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would be no more disastrous to the United States than the loss of ability to use it.
A scrupulous regard for the obligations of treaties is an evidence of a nation's high standing in the scale of civilization, as a disregard of them is an evidence of low standing. In ancient times it was customary to exact hostages to insure the fulfilment of treaties, now the merited reproach of other nations is generally sufficient to insure their observance. The United States can not afford to place itself in antagonism to this moral sentiment, for though, sometimes, even civilized people may not be held in check by it, still it has a restraining influence, and that influence is felt more and more as nations grow older, and rise higher in the scale of civilization. There can be no doubt but that the Hay-Pauncefote Treaty was made with a view of neutralizing the canal; if it fails to accomplish that purpose there is still time to correct its defects; these should not be left until it is too late. But it is confidently claimed that the treaty does neutralize the canal, that such is the almost universal understanding, and that the construction of fortifications commanding the approaches thereto will destroy neutralization. Nothing short of the most imperious necessity would therefore justify the United States in constructing them, and no such necessity exists.
PETER C. HAINS.
THE MOST-FAVORED-NATION CLAUSE
History The phra se “ 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."
Rarely does a conditional provision so extensively used and so vital in its bearing upon economic relations escape misinterpretation and avoid becoming the source of misunderstanding. The experience of this clause has been no exception to the rule. All through the
correspondence of the last century there appear constant disagreements and ever-recurring irritation over what is the meaning and what are the obligations attaching to this or that clause. In view of these facts it is somewhat surprising that only recently has the clause been made the subject of special study. True, each of the more important treatises upon international law and many works upon international commerce have given it notice, while numerous articles have dealt with it briefly. The diplomatic correspondence which it has occasioned would fill many volumes. Wharton's Digest
of International Law (1887) and Moore's Digest (1906) contain excellent summaries of some of this. But no monographic study appeared until the work of Mr. Herod, which was published in 1901.
The changes in world politics which ushered in the twentieth century have vastly increased the general interest in questions which affect international, and especially commercial, relations. This widening of the political horizon has already borne fruit in the relatively immense crop of monographs which has appeared within the last decade. In this new consideration of living problems the most-favored-nation clause has begun to receive some of the attention which its importance merits.
Mr. Herod's “ Most-favored-Nation Treatment” discusses the clause in general but with reference especially to the historical and legal basis for American practice. In 1902 M. Visser produced an article which furnishes a careful resumé of the history of the clause and a discussion of the chief points in the controversies to which it has given rise. Since then several German writers, especially Calwer, Kaufmann, Glier, and Shippel, have devoted very considerable attention to numerous phases of the subject. Dr. Glier's work represents an elaborate study of commercial treaties and is of particular value as an index and guide. A serious study of the history and legal aspects of the clause appears in Sig. Cavaretta's book. Certain South American writers have recently contributed to the discussion. However, with the exception of Mr. Herod's book, practically no concise treatment has appeared in English.
De Martens has classified commercial treaties as containing three kinds of clauses:
1 Select Bibliography: Barclay: Problems of International Diplomacy, Boston, 1907; Borchardt: Entwicklungsgeschichte der Meistbeguenstigung in Handelsvertragsystem, 1906; Cavaretta : La clausola della Nazione piú Favorita, Palermo, 1906; Calwer: Die Meistbeguenstigung in Vereinigten Staaten von Nordamerika, Berlin, Berne, 1902; Glier: Die Meistbeguenstigungs-Klausel, 1905; Herod : Favored Nation Treatment, New York, 1901; Kaufmann: Welt-Zucherindustrie und Internationales und Koloniales Recht, Berlin, 1904; 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; 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 Meistbeguenstigung, Leipsig, 1884; 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 ff, Berlin, 1889; Great Britain, Parl. Papers, Commercial, (No. 9. (1903).); U. S. Treaties in Force 1904, Washington, 1904.
1. Those relating to the subjects or citizens of the contracting powers in regard to their civil rights ;
2. Those relating to rights reciprocally granted to the subjects in all that concerns navigation;
3. Those which concern commerce properly speaking.2
As the clause of the most-favored-nation covers commerce, navigation, and the rights of subjects and citizens, we may expect to find it in treaties of all these classes.
These treaties cover, of course, a wide variety of subjects. They include importation, exportation, transit, transfer, and warehousing of merchandise; customs, tariffs, navigation laws; quarantines; tolls upon water courses and canals; the stay of boats in roadsteads and docks, and the deposit of merchandise in customs warehouses; coasting trade; the admission of consuls and their rights; stipulations which govern the respective subjects of the contracting powers in the possession and transmission of personal and real property; payment and exemption from extraordinary levies and forced loans; service in the army and militia; conditions of citizenship; establishment of consuls, etc., etc.3
Every state has a two-fold object in its international politico-commercial arrangements: to gain and to preserve the greatest possible advantages, and to guard against present or future disadvantages and discriminations. In making treaties with this object in view, the clause of the most-favored-nation has been found one of the most convenient and effective instruments, especially for the attainment of the latter end. In substance, the clause deals with the treatment which citizens or subjects of each of the contracting powers shall receive in the territories and at the hands of the other, especially in matters of navigation and commerce. Favors in navigation and commerce extend to the articles, the agents, and the instruments of commerce. The object sought is uniform treatment without discrimination.
2 De Martens: Droit international, Tome II, pp. 314-315. 3 Calvo: Droit international, III, 1597.
In the simplest form of the clause the contracting parties agree that in all that respects commerce and navigation, any privilege, favor, or immunity which either grants to a third state shall be granted to the other.
The shortest way by which to arrive at an understanding of the position of the clause in modern treaties is to go to its origin and to trace it in its evolution, that is, to study it historically. Two inevitable conclusions will be derived from such a course.
To state these in advance will greatly simplify the demonstration. In the first place, the clause had a two-fold origin, and usually the two-fold object suggested above - it was at once a political and an economic instrument. In the second place, two leading schools of interpretation have grown up, the one demanding a strict, or literal, interpretation of the words of the clause, the other insisting upon a practical, and more political, interpretation. Of the leading exponents of these radically different interpretations, the nation which holds to the former, Great Britain, is at the same time the greatest exponent of the principles of free trade; while the nation which insists
the latter, the United States, is the foremost advocate of the theory and practice of protection.
Most writers on international law, inferring from the fact that in its practical development the clause of the most favored-nation has been most frequently applied as a regulator of commercial relations, affirm that it owes its origin to a movement eminently economic. Sig. Cavaretta points out, however, that in its first appearance, it was due to political rather than economic exigencies, although these were of course closely allied with elements of an economic character. He discovers the embryo of the clause in the treaty of November 8, 1226, in which the Emperor Frederick II conceded to the city of Marseilles the privileges previously granted to the citizens of Pisa
1“ 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.