Mr. Sherman to Mr. von Reichenau.

No. 384.]

Sir: By the Department’s note, No. 359, of July 30 last, you were informed that yours of the 28th of the same month, relative to the application of section 5 of the United States tariff act of July 24, 1897, to bounty sugar imported from Germany, had been referred to the Secretary of the Treasury for his consideration. That official having given careful attention to the protest which your said note contains, I have the honor to acquaint you with the substance of his conclusions as follows:

The protest of your Government rests upon two grounds: (1) That “this discriminating treatment of German sugar is incompatible with the most favored nation rights that are secured to German productions by the treaties in force as regards the duties to be levied on them when they are imported into the United States,” and (2) “that it is incompatible with the provisions of the Saratoga agreement of August 22, 1891.”

An answer to the first of these objections may be found in the opinion of November 13, 1894, of the Attorney-General upon the question whether salt exported from Germany was dutiable under paragraph 608 of the tariff act of August 28, 1894, in view of the fact that Germany imposed duties upon salt exported from the United States. In this opinion the Attorney-General said, in part:

If it be assumed * * * that the treaty of 1828 binds the United States as regards all the constituent parts of the German Empire, the claim of the German ambassador, founded upon the most favored nation clause, must be pronounced untenable for at least two conclusive reasons. In the first place, the most favored nation clause of our treaties with foreign powers has, from the foundation of our Government, been invariably construed both as not forbidding any internal regulations necessary for the protection of our home industries and as permitting commercial concessions to a country which are not gratuitous, but are in return for equivalent concessions, and to which no other country is entitled except upon rendering the same equivalents. Thus, Mr. Jefferson, when Secretary of State in 1792, said of treaties exchanging the rights of the most favored nation that they leave each party free to make what in ternal regulations they please and to give what preference they find expedient to native merchants, vessels, and productions. In 1817 Mr. John Quincy Adams, acting in the same official capacity, took the ground that the most favored nation clause only covered gratuitous favors and did not touch concessions for equivalents, express or implied. Mr. Clay, Mr. Livingston, Mr. Evarts, and Mr. Bayard, when at the head of the Department of State, have each given official expression to the same view. It has also received the sanction of the Supreme Court in more than one well-considered decision. * * * In the next place, even if the provisions of our recent tariff act under consideration could be deemed to contravene the most favored nation clause of the treaty with Germany (as they cannot be for the reasons stated), the result would be the same. The tariff act is a statute later than the treaty, and, so far as inconsistent with it, is controlling.

Inasmuch as the subject-matter of the above opinion and the question under consideration are, with respect to the most favored nation clause, in pari materia, the reasoning of the former may, under the well-known rule of construction, be applied to the latter question. But reliance upon this principle is not necessary to make the opinion of the Attorney-General applicable to the present case. One paragraph thereof is directly in point.

The interpretation of the most favored nation clause [he says], so clearly established as a doctrine of American law, is believed to accord with the interpretation put upon the clause by foreign powers—certainly by Germany and Great Britain. Thus as the clause permits any internal regulations that a country may find necessary to give a preference to native merchants, vessels, and productions, the representatives [Page 179]of both Great Britain and Germany expressly declared at the international sugar conference of 1888 that the export sugar bounty of one country might be counteracted by the import sugar duty of another without causing any discrimination which could be deemed a violation of the terms of the most favored nation clause.

As to the second ground of protest—that of incompatibility with the Saratoga agreement of August 22, 1891, the Secretary of the Treasury is of the opinion, in which I join, that the said agreement was no longer in force at the time of the passage of the act of July 24, 1897, inasmuch as the act of August 28, 1894, repealed section 3 of the act of October 1, 1890, under which the agreement was made.

It is to be added that the protest of Baron von Thielmann against the enforcement of the corresponding paragraph of the act of August 28, 1894, and against the enactment of section 5 of the act of July 24, 1897, having been at his request laid by me before the Senate on May 19 last, the Congress of the United States acted with full knowledge of them.

Accept, etc.,

John Sherman.