MOST-FAVOURED-NATION TREATIES.
-9VERYONE, without distinction of party, will approve 11 the graceful tribute paid to Mr. Chamberlain at the dinner held in honour of the occasion of his 75th birthday. Mr. Balfour was naturally the principal speaker on such an occasion. Apart from the personal references to Mr. Chamberlain, the most interesting feature of Mr. Balfour's speech was his reference to the American interpretation of the mpst-favoured-nation clause in commercial treaties. We are glad to see that Mr. Balfour clearly stated that the American view differs from that of all the rest of the world. He might have gone even further and said emphatically that the American view differs from that of every person who brings an ordinary knowledge of English to the inter- pretation of a simple and straightforward statement. How American Ministers ever succeeded in persuading them- selves that the treaty by which their country is bound can bear the interpretation which they put upon it is a mystery.
• The question arose in an acute form in 1884 and ,1885 when a proposal was made for the negotiation of a Reciprocity Treaty between the United States and the West Indies. At this time the Government of the United States was negotiating treaties with various South American Republics, and the British .West Indian Colonies were afraid that the effect of these treaties would be to give more favourable terms to Spanish-American than to British West Indian produce. Lord Granville opened the negotiations by suggesting that the United States should formally extend to the British West Indies the most-favoured-nation clause in the Treaty of 1815 between the United Kingdom and the United States. The answer of the American Secretary of State was that the Treaty of 1815 would not give Great Britain a right to any favours granted to other countries by the United States by reason of special reciprocity treaties. Some time elapsed before this challenge was taken up by Lord Granville, for the British Government at the time was very anxious to obtain a friendly arrange- ment with the United States for the benefit of the West Indies. Finally the United States put forward their proposals in the form of a draft treaty which Lord Granville rejected partly on the ground of the American view with regard to the most-favoured-nation clause and partly for other and at the moment equally important reasons. The • interesting point with regard to this American draft treaty is that we here find a statement in black and white of the American view of what a most-favoured-nation clause ought to be. The text is as follows :— "The Government of the United States on the one hand and her Majesty the Queen on behalf of her aforesaid possessions on the other bind themselves to extend each to the other reciprocally all favours and privileges in regard to Customs Tariff, commerce, property, and persons which either of them may have conceded or may concede to a third Power—freely if freely granted to such third Power—or for an equivalent consideration if granted to such third Power in virtue of a compensating arrangement."
There need not be a moment's hesitation in saying that if our most-favoured-nation clause with the United States had been drafted in these words it would bear the interpre- - tation which American Ministers place upon it. But it was not drafted in these words. The words of Clause 2 in the Treaty of 1815 are :— - "No higher or other duties shall be imposed on the importation into the United States of any articles, the growth, produce, or manufacture of his Britannic Majesty's territories in Europe, than are or shall be payable on the like articles, being the growth, pro- lice, or manufacture of any other foreign country."
This treaty has been renewed from time to time, and is still in force. It can be denounced by either party at twelve months' notice ; but as long as it remains in force it ought to be strictly observed, and we confess to a feeling of bewilderment that American Ministers, who no doubt value the reputation of their country for honest dealing as highly as we value the reputation of ours, should persist in giving an interpretation to plain words which they obviously do not bear.
This question, however, of the American treaty is only part of the general question of most-favoured-nation treaties. Mr. Balfour appeared to imagine that the idea, of the most-favoured-nation clause is a peculiar invention of the Free Trade party in this country. The fact that the American treaty dates back to 1815, when certainly little was heard of Free Trade in Great Britain, ought alone to have warned him of the improbability of this idea. As a matter of fact the most-favoured-nation clause has formed part of commercial treaties from time immemorial, and still forms part of such treaties whether negotiated by Pro- tectionist or by Free Trade countries. It is interesting to note in passing that France and Germany are bound together under the Treaty of Frankfort by a most-favoured-nation clause which stands for all time. In our own ease there is still in operation a most-favoured-nation clause negotiated with Sweden as early as 1654. A similar clause appears in a treaty with Spain in 1713, where the phrase " most-favoured-nation " is itself employed. It is interesting, too, to note, especially in view of the colonial question, that in 1814 we made a treaty with Spain embodying a clause which provided that, "in the event of the commerce of the Spanish-Ameri- can possessions being opened to foreign nations, his Catholic Majesty promises that Great Britain shall be admitted to trade with those possessions as the most favoured nation." It may reasonably be assumed that clauses of this character would not have been inserted in a whole series of commercial treaties for at least two cen- turies unless there had been some overwhelming reason for their insertion. The reason will be obvious after a moment's reflection. Suppose such a clause were not inserted, it would then be possible for a country, having made concessions to another country for the sake of reciprocal concessions, immediately afterwards to destroy the value of the concessions it had made to Country No. 2 by giving still larger concessions to Country No. 3. Take, for example, the case of tobacco, which Lord Granville used in his contro- versy with the American Secretary of State. Great Britain might make a bargain with the United States under the terms of which American tobacco was admitted to the United Kingdom at a certain rate of duty, and in return for this concession would obtain other conce.ssiois from the United States. But if there were no most-favoured- nation clause, or if the clause bore the interpretation which the Americans put upon it, there would be nothing to prevent Great Britain from subsequently admitting Turkish tobacco into the United Kingdom at a lower rate of duty than American tobacco. The effect would be that the United States, having paid for a concession in the British market by various concessions in their own market, would find the value of what they had paid for to a large extent destroyed. No question here arises between Protection and Free Trade. Indeed, if we look at the problem closely it will be seen that the most- favoured-nation clause is even more important to Protectionists than to Free Traders. For the Free Trader regards a reduction of his own home tariffs as a good thing in itself, and it is not part of his policy to make such a reduction contingent upon a reciprocal reduction in tariffs of foreign countries. The Protectionist, on the other hand, regards any reduction of home tariffs as an evil which is only to be tolerated if by undergoing it a reduction in foreign tariffs can be secured. Therefore it is to the interest of the Protectionist to see that, having paid his price by reducing his own tariff, he gets the full value of the consideration for which he had bargained. He cannot get the full value unless his commercial treaty contains a most-favoured-nation clause.
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