On opening our conversation, I said to the Minister that my Government
was very surprised he had not answered the representations I had made on
its behalf and that I had received instructions by telegraph to request
an immediate and favorable reply. The Minister then handed me the note
above referred to.
He said to me that he expected to discuss with the Minister for Foreign
Affairs of Chile, in the meeting they were to hold in Mendoza next week,
details of a permanent commercial agreement to replace the existing modus vivendi and that it was his understanding
that Chile would not desire to repeat in the new agreement the products
included in the modus vivendi which were exported
to Argentina by foreign countries, experience having shown that Chile
could not compete on an equal basis with European producers of those
products. To this I replied that I did not see how that affected the
claim of my Government, that the prejudice caused to American interests
by the extension of the provisions of the modus
vivendi to three European countries still continued and
furthermore that the question of principle involved concerning the
gratuitous extension to other countries of the provisions of the modus vivendi could not be put aside by a
subsequent commercial treaty between Chile and Argentina. The Minister’s
only reply was to say that the modus vivendi had
been made by Argentina as a gesture of friendly neighborliness in a
desire to come to the assistance of Chile at a time when that country
was in dire distress.
I again referred to the desire of my Government that a favorable response
be given to its request to place its nationals on an equal footing with
those of France, Great Britain and Italy and that his rejection of this
request, he having confirmed that his note was to this effect, seriously
injured American commercial intercourse with Argentina.
The Minister said that I had previously spoken to him about goods in
transit as being prejudiced by the application of the modus vivendi, to which I rejoined that not only were those
goods affected, but that since then the American exports affected by the
extension of the provisions of the modus vivendi
to other countries than Chile had practically ceased and that he could
realize the seriousness which this situation had produced.
The Minister then spoke, as he has in several previous conversations with
me, of the representations being made by the German Chargé d’Affaires in
regard to this question of the modus vivendi,
insinuating that it was unsatisfactory for him to deal with a Chargé
d’Affaires who was evidently trying to make a record for himself and
that he had intimated to the German Government, through the Argentine
Minister in Berlin, his hope that a German Minister would speedily be
sent to Buenos Aires. In this respect, it may be noted that the
newspapers announced some days ago the appointment of a German Minister
but I am, of course, unable to state whether the German Government made
the appointment previous or subsequent to the alleged informal
representations by the Argentine Minister to Germany. In this respect, I
also desire to state that in my opinion Dr. Hemmen, the German Chargé
d’Affaires, is not the type of diplomat who would be disposed to exceed
his instructions or be unreasonable in presenting them merely in a
desire to improve his standing with his Foreign Office. He impresses me
as an intelligent, hard-working German with characteristic meticulous
methods of approach to a difficult question and hardly capable of
presenting it in the way the Foreign Minister would have me believe.
Dr. Hemmen tells me that some years ago his Government desisted from
concluding a commercial treaty with a foreign power because of
representations made in Berlin by the Argentine Minister to the effect
that the Argentine Government considered the provisions of Articles 3
and 4 of the treaty between it and Germany were of an unconditional
nature and entitled Argentine products to the same tariff reductions
granted by Germany to other countries and that the German Government
obtained from the Argentine Government a written interpretation of the
Treaty of Commerce between the two countries (Articles 3 and 4 of which
are identic with the similar articles in our Treaty of 1853 with
Argentina) as being unconditional in most-favored-nation treatment.
I shall endeavor to obtain from the German Legation, for the information
of the Department, a copy of such communication as may have been made by
the Argentine Government in this respect.
[Enclosure—Translation]51
The Argentine Minister for Foreign Affairs
(Saavedra
Lamas) to the American
Ambassador (Bliss)
Buenos
Aires, January 23, 1933.
Mr. Ambassador: I take pleasure in
acknowledging receipt of Your Excellency’s notes of November 24th
and December 10th 1932, No. 845 and 850, referring to the modus vivendi effected on November 12th last
between Argentina and Chile. In those notes Your Excellency requests
that the reductions granted to Chile and subsequently extended to
France, Great Britain and Italy, be conceded in like manner and on a
gratuitous basis to similar products of American origin. You base
your request on article 4 of the Treaty of Friendship, Commerce and
Navigation of 1853, in force between the United States and
Argentina, and on the circumstance that the reductions were extended
to the said European countries without demanding any compensation in
return, which makes applicable article 3 of the treaty in question
by virtue of which privileges granted gratuitously to products of
third powers must be conceded without equivalent compensation to
similar products of the United States.
In reply, I must inform Your Excellency that the modus vivendi with Chile was effected by way of an
experiment (ensayo) and for a short period
which will terminate within some three and a half months. It is an
agreement intended to give economic assistance to a neighboring
country passing through a great crisis, in order to reestablish its
severed communication with the Atlantic, by resuming Transandine
Railway traffic which is the only means of communication. The
reduction granted to Chile was extended to similar products of
France, Great Britain and Italy, because the treaties with France
and Italy stipulate the treatment of the most favored nation
“without any restriction whatever”, and the treaty with Great
Britain is absolutely unconditional.
The advantages of the modus vivendi have been
extended to France by virtue of the text of article 1 of the
Commercial Convention supplementary to the Treaty of July 10, 1853,
signed with Argentina in 1892, which sets forth that:52
[Page 701]
“Whereas the Treaty of July 10, 1853, provides that the
Argentine Republic shall not accord any favor or immunity to
the flag or commerce of another nation unless it be likewise
accorded in France to the flag or commerce of another
nation, it shall be made equally extensive to the Argentine
commerce or flag. It is understood that in virtue of the
application of this provision and of that contained in
article 8 of the Treaty of 1853, the nationals as also the
products and ships of each of the two countries shall have
right to the most-favored-nation treatment, without any
restriction, especially in the matter of tariffs.”
Equal advantages have been extended to similar products of Italy, in
fulfillment of the Argentine-Italian Convention of 1894,53 whose article 1 reads as follows:
“Argentine citizens, products and ships in Italy and Italian
citizens, products and ships in Argentina, shall be entitled
without any restriction to the most-favored-nation treatment
and shall consequently be entitled to the enjoyment of any
favor, privilege or immunity that shall be accorded in the
Argentine or in Italy to the citizens, products and ships of
any other nation.”
The same concession was granted to similar products of Great Britain,
because in the Treaty of Friendship, Commerce and Navigation in
force with Argentina since 1825,54 the most-favored-nation treatment for citizens, ships
or products, is absolutely unconditional. In effect, its article 4
establishes that:
“No higher or other duties shall be imposed on the
importation into the Territories of His Britannick Majesty
of any articles of the growth, produce, or manufacture of
the United Provinces of Rio de la Plata, and no higher or
other duties shall be imposed on the importation into the
said United Provinces of any articles of the growth, produce
or manufacture of His Britannick Majesty’s Dominions than
are or shall be payable on the like articles being the
growth, produce or manufacture of any other foreign country;
nor shall any other or higher duties or charges be imposed
in the territories or dominions of either of the Contracting
Parties on the exportation of any articles to the
territories or dominions of the other than such as are or
may be payable on the exportation of the like articles to
any other foreign country; nor shall any prohibition be
imposed upon the exportation or importation of any articles
the growth, produce or manufacture of His Britannick
Majesty’s Dominions or of the said United Provinces which
shall not equally extend to all other Nations.”
The situation is different in the Treaty of Friendship, Commerce and
Navigation signed between the United States and Argentina on July
27, 1853. The articles mentioned by Your Excellency are the 3rd and
4th.
[Page 702]
Article 3 establishes that:
“The two high contracting parties agree that any favor,
exemption, privilege, or immunity whatever, in matters of
commerce or navigation, which either of them has actually
granted, or may hereafter grant, to the citizens or subjects
of any other government, nation, or state, shall extend in
identity of cases and circumstances, to the citizens of the
other contracting party gratuitously, if the concession in
favor of that other government, nation or state shall have
been gratuitous—or, in return for an equivalent
compensation, if the concession shall have been
conditional.”
Article 4 says:
“No higher or other duties shall be imposed on the
importation into the territories of either of two
contracting parties, of any article, of the growth, produce
or manufacture of the territories of the other contracting
party, than are or shall be payable on the like article of
any other foreign country; nor shall any other or higher
duties or charges be imposed in the territories of either of
the contracting parties on the exportation of any article to
the territories of the other, than such as are or shall be
payable on the exportation of the like article to any other
foreign country; nor shall any prohibition be imposed upon
the importation or exportation of any article of the growth,
produce or manufacture of the territories of either of the
contracting parties, to or from the territories of the
other, which shall not equally extend to the like article of
any other foreign country.”
Before beginning to study the interpretation of articles 3 and 4 of
the Treaty of 1853 between Argentina and the United States, I must
inform Your Excellency that this Chancellery regrets that it does
not share the opinion expressed in the note of December 10th last,
to which I am now replying, in which the same gratuitous extension
of the reduction which was granted to the products of France, Great
Britain, and Italy by virtue of the modus
vivendi with Chile is requested for products of the United
States: the most-favored-nation clause cannot produce that effect;
it establishes a relation between three entities, that is, between
two contracting Powers and a third State; any commercial or tariff
favor or advantage granted by one of the contracting Powers to the
third State may be claimed by the other contracting State,
gratuitously or conditionally, according to the form applied to the
clause; but the treatment of the most favored nation is limited to
those three entities, and not to the immediate consequences
resulting from the co-existence of other treaties signed with other
powers. Were such an interpretation admitted, negotiations would be
impossible and the immediate object sought in contracting the
most-favored-nation clause would be exceeded. For these reasons, it
is not possible for this Chancellery to accord to the products of
the United States gratuitously the reductions granted to similar
products of France, Great Britain and Italy. Any claim must be in
connection with privileges granted to Chile.
[Page 703]
To return to the interpretation of the clause contained in the Treaty
of 1853, it is indispensable that articles 3 and 4 which constitute
an indivisible whole, be considered together (combinar). Unlike the agreements with the three
above-mentioned European countries, the Treaty with the United
States is expressly conditional and requires equivalent cases and
circumstances in order to invoke the treatment of the most favored
nation. The extension of privileges granted to Chile requires the
offer of an equivalent compensation, not only according to article 3
of the Treaty, but also because it is so required by article 76 of
the Customs Law in virtue of which the reduction granted to Chilean
products was established. In treaties such as ours with the United
States, which contains two most-favored-nation clauses, one of which
has a conditional form as that in article 3, and the other an
unconditional form as that in article 4, it is understood that the
former stipulates the general principle or—as the North Americans
say—constitutes the “covering clause”, that is to say, that the
general principle covers the particular principle, in such a way
that if the general rule is conditionality the special rule is too,
although the latter may not say anything in this respect. That is
the real interpretation given not only by the Argentine Government,
but also by the United States during all of the XIXth century and
the first quarter of the XXth to the clause drafted in unconditional
form.
This interpretation was supported by great men of the United States
such as Adams in 1817, Monroe in 1821, Gallatin in 1823, Livingston
in 1832, Frelinghuysen in 1884, Bayard in 1886, Sherman in 1898, and
other American statesmen.55
During the incident brought about by the Anglo-American Treaty of
July 3, 1805 [1815],56 when France claimed the treatment of the most
favored nation for its ships by virtue of its own treaty with the
United States of 1803,57 Mr. Adams declared
on December 23, 1817:58
“It is true that the terms of the eighth article are positive
and unconditional; but it will readily be perceived that the
condition, though not expressed in the article, is inherent
in the advantage claimed under it”.
The United States believe that when there is conceded gratuitously to
one country that which is not obtained by another except through
compensation, the first is not given equal treatment but a more
favorable treatment than is granted to the second.
[Page 704]
Thus, in a note addressed to Mr. Hubbard on July 17, 1886, Mr.
Bayard, Secretary of State, said:59
“You will doubtless have understood that where the words
qualified and unqualified [are applied] to the
most-favored-nation treatment, they are used merely as a
convenient distinction between the two forms such a clause
generally assumes in treaties, one containing the proviso
that any favor granted by one of the contracting parties to
a third party shall likewise accrue to the other party,
freely if freely given, or for an equivalent if
conditional—and the other not so amplified. This proviso,
when it occurs, is merely explanatory and is inserted out of
abundant caution. Its absence does not impair the rule of
international law that such concessions are only gratuitous
and so transferable as to third parties when not based on
reciprocity or mutual interests of the contracting parties.
This principle has been long and consistently maintained by
the United States. It was held by two of my predecessors,
Mr. Clay and Mr. Livingston, that a covenant to extend to
third parties the privileges granted to a most-favored
nation refers to gratuitous privileges and does not cover
privileges granted on the condition of a reciprocal
advantage, i. e., for a consideration expressed.”
And the same opinion was expressed on January 11, 1898, by the
Secretary of State, Mr. Sherman, in a circular to various North
American Legations and also to the Minister in Buenos Aires, Mr.
Buchanan.60 He said:
“It is clearly evident that the object sought in all the
varying forms of expression is equality of international
treatment, protection against the wilful preference of the
commercial interests of one nation over another. But the
allowance of the same privileges and the same sacrifice of
revenue duties, to a nation which makes no compensation,
that had been conceded to another nation for an adequate
compensation, instead of maintaining destroys that equality
of market privileges which the most-favored-nation clause
was intended to secure.”
Besides the reasons thus expressed in favor of the restrictive
interpretation, there is a special condition in the modus vivendi with Chile that derives from
its position as a neighboring country and another condition
connected with communication by the Transandine Railway that is a
factor for which no substitute can be found. From this point of
view, priority likewise belongs to the United States as regards the
doctrine which was subsequently adopted by several European
countries in their recent commercial treaties. I refer to the idea
that it is expedient to except favors granted by countries that are
neighboring or have a common boundary from the most-favored-nation
clause, and that this exception is found to be implicit in the
treaties containing a conditional clause. The aforementioned
[Page 705]
note from the Secretary of
State, Mr. Bayard to Mr. Hubbard, in 1886, said:61
“That propinquity and neighborliness may create special and
peculiar terms of intercourse not equally open to all the
world”.
This is a conception which the Secretary of State, Sherman, in his
communication to Buchanan expressed as follows, in 1898:62
“The neighborhood of nations, their border interests, their
differences of climate, soil, and production, their
respective capacity for manufacture, their widely different
demands for consumption, the magnitude of the reciprocal
markets, are so many conditions which require special
treatment. No general tariff can satisfy such demands. It
would require a certainty of language which excludes the
possibility of doubt to justify the opinion that the
government of any commercial nation had annulled its natural
right to meet these special conditions by compensatory
concessions, or held the right only on condition of
extending the same to a nation which had no compensation to
offer. The fact that such concessions if made would
inevitably insure to the equal benefit of a third competitor
would often destroy the motive for, as well as the value of,
such reciprocal concession.”
As I said, these ideas of the United States regarding countries
having common boundaries were incorporated in many commercial
postwar agreements, thereby giving origin to different formulae
intended to connect neighboring countries more closely.
It was not only the Secretaries of State but also the Supreme Court
of Justice of the United States which with its lofty prestige
considered that treaties containing a double Clause, one of which is
a “Covering Clause”, must be interpreted jointly and in a
conditional form. This double Clause figures in numerous treaties
signed by the United States, such as the Treaties with Denmark in
182663 renewed in 1857,64 the Treaty with Austria on 1829,65 and other subsequent ones among them the Treaty of
1853 with the Argentine Republic. The application of the Treaty with
Denmark gave rise to a judicial case, when in 1875 the United States
granted Hawaii exemption from duties on the introduction of sugar.
The constitutionality of the tax imposed on sugar from Denmark
having been questioned, invoking the Clause in its unconditional
part, the Supreme Court declared:
“Our conclusion is, that the treaty with Denmark does not
bind the United States to extend to that country, without
compensation, privileges which they have conceded to the
Hawaiian Islands in exchange for valuable concessions. On
the contrary, the treaty provides that
[Page 706]
like compensation shall be
given for such special favors.” (Bartram v. Robertson, 122
U. S. 121).
The Argentine Government has repeatedly shown itself in favor of the
conditional interpretation given by the United States to the
most-favored-nation clause.
In 1891, during the negotiation of a convention of reciprocity
between the United States and the Argentine Republic, the then
Minister for Foreign Affairs, Doctor Estanislao S. Zeballos, stated
that:66
“Compensation is the universal rule to combine the customs
interests, and the countries which can not recompense the
favors which they claim, are not justified in hindering the
sovereign action of the others by invoking, on a gratuitous
basis, the most-favored-nation clause.”
Doctor Eduardo Costa, Minister for Foreign Affairs, expressed the
same opinion in Congress when the commercial treaty with Italy was
discussed in 1894, at which time he said:
“Jurisprudence establishes that it (the clause) only extends
to favors having no compensation; it may be claimed solely
with regard to such concessions as do not involve an equal
or a similar burden upon the nation to which they are
granted. This is the doctrine which prevailed in the United
States and that which the Argentine Government
supports.”
A declaration in the same sense was made in 1912 by the Minister for
Foreign Affairs, Doctor Ernesto Bosch, during the negotiation of a
commercial treaty with a European country, stating:
“The Argentine Government is obliged to maintain its ideas
owing to the onerous character of the most-favored-nation
clause, it being understood that in so doing it does not
restrict its broad meaning but that it simply defines its
interpretation and its functions in accordance with
equity.”
These Argentine and North American antecedents and others which I do
not enumerate in order not to make the present note too lengthy,
strengthen the opinion of this chancellery to the effect that
articles 3 and 4 of the Treaty of Friendship, Commerce and
Navigation of 1853, in force between the United States and
Argentina, do not justify a claim in favor of similar products of
North America, without offering an equivalent compensation, for the
reductions granted to products from Chile, France, Great Britain and
Italy, as a consequence of the modus vivendi
signed with Chile on November 12th, 1932.
At present, this Government is preparing a decree creating a
qualified Commission to study commercial policy, and I can assure
Your
[Page 707]
Excellency that one
of the first treaties to be studied will be that which ties us with
the United States with whom we believe the day has come to make even
closer our commercial relations for reciprocal benefit.
Accept [etc.]
