CO885-(13-15) — Page 630

17663.

SIR,

No. 215A.*

(WEST INDIES.)

FOREIGN OFFICE to the SOLICITOR-GENERAL.

Foreign Office,

June 20, 1899.

I HAVE the honour, by direction of the Marquess of Salisbury, to transmit to you the papers noted in the accompanying list, which relate to an Act passed this year by the Indian Government (Paper A) for the purpose of imposing countervailing duties on foreign sugar when imported into India under bounties.

The additional duties which are to be levied, as shown in Paper (B), are believed to be, as far as possible, exactly equivalent to the bounties granted, whether on production or export, in the respective foreign countries named.

A considerable amount of bounty-fed sugar is exported to India from Austrin- Hungary, and it is believed that although the amount of Russian sugar imported into India is at present inappreciable, the trade might possibly be greatly extended in the future.

Under these circumstances, representations have been made by these two countries respecting the bearing of the recent Indian Act upon international obligations.

The Treaty between Great Britain and Austria-Hungary of the 5th December, 1876 (Paper C), contains the following stipulations :-

"ARTICLE II.

"The produce and manufactures of, as well as all goods coming from, Austria- Hungary which are imported into the territories and possessions, including the Colonies and foreign possessions, of Her Britannic Majesty, and the produce and manufactures of, - as well as all goods coming from, British possessions which are imported into the Austro- Hungarian Monarchy, whether intended for consumption, warehousing, re-exportation, or transit, shall therein, during the continuance of this Treaty, be treated in the same manner as, and in particular shall be subjected to no higher or other duties than, the produce and goods of any third country, the most favoured in this respect.

"ARTICLE III.

"Every reduction in the Tariff of import and export duties, as well as every favour or immunity that one of the Contracting parties grants to the subjects and commerce of a third l'ower, shall be participated in simultaneously and unconditionally by the other."

The Treaty of the 12th January, 1859, between Great Britain and Russia (Paper D), ́ contains the following engagements :-

"ARTICLE II.

"No other or higher duties shall be imposed on the importation into the dominions and possessions of Her Britannic Majesty of any article the growth, proluce, or manu- facture of the dominions and possessions of His Majesty the Emperor of All the Russias, from whatever place arriving, and no other or higher duties shall be imposed on the importation into the dominions and possessions of His Majesty the Emperor of All the Russias of any article the growth, produce, or manufacture of Her Britannic Majesty's dominions and possessions, from whatever place arriving, than are or shall be payable on the like article, the growth, produce, or manufacture of any other foreign country; nor shall any prohibition be imposed on the importation of any article the growth, produce. or manufacture of the dominions and possessions of either of the two Contracting Parties into the dominions and possessions of the other, which shall not equally extend to the importation of the like articles being the growth, produ 'e, or manufacture of country."

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" ARTICLE X.

"Her Britannic Majesty engages that in all matters relating to commerce and navigation, the subjects of His Majesty the Emperor of all the Russias shall, in the British dominions, be entitled to every privilege, favour, and immunity which is actually granted, or may hereafter be granted, by Her Britannic Majesty to the subjects or citizens

any other Power."

of

Both of these Treaties include India, and are now terminable by twelve months' notice on either side.

The aim and intent of the most-favoured-nation stipulations contained in the above- quoted Treaties, and in others to a similar effect, is, that the goods of either Contracting State shall be placed, in the territories of the other, in no worse position than goods of any other country. It is certainly not meant that they should enjoy preferential treatment either to native goods—or to goods of the most favoured third country-and the question arises how far it is open to either Contracting Party, by Governmental administrative act, to secure for its goods the preferential position in the markets of the other which it was not designed by the Treaty that they should enjoy.

It has long been admitted internationally that natural circumstances, independent of Government agency or control, may be invoked in order to justify a prohibition of, or special treatment of, goods arriving under certain special conditions, although similar goods are admitted freely when such conditions are not present, notwithstanding_the existence of Treaty stipulations guaranteeing most-favoured-nation treatment in these

respects.

It is sufficient to cite as examples the restrictions imposed in Great Britain and in various other countries on the importation of cattle and plants suspected of discase, and the, precautions frequently adopted to prevent the importation or circulation of rags and other substances supposed to be capable of transmitting infection.

It is true that express stipulations providing for a derogation from most-favoured- nation treatment in such cases are now frequently inserted in Commercial Treaties, but the precautions above alluded to are also taken in cases where most-favoured-nation clauses exist without any exception or qualification.

Lord Salisbury desires, however, in the present instance, to direct your attention more particularly to the case where a Government, by its own administrative act overrides the spirit of the most-favoured-nation clause, and creates in favour of its own goods an inequality which it is the object of the Treaty to prevent, and which does not result from any natural or economic cause.

An instance in point is afforded by "The Foreign Prison-made Goods Act, 1897," [60 & 61 Vict., cap. 63] (Paper E). Although under this Act the importation of prison-made goods into the United Kingdom has been effectively stopped, notwithstanding the admission of similar goods not prison-made, no representations against the operation of the Act have been received by Her Majesty's Government from any foreign Power with whom most-favoured-nation clauses have existed or do now exist.

The Government of the United States have for some years past redressed by counter- vailing duties the inequality created by bounties on production or export, and find (in Paper F) a short statement of the arguments advanced by that Government to will you justify their action, to which I am to call your especial attention.

It will be within your recollection that the Law Officers of the Crown have on two previous occasions (see Opinions, Papers ( and H), expressed opinions somewhat adverse to the action which has now been taken by the Indian Government, but I am also to inclose a legal opinion which has been given by Sir J. Edge, Q.C., and Sir A. Wilson (Paper I), to the effect that the Indian Act is not inconsistent with Treaty engagements. Lord Salisbury is of opinion that the great extension and development of the bounty system in recent years constitutes a grave menace to British industry and enterprise, and is disinclined to admit that it is open to any Government to override by its own act the clear intention of Treaty stipulations, without its being open to the other Contracting Party, by corresponding legislative action, if such should seem to be expedient, to redress the balance of trade, which has been thus artificially disturbed.

I am therefore to invite your attention to the Papers now laid before you, and I am to inquire whether, having regard to the fact that representations on the subject of the Indian Act have been received from Austria-Hungary and from Russia, you would concur in a reply being made in the sense of the foregoing paragraph, accompanied by an intima- tion that, if either of these foreign countries he not willing to accept that view, Her Majesty's Government are prepared to give notice of termination of the Treaty.

3

I am further to request that you will also favour his Lordship with any general observations on the subject, if such should seem to you to be required.

In view of the fact that the Attorney-General is now in Paris, engaged in the Venezuelan Arbitration Case, his Lordship does not propose to trouble him for his opinion on this matter.

(A) Indian Act.

(B.) Schedule.

List of Papers.

I have, &c.,

MARTIN GOSSELIN,

(C.) Austrian Treaty, December 5, 1876, "Commercial No. 2

(1877)."

(D.) Russian Treaty

(E.) "Prison-made Goods Act, 1897."

(F.) American Arguments (Sir J. Pauncefote, No. 18, Cum-

mercial, February 3, 1898).

(G.) Law Officers (II.) Ditto

(1.) Sir J. Edge and Sir A. Wilson's Opinion (in India Office,

April 24, 1899).

MY LORD,

January 12, 1859.

July

12, 1880.

December 10, 1887.

The SOLICITOR-GENERAL to the MARQUESS OF SALISBURY.

Royal Courts of Justice, June 23, 1899. I was honoured with your Lordship's commands signified in Sir Martin Gosselin's letter of the 20th instant, transmitting to me papers relating to an Act passed by the Indian Government for the purpose of imposing countervailing duties on foreign sugar when imported into India under bounties, and inquiring whether I concurred in the reply which it was proposed to send to the representations which had been received from Austria-Hungary and from Russia on the subject of the Indian Act.

I have considered the papers, and, in obedience to your Lordship's commands, have the honour to

Report-

That I think that a reply may be properly made to Austria-Hungary and to Russia in the sense proposed.

The Indian Act is not, in my opinion, a breach of the Treaties with either of these countries. The Act imposes upon bounty-fed sugars, from whatever country they come, an additional duty equal to the amount of the bounty. This is not giving preference to one country over another; it is treating all countries alike. The meaning of the Treaties seems to me to be that no higher duties shall be imposed in respect of the fact that the, goods come from Austria-Hungary or Russia. The countervailing duty is not imposed in respect of the fact that the goals come from these countries. which come thence only because they are bounty-fed, and the Act would apply in the It is imposed on goods same way to the goods of any other country.

Other considerations would arise, if a condition imposed nominally on the goods of all countries alike were such that, owing to natural circumstances, it would affect one country prejudicially as compared to others. Bounties are given at the will of the foreign Government, and any foreign State can escape the operation of the countervailing duty by putting an end to the artificial state of things created by the grant of such bounty.

The Foreign Prison-male Goods Act and the Indian Act seem to me, for this purpose, to stand on the same footing. If it be a breach of these Treaties to impose a countervailing duty or goods which are bounty-fed, it is also a breach to prohibit the importation of goods produced in a foreign prison. The answer in each case is that the duty or the prohibition is not imposed in respect of the fact that the goods come from a particular country, or in respect of any natural circumstances applying to one country rather than another, but in respect of the fact that the goods have been produced or exported under artificial conditions the existence of which depends entirely upon the will of the foreign Government.

I have. &c..

ROBERT B. FINLAY.