No. 503.
Mr. Phelps to Mr. Bayard.

No. 652.]

Sir: I have tho honor to inclose herewith a report by Mr. Henry White, first secretary of this legation, upon the proceedings of the [Page 689] international conference recently held here in reference to the question of sugar bounties, at which he was directed by you to be present.

This report is so full and satisfactory that I do not deem it necessary or useful to add anything thereto.

I have, etc.,

E. J. Phelps.
[Inclosure in No. 652.]

Mr. White to Mr. Bayard.

report on sugar bounties.

Sir: I have the honor to acquaint you that in accordance with the instructions contained in your telegram to the minister of the 10th instant, I attended the fourth and subsequent meetings of the international conference on the sugar bounties question, until its adjournment on the 19th of this month; and I inclose herewith (inclosure A) the copy of a printed document embodying the minutes of its proceedings, together with other papers of interest connected with the same, to which I shall refer hereafter.

Upon my arrival at the foreign office on Monday, the 12th instant, to attend the meeting fixed for that day, I informed the president, Baron Henry de Worms, that I had been authorized by you to represent the United States in a friendly way at the conference, and to report its proceedings to my Government, but not to participate in its deliberations, nor to commit the United States to any of the conclusions which might be arrived at.

Baron de Worms expressed great pleasure at the presence of a representative from the United States, and the other delegates were good enough to assure me that their sentiments were in complete accord with those to which the president had given utterance, many of them coupling with this assurance an expression of regret that my Government was not officially represented, upon the ground that no conference on the sugar industry could be complete without the formal participation therein of the United States.

Baron de Worms also read to the conference a French translation of Mr. Phelps’ note to Lord Salisbury (inclosure A, page 51) of December 12, a copy of which has been already sent to you in dispatch No. 643, of the 17th instant, from this legation.

The French language was exclusively used in the deliberations of the conference, at which the following nations were represented: Austria-Hungary, Belgium, Denmark, France, Germany, Great Britain, Holland, Italy, Russia, Spain, and Sweden.

Brazil also sent a delegate, but instead of putting in an appearance at the conference, he remained at Paris, and from there addressed a letter to the president (inclosure A, p. 44), transmitting a brief statement with regard to the sugar industry in Brazil and to the legislation of that country affecting the same, together with an intimation that, in his opinion, the conference would be devoid of practical results, Owing to the conflicting interests of the countries represented, which would prevent their coming to any agreement.

France sent five delegates and a secretary; Holland and Great Britain four each (of the latter, Lord Onslow, colonial under-secretary of state, represented the British colonies); Belgium sent three delegates; Spain and Germany two each, and the other powers a single delegate. Most of these gentlemen, whose names are transmitted herewith (inclosure A, p. 31) are connected with the ministries of finance or with the customs departments of their respective countries. They are thoroughly (conversant with every detail in regard to the sugar industry, and some of them had been at previous conferences in reference thereto.

The senior French and British and the second Spanish delegates are, however, members of parliament in their respective countries, and the Austro-Hungarian, the senior Spanish, the Italian, and the second French delegates are diplomatists; the two latter being first secretaries, respectively, of the Italian and French embassies accredited to this court, and Mr. Dupuy de Lôme, of Spain, having been formerly secretary of legation at Washington.

The whole of the beet-sugar interest of the world, save our own, which is insigificant, and about four-fifths of that of cane-sugar, were thus officially represented at the conference, which was convoked for reasons set forth in the Marquis of Salisbury’s circular dispatch of July 2 last (inclosure A, p. 1), to Her Majesty’s representatives [Page 690] accredited to the governments invited to participate, a copy of-which.-is doubtless on file at the Department of State.

According to the terms of this dispatch, the attention of the proposed conference would he particularly called to the following points, without, however, excluding others bearing on the sugar industry which the delegates might wish to consider:

The means of remedying the unsettled condition of the sugar trade.
The possibility of adoption by the Governments represented of a system of refining and manufacturing in bond.
The elaboration of a system of duties and drawbacks, which should render any difference between them in favor of exporters of sugar an impossibility.
The examination of any proposals tending to guaranty the abolition of bounties which might be made.

It has long been obvious here that the sugar industry of Great Britain has been seriously impaired by the heavy bounties given by certain Governments (France and Germany in particular) to their exporters, who were thereby enabled, with profit to themselves, to place sugar on the London market at a lower rate than it could possibly be produced in this country save at a considerable loss.

That this has been the case for some time past with regard to sugar imported from the United States is well known, and the attention of the Secretary of the Treasury was called last year to the fact that our Government was giving bounties, to the extent) of thousands of dollars annually, in the shape of drawbacks, by Mr. Phelps’ dispatch No. 300, of June 19, 1886, which was based upon information furnished to him by an American resident of London, to the effect that by means of the excess of drawbacks received upon sugar exported from New York over the duty originally paid upon the importation of the raw material from the West Indies, the refiners of that city were able to sell their sugar, with profit, in the London market at a lower price than that originally paid for the raw material.

The drawback has since been reduced, but it still affords a bounty to our exporters.

Urgent representations, which are fully set forth in the accompanying Blue Book on sugar bounties, issued in 1884 by the board of trade (inclosure B), have been made on the subject at different times to successive British ministries, and there have been attempts by this country since 1880 to persuade certain Governments to take part in a conference, with a view to the abolition of bounties; but it is only this year that these efforts have met with success.

As it can not be supposed that any of the Governments, in consenting to send delegates to the conference, were actuated by other motives than self-interest, it must be assumed that they have found the system of giving bounties, which in certain countries, from motives of self-protection, have been steadily increasing in amount, more than their budgets would stand, and that they have consequently arrived at the conclusion that it is contrary to their interests to continue the disbursement annually of large sums, the chief effect of which is to cheapen the price of sugar to the British consumer.

The question of bounties in our own and certain other countries is treated so fully in a very interesting pamphlet by Dr. W. H. Wiley on the sugar industry of the United States, published by the Department of Agriculture, at Washington, in 1885 (Bulletin No. 5, Chemical Division), that I deem it unnecessary to dwell at length upon the subject.

The manner is therein set forth in which the exportation of sugar is encouraged by the payment of Government bounties, usually in the excess of drawbacks over duties. These drawbacks are supposed to be exactly equal in amount to the duties, but as a matter of fact this is not the case; for the reason that it is often difficult, if not impossible, to ascertain the exact quantity of sugar which can be obtained from a given amount of beets or cane; as this depends not only upon the quality of the machinery, but also upon that of the raw material used. In Belgium, for instance, where there is a fixed legal yield (prise en charge), it appears that the beet is much richer in the north, and consequently productive of more sugar than in the south.

The first sitting of the conference was devoted to the election of officers, the senior British delegate, Baron Henry de Worms, M. P., parliamentary secretary of the board of trade, being chosen president, and the Comte de Kuefstein, representing Austria-Hungary, vice-president.

Papers embodying statistics of the sugar trade, and also the systems of taxation, duties, and drawbacks prevalent in each of the countries represented, were laid before the conference at this meeting. The details contained in these documents, which were furnished by the different powers at the request of the British Government, are of much interest, and are transmitted herewith (inclosure A, pp. 2–29).

After the expression in happily worded speeches (inclosure A, p. 31) by the president and vice-president of a hope, in which M. Guillaume, el-Belgium, concurred, that the conference might be able to agree upon means for carrying into effect the object for which it had come together, namely, the abolition of bounties, direct and indirect, upon the exportation of sugar, an adjournment was voted to Monday, November [Page 691] 28, on the understanding that meanwhile the delegates should acquaint themselves with the memoranda contained in the papers to which I have already referred.

At the second meeting of the conference the questions at issue were seriously broached, as will be seen by the minutes (inclosure A, pp. 34–40), in which the positions assumed by the delegates of each country are fully set forth. Upon the suggestion of M. Kamensky, of Russia, the representatives of the powers were requested to state in turn the views of their respective Governments, and especially, whether and to what extent the latter favor the exportation of sugar by granting direct or indirect bounties, and whether they really desire to abolish the same.

From the statements made in reply to this suggestion, which are given so fully in the minutes that I deem any description of them other than a brief summary unnecessary, it appeared that the recent legislation of Austria-Hungary and that of Germany tend to the abolition of bounties; that France, while compelled in self-defense to give very high bounties to her exporters, earnestly hopes that by their abolition elsewhere she may be enabled to do away with them; that in Russia they had already been abolished, save on the Asiatic frontier (where they would also cease to exist in 1891); that Spain practically gives no bounties; and that Holland, Belgium, Italy, Sweden, and Denmark would cheerfully join in their abolition with the other powers.

In the course of their statements a variety of interesting statistics were gone into by the delegates, the accuracy of some of the figures quoted and the conclusions of certain members of the conference based thereupon being occasionally called in question by others.

The discussion was continued at the third meeting of the conference, which took place on Wednesday, November 30, and it soon became evident that the delegates, while apparently agreed upon the principle of abolishing bounties, were far from unanimous as to the means of attaining that end. The majority appeared to favor the proposal of a tax in each country upon the quantity of sugar produced and intended for consumption therein, the raw material being admitted free of duty, and all necessity for a drawback being thereby obviated. But the Belgian delegates, under instructions from their Government, objected strongly to this system, giving as reasons that (1) no uniform method for abolishing bounties would be, in their opinion, possible, owing to the difference between the fiscal systems and the customs of the trade of different countries; and (2) that a system of refining and manufacturing in bond would be out of the question in Belgium (where it had been tried for a short time), owing to the unpopularity and to the expense to the state of the strict excise supervision which would become necessary, and would be injurious to the trade.

It was eventually decided to appoint a committee to consider the different proposals, and to recommend the best means to be adopted for the abolition of the bounties.

In this connection, M. Sans-Leroy, who represented French interests with marked ability at the conference, raised the question of saccharometry, stating that in his opinion the exact saccharine value of the product to be taxed (under the system to which I have just referred) should be determined before the appointment of a committee to consider and recommend a general system of taxation; but after some discussion this question was referred to the committee, which was composed of the Comte de Kuefstein(Austria-Hungary), Messrs. Jaehnigen (Germany), Guillaume(Belgium), Sans-Leroy (France), Verkerk Pistorius (Holland), and Walpole (Great Britain).

The conference then adjourned until the committee should be in a position to report-On Monday, December 12, the conference, at which, as already stated, I was present that day for the first time, held its fourth sitting to receive the report of the committee (inclosure A, p. 51), which recommends:

A system of taxation based upon the quantities of sugar produced and ready for consumption, including glucose and sugar extracted from molasses, as the sole means of abolishing bounties. (Belgium, while assenting to the principle of the abolition of bounties, makes formal reservations in a second paragraph of this clause with regard to the method suggested by the other members of the committee.)
That the extent to which saccharometry shall be used in the proposed system of taxation upon the quantities of sugar produced be referred to each Government. Uniformity of method in its use is suggested as desirable.
That the different Governments communicate to each other their respective views upon the aforesaid suggestions before March 1, and if favorable to the same, that they be requested to formulate and transmit to each other a project for the taxation of quantities of sugar produced, which project should state the extent to which saccharometry should be employed.

The report of the committee led to a protracted discussion; most of the delegates being in favor of its adoption, save as respects the clause affecting Belgium. The senior Belgian delegate repeated the objections of his Government to a system of refining and manufacturing in bond, and then proceeded to explain the concessions [Page 692] proposed in its stead as guaranties for the suppression of bounties. These consisted of modifications in the system now in force in Belgium. This is based upon the volume and the density of the juice, which the Belgian Government believes to be ascertained with accuracy by means of an apparatus provided with an automatic meter, a drawing and description of which will be found herewith (inclosure A, p. 10). It is now assumed, for purposes of taxation, that for every hectoliter of volume, and for every degree of density registered by this apparatus 1,500 grams of sugar are obtained, and this is taxed at 45 francs per 100 kilograms; but it is well known that the actual yield of sugar is much greater. With a view to doing away with the difference between the legal and the actual yield, M. Guillaume proposed to raise the former (prise en charge) to 1,700 grams, and to reduce the tax from 45 to 25 francs per 100 kilograms. He claimed that these modifications, if adopted, would afford complete guaranties for the abolition of bounties, and gave his reasons at considerable length; but they were not deemed satisfactory, such abolition being impossible, in the opinion of most of the delegates, of accomplishment by the means proposed by M. Guillaume, for the reason that no fixed legal yield could be settled upon as an equivalent of the actual yield, which must vary, as already stated, in accordance with the richness of the beet. Full particulars of the discussion on this subject will be found in the minutes (inclosure A, pp. 45–50).

The delegates promised to submit to their respective Governments the Belgian proposals, intimating clearly, however, that they would not be considered satisfactory.

After adopting the report of the committee the conference adjourned until Wednesday, December 14, when its fifth sitting (inclosure A, page 52) was held.

An ineffectual attempt was made on this occasion by the French and Dutch delegates to induce their Belgian colleague to modify the position assumed by him at the last meeting.

Mr. Dupuy de Lôme, of Spain, then raised a question of importance, especially to countries not belonging to the sugar union, which it is hoped (and in my opinion not without reason) will be the outcome of the conference, namely, as to the guaranties to be given to countries within the union against the importation from those not parties thereto of bounty-fed sugar, which he maintained would, if allowed, be equivalent to the imposition of a discriminating duty upon non-bountied sugar, and would be a violation of the most favored nation clause in many treaties of commerce.

This question, although it evoked no general expression of opinion, was deemed worthy of serious consideration, and it is to be submitted during the adjournment to the various Governments represented. It will undoubtedly be again brought forward when the conference re-assembles in April next, and a penal clause will not improbably be inserted in the treaty.

M. Verkerk Pistorius, of Holland, also raised the question of “surtaxes,” which he explained to be the difference between the tax levied in a country upon homemade sugar and the duty charged upon sugar imported from abroad. He expressed a desire to have a clause inserted in the treaty prohibiting “surtaxes,” on the ground that any country, by allowing an import duty in excess of the internal tax on sugar, could at once create protection for its home market, and that such protection might, by developing the manufacture of sugar, enable a country of the union largely to increase its exports of that commodity.

There was some discussion of this question, which was eventually dropped, most of the delegates stating that they were without instructions on the subject, as their respective Governments had not deemed “surtaxes” to be within the range of the deliberations of the Conference; the more so, as no rule could be laid down in the matter without interfering with the right of each nation to impose such import duties as it might deem advantageous or desirable. It was, moreover, distinctly intimated that certain countries—France and Russia among the number—would not undertake to abolish “surtaxes,” as such a step would deprive them of the right to reserve their home markets to their own sugar, should they wish to do so. I do not think this subject will be again brought forward upon the re-assembling of the conference; certainly not with any chances of success; but it is to be submitted by the delegates to their Governments.

The Earl of Onslow, before the adjournment of the conference, in reply to a suggestion of the French delegate that it would be impossible to conclude any arrangement on the sugar-bounties question without including therein the British colonies, stated that of all the self-governing colonies of this Empire Victoria and New Zealand alone give bounties; the former grants one of a halfpenny per pound, which has thus far never been claimed or paid, and in the latter a bounty of 3s. 6d. per hundred-weight exists, but he hoped that before March 1 these two colonies and all the others excluded by Article VIII of the proposed convention would have agreed to become parties thereto.

The proceedings of the seventh and last meeting of the conference, which took place on Monday, December 19, were chiefly formal.

The Spanish delegates presented a memorandum of their proposal with regard to a penal clause (inclosure A, p. 58.)

[Page 693]

The protocol, of which I inclose an original copy (inclosure C) herewith (it is also to he found in inclosure A, p. 63), was signed by the delegates of all the powers officially represented at the conference, it being understood that Belgium made express reservations as to the last paragraph, relative to Article III of the “projet de convention,” which formally records the reservations made by the French, Austro-Hungarian, German, Spanish, Italian, Dutch, and Russian delegates as to the Belgian proposals.

I transmit herewith a translation of the protocol and “projet de convention” (inclosure D).

After the signature of the protocol a letter was read by the president from Lord Salisbury (inclosure A, p. 64) congratulating the members of the conference upon the successful issue of their labors; which were then brought to a close by Baron Henry de Worms in a speech summarizing the results that had been accomplished, and thanking the delegates for their co-operation. To this the vice-president and M. Sans Leroy, of France, replied. The conference then adjourned to Thursday, April 5, next.

It was undoubtedly successful in its results, beyond the expectation of those who took part in it; and I ought to add that, in my opinion, this was largely due to the ability and tact of the president, Baron Henry de Worms; although, of course, his services would have been of no avail, had not the Governments represented been anxious to do away with bounties if possible.

It is scarcely necessary for me to call attention to the fact that by signing the protocol on the 19th instant the delegates are only bound to submit to their respective Governments the “projet de convention,” and that the latter will only become binding upon its ratification, which is expected to take place in April next.

Of course, it is quite possible that the convention may not be ratified, but I infer from what I heard at the conference, and from frequent conversations with the leading delegates, who were in constant telegraphic communication with their Governments, that a sugar union will be formed next year, having for its basis the abolition of export bounties.

Belgium can hardly afford to be excluded from such a union, if the other powers represented at the conference unite in forming it; it will certainly not be admitted on the terms proposed by the Belgian delegates. It is therefore probable that these proposals will be modified in such a manner as to furnish the guaranties required by the other powers.

I have already, stated that a very earnest desire was evinced at the conference that the United States should become a party to the proposed sugar union and should sign the convention in April next.

I do not conceive it to be a part of my duty to express an opinion as to the propriety of our adopting such a course or otherwise; but I observe that the Secretary of the Treasury, in his report to Congress on the state of the finances for this year (page xviii) recommends that “our drawback laws be so framed as to insure the payment of no more than the amounts actually collected in duties (i. e. that bounties be abolished).”

It may be well, however, to point out in this connection—

  • First. That under Article IV any Government may become a party to the convention without necessarily adopting the principle of refining and manufacturing in bond, by undertaking to impose no duties on sugars or not to allow any drawback or reimbursement of duties upon imported sugars.
  • Second. That, by joining the proposed sugar union, a nation will not, according to present indications, be compelled to forego the right to protect its home market by import duties to any extent that it may consider advantageous.
  • Third. That should a Government not deem it advisable to join the union at the time of its formation it may do so hereafter, under Article VII of the convention, by notifying the British Government.
  • Fourth. That sugar imported into the union from bounty-giving countries will, in all probability, be subjected, should the penal clause previously mentioned be inserted in the convention, to a duty whereby any advantages derived from such bounties will be annulled.

I have delayed sending this report for a few days in the hope of obtaining an English translation of inclosure A; but I am informed that this will only be ready for the opening of Parliament in February.

I should have been happy to translate it myself had the clerical assistance allowed to this legation been adequate; but it would have been impossible, under the circumstances, for me to undertake any such work, consistently with my other duties, without greatly retarding the transmission of this report. As soon as a translation can le obtained it shall be forwarded to you.

It is understood that Her Majesty’s Government will communicate to all the others who have participated in the conference, through the usual diplomatic channels, any expression of the views of the powers with respect to the principles adopted by the [Page 694] conference, and any proposals as to the application of the system of taxation upon quantities of sugar produced, which may reach the foreign office here.

Copies of any such documents which may be received at this legation shall be immediately forwarded to you.

I have the honor to be, sir, your obedient servant,

Henry White.

Note.—Inclosures A, B, and C are not printed herewith.;

[Inclosure D in Mr. White’s report.]

The sugar bounties conference.—Proposed convention.

The members of the International Conference on Sugar Bounties met yesterday afternoon at the foreign office for the last time before adjourning. Baron Henry de Worms presided, and all the representatives attended. The sitting occupied overthree hours, and on rising the conference adjourned to April 5.

The following letter was read to the members of the conference by Baron Henry de Worms:

Foreign Office, December 17.

My Dear Baron de Worms: A political engagement of long standing will take me away from London, and will, to my great regret, prevent me from having the opportunity of meeting the delegates to the sugar conference at their final sitting. Will you kindly be the bearer of my apologies, and, at the same time, of my sincere congratulation on the success which has attended their labors? The present suspension of their labors is only an adjournment. I shall hope to have the honor of welcoming them on their re-assembling in March, when I trust they will return armed with the powers necessary to give practical effect to their valuable deliberations.

“Believe me, yours, very truly,


“To the Baron Henry de Worms, M. P.”

The following protocol was signed yesterday by the delegates of the various States represented at the conference:

“The undersigned delegates of Germany, Austria-Hungary, Belgium, Denmark, Spain, France, Great Britain, Italy, the Netherlands, Russia, and Sweden met in London on the 24th of November, 1887, in order to study the bases of an understanding with regard to the suppression of bounties on the exportation of sugars. After the deliberations recorded in the ‘procès verbaux’ of the sittings, they arrived at an agreement upon the principles enunciated in the report of the commission. In order to give a practical application to this enunciation, the president of the conference communicated to them a proposal of convention, which they have examined and undertake to submit to the consideration of their Governments, praying them to make known to her Britannic Majesty before the 1st March, if they adhere to the principles of this proposed convention which is annexed to the present protocol. In case of agreement each Government shall communicate with the British Government before the said date a proposal indicating the bases of the application of the system of taxing the quantities of sugar produced. This proposal is to state with what limitations and in what cases saccharometry will be employed. Each Government will at the same time make known if, for the sake of uniformity, it may be disposed to admit what is called the French method generally employed in the commerce of several nations. With regard to Article III of the said proposed convention, the French delegates, not considering that the system proposed by Belgium presents for the suppression of bounties the guaranties with which the high contracting parties ought to be furnished, make the most express reserves as to this article. The delegates of Germany, Austria-Hungary Spain, Italy, the Netherlands, and Russia adhere to the reserves made by the French delegates.

“Done at London, 19th December, 1887.”

The following is the annex to the above protocol:

“The high contracting parties, desiring to insure the total suppression of premiums, open or disguised, on the export of sugars, have resolved to conclude a convention to this effect, and have appointed as their plenipotentiaries the following: —— ———, who, after having exhibited their full powers, found to be in good and due form, have agreed upon the following articles:

  • “(1) The high contracting parties undertake to take or to propose to their respective legislatures measures which shall constitute an absolute and complete guaranty that there shall not be granted any premium, open or disguised, on the export of Sugars.
  • “(2) The high contracting parties undertake to adopt, or to propose to their respective legislatures, a system of taxation of the quantities of sugar produced, and ready for consumption, as the only plan which permits of the suppression of the premiums in question, and to submit to the same arrangement the factories of glucose and factories for the extraction of sugar from molasses.
  • “(3) Belgium not being under the same conditions with regard to the application of the system of taxing the quantities of sugar produced, the system at present in force in that Kingdom may be maintained with the following modifications: The assessment of the tax shall be reduced from 45 francs to 25 francs, from the time the present convention shall be put in force. The capacities of the compounding factories shall he increased from 1,500 to 1,700 grams.
  • “(4) States or colonies and foreign possessions of the high contracting parties, who, though not adopting the system mentioned in Article II, do not levy taxes on sugars, or who agree not to allow upon raw or refined sugars which are being exported any drawback, re-imbursement, or reduction of charge of dues or quantities, shall also be admitted to the convention.
  • “(5) In case a State which does not levy duties on sugar shall impose them, this State must levy those duties upon the quantities of sugar produced and intended for consumption, or at least must not give any drawback, re-imbursement, or discharge of duties or quantities.
  • “(6) The high contracting parties shall communicate the laws which may have been already adopted, or which are about to be enacted, in their respective States with reference to the object of the present convention.
  • “(7) States which have not taken part in the present convention are admitted to adhere to it on their demand. This adhesion shall be notified in diplomatic course to the Government of Her Britannic Majesty, and by them to other contracting powers.
  • “(8) The stipulations of the present convention shall be applicable to the colonies and possessions of her Britannic Majesty, with the exception of those here named, that is to say, the East Indies, Canada, Newfoundland, the Cape, Natal, New South Wales, Victoria, Queensland, Tasmania, South Australia, Western Australia, and New Zealand.
  • “In any case the stipulations of the present convention shall be applicable to any of the colonies above indicated from the time when the British Government shall notify the adhesion of that colony or possession to the other contracting powers. Each of the colonies or possessions above named which may have adhered to the present convention preserves the power of retiring in the same manner as the contracting powers. In case one of the colonies or possessions alluded to should desire to withdraw from the convention, a notification to this effect shall be given by the British Government to the other contracting parties.
  • “‘(9) The present convention shall he put in force from ——. It shall remain in force for ten years from that day, and in case none of the high contracting parties shall have notified twelve months before the expiration of the said period of ten years its intention to put an end to it, it shall continue in force for a year, and thus from year to year. In case one of the signatory powers shall denounce the convention, this denunciation shall have no effect save with respect to that power.
  • “(10) The present convention shall be ratified, and the ratifications shall be exchanged in London within —— months or sooner, if possible.”