tralia with respect to rates of duty is one that may well be restricted as far as possible by treaties requiring equal rates to all countries. It must be confessed, however, that the repeated failure of negotiations undertaken by Canada, the difficulties presented by the problem of discriminations resulting from imperial preferences, and Australia's distance from and apparent exemption from necessary dependence upon the United States for a market, do not combine to present a particularly encouraging outlook. On the other hand, there appear to be no legal obstacles in the way of Australia's granting to the United States guaranteed most-favorednation treatment, meaning thereby treatment as favorable as that accorded not only to any foreign country but to any other portion of the British Empire as well.

Whether the application by the United States of defensive duties to Australian wool would prove an effective argument for the achievement of this end presents an interesting question.

71. THE CENTRAL AMERICAN STATES

The United States is a party to treaties containing conditional most-favored-nation clauses now in force with two of the five Central American states, namely, Costa Rica and Honduras.1 With the others there exists not even that limited protection against discrimination. Several treaties, which certain ones of them have entered into with European countries in order to obtain favorable markets for their raw materials, have provided in return for reduced import duties on manufactured goods, which are thus enabled to compete with advantage against nearer sources of supply in the United States.

Guatemala, with an estimated population of two millions, imports an average of about six million dollars' worth of

1For specific references see Appendix 3.

[518 goods annually from the United States, with which country it has no agreement assuring most-favored-nation treatment. Its principal treaties affecting commercial relations are with Italy, Spain and France.' The last-named treaty, promulgated by the President of Guatemala under date of April 30, 1923, provides for tariff favors to Guatemalan products entering France and for special reductions, ranging from fifteen per centum of the regular duties to total exemption, on seventy-eight French products imported into Guatemala. Unless these duties are to continue to discriminate against American products an agreement with Guatemala providing for unconditional most-favored-nation treatment would appear to be necessary.

Honduras has a population of nearly 650,000 and an import trade with the United States averaging about eleven million dollars annually. Besides its treaty with the United States it has commercial treaties with Belgium, France, Great Britain, Italy and Mexico. These instruments do not appear to contain any discriminatory clauses affecting

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commerce.

Nicaragua, with approximately the same population, has, for the United States, about half the commercial importance of Honduras. Like Honduras it has non-discriminatory commercial agreements with several European states and with Mexico. The Treaty of January 27, 1902, with

1Handbook, pp. 61, 62. A treaty with Chile is reported to have been concluded April 20, 1920.

'By decree of May 4, France brought the treaty into force as of May 8. 1923, see Board of Trade Journal, May 17, 1923; Commerce Reports, June 4, 1923. It was approved by the Guatemala legislature April 26, 1923.

Treaty of July 4, 1864. See Articles III and IV. Malloy, Treaties, p. 952.

Handbook, p. 62. There is a free-trade treaty with El Salvador, signed Feb. 28, 1918.

France, however, provides that Nicaraguan coffee and other specified products are to be admitted into France and its possessions at the lowest rates of import duty applicable to similar products of any other foreign origin and that, in addition to reciprocal most-favored-nation treatment, Nicaragua is to grant a twenty-five per centum reduction in rates of import duty to certain listed products of France and its dependencies. This reduction has been extended to products from Great Britain, Italy and Spain. It has not been extended to the United States. In Nicaragua, as in Guatemala, the United States should seek unconditional mostfavored-nation assurances."

El Salvador has a million and a half inhabitants and imports annually from the United States about five million dollars' worth of goods. It is not a party to a commercial treaty with the United States but maintains commercial arrangements with Belgium, Ecuador, France, Germany, Italy, Spain, Switzerland and Venezuela. Under the terms of the French treaty discriminations are practiced against the commerce of the United States. After a pledge by France, including dependencies, of most-favored-nation treatment to coffee and other enumerated products and by Salvador to all products, provision follows that "the tariff rates in force in Salvador will in so far as they affect the 'This treaty was denounced by France in 1918 but revived in 1921. 'Administrative circular dated November 1 and published November 9, 1923. Commerce Reports, January 7, 1924, p. 62. See also Handbook, p. 76.

By Decree of August 23, 1911, the Government of Nicaragua, in order to obtain the benefit of the minimum schedule of the United States Tariff Act of 1909, extended to American products the reduced rates of the French Treaty. The favor has not been accorded since the revival of that treaty.

"Handbook, p. 86.

"Preferential treatment is extended to other countries under mostfavored-nation pledges.

[520 French products enumerated" in an appended list, “be reduced so that those products will in no case be liable... to rates higher than those stipulated". Here again there is needed for the United States an unconditional most-favorednation pledge. The reciprocal character of the French treaty is such that the special rates are not given without compensation. Hence their benefit would not inure to the United States under a conditional most-favored-nation covenant.

Costa Rica has a population of somewhat more than half a million and is usually considered the most prosperous and progressive of the Central American republics. Its annual imports from the United States average about four millions in value. Besides the treaty with the United States,' commercial treaties are in force with Great Britain and Spain." These treaties do not contain discriminatory provisions but a European country is reported to be negotiating for an agreement with Costa Rica apparently providing for reduced import duties on certain of its products entering the latter. Should such a treaty, based upon reciprocal concessions, become operative, the conditional most-favored-nation clause in the treaty with the United States would be ineffective and an unconditional clause would be needed to protect American commerce from discrimination.

At the conference of the Central American States held in Washington from December 4, 1922 to February 7, 1923, the republics of Guatemala, Honduras, Nicaragua and El Salvador signed a Convention for the Establishment of Free Trade, providing essentially as follows:

The importation and exportation through the custom houses

'Treaty of July 10, 1851, Articles III and IV. Malloy, Treaties, p. 342. 'Handbook, p. 33. A treaty with France expired Mar. 1, 1923 (Commerce Reports, Mar. 26, 1923).

of the Signatory Republics at the various ports or on the frontiers of articles grown or manufactured in said Republics, shall be absolutely free of import and export duties and of municipal taxes or imposts of an eleemosynary nature.

Manufactured articles, in which the raw materials originating in the manufacturing or exporting country, do not form the greater percentage, shall not be included in this exemption.

Coffee and sugar are excluded from the foregoing provision, as are also those articles the sale of which is or may become a governmental monopoly or may be unlawful. Provision is made for the adherence of Costa Rica should that state later so desire."

This and other free-trade conventions that Central American countries have from time to time concluded with each other may be considered to be reciprocal, and hence not to onerate the contracting parties with obligations to extend free trade to outside countries, parties to conditional mostfavored-nation agreements. It is practically certain that the United States would not ask, even under an unconditional most-favored-nation pledge, for the benefit of favors mutually exchanged among these little countries. However, specific exception in this respect may appropriately be made in drafting treaties with them. Central American treaties with European countries characteristically provide, in according most-favored-nation treatment, for an exception of treatment which one may accord to the others of the Central American group.

However inadequate is the picture presented by the hasty review just given of a few of the treaties that make up the conventional systems with which the United States, in developing a new system of its own, must endeavor to effect

'Conference on Central American Affairs (Washington, Government Printing Office, 1923), pp. 388 et seq. The quoted passage is Article I.