discharge of the political power with which they have been intrusted to +warrant the belief that they can be educated and trained to complete +self-government. But the present satisfactory results are due to constant +support and supervision at every step by Americans. + +If the task we have undertaken is higher than that assumed by other +nations, its accomplishment must demand even more patience. We must not +forget that we found the Filipinos wholly untrained in government. Up to +our advent all other experience sought to repress rather than encourage +political power. It takes long time and much experience to ingrain +political habits of steadiness and efficiency. Popular self-government +ultimately must rest upon common habits of thought and upon a reasonably +developed public opinion. No such foundations for self-government, let alone +independence are now present in the Philippine Islands. Disregarding even +their racial heterogeneity and the lack of ability to think as a nation, it +is sufficient to point out that under liberal franchise privileges only +about 3 per cent of the Filipinos vote and only 5 per cent of the people +are said to read the public press. To confer independence upon the +Filipinos now is, therefore, to subject the great mass of their people to +the dominance of an oligarchical and, probably, exploiting minority. Such a +course will be as cruel to those people as it would be shameful to us. + +Our true course is to pursue steadily and courageously the path we have +thus far followed; to guide the Filipinos into self-sustaining pursuits; to +continue the cultivation of sound political habits through education and +political practice; to encourage the diversification of industries, and to +realize the advantages of their industrial education by conservatively +approved cooperative methods, at once checking the dangers of concentrated +wealth and building up a sturdy, independent citizenship. We should do all +this with a disinterested endeavor to secure for the Filipinos economic +independence and to fit them for complete self-government, with the power +to decide eventually, according to their own largest good, whether such +self-government shall be accompanied by independence. A present declaration +even of future independence would retard progress by the dissension and +disorder it would arouse. On our part it would be a disingenuous attempt, +under the guise of conferring a benefit on them, to relieve ourselves from +the heavy and difficult burden which thus far we have been bravely and +consistently sustaining. It would be a disguised policy of scuttle. It +would make the helpless Filipino the football of oriental politics, tinder +the protection of a guaranty of their independence, which we would be +powerless to enforce. + +REGULATION OF WATER POWER + +There are pending before Congress a large number of bills proposing to +grant privileges of erecting dams for the purpose of creating water power +in our navigable rivers. The pendency of these bills has brought out an +important defect in the existing general dam act. That act does not, in my +opinion, grant sufficient power to the Federal Government in dealing with +the construction of such dams to exact protective conditions in the +interest of navigation. It does not permit the Federal Government, as a +condition of its permit, to require that a part of the value thus created +shall be applied to the further general improvement and protection of the +stream. I believe this to be one of the most important matters of internal +improvement now confronting the Government. Most of the navigable rivers of +this country are comparatively long and shallow. In order that they may be +made fully useful for navigation there has come into vogue a method of +improvement known as canalization, or the slack-water method, which +consists in building a series of dams and locks, each of which will create +a long pool of deep navigable water. At each of these dams there is usually +created also water power of commercial value. If the water power thus +created can be made available for the further improvement of navigation in +the stream, it is manifest that the improvement will be much more quickly +effected on the one hand, and, on the other, that the burden on the general +taxpayers of the country will be very much reduced. Private interests +seeking permits to build water-power dams in navigable streams usually urge +that they thus improve navigation, and that if they do not impair +navigation they should be allowed to take for themselves the entire profits +of the water-power development. Whatever they may do by way of relieving +the Government of the expense of improving navigation should be given due +consideration, but it must be apparent that there may be a profit beyond a +reasonably liberal return upon the private investment which is a potential +asset of the Government in carrying out a comprehensive policy of waterway +development. It is no objection to the retention and use of such an asset +by the Government that a comprehensive waterway policy will include the +protection and development of the other public uses of water, which can not +and should not be ignored in making and executing plans for the protection +and development of navigation. It is also equally clear that inasmuch as +the water power thus created is or may be an incident of a general scheme +of waterway improvement within the constitutional jurisdiction of the +Federal Government, the regulation of such water power lies also within +that jurisdiction. In my opinion constructive statesmanship requires that +legislation should be enacted which will permit the development of +navigation in these great rivers to go hand in hand with the utilization of +this by-product of water power, created in the course of the same +improvement, and that the general dam act should be so amended as to make +this possible. I deem it highly important that the Nation should adopt a +consistent and harmonious treatment of these water-power projects, which +will preserve for this purpose their value to the Government, whose right +it is to grant the permit. Any other policy is equivalent to throwing away +a most valuable national asset. + +THE PANAMA CANAL + +During the past year the work of construction upon the canal has progressed +most satisfactorily. About 87 per cent of the excavation work has been +completed, and more than 93 per cent of the concrete for all the locks is +in place. In view of the great interest which has been manifested as to +some slides in the Culebra Cut, I am glad to say that the report of Col. +Goethals should allay any apprehension on this point. It is gratifying to +note that none of the slides which occurred during this year would have +interfered with the passage of the ships had the canal, in fact, been in +operation, and when the slope pressures will have been finally adjusted and +the growth of vegetation will minimize erosion in the banks of the cut, the +slide problem will be practically solved and an ample stability assured for +the Culebra Cut. + +Although the official date of the opening has been set for January 1, 1915, +the canal will, in fact, from present indications, be opened for shipping +during the latter half of 1913. No fixed date can as yet be set, but +shipping interests will be advised as soon as assurances can be given that +vessels can pass through without unnecessary delay. + +Recognizing the administrative problem in the management of the canal, +Congress in the act of August 24, 1912, has made admirable provisions for +executive responsibility in the control of the canal and the government of +the Canal Zone. The problem of most efficient organization is receiving +careful consideration, so that a scheme of organization and control best +adapted to the conditions of the canal may be formulated and put in +operation as expeditiously as possible. Acting tinder the authority +conferred on me by Congress, I have, by Executive proclamation, promulgated +the following schedule of tolls for ships passing through the canal, based +upon the thorough report of Emory R. Johnson, special commissioner on +traffic and tolls: + +I. On merchant vessels carrying passengers or cargo, $1.20 per net vessel +ton-each 100 cubic feet-of actual earning capacity. 2. On vessels in +ballast without passengers or cargo, 40 per cent less than the rate of +tolls for vessels with passengers or cargo. 3. Upon naval vessels, other +than transports, colliers, hospital ships, and supply ships, 50 cents per +displacement ton. 4. Upon Army and Navy transports, colliers, hospital +ships, and supply ships, $1.20 per net ton, the vessels to be measured by +the same rules as are employed in determining the net tonnage of merchant +vessels. Rules for the determination of the tonnage upon which toll charges +are based are now in course of preparation and will be promulgated in due +season. + +PANAMA CANAL TREATY + +The proclamation which I have issued in respect to the Panama Canal tolls +is in accord with the Panama Canal act passed by this Congress August 24, +1912. We have been advised that the British Government has prepared a +protest against the act and its enforcement in so far as it relieves from +the payment of tolls American ships engaged in the American coastwise trade +on the ground that it violates British rights tinder the Hay-Pauncefote +treaty concerning the Panama Canal. When the protest is presented, it will +be promptly considered and an effort made to reach a satisfactory +adjustment of any differences there may be between the two Governments. + +WORKMEN'S COMPENSATION ACT + +The promulgation of an efficient workmen's compensation act, adapted to the +particular conditions of the zone, is awaiting adequate appropriation by +Congress for the payment of claims arising thereunder. I urge that speedy +provision be made in order that we may install upon the zone a system of +settling claims for injuries in best accord with modern humane, social, and +industrial theories. + +PROMOTION FOR COL. GOETHALS + +As the completion of the canal grows nearer, and as the wonderful executive +work of Col. Goethals becomes more conspicuous in the eyes of the country +and of the world, it seems to me wise and proper to make provision by law +for such reward to him as may be commensurate with the service that he has +rendered to his country. I suggest that this reward take the form of an +appointment of Col. Goethals as a major general in the Army of the United +States, and that the law authorizing such appointment be accompanied with a +provision permitting his designation as Chief of Engineers upon the +retirement of the present incumbent of that office. + +NAVY DEPARTMENT + +The Navy of the United States is in a greater state of efficiency and is +more powerful than it has ever been before, but in the emulation which +exists between different countries in respect to the increase of naval and +military armaments this condition is not a permanent one. In view of the +many improvements and increases by foreign Governments the slightest halt +on our part in respect to new construction throws us back and reduces us +from a naval power of the first rank and places us among the nations of the +second rank. In the past 15 years the Navy has expanded rapidly and yet far +less rapidly than our country. From now on reduced expenditures in the Navy +means reduced military strength. The world's history has shown the +importance of sea power both for adequate defense and for the support of +important and definite policies. + +I had the pleasure of attending this autumn a mobilization of the Atlantic +Fleet, and was glad to observe and note the preparedness of the fleet for +instant action. The review brought before the President and the Secretary +of the Navy a greater and more powerful collection of vessels than had ever +been gathered in American waters. The condition of the fleet and of the +officers and enlisted men and of the equipment of the vessels entitled +those in authority to the greatest credit. + +I again commend to Congress the giving of legislative sanction to the +appointment of the naval aids to the Secretary of the Navy. These aids and +the council of aids appointed by the Secretary of the Navy to assist him in +the conduct of his department have proven to be of the highest utility. +They have furnished an executive committee of the most skilled naval +experts, who have coordinated the action of the various bureaus in the +Navy, and by their advice have enabled the Secretary to give an +administration at the same time economical and most efficient. Never before +has the United States had a Navy that compared in efficiency with its +present one, but never before have the requirements with respect to naval +warfare been higher and more exacting than now. A year ago Congress refused +to appropriate for more than one battleship. In this I think a great +mistake of policy was made, and I urgently recommend that this Congress +make up for the mistake of the last session by appropriations authorizing +the construction of three battleships, in addition to destroyers, fuel +ships, and the other auxiliary vessels as shown in the building program of +the general board. We are confronted by a condition in respect to the +navies of the world which requires us, if we would maintain our Navy as an +insurance of peace, to augment our naval force by at least two battleships +a year and by battle cruisers, gunboats, torpedo destroyers, and submarine +boats in a proper proportion. We have no desire for war. We would go as far +as any nation in the world to avoid war, but we are a world power. Our +population, our wealth, our definite policies, our responsibilities in the +Pacific and the Atlantic, our defense of the Panama Canal, together with +our enormous world trade and our missionary outposts on the frontiers of +civilization, require us to recognize our position as one of the foremost +in the family of nations, and to clothe ourselves with sufficient naval +power to give force to our reasonable demands, and to give weight to our +influence in those directions of progress that a powerful Christian nation +should advocate. + +I observe that the Secretary of the Navy devotes some space to a change in +the disciplinary system in vogue in that branch of the service. I think +there is nothing quite so unsatisfactory to either the Army or the Navy as +the severe punishments necessarily inflicted by court-martial for +desertions and purely military offenses, and I am glad to hear that the +British have solved this important and difficult matter in a satisfactory +way. I commend to the consideration of Congress the details of the new +disciplinary system, and recommend that laws be passed putting the same +into force both in the Army and the Navy. + +I invite the attention of Congress to that part of the report of the +Secretary of the Navy in which he recommends the formation of a naval +reserve by the organization of the ex-sailors of the Navy. + +I repeat my recommendation made last year that proper provision should be +made for the rank of the commander in chief of the squadrons and fleets of +the Navy. The inconvenience attending the necessary precedence that most +foreign admirals have over our own whenever they meet in official functions +ought to be avoided. It impairs the prestige of our Navy and is a defect +that can be very easily removed. + +DEPARTMENT OF JUSTICE + +This department has been very active in the enforcement of the law. It has +been better organized and with a larger force than ever before in the +history of the Government. The prosecutions which have been successfully +concluded and which are now pending testify to the effectiveness of the +departmental work. + +The prosecution of trusts under the Sherman antitrust law has gone on +without restraint or diminution, and decrees similar to those entered in +the Standard Oil and the Tobacco cases have been entered in other suits, +like the suits against the Powder Trust and the Bathtub Trust. I am very +strongly convinced that a steady, consistent course in this regard, with a +continuing of Supreme Court decisions upon new phases of the trust question +not already finally decided is going to offer a solution of this +much-discussed and troublesome issue in a quiet, calm, and judicial way, +without any radical legislation changing the governmental policy in regard +to combinations now denounced by the Sherman antitrust law. I have already +recommended as an aid in this matter legislation which would declare +unlawful certain well-known phases of unfair competition in interstate +trade, and I have also advocated voluntary national incorporation for the +larger industrial enterprises, with provision for a closer supervision by +the Bureau of Corporations, or a board appointed for the purpose, so as to +make more certain compliance with the antitrust law on the one hand and to +give greater security to the stockholders against possible prosecutions on +the other. I believe, however, that the orderly course of litigation in the +courts and the regular prosecution of trusts charged with the violation of +the antitrust law is producing among business men a clearer and clearer +perception of the line of distinction between business that is to be +encouraged and business that is to be condemned, and that in this quiet way +the question of trusts can be settled and competition retained as an +economic force to secure reasonableness in prices and freedom and +independence in trade. + +REFORM OF COURT PROCEDURE + +I am glad to bring to the attention of Congress the fact that the Supreme +Court has radically altered the equity rules governing the procedure on the +equity side of all Federal courts, and though, as these changes have not +been yet put in practice so as to enable us to state from actual results +what the reform will accomplish, they are of such a character that we can +reasonably prophesy that they will greatly reduce the time and cost of +litigation in such courts. The court has adopted many of the shorter +methods of the present English procedure, and while it may take a little +while for the profession to accustom itself to these methods, it is certain +greatly to facilitate litigation. The action of the Supreme Court has been +so drastic and so full of appreciation of the necessity for a great reform +in court procedure that I have no hesitation in following up this action +with a recommendation which I foreshadowed in my message of three years +ago, that the sections of the statute governing the procedure in the +Federal courts on the common-law side should be so amended as to give to +the Supreme Court the same right to make rules of procedure in common law +as they have, since the beginning of the court, exercised in equity. I do +not doubt that a full consideration of the subject will enable the court +while giving effect to the substantial differences in right and remedy +between the system of common law and the system of equity so to unite the +two procedures into the form of one civil action and to shorten the +procedure in such civil action as to furnish a model to all the State +courts exercising concurrent jurisdiction with the Federal courts of first +instance. + +Under the statute now in force the common-law procedure in each Federal +court is made to conform to the procedure in the State in which the court +is held. In these days, when we should be making progress in court +procedure, such a conformity statute makes the Federal method too dependent +upon the action of State legislatures. I can but think it a great +opportunity for Congress to intrust to the highest tribunal in this +country, evidently imbued with a strong spirit in favor of a reform of +procedure, the power to frame a model code of procedure, which, while +preserving all that is valuable and necessary of the rights and remedies at +common law and in equity, shall lessen the burden of the poor litigant to a +minimum in the expedition and cheapness with which his cause can be fought +or defended through Federal courts to final judgment. + +WORKMAN'S COMPENSATION ACT + +The workman's compensation act reported by the special commission appointed +by Congress and the Executive, which passed the Senate and is now pending +in the House, the passage of which I have in previous messages urged upon +Congress, I venture again to call to its attention. The opposition to it +which developed in the Senate, but which was overcome by a majority in that +body, seemed to me to grow out rather of a misapprehension of its effect +than of opposition to its principle. I say again that I think no act can +have a better effect directly upon the relations between the employer and +employee than this act applying to railroads and common carriers of an +interstate character, and I am sure that the passage of the act would +greatly relieve the courts of the heaviest burden of litigation that they +have, and would enable them to dispatch other business with a speed never +before attained in courts of justice in this country. + +THE WHITE HOUSE, December 19, 1912. To the Senate and House of +Representatives: + +This is the third of a series of messages in which I have brought to the +attention of the Congress the important transactions of the Government in +each of its departments during the last year and have discussed needed +reforms. + +HEADS OF DEPARTMENTS SHOULD HAVE SEATS ON THE FLOOR OF CONGRESS + +I recommend the adoption of legislation which shall make it the duty of +heads of departments--the members of the President's Cabinet--at convenient +times to attend the session of the House and the Senate, which shall +provide seats for them in each House, and give them the opportunity to take +part in all discussions and to answer questions of which they have had due +notice. The rigid holding apart of the executive and the legislative +branches of this Government has not worked for the great advantage of +either. There has been much lost motion in the machinery, due to the lack +of cooperation and interchange of views face to face between the +representatives of the Executive and the Members of the two legislative +branches of the Government. It was never intended that they should be +separated in the sense of not being in constant effective touch and +relationship to each other. The legislative and the executive each performs +its own appropriate function, but these functions must be coordinated. Time +and time again debates have arisen in each House upon issues which the +information of a particular department head would have enabled him, if +present, to end at once by a simple explanation or statement. Time and time +again a forceful and earnest presentation of facts and arguments by the +representative of the Executive whose duty it is to enforce the law would +have brought about a useful reform by amendment, which in the absence of +such a statement has failed of passage. I do not think I am mistaken in +saying that the presence of the members of the Cabinet on the floor of each +House would greatly contribute to the enactment of beneficial legislation. +Nor would this in any degree deprive either the legislative or the +executive of the independence which separation of the two branches has been +intended to promote. It would only facilitate their cooperation in the +public interest. + +On the other hand, I am sure that the necessity and duty imposed upon +department heads of appearing in each house and in answer to searching +questions, of rendering upon their feet an account of what they have done, +or what has been done by the administration, will spur each member of the +Cabinet to closer attention to the details of his department, to greater +familiarity with its needs, and to greater care to avoid the just criticism +which the answers brought out in questions put and discussions arising +between the Members of either House and the members of the Cabinet may +properly evoke. + +Objection is made that the members of the administration having no vote +could exercise no power on the floor of the House, and could not assume +that attitude of authority and control which the English parliamentary +Government have and which enables them to meet the responsibilities the +English system thrusts upon them. I agree that in certain respects it would +be more satisfactory if members of the Cabinet could at the same time be +Members of both Houses, with voting power, but this is impossible under our +system; and while a lack of this feature may detract from the influence of +the department chiefs, it will not prevent the good results which I have +described above both in the matter of legislation and in the matter of +administration. The enactment of such a law would be quite within the power +of Congress without constitutional amendment, and it has such possibilities +of usefulness that we might well make the experiment, and if we are +disappointed the misstep can be easily retraced by a repeal of the enabling +legislation. + +This is not a new proposition. In the House of Representatives, in the +Thirty-eighth Congress, the proposition was referred to a select committee +of seven Members. The committee made an extensive report, and urged the +adoption of the reform. The report showed that our history had not been +without illustration of the necessity and the examples of the practice by +pointing out that in early days Secretaries were repeatedly called to the +presence of either Rouse for consultation, advice, and information. It also +referred to remarks of Mr. justice Story in his Commentaries on the +Constitution, in which he urgently presented the wisdom of such a change. +This report is to be found in Volume I of the Reports of Committees of the +First Session of the Thirty-eighth Congress, April 6, 1864. + +Again, on February 4, 1881, a select committee of the Senate recommended +the passage of a similar bill, and made a report, In which, while approving +the separation of the three branches, the executive, legislative, and +judicial, they point out as a reason for the proposed change that, although +having a separate existence, the branches are "to cooperate, each with the +other, as the different members of the human body must cooperate, with each +other in order to form the figure and perform the duties of a perfect +man." + +The report concluded as follows: This system will require the selection of +the strongest men to be heads of departments and will require them to be +well equipped with the knowledge of their offices. It will also require the +strongest men to be the leaders of Congress and participate in debate. It +will bring these strong men in contact, perhaps into conflict, to advance +the public weal, and thus stimulate their abilities and their efforts, and +will thus assuredly result to the good of the country. + +If it should appear by actual experience that the heads of departments in +fact have not time to perform the additional duty imposed on them by this +bill, the force in their offices should be increased or the duties +devolving on them personally should be diminished. An undersecretary should +be appointed to whom could be confided that routine of administration which +requires only order and accuracy. The principal officers could then confine +their attention to those duties which require wise discretion and +intellectual activity. Thus they would have abundance of time for their +duties under this bill. Indeed, your committee believes that the public +interest would be subserved if the Secretaries were relieved of the +harassing cares of distributing clerkships and closely supervising the mere +machinery of the departments. Your committee believes that the adoption of +this bill and the effective execution of its provisions will be the first +step toward a sound civil-service reform which will secure a larger wisdom +in the adoption of policies and a better system in their execution.(Signed) +GEO. H. PENDLETON. W. B. ALLISON. D. W. VOORHEES. J. G. BLAINE. M. C. +BUTLER. JOHN J. INGALLS. O. H. PLATT. J. T. FARLEY. It would be difficult +to mention the names of higher authority in the practical knowledge of our +Government than those which are appended to this report. + +POSTAL SAVINGS BANK SYSTEM + +The Postal Savings Bank System has been extended so that it now includes +4,004 fourth-class post offices', as well as 645 branch offices and +stations in the larger cities. There are now 12,812 depositories at which +patrons of the system may open accounts. The number of depositors is +300,000 and the amount of their deposits is approximately $28,000,000, not +including $1,314,140 which has been with drawn by depositors for the +purpose of buying postal savings bonds. Experience demonstrates the value +of dispensing with the pass-book and introducing in its place a certificate +of deposit. The gross income of the postal savings system for the fiscal +year ending June 30, 1913, will amount to $700,000 and the interest payable +to depositors to $300,000. The cost of supplies, equipment, and salaries is +$700,000. It thus appears that the system lacks $300,000 a year of paying +interest and expenses. It is estimated, however, that when the deposits +have reached the sum Of $50,000,000, which at the present rate they soon +will do, the system will be self-sustaining. By law the postal savings +funds deposited at each post office are required to be redeposited in local +banks. State and national banks to the number of 7,357 have qualified as +depositories for these funds. Such deposits are secured by bonds +aggregating $54,000,000. Of this amount, $37,000,000 represent municipal +bonds. + +PARCEL POST + +In several messages I have favored and recommended the adoption of a system +of parcel post. In the postal appropriation act of last year a general +system was provided and its installation was directed by the 1st of +January. This has entailed upon the Post Office Department a great deal of +very heavy labor, but the Postmaster General informs me that on the date +selected, to wit, the 1st of January, near at hand, the department will be +in readiness to meet successfully the requirements of the public. + +CLASSIFICATION OF POSTMASTERS + +A trial, during the past three years, of the system of classifying +fourth-class postmasters in that part of the country lying between the +Mississippi River on the west, Canada on the north, the Atlantic Ocean on +the east, and Mason and Dixon's line on the south has been sufficiently +satisfactory to justify the postal authorities in recommending the +extension of the order to include all the fourth-class postmasters in the +country. In September, 1912, upon the suggestion of the Postmaster General, +I directed him to prepare an order which should put the system in effect, +except in Alaska, Guam, Hawaii, Porto Rico, and Samoa. Under date of +October 15 I issued such an order which affected 36,000 postmasters. By the +order the post offices were divided into groups A and B. Group A includes +all postmasters whose compensation is $500 or more, and group B those whose +compensation is less than that sum. Different methods are pursued in the +selection of the postmasters for group A and group, B. Criticism has been +made of this order on the ground that the motive for it was political. +Nothing could be further from the truth. The order was made before the +election and in the interest of efficient public service. I have several +times requested Congress to give me authority to put first-, second-, and +third-class postmasters, and all other local officers, including +internal-revenue officers, customs officers, United States marshals, and +the local agents of the other departments under the classification of the +civil-service law by taking away the necessity for confirming such +appointments by the Senate. I deeply regret the failure of Congress to +follow these recommendations. The change would have taken out of politics +practically every local officer and would have entirely cured the evils +growing out of what under the present law must always remain a remnant of +the spoils system. + +COMPENSATION TO RAILWAYS FOR CARRYING MAILS + +It is expected that the establishment of a parcel post on January 1st will +largely increase the amount of mail matter to be transported by the +railways, and Congress should be prompt to provide a way by which they may +receive the additional compensation to which they will be entitled. The +Postmaster General urges that the department's plan for a complete +readjustment of the system of paying the railways for carrying the mails be +adopted, substituting space for weight as the principal factor in fixing +compensation. Under this plan it will be possible to determine without +delay what additional payment should be made on account of the parcel post. +The Postmaster General's recommendation is based on the results of a +far-reaching investigation begun early in the administration with the +object of determining what it costs the railways to carry the mails. The +statistics obtained during the course of the inquiry show that while many +of the railways, and particularly the large systems, were making profits +from mail transportations, certain of the lines were actually carrying the +mails at a loss. As a result of the investigation the department, after +giving the subject careful consideration, decided to urge the abandonment +of the present plan of fixing compensation on the basis of the weight of +the mails carried, a plan that has proved to be exceedingly expensive and +in other respects unsatisfactory. Under the method proposed the railway +companies will annually submit to the department reports showing what it +costs them to carry the mails, and this cost will be apportioned on the +basis of the car space engaged, payment to be allowed at the rate thus +determined in amounts that will cover the cost and a reasonable profit. If +a railway is not satisfied with the manner in which the department +apportions the cost in fixing compensation, it is to have the right, tinder +the new plan, of appealing to the Interstate Commerce Commission. This +feature of the proposed law would seem to insure a fair treatment of the +railways. It is hoped that Congress will give the matter immediate +attention and that the method of compensation recommended by the department +or some other suitable plan will be promptly authorized. + +DEPARTMENT OF THE INTERIOR + +The Interior Department, in the problems of administration included within +its jurisdiction, presents more difficult questions than any other. This +has been due perhaps to temporary causes of a political character, but more +especially to the inherent difficulty in the performance of some of the +functions which are assigned to it. Its chief duty is the guardianship of +the public domain and the disposition of that domain to private ownership +under homestead, mining, and other laws, by which patents from the +Government to the individual are authorized on certain conditions. During +the last decade the public seemed to become suddenly aware that a very +large part of its domain had passed from its control into private +ownership, under laws not well adapted to modern conditions, and also that +in the doing of this the provisions of existing law and regulations adopted +in accordance with law had not been strictly observed, and that in the +transfer of title much fraud had intervened, to the pecuniary benefit of +dishonest persons. There arose thereupon a demand for conservation of the +public domain, its protection against fraudulent diminution, and the +preservation of that part of it from private acquisition which it seemed +necessary to keep for future public use. The movement, excellent in the +intention which prompted it, and useful in its results, has nevertheless +had some bad effects, which the western country has recently been feeling +and in respect of which there is danger of a reaction toward older abuses +unless we can attain the golden mean, which consists in the prevention of +the mere exploitation of the public domain for private purposes while at +the same, time facilitating its development for the benefit of the local +public. + +The land laws need complete revision to secure proper conservation on the +one hand of land that ought to be kept in public use and, on the other +hand, prompt disposition of those lands which ought to be disposed in +private ownership or turned over to private use by properly guarded leases. +In addition to this there are not enough officials in our Land Department +with legal knowledge sufficient promptly to make the decisions which are +called for. The whole land-laws system should be reorganized, and not until +it is reorganized, will decisions be made as promptly as they ought, or +will men who have earned title to public land under the statute receive +their patents within a reasonably short period. The present administration +has done what it could in this regard, but the necessity for reform and +change by a revision of the laws and an increase and reorganization of the +force remains, and I submit to Congress the wisdom of a full examination of +this subject, in order that a very large and important part of our people +in the West may be relieved from a just cause of irritation. + +I invite your attention to the discussion by the Secretary of the Interior +of the need for legislation with respect to mining claims, leases of coal +lands in this country and in Alaska, and for similar disposition of oil, +phosphate, and potash lands, and also to his discussion of the proper use +to be made of water-power sites held by the Government. Many of these lands +are now being withheld from use by the public under the general withdrawal +act which was passed by the last Congress. That act was not for the purpose +of disposing of the question, but it was for the purpose of preserving the +lands until the question could be solved. I earnestly urge that the matter +is of the highest importance to our western fellow citizens and ought to +command the immediate attention of the legislative branch of the +Government. + +Another function which the Interior Department has to perform is that of +the guardianship of Indians. In spite of everything which has been said in +criticism of the policy of our Government toward the Indians, the amount of +wealth which is now held by it for these wards per capita shows that the +Government has been generous; but the management of so large an estate, +with the great variety of circumstances that surround each tribe and each +case, calls for the exercise of the highest business discretion, and the +machinery provided in the Indian Bureau for the discharge of this function +is entirely inadequate. The position of Indian commissioner demands the +exercise of business ability of the first order, and it is difficult to +secure such talent for the salary provided. + +The condition of health of the Indian and the prevalence in the tribes of +curable diseases has been exploited recently in the press. In a message to +Congress at its last session I brought this subject to its attention and +invited a special appropriation, in order that our facilities for +overcoming diseases among the Indians might be properly increased, but no +action was then taken by Congress on the subject, nor has such +appropriation been made since. + +The commission appointed by authority of the Congress to report on proper +method of securing railroad development in Alaska is formulating its +report, and I expect to have an opportunity before the end of this session +to submit its recommendations. + +DEPARTMENT OF AGRICULTURE + +The far-reaching utility of the educational system carried on by the +Department of Agriculture for the benefit of the farmers of our country +calls for no elaboration. Each year there is a growth in the variety of +facts which it brings out for the benefit of the farmer, and each year +confirms the wisdom of the expenditure of the appropriations made for that +department. + +PURE-FOOD LAW + +The Department of Agriculture is charged with the execution of the +pure-food law. The passage of this encountered much opposition from +manufacturers and others who feared the effect upon their business of the +enforcement of its provisions. The opposition aroused the just indignation +of the public, and led to an intense sympathy with the severe and rigid +enforcement of the provisions of the new law. It had to deal in many +instances with the question whether or not products of large business +enterprises, in the form of food preparations, were deleterious to the +public health; and while in a great majority of instances this issue was +easily determinable, there were not a few cases in which it was hard to +draw the line between a useful and a harmful food preparation. In cases +like this when a decision involved the destruction of great business +enterprises representing the investment of large capital and the +expenditure of great energy and ability, the danger of serious injustice +was very considerable in the enforcement of a new law under the spur of +great public indignation. The public officials charged with executing the +law might do injustice in heated controversy through unconscious pride of +opinion and obstinacy of conclusion. For this reason President Roosevelt +felt justified in creating a board of experts, known as the Remsen Board, +to whom in cases of much importance an appeal might be taken and a review +had of a decision of the Bureau of Chemistry in the Agricultural +Department. I heartily agree that it was wise to create this board in order +that injustice might not be done. The questions which arise are not +generally those involving palpable injury to health, but they are upon the +narrow and doubtful line in respect of which it is better to be in some +error not dangerous than to be radically destructive. I think that the time +has come for Congress to recognize the necessity for some such tribunal of +appeal and to make specific statutory provision for it. While we are +struggling to suppress an evil of great proportions like that of impure +food, we must provide machinery in the law itself to prevent its becoming +an instrument of oppression, and we ought to enable those whose business is +threatened with annihilation to have some tribunal and some form of appeal +in which they have a complete day in court. + +AGRICULTURAL CREDITS + +I referred in my first message to the question of improving the system of +agricultural credits. The Secretary of Agriculture has made an +investigation into the matter of credits in this country, and I commend a +consideration of the information which through his agents he has been able +to collect. It does not in any way minimize the importance of the proposal, +but it gives more accurate information upon some of the phases of the +question than we have heretofore had. + +DEPARTMENT OF COMMERCE AND LABOR + +I commend to Congress an examination of the report of the Secretary of +Commerce and Labor, and especially that part in which he discusses the +office of the Bureau of Corporations, the value to commerce of a proposed +trade commission, and the steps which he has taken to secure the +organization of a national chamber of commerce. I heartily commend his view +that the plan of a trade commission which looks to the fixing of prices is +altogether impractical and ought not for a moment to be considered as a +possible solution of the trust question. + +The trust question in the enforcement of the Sherman antitrust law is +gradually solving itself, is maintaining the principle and restoring the +practice of competition, and if the law is quietly but firmly enforced, +business will adjust itself to the statutory requirements, and the unrest +in commercial circles provoked by the trust discussion will disappear. + +PANAMA-PACIFIC INTERNATIONAL EXPOSITION + +In conformity with a joint resolution of Congress, an Executive +proclamation was issued last February, inviting the nations of the world to +participate in the Panama-Pacific International Exposition to be held at +San Francisco to celebrate the construction of the Panama, Canal. A +sympathetic response was immediately forthcoming, and several nations have +already selected the sites for their buildings. In furtherance of my +invitation, a special commission visited European countries during the past +summer, and received assurance of hearty cooperation in the task of +bringing together a universal industrial, military, and naval display on an +unprecedented scale. It is evident that the exposition will be an accurate +mirror of the world's activities as they appear 400 years after the date of +the discovery of the Pacific Ocean. + +It is the duty of the United States to make the nations welcome at San +Francisco and to facilitate such acquaintance between them and ourselves as +will promote the expansion of commerce and familiarize the world with the +new trade route through the Panama Canal. The action of the State +governments and individuals assures a comprehensive exhibit of the +resources of this country and of the progress of the people. This +participation by State and individuals should be supplemented by an +adequate showing of the varied and unique activities of the National +Government. The United States can not with good grace invite foreign +governments to erect buildings and make expensive exhibits while itself +refusing to participate. Nor would it be wise to forego the opportunity to +join with other nations in the inspiring interchange of ideas tending to +promote intercourse, friendship, and commerce. It is the duty of the +Government to foster and build up commerce through the canal, just as it +was the duty of the Government to construct it. + +I earnestly recommend the appropriation at this session of such a sum as +will enable the United States to construct a suitable building, install a +governmental exhibit, and otherwise participate in the Panama-Pacific +International Exposition in a manner commensurate with the dignity of a +nation whose guests are to be the people of the world. I recommend also +such legislation as will facilitate the entry of material intended for +exhibition and protect foreign exhibitors against infringement of patents +and the unauthorized copying of patterns and designs. All aliens sent to +San Francisco to construct and care for foreign buildings and exhibits +should be admitted without restraint or embarrassment. + +THE DISTRICT OF COLUMBIA AND THE CITY OF WASHINGTON + +The city of Washington is a beautiful city, with a population of 352,936, +of whom 98,667 are colored. The annual municipal budget is about +$14,000,000. The presence of the National Capital and other governmental +structures constitutes the chief beauty and interest of the city. The +public grounds are extensive, and the opportunities for improving the city +and making it still more attractive are very great. Under a plan adopted +some years ago, one half the cost of running the city is paid by taxation +upon the property, real and personal, of the citizens and residents, and +the other half is borne by the General Government. The city is expanding at +a remarkable rate, and this can only be accounted for by the coming here +from other parts of the country of well-to-do people who, having finished +their business careers elsewhere, build and make this their permanent place +of residence. + +On the whole, the city as a municipality is very well governed. It is well +lighted, the water supply is good, the streets are well paved, the police +force is well disciplined, crime is not flagrant, and while it has purlieus +and centers of vice, like other large cities, they are not exploited, they +do not exercise any influence or control in the government of the city, and +they are suppressed in as far as it has been found practicable. Municipal +graft is inconsiderable. There are interior courts in the city that are +noisome and centers of disease and the refuge of criminals, but Congress +has begun to clean these out, and progress has been made in the case of the +most notorious of these, which is known as "Willow Tree Alley." This +movement should continue. + +The mortality for the past year was at the rate Of 17.80 per 1,000 of both +races; among the whites it was 14.61 per thousand, and among the blacks +26.12 per thousand. These are the lowest mortality rates ever recorded in +the District. + +One of the most crying needs in the government of the District is a +tribunal or public authority for the purpose of supervising the +corporations engaged in the operation of public utilities. Such a bill is +pending in Congress and ought to pass. Washington should show itself under +the direction of Congress to be a city with a model form of government, but +as long as such authority over public utilities is withheld from the +municipal government, it must always be defective. + +Without undue criticism of the present street railway accommodations, it +can be truly said that under the spur of a public utilities commission they +might be substantially improved. + +While the school system of Washington perhaps might be bettered in the +economy of its management and the distribution of its buildings, its +usefulness has nevertheless greatly increased in recent years, and it now +offers excellent facilities for primary and secondary education. + +From time to time there is considerable agitation in Washington in favor of +granting the citizens of the city the franchise and constituting an +elective government. I am strongly opposed to this change. The history of +Washington discloses a number of experiments of this kind, which have +always been abandoned as unsatisfactory. The truth is this is a city +governed by a popular body, to wit, the Congress of the United States, +selected from the people of the United States, who own Washington. The +people who come here to live do so with the knowledge of the origin of the +city and the restrictions, and therefore voluntarily give up the privilege +of living in a municipality governed by popular vote. Washington is so +unique in its origin and in its use for housing and localizing the +sovereignty of the Nation that the people who live here must regard its +peculiar character and must be content to subject themselves to the control +of a body selected by all the people of the Nation. I agree that there are +certain inconveniences growing out of the government of a city by a +national legislature like Congress, and it would perhaps be possible to +lessen these by the delegation by Congress to the District Commissioners of +greater legislative power for the enactment of local laws than they now +possess, especially those of a police character. + +Every loyal American has a personal pride in the beauty of Washington and +in its development and growth. There is no one with a proper appreciation +of our Capital City who would favor a niggardly policy in respect to +expenditures from the National Treasury to add to the attractiveness of +this city, which belongs to every citizen of the entire country, and which +no citizen visits without a sense of pride of ownership. We have had +restored by a Commission of Fine Arts, at the instance of a committee of +the Senate, the original plan of the French engineer L'Enfant for the city +of Washington, and we know with great certainty the course which the +improvement of Washington should take. Why should there be delay in making +this improvement in so far as it involves the extension of the parking +system and the construction of greatly needed public buildings? +Appropriate buildings for the State Department, the Department of justice, +and the Department of Commerce and Labor have been projected, plans have +been approved, and nothing is wanting but the appropriations for the +beginning and completion of the structures. A hall of archives is also +badly needed, but nothing has been done toward its construction, although +the land for it has long been bought and paid for. Plans have been made for +the union of Potomac Park with the valley of Rock Creek and Rock Creek +Park, and the necessity for the connection between the Soldiers' Home and +Rock Creek Park calls for no comment. I ask again why there should be delay +in carrying out these plans We have the money in the Treasury, the plans +are national in their scope, and the improvement should be treated as a +national project. The plan will find a hearty approval throughout the +country. I am quite sure, from the information which I have, that, at +comparatively small expense, from that part of the District of Columbia +which was retroceded to Virginia, the portion including the Arlington +estate, Fort Myer, and the palisades of the Potomac can be acquired by +purchase and the jurisdiction of the State of Virginia over this land ceded +to the Nation. This ought to be done. + +The construction of the Lincoln Memorial and of a memorial bridge from the +base of the Lincoln Monument to Arlington would be an appropriate and +symbolic expression of the union of the North and the South at the Capital +of the Nation. I urge upon Congress the appointment of a commission to +undertake these national improvements, and to submit a plan for their +execution; and when the plan has been submitted and approved, and the work +carried out, Washington will really become what it ought to be--the most +beautiful city in the world. + + + +*** END OF THE PROJECT GUTENBERG EBOOK OF ADDRESSES BY WILLIAM H. 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