PUBLIC RECORD OFFICE
Reference :-
PER C.O. 885
15 PUBLIC RECORD OFFICE, LONDON ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO
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Indian Act increasing the Customs duties on sugar imported from countries where a surtax of 6 fr. per 100 kilog. exists.
In this communication your Excellency informs me that the Austrian and Hungarian Governments have decided to make a formal protest against the measure in question, and that you have been directed to address an urgent request to His Majesty's Govern- ment to prevent its application to consignments from Austria-Hungary.
Your Excellency's representation is based apparently upon two grounds :-
1. That it is not open to the Government of India to increase the duties on Austrian and Hungarian sugars (a) because there was some implied understanding at the Brussels Conference that no action of the kind would be resorted to in the interval before the Convention should come into force; and (b) because the Brussels Convention is not yet in operation.
2. That such action is inconsistent with the Treaty of Commerce between the United Kingdom and Austria-Hungary of 1876.
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In regard to the appeal to the proceedings in Conference, His Majesty's Government are unable to find in the records any vestige of such an implied understanding; on the contrary, the records of the Conference show that at its termination each Power had reserved to itself the most complete liberty of action during the interval before the Convention should come into force. More especially was this necessary for Great Britain when, in-opposition contrary to the wishes of the British Government, the date of operation of the Convention was deferred until the 1st September, 1903 ; and consequently the declarations made by the British Delegates at earlier stages were in-consequence expressly and formally renewed at the 15th sitting.
Mr. Phipps on that occasion (see p. 201 of the procès-verbaux) expressly confirmed the previous declarations by which the British Delegates had formally reserved the right of their Government to take in the interval the measures which might be necessary for the protection of British interests if the date of operation of the Convention were His Majesty's Government are not aware of fixed at a date later than September, 1902. any statements made or pledges given by the British Delegates which could lead to a contrary conclusion, and I should be happy to learn if the Austro-Hungarian Govern- ment can point to anything which could give colour to such a contention.
In the absence of any such evidence, His Majesty's Government must assume that their entire freedom to take during the interval any steps which may become necessary for the protection of British interests, and which at the same time are not incompatible with existing Treaty engagements, cannot seriously be questioned.
I ass on, therefore, to the contention that the exact method which has been adopted by the Indian Government for the computation of the amount of the bounties arising under the operation of the surtax ought not to have been adopted because the Brussels Convention is not yet in force.
It is quite true that this method of computation is not yet obligatory as between the contracting States; but His Majesty's Government must claim that the Indian Government have shown in this respect a due regard for international comity, inasmuch as, for the assessment of the new duties, they have adopted a method of computation which was considered by the Representatives of all the Powers at Brussels to be the most r-quitable that could be devised, and which was fully accepted by the Austro-Hungarian Delegates and embodied in Article IV. of the Convention.
It remains for me to examine the contention that the action of the Indian Govern- ment is inconsistent with the terms of the Treaty of 1876 between Great Britain_amd Austria Hungary. British India is undoubtedly a party to that Treaty, but His Majesty's Government cannot admit that their action in countervailing the bounty arising from the operation of the surtax is a violation of its stipulations.
In my predecessor's note of the 14th July, 1899, when explaining to your Excel- lency the reasons which had led the Indian Government to resort in the first instance to "Her countervailing duties, the Marquess of Salisbury made the following statement: Majesty's Government are not disposed to admit that any Government has the right by such means (ie., by a system of bounties) to override the clear intention of the most- favoured-nation clause, which is, that goods shall enjoy equality of treatment, but not preferential advantages, as compared with goods of the most-favoured nation. When an artificial preference of such a character is produced by the direct legislative Act of a foreign Government which is a party to a most-favoured-nation stipulation, Her Majesty's Government consider that it should be open to the other Contracting Party, i such action should seem expedient, to redress the balance of trade which has thus been artificially disturbed. The remedy in such a case lies in the hands of the Government
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which grants the bounty, the discontinuance of which would cause the counteracting measures to disappear."
The argument thus quoted applies with exactitude to the present case; for the surtax, by means of which the cartels flourish and produce heavy bounties, is produced by the direct legislative Act of the Austro-Hungarian Government, which also has the power to discontinue it, in which case the extra duty imposed in India would no longer apply to Austro-Hungarian sugars. the Act-now passed-by the Indian-Government is in fact merely the application-to-another form-of-bounty-of-the principle-contained in the Indian Act of 1800.
In conclusion, I may state that the Indian Government have been impelled to the imposition of these duties by no motives of a nature unfriendly to Austria-Hungary, but solely by the imperative necessity of safeguarding an important native industry, which might otherwise have suffered irretrievable injury before the Brussels Convention could come into force. I trust that I may have convinced your Excellency that the action of the Indian Government, far from having been incorrect or opposed to existing Treaty engagements, has been necessitated by the circumstances of the case, and has been strictly consistent with the international obligations of this country.
R. B. F. E. C.