TREATY OF COMMERCE AND CONSULAR RIGHTS WITH

GERMANY.

THURSDAY, JANUARY 31, 1924.

UNITED STATES SENATE,

COMMITTEE ON FOREIGN RELATIONS,

Washington, D. C.

The committee met, pursuant to call, at 10.30 o'clock a. m., in the committee room, Capitol, Senator Henry Cabot Lodge presiding. Present: Senators Lodge (chairman), Brandegee, Moses, Wadsworth, Swanson, Pittman, Robinson, Owen, and Shipstead.

STATEMENT OF WILLIAM S. CULBERTSON, VICE CHAIRMAN OF THE UNITED STATES TARIFF COMMISSION.

The CHAIRMAN. Article VII of the German treaty involves the question of the most-favored-nation clause and some others, but the subject that Senator Jones discussed here, and in which I think Senator Fletcher is also interested, is the policy of what is commonly known as national treatment-the policy of all nations being treated in limited respects on an equality with our own citizens. That is what it amounts to.

Mr. Culbertson, Article VII is the one we have had under consideration, but not the first paragraph. It is the paragraph beginning:

All the articles which are, or may be, legally imported from foreign countries

the point being the discriminating duties in favor of American bottoms. The Secretary of State told Senator Swanson and told me that you had given great attention to that subject. The committee would like to know what the relations now are with other countries. They are not the same.

Senator SWANSON. I went to the State Department to get some information and the Secretary of State told me that you were especially posted on this matter and had made a special study of it, and suggested that I should have you before the committee on that phase of it.

Mr. CULBERTSON. Article VII of this treaty, as the chairman has indicated, involves the two fundamental principles which are usually embodied in commercial treaties-first, the most-favored-nation principle, and second, the principle of national treatment.

I think at the very outset it is highly important, for a clear understanding of the problem, to distinguish between these two. They

are very closely interrelated and act and react upon each other, but they are distinctly different.

When one nation guarantees to another nation most-favorednation treatment the guaranty is that there shall be no discriminations against the second state in favor of a third state. For example, we might grant most-favored-nation treatment to Japan in respect to customs duties. That would mean that no higher duties would be charged upon goods of Japanese production imported into the United States than we would impose upon goods the product of any third state. Most-favored-nation treatment is equality of treatment as between products of other countries and as between citizens of other countries. National treatment, on the other hand, is a pledge by a nation to grant to aliens in the matters specified the same treatment that it grants to its own citizens. In the treaty of 1815 between the United States and Great Britain it is provided that no other or higher duties or charges shall be imposed in any of the ports of the United States on British vessels than those payable in the same ports by vessels of the United States, and, reciprocally, that no higher or other duties or charges shall be imposed in the ports of any of the British territories in Europe on vessels of the United States than shall be payable in the same ports on British vessels. A similar guaranty of national treatment is embodied in the treaty with respect to importations of goods in national vessels.

Senator BRANDEGEE. How does that differ from the most-favorednation treatment of which you have just spoken?

Mr. CULBERTSON. Most-favored-nation treatment is a pledge to grant in the matters specified the same and equal treatment to the citizens of the other State as is granted to the citizens of any third State. It is always a matter of importance to a State to be assured that the treatment its citizens receive at the hands of another shall not be less favorable than that which the other accords to the citizens of third States. The principle of most-favored-nation treatment is based upon the conception that a State is entitled to and should grant equality of treament in commercial relations.

In order to guard against oversight at the moment of negotiation and to remove the necessity of subsequent negotiations, the provision known as the most-favored-nation clause was devised to assure the contracting States not only of the benefits of concessions previously made but also those subsequently to be made by either of the contracting States. The purpose of the most-favored-nation clause is not to establish "a most-favored nation," i. e., a nation more favored than others. On the contrary, its function is to maintain equality of treatment and to assure to each State that it shall at all times be treated as favorably as the State which is "most favored." The effect of the clause in operation is to obtain for each of the contracting States any benefits which momentarily make a third nation "favored." It would be a more truly descriptive term to refer to the clause as "the equally-favored-nation clause."

Senator BRANDEGEE. I see.

Mr. CULBERTSON. Those two principles are interwoven in Article VII of this treaty.

The CHAIRMAN. They are interwoven here, and the result is much the same.

Mr. CULBERTSON. I should like to put into the record for your information a list of commercial treaties of the United States as of December, 1922. It is a compilation of our existing treaty relations, which, I think, will be helpful to the committee.

The CHAIRMAN. I hope you will.

(The list is as follows:)

Conspectus of commercial treaty relations of the United States, December, 1922.

NOTE. Some countries of minor importance with which we have no treaties have been omitted.

Senator ROBINSON. Are those treaties all in force?

Mr. CULBERTSON. These treaties are all in force, and the date of each is given. This list shows, first, the treaties with the countries of Europe, then the treaties with the countries of the Americas, and then others; and then it gives, below, the countries with which we have no commercial treaty.

The CHAIRMAN. This, of course, does not touch at all on the question of lighthouse dues, and pilotage, and things like that. That is a separate subject.

Senator ROBINSON. These are commercial treaties, as I understand?

Mr. CULBERTSON. These are commercial treaties.

Senator ROBINSON. This is a very interesting statement, in the nature of a diagram.

Mr. CULBERTSON. I should like to review briefly the development of our national policy with respect to national treatment. Our policy falls into three periods: An early period favorable to the adoption of national treatment; a period of discrimination virtually forced upon us by the navigation laws of other States; and a return to reciprocal national treatment, which is the policy of our Government to-day.

The records show that the leaders of the Continental Congress favored the adoption of reciprocal national treatment in our dealings with foreign powers. Information on this subject may be had from the instructions of Congress to the ministers empowered by it to negotiate treaties with foreign countries. On June 12, 1776, the Continental Congress appointed a committee of five to prepare plan of treaties to be proposed to foreign powers."

a

On July 18, this committee brought in a report containing a treaty plan. As the Colonies were most desirous of obtaining the assistance of France in their struggle for independence, they endeavored to enter into a treaty with that country. In accordance with this purpose the committee, in drawing up its plan of treaties, inserted the names of France and its King. Articles 1 and 2 of the plan, which dealt with trade and commerce, where as follows: 2

ART. 1. The subjects of the most Christian King shall pay no other duties or imposts in the ports, havens, roads, countries, islands, cities, or towns of the said United States, or any of them, than the natives thereof, or any commercial companies established by them or any of them, shall pay, but shall enjoy all other the rights, liberties, privileges, immunities, and exemptions in trade, navigation, and commerce in passing from one part thereof to another and in going to and from the same from and to any part of the world which the said natives or companies enjoy.

ART. 2. The subjects, people, and inhabitants of the said United States and every of them shall pay no other duties or imposts in the ports, havens, roads, countries, islands, cities, or towns of the most Christian King, than the natives of such countries, islands, cities, or towns of France, or any commercial companies established by the most Christian King shall pay, but shall enjoy all other the rights, liberties, privileges, immuniteis, and exemptions in trade, navigation, and commerce in passing from and to any part of the world which the said natives or companes enjoy.

In a word, these articles were to pledge reciprocal national treatment.

3

In negotiating treaties the commissioners of the United States were to use the treaty plan as a guide, but they were not to be bound by it. The American commissioners, who were sent to the court of France to propose treaties to France and other European countries, were instructed with respect to articles 1 and 2, as follows: *

There is delivered to you herewith a plan of a treaty with his most Christian Majesty of France, approved of in Congress on the part of the United States of America.

Journal of the Continental Congress, vol. 5, pp. 433 and 710. The members of the committee were John Dickinson. Benjamin Franklin, John Adams, Benjamin Harrison, and Robert Morris. Later two more members, Richard Henry Lee and James Wilson, were added to the committee.

2 Ibid., p. 576.

3 Ibid., pp. 827 and 828. The commissioners were Benjamin Franklin, Silas Deane and Thomas Jefferson.

4 Ibid., pp. 813 and 914.