It was soon made clear that there was to be no more dollar diplomacy. The Knox policies in Central America were dropped--although American troops continued to dominate Nicaragua--and in 1914 the Administration successfully discouraged American participation in a six-power loan to China. The Russo-Japanese absorption of Manchuria was to be treated as the accomplished fact that it was; and in general the policy of the new Administration was anything but aggressive. It would not use diplomacy to advance American commercial interests, nor was it prepared to accept the assistance of American financiers in promoting the policies of diplomacy.
But it was evident from the outset that the most quiescent foreign policy could not prevent foreign complications. Growing anti-Japanese sentiment in California led to the passage of a State law against Japanese land holdings. There was much resentment in Japan, and protest was made to the Federal Government. Mr. Bryan, as Secretary of State, had to make a personal trip to Sacramento to intercede with the Californians; and at one time (May, 1913) military men appeared to feel that the situation was extremely delicate. But the crisis passed over, the Californians modified the law, and though in its amended form it suited neither the Californians nor the Japanese, the issue remained in the background during the more urgent years of the war. Toward the very end of the Wilson Administration it was to come back into prominence.
Another question which caused much disturbance to the new Administration was the question of Panama Canal tolls. An act passed in 1912 had exempted American coastwise shipping passing through the canal from the tolls assessed on other vessels, and the British Government had protested against this on the ground that it violated the Hay-Pauncefote treaty of 1901, which had stipulated that the canal should be open to the vessels of all nations "on terms of entire equality." Other nations than England had an interest in this question, and there was a suspicion that some of them were even more keenly if not more heavily interested; but England took the initiative and the struggle to save the exemption was turned, in the United States, into a demonstration by the Irish, Germans and other anti-British elements. Innate hostility to England, the coastwise shipping interests, formed the backbone of the opposition to any repeal of this exemption, but the Taft Administration had held that the exemption did not conflict with the treaty (on the ground that the words "all nations" meant all nations except the United States), and British opposition to the fortification of the canal, as well as the attitude of a section of the British press during the Canadian elections of 1911, had created a distrust of British motives which was heightened by the conviction of many that the Hay-Pauncefote treaty had been a bad bargain.