(3) The unheard-of extension by the United States of the meaning of the term coasting trade would allow an American vessel sailing from New York to the Hawaiian Islands, but touching at the ports of Mexico or of a South American State, after having passed the Panama Canal, to be considered as engaged in the coasting trade of the United States. Being exempt from paying the Canal tolls she could carry goods from New York to the Mexican and South American ports concerned at cheaper rates than foreign vessels plying between New York and these Mexican and South American ports. There is, therefore, no doubt that in such cases the exemption of American coasting trade vessels from the tolls would involve a discrimination against foreign vessels in favour of vessels of the United States. (4) It has been asserted that the wording of Article III, No. 1, of the Hay-Pauncefote Treaty only prohibits discrimination _against_ some particular nation, and does not prohibit a _special favour_ to a particular nation, and that, therefore, special favours to the coasting trade vessels of the United States are not prohibited. But this assertion is unfounded, although the bad drafting of Article III, No. 1, lends some slight assistance to it. The fact that in this article the words "so that there shall be no discrimination against any such nation" are preceded by the words "the canal shall be free and open to the vessels of commerce and of war of all nations observing these rules, _on terms of entire equality_," proves absolutely that any favour to any particular nation is prohibited because it must be considered to involve a discrimination against other nations. VI. There is one more contention in the memorandum of President Taft in favour of the assertion that the United States is empowered to exempt all her vessels from the Panama Canal tolls. It is thefollowing:--Since the rules of the Hay-Pauncefote Treaty do not provide, as a condition for the privilege of using the Canal upon equal terms with other nations, that other nations desiring to build up a particular trade which involves the use of the Canal shall not either directly pay the tolls for their vessels or refund to them the tolls levied upon them, the United States could not be prevented from doing the same.