With regard to the levying of an identical ad valorem duty of 40 per cent on sugar from all countries, with the addition of one-eighth of a cent per pound on sugar above No. 16 Dutch standard, the German Government will refrain from making any observations, although German sugar, since it is of better quality than the inferior grades of sugar from the competing countries, is there by placed at a disadvantage, as compared with those inferior grades. The German Government must, however, regard the discrimination against German goods by levying a duty thereon of one-tenth of a cent additional per pound as an injury to the German sugar trade which can not be reconciled with the treaty stipulations now in force between Germany and the United States. The payment of a bounty is a purely domestic matter, and is not to be considered in connection with the establishment of duties between States which, like Germany and the United States, sustain the relation of most favored nations toward each other. The United States might, for instance, with the same reason assert that German manufacturers in any particular branch of industry paid lower taxes than elsewhere, and then, in order to bring about a so-called equalization, levy a discriminating duty on the German product concerned on its importation into an American port. It is quite evident that such a view of the case would render the most-favored-nation clause altogether illusory.

While the Imperial Government can not thus do otherwise than regard the addition of one-tenth of a cent per pound as being at variance with the treaty, the German sugar producers declare, on the basis of accurate computations made by them, that this addition would, in fact, drive out German productions from the American market. The addition, moreover, falls more heavily upon the sugar industry of Germany than it does upon that of other bounty-paying countries, since the German bounty, which, in the year 1897, is to be discontinued entirely, is by no means as high as those of Austria and France, and does not even approximately condensate the exporter for the loss entailed upon him by the additional duty.

The excitement which prevails in German agricultural and manufacturing circles on account of this inequitable treatment of a German production, is the more vehement and the less easily resisted, inasmuch as it is generally believed that the United States, in the agreement of August 22, guaranteed exemption to Germany from the duty on sugar, in return for the concession of the conventional duties on American agricultural products and the removal of the restrictions on the importation of swine.

However fully the Imperial Government is convinced that the passage of the resolution fixing the duty on sugar, which has been adopted by the Senate, is not to be considered as an act unfriendly to Germany, yet it is so considered in many quarters. The Imperial Government is consequently at present unable to say whether it will be possible for it, in view of the increasing agitation on account of the proposed measure, to restrain the interested parties from demanding retaliatory action, which the Imperial Government, owing to the friendliness and fairness that characterize its intercourse with the United States, desires to avoid.