Tariff Deadlock

Warning. The U. S. Government last week answered the French tariff thesis (TIME, Sept. 19 et seq.) and sounded a note of warning against what it called "dis-crimination" against U. S. goods. The note gave a detailed explanation of the U. S. tariff law. It opposed firmly the principle of reciprocity and demanded that France grant the U. S. most-favored-nation treatment under pain of sanctions authorized by Article No. 317 of the Fordney-McCumber Tariff Act, which empowers the President to increase by 50% the duties on the goods of a nation discriminating against the U. S. The French Government took the matter under advisement. An answer was thought likely to be despatched to Washington as soon as the French Cabinet had reviewed the situation. U. S. Thesis. The U. S. holds that any foreign government has the right to impose whatever duties it sees fit, but that the treatment it offers should not discriminate against any country. In other words, it upholds the principle of most-favored-nation treat-ment,* i. e., that all countries should automatically receive equal tariff treatment. But this does not mean that the treatment between two countries can be equal, because of the difference in purchasing powers, price levels, commodities, etc. In illustration of this the U. S. note pointed out that 95% of imports from Brazil are admitted duty free, but that a large proportion of exports to Brazil have to pay a "very solid rate of duty." It is therefore held that Brazil, in extending most-favored-nation treatment, is not obliged to admit an equivalent amount of U. S. goods free because the U. S. admits without duty most Brazilian commodities. French Thesis. The French viewpoint is exactly the opposite. As the U. S. admits all foreign goods under a general tariff schedule, and therefore extends equal treatment to all countries, the French hold that they, too, are entitled to force the U. S. to pay the duties imposed by their general tariff schedule. But they are willing to conclude treaties with countries prepared to grant them reciprocal treatment. As certain French commodities must pay the maximum U. S. duty, the French contend that certain U. S. goods must pay the maximum French duties. Seemingly there is no way out of the impasse, although it was admitted in responsible quarters that every nerve will be strained to prevent a ruinous tariff war.

*It was incorrectly stated in TIME (Sept. 26) that "the U. S. tariff law does not permit most-favored-nation treatment." This should be read as meaning "on the principle of reciprocity." The U. S. has concluded most-favored-nation treaties with Hungary, Estonia, Germany. Negotiations for similar treaties are under way with: Brazil, Czechoslovakia, Poland, Finland, Latvia, Guatemala, Norway, Sweden, Switzerland, Austria, Jugoslavia, Honduras. Modus-vivendi agreements extending most-favored-nation treatment are in effect with: Albania, Brazil, Czechoslovakia, Dominican Republic, Finland, Greece, Guatemala, Haiti, Latvia, Lithuania, Nicaragua, Poland, Rumania. Turkey.