File No. 761.94/133
The Secretary of State to Minister Reinsch
Washington, January 19, 1917.
Sir: Adverting to your despatch No. 1222 of October 12, 1916, relative to the question of favored nation rights under the new Russo-Japanese Convention, I have to state that the Department has given further consideration to the points raised by you in the above-mentioned despatch and has arrived at the following conclusions:
It is provided in Article XIV of the Treaty of Peace, Amity and Commerce of 1858 between the United States and China that:
The citizens of the United States are permitted to frequent the ports and cities of Canton and Chau-chau or Swatau, in the province of Kwang-tung, Amoy, Fuh-chau, and Tai-wan, in Formosa, in the province of Fuh-kien, Ningpo, in the province of Cheh-kiang, and Shanghai, in the province of Kiang-su, and any other port or place hereafter by treaty with other powers or with the United States opened to commerce, and to reside with their families and trade there, and to proceed at pleasure with their vessels and merchandise from any of these ports to any other of them.
Under such treaty provisions, it was held by the Department on November 30, 1897, that “citizens of the United States are entitled to frequent and reside at any port open to commerce by the treaty with any power.” (Foreign Relations 1897, 76–80.) That ruling, although not specifically so stated therein, seems to have been based upon the theory that those treaty provisions are to be distinguished from the usual most favored nation clauses in treaties and to be regarded as an absolute grant of the rights therein set forth, based only upon the contingency of the opening to commerce of further ports and places in China. That construction of the provisions in question appears to be reasonable, since they do not, in terms, correspond to the usual most favored nation grants but appear to import the automatic extension of certain rights to American citizens upon the happening of certain contingencies.
However, it would appear that there might be some ground for contention on the part of an interested power, that these provisions, so far as they relate to the opening to commerce of a port or place, by treaty with any other Power than the United States, should be construed in the same sense as the usual so-called unqualified most favored nation clause, that is, as intended to apply only to gratuitous concessions.
Article XXX of the said treaty contains the following provisions:
The contracting parties hereby agree that should at any time the Ta Tsing Empire grant to any nation, or the merchants or citizens of any nation, any right, privilege or favor, connected either with navigation, commerce, political or other intercourse, which is not conferred by this treaty, such right, privilege and favor shall at once freely inure to the benefit of the United States, its public officers, merchants and citizens.
Were not the word “freely” used in the last quoted provisions there would seem to be little reason to doubt that the appropriate construction of these provisions would be to regard them as an instance of the so-called unqualified most favored nation clause, concessions under which, according to this Government’s interpretation [Page 288] of such provisions, could only be claimed as a result of the grants by China to a third nation not based on reciprocity or mutually reserved interests as between the contracting parties to such grants.
However, the use of the word “freely” in the provisions last set forth must import a qualification to the clause, unless contrary to the rule of construction, this word is to be regarded as used without a meaning. It may be said in this connection that the usual qualification of a most favored nation clause is by a proviso, that any favor granted by one of the contracting parties to a third party shall likewise accrue to the other contracting party, freely, if freely given, or for an equivalent, if conditional, and such qualification, of course, is aimed to set forth in terms the intention that concessions thereunder may only be claimed when based upon grants to third parties of a gratuitous nature.
No reason is perceived why a nation may not also qualify its most favored nation grants in treaties by setting forth that concessions to third Powers shall be available also to the other contracting party without a price, irrespective of what price may be exacted for such concession when originally given.
If it be assumed that a nation has the power to qualify its most favored nation clause in the manner and with the effect last mentioned, it would seem to follow that China must be regarded as having accomplished this result by the insertion of the word “freely” in the last quoted treaty provisions. That word is the one which is ordinarily used in qualified clauses of this character in the alternative to the provision for a conditional grant. No alternative appearing in the provisions under consideration, it would seem that the United States must be considered to be entitled to the concessions set forth in such provisions as a gratuity and irrespective of the price paid by another Power for the grant to it of such concessions.
Therefore, the conclusion of the Department is, that, with respect to the rights of residence and trade and any other “right, privilege or favor, connected either with navigation, commerce, political or other intercourse” which is not expressly conferred by the said treaty of 1858, the United States is justified in maintaining that such of those rights as have been granted to Japanese nationals in Manchuria accrue to the benefit of American citizens by virtue of the treaty provisions herein discussed.
I am, [etc.]