Memorandum to the French Embassy.

The Department of State has not failed to give most careful consideration to the French ambassador’s note of the 12th ultimo, containing the counterproposals of his Government for a new commercial agreement between the United States and France, in response to this Government’s proposals of June 19, 1907. The department has also received and carefully considered the ambassador’s memorandum of the 28th ultimo on the same subject, with special reference to the commercial movement between the two countries and their respective customs tariffs.

While this Government is deeply disappointed that the Government of France has found itself unable to accept the propositions submitted to it last June, it still cherishes the hope that some middle ground between what was then asked on the part of the United States and what is now offered by France may be found upon which the two Governments may eventually reach a mutually satisfactory agreement.

As regards the opposing views of the two Governments on the subject of the inclusion of the clause relative to Porto Rican coffee in the additional commercial agreement of August 20, 1902, and on the subject of the correlation of the conditional concession in favor of French still wines and vermuth in the agreement of May 28, 1898, with the continuance of the minimum tariff in favor of Porto Rican coffee, the department is of the opinion that further discussion would be futile. Suffice it to say, however, that the threatened imposition of a duty on coffee, Porto Rico’s only important article of export, of 26 cents per pound—equivalent to an ad valorem of 289 per cent—would present precisely such a contingency as the American negotiator of the commercial agreement of May 28, 1898 (although Porto Rico was still a colony of Spain), sought to guard against by making the reduction of duty in favor of French still wines subject to withdrawal by the President.

There are, however, a few points of difference disclosed in the correspondence in respect of which it would seem desirable that the department give a clearer exposition of the views of this Government. In its memorandum of last June the department referred to the inequality of tariff conditions existing in the commercial relations between the United States and France by reason of the system of differential duties extensively applied to American products upon their importation into France, while French products (with the single exception of champagne) are received into the markets of the United States upon an equal footing as respects tariff treatment with the like products of any other foreign origin (Cuba, of course, excepted). With a view to obtaining some amelioration in the burdensome restrictions imposed upon trade by this differential tariff treatment, the United States requested France to grant the benefit of the minimum rates to certain American products that are now dutiable under the general tariff.

In declining that proposition the ambassador states that his Government can not agree to “concessions or consolidations of duties which have, for the greater part, already been refused to the countries [Page 323] with which France has concluded commercial conventions in recent years.” The department’s projet of agreement submitted last June asked for the minimum tariff on the American articles now subject to the maximum rates enumerated in only 24 numbers of the French tariff, viz, Nos. 16, 17, 212 ter, 480, 481, 482, 510, 511, 512, 512 bis, 521, 522, 523, 524, 525, 525 bis, 526 quater, 536, 537, 559, 559 bis, 579, ex 614, and 646. In the commercial convention concluded on September 19, 1907, between France and Canada, the Government of France has granted to Canadian products the benefits of the minimum tariff in 144 numbers, of which all but 16 contain differential rates actually applied to American trade. It is somewhat significant that included in the grant of 144 numbers to Canada are 14 complete numbers and 5 partial numbers of the 24 numbers asked by the department in its propositions of June last. It is assumed, therefore, that the willingness to give to Canada what has been denied to the United States rests not upon any public policy, but upon the relative value of the counterconcessions, the partial intermediate tariff of Canada being rated higher than the complete American tariff concessions authorized by section 3.

But it should be remembered that a country that uses the single-tariff system stands upon a different footing than one that has a double tariff and is able to exchange its lowest duties for the French minimum. The making of reciprocity treaties with tariff agreements is a normal part of the general and conventional tariff system used by the several countries of Europe to which the ambassador refers as having assented to France’s invitation to negotiate such treaties upon the basis of reciprocal advantages. It is of interest to note, therefore, how the French Government has treated other single-tariff countries than the United States since the adoption of her present double-tariff system in 1892. Almost without exception the complete minimum tariff has been extended to imports from these countries by virtue of most-favored-nation stipulations, without requiring them to make the slightest tariff reduction or special concession in return. To take only the countries of this hemisphere in illustration: Under the operation of a mutual most-favored-nation clause France has granted her entire minimum to all imports from Argentina, Colombia, Dominican Republic, Mexico, Paraguay, Uruguay, and Venezuela. But, as a matter of fact, these countries treat imports from France precisely on the same terms as those from any other foreign countries, and none of them grants to France any preferential tariff treatment analogous to that offered by the United States.

It seems pertinent to refer in this connection to the tariff treatment of American products by the various double-tariff countries of Europe. As stated in the department’s previous memorandum, France stands to-day as the only country which applies to imports from the United States an extensive system of discriminatory duties that do not apply to the principal competitors of the United States. Italy, Austria-Hungary, Roumania, Servia, and Bulgaria grant, and have always granted, to American products the unqualified benefits of their respective conventional tariffs. Germany formerly did the same, and, with some exceptions, continues to do so. At the commencement of the year 1905 four Governments of Europe maintained differential duties against American commerce, namely, France, Russia, Switzerland, and Spain. In the summer of that year Russia [Page 324] left the group and applied her lowest tariff in its entirety, as in former years. By decree adopted in the same year, Switzerland restored the entire conventional rates to American products, dating from January 1, 1906. In August, 1906, Spain formally agreed to give the United States the benefit of her entire minimum tariff. The action of Spain, therefore, left France the sole survivor in the group.

It is worthy of note that none of these dual-tariff countries, excepting Germany, has received the concession on sparkling wines; that Russia has not received any of the advantages of section 3; that Switzerland took the action she did spontaneously and independently of the American concessions extended to Swiss products by the President’s proclamation of January 1, 1906; that Spain has a maximum and minimum tariff precisely like that of France, and that neither Spain nor Switzerland has a treaty with the United States containing the most-favored-nation clause relating to imports of merchandise, which clause appears to be the basis of the grant by France of her minimum tariff to the majority of countries whose exports now enjoy that favorable treatment. Under these circumstances it does not seem strange to the department that the manufacturing and commercial interests of the United States fail to understand why France continues to furnish the isolated instance of extensive tariff restrictions that they encounter in the development of their export trade with Europe.

In his memorandum of November 28, 1907, the ambassador gives an analysis of the commercial movement between the two countries and makes certain observations on the character of their respective customs tariffs, showing the proportion of free to dutiable products imported by either country from the other and the respective average ad valorem duties thereon. In making such comparisons by percentages, however, the character of the respective imports should be taken into consideration. The commerce between the United States and France shows a radical difference in this respect. Approximately three-fourths of the imports into the United States from France consist of advanced products of manufacture that enter into close competition with domestic manufactures, while about the same proportion of the total imports into France of American products consists of raw materials exempt from duty or of products but slightly advanced in manufacture. In accordance with the general practice among nations to impose duties on imports of foreign products in proportion to the degree of advancement in the manufacture of the goods, it is natural that the average duty imposed by the United States on French products should be considerably higher than the corresponding duty imposed by France on American products, and that the proportion of free to dutiable goods should be noticeably greater in France than in the United States.

In his note of November 12, the French ambassador outlines the concessions which his Government is willing to make to the United States in return for the proposed grant of all concessions which the President of the United States is authorized to make under section 3 of the tariff act of July 24, 1897, namely, the revocation of the decree relative to Porto Rican coffee and a formal guaranty of the continuance of the minimum rate on that product, as well as upon other colonial products imported from the United States, and continuance of the minimum duties on mineral oils. In discussing the statistics [Page 325] of relative reductions of duty adduced by the department in its memorandum of last June, the ambassador points out that the department has failed to credit France with the concessions in favor of coffee and mineral oils, represented by the difference between the actual revenues collected under the minimum tariff and the imaginary revenues that might be collected were the maximum rates to be applied. On the basis of the importations into France in the calendar year 1906, these differences of duty, or so-called concessions, would amount to formidable figures, viz, in the case of mineral oils (Algeria included) $5,415,738.61, and in the case of coffee $905,152.24, of which $599,172.36 represents coffee from Porto Rico and $305,979.88 coffee from continental United States.

The ambassador argues from these amounts of difference in duty that the value of the proposed French concessions far outweighs that of the reductions in United States duty indicated in the department’s memorandum; that is, $1,339,283 on the basis of imports from France in the fiscal year ending June 30, 1906. The department is unable to concur in this method of measuring the relative value of the proposed concessions.

As regards the formal concession of the minimum duty on coffee, the department is of opinion that the difference between the minimum and general tariff duties as applied to the total importation of this article from the United States can not be adduced by France as a sacrifice of revenue to the extent of $900,000, as claimed in the ambassador’s note of November 12. The present French duty on coffee is perhaps the highest in the world, and amounts to an ad valorem of 130 per cent. The maximum duty would be equivalent to 289 per cent ad valorem. In view of the fact that the total imports of coffee from the United States, including Porto Rico, constitute only about 3 per cent of France’s total importation from the world, it is evident that the application of the maximum rate would bar this product from the French market, and there would be no duties whatever to be collected.

To some extent the same observations apply in the case of American mineral oils, which since 1893 have enjoyed the treatment of the minimum tariff in France. The minimum duties on light oils are equivalent to an ad valorem duty of 74.3 per cent and on heavy oils of 56.3 per cent. The maximum duties on light oils are exactly twice the minimum rates, considering the difference in mode of assessment;, while the maximum rate on heavy oils is exactly one-third higher than the minimum rate. The United States supplied 68.5 per cent of the light oils and 65 per cent of the heavy oils consumed by France in 1906. While it is not believed that the large proportion of these oils now furnished by the United States could be obtained by France in toto from other sources, it is recognized that the application of the general rates would cause considerable diversion of trade from the United States to other oil-producing countries. To this extent the maximum tariff would prove prohibitory, hence the imaginary concession of revenue becomes illusory.

The question of mineral oils was not referred to in the department’s memorandum of last June for the simple reason that it was assumed that it is part of the fixed economic policy of the French Government to admit all mineral oils upon the same tariff footing, and that much the same considerations dictated the decree of July 7, [Page 326] 1893, in regard to this product as have influenced the Congress of the United States in putting and keeping on the free list raw silk, which was imported from France in the fiscal year ending June 30, 1907, to the value of two million dollars; hides, skins, and furs to the value of six millions; crude india rubber to the value of nearly two millions, etc.

For the reasons above explained, the department is of opinion that the difference in the two French tariffs, as applied to present imports into that country of American coffee and mineral oils, cannot logically be balanced against the actual reductions of duty proposed by the United States in favor of French products enumerated in section 3, which concessions, for the fiscal year ending June 30, 1907, would amount to $1,356,182.83, distributed as follows:

Articles. Quantity. Value. Duty reduction.
Argols pounds 11,952,711 $1,027,089.00 $68,172.66
Brandies and other spirits proof gallons 748,074.41 2,020,207.69 374,037.20
Still wines and vermuth:
In casks gallons 572,303.3 358,007.59 28,615.17
In other coverings dozen quarts 215,241.05 964,485.11 75,334.38
Paintings and statuary 1,230,588.41 61,529.42
Total concessions under agreement of 1898 607,688.83
Champagne and other sparkling wines dozen quarts 374,247 5,547,532.00 748,494.00
Total proposed concessions 1,356,182.83

The Government of the United States, however, is not unmindful of the value to American commercial interests of the conventional guaranties in favor of American mineral oils, coffee, and other colonial products which the French ambassador offers on behalf of his Government. While this Government does not regard those proposed concessions as constituting the essential elements of a satisfactory reciprocal arrangement for the regulation of the commercial relations between the two countries for a term of years—such as it had been hoped might be agreed upon—nevertheless, in order to prevent any disturbance of the mutual trade, and with a view to paving the way for a more permanent arrangement negotiated on a more equitable basis, this Government is willing to conclude a temporary agreement with the French Government on the basis of the counter proposals presented on the part of France in the ambassador’s note of November 12, 1907.

This temporary arrangement to provide for the continuance by the French Government of its minimum tariff rates on mineral oils, coffee, and other colonial products imported into France from the United States, including its insular possessions. The United States to admit champagne and all other sparkling wines, the products of France, on payment of the reduced duties authorized by section 3 of the United States tariff act of July 24, 1897; express provision to be made, however, that the respective concessions may be withdrawn in the discretion of the President of France on the one hand or the President of the United States on the other, whenever any additional duties beyond those now existing and which may be deemed by him unjust to the commerce of his country shall be imposed on its products by the Government of the other country.

[Page 327]

The agreement to provide further that—inasmuch as complaints have arisen in both countries regarding the effect of the regulations in force in the respective countries affecting the admission of each other’s products, and to the end that if there be in the regulations of either country any provisions which unnecessarily restrict trade, such provisions may be modified and the cause of complaint removed—a commission of three experts shall be appointed by the Government of the United States and a like commission of three experts shall be appointed by the Government of France, and such commissions shall, in conference each with the other, inquire into and ascertain fully the existing conditions in each country, as bearing upon the reasonableness and necessity of the regulations affecting the trade of the other country, and each commission shall report to its own Government thereon: that upon the basis of the report so made the respective countries shall enter upon an interchange of views, to the end that all cause of complaint in their respective regulations regarding the admission of any of the products of either country to the other may be removed.