(3) RETALIATORY OR COMPULSIVE DISCRIMINATIONS.

§ 767.

By section 3 of the tariff act of October 1, 1890, commonly called the McKinley Act, it was provided that whenever the President of the United States should be satisfied that the government of any country producing and exporting sugars, molasses, coffee, tea, and hides, or any of such articles, imposed duties on the agricultural or other products of the United States, which, in view of the free introduction of the specified articles into the United States, he might deem to be "reciprocally unequal and unreasonable," it should be his duty by proclamation to suspend the free admission of the articles mentioned from such country, which were thereupon to become subject to certain duties.

Under this section agreements were concluded and proclaimed with Austria-Hungary, Brazil, Dominican Republic, German Empire, Great Britain (for the British West Indies), Guatemala, Honduras, Nicaragua, Salvador, Cuba, and Porto Rico. Agreements were also concluded with Costa Rica and France.

Message of President Harrison, June 27, 1892, S. Ex. Doc. 119, 52 Cong. See, also, President Harrison's annual messages, Dec. 9, 1891, and Dec. 6, 1892.

1 sess.

As to the claims made by various European powers for equal privileges in
Santo Domingo, see Mr. Wharton, Act. Sec. of State, to Mr. Coleman,
chargé at Berlin, confid., No. 375, March 11, 1892, MS. Inst. Germany,
XVIII. 551; Mr. Wharton, Act. Sec. of State, to Mr. Durham, No. 8,
Dominican series, March 11, 1892, MS. Inst. Hayti, III. 238; Mr.
Blaine, Sec. of State, to Mr. Durham, No. 19, Dominican series,
April 30, 1892, MS. Inst. Hayti, III. 248; Mr. Foster, Sec. of State, to
Mr. Durham, No. 36, Dominican series, Aug. 4, 1892, id. 274; Mr.
Foster to Mr. Terres, No. 59, Dominican series, Nov. 18, 1892, id. 298.
Spain admitted the claim of Great Britain to equal treatment with the
United States in Cuba and Porto Rico under the most-favored-nation
clause, but gave notice of the termination of the treaty containing
the clause and afterwards declined to insert a similar clause in a
new treaty. (Mr. Grubb, min. to Spain, to Mr. Blaine, Sec. of State,
No. 246, May 7, 1892, MS. Desp. Spain; Mr. Blaine, Sec. of State, to
Mr. MacNutt, chargé, No. 219, May 23, 1892, MS. Inst. Spain, XXI.
137.)
As to the imposition in Spanish ports of duties on paraffine and lubricating
oils exported from the United States at a higher rate than on similar
articles from England and Germany, see Mr. Foster, Sec. of State, to
Mr. Flagg, Dec. 22, 1892, 189 MS. Dom. Let. 525.

March 15, 1892, a proclamation was issued in conformity with the foregoing section, imposing duties on sugars, molasses, coffee, tea, and hides produced in or exported from Colombia. The Colombian minister, March 23, 1892, protested against the proclamation as a

violation of the treaty between the United States and New Granada of December 12, 1846. By Article II. of that treaty each country engaged to grant to the other most-favored-nation treatment; and by Article V. it was agreed that no higher or other duties should be imposed in the one country on the importation of the produce of the other than should be payable on like produce" of any other foreign country." The Colombian minister affirmed that the imposition of import duties by the United States on certain articles of Colombian produce, while the like articles were admitted free from other countries, established a discrimination against Colombian produce which his government held "to be contrary to the spirit and express stipulations of the treaty of 1846." Mr. Blaine replied that the President did not regard the law in question nor his action under it as a violation of the treaty. "The law cited," said Mr. Blaine, "applies the same treatment to all countries whose tariffs are found by the President to be unequal and unreasonable."

Mr. Blaine, Sec. of State, to Mr. Hurtado, Colombian min., May 31, 1892,
For. Rel. 1894, Appendix I. 472, 473; S. Ex. Doc. 56, 53 Cong. 2 sess.
In a subsequent note Mr. Hurtado amplified his protest, pointing out that
President Polk, in his message to the Senate of February 15, 1847,
submitting the treaty of 1846 for approval, said: "This treaty re-
moves the heavy discriminating duties in the ports of New Granada
which have nearly destroyed our commerce and navigation with that
Republic and which we have been in vain endeavoring to abolish for
the last twenty years." The nations that enjoyed the privilege of
free importation of hides and coffee into the United States might,
said Mr. Hurtado, be divided into two classes-(1) those which, like
Mexico and the Argentine Republic, freely received the favor, and
(2) those which, like Brazil and certain others, had acquired the
privilege by making certain concessions in favor of United States
produce. He claimed that, in virtue of the stipulations of Article I.,
the concessions made by the United States in either case became com-
mon to Colombia. In this relation he cited a similar clause in
Article XV. of the treaty between the United States and Great
Britain of 1794 and the construction put upon it by Mr. Madison and
others in the debates in Congress; the similar clause in article II. of
the commercial convention with Great Britain of 1815, negotiated
while Mr. Madison was President; the concession by Great Britain in
1846 of the demands of the United States in the rough rice case; and
the note addressed by Mr. Fish, as Secretary of State, to Mr. Garcia,
Argentine minister at Washington, March 14, 1869, supra, § 765,
declining to enter into reciprocity negotiations with that Republic.
He also contended that the discrimination, growing out of the proc
lamation, constituted a violation of that clause of Article V. of the
treaty of 1846 which reads: Nor shall any prohibition be imposed
on the
importation of any articles the produce or manufac-
of the Republic of New Granada, to . . . the United
which shall not equally extend to all other nations."
(Mr. Hurtado, Colombian min., to Mr. Foster, Sec. of State, July 28,
1892, For. Rel. 1894, Appendix I. 477-482.)

ture. States,

For further correspondence between Mr. Hurtado and the Department of
State, see For Rel. 1894, Appendix I. 482-496.

For a discussion in the report of the Colombian minister for foreign
affairs for 1894, see For Rel. 1894, 198-199.

(4) BOUNTIES.

§ 768.

By the tariff act of August 28, 1894, an additional duty of onetenth of a cent a pound was imposed on sugars which were imported from or were the product of a country that paid a bounty on the exportation of such sugars. Against this additional duty the German ambassador, as well as the diplomatic representatives of certain other governments, protested. The protest of the German ambassador was based on the treaty between the United States and Prussia of May 1, 1828. By Article V. of that treaty it is stipulated that no higher or other duties shall be imposed in one country on the produce or manufactures of the other than shall be payable on like articles from any other foreign country; and by Article IX. provision is made for most-favored-nation treatment.

October 12, 1894, Mr. Gresham, Secretary of State, in a report upon the protest of the German ambassador, stated that the stipulations in question gave either party "the right, special engagements of reciprocity being excepted, to take the duties levied by the other on articles the produce or manufacture of any other country, and to demand the same treatment for its own products and manufactures. It is obviously no answer to this to say that certain discriminating duties levied by one party on the products or manufactures of the other are not confined to the latter, or to any country by name, but apply equally to all countries that may happen to fall in a certain category. If there is any other country, or if there are other countries, which, either by name or by a general classification, are exempt from the duty (special engagements of reciprocity being excepted), the requirements of the treaty are not fulfilled. To say that the discrimination is not specifically and explicitly national, or that it applies to more than one country, is a mere argumentative subterfuge, inconsistent with the clear intention of the treaty."

In this relation Mr. Gresham referred to the discussion between Great Britain and the United States of the question of duties on rough rice as affected by Article II. of the treaty between the United States and Great Britain of July 3, 1815, which was in terms similar to Article V. of the treaty between the United States and Prussia of 1828, and to the action of the British Government in equalizing the duties in response to the protest of the United States.

H. Doc. 551-vol 5—20

Mr. Gresham also discussed the question whether the payment by a government of a bounty on the exportation of an article of its produce or manufacture could be considered in the light of a discrimination which might warrant another government in laying, in spite of a most-favored-nation clause, an additional or countervailing duty. He answered this question in the negative, on the ground that the payment of bounties was a domestic measure which could no more be considered a discrimination than could the imposition of a protective or practically prohibitive duty for the purpose of encouraging domestic manufactures.

Report of Mr. Gresham, Sec. of State, to the President, Oct. 12, 1894,
For. Rel. 1894, 236.

"The German government has protested against that provision of the
customs tariff act which imposes a discriminating duty of one-tenth
of one cent a pound on sugars coming from countries paying an
export bounty thereon, claiming that the exaction of such duty is
in contravention of articles five and nine of the treaty of 1828 with
Prussia.

66

"In the interests of the commerce of both countries and to avoid even
the accusation of treaty violation, I recommend the repeal of so
much of the statute as imposes that duty, and I invite attention
to the accompanying report of the Secretary of State containing a
discussion of the questions raised by the German protests.” (Presi-
dent Cleveland, annual message, Dec. 3, 1894, For Rel. 1894, ix.)
The government of Austria-Hungary also protested against the dis-
criminating duty, on the strength of Art. V. of the treaty of 1829.
(For. Rel. 1895, I. 6-8; S. Ex. Doc. 58, 53 Cong. 3 sess.)

Also the government of Denmark, on the strength of Art. V. of the
treaty of April 26, 1826. (For Rel. 1895, I. 205–207.)

The American interpretation of the most-favored-nation clause "is believed to accord with the interpretation put upon the clause by foreign powers-certainly by Germany and Great Britain. Thus, as the clause permits any internal regulations that a country may find necessary to give a preference to native merchants, vessels, and productions,' the representatives of both Great Britain and Germany expressly declared, at the International Sugar Conference of 1888, that the export sugar bounty of one country might be counteracted by the import sugar duty of another without causing any discrimination which could be deemed a violation of the most-favored nation clause.'' (Mr. Olney, At. Gen., Nov. 13, 1894, 21 Op. 80, 82.) As to the London Sugar Bounties Conference of 1888, see For. Rel. 1888, II. 686-688, 706-708, 710, 711, 715-717, 721, 726, 732, 733, 737, 745, 771, 772, 775, 789, 792, 796.

The passage above quoted from Mr. Olney's opinion of Nov. 13, 1894, is
embodied in a note of Mr. Sherman, Sec. of State, to the German
chargé d'affaires ad interim, Sept. 22, 1897, For. Rel. 1897, 178.
April 13, 1897, the minister of Austria-Hungary at Washington protested
against a clause in the new tariff bill then pending, imposing an addi-
tional duty on sugars imported from bounty-paying countries. He
referred to previous correspondence, and particularly to Mr.
Gresham's report of October 12, 1894, and the President's recom-

mendation in his annual message of 1894 of the repeal of the addi-
tional duty in the tariff act of that year. The Department of State
replied that copies of the note had been sent to the appropriate com-
mittees of Congress for their information and consideration.
Rel. 1897, 22, 23.)

(For.

By Article VII. of the convention adopted by the International Sugar Bounties Conference of 1888, the contracting parties agreed to lay a countervailing duty on sugars imported from any country paying a bounty, either direct or disguised, on their exportation. This was known as the penal clause of the convention. The convention, however, never became effective.

By act of the British Parliament, entitled the "Indian tariff act (1894) amendment bill," a countervailing duty was imposed on Russian sugar imported into India. Against this duty the Russian government, by a note of June 12, 1899, protested on the grounds (1) that no bounty, direct or indirect, was paid in that country on the exportation of sugar, and (2) that, even if such a bounty were paid, the imposition of a countervailing duty would infringe the mostfavored-nation clause in the treaty between the two countries of January 12, 1859.

66

a

Lord Salisbury, July 15, 1899, replied that the Russian system, under which the excise duty on sugars is repaid in case of exportation, which had the same effect as created an "artificial stimulus bounty of a more direct character," and that the same opinion was disclosed in the legislation of the United States and in the records of the then recent conference at Brussels. In this relation, Lord Salisbury maintained that it was the intention of the most-favored-nation clause "that goods shall enjoy equality of treatment, but not preferential advantages as compared with goods of the most-favorednation;" and that, where an artificial preference was produced by the direct legislative act of a government which was a party to a mostfavored-nation stipulation, the other government might "redress the balance of trade which has thus been artificially disturbed," the remedy being in the hands of the other government to discontinue the bounty or the legislative act producing the artificial stimulus. He offered, however, if the Russian government should be unwilling to accept this view, to give notice of the termination of the treaty.

In the Brussels convention of March 5, 1902, a penal clause similar to that in the unratified convention of 1888 was embodied. To the convention of 1902 Russia was not a party, nor was she represented in the conference by which it was framed. In a communication to the British government, July 8, 1902, it was stated that Russia would consider the application by that government of the countervailing duty to Russian sugars as a violation of the treaty of 1859. For this view the same reasons were given as in 1899.