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The Most-Favored-Nation Clause

Published online by Cambridge University Press:  04 May 2017

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Extract

The phrase “ most-favored-nation ” first appeared in commercial treaties toward the close of the seventeenth century. The clause in which it was used had been invented earlier in the century to meet the exigencies of that great commercial expansion which had followed upon the restless activities of the fifteenth and sixteenth centuries. The growth of international trade in the eighteenth century called for the multiplication of commercial treaties, and with the treaties the necessity for using the new clause increased.

After the American revolution, a series of treaties were made in which the clause was given an expanded and modified form. Henceforth there appear both the unqualified and the qualified forms. During the nineteenth century, while international trade became world commerce, commercial treaties became so common that they now bind the trading nations in a fine-meshed web. In these treaties the clause of the most-favored-nation was inserted with so few exceptions as to warrant its characterization as the “ corner-stone of all modern commercial treaties.”

Type
Research Article
Information
American Journal of International Law , Volume 3 , Issue 2 , April 1909 , pp. 395 - 422
Copyright
Copyright © American Society of International Law 1909

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References

1 Select Bibliography: Barclay, : Problems of International Diplomacy, Boston, 1907 Google Scholar; Borchardt, : Entwicklungsgeschichte der Meistbegünstigung in Handelsvertragsystem, 1906 Google Scholar; Cavaretta, : La clausola della Nazione più Favorita, Palermo, 1906 Google Scholar; Calwer, : Die Meistbegünstigung in Vereinigten Staaten von Nordamerika, Berlin, Berne, 1902 Google Scholar; Glier, : Die Meistbeguenstigungs-Klausel, 1905 Google Scholar; Herod, : Favored Nation Treatment, New York, 1901 Google Scholar; Kaufmann, : Welt-Zucherindustrie und Internationales und Koloniales Recht, Berlin, 1904 Google Scholar; Lehr: La clause de la nation la plus favorisée, Rev. Droit Internat., 1893, pp. 313-316; Moore, : Digest of International Law, Vol. V, 257–319, Washington, 1906 Google Scholar; Philbert: De la liberté du commerce dans les traités de commerce, Paris, 1902; Schippel: Amerika und die Handelsvertragpolitik, 1906; Schraut, : System der Handelsvertraege und der Meistbegunstigung, Leipsig, 1884 Google Scholar; Visser: La clause de la nation la plus favorisée, Rev. Droit Internat., 1902, pp. 66-87, 159-177, 270-280; Von Melle, : Die Meistbeguenstigungsklausel, In Holtzendorff’s Handbuch der Voelkerrecht, III, pp. 204–214 and ffGoogle Scholar, Berlin, 1889; Great Britain, Parl. Papers, Commercial, [No. 9. (1903).]; IL S. Treaties in Force 1904, Washington, 1904.

2 De Martens, : Droit international, Tome II, pp. 314–315 Google Scholar.

3 Calvo, : Droit international, III, 1597 Google Scholar.

4 “ It is clearly evident that the object sought in all — is equality of international treatment, protection against the wilfull preference of the commercial interests of one nation over another.” — Mr. Sherman’s note to Mr. Buchanan, Jan. 11, 1898. Moore, op. cit., Vol. V, p. 278.

5 Cavaretta, op. cit., 59.

6 For a detailed etudy of analogies to the clause in early times, and of its historical development, compare Cavaretta, op. cit., pp. 12-61.

7 Visser, op. cit., 78.

8 Cf. Treaty between Portugal and the United Provinces, August 6, 1661.

9 See Treaties, England-Portugal, Dec. 27, 1703; England-Spain, Dec. 9, 1713; England-Spain, Dec. 14, 1715; England-Spain, Oct. 5, 1750; England-Sweden, Feb. 5, 1766; Prussia-Saxony, June 18, 1766; England-Russia, June 20, 1766; Portugal-Denmark, Sept. 26, 1766.

10 In making this treaty, it may be observed, France was considering her political even more than her economic interests.

11 Cf. Cavaretta, op. cit., 50 ff.

12 Cf. Visser, op. cit., 72-74.

13 In a treaty with Japan, Jan. 2, 1897, art. 14, Spain accords Japan most-favored-nation treatment as regards customs duties; and Nov. 13, 1899, the products of Holland were accorded by Spain the most-favored-nation treatment.

14 Cf. Treaties, Argentina-Italy, June 1, 1894; Argentina-Norway and Sweden, July 17, 1885; Paraguay-Italy, Aug. 22, 1893; Paraguay-Belgium, Feb. 15, 1894.

15 “On peut donc dire que les traités de commerce se basent en général sur le traitement de la nation la plus favorisée. Presque tous les traités contiennent une clause garantissant ce traitement d’une manière plus ou moins étendue, et le petit nombre d’Etats qui ont essayé de s’y soustraire n’y ont réussi que fort peu. Il s’entend que les exceptions faites en ce qui concerne le commerce frontière, les relations avec les Etats avoisinants ou la faculté de conclure une union douanière n’enfreignent pas le principe d’une manière importante. Ces réserves ne pré sentent que peu d’intérêt ou sont expliquées par les nécessités du voisinage.” (Visser, op. cit., 77.)

16 Cavaretta, op. cit., 53.

17 Cf. Herod, op. oit., 112-115; Visser, op. cit., 162. Treaty between Great Britain and Uruguay, July 15, 1899; treaty between United States and Ecuador, June 13, 1839; treaty between Holland and Portugal, July 5, 1894.

18 Cf. classification by Herod, op. cit., pp. 5-7; and Cavaretta, op. cit., pp. 8-9.

19 In the treaty between Japan and Great Britain, Oct. 14, 1854, article V provides: “In the ports of Japan either now open or which may hereafter be opened to the ships or subjects of any foreign nation, British ships and subjects shall be entitled to admission and to the enjoyment of an equality of advantages with those of the most-favored nation, always excepting the advantages accruing to the Dutch and Chinese from the existing relations with Japan.” In the treaty between China and the United States, Oct. 8, 1903, article III provides that citizens of the United States in the open or hereafter opened ports of China “shall generally enjoy as to their persons and property all such rights, privileges, and immunities, as are or may hereafter be granted to the subjects or citizens of the nation the most favored in these respects.”

20 Treaty between China and United States, July 28, 1868, article 6, specifies for most-favored-nation privileges as regards travel and residence. In the treaty between France and Italy, Nov. 3, 1881, article 17 provides that each contracting party engages to allow the other to profit by any privilege or lowering of the tariff duties on the importation or exportation of articles, whether mentioned or not in the treaty, which one of them has accorded or shall accord to a third power. (The terms of the treaty not to apply to articles which are the objects of state monopoly.) Treaties between France and Honduras, Feb. 11, 1902; France and the Dutch Colonies, Aug. 13, 1902; and France and Nicaragua, Jan. 27, 1902, provide for most-favored-nation treatment as regards duties on importation and exportation of specified articles. The form adopted in the treaty between Great Britain and Uruguay, July 15, 1899, specifically restricts the application. “ The stipulations contained in the treaty * * * do not include cases in which the Government of * * * Uruguay may accord special favors, exemptions, and privileges to the citizens or the productions of the United States of Brazil, or of the Argentine Republic, or of Paraguay in matters of commerce. Such favors cannot be claimed in behalf of Great Britain on the ground of the most-favored-nation rights as long as they are not conceded to other states.” See treaties between United States and Great Britain, Nov. 19, 1794, article 15; Holland and Spain, July 12, 1892, articles 2, 6; Holland and Italy, Nov. 24, 1863, article 2; Holland and Austria-Hungary, March 26, 1867, article 2.

21 In the treaty between Great Britain and Servia, June 28-JuIy 10, 1893, articles I, II provide : “The two contracting parties engage reciprocally not to accord to subjects of any other power in matters of navigation or commerce any privilege, favor, or immunity, whatever, without extending them during the duration of the said concessions to the commerce and navigation of the other party, and they will enjoy reciprocally all the privileges, immunities, and favors which have been or shall be conceded to any other nation.” In that between Japan and China, July 21, 1896, article 4 grants, “in all respects the same privileges and immunities as are now or may hereafter be granted to the subjects or citizens of the most-favored nation.” A convention between Austria-Hungary and Mexico, Sept. 17, 1901, grants “Most-favored-nation treatment not only as regards importation, exportation, transit and in general everything relating to commercial operations and to navigation, but also in carrying on of business and of manufactures and the payment of taxes in connection with them.” Cf. Treaties between United States and Great Britain, July 3, 1815; Great Britain and Netherlands, Oct. 27, 1837, article I; Russia and Great Britain, Jan. 12, 1859, article X; France and Mexico, Nov. 27, 1886, article II; Germany and France, May 10, 1871, article XI; Servia and Greece, June 17, 1894; Roumania and Bulgaria, March 4, 1895; Belgian Treaties with Denmark, Greece, and Sweden, 1895; and English Treaties cited infra.

22 The treaty between Germany and Austria-Hungary, Dec. 6, 1891, as amended and completed Jan. 25, 1905, provides that no more favorable conditions in respect of import, export, or transit duties shall be granted by either contracting party to a third power than shall be accorded to the other party, and that any concession of this kind made to the third power shall at once be applied to the other. Any dispute relating to these provisions to be referred to arbitration (article 23a). la the treaty between Great Britain and France, Feb. 28, 1882, it is provided that “ * * * with the exception above stated each * * * engages to give the other immediately and unconditionally the benefit of every favor, immunity, or privilege in matters of commerce or industry which has been or may be conceded by one * * * to any third nation, whatsoever, whether within or beyond Europe.” Cf. treaties between Great Britain and Italy, June 15, 1883, article 11; Russia and Denmark, Mar. 2, 1895, article I.

23 Treaty between United States and Japan, Nov. 22, 1894, article XIV provides: “The contracting parties agree that in all that concerns commerce and navigation, any privilege, favor, or immunity which either has actually granted or may hereafter grant to * * * any other state shall be extended to * * * the other high contracting party gratuitously if the concession in favor of that other state shall have been gratuitous, and upon the same or equivalent conditions if the concession shall have been conditional; it being their intention,” etc. Cf. treaties between Argentine Confederation and Prussia, Sept. 19, 1857, article III; and Argentine Confederation and Japan, Feb. 3, 1898, article IV. For complete list of U. S. treaties containing this form, 1778-1887, cf. Herod, op. cit., 13, note. Cf. treaties between Portugal-Prussia, Feb. 20, 1844, article XII; England-Liberia, Nov. 21, 1848; Zoll-Verein-Netherlands, Dec. 31, 1851, article XXXIII; Holland-Liberia, Dec. 30, 1862, article XI; North Germany-Liberia, Oct. 31, 1867, article VI; and modern Japanese treaties.

24 Cf. Barclay: Problems of International Diplomacy, 137.

25 Treaties between United States and Great Britain, July 3, 1815; United States and Switzerland, Nov. 25, 1850.

26 Cf. infra, p. 410.

27 Mr. Bayard to Mr. Hubbard, July 17, 1886, MS. Inst. Japan, III, 425, Moore, op. cit., V, 273. Cf. Whitney v. Robertson, (1888) 124 U. S. 190.

28 Moore, op. cit., V, 257-260. American State Papers, F. R., Vol. V.

29 Mr. Sherman to Mr. Buchanan, Jan. 11, 1898, Moore, op. cit., V, 278.

30 Visser, op. cit., 273.

31 Cf. Barclay, op. cit., 138 ff.

32 Cf. Visser, op. cit., 273, and Cavaretta, op. cit., 99.

33 Moore, op. cit., V, 260.

34 Cf. infra, pp. 412, 414.

35 Moore, op. cit., V, 261.

36 Cf. Mr. Fish’s refusal to make a treaty with Argentine for a fixed scale of duties, 1869, Moore, op. cit., V, 262; the action of the United States when unexpected consequences followed the making of the treaty with Belgium (Ib. 262).

37 Moore, op. cit., V, 285.

38 Sweden, Belgium, and Holland also protested under treaties of July 1, 1852, Oct. 4, 1862, and Oct. 16, 1862, respectively.

39 Cf. Mr. Freylinghuysen’s note to Mr. Bingham, Minister to Japan, June 11, 1884, Moore, op. cit., V, 267-268. Cf. Herod, op. cit., 113-114.

40 See Foreign Relations U. S., 1878, 382-383, 403, 405.

41 Bartram v. Robertson, 1887, 122 U. S. 116.

42 See also U. S. Foreign Relations, 1881, 622 ff; and Herod, op. cit., 116 ff.

43 Snow: American Diplomacy, 176. Contrast with this the treaty between Great Britain and Tonga, Nov. 29, 1879, art. 2.

44 U. S. Foreign Relations, 1901, 278-279.

45 See Stone, : Most-favored-nation relations between Germany and the United States, N. Am. Rev., 182 (1906), pp. 433–445 Google Scholar.

46 Visser, op. cit., 83-84.

47 Cf. also treaty between United States and Japan, November 22, 1894.

48 Mr. Freylinghuysen to Mr. Bingham, June 11, 1884, MS. Inst. Japan, III, 1253, Moore, op. cit., V, 267.

49 Earl Granville to Mr. West, Feb. 12, 1885, Blue Book, Commercial, No. 4 (1885), 21-22, Moore, op. cit., V, 270-271.

50 Treaty between Great Britain and Sweden and Norway, March 18, 1826, art. 9. In the treaty between England and France, Jan. 26, 1826, art. 4 provides: “It is mutually agreed between the high contracting parties that, in the intercourse of navigation between their two countries, the vessels of any third power shall in no case obtain more favorable conditions than those stipulated in the present convention in favor of British and French vessels.”

51 Treaty between Great Britain and Paraguay, Oct. 16, 1834, art. 2. Cf. also treaties of Great Britain with Honduras, Jan. 21, 1887; France, Feb. 28, 1882; Mexico, Nov. 27, 1888; Japan, July 16, 1894.

52 Treaty between United States and Great Britain, July 3, 1816, art. 1.

53 Great Britain and Venezuela, April 18, 1825, art. II; and Great Britain and Russia, Jan. 12, 1859, art. I. In the convention between Great Britain and the United States, March 2, 1899, and Jan. 13, 1902, art. 5, appears the following: “In all that concerns the right of disposing of every kind of property, real and personal, citizens or subjects of each * * * shall in the dominions of the other enjoy the rights which are or may be accorded to the subjects or citizens of the most-favored nation.”

54 In 1903 no less than forty-two English treaties with foreign powers contained most-favored-nation clauses. Cf. Pari. Pap. Commercial No. 9. (1903).

55 Cararetta, op. cit., 109-110.

56 Ib. 113.

57 Cf. Smart: The Eeturn to Protection, 130.

58 Cf. Cunningham: The Free Trade Movement, 84 ff.

59 “No higher or other duties * * * on the imports or exports of any articles the growth, produce, or manufacture of the territories of one * * * into one from the other » * * than payable on the like articles * * * of any other foreign country.”

60 Cavaretta, op. cit., 125.

61 Cf. Visser, op. cit., 279.