Expansion Through Reciprocity
THE name and fame of the lamented President McKinley will be identified in American history with the policy of reciprocity, which never had an abler and more sincere advocate. To the very last he remained an unflinching sponsor of the treaties made under his direction, and in his last annual message to Congress (December 3, 1900) he said of them : —
“ The failure of action by the Senate, at its last session, upon the commercial conventions then submitted for its consideration and approval, although caused by the great pressure of other legislative business, has caused much disappointment to the agricultural and industrial interests of the country, which hoped to profit by their provisions. . . .
“ The policy of reciprocity so manifestly rests upon the principles of international equity, and has been so repeatedly approved by the people of the United States, that there ought to be no hesitation in either branch of the Congress in giving to it full effect.”
There is an element of the pathetic in these words of gentle reproach. Even in his brief second inaugural address (March 4, 1901) Mr. McKinley made passing mention of this subject, so important, in his judgment, for the maintenance of our prosperity, saying : —
舠 Now every avenue of production is crowded with activity, labor is well employed, and American products find good markets at home and abroad.
“ Our diversified productions, however, are increasing in such unprecedented volume as to admonish us of the necessity of still further enlarging our foreign markets by broader commercial relations. For this purpose reciprocal trade arrangements with other nations should in liberal spirit be carefully cultivated and promoted.”
But it was in his farewell words to the American people, in his masterly speech at Buffalo, delivered on the eve of his martyrdom, that President McKinley gave the fullest expression to the results of his four years of deliberation on the subject of reciprocity. This is what he said : —
“ By sensible trade arrangements which will not interrupt our home production, we shall extend the outlets for our increasing surplus. A system which provides a mutual exchange of commodities is manifestly essential to the continued and healthful growth of our export trade. We must not repose in fancied security that we can forever sell everything, and buy little or nothing. If such a thing were possible, it would not be best for us or for those with whom we deal. We should take from our customers such of their products as we can use without harm to our industries and labor. Reciprocity is the natural outgrowth of our wonderful industrial development under the domestic policy now firmly established. What we produce beyond our domestic consumption must have a vent abroad. The excess must be relieved through a foreign outlet, and we should sell everywhere we can, and buy wherever the buying will enlarge our sales and productions, and thereby make a greater demand for home labor.
“ The period of exclusiveness is past. The expansion of our trade and commerce is the pressing problem. Commercial wars are unprofitable. A policy of good will and friendly trade relations will prevent reprisals. Reciprocity treaties are in harmony with the spirit of the times ; measures of retaliation are not.
“ If, perchance, some of our tariffs are no longer needed for revenue or to encourage and protect our industries at home, why should they not be employed to extend and promote our markets abroad ?”
The query in the final sentence suggests the current agitation in favor of a revision of the existing tariff law, applicable at least to certain schedules.
LEGISLATIVE REVISION.
The leading proposition for legislative revision of the tariff is known as the Babcock Plan. Representative Babcock, of Wisconsin, a Republican member of the Committee on Ways and Means, introduced in the last (Fifty-Sixth) Congress a bill providing for placing upon the free list all manufactures of iron and steel imported from abroad, the like of which are made in the United States by a “ trust,” without attempting to define what is a trust. This bill was never reported, but, since the adjournment of Congress, a far more radical scheme of revision has been discussed extensively in the press. It has been proposed to place either on the free list or on an exclusively revenue-producing basis all articles, now dutiable, which were formerly largely imported, but are now produced in this country and exported and sold abroad, under conditions of free competition. In other words, the mere fact of the exportation and sale in a foreign market of a given article of American manufacture shall be accepted as proof that the said article no longer stands in need of any protection by the United States tariff laws. This test of the efficiency and necessity of protective duties would be manifestly inadequate and unfair to many domestic industries that are struggling, against heavy odds, to place their surplus products in foreign markets, and must rely on absolutely stable conditions in the home market. It must be remembered that much of our export trade is still in the experimental stage, and that many manufacturers are making considerable sacrifices in order to find new outlets abroad for their goods. We have only to consult the formidable list of articles of American manufacture which have, in recent years, come within the scope of such a test, to realize the far-reaching application of the plan. It would involve a complete reversal of the economic policy of the government, and constitute virtual free trade. The industrial stagnation prevailing under the Wilson tariff is only one indication of the disastrous conditions which would surely follow a change of policy of that character.
Moreover, such a scheme of tariff revision would involve the sacrifice of an unknown amount of needed revenue. This release of revenue would be a sheer gift on the part of the United States at the expense of American producers. It is all very well to allege that a remission of duties by the government is simply a forbearance in the taxing of American consumers, but the fact remains that the principal beneficiaries in the transaction would be the European manufacturers, whose sales would be enlarged and profits swelled in American markets. It is surely idle to assert that the American people who emphatically voiced the merits of the protective tariff system in their electoral verdict of 1896, and again, at their very last opportunity, in 1900, are now prepared to sanction a desertion of that policy in the midst of an era of unexampled national prosperity.
REVISION THROUGH RECIPROCITY.
Let us now consider the other remedy. Reciprocity is an international commercial bargain, wherein the interested governments make mutual and equivalent concessions in their respective customs duties on particular articles of merchandise. It has been suggested that this might be effected by concurrent legislation in the respective countries, but that method is practically impossible. In the first place, it presents the weakness of instability. Take, for example, the acts of our own legislative branch. One Congress, whose life is only two years, cannot bind its successors in general legislation, and hence no one can accurately foretell the duration of a tariff act. But a treaty, made for a definite term of years, affords satisfactory security to its beneficiaries, inasmuch as it is a solemn compact between nations, which neither contracting party can afford to violate in this age of enlightenment. Secondly, in addition to the question of security, diplomacy is better adapted than the legislature to the adjustment of the precise terms and conditions of a well-balanced international arrangement in commercial reciprocity. It is, therefore, to the treaty-making power that we must resort for the practical application of the principle of reciprocity in tariffs.
HISTORICAL REVIEW OF THE POLICY OF RECIPROCITY.
The famous Marcy - Elgin treaty of 1854 with Great Britain on behalf of Canada stands as the first example of our adoption of the reciprocity principle in the modern sense. It provided for the mutual exemption from duty of an important list (identical on both sides) of natural products of the farm, forest, mine, quarry, and sea. It went into operation in 1855, and remained in force for eleven years ; being abrogated by act of Congress, and terminating on March 17, 1866.
The only other reciprocity treaty that the United States ever put in operation was the treaty of 1875 with the Hawaiian Islands, which established virtual free trade in the commercial relations of the two countries ; tropical or subtropical articles being exempted from duty on the one side, and an important list of miscellaneous products on the other. This treaty possessed an exceptional political significance in virtue of the geographic and intimate historical relations of the contracting parties, which foreshadowed, since an early date, the ultimate annexation of the islands by their powerful protector against foreign aggression. It was renewed in 1884, with the addition of an important concession to the United States of the exclusive use of Pearl Harbor for a naval station, and was still in force when annexation was accomplished. In fact, the customs provisions of the treaty continued in operation until the passage of the act of Congress of April 30, 1900.
Of the several unperfected treaties of reciprocity negotiated on the part of the United States, the administration of President Arthur furnished no less than three, namely, the Grant-Trescot treaty of 1883 with Mexico, the Foster treaty of 1884 with Spain on behalf of Cuba and Porto Rico, and the Frelinghuysen treaty of 1884 with the Dominican Republic. The last two failed of ratification by the Senate, and were withdrawn by President Cleveland in March, 1885 ; and the first, although duly ratified, never went into effect, for want of the stipulated legislation by Congress. In one sense, however, the rejected Mexican treaty was actually a “ perfected ” treaty, and hence is included in the official compilation of United States treaties.
In the popular mind the reciprocity of the Harrison administration still looms up conspicuously. The McKinley Tariff Act of 1890 contained in its third section the first instance of the incorporation of the reciprocity principle in tariff legislation, and this was done on the advice of Secretary of State Blaine. But it was reciprocity only by a curious indirection, for the act contained no reference to diplomatic negotiations, except the statement that the object was “to secure reciprocal trade.” The free list of the law embraced the items of sugar, molasses, coffee, tea, and hides. The so-called reciprocity section simply empowered the President, whenever satisfied that any foreign government producing and exporting the articles mentioned was imposing unequal and unreasonable duties on American products, to suspend the free introduction of the same, and thereupon the said articles should be subjected, on entry, to the payment of certain duties specified therein.1 Thus the threat of retaliatory action was the effective leverage of the reciprocity movement that followed. Reciprocal arrangements were negotiated in 1891—92, under this provision, by Secretary Dlaine and General Foster, with Germany, Austria-Hungary, France (never proclaimed), Brazil, British West Indies and Guiana, Cuba and Porto Rico, Dominican Republic, and four countries of Central America. They were in no sense “ treaties, ’ but simply reciprocal agreements which were arranged by the exchange of diplomatic notes, and became effective on presidential proclamation, without reference to the Senate.
These arrangements, which have justly enhanced the fame of Mr. Blaine, were in operation only two or three years, when they were all unceremoniously abrogated by the Wilson law of 1894, to the dismay and detriment of our exporters, and to the extreme disgust of the interested foreign governments. But even in that short period they exercised a remarkable influence in the development of the foreign trade of the United States in the countries with which they had been concluded. Their beneficial effect was especially noticeable in the increase of our flour exports to Brazil and Cuba.
This hasty review of the history of American reciprocity brings us to the advent of the McKinley administration.
RECIPROCITY PROVISIONS OF THE ACT OF JULY 24, 1897.
The Republican party having, in its national platform of 1896, pledged itself to reëstablish reciprocity equally with protection, and the President and a Republican Congress having been elected on that platform, the framers of the Tariff Act of July 24, 1897, very properly incorporated in it provisions for carrying out the policy of reciprocity. These provisions are contained in Sections 3 and 4.
The third section authorizes the President to enter into negotiations with any country exporting to the United States any of certain enumerated articles, — argols, wines, spirits, and works of art, — and, in exchange for reciprocal and equivalent concessions, to suspend by proclamation the existing duties on the said products imported from the country in question, which shall thereupon be entitled to admission at reduced rates specified therein. This is, of course, limited in scope, and applicable to only a few countries of Europe, because of the character of the foreign merchandise subject to reductions. Reciprocal agreements under this section have been concluded, in the form of conventions duly signed by the respective plenipotentiaries, with France, Germany, Italy, and Portugal. Like the Blaine arrangements, they went into effect upon proclamation by the President, and are now working satisfactorily. In each instance a full equivalent of commercial advantages has been secured by the United States. Although there are a few other countries with which the United States might profitably conclude similar agreements, the work under this section is substantially accomplished.
But it is Section 4 of the Dingley law that is the real legislative expression of the Republican pledge of reciprocity. It empowers the President to negotiate reciprocity treaties which may provide, during a period not to exceed five years, for concessions, on the following bases, to the contracting nation, in exchange for equivalent advantages secured to the export interests of the United States : —
(1.) Reduction of the present duty upon any article imported from any country, to the extent of not more than 20 per cent.
(2.) Transfer from the dutiable to the free list of any article that is a natural product of any foreign country, and, at the same time, not a natural product of the United States.
(3.) Guarantee of retention on the free list of any article now free.
The pledge of protection was faithfully executed by Congress in the schedules of import duties contained in the first section of the Dingley tariff, while simply the means of carrying out the equally meritorious pledge of reciprocity was provided in Section 4. The former section conserves and defends the home market for American industries, and safeguards the wages and tenure of employment of American labor, while the latter is intended to afford protection and security in foreign markets to our growing export interests, as well as to enlarge the field of their operations. There is no conflict whatever in the objects of these two sections, but rather an admirable harmony. The explanation is simple. When the rates of duty enumerated in the first section were being formulated, it was clearly understood by the framers of the law and by the interested manufacturers that each and every rate was subject to reduction to the extent of one fifth, under the operation of the reciprocity section. The rates were consequently made one fifth higher than would otherwise have been justified. If the present rates on highly protected articles are reduced by 20 per cent, and the results compared with the corresponding rates of the McKinley tariff of 1890, it will be found that in every instance an ample measure of protection is left to the article, often higher than the duty under the high tariff of 1890. Reciprocity under the Dingley law is, therefore, not in any sense an abandonment of the protective system ; nor can it properly be said to be a step in the direction of free trade. It makes for freer, fairer, and larger trade, but is utterly inconsistent with the economic policy commonly denominated “ free trade.”
It will thus be seen that, in Section 4, the tariff law contains a provision for self-revision within limits that are entirely rational. In fact, the natural inference is that many of the present duties are needlessly excessive, and ought to be reduced to the point contemplated by the framers of Section 4, who, as a matter of fact, were the framers of the entire act. Indeed, it is perfectly consistent to entertain this view, and still hold to the conviction that any more radical reduction in the existing rates, at this time, would be inopportune and fraught with danger to domestic industries.
Considered purely as an agency in the amelioration of possibly excessive duties, reciprocity is infinitely superior to the plan of the tariff revisionists. But when we come to consider the real object of the policy — the expansion of our foreign trade — no comparison is possible. One contemplates a national sacrifice in revenue, without the slightest assured return, but with a prospect of serious injury to home interests ; the other secures positive advantages to our export interests, without menacing the integrity of the national policy which is the basis of the existing prosperity. Indeed, our export interests are also our home interests, and protection of the former is equally protection of the latter, inasmuch as wider markets abroad create a greater demand for American labor and keep our industrial wheels going. A horizontal reduction of 20 per cent in the tariff by simple act of Congress would constitute a national extravagance, whereas the same reduction through the agency of reciprocity would prove a valuable national investment.
WORK OF COMMISSIONER KASSON.
Soon after the passage of the Dingley law, President McKinley appointed Hon. John A. Kasson, of Iowa, special commissioner plenipotentiary to represent him in the negotiations with foreign governments prescribed by the third and fourth sections. Commissioner Kasson was admirably qualified for this responsible and difficult service by a long and brilliant diplomatic and congressional experience. The negotiations were conducted simultaneously with several governments of Europe and of this hemisphere. In order to secure in each instance the greatest possible commercial advantages on the most favorable terms, the commissioner plenipotentiary applied himself to the careful study of home and foreign tariffs as well as of the official statistics of the international commercial movement; investigating the needs of our foreign commerce ; cautiously considering the effect of each proposed reduction in duty ; weighing the relative value of the total concessions on each side, with proper allowance for the character of the respective national tariffs ; seeking and receiving the expert advice of influential Chambers of Commerce, Boards of Trade, and other commercial organizations, as well as of manufacturers and exporters in various sections of the United States; and giving personal attention to the representations of Senators and Representatives respecting the business interests of their constituents likely to be affected in any way by the proposed treaties. The fact that the negotiations were in progress was heralded broadcast, and every manufacturer and merchant in the land was given the fullest opportunity to present his views. Many did so, but the few manufacturing interests which are now conspicuously protesting against certain provisions of the completed treaties remained silent and apparently indifferent until after their transmission to the Senate. On the other hand, some important interests have expressed by letters to the commissioner their acceptance of the reductions made in the treaties upon their branch of manufacture.
In his official labors, the commissioner constantly received the able and hearty coöperation of the Secretary of State in diplomatic matters, and the advice of the Secretary of the Treasury in questions of national finance. President McKinley himself manifested a deep concern in the success of the negotiations, and gave his personal approval to all the Kasson treaties.
Besides the reciprocal agreements under Section 3, already mentioned, the substantial results of the work of the Reciprocity Commission are shown in the following list of eleven treaties 2 transmitted to the Senate by the President, and still pending action by that body : —
THE KASSON TREATIES.
Country. Concluded.
France . . . . . . .July 24, 1899.
GREAT BRITAIN for
Barbados . . . . . . June 16, 1899.
British Guiana . . . . July 18, 1899.
Turks and Caicos Islands July 21, 1899.
Jamaica . . . . . . July 22, 1899.
Bermuda . . . . . . July 24, 1899.
ARGENTINE REPUBLIC . . July 10, 1899.
DENMARK for
St. Croix . . . . . . June 5, 1900.
ECUADOR . . . . . . July 10, 1900.
Nicaragua . . . . . . October 20,1899.
DOMINICAN REPUBLIC . . June 25, 1900.
The first seven conventions in the foregoing list were transmitted to the Senate at the first session of the Fifty-Sixth Congress, and their contents made public ; the other four were submitted at the second session of the same Congress, and, although printed confidentially, the injunction of secrecy on them has not yet been removed. Some of the treaties, including the French, have been favorably reported by the Senate Committee on Foreign Relations (to which all had been referred for consideration), but the Senate has not yet taken any of them up for action. The conventional periods for their ratification having expired, additional articles extending the time have been signed, as necessity arose, so as to keep the treaties alive throughout the first session of the Fifty-Seventh Congress, except in two cases in which the requisite steps to that end have been taken.
It is true that the Senate has been unusually occupied with important legislative business since the reciprocity treaties were received, but it is well known that the strong opposition which has developed to certain features of the French, Jamaican, and Argentine treaties has beenthe principal cause of senatorial nonaction.
THE FRENCH TREATY.
The reciprocity treaty with France is opposed because it provides for the reduction of the present average ad valorem duty on French cotton knit goods from 64 2/10 per cent to 51 5/10 per cent; on imitation jewelry from 60 per cent to 57 per cent; on spectacles from 79 8/10 per cent to 71 8/10 per cent; and on perfumes from 67 7/10 per cent to 61 per cent. There are a few other protesting industries, — certain manufacturers of brushes, tiles, braids, and gas and electric fixtures, — and that is the extent of the opposition. The great majority of American producers are emphatically in favor of the adoption of the treaty.
If the concessional rates above mentioned are compared with the corresponding duties of the McKinley tariff, which was enacted at a period when the industries in question were in greater need of governmental assistance, it will be seen that the French treaty in no way menaces the principle of protection. For example, the treaty would leave the duty on imitation jewelry at 57 per cent ad valorem, although under the McKinley law it was only 50 per cent ad valorem. The American negotiator confined the United States concessions in duty to 126 of the 463 numbers comprising the dutiable list of the Dingley tariff, although absolutely unrestricted in this respect by Section 4; and although authorized to concede in every instance a remission of 20 per cent of the duty, he granted the full reduction on only eight articles of French merchandise. The average of all the reductions proposed on the part of the United States is actually only 6 8/10 per cent, notwithstanding it might have been 20 per cent and still be in perfect conformity with congressional authorization. Surely this is extremely conservative action on the part of the Executive.
On the other hand, the great value of the French concessions to the United States is appreciated only by those American manufacturers who, in recent years, have attempted to gain a foothold for their surplus products in the markets of France, in competition with the products of English, German, Belgian, and Swiss rivals. The difficulty is that, with the single exception of Portugal, every commercial nation of Europe enjoys in France the benefit of her minimum, or conventional, tariff on imports, while the products of the United States are subjected to payment of the maximum rates of her general tariff. Reduced to an ad valorem basis, the difference between the two tariffs, so far as American products are concerned, averages about 48 per cent (excluding mineral and vegetable oils, 26 per cent). Many of our manufacturers engaged in foreign trade are effectually barred from the French market by this discrimination in rates, and those who have managed to effect an entrance are contending under difficulties.
But the reciprocity treaty of 1899, in a single clause, sweeps away this formidable obstacle to the expansion of our trade in France, and, during the conventional term of five years, establishes conditions of absolute security for our commercial interests there. France agrees, in Article I. of the treaty, that “ all articles of merchandise being the product of the soil or industry of the United States of America exported to France or Algeria (whether shipped directly to a French or Algerian port or arriving by way of an intermediate port) shall be admitted into France and Algeria upon payment only of the minimum rates of duty imposed on the like articles of any other origin ; ” excepting from the provisions of this sweeping grant only nineteen specified articles, which are mostly of little commercial significance. The liberality of this concession has aroused considerable opposition to the treaty in France, on the part of the manufacturing and agrarian interests. The political organization is such, however, that the French government would probably be able to carry the treaty through the Chambers, as soon as its acceptance by the United States should be assured. But, in any case, the agitation in French industrial circles has made it clear that the United States could not again secure such favorable terms in exchange for no more than has been given in the pending treaty.
THE JAMAICAN TREATY.
The opposition to the ratification of the reciprocity treaty with Jamaica comes from the fruit-growers of California, who complain because it makes a reduction of 20 per cent in the present duty on citrus fruits imported from that island. The duty is now one cent per pound, and hence, under the treaty, would be four fifths of a cent. In view of the facts that the season of importation of the Jamaican fruit is only partially coincident with the market season of the California product, and that already about 98 per cent of the entire crop of Jamaican oranges is sold in the United States, there would seem to be small ground for apprehension of increased competition, and no danger whatever of real injury to domestic interests.
But, considering the colonial concessions, even a cursory examination of the treaty will show that it is highly favorable to the United States. Jamaica agrees to admit free of duty no less than fifty-nine classes of United States merchandise, mostly important articles of manufacture, and also guarantees specified reduced rates on another list of agricultural products.
THE ARGENTINE TREATY.
The reciprocity treaty with the Argentine Republic is, strictly, not one of the Kasson treaties, having been negotiated and signed at Buenos Ayres by the United States Minister to Argentina. It is attacked by the wool-growers of the United States because it provides for a reduction of 20 per cent in the duties on Argentine wools. It is often asserted that the wool tariff is the keystone of the arch of protection, and certainly the storm of abuse which the proposed concession has brought down upon the treaty lends some color to the statement. If the treaty were to go into operation, the rate on Argentine wools of Class I. would be reduced from 11 to 8 8/10 cents per pound, and on those of Class III. from 4 and 7 to 3 2/10 and 5 6/10 cents per pound respectively, — and, they tell us, the arch would thereupon fall. The Argentine government made this concession a sine qua non; and, after all, it only emphasizes what President Arthur’s commissioners to Central and South America discovered so long ago as 1885, namely, that Argentina and Chile will not even discuss the subject of reciprocity with the United States unless their wools enter generously into the bargain.
Aside, however, from this single vulnerable feature, the treaty with Argentina is admirably drawn to develop and safeguard the export trade of the United States ; substantial reductions in the present Argentine duties on our lumber, cereal foods, cotton-seed oil, and certain other products being secured.
THE UNCHALLENGED TREATIES.
As respects the eight other reciprocity treaties, they are all carefully framed to stimulate, develop, and protect the foreign trade of the United States in particular markets, and if put into effect would demonstrate their merits within the short period of four and five years specified for their duration. The United States concessions on dutiable articles are confined to three or four natural products, such as sugar and fresh vegetables. In the case of the British and Danish colonies and the Dominican Republic the reduction of duty on sugar is only 12 1/2 per cent. Reciprocally, we secure for the principal products of our soil and industry either entire exemption from import duty or its substantial reduction, exemption from all extra charges (often vexatious and burdensome), and guarantee of the lowest rates of duty granted to the like products of any country. These treaties, however, have not yet been subjected to any special criticism ; why, then, should the storm raised by French cotton knit goods and Jamaican oranges and Argentine wool prejudice them ? On the legal principle that where character is not impugned good character must be presumed, they appear before the Senate as meritorious applicants for ratification.
GENERAL OBJECTIONS TO THE TREATIES.
An absurd charge against the pending treaties is that they were not negotiated on the true principle of reciprocity, which the objectors define to be the exchange on favorable terms of “ dissimilar and non-competing products.” In theory this may appear an ideal basis of commercial reciprocity, but among civilized and progressive nations it is impracticable. But this charge is really a criticism of the Dingley tariff, for, as has been shown, Congress had no intention of restricting negotiations for reciprocity to any such narrow basis. In view of the extensive industrial development of the United States, there are practically no non - competing foreign manufactures. This element being eliminated, the suggested basis is confined to crude products of the soil. In fact, one of the provisions of Section 4 is that natural products of foreign countries which are not also produced in the United States may be transferred in reciprocity from the dutiable to the free list. But what are they ? In the early history of the country it might have been quite practicable to confine the operations of reciprocity to this basis, but Congress has been so extravagantly generous in placing such articles on the free list that, were dutiable non-competing products to constitute the extent of our available assets in negotiations, the keenest diplomacy of the United States would find its task more difficult than was the manufacture of bricks without straw to the Israelites. Adding to the producing capacity of the United States that of its outlying possessions, — Hawaii, Porto Rico, and the Philippines, — there is absolutely nothing left for the operation of that kind of reciprocity which is limited to tariff concessions on “ articles which we need, but do not produce.”
Another indefinite assertion designed to throw discredit on the pending treaties, which has gained unworthy currency, is that they were negotiated under conditions which have since changed, and that better bargains might now be secured by the United States. This is not a fact. Some conditions may have partially changed, but they have invariably tended to become more difficult as a basis for successful reciprocity : so that, were the pending treaties to be rejected and negotiations begun afresh, it is extremely doubtful whether the United States could again secure equally favorable terms.
RECIPROCITY AND THE FAVOREDNATION” CLAUSE.
Within recent years two or three distinguished Senators have contended that all reciprocity treaties are at variance with the most-favored-nation clause contained in the majority of our treaties of commerce and navigation with foreign powers. They maintain that, under a proper construction of the said stipulations, the United States would, on demand, be obliged to extend to the signatory governments, immediately and without special compensation, any and all concessions this government grants to a particular country in a treaty of reciprocity. If this view were correct, it would, indeed, be a serious menace to the policy of reciprocity. Fortunately, however, the position uniformly taken by the executive branch of the government of the United States, since the time of John Quincy Adams, is that commercial concessions granted in reciprocity by this government to another in exchange for an expressed equivalent cannot be lawfully claimed by a third nation without like compensation.
The soundness of this construction is clearly demonstrated by Hon. John A. Kasson in a recently published article.3 Referring to the language of the mostfavored - nation clause in the principal commercial treaties of the United States, he writes: —
“ It is clearly evident that the object sought in all the varying forms of expression is equality of international treatment, — protection against the willful preference of the commercial interests of one nation over another. But the allowance of the same privileges and the same sacrifice of revenue duties, to a nation which makes no compensation, that had been conceded to another nation for an adequate compensation, instead of maintaining, destroys that equality of market privileges which the ' most-favored-nation ’ clause was intended to secure. It concedes for nothing to one friendly nation what the other gets only for a price. It would thus become the source of international inequality, and provoke international hostility.”
This view is supported by many precedents quoted by Mr. Kasson, and by a decision of the Supreme Court of the United States in 1887, in the case of Bartram et al. vs. Robertson, 122 U. S. Reps. p. 116, affirmed in Whitney vs. Robertson, 124 U. S. Reps. p. 190.
COMMERCIAL WAR OR RECIPROCITY ?
It is the function of reciprocity not only to improve present tariff conditions in foreign countries for the benefit of our exporting interests, but to establish effectual guarantees against worse conditions. Perhaps, indeed, this is the most important phase of the whole subject. It is well known that the governments of certain great commercial powers of Europe are contemplating the revision of their customs tariffs at the earliest feasible date. In at least three instances this may be accomplished immediately upon the termination of their commercial treaties with one another at the expiration of the year 1903. Preparations for that event are already in progress, in the form of preliminary tariff studies and projected schedules.
It requires no great political sagacity to perceive that what is termed the “ American commercial invasion ” of Europe, added to the ultra-protectionism of the Dingley tariff, has aroused a feeling of strong resentment and a spirit of retaliation in the invaded territory. We read much about the threatened official combination of European nations against the commercial interests of the United States, on the lines of the scheme proposed in 1897 by Count Goluchowski, Premier of Austria-Hungary. Although this peril to American commerce may be somewhat exaggerated by some writers, in view of the improbability of any basis of united official action being attained by rival European powers, there is, nevertheless, ample justification for serious apprehension of separate action on their part against our interests. An official coalition would be difficult, but the real danger is that, provoked by the same transoceanic conditions and acting independently, the principal nations of Europe may enact inimical and highly discriminating tariffs against the United States, to the incalculable injury of American commerce. Indeed, one such tariff is actually in course of official preparation by Germany, and will go into effect, it is said, January 1, 1904.
The recent retaliatory action of Russia in withdrawing from our manufactures the benefit of the minimum rates of her conventional tariff, and subjecting them to the almost prohibitory duties of her general tariff, has already resulted in a considerable loss to our producers. Similar commercial reprisals are to be feared in other quarters unless the Dingley tariff is mollified by the equity of reciprocity. The ratification of the pending reciprocity treaty with France would completely eliminate her from the theatre of commercial hostility to the United States, and would pave the way for negotiations to place American commerce on an equally favorable basis in every menacing quarter. Each one of the pending treaties, if adopted, will tie up one foreign country in the bonds of mutual interest, and effectually disarm it from taking adverse action against our commerce at any time during the conventional period. Reciprocity is, therefore, the only safeguard against a war of retaliatory tariffs, destructive to commerce and prejudicial to international comity.
John Ball Osborne.
- The constitutionality of the third section of the Tariff Act of 1890 was questioned on the ground that it was a delegation by Congress of legislative powers. The matter was carried to the Supreme Court of the United States, which, on February 29, 1892, decided that it involved no such delegation, but was entirely constitutional. See Fields vs. Clark; Boyd vs. U. S. ; and Sternbach vs. U. S., 143 U. S. Reps. 649 et seq. This decision unquestionably also establishes the constitutionality of the Kasson reciprocal agreements under Section 3 of the Act of 1897.↩
- A reciprocity treaty with Great Britain on behalf of Trinidad was signed on February 13, 1900, but it was never submitted to the Senate, the colonial authorities declining, upon the expiration of the brief period prescribed for its ratification, to extend the same.↩
- The Construction of the Most-FavoredNation Clause of Treaties, in Philadelphia Record, July 27, 1901.↩