40 State Department Press Release on the Most-Favored-Nation Policy.
April 5, 1935

It appears that in various quarters certain misconceptions have arisen concerning the policy of this Government as expressed in the press release of April 1st regarding the generalization of the tariff concessions made in the Belgian agreement. It has been inferred by some that the statements contained in that press release indicate a departure from the unconditional most-favored-nation principle. Nothing could be farther removed from fact.

The Trade Agreements Act of June 12, 1934, provides that the duties proclaimed in consequence of the trade agreements entered into with foreign countries shall be extended to all countries but provides that they may be confined to such countries as do not discriminate against American commerce or pursue policies which tend to defeat the purposes of the Act. This provision is wholly in accord with the unconditional most-favored-nation principle, the very essence of which is non-discriminatory treatment in commercial relations.

This country stands ready to extend unconditionally the concessions granted in our trade agreements to all other countries which give this country non-discriminatory treatment. Naturally no nation which favors and practices a policy of trade discrimination—a policy diametrically opposed to the most-favored-nation principle—would expect, or be disposed to accept, the benefits of most-favored-nation treatment.

This policy is the opposite of retaliation. It is a policy of respectful and friendly approach to all countries to join us in establishing equality of trade treatment throughout the world. This policy implements the unconditional most-favored-nation principle, which is the most effective means of bringing about more rapidly a general reduction of trade barriers, of giving elasticity to trade arrangements, and of expanding foreign trade.

The reciprocal trade agreements program recently inaugurated by this Government places us in a position where we have something positive to offer other countries in return for most-favored-nation treatment. In point of fact, most of the nations of the world have and do accord us unconditional most-favored-nation treatment on customs duties. Whenever these countries make trade agreements with other countries, we get the benefit of the lower rates. This is the usual rule. If, however, a country, as in some instances is the case, refuses to give us the benefits of the rates which it grants to other countries, such a country cannot expect to enjoy the benefits of the concessions which we make in our trade agreements. The unconditional most-favored-nation principle requires only that we grant the lower rates emerging from our trade agreements to those countries which extend us non-discriminatory treatment.

More recently, however, new forms of trade discrimination have arisen. Reference is made to the various types of quantitative restrictions such as import quotas and the allocation of exchange. While tariff discriminations against American commerce are, in the case of most countries, relatively unimportant, these new forms of discrimination are far more widespread through the world at the present moment. In the case of these newer forms of control, this Government requires only that foreign countries shall accord our nationals fair and equitable treatment; that quota allocation shall give us such a fair share of the trade as may be indicated by a representative period prior to the institution of the control; and that the exchange allotted to this country shall similarly represent our fair share of the total provided as nearly as may be judged by a previous representative period.

Some countries with which we now have most-favored-nation agreements do in fact substantially discriminate against American commerce. The discriminatory practices of these countries do not justify us in continuing to extend to them the benefits of unconditional most-favored-nation treatment. Under these circumstances, there is no course open except to terminate these obligations, particularly in view of the fact that in many cases these treaties are old and obsolete and do not provide as explicitly for equality of treatment with respect to the newer forms of trade restriction, as might be desired.

In all cases this Government is ready at all times to enter into unconditional most-favored-nation arrangements with any and all countries, and to grant the benefit of equality of treatment to all countries which in practice accord us non-discriminatory treatment. Far from departing from the unconditional most-favored-nation principle, the steps recently taken strongly implement and reenforce it.