granted conditionally and for a consideration cannot be claimed under it. From this interpretation Her Majesty's Government entirely and emphatically dissent. The most-favorednation clause has now become the most valuable part of the system of commercial treaties, and exists between nearly all the nations of the earth. It leads more than any other stipulation to simplicity of tariffs and to ever-increased freedom of trade; . . . Its effect has been, with few exceptions, that any given article is taxed in each country at practically one rate only. But should the system contemplated by the United States be widely adopted, there will be a return to the old and exceedingly inconvenient system under which the same article in the same country would pay different duties varying according to its country of origin, nationality of the importing ship, and, perhaps at some future time, varying also with the nationality of the importer himself. It is, moreover, obvious that the interpretation now put forward (exactly that which had always been applied by the United States) would nullify the most-favored-nation clause; for any country, say, France, though bound by the mostfavored-nation clause in her treaty with Belgium, might make treaties with any other country involving reductions of duty on both sides, and, by the mere insertion of a statement that these reductions were granted reciprocally and for a consideration, might yet refuse to grant them to Belgium unless the latter granted what France might consider an equivalent. The object of the European interpretation of the mostfavored-nation clause in commercial treaties is to generalize concessions, to guarantee that no country will be placed on a less favorable basis than another. It holds that concessions granted by treaty to one country are immediately and unconditionally to be extended to every other country entitled to most-favored-nation treatment. During the war discussions in Europe cast some doubt on the value of the unconditional form and interpretation of the most-favored-nation clause. In the minds of the French this provision of the Treaty of Frankfort of 1871 rankled. Plans of discrimination were frequently formulated. The most famous was that resolution of the Paris Economic Conference in June, 1916, providing that most-favored-nation treatment should not be granted to "enemy powers" during a period following the Peace Conference to be fixed by mutual agreement" among the Allies.14 The two bargaining methods which have been discussed in this chapter both have the same object, the establishment of equality of treatment in international commercial relations. One may be used in one set of circumstances, the other in another. Without doubt the United States will need a more flexible tariff in the future than it has had in the past. The concessional method, if adopted in the United States, would require a general revision of the tariff. It involves virtually something in the nature of a maximum and minimum tariff. The rates of the minimum tariff would be those dictated by domestic policy and would be extended to all countries granting to the United States equality of treatment. In practice the minimum rates of a concessional tariff would be made in accordance with the revenue and industrial needs of the country and except in rare instances would be the effective tariff rates. The higher or maximum rates would, like penalty duties, be applied to those countries refusing most-favored-nation treatment. More important than the particular method of bargaining adopted, whether it be penalty duties or the concessional method, is the spirit which animates the legislation. The Government of the United States has, since its 14 See Appendix II. See also British Report of the Committee on Commercial and Industrial Policy after the War (Cd. 9035), p. 49 et seq. establishment, contended for the conditional form of the most-favored-nation clause, and has argued that in doing so its intent was to offer and to secure equality of treatment. The actual result in practice has been special agreements establishing inequality. As it has worked out, the conditional clause has facilitated the negotiation of special agreements. The unconditional clause, on the other hand, gives and accepts guarantees that the nations concerned will not discriminate against each other. Here again much depends upon the spirit in which nations use the most-favored-nation clause. Unconditional mostfavored-nation treatment, involving the generalization of each special favor, need by no means result in equality of treatment, and conversely, conditional most-favorednation treatment, with its special reciprocity agreements, need by no means necessarily result in discrimination. Where, however, the guiding principle of a Government is equality of treatment, the presumption is in favor of the unconditional clause. It is a highly desirable sup plement to the concessional method of bargaining, and in general tends to remove discriminations and to establish equality. It is a matter of serious debate whether or not the American interpretation of the most-favored-nation clause is adapted to the ideals of international politics and trade for which this country is now contending. The unconditional clause, on the other hand, has for its specific purpose equalization and generalizing of favors. In carrying out the principle of equality of treatment, it is very likely that the United States in the future will find the unconditional form and interpretation of the most-favored-nation clause most satisfactory. Any reversion by the European countries to the conditional form should also be deprecated. As long as the United States, or any other country, insists upon the conditional form of the clause, we retain a ground for friction between nations, and the world is deprived of one of the most effective means known to modern international commerce for establishing equality of treatment and international fair dealing. CHAPTER XI NATIONAL CONTROL OF AMERICAN COMMERCIAL ACTIVITIES ABROAD Undemocratic tendencies in national commercial policy - Types of American commercial activity abroad - Export of food and raw materials Export of manufactured goodsAmerican factories abroad American capital to develop foreign resources Loans of American capitalists to foreign governments - Need for regulation - Types of complications which may arise - Neither imperialism nor laissez faire is a proper policy - Precedents for regulation and control - Need for more comprehensive control that will remove causes of international friction - Limitations of national regulation— First step toward a democratic world league is democratic life in individual nations. On a democratic nation, such as America, rests the obligation to provide security and equality of treatment for its economic interests at home and abroad and to assist in developing its national resources. It may, if its needs demand, enact a tariff that equalizes conditions of competition against foreign producers, establish regulations that prevent dumping, promote foreign enterprises by its citizens, and compel equality of treatment for them abroad. But thus far there is little in the commercial policy of democracy that distinguishes it from an imperialistic nation. It may be asked: "Do not even the publicans do the same?" They do, but they do other things which are distinctly undemocratic. Nations that pride themselves on the democracy of their political institutions do not always pursue a democratic commercial policy. The extension of American commercial activities abroad is not objectionable. Prosperity and goodwill |