SEIZURE OF SUSPECTED SHIPS—TRADING WITH THE ENEMY—THE APPAM—THE ANGLO-FRENCH LOAN—FORD PEACE EXPEDITION

The next issue the United States raised with Great Britain related to the seizure of three ships of American registry—the Hocking, Genesee and the Kankakee—in November, 1915, on the ground that they were really German-owned. France had also confiscated the Solveig of the same ownership for a like reason. The four vessels belonged to the fleet of the American Transatlantic Steamship Company, the formation of which under unusual circumstances was recorded earlier in this history. Great Britain and France served notice that this company's vessels were blacklisted, and became seizable as prizes of war because of the suspicion that German interests were behind the company, and that its American officials with their reputed holdings of stock were therefore really prizes for German capital. The Bureau of Navigation had at first refused registry to these vessels, but its ruling was reversed, and the vessels were admitted, the State Department taking the view that it could not disregard the company's declaration of incorporation in the United States, and that its officers were American citizens. Great Britain sought to requisition the vessels for navy use without prize-court hearings, but on the United States protesting she agreed to try the cases.

Another dispute arose, in January, 1916, over the operation of the Trading with the Enemy Act, one of Great Britain's war measures, the provisions of which were enlarged to forbid British merchants from trading with any person or firm, resident in a neutral country, which had German ownership or German trade connections. The United States objected to the prohibition as constituting a further unlawful interference with American trade. It held that in war time the trade of such a person or firm domiciled in a neutral country had a neutral status, and consequently was not subject to interference; hence goods in transit of such a trader were not subject to confiscation by a belligerent unless contraband and consigned to an enemy country.

An example of the working of the act was the conviction of three members of a British glove firm for trading with Germany through their New York branch. They had obtained some $30,000 worth of goods from Saxony between October, 1915, and January, 1916, the consignments evading the blockade and reaching New York, whence they were reshipped to England. One defendant was fined $2,000; the two others received terms of imprisonment.

While the act would injure American firms affiliated with German interests, it aimed to press hardest upon traders in neutral European countries contiguous to Germany who were trading with the Germans and practically serving as intermediaries to save the Germans from the effect of the Allies' blockade.

The appearance of a captured British steamer, the Appam, at Newport News, Va., on February 1, 1916, in charge of a German naval lieutenant, Hans Berg, and a prize crew, involved the United States in a new maritime tangle with the belligerents. One of the most difficult problems which Government officials had encountered since the war began, presented itself for solution. The Appam, as elsewhere described, was captured by a German raider, the Moewe (Sea Gull), off Madeira, and was crowded with passengers, crews, and German prisoners taken from a number of other ships the Moewe had sunk. Lieutenant Berg, for lack of a safer harbor, since German ports were closed to him, sought for refuge an American port, and claimed for his prize the privilege of asylum under the protection of American laws—until he chose to leave. Count von Bernstorff, the German Ambassador, immediately notified the State Department that Germany claimed the Appam as a prize under the Prussian-American Treaty of 1828, and would contend for possession of the ship. This treaty was construed as giving German prizes brought to American ports the right to come and go. The British Government contested the German claim by demanding the release of the Appam under The Hague Convention of 1907. This international treaty provided that a merchantman prize could only be taken to a neutral port under certain circumstances of distress, injury, or lack of food, and if she did not depart within a stipulated time the vessel could not be interned, but must be restored to her original owners with all her cargo. Were the Appam thus forcibly released she would at once have been recaptured by British cruisers waiting off the Virginia Capes. The view which prevailed officially was that the case must be governed by the Prussian treaty, a liberal construction of which appeared to permit the Appam to remain indefinitely at Newport News. This was what happened, but not through any acquiescence of the State Department in the German contention. The Appam owners, the British and African Steam Navigation Company, brought suit in the Federal Courts for the possession of the vessel, on the ground that, having been brought into a neutral port, she lost her character as a German prize, and must be returned to her owners. Pending a determination of this action, the Appam was seized by Federal marshals under instructions from the United States District Court, under whose jurisdiction the vessel remained.

After twelve months of war Great Britain became seriously concerned over the changed conditions of her trade with the United States. Before the war the United States, despite its vast resources and commerce, bought more than it sold abroad, and was thus always a debtor nation, that is, permanently owing money to Europe. In the stress of war Great Britain's exports to the United States, like those of her Allies, declined and her imports enormously increased. She sold but little of her products to her American customers and bought heavily of American foodstuffs, cotton, and munitions. The result was that Great Britain owed a great deal more to the United States than the latter owed her. The unparalleled situation enabled the United States to pay off her old standing indebtedness to Europe and became a creditor nation. American firms were exporting to the allied powers, whose almoner Great Britain was, commodities of a value of $100,000,000 a month in excess of the amount they were buying abroad. Hence what gold was sent from London, at the rate of $15,000,000 to $40,000,000 monthly, to pay for these huge purchases was wholly insufficient to meet the accumulating balance of indebtedness against England.

The effect of this reversal of Anglo-American trade balance was a decline in the exchange value of the pound sterling, which was normally worth $4.86-½ in American money, to the unprecedented level of $4.50. This decline in sterling was reflected in different degrees in the other European money markets, and the American press was jubilant over the power of the dollar to buy more foreign money than ever before. Because Europe bought much more merchandise than she sold the demand in London for dollar credit at New York was far greater than the demand in New York for pound credit at London. Hence the premium on dollars and the discount on pounds. It was not a premium upon American gold over European gold, but a premium on the means of settling debts in dollars without the use of gold. Europe preferred to pay the premium rather than send sufficient gold, because, for one reason, shipping gold was costly and more than hazardous in war time, and, for another, all the belligerents wanted to retain their gold as long as they could afford to do so.

An adjustment of the exchange situation and a reestablishment of the credit relations between the United States and the allied powers on a more equitable footing was imperative. The British and French Governments accordingly sent a commission to the United States, composed of some of their most distinguished financiers—government officials and bankers—to arrange a loan in the form of a credit with American bankers to restore exchange values and to meet the cost of war munitions and other supplies. After lengthy negotiations a loan of $500,000,000 was agreed upon, at 5 per cent. interest, for a term of five years, the bonds being purchasable at 98 in denominations as low as $100. The principal and interest were payable in New York City—in gold dollars. The proceeds of the loan were to be employed exclusively in the United States to cover the Allies' trade obligations.

The loan was an attractive one to the American investor, yielding as it did a fraction over 5-½ per cent. It was the only external loan of Great Britain and France, for the repayment of which the two countries pledged severally and together their credit, faith, and resources. No such an investment had before been offered in the United States.

Strong opposition to the loan came from German-American interests. Dr. Charles Hexamer, president of the German-American Alliance, made a country-wide appeal urging American citizens to "thwart the loan" by protesting to the President and the Secretary of State. Threats were likewise made by German depositors to withdraw their deposits from banks which participated in the loan. The Government, after being consulted, had given assurances that it would not oppose the transaction as a possible violation of neutrality—if a straight credit, not as actual loan, was negotiated. Conformity to this condition made all opposition fruitless.

Toward the close of 1915 an ambitious peace crusade to Europe was initiated by Henry Ford, the automobile manufacturer. Accompanied by 148 pacifists, he sailed on the Scandinavian-American liner, Oscar II, early in December, 1915, with the avowed purpose of ending the war before Christmas. The expedition was viewed dubiously by the allied powers, who discerned pro-German propaganda in the presence of Teutonic sympathizers among the delegates. They also suspected a design to accelerate a peace movement while the gains of the war were all on Germany's side, thus placing the onus of continuing hostilities on the Allies if they declined to recognize the Ford peace party as mediators. The American Government, regardful of the obligations of neutrality, notified the several European Governments concerned that the United States had no connection with the expedition, and assumed no responsibility for any activities the persons comprising it might undertake in the promotion of peace.[Back to Contents]