MOST-FAVOURED NATION.—This term is applied to a clause very generally inserted in internatioual commercial treaties, by which the contracting powers bind themselves to grant to each other whatever privileges may be given by either to any third power. The clause is found in two forms, or if not in so many actually distinct forms, at least subject to two interpretations. One of these, based upon the principle of reciprocity, makes the grant of the privileges conditional upon the reci pient power giving to the grantor power the same consideration or com pensation as the third power to which they are granted has had to pay therefor. The other form or interpretation attaches no such condition • In Ireland, three months.
to the grant. The clause has now been in use for considerably over a century, and during this long period has been so frequently inserted m treaties that its verbal variation in practice is too extensive to be here dwelt upon. It is sufficient to say that the former of the above two forms or interpretations was the original one, but is now only adopted by the United States ; while the latter was introduced—but only constructively —in 1860, in the treaties of that year between France and England, and since then has been expressly accepted and adopted by the powers of Europe.
Article 2 of the treaty of peace and commerce between the United States and France of the year 1778 runs as follows :— The most Christian King and the United States engage mutually not to grant any particular favour to other nations, in respect of commerce and navigation, which shall not immediately become common to the other party, who shall enjoy the same favour freely, if the concession was freely made, or on allowing the same compensation if the concession was conditional.
In the 1891 treaties of the middle European States the clause is thus given :— In regard to the amount, the guaranty, and the payment of imposts on imports and exports, as well as in regard to the transit trade, neither of the high con tracting parties shall treat a third State on a more favourable basis than the other contracting. party. Each favour given in this connection to a third party is therefore to be given at once, and without compensation to the other contracting party.
These two examples show very clearly the difference between the forms, the difference between the resultant position of the European States to one another and to the United States in this matter, and the tendency in modern times to be more specific in particularising the subjects affected by the clause. It is perhaps in connection with the Customs tariffs of the various powers that this clause reveals its great importance, though certainly the other incidents of international commerce should not be over looked. It means, in the case of the European nations, that if England has received this most-favoured-nation treatment from Germany, England has a guarantee that its commercial intercourse with Germany shall not be treated less favourably than that of any other country, say Italy, to which Germany may make a concession. Should such a concession be made which takes the shape of a lower tariiT upon Italian imports into Germany than that imposed by the latter country upon English imports, then forthwith—automatically—that lower tariff' must apply to English imports. And this advantage England acquires gratuitously, notwith
standing that Italy may perhaps have paid for it very heavily. And what here applies to England would apply to all other powers whose treaties with Germany have been concluded on the most-favoured-nation basis. The clause is most decidedly a limitation to future action which cannot be properly estimated at any time ; for instance, a State which has handicapped itself.by the clause finds the position a very difficult one when it desires on a future occasion to give some material commercia/ advantage to another power. If England, for example, were bound by this clause with practically all the European nations—as in fact she is—a 'educ tion of import duties upon light wines in favour of France would hardly be worth acceptance as a favour by the latter country. But a nation that has a highly protective tariff would be a more forcible illustration of the effect of the clause. It disturbs to a considerable extent the stability of international commercial relations and commercial prospects generally. In 1895 there was a movement in Germany to denounce the most favoured-nation treaty of 1857 with Argentine, for the latter country, giving no consideration therefor, received all tariff concessions which Germany gave to Austria and Russia, and flooded the German market with wheat. One of the most significant instances of the working of the clause is that connected with the Frankfort Treaty of 1871, which being a treaty of peace cannot be denounced by either party thereto and must therefore be observed for ever. The clause at first worked very adversely to France; for Germany, refraining for the time being from entering at all extensively into commercial treaties, was able to enjoy without effort of its own the commercial advantages of the niece active policy of France. Subsequently the position was reversed, for Germany became active and France passive in this respect. In the meanwhile, however, the clause made it difficult for a treaty to be negotiated between France and Switzerland; the former country declined to give privileges to Switzerland, for they would necessarily accrue to Germany as well, as also would any privileges which might be given by Switzerland to France. But the United States entirely dissociates itself from the European form and in terpretation of the clause. In the words of an excursus in a number of the official Monthly Summary of Commerce and Finance of the United States, that country " reserves to itself the right to give concessions only in return for certain favours, and likewise reserves to itself the right to decide whether favours offered by other countries are the equivalent of those received from a specified country. The United States, therefore, is in a position to use any system of tariff, either a conventional and general tariff or a maximum and minimum tariff, without the disadvantages which the construction of the most-favoured-nation clauses imposes upon European countries." Wherefore the United States has the advantage of receiving the benefits of the European clause, but practically granting nothing in return. See TARIFF; TREATIES.