and which have, as a matter of fact, nothing to offer in return for a reduction of duties, would be likely to insist strenuously upon this second interpretation.

The "simply reciprocal form" of the most favored nation clause is, of course, the one to which the United States has consistently held. It has, from the beginning, adhered rigidly to the view that trade concessions offered by it to some other country need not become common to a third country with which we had treaty relations involving the most favored nation clause, unless that third nation should meet us on our own ground by granting the same favors that we secured at the hands of the other nations with which we had entered into treaty relations. In the treaty negotiated between the United States and France, February 6, 1778, the following words occur:

"The most Christian King and the United States engage mutually not to grant any particular favor to other nations in respect of commerce and navigation which shall not immediately become common to the other party, who shall enjoy the same favor freely, if the concession was freely made or on allowing the same compensation if the concession was conditional." "

In Art. IX. of the treaty with Prussia, in 1828, and in Art. IX. of the treaty with Austria, in 1829, occur the words:

"If either party shall hereafter grant to any other nation any particular favor in navigation or commerce, it shall immediately become common to the other party, freely, where it is freely granted to such other nations, or on yielding the same compensation, when the grant is conditional.'

18

On the other hand, European diplomacy has developed the interpretation of the most favored nation clause along a different line, following out the second of the tw interpretations already referred to. As things now stand, most European countries admit that nations which have granted to other nations the benefits of the most favored nation clause have guaranteed to

17 Treaties and Conventions concluded between the United States of America and other powers since July 4, 1776. Washington, Treaty with France, February 6, 1778, Art. II., p. 245.

is Ibid., Art. IX. of treaty with Prussia, 1828, p. 726; and Art. IX. of treaty with Austria, 1829, p. 33.

them that their commercial relations shall not be less favorable with it than shall those of any other country. In other words, new and more extensive trade concessions granted by country A to C, a third nation, are, ipso facto, extended to B, a second nation, with which it has originally entered into commercial relations, while B obtains these advantages without compensation even though they may have been paid for very heavily by C. This, of course, is a marked reversal of the original interpretation given to the "most favored nation clause," during the eighteenth and the first half of the nineteenth century. It is a most important point to bear in mind, in studying the development of reciprocity as a policy, for it will readily be seen that the adoption of the European interpretation of the most favored nation clause implies either the giving up of all commercial treaties, or else the conscious recognition of tariff reduction as a system to be regularly applied whenever granted in an individual case. Reciprocity, when limited to isolated instances, becomes nothing more than a matter of international bargaining, which may or may not be undertaken according as the circumstances of the particular case seem to indicate.

It is apparent that the United States in maintaining its own interpretation of this clause, reserving the right to grant tariff concessions only in return for certain other concessions, and the right to decide whether concessions offered by other countries are equivalent to those obtained from any particular country, occupies a vantage ground as compared with a group of nations adhering to a different interpretation and granting to us the advantages of the clause which we, however, deny to them. All of this has led to exceedingly unfavorable comment on the part of European countries which regard our attitude on the subject of the most favored nation clause as characteristically selfish. 19

19 This subject has been discussed at considerable length and very unfavorably to the United States by Calwer in "Die Meistbegünstigung der Vereinigten Staaten."

With the repeal of the English corn laws about 1846 came a period of considerably greater relaxation in trade regulations. The more liberal spirit which thus was beginning to find its way into European legislation continued to grow until about 1860, when it broadened into a general European movement toward a much freer tariff policy. In that year, a treaty negotiated between Great Britain and France contained liberal concessions on goods exported by the contracting countries, and removed all of the prohibitions previously laid on certain kinds of traffic passing between them. On the basis of the principles accepted in this treaty, there grew up an elaborate system of agreements between the several European states. These agreements granted commercial concessions which, by reason of the fact that they were subject to the "most favored nation clause," became generally applicable to European commerce and led to a condition bordering upon freedom of trade.20

Commercial development under these treaties was unexpectedly favorable. The trade of Austria, Belgium, France, Holland, Italy and Great Britain increased more than one hundred per cent. from 1860 to 1873, while the trade of the same countries with nations which had not entered into reciprocity treaties with them increased only sixty per cent. In this way, a policy which was at least analogous to reciprocity gained ground and seemed to meet with unexpected success. It undoubtedly gave general satisfaction within the countries which were affected by it. Yet it was not long before a distinctly new tendency became apparent. In the years immediately following the crisis of 1873, there began a definite and very general reaction from free trade. This reaction came on insidiously. In part, the higher tariff policy, which was then initiated, was due to the Franco-Prussian war, which produced increased expenditures and heavier indebtedness in con

20 Wells, "Recent Economic Changes," New York, 1893, p. 263.

sequence of the necessity of maintaining heavy armaments. Thus, increased taxation was required. Moreover, it is maintained by some that the new modes of production which were then gaining the ascendency led to maladjustment, and brought about a struggle to dispose of certain kinds of goods which were being freely manufactured by all countries, and which, it was supposed, were in danger of overproduction. In consequence of this movement, came a demand for protection, in order that the producing interests of the several countries might be safeguarded in the control of their own markets. Thus there gradually grew up a systematic attempt to encourage domestic manufactures by the levy of protective duties. At the same time, side by side with the protective movement thus sketched, there was noted a tendency to develop certain kinds of industry by the payment of bounties on articles of domestic production or by subsidizing vessels built for foreign commerce. These tendencies were not exclusively confined to Germany and France, although, of course, the effects of the Franco-Prussian war were felt with the greatest intensity in those two countries. The reaction from free trade spread throughout the whole of Europe, and by 1880 was in full swing. Some of the smaller states merely imitated the example of the more powerful. Others attempted a system of retaliatory legislation, thinking to break down the duties of their antagonists, while others fell into the belief that their producing interests would be best served by protection irrespective of the policy of other countries.

In 1879, Germany adopted an elaborate new tariff, modeled. upon the idea that she had certain paramount economic interests which must be cultivated. These interests were supposed to center about the production of grain, on the one hand, and about sundry extensive manufacturing industries on the other. The tariff adopted under these circumstances was not a system of high duties universally applied to all imported goods without exception. It aimed only to further the particular interests in

The

question by the imposition of duties upon products likely to compete with them. At the same time, a strong effort was made to prevent other countries from retaliating by the imposition of discriminating duties upon German exports. various political disturbances which occurred subsequent to 1880 furnished opportunity for Germany, by throwing her political influence into the scales, to overbalance the economic interests of sundry smaller countries, and to get low rates of duty without promising to admit the products of those countries on similar terms. So, also, in Austria, the tariff revision act of 1879 was a step in the direction of protection, although the legislation was still moderate. The tariff acts of 1882 and 1887 carried Austria still further in the direction of higher duties. Italy had much the same experience. Starting with fairly liberal legislation in 1878, the schedule of duties adopted in 1883 and subsequently modified in 1887, swung to the farther extreme of protection, in many instances going almost so far as to prohibit trade. In Spain a protectionist party succeeded in adopting high duties as early as 1877, and various other European countries of the second class followed suit. By 1890 most of them had come within the protective boundary. In France a similar reaction was in progress. Duties were materially raised at various times during the later seventies. In 1881 came a vigorous effort to secure the adoption of a maximum and minimum tariff system. Russia, while introducing fewer changes into her protective system than had been made by the other countries, enforced a fairly high schedule against the rest of Europe down to 1893, with few, if any, discriminations. England alone, among the important European countries, maintained her determined free trade attitude, and was imitated only by Norway and Holland among the states of secondary importance.

The system thus inaugurated in the seventies, and carried out during the eighties, very early produced distinct results. Assisted by the bounties and subsidies granted to favored in