Papers relating to the foreign relations of the United States, 1929, Volume I

611.003/1526

Memorandum by the Assistant Chief of the Treaty Division (McClure)

[Washington,] April 15, 1929.

The question has arisen whether, in view of the tariff legislation that is expected from the extraordinary session of Congress convening to-day, this Government should discontinue its program of concluding with other countries treaties containing the most-favored-nation clause.

The effect of agreeing with another country to accord most-favored-nation treatment to its commerce is to prevent this Government from levying tariff duties which discriminate against such country’s commerce. Technically, at least, that is the only point of contact between tariff legislation and treaties containing the most-favored-nation clause. Whether the treaty program should be discontinued, pending the action of Congress in determining what tariff legislation it will enact, would seem to depend on whether, in reasonable contemplation, there will be enacted discriminatory duties.

So far as the Treaty Division is aware, no suggestion whatever has been made that Congress either should or would enact such duties. It is believed that Congress will not enact such duties:

1. Because it could not do so without violating numerous existing treaties and other agreements to which the United States is a party;

2. Because, since the foundation of the Government, the traditional American practice (to which exceptions have been few and relatively unimportant) has been the maintenance of tariff duties uniformly applicable regardless of the country of origin of goods imported into the United States;

3. Because, after most careful consideration, this Government has decided that the economic interests of the country are best served by such uniformity and the consequent ability of the Government effectively to insist upon equality of treatment for American commerce in other countries. This policy is indicated by Section 317 of the Tariff Act of 1922 and written into all succeeding agreements on the subject with other countries.

The present policy of the Government of the United States to obtain assured equality of treatment for its commerce in other countries by means of treaties containing the unconditional most-favored-nation clause appears to have met with practically universal public approval. Certainly no perceptible body of opinion has expressed itself against it. Moreover, its acceptance and practice in the majority of other countries would make its discontinuance by the United States difficult, if not dangerous.

The tariff program of the present Congress is commonly expected to be essentially one of higher duties, especially upon agricultural products. As the duties are, with all but certainty, to be of uniform application, connection with the most-favored-nation clause appears at first to be non-existent. It is non-existent so far as conflict between treaty and statute is concerned. But in another sense there is a very close connection, one that may have a profound effect upon the accomplishment of our treaty program—and one which very urgently argues in favor of pushing all negotiations for most-favored-nation treaties with the utmost possible rapidity.

Under the leadership of France the idea that countries of relatively low tariffs are not, in view of their own interests, justified in granting most-favored-nation treatment to countries of relatively high tariffs appears to be gaining ground, at least on the continent of Europa That a certain amount of correctness attaches to this idea can not be denied. While it is believed that few national tariff levels exist or are likely to exist that vary so greatly as to invalidate the argument for equality of treatment, there can be no doubt that a conspicuous increase in the level of the American tariff would arouse increased antagonism in other countries to American commercial policy in general and render more difficult, if not, indeed, wholly impossible, negotiations with other countries having in view treaty guaranties of equality of treatment for American goods in their customhouses. Accordingly, the conclusion of treaties ought to be pushed, not discontinued.

When, following the passage of the Tariff Act of 1922, this Department commenced the negotiation of agreements with other countries containing the unconditional most-favored-nation clause, it did so with the express consent and approval of the President. Accordingly, any step by the Department definitely affecting the pursuit of that policy ought, it would seem, to be taken only with the consent and approval of the President. In view of Mr. Hoover’s well-known interest in all matters pertaining to commercial policy, it seems especially inappropriate to discontinue negotiations of this character without consulting him.

In addition to the foregoing consideration, an examination of the negotiations actually in progress affords additional reasons—reasons that are, in the opinion of the Treaty Division, unanswerable—against discontinuance, even temporarily:—

Australia. The Australian Government desires a treaty at this time and a favorable opportunity presents itself to obtain guaranties of most-favored-nation treatment. A draft note accepting the proposal has been prepared in the Treaty Division, but has not been signed.¹² Delay might mean the loss of an awaited opportunity.

Austria. A treaty containing the most-favored-nation clause has been signed, but ratifications have not been exchanged.¹³ A treaty of this sort with a Central European country is of such importance as, seemingly, to preclude the idea of delay, pending tariff revision.

Bolivia. A draft treaty has been submitted to the Bolivian Government for negotiation.¹⁴

Brazil. A draft treaty has been presented to the Brazilian Government and negotiations have been commenced.¹⁵ To fail to continue negotiations would be embarrassing.

Chile. Negotiations with Chile have been long and difficult.¹⁶ Final agreement upon the text appears to be imminent. Two telegraphic instructions have been prepared and await signature. The early conclusion of the treaty is of the utmost importance to the future development of our commercial policy. Delay might well spell failure. It would certainly put this Government in a most awkward position vis-a-vis a country with which the best relations are especially desirable. It would be most embarrassing to the Ambassador and would have an almost certainly adverse effect upon our efforts to promote commerce with South America.

Colombia. The proposal to negotiate made by the United States has been accepted by the Colombian Government.¹⁷ As in the case of other Latin American countries, the importance of hastening negotiations is increased by the danger that special discriminatory arrangements might be entered into with some European commercial nation.

Costa Rica. The two Governments have agreed to negotiate and a draft treaty has been presented by this Government to the Government of Costa Rica.¹⁸

Czechoslovakia. Negotiations are under way.¹⁹ An instruction which should enable the Legation at Prague to proceed with them is nearly ready for signature. Delay in obtaining a treaty with a Central European power would be very unfortunate.

Ecuador. An instruction with draft treaty for negotiation is ready for signature.²⁰ It is important to hasten negotiations with any Latin American country.

Finland. A draft treaty has been transmitted by the Government of Finland for negotiation.²¹ An answer to counter proposals is in preparation. To give evidence now that we don’t want such a treaty would be embarrassing.

Greece. Negotiations have made considerable progress and early continuance is expected on both sides.²² Withdrawal or undue delay by this Government would be exceedingly embarrassing.

Guatemala. The American Minister to Guatemala, now in this country, has just been in conference with the Treaty Division regarding instructions which are expected to bring negotiations to a conclusion.²³ The Minister urges immediate action so as to get action by the Guatemalan Assembly before adjournment in May. Otherwise there would probably be a delay of a year.

Irish Free State. This Government has agreed in principle to negotiate.²⁴

Netherlands. An unusually favorable opportunity for obtaining from the Netherland Government a treaty containing the most-favored-nation clause has been recently presented. It would be unfortunate to delay taking advantage of this opportunity.²⁵

Norway. A treaty containing the most-favored-nation clause has been signed and has been ratified by Norway.²⁶ It is before the Senate. Only the President can withdraw it.

Paraguay. This Latin American country has agreed in principle to a treaty.²⁷ A draft for presentation is being prepared.

Persia. The American Legation at Teheran has been instructed to present a treaty to the Persian Government. The existing modus vivendi with Persia may be terminated on thirty days’ notice.²⁸

Peru. A treaty, long under negotiation with Peru,²⁹ is ready for signature excepting one or two disputed provisions. To cut off negotiations at this stage would certainly put this Government in a most awkward and embarrassing position with a country with which the most friendly relations maintain and ought to be confirmed and with which a treaty is of more than usual importance.

Poland. Negotiations have reached final stages.³⁰ Withdrawal would not only be an act of something very much like bad faith but would gravely injure American export interests, trade with Poland being intimately concerned with the conclusion of a treaty assuring to imports by way of a third country complete most-favored-nation treatment.

Salvador. The treaty awaits exchange of ratifications.³¹

Kingdom of the Serbs, Croats and Slovenes. Negotiations are well advanced.³² An elaborate instruction to the Legation at Belgrade awaits signature. It would be especially embarrassing to the Legation not to receive these instructions promptly, in view of danger of presentation of Serbian counter draft which the Legation has been instructed to endeavor to avoid if possible.

Sweden. Negotiations have long been under way³³ and the Minister of Sweden is pressing the Department for final conclusion. To withdraw now would be extremely embarrassing.

Turkey. This Government has committed itself to the negotiation.³⁴ To withdraw or to delay unduly would be imputed bad faith and would prejudice important interests.

The foregoing instances do not exhaust the cases of embarrassment and loss that would result if negotiations of treaties containing the most-favored-nation clause were suddenly suspended, but they give an idea of the effect of such suspension.

It has been asserted that provisions of our customs laws authorizing special anti-dumping duties and countervailing duties against bounties are not in harmony with most-favored-nation obligations. Such provisions are not uncommon in other countries and are usually interpreted as outside the implications of the most-favored-nation clause. The reason is that the extraordinary duties fall not upon the goods in general of a country but upon particular shipments of goods regardless of the country of origin. There is thus an analogy to exclusions under quarantine regulations, which appear to be universally excepted from most-favored-nation obligations. The same is true of additional duties or exclusions under Section 316 of the Tariff Act of 1922. Dumping is regarded as an unfair practice, as are the practices against which Section 316 is directed. The practice is always that of the individual exporter, not of the country or the other exporters of the country.

Section 315 of the Tariff Act of 1922 provides for alterations in duties, but such alterations are always made general and never in respect of any particular country or countries. The fact that one country may be the chief source of supply can not affect the situation when, if importation from another country does in fact take place, the duty would be the same.

The Treaty Division recommends that the negotiation of treaties containing the most-favored-nation clause be not stopped but expedited with the utmost possible vigor and without cessation.

W[allace] McC[lure]

12. Not printed; the conclusion of a treaty was not effected.
13. See Foreign Relations, 1928, vol. i, pp. 924 ff.
14. See ibid., 1927, vol. ii, pp. 477 ff.
15. See ibid., 1926, vol. i, pp. 569 ff.
16. See ibid., 1927, vol. i, pp. 517 ff.
17. See ibid., 1926, vol. ii, pp. 1 ff.
18. See ibid., 1927, vol. ii, pp. 500 ff.
19. See ibid., pp. 539 ff.
20. No treaty was concluded with Ecuador.
21. A treaty of friendship, commerce and consular rights with Finland was concluded on February 13, 1934.
22. See Foreign Relations, 1928, vol. iii, pp. 18 ff.
23. See ibid., 1926, vol. ii, pp. 393 ff.
24. No treaty was concluded with the Irish Free State.
25. No treaty was concluded with the Netherlands.
26. See Foreign Relations, 1928, vol. iii, pp. 593 ff.
27. See ibid., 1926, vol. ii, pp. 871 ff.
28. See ibid., 1929, vol. iii, pp. 682 ff.
29. See ibid, 1927, vol. iii, pp. 594 ff.
30. Signed June 15, 1931, but not in force.
31. See Foreign Relations, 1926, vol. ii, pp. 912 ff.
32. See ibid., 1927, vol. iii, pp. 828 ff.
33. See ibid., pp. 740 ff.
34. See ibid., 1928, vol. iii, pp. 950 ff.