662.6331/204
The Minister in the Netherlands (Swenson) to the Secretary of State
[Received May 29.]
Sir: I have the honor to refer to the Department’s instruction No. 4, of April 28th, last,15 in which the Legation was instructed to forward any further information obtainable with regard to the bearing of so-called European case law on the construction of the most-favored-nation clause in its relation to the proposed Austro-German customs union.
The Legation’s despatch No. 583, of April 21st, and the third paragraph of despatch No. 13, of May 6th,16 report upon this question.
Mr. Johnson took the occasion today to continue his conversations with Mr. van Kleffens, Chief of the Diplomatic Section of the Foreign Office, and Mr. Beucker Andreae, the Chief of the Juridical Section, and gathered that the following opinions represent the present point of view of the Foreign Office.
A customs union between two countries is the merging of the economic identity of these countries and the unconditional most-favored-nation clause does not bear upon the new unit. The clause was not drafted with any such end in view. Thus Holland saw no reason to protest against the customs union between Belgium and Luxemburg on account of the most-favored-nation clause which forms [Page 586] a part of her commercial treaty with Belgium. The Foreign Office would see no ground for protest against any union exactly similar to the one referred to above. The proposed German-Austrian union, however, will have to be considered on its merits. No draft of the proposed union has as yet proved obtainable. If the draft provides for intermediary tariffs between Germany and Austria it is possible that grounds for a protest exist and while the most-favored-nation clause cannot be held to apply to a merging of economic identities, it may be argued that it does apply to the mere agreement for an intermediary tariff.
The only previous case cited by the Foreign Office is the Belgium-Luxemburg customs union. There seems to be no doubt in the minds of the above mentioned officials, however, that a complete customs union forms an implied exception to most-favored-nation treatment.
Respectfully yours,