Mr. D. H. Miller to Colonel E. M. House 8

Herewith is a tentative draft of a Declaration respecting Equality of Trade Conditions. The attempt primarily has been to indicate the difficulties and points of divergence which must or may arise.

D. H. M[iller]

[Enclosure 1]

Tentative Draft of a Declaration for Equality of Trade Conditions

The Powers signatory to the Agreement for an Association of Nations declare as a part of said Agreement:

Equality of Trade Conditions

For the purposes of this Declaration every colony, protectorate, dependency or possession of one of the signatory Powers now having a tariff system separate from its home Power, shall be regarded as a State.
While every State is free to adopt and from time to time to change its system, laws and regulations of import and export tariffs, port dues, tariff rates, inspection methods and charges, and trade charges of every kind, any and every such system, law and regulation shall at any given time as to the rest of the world be fixed and single, and shall also at any given time as to the rest of the world be equal and without any discrimination, difference or preference, direct or indirect.
Existing preferential arrangements between or among States, including those in the nature of Customs Unions, may be continued notwithstanding the provisions of Article 2.
While for the purposes of this Declaration the Dominions of Canada and of New Zealand, the Commonwealth of Australia, the Union of South Africa and the Colony of Newfoundland are each to be regarded as States under the provisions of Article 1, they may, notwithstanding the provisions of Article 2, make preferential arrangements, inter se and or with Great Britain.
Notwithstanding the provisions of Article 2, States whose territorial limits are wholly or partly within the continent of Europe may enter into agreements inter se in the nature of Customs Unions.
Notwithstanding the provisions of Article 2, States whose territorial limits are wholly or partly within the continents of North America and South America may enter into agreements inter se in the nature of Customs Unions.
No part of the revenues of any State, whether in kind or in cash, shall be pledged or assigned to any other State, its citizens or subjects.
A State engaged in trade or commerce shall not in respect thereof have or be deemed to have any of the rights, privileges, immunities, duties or obligations of sovereignty.
[Enclosure 2]

Note on the Declaration for Equality of Trade Conditions

The annexed tentative draft of a Declaration for Equality of Trade Conditions9 perhaps only emphasizes the very great difficulties of the whole subject.

Inevitably the difference between “economic units” and what may be called, “units of sovereignty,” must be recognized. The text is not one of continuous territory, for Alaska is a part of the United States, Ireland of the United Kingdom, and Algeria of France. Article 1 adopts the general definition that regardless of sovereignty, a “unit” with a separate tariff system is a separate economic unit.

Article 2 states the general rule of equality and of the Open Door.

While possibly there might be substantially general agreement on Article 2 for the future, there are many existing trade arrangements which would conflict with its language, strictly applied. For example, there are so-called, “frontier arrangements” in Europe, and there are various other kinds of reciprocal trade arrangements, sometimes between neighboring countries and sometimes not. These will not be [Page 513] enumerated, but instances are the United States and Cuba and the United States and Brazil.

Accordingly by Article 3 the continuance of existing preferential arrangements is permitted.

By Article 4 permission is given so far as the self-governing Dominions of Great Britain are concerned, for the continuance and even extension of the British policy of preference within the Empire. So far as an extension of this policy is concerned, it perhaps can hardly be defended on principle, and the provision has been inserted under the theory that it is a political necessity.

It will be observed that by Articles 2, 3 and 4 future arrangements in the nature of reciprocity treaties would generally not be permissible.

The question of customs unions or free trade between two or more economic units is one which is extremely complex and one which it is very difficult to treat generally. No objection could be seen, for example, to such an arrangement between countries situated as Sweden and Norway, or as Spain and Portugal, or among the Central American States or the South American Republics; and, indeed, such an arrangement might be highly advantageous in such cases as Finland and the rest of Russia and the Balkan States, inter se. On the other hand, a similar arrangement between China and Japan would be flying in the face of the policy of the Open Door, and the existence of such conditions between Great Britain and India could only be regarded as exploitation by the former country of the latter.

A general solution of these difficulties has been attempted by Articles 5 and 6, which would permit agreements of customs unions within Europe and within America respectively but not within Africa or Asia and not between States situated in different continents outside of America.

Article 7 is intended to prevent what may be regarded as substantially a pledge of the sovereignty of a State. Its language is drawn from the agreement between Great Britain and Russia in respect of Tibet.10

The progress of States toward what is vaguely called “Socialism” or “Nationalization of industry” requires the formulation of rules of international law not now existing. It is the law in the United States that a State which engages in a commercial transaction cannot, when in Court, escape the general rules of law by reason of its sovereignty, although it may not be sued. Considering the enormous possibilities of this subject for the future, it is believed that a State should neither be benefited nor burdened by the rules attached to the question of sovereignty when commercial transactions are involved. Article 8 has been drawn with this end in view. It should [Page 514] be added that the rule therein formulated would, in respect of commercial transactions, place a neutral State in time of war in the same situation as one of its citizens or subjects. The whole question is one of great interest to the United States in view of its present ownership (through the medium of a corporation) of a very large merchant fleet.

It has been considered that the question of concessions will require at least local and perhaps detailed statement in connection with the particular countries.

General Note:

Under any agreement of such nature the national economic policy of each country will remain for its own decision, and bounty systems, nationalization of industries and Socialism generally will in fact permit a country to attempt to favor its own trade or even to destroy that of another. A State monopoly, run deliberately at a loss, may produce results more disastrous than the German cartel system and provoke counter measures.

  1. This paper and its two enclosures are reprinted from Miller, My Diary, vol. ii, pp. 162–167.
  2. Supra.
  3. Foreign Relations, 1907, pt. 1, p. 552.