23. SECTION 317 SUGGESTS THE NEGOTIATION OF A SYSTEM OF COMMERCIAL TREATIES

The existence of Section 317 may reasonably be regarded as an argument that will, without necessarily being mentioned by American negotiators, have its appeal in negotiations for commercial treaties or for less formal arrangements.1 More important than the existence of Section 317 as a warning, its existence as a demand for equality compels attention to the proper method not only of producing equality but of making equality secure and lasting. Among the states of the world today the appropriate instrument available for this purpose is usually a treaty.

The passage of Section 317 should be welcomed as the occasion-if not, indeed, the Congressional mandate-for undertaking the negotiation of new commercial treaties and the eventual revision of existing ones with a purpose single to the development of a consistent, unhesitant policy of giving and demanding the "Open Door" of complete equality.

Thus the essence of the commercial policy enunciated by the Congress in the enactment of Section 317 appears to be trust for fair and equal access to market with our productions, or for our due share in the transportation of them; but to our own means of independence, and the firm will to use them. . . ."-Writings of Thomas Jefferson, collected and edited by Paul Leicester Ford, vol. vi, p. 470 (pp. 479, 480, 483). Ten volumes. New York, 1892-1899.

'As an unveiled warning of the consequences of failure to negotiate, however, it must be confessed that Section 317 seems a bit halting and indirect when compared with the following decree of the Russian Central Executive Committee and the Soviet of People's Commissars:

"In regard to goods and articles imported from countries which have not concluded trade agreements with the R. S. F. S.R. or which have violated the agreements concluded, the People's Commissariat of Foreign Trade, in agreement with the People's Commissariat for Foreign Affairs, may charge 100 percent more than the existing custom duties and may subject goods exempt from duties to duties up to 50 percent of their value."-Decree of Mar. 9, 1922. Translated from Izvestia, no. 58, Mar. 12, 1922. See also Appendix 5.

absolute equality to all the world and absolute equality from every country, guaranteed by solemn treaty.1

There remains for consideration the so-called mostfavored-nation clause, by which the policy of equality is guaranteed in commercial treaties.

24. SHALL THE MOST-FAVORED-NATION CLAUSE BE CONDI

TIONAL OR UNCONDITIONAL?

2

In connection with the description heretofore given of the Senatorial debate upon Section 317, the meaning of conditional most-favored-nation treatment was set forth. The reasons for the adoption of the conditional meaning by the courts and administrative officials of the United States will be made clear later on. The point to be emphasized here is the double meaning of the expression and the fact that to almost the entire commercial world, outside the United States, most-favored-nation treatment has had a different connotation from that given it in this country. Unconditional or unlimited most-favored-nation treatment implies a promise that concessions made to third countries, even though for a special consideration, will be extended to the "favored" nation as a matter of course.

Section 317 states no exception in favor of discriminatory practices simply because they happen to be committed in compensation for equivalent concessions made by a third country. The plea that, under the American interpretation of the meaning of most-favored-nation treatment, other countries could legitimately exchange reciprocal concessions without extending them to the United States would not, apparently, safeguard such countries from the imposition of

'Customs tariff equality holds the place of first importance but, it should not be forgotten, the terms of Section 317 are broad enough to cover almost any conceivable variety of discrimination.

2 Supra, subdivision 16.

defensive duties by the American Government. There exists, accordingly, an incompatibility between the policy of equality naturally resulting from Section 317 and a policy permitting special reciprocal concessions. Evidently the spirit and purpose of language such as that used in Section 317 would be largely subverted if restrained by such a limi

tation.

The fact that an exclusive favor to some other country is granted in return for a reciprocal favor does not make it any less in fact a discrimination against the commerce of the United States. The market that favors a third country is not any the less disadvantageous or closed to American products because it receives compensation for the favor in the form of a concession for its exports which enter the third country's market. A provision of law framed in behalf of American exporters would present but a sorry case for itself if it had to start with the confession that it did not apply to the very sort of differential treatment against which protection is probably most needed.

It seems manifestly necessary, therefore, that such treaties as are made in pursuance of a policy derived from Section 317 must seek (and consequently offer) unconditional most-favored-nation treatment. The promise of conditional most-favored-nation treatment would be the promise of only a part of what Section 317 demands. The promise of unconditional most-favored-nation treatment, that is to say, the full enjoyment of all favors and concessions that any other country enjoys, would just fulfil the demands of Section 317. Such a promise would be an agreement to refrain from all, not merely a part, of the discriminations against which the defensive duties may be proclaimed.

The unconditional most-favored-nation clause is the keystone of the arch upon which rests the treaty policy logically growing out of Section 317.

25. THE APPROPRIATE MOST-FAVORED-NATION POLICY FOR THE UNITED STATES

If the law of the land as laid down in Section 317 is to be adequately carried out by the executive branch of the Government the negotiation of treaties assuring unconditional most-favored-nation treatment to American goods would appear to be necessary. Such treatment must, of course, be granted in return to other countries for their goods entering the market of the United States.

Entirely apart from the necessity of an adequate administration of Section 317, there are a number of considerations which argue in favor of the adoption by the United States of the policy of unconditional most-favored-nation treatment. These considerations, together with certain

1

'The text of the unconditional most-favored-nation provisions of the treaty signed by the United States and Germany on December 8, 1923, is set forth infra, subdivision 64. The following language is that of a possible treaty article based directly upon the text of Section 317:

The High Contracting Parties mutually and unconditionally agree that within the territories under their respective customs jurisdictions they will not:

(1) Impose, directly or indirectly, upon the disposition in or transportation in transit through or re-exportation from such territory of any article wholly or in part the growth or product of the other any unreasonable charge, exaction, regulation or limitation which is not equally enforced upon the like articles of every foreign country;

(2) Discriminate in fact against the commerce of the other, directly or indirectly, by law or administrative regulation or practice by or in respect to any customs, tonnage or port duty, fee, charge, exaction, classification, regulation, condition, restriction or prohibition in such manner as to place the commerce of the other at a disadvantage compared with the commerce of any foreign country.

It is understood that the term “foreign country” when used in this Article shall mean any empire, country, dominion, colony, protectorate or mandated territory or any subdivision or subdivisions thereof within which separate tariff rates or separate regulations of commerce are enforced, regardless of whether such colony, protectorate, mandated territory or subdivisions thereof shall be under the political control, protection or

relevant and not heretofore sufficiently emphasized matters in regard to the relation between Section 317 and the mostfavored-nation clause, may be summarized briefly as follows:

(a) The arguments in favor of the conditional type of most-favored-nation clause should first be disposed of.

The first point in the case for the conditional type and for its retention in American treaties is the fact that the United States has consistently made use of it since the beginning of the national history. In political science one may consider as axiomatic the point that changes in policy should occur only for good and sufficient reasons. The force of the maxim in the present case must, of course, vary inversely with the strength of the arguments presented in favor of the unconditional type of clause.

The second point in the case for the conditional clause is the fact that, in a treaty containing it, a country does not promise to give more than conditional treatment ;-while getting the promise of less in return, the United States would itself promise less than under the unconditional clause. Apparently the only consideration of practical importance in this connection is that of freedom to enter into special reciprocity treaties with particular countries through which, by means of bartering concession for concession, a country might hope to get the best of a bargain or, at least, to obtain an advantage compensating it for the concession granted and corresponding to that accruing to the other country. Unless accompanied by a policy of active barmandate of either of the High Contracting Parties or of some third country.

Each of the High Contracting Parties reserves the right to impose additional duties upon the products of any industry of the other, which industry benefits by any unequal imposition upon or discrimination against its commerce enforced by any third country.

1See however, infra, subdivisions 36 (last paragraph), 54 and 64.