662.6331/261
The Solicitor for the Department of State ( Hackworth ) to the Secretary of State
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Conclusions
The logical conclusion, therefore, would seem to be that, since certain exceptions to the most-favored-nation provisions were made [Page 589] in the treaties with Germany and Austria and such exceptions do not include customs unions, we would be entitled to claim from Germany whatever advantages she may extend to Austrian trade and commerce, and to claim from Austria whatever advantages may be extended by that country to trade and commerce with Germany.
The fact that the contracting parties undertook to make exceptions to the obligation to extend unconditional most-favored-nation treatment in customs matters and made no exception with respect to a possible customs union would seem to preclude the possibility of regarding such an arrangement as an exception to the most-favored-nation provisions on the basis of the principle inclusio unius exclusio alterius. The whole purpose of these treaties (and I speak from personal knowledge, since I participated in the negotiations) was to remove all possible grounds for discrimination against American commerce and trade.
If it be admitted that the favored-nation clause has no application to favors granted under a customs union between Germany and Austria, there would be nothing to prevent the whole of Europe from entering into a general customs union and thus depriving us of all of the advantages sought to be obtained through the unconditional most-favored-nation clause in our various treaties.
Some effort has been made to justify the proposition that customs unions are outside the purview of favored-nation clauses by referring to such unions as “economic units”, as distinguished from “political units”, and regarding them as effecting the abolition of “customs frontiers”. It is easy enough to understand how these so-called “economic units” would be effective as against favored-nation clauses if there were also political unions between the States, but it is not believed that so long as the States concerned maintain their separate political positions in the family of nations they can defeat provisions in their treaties designed to establish equality of treatment in customs matters by uniting for these purposes alone. Treaties are concluded with the “political entity” representing the State, as distinguished from any “economic unit” or “union”, and unless they expressly take cognizance of so-called economic unions, such unions are not, it is believed, excepted by implication from the operation of the terms of the treaty.
Thus far the whole question is purely hypothetical. It may never become necessary for us to state our position. The right of Germany and Austria to enter into a customs union, in view of provisions of the treaty of St. Germain (Article 88) and of the Geneva Protocol of October, 1922, has been questioned by certain European countries and the question has been submitted to the Permanent Court of International Justice for an advisory opinion.
[Page 590]Article 88 of the treaty of St. Germain provides—
“The independence of Austria is inalienable otherwise than with the consent of the Council of the League of Nations. Consequently Austria undertakes in the absence of the consent of the said Council to abstain from any act which might directly or indirectly or by any means whatever compromise her independence, particularly, and until her admission to membership of the League of Nations, by participation in the affairs of another Power”.
The Protocol of 1922 reads in part as follows:
“The Government of the Federal Republic of Austria … undertakes, within the terms of Article 88 of the Treaty of St. Germain, not to alienate its independence; it will abstain from every economic or financial negotiation and engagement which might be of a nature to directly or indirectly compromise this independence.
“This undertaking is not opposed to the conservation by Austria, under the reservation in the provisions of the Treaty of St. Germain, of its liberty in matters of customs tariffs and commercial or financial accords, and, in general, in all which touches its economic régime or its commercial relations, it being understood, however, that it will not prejudice its economic independence by the grant to any State whatsoever of a special régime of [or?] exclusive advantages, of a nature to menace this independence”.
Whatever the outcome may be it seems improbable that any action will be required by this Government within the very near future.