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State Trading and the Most-Favored-Nation Clause

Published online by Cambridge University Press:  28 March 2017

Martin Domke
Affiliation:
New York University School of Law
John N. Hazard
Affiliation:
Of the Board of Editors

Extract

The governments of eleven Western countries have recently declined to accept a Soviet proposal to include an unconditional most-favored-nation clause in a draft All-European Agreement of Economic Co-operation.

Type
Research Article
Copyright
Copyright © American Society of International Law 1958

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References

1 Economic Commission for Europe, U.N. Doc. E/ECE/270, Pts. I and II, March 12, 1957.

2 See Hazard, John N., “Legal Research on ‘Peaceful Co-Existence,’ “ 51 A.J.I.L. 63 (1957).Google Scholar

3 ‘'Different from most-favored-nation treatment is ‘ national treatment,’ which means that the nationals of one of the contracting parties shall be treated in the respects agreed to, in the territory of the other contracting party, just as if they were nationals of the second contracting party.” L. Oppenheim, International Law 97, note 3a (8th ed. by H. Lauterpacht, 1955). See also Philip C. Jessup, A Modern Law of Nations 35 (1948) : “Such national treatment clauses are to be contrasted with most favored- nation clauses, which use a standard of equality with the most favorable treatment accorded to nationals of another state . “ Correctly it is observed by Harry C. Hawkins, Commercial Treaties & Agreements, Principles & Practice 12 (1951), that “ a most-favored-nation clause may have a value superior to national treatment, as for example, when a great power obtains from a backward country an absolute right superior to that enjoyed by the national interests of the backward country.”

4 Georg Erler, Grundprobleme des Internationalen Wirtschaftsrechts 52 (1956, transl.).

5 Cf. Protocol between Japan and the Union of Soviet Socialist Republics concerning the Development of Trade and the Mutual Granting of Most-Favored-Nation Treatment, of Oct. 19, 1956. Japanese Annual of International Law, No. 1 (1957), p. 131. 8 For a survey, see T. A. Taracouzio, The Soviet Union and International Law, Appendix XXIV (1935). 7 68 League of Nations Treaty Series 321.

6 For a survey, see T. A. Taracouzio, The Soviet Union and International Law, Appendix XXIV (1935).

7 68 League of Nations Treaty Series 321.

8 Martens-Triepel, Nouveau Recueil Général de Traités et autres actes relatifs aux rapports de droit international (3 Série), Tome XXI, p. 925 (1925).

9 Report of Sub-Committee on the Most-Favored-Nation Clause (George W. Wickersham, Rapporteur), adopted by the Committee of Experts for the Progressive Codification of International Law, League of Nations Publications V. Legal. 1927. V. 10; 22 A.J.I.L. Spec. Supp. 134 (1928).

10 49 Stat. 3805; Executive Agreement Series, No. 81. Cf. Chandler Anderson, P., “The Recent Trade Agreement with Russia,” 29 A.J.I.L. 653, 654 (1935).Google Scholar

11 Executive Agreement Series, No. 105, 32 A.J.I.L. Supp. 93 (1938).

12 Foreign Relations of the United States: The Soviet Union 1933-1939, p. 438 (Dept. of State Pub. 4539 (1952)).

13 Harry C. Hawkins, op. cit. (note 3 above) at 202. See Jessup, Philip C., “Negotiating Reciprocity Treaties,” 27 A.J.I.L. 738, 740 (1933).Google Scholar

14 “ LaClause de la Nation la plus Favorisée,” 39 Hague Academy Recueil des Cours 24 (1932).

15 Ibid, at 83.

16 Ibid. at 84. Cf. also his report to the Paris session of the Institut de Droit International, “ Les effets de la clause de la nation la plus favorisée en matière de commerce et de navigation,” 38 Annuaire 414, 472 (1934).

17 Treaty Series, 1930, No. 19, Cmd. No. 3552; 101 League of Nations Treaty Series

18 Parl. Deb., Commons, Vol. 286, Cols. 1291-1292, March 1, 1934; also quoted in Carlton Snyder, Richard, The Most Favored Nation Clause: An Analysis with Particular Reference to Recent Treaty Practice and Tariffs 144 (New York, 1948). CrossRefGoogle Scholar19 Memorandum on the Most-Favored-Nation Clause as an Instrument of National Policy 23 (Information Department, Eoyal Institute of International Affairs, 1933).

19 Memorandum on the Most-Favored-Nation Clause as an Instrument of National Policy 23 (Information Department, Eoyal Institute of International Affairs, 1933).

20 149 League of Nations Treaty Series 450.

21 ‘’ The Most-Favored-Nation Standard in British State Practice,'’ 22 Brit. Yr. Bk. of Int. Law 96, 113 (1945).

22 For the text of the Havana Charter for an International Trade Organization of March 24, 1948, see United Nations Conference on Trade and Employment, Final Act and Belated Documents (1948), Dept. of State Publication 3206 (Commercial Policy Series 114).

23 Art. 29: Non-discriminatory Treatment.

24 Art. 30: Marketing Organizations. Cf. Wilson, Robert R., ‘'Proposed ITO Charter,'’ 41 A.J.I.L. 879 (1947).Google Scholar

25 Cf. Reports of Committees and Principal Sub-Committees, United Nations Conference on Trade and Employment (Havana, 1948, JCITO 1/8 September 1948), p. 115; Clair Wilcox, A Charter for World Trade 94 (1949) ; and William Adams Brown, Jr., The United States and the Restoration of World Trade 181 (Brookings Institution, Washington, 1950).

26 61 Stat. (Part 5 ) ; Treaties and Other International Acts Series, No. 1700, Vol. 1. Cf. Wilson, Robert R. ‘'Postwar Commercial Treaties of the United States,'’ 43 A.J.I.L. 262, 279 (1949).Google Scholar

27 Basic Instruments and Selected Documents, Vol. 1 (rev.) (Geneva, 1955, GATT 1955-1), p. 33; and Report in Third Supplement (Geneva, 1955, GATT 1955-2), p. 227.

28 First Annual Report on the Operation of the Trade Agreements Program, TJ. S. House Doe. No. 93, 85th Cong., 1st Sess., p. 73 (1957).

29 Akademiya Nauk SSSR, Institut Prava, Mezhdunarodnoe Pravo (editor, E. A. Korovin) 398 (Moscow, 1951).

30 Op. cit. note 1, Pt. I, pp. 12, 17, 18, 19, 30, 44, 48, 55, 64, 67.

31 “Foreign Assistance Activities of the Communist Bloc and their Implications for the United States,” in Foreign Aid Program, Compilation of Studies and Surveys, 85th Cong., 1st Sess., Sen. Doc. No. 52, p. 639 (1957). A summary of trade agreements is compiled twice yearly in the International Trade News Bulletin, Pt. II, distributed by GATT, the last one Vol. VII (October, 1957), p. 500. Cf. also the U. S. State Department's study on the Soviet bloc's economic offensive, New York Times, Jan. 4, 1958, p. 4, col. 2.

32 International Trade 1956, GATT 1957-2, pp. 231, 236.

33 See Sbornik deistvuyushchikh dogovorov, soglashenii i konventsii, zaklyuchennykh SSSR s inostrannymi gosudarstvami, Vypusk XIII 344 (Moscow, 1956).

34 Text in Bundesgesetzblatt fuer die Republik Oesterreich 1956, p. 1509. It is stated in Part II of the Report of the Economic Commission for Europe of March 12, 1957 (cited above, note 1), p. 7, that some treaties of the U.S.S.E. contain a general mostfavored- nation clause covering all matters relating to commerce and navigation, whereas others contain merely a list of particular points to which the clause applies.

35 Sbornik (cited above, note 33), at p. 363; cf. Arnold Loher, Die Meistbeguenstigungsklausel (Thesis, Neuchatel, Switzerland, 1949). 36. cf. “survey of East-west Trade in 1955”,Eighth Report of international Cooperation Administration on the Mutual Defense Assistance Control Act of 1951, p. 21 (1956), and “The Strategic Trade Control System 1948-1956,” Ninth Report, p. 23 (1957); see also Justus Fuerstenau, Die Handelsoffensive des Ostblocks auf den Maerkten der Entwicklungslaender 36 (Frankfurt a. M., 1956), and the survey of foreign aid and credits of the U.S.S.R. to underdeveloped countries and of Soviet credits to bloc countries in Congressional Record of Aug. 27, 1957, p. 14617 (daily ed.)

36 Cooperation Administration on the Mutual Defense Assistance Control Act of 1951, p. 21 (1956), and “The Strategic Trade Control System 1948-1956,” Ninth Report, p. 23 (1957); see also Justus Fuerstenau, Die Handelsoffensive des Ostblocks auf den Maerkten der Entwicklungslaender 36 (Frankfurt a. M., 1956), and the survey of foreign aid and credits of the U.S.S.R. to underdeveloped countries and of Soviet credits to bloc countries in Congressional Record of Aug. 27, 1957, p. 14617 (daily ed.)

37 Cf. Matecki, Bronislaw E., Foreign Trade in the People's Democracies of Central and Eastern Europe 40 (A Research Study for the National Committee for a Free Europe, New York, 1952);Google Scholar and for further details: Economic Treaties and Agreements of the Soviet Bloc in Eastern Europe 1945-1951, p. 12 (2nd ed., Mid-European Studies Center, New York, 1952).

38 Georg Erler and Gottfried Zieger, Die rechtliche Bedeutung der Meistbeguenstigungsklausel in Ost-West-Handel 19 (Institute of International Law, Goettingen, 1957, unpublished study made available to the authors of this article).

39 This view has been expressed in Finland; see Hjalmar Procopé, Kansantaloudel Linen aikakauskirja (Helsinki, 1938), p. 114, although another view is taken by Eafael Erich, Suomen Ulkomaankauppa (Helsinki, 1934), p. 652. The first view is believed to be that of the majority of Finnish scholars by Prof. Veiko Reinikainen, Vice President of the Federation of Finnish Industries, who has provided the authors with a commentary from which the Finnish views and trade practice have been taken for this paper.

40 The International Law Standard in Treaties of the United States 246 (1953).

41 Erler and Zieger, op. cit. note 38 above, at 17.

42 Op. cit. note 30 above, at 91: “ [the most-favored-nation clause] is a long-established standard recognized in this field of law but not in the sense that by force of custom alone, and not by agreement, such treatment may be comprehended under the international law standard.”

43 Op. cit. note 1, Pt. I, pp. 13, 15, 21, 24, 26, 28, 31, 33, 36, 38, 41, 45, 49, 50, 53, 56, 62, 65.

44 Ibid., p. 57.

45 Cf. Berman, Harold J., “Soviet Law Reform—Dateline Moscow 1957,” 66 Yale Law Journal 1191, 1209 (1957).Google Scholar

46 It should be observed that the statement in the Report of the (Randall) Commission on Foreign Economic Policy, of January, 1954, on p. 48 that “Our policy of nondiscrimination in trade matters, as reflected in our unconditional most favored-nation policy, should be changed,” refers only to “ t r a d e relations with other free nations.” (Italics added.) 19 U.S.C.A. § 1362, enacted on June 16, 1951, 65 Stat. 73, provides for the suspension or withdrawal of concessions “from any nation or area dominated or controlled by the foreign government or foreign organization controlling the world Communist movement.'’

47 Op. cit. note 9 above, at 12; 22 A.J.I.L. Spec. Supp. at 150 (1928).

48 The Soviet Government has indicated its willingness to compromise in face of the private-enterprise opposition to its ECE proposal, for it currently offers to accept an agreement to “strive to extend reciprocal application” of the most-favored-nation principle. As an expression of endeavor, such a provision would create less than the binding obligation of the standard provision. Cf. “Soviet proposals for All-European Economic Co-operation,” International Affairs, 1957, No. 5, p. 156 at 162.