Speech Transcript:

 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.