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and those of Genoa. 'These concessions were dictated by political motives.5
Although the practice of granting reciprocal favors and the theory of favored nations had existed much earlier than this treaty, and although this example was followed with modifications during succeeding centuries, it is not until the seventeenth century that the real clause of “the most-favored-nation” makes its appearance in written treaties.
Previous to this time the number of nations engaged in international commerce, as regulated by treaties, was small. Trade was really carried on by the adventurous few, and was, as a rule, either sporadic or governed by monopolies. As world commerce increased in the fifteenth and sixteenth centuries, as England and Holland set themselves to compete with Spain and Portugal, and the French and Scandinaviaus commenced to dispute the supremacy of the Hanseatic League and the waning power of the Italian Republics, conditions were changed. Treaties became necessary and frequent. In order to avoid repetition, a clause was framed which should refer back, embrace the conditions of the treaties already existing, and extend their provisions to the newly contracting states. This clause was that of the most favored-nation."
Not only did this clause generalize previous provisions, it performed a more important function, namely, to safeguard the state in whose treaties it appeared against future discriminations. This made it at once of great importance. Thus M. Visser finds the principal cause for its extensive use in the economic necessity which forced each state, in the clash of international commercial competition, to guard against falling into a position of disadvantage.?
In the beginning, this extension of favors was made but to one or two specified states. For instance, in the agreement, July 6, 1612, between the United Provinces and the Porte, the former secured the same advantages which had already been granted to Great Britain
6 Cavaretta, op. cit., 59.
6 For a detailed study of analogies to the clause in early times, and of its his. torical development, compare Cavaretta, op. cit., pp. 12–61.
7 Visser, op. cit., 78.
and France. The next step was to extend the advantages to include such favors as should be granted to certain other specified nations; then to include advantages granted to any nation whatsoever. Thus, article 4 of the treaty between Great Britain and Portugal, January 29, 1642, specifies that subjects of Great Britain shall enjoy all the immunities accorded the “subjects of any nation whatsoever in league with the Portugals.” This treaty is regarded as marking a turning point in the economic and political fortunes of both nations. The treaty of February 13, 1661 between Great Britain and Denmark contains the words (article 11) “ people of any foreign nation whatsoever.” 8 The Anglo-Danish Treaty of November 29, 1669 contained the phrase “ whatsoever foreign nations.” in September, 1675, between Great Britain and the Porte extends the favors of this grant to “ whatsoever other Christian Nation," (article 3); while that of August 16, 1692, between Denmark and the Hanse cities, contains the phrase "most-favored-nation,” (article 6).
In the eighteenth century, the treaty of commerce became of great importance, and with it the importance and the frequency of the appearance of the clause increased. The regime of the monopoly and of the mercantile system gave rise to reciprocal commercial arrangements between nations, and the gradual opening of world commerce. The success of the American Revolution was of the greatest importance in all that relates to commerce. Soon after the Declaration of Independence the United States began making treaties with European nations. In nearly all the treaties which were then and subsequently made by the United States, the clause of the most favored-nation was inserted, but in a form which, for the first time, provided that the advantages to be accorded were to be in return for an equivalent. The treaty with France, February 6, 1778, contains the first example of this new development. There in article 2, it is agreed that the favors which either of the contracting parties shall grant to any other shall be immediately extended to the other“ freely, if the concession was freely made, or on allowing the same compensation if the concession was conditional.” 10 Treaties with Sweden, April 3, 1783, and Prussia, September 10, 1785, contain similar stipulations. With the making of these treaties, there begins the development of the so-called “ American interpretation."
8 Cf. Treaty between rtugal 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.
The clause now enters upon a third phase, that in which it is used as an instrument to regulate the multiplex counter-rights of the subjects of the contracting parties. 11 During the nineteenth century, the use of the clause increased and became so common, in one or another of its various forms, that its appearance came to be looked
almost as a matter of course. Schmoller has characterized the clause as the “volkerrechtlichen Eckspfeiler aller neueren Handelsvertraege.” The clause was regularly inserted in the treaties of the Zollverein. It was a regular feature in the treaties fashioned under the new commercial policy of Napolean III. It forms the basis of the present commercial relations of France and Germany. It appears in most of the commercial treaties of the United States and Great Britain. It is prevalent in that large group of European treaties which were made in the last ten years of the century. The German treaties contain it in practically absolute form. France holds to it as far as possible in spite of her adoption of the double tariff.12 Spain developed an elaborate commercial policy, meaning to rid herself of the cramping restrictions of the clause, but in practice she has succeeded only to a very limited extent in effecting this exclusion. 13
Portugal, with a similar policy, has succeeded in making very few treaties without this clause. Switzerland has opposed the clause but has continued to use it. It occurs regularly in the new Japanese treaties and in recent Chinese treaties, having in several of each a very wide extension. Some South and Central American states have abrogated their commercial treaties with the object of getting rid of the clause in its unlimited form. Chile, Costa Rica, Dominica, Guatemala, and Uruguay denounced their commercial treaties with European countries, thinking these treaties an obstacle to their project of forming a customs-union, but Argentina and Paraguay · have accepted and retained the most-favored-nation clause.14 We may conclude that as commercial treaties exist to-day, they generally contain this clause in some form, and that attempts to get rid of it have not been conspicuously successful.15
10 In making this treaty, it may be observed, France was considering her politi. cal 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.
It may perhaps be said that a fourth phase in the history of the clause has begun with the rise of the system of double tariffs. The French system of double tariffs was introduced with the affirmed object of freeing the legislature from the checks imposed by the régime of treaties of commerce.16 Spain, Russia, Germany, and Norway, and, in America, Brazil and Argentina have to some extent imitated the French in the use of this system. What effect this new development has had or may have upon the clause of the mostfavored-nation will remain to be dealt with in a further chapter.
In order to simplify the study of the clause as it appears in many treaties, we may first consider the limitations within which it operates and the general forms in which it occurs. It is not intended that the clause shall operate so as to affect the internal policy of the state; it applies solely to treatment of foreign states, that is, to the relative treatment of the citizens and the commerce of foreign states. It is not usually considered as comprehending special arrangements and reciprocity between nations, where on account of proximity or special circumstances, reason exists for relations which cannot be shared by the world at large.1? Special relations between a colony and the mother country are generally understood to be exempt from the operation of the clause. The term “most-favored-nation” is sometimes replaced by “most-favored-foreign-nation,” though even where not so specified, that meaning is understood, as the contracting parties do not mean, for the purpose of the clause, that reciprocal relations between themselves and their colonies shall be considered as standards for 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'États 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 États avoisinants ou la faculté de conclure une union douanière n'enfreignent pas le principe d'une manière importante. Ces réserves ne présentent que peu d'intérêt ou sont expliquées par les nécessités du voisinage." (Visser, op. cit., 77.)
16 Cavaretta, op. cit., 53.
With these exceptions, the scope of the clause appears to be limited only by its wording and the interpretation put upon that wording. The clause sometimes stipulates that whatever advantages are accorded by either contracting party to a third state shall extend to the other; sometimes, that this shall be so without equivalent; sometimes forbids putting obstacles to the commerce of one which are not extended to the commerce of other nations. In some clauses there exists a limitation including or excluding certain nations; again the advantages are specified or limited; sometimes the articles which are to enjoy special treatment are enumerated.
An analysis and arrangement of the forms in which the clause occurs leads to the following classification.
Form 1. The form of simple transfer, which grants a privilege without reciprocity or condition. This often appears as a unilateral provision, especially in treaties between Christian or highly-civilized and non-Christian or semi-civilized, states, whereby the favors are extended to the former without reciprocity. In this form,
One state grants to the other all the privileges granted to any other.19
17 Cf. Herod, op. cit., 112-115; Visser, op. cit., 162. Treaty between Great Britain and t'ruguay, 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