711.452/41
The Acting Secretary of State to the British Ambassador (Halifax)
Excellency: I have the honor to refer to this Government’s note of October 10, 1939,39 to your predecessor transmitting a draft of a treaty of establishment, commerce, navigation and consular rights between the United States and India, and to recent conversations at Washington between Sir Firoz Khan Noon, High Commissioner for India at London, and officers of this Department with respect to the draft treaty.
The conversations indicate that there is substantial agreement as to the various articles of the draft treaty, except as to the article on mineral resources. As pointed out in the note under reference, this article provides for most-favored-nation treatment in respect of the exploration for and exploitation of mineral resources. It also provides, on a basis of reciprocity, for national treatment in the ownership of stock in domestic corporations engaged in the exploration for and exploitation of a specified list of resources, including oil.
This Government is of the opinion that the article concerning mineral resources is of considerable importance in the proposed treaty with India and requests that further consideration be given to its inclusion as originally drafted. This Government will be pleased to receive the expression of the views of His Majesty’s Government.
It is understood that the Government of India desires that a specific condition of reciprocity be added at the end of Article I. The major effect of such a provision probably would be to limit the operation of the most-favored-nation clause contained in paragraph 2 of that Article. This Government would prefer the most liberal possible construction of the most-favored-nation provisions of the Article. However, should the Government of India insist upon the addition of the condition of reciprocity, and should all other outstanding questions be satisfactorily settled, this Government would agree to the following stipulation:
“9. Nothing in this Article shall be construed to require the United States of America to grant Indian nationals rights greater than those received by American nationals in India, or to require India to grant American nationals rights greater than those received by Indian nationals in the United States of America”.
This Government further understands that it is the desire of the Government of India to define coasting trade in paragraph 2 of Article V so as to include trade between India, on the one hand, and Burma, Ceylon and Persian Gulf ports on the other hand. While this Government is prepared to agree to a definition of the coasting trade of India which will include trade with Burma and Ceylon, it would find it difficult to place trade between India and the Persian Gulf ports in the same category. It is proposed, therefore, that paragraph 2 of Article V read as follows:
“The coasting trade of the two countries, including trade between India and Burma and Ceylon, shall be exempt from the foregoing provision and from the other provisions of this Treaty, and shall be regulated according to the laws of each country in relation thereto. It is agreed, however, that with respect to the coasting trade, vessels of either country shall enjoy within the territory of the other country the most-favored-nation treatment.”
The provisions of Article XII relating to exemption from internal taxation of officials of the Government of one country within the territory of the other country are understood to meet with some objection on the part of the Government of India on the ground that it infringes upon the freedom of action of some of the subdivisions of the Government of India. This Government is prepared to agree to limit this Article so as to apply only to internal taxes imposed by the central governments. This Government would be pleased to receive a redraft of Article XII.
You will recall that this Government has proposed that the last sentence of the first paragraph of Article XVI read as follows:
“The present Treaty shall apply, on the part of India, to India, including the Indian States.”
It appears that the inclusion of the Indian States within the scope of the treaty is not acceptable to His Majesty’s Government. In view of the great difficulties of administration in the United States of a treaty applicable to India but not to the Indian States, and in view of the fact that at least one other treaty, namely, the convention concerning the tenure and disposition of real and personal property of March 2, 1899,40 has been made applicable to India including the Indian States, this Government hopes that His Majesty’s Government may be able to include the Indian States within the purview of paragraph 1 of Article XVI.
[Page 198]In connection with the term “most-favored-nation” in paragraph 3 of Article XVI it appears that the definition proposed by this Government is not acceptable. This proposal was as follows:
“3. The term ‘most-favored-nation’ as used in this treaty shall be construed to mean the most favored third country, including the United Kingdom of Great Britain and Northern Ireland.”
It is appreciated that the inclusion of the reference to the United Kingdom of Great Britain and Northern Ireland raises the whole problem of the conditions of trade between two component parts of the British Commonwealth of Nations. While it is my hope that these conditions may embody the most liberal principles of international trade, this Government, in view of present unsettled world conditions will refrain from raising the question at the present time. It, therefore, proposes the following wording for paragraph 3 of Article XVI:
“3. The term ‘most-favored-nation’ as used in this treaty, except Articles II, III and IV shall be construed to mean the most favored third country including the United Kingdom of Great Britain and Northern Ireland. The term ‘most-favored-nation’ as used in Articles II, III and IV shall be construed to mean the most favored foreign country.”
In view of the fact that the proposed treaty as concluded, would leave a number of problems without definitive rules for their solution, it is suggested that the initial term of the treaty specified in paragraph 1 of Article XVII be three years in lieu of five years.
It is understood that the Government of India would agree to the establishment of an American consular establishment at Delhi, such agreement to be in the form of an exchange of notes. In the event Agents General or Commissioners are received at Washington and Delhi pursuant to this Department’s memorandum of May 28, 1941,41 it will, of course, be unnecessary to conclude the previously mentioned exchange of notes.
There are a number of small refinements in language which this Government desires in the proposed treaty, particularly in the provisions relating to foreign exchange control, but such changes may be discussed at some later time.
In view of the substantial progress made in the negotiations hitherto conducted it is my hope that, despite the pressure of other problems, it may be possible to bring these negotiations to a speedy conclusion.
Accept [etc.]
- Foreign Relations, 1939, vol. ii, p. 352.↩
- William M. Malloy (ed.), Treaties, Conventions, etc., Between the United States of America and Other Powers, 1776–1909 (Washington, Government Printing Office, 1910), vol. i, p. 774.↩
- Ante, p. 170.↩