710.G Commercial Agreement/95
The Acting Secretary of State to the Chargé in Uruguay (Dominian)
Sir: Reference is made to the Legation’s telegram No. 75, of November 9, 4 p.m., and to the Department’s telegraphic reply dated [Page 28] today,20 on the subject of the interpretation of Article II of the Agreement of July 15, 1934, pledging the parties to refrain from the use of the most-favored-nation clause to obtain the favors enjoyed by virtue of certain multilateral economic conventions.
The object of Article II of the Agreement of July 15, is to enable countries which actually perform the obligations of liberalizing economic conventions, fulfilling the requirements of the second paragraph of Article I, to enforce the most-favored-nation clause in treaties (usually bilateral treaties) with parties to such liberalizing conventions, notwithstanding the fact that both parties to the most-favored-nation treaties in question are parties to the Agreement of July 15, which otherwise, by Article I, have renounced the right to enforce the most-favored-nation clause.
Accordingly, a contracting party, that is, a party to the Agreement of July 15, can, if the condition of Article II is fulfilled, demand the enforcement of the most-favored-nation clause from another contracting party as well as from a non-contracting party.
The intention of Article II may perhaps best be illustrated by an example:
For instance, let it be supposed that various countries become parties to a liberalizing multilateral economic convention open to all countries. The convention provides for the abolition of quotas so far as the trade of the parties to the convention is concerned, but contains also an extraneous provision which Uruguay cannot accept. Accordingly, Uruguay, though quite willing to abolish quotas, does not become a party. Uruguay and the parties to the convention are parties to the Agreement of July 15. Uruguay, in fact, abolishes quotas. Uruguay has most-favored-nation treaties with one or more of the parties to the liberalizing multilateral convention. Notwithstanding the provisions of Article I of the Agreement of July 15, Uruguay, by virtue of Article II, has the right to enforce the most-favored-nation clause so as to obtain the abolition of quotas affecting its trade with the parties to the convention.
Article II was inserted as a safeguard against extraneous provisions which might prevent individual countries from accepting membership in multilateral economic conventions which fulfill the requirements of Article I of the Agreement of July 15, 1934.
The Department appreciates the care and ability with which you are fulfilling its instructions in this matter and trusts that you may be successful in persuading the Government of Uruguay to become a party to the Agreement of July 15.
Very truly yours,
- Telegram No. 47, November 10, 3 p.m., not printed.↩