The Secretary of State to American Diplomatic Officers
Gentlemen: The Department desires to inform you confidentially and for such comment as you may care to make that the President has authorized the Secretary of State to negotiate commercial treaties with other countries by which the contracting parties will accord to each other unconditional most-favored-nation treatment.
It has long been the view of this Government that it has fulfilled its obligations under its pledges to accord most-favored-nation treatment when it has accorded to a country to which it has guaranteed such treatment the lowest rates of customs duty which it has freely and without special compensation accorded to a third country. In the view heretofore maintained by the American Government, other Governments to which the United States has pledged most-favored-nation treatment have not been entitled to claim the extension to them of tariff concessions accorded by the United States to a third country in return for reciprocal tariff concessions, unless they offer to accord to the United States equivalent concessions. Most of the treaties to which the United States has been or is a party, for example, the Treaty of February 6, 1778, with France92 and the Treaty of February 21, 1911, with Japan,93 contain most-favored-nation clauses that are in this respect expressly conditional. Others such as the Treaty of July 3, 1815, with Great Britain,94 in which the most-favored-nation clause is not expressly conditional, have nevertheless been interpreted as though the condition were specified.
When the conditional most-favored-nation policy was first formulated, discrimination in commercial matters was the general rule among nations, and it was deemed advisable for the United States to adopt a policy of making concessions only to such states as granted in each case some definite and equivalent compensation. Since that time, however, the principle of equality of treatment has made great progress, and it is now considered to be in the interest of the trade of the United States, in competing with the trade of other countries in the markets of the world, to endeavor to extend the acceptance of that principle. The enlarged productive capacity of the United States developed during the World War has increased the need for assured equality of treatment of American commerce in foreign markets.[Page 132]
Today in a large majority of commercial countries most-favored-nation treatment is considered to connote equality of treatment irrespective of concessions that may have been granted by third countries. The convenience of having one uniform practice for the entire commercial world together with the comparatively greater liberality of unconditional most-favored-nation treatment have frequently been urged as reasons for a change of policy on the part of the United States.
A further consideration in favor of the change has been presented by the inclusion of Section 317 in the Tariff Act of 1922.95 Under this section the President is directed, if he finds such action to be in the public interest, to levy additional import duties upon the products of countries that impose differential customs duties unfavorable in fact to the commerce of the United States. Nothing is said in this section concerning the process by which the discriminations are or shall have been effected, and it may reasonably be assumed that the exception of reductions of duties made in return for reciprocal concessions has not been intended.
In connection with the negotiation of new commercial treaties, therefore, the Department of State has decided to propose a most-favored-nation clause under which the United States will guarantee and expect to be guaranteed unconditional equality of treatment. The United States, in making this proposal, will offer nothing more than a guarantee of the treatment which, in practice, it already accords to the commerce of other countries. Concerning the reduced duties which the United States, under the Treaty of 1902,96 levies upon the products of Cuba, the relations between which country and the United States, both political and economic, are exceptional, and also concerning the free importation of goods from American dependencies, it is proposed to make specific exception. It is not considered that the exception of Cuba is inconsistent with or a deviation from the general principle adopted.
It may be added for your further confidential information that the Government of the United States has already commenced negotiation of treaties embodying the idea of unconditional most-favored-nation treatment with the Governments of Spain, Germany, Austria, Hungary and Czechoslovakia, and that the initiation of negotiations with a number of other countries at an early date is contemplated. The Department desires to receive as soon as possible any comments that you may be in a position to submit with respect to the desirability of undertaking negotiations with the Government of the country to which you are accredited, and in particular with respect to its probable attitude in connection with such negotiations. However, any [Page 133] investigations on this subject should be most discreet, and, in the absence of express instructions from the Department, you should not in any way suggest, directly or indirectly, to officials of the Government to which you are accredited the possibility of negotiation of a treaty with the United States.
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