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The Government of Our Acquired Territory, CHINA MUST PUNISH AND PAY. The Enorinons Trudo of tlie Country Sound Financial Condition aud (Sttu eral Prosperity The Army CuUa'b Freedom Torto Jtleo's Need. President McKlnley's message tAkos up first the matter of the Chinese question, cn which ho rays: The recent troubles In China spring from the antl-forelgn agitation which lor tho Xast three years has gained strength In the northern provinces. Their origin lies deep in the churacter of the Chinese race nnd In the trudltiona of their government. The Tatplng rebellion and the opening of Chinese porta to foreign trade and settle, tneiit disturbed alike the homogeneity and the seclusion of China. Meanwhile foreign activity made itself felt In all quarters, not alone on the cents t, but alonrr the great river arteries and In the remoter districts, carrying new ideas and introducing new associations among a primitive people which had pursued for centuries a national policy of isolation. The telegraph and the railway spreading over the land, the steamers plying on their waterways, the merchant rnd the mission ary penetrating year by year farther to tho interior, became to the Chinese mind types of an alien Invasion, changing the course of their national life and fraught with vague forebodings of disaster to their beliefs and their self-control. For several years before the present troubles all the resources of foreign diplomacy, bached by moral demonstra tions of tho physical forces of fleets and arms, have been needed to secure duo re spects for the treaty rights of foreigners and to obtain satisfaction from the re sponsible authorities for the sporadic out rages upon the perrons and properly of unoffending sojourners, which from time to time occurred at widely separated loints in the ncrlhern provinces, ns In the case of the outbreak in Sze-Chucn and Shantung. The .cet. commonly styled the Roxers. de veloped greatly In the provinces north of the Yang-Tie, and with the collusion of many notable c facials, including some in the immediate councils of the throne 1t elf, became alarmingly aggressive. No foreigner's life, outside of the protected treaty ports, was safe. No foreign inter est was secure from spoliation. The diplomatic representatives of the powers in Tekln sttrvo in vain to check this movement. Protest was followed Ly demand and demand by renewed protest, lo be met with perfunctory edicts from the palace and evasive and futile assur ances from tho tsung 11 yamen. The cir cle of the Uoxer influence narrowed about I'ekin. and while nominally stigmatized a eedltious, it was felt that its spirit per vaded, tho capital Itself, that the imperial forces were Imbued with its doctrines, and that the Immediate counselors of the empress dowager were In lull sympathy tvith the anti-foreign movement. Our Policy, Pence. The Increasing gravity of the conditions tn China nnd tho imminence of peril to our own diversified Interests in the em pire, as well as to thoso of all other treaty governments, were soon appreciated by this government, causing it profound sol Icltude. The United States, from the ear liest days of foreign intercourse with China, had followed a policy of peace, omitting no occasion to testify good will, to further the extension of lawful trado, to respect the sovereignty of its govern ment, and to insure by all legitimate and lilndly but earnest means the fullest measure of protection of our law-abiding citizens and for the exercleo of their bene ficent callings among the Chinese people. Mindful of this it was felt to bo appro priate that our purrcses should ba pro nounced In favor of such course as would hasten united action of the powers at I'o kln to promote the administrative reforms ko greatly needed for strengthening the imperial government and maintaining the integrity of China, in which we believed the whole western world to be alike con cerned. To these ends I caused to be ad- dressed to tho several powers occupying territory and maintaining spheres of in fluence In China tho circular proposals 'of ' 1SD9, inviting from them declarations of their intentions and views as to the de sirability of tho adoption of measures in suring the benefits of equality of treat ment ot all foreign trade throughout China. With gratifying unanimity tho responses coincided In this common policy, enabling me to see in the successful termination of j those negotiations proof of the friendly spirit which animates the various powers I Interested In the untrammelcd develop ment of commerce and Industry in the thlneso empire as a source of vast benefit lo the whole commercial world. In this conclusion, which I had tho gratification to announce as a com pleted arrangement to tho interested powers on March 0, 1900, I hopefully discerned a potential factor for tho abate ment of tho distrust of foreign purposes which for a year past had appeared to Inspire tho policy of the Imperial govern tnent. and for the effective exertion by it of power and authority to quell tho criti cal nntl-foreign movement in tho north ern provinces most immediately influ enced by the mnnchu sentiment. Seeking to testify oonlilt nco in the will ingness and ability of the imperial ad ministration to redress tho wroigs and prevent the evils we suffered and feared, tho marine guard, which hail been sent to l'ektn In the autumn of 1S99 for the pro tection of the legation, was withdrawn at the earliest practicable moment, and all pending questions were remitted, us far as we were concerned, to the ordinary re sorts of diploma tic intercourso. Tho Chinese government proved, how ever, unable to check the rising strength of tho Hoxcrs and nppevred to be a prey to internal dissensions. In the unequal contest tho antl-forelgn influences soon pained tho ascendancy under tho leader ship of Prince Tuan. Organized armies of Boxers, with which the imperial forces affiliated, held tho country between Pckln and tho coast, penetrated Into Manchuria nn to tho Russian border, and through the-lr emissaries threatened a like rising! tnrougnoui nonnern inin.i. Attacks upon foreigners, destruction of Iheir property and slaughter of native ronverts wcro reported from nil sides Tho tsung 11 yamen. already permeated with hostile sympathy, could make no effective response to the appeals of the legations. At this critical Juncture, In the early spring of this year, a proposal was made by the other powers that a com bined fleet should bo assembled In Chi nese waters as a moral demonstration, under cover of which to exact of the Chi nese government respect for foreign treaty rights and tho suppression of the Ztoxers. The tJnlltr ClilnkM. Tho siege and the relief of the legal Ions has passed Into undying history, in all tha stirring chapter which record the heroism of the devoted band, clinging to hop in the face of despair, nnd tho un daunted spirit that ld their- relievers through battle and suffering to the goal. It Is a memory of which my countrymon may ho. Justly proud that the honor of our flag wan maintained nlike in the p.iego nnd tho rescue, nnd that stout American hearts have again set high. In fervent emulation with true mcr; of other race and language, the Indomitable cour age that ever strives for tho cause of right and Justice. The president treats t length of the rtrugglo to relievo tho legations rnd Bays; Not only are tho protestations of the Chinese government that it protested and succored tho legations positively con tradicted, Imt Irresistible proof accumu lates that tho attacks upon them were made by Imperial troops, regularly uni formed, nrrned and officered, belonging to the command or .lung In. the Imperii! commander-in-chief. Hecrees encourag ing tho Iloxers. organising them under jromlrient Imperial officers, provisioning them, nnd even granting them Urge tium1 In the name of the empress dowager, an, Vnown to exV.t. Members of the tsung ' yn men who vensfel protection of th tnrelgner were beheaded. Kven In th ttant prtlneo men suspected of for elgn synipuu., i. ucaih, prom inent among thfi-t; ic:)ig Chang Yen J loon, formerly Chlt.so minister In Washington. With the negotiation of the partial ar mistice of July 14, ,t pro -e.-dlng which was doubtless promoted by tuc representations of tho Chinese envoy in Washington, the way wag opened for the conveyance to 1 Mr. Conger of a tent message tent by the secretary of stale through the kind oiflccs of Minister Wu Ting Fang. Mr. Congor's reply, dispatched from J'civln on July 18 through the same cnanno!, afforded to the outside world the llrst tidings that tho In mates of the legation! were si.Ul alive ami hoping lor smcor. This news stimulated the preparations for a Joint relief expedition in number , Mifllclent t over one the rcmstanco wiileli i for a month had been organizing between Taku and the capital. Reinforcements I ncnt by all the co-opcratlng governments ! v.cro constantly arriving. The Urltod Ftutcs contingent, hastily assembled from the 1 hilippines, or dispatched from this country, amounted to s mic ft.OM) nu n, un der the ablo command first of tho lament ed Col. Llscum and afterward of Gen. Chaffee. The Innocents. Happily, the acute disturbances were confined to the northern provinces. It Is a relief to recall and a pleasure lo record the loyal conduct of the viceroy and local authorities of the southern and eastern provinces. Their oft'orts were continuous ly directed to the pacific control of the vast populations under their rule and to the scrupulous observaneo of foreign treaty rights. At critical moments iiey did not hesitate to memorialize the throne, urging the protection of the legations, the restoration and the assertion of the Im perial authority against the subversive elements. They maintained excellent re lations with the otllclal representative of foreign powers. To their kindly disposi tion Is larp.ely duo the success of the con suls In removing many of the missionar ies from Hie interior to places of safety. In this relation the action of the consuls should be highly commended. In Shang Tung and eastern Chl-Ll the task was dif llcult; but. thanks to their energy and the co-operation of American and foreign na val commanders, hundreds of foreigners, Including those of other nationalities than ours, were rescued from Imminent peril. The policy of the United States through all this trying period was clearly an nounced und scrupulously carried out. ruiiisliinent, Tho Russian proposition looking to the restoration of the lmperUl power In Pc kln has been accepted as in full conson ance with our own desires, for we have held and hold that effective reparation for wrongs suffered and an enduring settle ment that will make their recurrence Im possible can best bo brought about under an authority which the Chinese nation reverence and obeys. While so doing we forego no jot of our undoubted right to exact exemplary and deterrent punish ment of the responsible authors and abet tors of the criminal acts whereby we and other nation have Buffered grievous in Jury. For the real culprits, the evil counselors who have misled the imperial Judgment and diverted the sovereign auMiority to their own guilty ends, full expiation be comes imperative within the rational lim its of retributive Justice. Regarding this as the initial condition of an acccptablo settlement between China and the power. Taking, ts a point of departure, the Im perial edict appointing Karl Li Hung Chang and Prince Ching plenipotentiaries to arrango a settlement, and tho edict of September 25, whereby certain high offi cials wero designated for punishment this government has moved, in concert with tho other powers, toward the opening of negotiations, which Mr. Conger, assisted by Mr. Ilockhill, ha been authorized to conduct on behalf of the United State. I nd em n My. The matter of Indemnity for our wronged citizens is a question of grave concern. Measured by money alone, a sulficient re paration may prove to bo beyond tho abil ity of China to meet. All the powers con cur in emphatic disclaimers of any pur pose of aggrandizement through tho dis memberment of the empire. I am disposed to think that duo compensation may bo mada In nart bv Increased guarantees of security for foreign rights and Immuni ties, and most important of all. by the opening of China totlio equal commerce of all tho world. These views nave ucen and will bo earnestly advocated by our representatives. Tho government of Russia has put for ward a suggestion that in the event, of protracted divergence or views in regaru to indemnities tho matter may be rele gated to the court of arbitration at Tha Harrue. I favorably incline to this, be lieving that high tribunal could not fall to reach a solution no loss conducive to tho stability and enlarged prosperity of China Itself than immediately beneficial to tho powers. Other Foreign Relations. Ratifications of a treaty of extradition with tho Argentine Republic wero ex changed on June 2 last. While tho Austro-llungarian government has in tho many cases that have been reported of the nrrest of our naturalized citizens for alleged evasion of military service faithfully observed tho provisions of tho treaty and released such persons from military obligations, it has in some Instances expelled those whoso presence In the community of their origin was as serted to have a pernicious influence. Representations have been made against this course whenever its adoption has appeared unduly onerous. Wo have been urgently solicited ny Bel gium to ratify tho International conven tion of June, 1X99, amendatory of the pre vious convention of 18!X). in respect to the regulation of tho liquor trade in Africa. Compliance wns necessarily withheld, in tho absence of the advice and consent of tho senate thereto. The principle In volved has tho cordial sympathy of this government, which In the revlslonary ne gotiations advocated more drastic meas ures, and I would gladly bco Its extension, by International agreement, to tho re striction of tho liquor trafllc with all un civilized peoples, especially In the western Pacific. A conference will le held at Tlrussels, December 11, 1900. under the convention for tho protection of industrial property, concluded at Paris, March 20, 18S3, to which delegates from this country have been appointed. In tho Interest of expanding trade ho tween this country and South America, efforts have been made during the past year to conclude conventions with tho southern republics ' for the enlargement or postal facilities. Two such agreements were signed with Rollvia on April 21. of which that establishing tho money order system Is undergoing certain change sug gested bv the postollice department. A treaty of extradition with that country, signed on the same day, la before the scm- The Imposition. The year of tho exposition has been fruitful In occasions for displaying the ,'ood will which exists between this country and Franco. This great compe tition brought together from every na 'lon the best in natural productions, in dustry, science, and the arts, submitted in generous rivalry to a Judgment made nil tho more searching because of that rivalry. The extraordinary Increase of "xportations from this country during tho past three yrnrs and tho activity with which our Inventions and wares had Invaded new markets caused mach Interest lo center upon the American ex hibit, and every encouragement was of fered l.i the way of space and facilities to permit of its being compreherislvo as a whole and complete in every part. It was, however, not an easy task to assemble exhibits that could fitly illus trate our diversified resources and man ufactures, singularly enough, our na tional prosperity lessened the Incentive to exhibit. Tho denier In raw materials knew that the user must come to him; tho great factories were contented with the phenomenal demand for their output, not alone at home, but also abroad, where merit had already won a profitable trade; A criterion of extent and success of our participation and of thoroughness with which our exhibits were organized Is keen In the awards granted to Amer ican exhibitors by the International Jury, namely, grand prizes. 210; gold medals, 597; silver medals, 77ti; bronate medals, ill, and honorable mention', 322, 2,17(1 in all, being i... ... number giv en to the cliU... . . .iay exhibiting na tion, as well ns tiu liu-gct number in each grade. This tlgu'wicaat recognition of merit in coiupuumm with the chosen exhibit of all otiier nation:! and at tho j hand of juries almost wholly made up I ol representatives of Franco and other ' competing countries is not only most grauf.vlng, but id especially valuable, I binco it tets us to the front In interna j tlotiHl questions of nupply and demand, I whilo tho largo proportion of awards In i the clisses of art und artistic tnanufuc ! tu'ts afforded unexpected proof of tho i stimulation of national culture by the prosperity that iiows from natural pro ductiveness Joined to industrial excel . k'iice. ; Apart from th exposition several oc casions for showing international good will occurred. The inauguration in Pari of the IafyeU.a monument, presented by tho school children or the United State and tho designing of a coinnomorativo coin by our mint und tho presentation ot the first piece struck to tho president of the republic, were marked bv appro priate ceremonies, and tho Fourth of July was especially observed In tho French capital. Relation With (eriiiaii-. Good will prevails in our relations with the German empire. An amicable ad justment of the long pending question of the admission of our life insurance' com panies to do buslnea in Prussia has been reached. One of the principal companies has already been re-admitted and the way is openod for tho oilier to share the privilege. The settlement of the Samoan problem, to which I adverted In my last message, ha3 accomplished good results. Peace and contentment prevail in the Islands. An imperial meat inspection law has been enacted for Germany. Whilo it may nrrpniy me inspections, it prohibits cer tain products heretofore udmltted. There is ttlll great uncertainty a to whether our well-nigh extinguished German trade in meat product can revive under its new burdens. Much will i.epend upon regulations not yet promulgated, which we confidently hope will be free from the discriminations which attended the enforcement of tho old statutes. lliitulu nnd the Iloers. Our frlcnd'.y relations with Great Britain continue. The war In ticuthern Africa Introduced Important questions. A condi tion unusual in in: t i national war was oic sented in that whilo one belligerent had ccnlrol of the mis, the other had no ports, but was only accessible through the territory of a neutral. Vcxatiouj questions arose through Great lirltain s uetlon In respect to neutral cargoes, not contraband in their own nature, shipped to Portuguese South Africa, on the score of probable or suspected ultimate destin ation to tho lloer states. Alnxknii Uoiindnry Question. The work of marking certain provisional boundary points, for convenience of ad ministration, around tho head of 1ynn canal, in accordance with the temporary arrangement of October, is?'., was com pleted by a joint survey In July last. The modus vlvendl has so far worked without friction, and tho dominion government has provided rules and regulations for securing to our citizens the benefit of the reciprocal stipulation that the citi zens or subjects of cither power found by that arrangement within the tem porary jurisdiction of the oilier shall suffer no diminution of the rights and privileges they have hitherto enjoyed. But however necessary such an expedient may have been to tide over tho grave emergencies of the situation, It is at best but an unsatisfactory makeshift, which Bhould not be suffered to delay the speedy and complete establishment of the frontier line to which we aro entitled under the Russn-Arnerloan treaty for the cession of Alaska. In this relation I may refer again to the need of dellnitely marking the Alaskan boundary where it follow the 111st mer idian. Turkey Will Pny. Our claims upon the government of tho sultan for reparation for injuries suf fered by American citizen in Armenia nnd elsewhere give promise of early and satisfactory settlement. Ills majesty' good disposition in this regard has been evinced by the Issuance of an Irado for rebuilding the American college at Har poot. Japan's Progrenx. Tho closing year lias witnessed a de cided strengthening of Japan's relations to other states. The development of her Independent judicial nnd administrative functions under the treaties which took effect Julv 17, 1SH0. has proceeded without International friction, showing the com petence of the Japanese to hold a fore most place among (nndern peoples. In tho treatment of the difficult Chinese problems Japan has acted in harmonious concert with the ocher powers, nnd. her generous co-opcratlon materially aided in the joint relief or the beleaguered lega tions In Pekin and in lirlnging about an understanding preliminary to a settle ment or the issue between the power and China. Pence Convention. It Is with satisfaction that I am able to announce the formal ratification at the Hague, on September 4. of the deposit ot ratitlcatlons of convention for the pacific settlement of Inlet national disputes by sixteen powers, namely, the United States, Austria, Belgium, Henmark, England, France, Germany, Italy. Persia. Portugal, Roumanla. Russia. Slam. Spain. Sweden and Norway, and the Netherlands. Japan also haa since ratified the convention. The Cn mi I. The all-Important matter of an Intcr oceanlc canal has assumed a new phase Adhering to its refusal lo reopen the ques tion of the forMturo ol the contract of tho Maritime Canal Company, which was terminated for alleged non -execution In October. 1!, the government f Nicara gua has since supplemented that action bv declaring the so-styled Kr-Crtn option void for non-payment of the stipu lated advance. Protests In relation to theye acts have been filed In the slate de partment and ate now undci coiimOci.i tion. Deeming Itself relieved from exist ing engagements, the Nleuraguan govern ment showed a disposition to deal freely with the canal question eltl'er In the wav of negotiations with the United States or by taking measures to promote tho water wny. Overtures for a convention to effect th building of a cant I under the auspices or the United States are under considera tion. In the meantime the views of the congress upon the general subject. n the light ot the report f the commission ap pointed to examine the comparative mer its of the various trans-Isthmian ship canal projects, may be awaited. I commend to the early attention nf the senate the convention with Great Hi Haiti to facilitate the construction of such a canal ami to remove any objection which might arise out of the convention com monly called the Clayton-Hulwer treaty. 2Vev Trenly With Spain. Patlsfaetory progress has been mart to ward the conclusion of a general treaty of friendship and intercourse with Spain. In replacement of the old treaty, wldch passed Into abeyance by reason of the late war. A r.ew convention of extradition Is approaching completion, and I should be very much pleased were a e:ommeirlal arrangement to follow. I feci thar wo hould riot suffer to pass any opportunity to reaffirm the cordial ties that existed between us and Spain from the time of tur earliest Independence, nnd to enhance the mutual . benefits of that ioninicrcl.il intercourse which Is natural between the two countries. Hy the terms of the treaty of peace the line bounding tho ceded Philippine group in the nouthwest failed to Include several smell islands lying west of tin Sulus. which have always been recognized ns un der Spanish control. The occupation of Sibutu and Cyagnn Sulu by our naval forces elicited a claim on the part of Spain, the eHwenth! equity of which could not be snlnsald. In order to euro the de fect of the treaty by removing nil possible ground of future misunderstanding re specting the Interpretation of Its third article, I directed the negotiation of a sup plementary treaty, which will be forth with laid before the eenate, whereby Fpaln quits all title nnd claim of title to the islands named ns well hh to nnv nnd nil Mauds belonging to th Philippine archipelago lying outside the lines de scribed In said third -mlcM, and agree thiil nil such Islands shill be comprehend ed In the restdon of the archipelago as fully ir.a it they had been expressly Includ ed within ii...- . i.i consideration of this cession thu Utihod State 1 to pay to Spain tho sum of ?lix),000. i National Finances. It la gratifying to be uble to state that the surplus revenue for th fiscal year ended Juno 3:, 1'JeiO, were $7'J,527,Ot 18. For j me tlx preceding year wo had only de j fielts, thu aggregate of which from 1831 to 1S1IX. inclusive, umounted to lUSS.u&S.Dyi 41. The rtccipts for the year from all sources, I exclusive of poctal revenue, aggregated J $'ii!7.210,Kjl fc'J, and expenditures for all purposes, ixcept for the administration I of ilio postul department, aggregated j ?i.H7.7i:i.7r)l 71. Tho receipts from customs j were $rJ3,ltM,K71 1G, an Inereaso over the I preceding year of $27,03C,3S9 41. The rc i tvlpts from Internal revenue were $293.- 327, 92U 7i. an Increase of $21 ,8'.i3,7ti5 25 over l lS'J'.i. The receipts from miscellaneous sources were ?;)S,748.0T)3 97, a against oi),j:'i.ifr ror tho previous year. U is gratifying also to note that during tho year a considerable reduction Is shown in the expenditures of the govern ment. The war department expenditures for the llscal year HMO were $134,774,707 78, a reduction of $si5.0ti(l.4S0 69 over those ef In the navy department the expend itures were $': 1.3.077 72 for the year 1000. as against $(Ja,012.104 25 for the preceding year, a decrease of $7.i)S3,020 f.3. In the ex penditures m account of Indians there was a decrease in IMC over 1S0 of $2,630. C01 38; and In the civil and miscellaneous expenses for 1000 there wa a reduction of $i;f.41S.Oi5 74. Because of the excess of revenues over expenditures tho secretary of the treas ury was enabled to apply bonds and other securities to the sinking fund to the amount of $.V..rU.frU Oti. The details of the sinking fund are set forth in the report of the secretary of the treasury, to which I Invite attention. Tho secretary of the treasury estimates that the receipts for the current fiscal year will aggregate $."Si.n00.(X0. and the expenditures $.100,000, 000. leaving an excess of revenues over expenditures of JSO.onn.OOO. The present condition of ihe treasury Is one or un doubted strength. The available cash bal aiKP November 30 was $13!l,:t03.7:t4 f0. ir thrt old form were pursued, the cash balance. Including the present gold re serve of $1:.O Oimi.iki0. would be $:!9.303. 704 50. Such balance November 20, ISM, wns $20(1.4:1.. 301 r..V In the general fund, which Is wholly separate from the reserve ind trust funds, there was on November 10, $70.0!0.0i3 15 In gold coin and bullion, to which slioubl be added $22,057,300 In gold rortiticate,3 subject to Issue, against which there is held in the division of redemption gold coin and bullion, making a total hold ing of free gold amounting to $03,017.373 1". It will be the duty, as 1 am sure it will bo the disposition of congress, to provide whatever further legislation Is needed to Insuro the continued parity under all con ditions between our two forms of metallic money, silver and gold. . It Is worthy of mention that the greater number of banks being organized under tho new law are In sections where the need of banking facilities has been most pronounced. Iowa stands first, with 30 banks of the smaller class, while Texas, Oklahoma, Indian Territory, and the mid dle and western sections of the country have also availed themselves largely of the privileges under the new law. A large Increase In national bank note circulation has resulted from the provision of tho act .which permits national banks to Issue circulating notes to the par value of the United States bonds deposited ns security instead of only 90 per cent there of, ns heretofore. The increase in cir culating notes from March 11 to November 30. Is $77,889,570. The partv in power Is committed to Fuch legislation as wilt better make the currency responsive to tho varying needs of business at all season and in all sec tions. Foreign Trade Growing. Our foreign trado shows a remarkable record of commercial and Industrial prog ress. The total of Imports and exports for the first time In the history of the country exceeded two billions of dollars. The exports are greater than they have ever been before, the total for the fiscal vear 10H being $1,301,483,082. an increase over 1S0O of $nl7.4G9.7fcO. an Increase over 1S98 or $10:1,000.752. over 1897 or $."i:?.4S9.52C, and greater than 18.H5 by J5U.87C.144. The growth of manufactures in the United States is evidenced by the fact that exports of manufactured products largely exceed those of any previous year, their value for 1000 being $ 133,851 .7.V.. against $339,592,1-111 In 1899, an increase of 28 per cent. Agricultural products were also export ed during 1900 in greater volume than In lsoo, the total for the year belnif $S35,S5S, 123. against S784.776.l-t2 in 1S99. The imports for the year amounted to $819,011,184. an Increase over 1S09 of $152. 792.W5. This Increase Is largely In mater ials for manufacture, and Is In response to the rapid development of manufactur ing in the United States. While t'here was Imported for use In manufactures in 1900 material to tho value of $79,7f.8,972 In ex cess of 1800. It is reassuring to observe that there is a tendency toward decrease In the Importation or articles manufac tured reailv for consumption, which in 1900 formed 15.17 per cent or the total im ports, against 15f4 per cent In lS'JU and 21.09 per cent In isoii. Revenue Tnes. I recommend that the congress at its present session reduce the Internal rev cnuo taxes imposed to meet the expenses of the war with Spain in the sum of thirty millions of dollars. This reduction should be secured by the remission of thoso taxes which experience La shown to be the most burdensome to the indus tries of the people. . I specially urge that there be Included In whatever r duct ion Is made the legacy tax licqiiests for public ues of a literary, educational or charitable character, r.nconrngc MilpptiiK. American vessel during tho past, three veiir have carrlcl about U per cent of our exports and imports. Foreign ships Bhould carry the least, not the greatest, part of American trade. Tho lem.nkable growth of our steel Industries, the prog ress or shipbuilding for Ihe domestic trade, and out steadily maintained ex penditures for the navy havn created an opportonttv to place the United Stale? in the first rank of commercial maritime power. 1 urn satisfied t'he ludgment of the coun try favor I lie policy of aid to our iner chant marine, 'which will broaden our commerce urd markets ami upbuild out" sea-cutrying capacity for the products of iigtlcullute und manufacture, which, with the Increase of our navy, mean mole work and wage to our countrymen a well us a safeguard to American liiU-rcsl in eve-ry part of the wot Id. Tlie Trntf. In my last nimunl message to the con gress I called attention lo tho necessity for curly action to rcmedv such ovils ns might be found to exist tn connection with combinations of capital organized Into trusts, and again Invito attention o my discussion of the subject at that time, which concluded with these words: It is apparent that uniformity er legis lation upon this subject In l lie several stales Is much to be desired. It ts to be hoped that such uniformity, founded In a wise and Just discrimination between what Is Injurious and what Is useful nnd neces sary in business operations. mv bo ob tained, and that means may bw found for the congress, within the limitation! of Its constitutional power, so to supplement an effcctlvo code of state legislation as to make a complete svstem of laws through out the United States adequate to compel a general observance of the salutary rule to which I have referred. The whole question Is so Important nnd far rcaeiiin that 1 am sure no part of It will be lightly considered, but every ph iso of It will have the studied deliberation of the congress, resulting In wise and Ju dicious action. Restraint upon such combinations as are Inlurlous and which are within fed eral jurisdiction should be promptly ap plied by the congress. The I'll 1 1 1 ppl iiea. In my last annual message T dwelt at some length upon the condition of affairs In the Philippines While seeking to im press upon you that the grave responsi bility of the future government of those Islands rests with the congrest of the United States. I abstained from recom mending at that time a specific and final form of government for the territory ac tus lly held by the United Strife forces nn.1 In which, ns long as Insurrection con tinues, the military nun mut necessarily bu supreme. 1 Haled my purpose, until the congress shall have made known the forVnal expression of Its will, to use the authority vested tu r.iu by the coaitltu- tlon and tlu statute to uphold the sov ereignty of lira United State in those dis tant inlands as" In all other places where) our flag rlghtfu)y floats, placing to that end. at the ellsposSil or the army and na vy, all the means whVh the liberality of the congress and the peoftie have provid ed. No contrary expression of tho will of the eongres having lreen made, I havo steadfastly pursued the purpose no de clared, employing the civil arm as well toward the accomplishment of pacification and the institution of local governments within the lines of uuthority and law. . Progress in the hoped-for direction has been favorable. Our forc have success fully controlled tho greater part ot tha islands, overcoming the organized forces of the insurgents nnd carrying order nd administration regularly to all quarters. What opposition remains is for the most pnrt scattered, obeying no concerted plan of strategic action, operating only by the methods common to the traditions of guerrilla warfare, . which, while ineffec tive to alter the general control now es tablished, are still sufficient lo beget inse curity among the populations that have felt the good results of our control and thus delay the conferment upon them of the fuller measures of local self-government, of education and of Industrial and eigrieultural development which we stand ready to give to them. By tho spring of this year the effective opposition of the dissatisfied Tagals to the authority of the United States was virtu ally ended, thus opening the door for the extension of a stable administration over much of tho territory of the archipelago. Desiring to bring this about I appointed in March last a civil commission composed of Hon. William H. Taft, of Ohio; Prof. Dean C. Worcester, or Michigan; the Ilort. Luke I. Wright, of Tennessee; the Hon. Henry C. Ide, of Vermont, und Prof. Ber nard Moses, of California. The effects of their mission nnd the scope of their au thority aro clearly set forth In my in structions of April 7. 1900, addressed to the secretary of war to be transmitted to them. In the message transmitted to the con gress on the 5th of December, 1900. I said, speaking of the Philippine Islands: "As long-ns the Insurrection continues the military arm must necessarily be su preme. But there is no reason why steps should not ho taken from time to time to Inaugurate governments essentially popular in their form an fast as territory Is held and controlled hy our troops. To this end I am considering the advisability of the return of the commission, or such or the members thereof as can lie se cured, to n'd the existing authorities nnd facilitate this wcr throughout the isl ands." Tlie Taft Cnmuilxslnn. To give effect to tho intention thus ex pressed. I have appointed lion. William If. Taft. of Ohio; Prof. Dean C. Worcester, of Michigan; Hon. I.u'-eo I. Wright, of Ten nessee; Hon. Henry C. Ide, of Vermont, and Prof. Bernard Moses, of California, commissioners to the Philippine Islands. to continue and perfect the work of or ganizing and establishing civil govern ments already commenced by the military authorities, subject in all respects to any laws which congress may hereafter enact. You w 111 Instruct the commission to pro ceed to the city of Manila, where they will make their principal office, and to communicate with the military governor of the Philippine Islands, whom you will at the same time direct to render to them every assistance within hi power In the performance of their duties. Without hampering them by too specific Instruc tions, they should in general be enjoined. after making themselves familiar with the conditions and needs of the country, to devote their attention in tho first instance to the cstabliphment of municipal govern ments, in which the natives of the isl ands, both in the cftlos end In the rural communltle3, shall he afforded the oppor tunity of managing their own local iwmirs to the fullert extent of which they are capable, and subject to tho least degree ef supervision r.r.d control which a careful study or their capacities and observation of the workings of native control show to be consistent with the maintenance of law, order and loyalty. Whenever the commission Is of the opin ion that the condition of affairs in the isl and Is such that tho central administra tion may safely be transferred from mili tary to civil control, they will report that conclusion to you with their recommenda tions as to the form of central govern ment to be established for the purpose of taking over the control. In the establishment of municipal gov ernments the commission will take as the basis of their work the governments es tablished by the mililary governor un der his order of August 8. ltt'9. and under the report of the loard constituted by the military governor by his order of January 20, 1900. to formulate and report a plan of municipal government, of which his honor Cayetano Arellano, president of the Audi encln. was chairman, and . they will give to tho conclusions of that benrd the weight and consideration which tho hlch character and distinguished abilities of its members Justify. Tho many different decrees ef civiliza tion and varieties of custom and capacity among tho people of the different islands preclude very definite instructions as to tlie part which the people shall take in tho selection of their own officers; but thoso general rules aro to be observed: That In nil cases tho municipal officers, who administer the local affair of the people aro to be selected by the people, und that wherever officers of more ex tended Jurisdiction are to be selected In any wav, natives of the Islands are to be preferred, nnd If they can be found com petent and willing to perform tho duties, they are to receive tho office in prefer ence to any others. It will be necessary to fill some offices for the present with Americans which after a tlmo may well be filled by natives of tho islands. As soon ns practicable a system for ascertaining tho merits ind fitness of candidates for civil office should bo put in force. An indispensable quali fication for all offices and positions of trust nnJ authority In the Islands must b absoluto and unconditional loyalty to tho United States, nnd absolute and un hampered authority and power to remove and punish any officer deviating from that standard must at all times lv re tained in the bands of the central author ity of the Islands. That the provision of the treaty o" Paris pledging the United States to the protection of all rights or property In tho islands, and ns well the principle of our own government which prohibits the tak ing of prlvute property without due pro--cess of law. shall not be violated; that the welfare of tho people of the islands, which should bo a paramount considera tion, shall be attained consistently with tills rule of property rights: that if It become necessary for the public interest of lh people of the Islands to dispose ot claims to property which the commission find to bo not lawfully acquired snd held, ellsnosltlon shall be made thereof bv duo legal procedure. In which there shall tic full opportunity for fair nnd impartial bearing and Judgment; that If the same public Interests require the xtingulsh ment or property rights lawfully acquired nnd held duo compensation shall bo mndi out of the public treasury therefor; that no form of religion and no minister of religion shall be forced upon any commu nity or upon any citizen of the islands: that, upon the other hand, no minister of tellglon shall bo Interfered with or mo lested In following his calling, nnd that tho separation betwee state and church shall b real, entire and nhsolute. It will be the duty of the commission to promote und extend, and ns they find necessary to prove, tho system of educa tion already inaugurated by the tillilary authorities. Tho articles of capitulation of the elfy of Manila on the 13th of August, 1898, con cluded with thoso words: "This city. Its Inhabitant. Its churches nnd religious worship. Its educations.! es tablishments, and Its private property of nil descriptions, are placed under the spe cial safeguard of the faith and honor of th American nrmy." I believe 1 ha t this pledge has been faith fully kept. Amnesty Prorlnmnt Ion. Olneldcntly with tho entrance of the commission upon Its labors I ennsed t lie Issued hv Gen MaeArthur, the mili tary leovernor of the Philippines, on June 21. 1900. a proclamation of amnesty In generous terms, of which many. of the In surgents ook advantage. amon3 them it number of Important leaders. Oar Wards. I have on another occasion ff1led th Filipinos "the wards of the natlov" Oui obligation a guardian was not lightly assumed; it must not bo otherwise thafi honestly fulfilled, aiming first of oil ttf benefit those who have come under oui fostering care. It 1 our duty so to treat them that our flag may be no leB belevexl in the mountains of Luzon and tho fertile zones of .Mindanao and Ncgros than It if at home, that there as line It shall b the revered symbol of liberty, enlighten, ment and progress in every avesere ol development. Porto Rico. I recommend that legislation be enacted by the congress conferring upon the sec retary of tho interior supervision ovel the public lands in Porto Rice, and thti ho be directed to ascertain the location and quantity of lands tho title to which remained In the crown ef Fpaln nt tho date of cession of Porto Rico to thf United States, and rhat appropriation necessary for surveys be made, and thai the methods of the disposition ef sucl land be prescribed by law. Cuba's niectlon. On tho 25th of July, 1900, I directed thai a call be Issued for an election In Cuba for members of a constltutlenal conven tion to frame a constitution as a basis fat a stable and Independent government in the island. The election was held on tin 15th of September and the convention assembled on the Cth of November, lacO, and la now in session. Pncirto Cnble. I renew the recommendation made la my special message of February 10. 1899, as to the necessity for cable communica tion between the United States and Ha waii, with extension to Manila. Slnct then circumstances have strikingly em phasized thl need. Surveys have shown the entire feasibility of a chain of cable which at each stopping place shall touch on American territory, so that the sys tem shall be under our own complete con trol. Manila once within telegraphic reach, connection with the system of th Asiatic coast would open Increased ancl profltablo opportunities for a more direct cable route from oar shores to the Orient than Is now afforded by the trans-Atlantic, Continental and trans-Asian lines. I urge attention to this important matter. The , Army. The present strength of the army h IOO.OiKI men K5.000 regulars and 35.000 vol unteer. Under the nU of March 2. 1899, on the 30th of Juno the present volunteer force will be discharged and the regulat army will be reduced to 2,447 officers and 2:.0L'a enlisted men. We will be required to keep a consider able forco in the Philippine Inlands foi some time to come. From tho best infor mation obtainable, wo will need there for tho immediate future from 45,009 to OO.OiJt men. I air. sure tho number may bo re duced ns the Insurgents shall come tfl acknowledge 'tho authority of the United States, of which there are assuring indi cation. It must be apparent that wo will rcqulr an army of about 00,000 and that durlnj present conditions in Cuba and the Philip pines tho president should have authorltj to Increase the force to the present num ber of 100,000. Included In this number authority should be given to raise natlv troop In the Philippines up to 15.000, which the Taft commission believe will b more effective In detecting and suppress ing guerillas, assassin and Badroncs than our own soldier I renew tho recommendation made in mj last annual message that the congresj provide a special medal of honor for tlu volunteers, regulars, sailors and marlnei on duty in tho Philippines who volun tarily remained In the service after theii term of enlistment had expired. The Navy. Very efficient service has been rendered by the navy in connection with the insur rection in tho Philippines and the recent disturbance In China. A very satisfactory settlement has beer made of tho long-pending question of the manufacture or armor plate. A reason able price has been secured and the ne cessity for a government armor plant avoided. I approve of the recommendations of the secretary for new vessels and for addi tional olllcers and men which the required increase of the navy makes necessary. Pensions. At the end of the fiscal year there weM on the pension roll 993. .'29 names, a net In crease of 2,010 over the fiscal year 1R'.)9. The number added to the rolls during th year wa 45,314. The amount disbursed tor army pensions during the year was $134. 700.597 24 and for navy pensions $3,701,53311, a total of $138,402,130 C5. leaving an unex pended balance of $o.512,7CS 25 to be covered into the treasury, which shows an Increase over the previous yeur's expenditure of $107,077 70. There were f81 names added to tho rolls during tho year hy special nct passed at the first session of the fifty sixth congress. The act of May H, 1900. among othef things provides for an extension of Income to widows pensioned under said net to $250 per annum. The secretary of the interior believes that by the operations of thi net the number of persons petitioned un der It will Increase, and the increased an nual payments for pensions will be be tween $3,000,000 and $1,000,000. Ilitvrnll. Mneh Interesting Information Is given in the report of the governor or Hawaii as to the progress and development nt th Islands during the period from July 7. 1S91. the date of the approval of the joint resolution of congress providing for their annexation, up to April CO. 19W. the date of the approval of the act providing a gov. crnment for the territory, nnd thereafter. The last Hawaiian census, taken In tho vear 1SJ5. gives a total population of 109. 020, of which 31.19 were native Hawallans. The number of Americans reported was 885. The results of the federnl census, taken this year, show the Islands to havo a total population of 154.001, showing an Increase over that reported In 1833 of 44, S)M. or 41 5 par cent. There has been marked progress In thfl educational, agricultural and railroad dt velopment of the Islands The Sunday cchool3 in Spain aro said to have only 3,200 pupils. The' czar haa 27,000 wood police, who each cut 45 worth of wood year. A memorial bust of Chopin has been unveiled In tho Luxembourg Gardens at Pari 3. There are 894 creameries In Iowa, a net Increase over those of a year ago of forty-six. King Oscar of Sweden is the tallest reigning monarch. He is a little over six fect. There are 30Q.000 French Canadians, of whom 25,000 are voters, In Massa chusetts. Tho baggage checking system, which 13 universal in America, is coming Into use in England. Thirty-six per cent of the area of the state of Washington i3 covered with merchantable timber. The Argentine Republic exported only 205,103 bales of wool last year, as against 237,479 In 1898. Australians hold a world's record in tea consumption, drinking nearly eight pounds a head yearly. In Milwaukee recently during a rainstorm several trees were set on fire by diverted electric currents. A new photographic machine takes five different views of a person at ono sitting. This is done by means of mirrors. An election Judge in San Francisco cast his vote early, but forgot to mark It, and consequently it waa couated aa a blank.