cession from the United States the free admission of her products only. Great Britain, relying upon a clause in her treaty with Hawaii which provided that no other or higher duties should be charged upon her goods when entering the ports of the latter country than were charged upon the like goods of other nations, demanded for her exports the same treatment that was secured to like goods, the products of the United States. Hawaii could not meet this demand, for she had bound herself by treaty with the United States not to admit the goods of any other country free of duty, and was compelled to denounce the clauses in the British treaty under which Great Britain had made her claim. As, however, the treaty by its own terms did not terminate until one year after notice given, Great Britain brought a claim for the payment of what she termed excessive duties collected during this period which were denied by Hawaii.1

While not brought into direct issue in the case last cited, owing to the peculiar political and geographical

11. Immediately after the American treaty came into operation, the British representative at Honolulu notified Hawaii that "Her Majesty's Government cannot allow " any discrimination against British products in favor of American.

The British Government insisting upon its claim, the Hawaiian Government gave one year's notice (under the 17th article of its treaty with Great Britain), terminating the 4th, 5th, and 6th articles of the Anglo-Hawaiian treaty of 1851-2.

3. This action was resented as "unfriendly."

4. In London, Lord Derby informed Mr. Carter, Hawaiian Commissioner, that Great Britain would drop the controversy if Hawaii would withdraw its denunciation of the articles referred to in section 2, and would attach the American free schedule to an agreement not to tax the articles therein enumerated when British, more than 10 per cent.

5. The notice of denunciation was withdrawn as to all except first paragraph of both articles.

6. Hawiian tariff was amended substantially as proposed by Lord Derby (10 per cent ad valorem horizontal). It was supposed this would end the British claim.

7. Great Britain claimed for importers a refund of duties paid during the period of termination of the treaty.

position of Hawaii, and the special character of the treaty of 1875, the question has sometimes been raised whether or not a nation that through the policy of free trade imposes no duties on imports, is entitled by favored nation treatment to all the benefits of a treaty of reciprocity founded solely upon mutual concessions in the exchange of articles of commerce. It seems only fair that she be, for she has not only conceded the equivalents, but has done so in advance of the nation that has bought the favor.

8. Hawaii insisted that importers had their remedy in the Courts of the country.

9. British Representatives demanded action on the part of the Executive to refund duties.

Mr. Comly to Mr. Blaine, For. Rel. 1881, p. 622.

At this stage Mr. Blaine instructed Mr. Comly: "The treaty was made at the continuous and urgent request of the Hawaiian Government. It was, as it was intended to be, an evidence of the friendship of the United States, and was shaped by a large and liberal disposition on our part to consult the wishes and interests of the Hawaiian Government. As you are aware, there was much opposition to some of its concessions by some of our own citizens, whose capital was employed in certain agricultural industries. The term of the treaty was limited in order that both parties might obtain practical experience of its operation, and in order to secure the experiment from possible disturbance, it was expressly stipulated.

"It would be an unnecessary waste of time and argument to undertake an elaborate demonstration of a proposition so obvious as that the extension of the privileges of this treaty to other nations under a 'most favored nation' clause in existing treaties, would be as flagrant a violation of the explicit stipulations as a specific treaty making the concession.

"You are instructed to say to the Hawaiian Government that the Government of the United States considers this stipulation as the very essence of the treaty, and cannot consent to its abrogation or modification directly or indirectly. From your history of the controversy, I find it difficult to understand how Her Britannic Majesty's Government can consistently maintain a right for the settlement of any claim for the difference in duty imposed under the British treaties and under the treaty with the United States. In event, therefore, that a judicial construction of the treaty should annul the privileges stipulated, and be carried into practical execution, this Government would have no alternative and would be compelled to consider such action as the violation by the Hawaiian Government of the expressed terms and conditions of the treaty, and, with whatever regret, would be forced to consider what course in reference to its own interests had become necessary upon the manifestation of such unfriendly feeling." Mr Blaine to Mr. Comly, For. Rel. 1881, p. 624.

By Act of Congress of October 1, 1890, certain articles were made free of duty (sugar, molasses, coffee, hides, etc.); but whenever the President became satisfied that reciprocal favors were not granted to the products of the United States in the countries producing these articles, it was made his duty to impose upon the latter certain import duties. The advantages of this act were availed of by nearly all countries producing the articles in question.1 The Government of Austria-Hungary took the position of willingness to grant "such reductions of duties as have been or may hereafter be granted to other States by commercial treaties, as far as such reductions are applicable to our countries enjoying usage of the most favored nation, to similar productions from the United States." The offer of Austria-Hungary was accepted by Mr. Blaine as satisfactory.2

1 Under section three of that tariff law, Brazil, Dominican Republic, Spain for Cuba, and Puerto-Guatemala, Salvador, German Empire, Great Britian for certain West India Colonies and British Guinea, Nicaragua, Honduras, and Austria-Hungary received favorable treatment. Annual Message President Harrison, U. S. For. Rel. 1892, p. IX.

2" The Austro-Hungarian Government is consequently prepared to grant such reduction of duties as have been or may hereafter be granted to other States by commercial treaties, as far as such reductions are applicable to our countries enjoying usage of the most favored nation, to similar productions from the United States." Mr. Tavera to Mr. Blaine, Sen. Ex. Doc. 119, 52d Con. 1st Sess.

The representative of Colombia protested against the action of the President enforcing discriminating duties against the products of the former country. Under the act of October 1, 1890, certain articles were admitted free of duty, but if the President deemed the duties of any other country reciprocally unequal, it was his duty to suspend these free duties. After a long delay in attempting to negotiate an arrangement with Colombia, the President, by proclamation of March 15, 1892, suspended the free list on Colombian goods, i. e., sugars, molasses, coffee, tea and hides. Colombia protested that such action was in violation of the favored nation clause in her treaty, inasmuch as Mexico and the Argentine Republic were gratuitously enjoying these favors.

The United States replied that negotiations were pending with these powers. U. S. For. Rel. 1894, Appendix I, p. 451 and following. (Not a good answer and unfair to Colombia. All nations should be treated the same and the countervailing act should apply to all at the same time.)

CHAPTER XI.

Arising through Act of Congress of August 28, 1894, the question of the right of a State to levy a discriminating duty upon the product of a country that encourages its exports by a bounty, has assumed considerable importance. Such a tax a Government will probably hold fair or unfair, according to its policy in trade. Where free trade is the policy the tax will doubtless fall; by the doctrines of protection it will be sustained. The principles of free trade teach that the geographical boundaries of a country are, for the purposes of commerce, only imaginary ; that no restrictions should be placed upon the importation of any article which is of use to the people; and that it is to their advantage to obtain for their consumption articles wherever produced at the lowest possible price. If another nation chooses to grant a bounty on the export of its productions and thus give them wider sale, this bounty is to the advantage of the purchaser in that it cheapens the articles consumed by him. The protectionists on the other hand advocate the encouragement of home industry and erect custom barriers to prevent undue competition between domestic and foreign products and manufactures, to the detriment of the former, and, for this purpose, impose protective duties.

Their policy is to give protection to the native producers and manufacturers and the usual means employed for this purpose, is the import duty. The object of the bounty is to enable the producer to sell at a lower cost

when coming in competition with the foreign producer of the same article, and it may be fairly said that it enables the former to evade the import duties of other countries in so far as they are established to protect home industries. A tax, therefore, upon a bounty product equal to the unnatural advantage which it enjoys is justifiable.1 It was said by Mr. Gresham in a report advocating the abolition of the tax that if a discriminating tax upon a bounty article was justifiable, by analogy, a similar tax upon an article produced under protective tariff laws was likewise justifiable; and that the bounty and the protective tariff were but different means for arriving at the same end, namely, an encouragement of home industries. A protectionist might well reply that this is true, and that there is no international law or regulation forbidding a discriminating tax upon articles the production of which is thus encouraged.

The objection to a discriminating tax upon articles produced under a bounty system is that it opens the doors to retaliations and tariff wars which may be exceedingly harmful to foreign commerce, though conducted within the rules of international law.

The act of August 28, 1894, above referred to, was objected to by Germany on the grounds:

1. That the bounty was a domestic affair of Germany. 2. That Germany could not therefore be inferred as unwilling to fulfill its treaty stipulations based on the most favored nation clause.

3. The view manifested by the legislative body of the United States, "would render the effects of the most favored nation clause illusory, and that it would expose the contracting party to the adoption of arbitrary duties,

1 The essential characteristic of a bounty is the unnatural, governmentbestowed advantage accruing upon production, exportation or sale.