forth in point 10 might be subject to abuse, there are circumstances in which such prohibitions appear necessary and accordingly this Department makes no objection to that exception. The Department is not clear why exception 10 makes no reference to "restrictions". It appears also that a comma should follow the word "currency", in case, as it appears, that word is intended to cover coins or circulating media other than gold and silver.

Additions to the exceptions listed in Article 4 are necessary to cover the following points, in view of American legislation: (a) prohibition or restriction of importation of prison-made goods; (b) restrictions and prohibitions pursuant to the so-called grain, cotton and tea standards legislation.

With respect to prison-made goods, the situation might be met in one of two ways. The following statement might be included at the end of point 9:

"(including the prohibition or restriction of importation of prisonmade goods, regardless of whether domestic commerce in such goods is prohibited or restricted)."

Alternatively, a separate exception having a distinct number might be inserted, as follows:

"Prohibitions or restrictions applied to the importation of prisonmade goods, regardless of whether domestic commerce in such goods is prohibited or restricted."

With respect to the grain, cotton and tea standards legislation, it is suggested that an additional exception be inserted, as follows:

"Prohibitions or restrictions in connection with the application of standards for classification and grading of commodities in international commerce, provided equivalent measures are applied to national products.'

In connection with this matter, reference is made to the letters from the Department of Agriculture, transmitted with the Department's instruction No. 63 of September 30, 1927.7

8

A further prohibition authorized by American law is that provided for in Section 510 of the Tariff Act of 1922 to the effect that the Secretary of the Treasury may prohibit importation of specific shipments when the foreign shipper thereof has refused to permit a duly accredited officer of the United States to inspect his records pertaining to the market value or classification of the goods in question. The Department prefers that you should not raise this question until the general discussions on the draft treaty have practically crystallized the treaty into final form when you should ask specific instructions on this point.

Not printed.

42 Stat, 858, 908.

Article 5

The Department considers that this article, in its present draft form is far too broad and vague, and that if permitted to stand might practically nullify the convention. If the article were maintained, countries that have the system of prohibitions and restrictions might feel free to contend that its continual existence is necessary "to protect the vital economic and financial interests of the State." Heretofore, such measures have been defended as necessary to protect the currency, or to develop industries regarded as "vital". It is believed that in general States considering it necessary to protect their industries against foreign competition may do so with less disturbance to international trade by employing protective duties than by the arbitrary method of prohibitions or restrictions, which so greatly interferes with commercial stability.

The Department suggests the following substitute for Article 5:

"Nothing in this Agreement shall affect the right of any contracting State to apply to importation or exportation all necessary measures in case of war or national calamity. The duration of any such measures shall be restricted to that of the causes or circumstances from which they arise".

The Department attaches great importance to effecting the change set forth above, and desires you strongly to oppose the original wording, even though it appears likely that the State maintaining the licence system will try to keep the original draft.

Article 6

The Department considers that the provisions of this article are necessary. It is doubtless intended to cover the application of prohibitions or restrictions as penalty measures, as authorized or contemplated in Section 317 of the Tariff Act of 1922 and in Section 26 of the Shipping Act, 1916.10

9

It is, however, necessary to leave out the word "third". Otherwise, it appears that a State party to the Agreement which might impose "measures of exclusion or discrimination" would be in a position to object to prohibitions or restrictions which another State party to the Agreement might adopt for the purpose of penalty or retaliation.

Article 7

It is believed that the first paragraph of Article 7 would be clarified if the words "provided they mutually agree to do so" are inserted in the fourth line between "may" and "before."

42 Stat. 858, 944.

10 39 Stat. 728.

Inasmuch as the United States has not adhered to the Statute of the Permanent Court of International Justice, it is essential that the United States should not be obligated by the Agreement to submit to that Court a dispute arising thereunder. At the same time, the United States naturally does not wish to object to the adoption by the states adhering to the Statute of such procedure for settlement of disputes among them as they may consider appropriate. Nor does the Department desire you to take a position that might be taken to indicate that it would not in any circumstances submit a dispute to that Court.

11

The Department would greatly prefer to substitute for the entire Article 7 language based upon Article 35 of the Convention for the Supervision of the International Trade in Arms and Ammunitions and in Implements of War, concluded June 17, 1925,11 changing "shall" to "may" wherever occurring. If this proves impracticable, you should telegraph the Department for further instructions, at the same time offering such suggestions as you may deem appropriate.

Article 8

The second paragraph of Article 8 is not clear. It provides that "such State" may accede to the agreement. The reference is to the preceding paragraph which provides for accession by States members of the League of Nations or to which the Council shall have communicated a copy of the agreement for purpose of signature.

It would thus appear that only such States as are members of the League of Nations or are invited to sign the agreement may accede. Such a provision is adequate only if all States are invited to sign. The Department considers that the utility of an agreement on this general subject would be the greater if all States should adhere thereto.

Article 9

The Department does not at this time desire to give you instructions as to the number of States whose ratification is requisite, but desires your telegraphic comment on this point after you have had opportunity to discuss the matter with your colleagues.

The Department has no objection to the wording proposed. It is presumed that it will not be suggested that the United States be included as one of the States whose ratification shall be requisite before the Agreement becomes effective, since the United States does not enforce the prohibitions or restrictions against which the Agreement is understood to be directed.

Article 10

The second paragraph of Article 10 refers to the "contracting States named in the preceding article." No States are named in the preceding article, in which there is only a reference to countries named in the appendix.

No time is fixed in the second paragraph of Article 10 within which the Council must decide whether or not to summon a conference. Apparently some clarification of drafting is requisite with respect to this matter.

Article 11

From the point of view of the countries not members of the League of Nations, it seems preferable to omit this article, involving as it does, an obligation to make a report to the Secretary General of the League. Undoubtedly, Governments, regardless of League membership, would be glad to respond to any inquiries which the Secretary General might make on the subject.

Article 12

The Department feels that this article might appropriately be redrafted with a view to making the obligations thereof more definite and clear.

In reference to the question raised in the note at the bottom of page 18 of C. I. A. P. 1. as to the application of the Convention to colonies and overseas possessions, the following provision which is contained as Article 13 in the International Convention for the Unification of Certain Rules in Regard to Bills of Lading, signed at Brussels, in 1924 and 1925 12 would be satisfactory to this Government:

"Article-.

"The high contracting parties may at the time of signature, ratification, or accession declare that their acceptance of the present convention does not include any or all of the self-governing dominions, or of the colonies, overseas possessions, protectorates, or territories under their sovereignty or authority, and they may subsequently accede separately on behalf of any self-governing dominion, colony, overseas possession, protectorate, or territory excluded in their declaration. They may also denounce the convention separately in accordance with its provisions in respect of any self-governing dominion, or any colony, overseas possession, protectorate, or territory under their sovereignty or authority."

The Department is concerned lest the various countries attending the Conference may introduce so great a number of exceptions such as are contained in Article 4 to the provisions eliminating import

12 Foreign Relations, 1925, vol. I, p. 254.

and export prohibitions and restrictions that the usefulness of the proposed agreement will be threatened. You should particularly observe signs of such a tendency during the opening days of the Conference and should keep the Department fully informed. It seems possible that, in the event that the usefulness of the proposed agreement is too seriously threatened, this Government may withhold its signature, in which case the introduction of exceptions by the United States might possibly be omitted entirely.

The Department has undertaken to reduce as far as possible the number of exceptions which it must request in order to conform to the requirements of American law. In introducing those brought forward in this instruction you may appropriately avoid being among the first delegates to propose exceptions not included in the draft as prepared. You may also appropriately introduce them one by one at times when they will create the smallest impression of piling up exceptions.

The Department calls particular attention to the recommendations of the Economic Conference endorsing the draft convention as “a very satisfactory basis" for the work of the forthcoming conference. The Economic Conference, however, in addition recommended:

"That, moreover, the application of the principles laid down in this draft should not be indirectly defeated by such means as export duties, the fixing of quotas, health regulations or any other measures not justified by exceptional or imperative circumstances;

"And, further, that the application of these principles should not be indirectly defeated by restrictions on the free circulation of capital-including, for example, any system for controlling exchange which impedes the purchase or exportation of foreign exchange for the purpose of paying for goods imported". See page 21 of the Final Report of the Economic Conference, Document C. E. I. 44 (1).13

13

In the same connection reference is also made to the provisions on page 31 of the report of the Economic Conference dealing with "Export Duties".

Accordingly, questions relating to the points quoted above will presumably arise at the forthcoming conference. The Department will address to you separate instructions regarding the attitude you should take concerning these points.

The Department considers it important that a suitable agreement be reached for the abolition of import and export prohibitions and restrictions. Such measures have caused material difficulty to American commerce in the period since the war, by reason of the arbitrary and discriminatory manner in which they have been applied. They have interfered with that stability of conditions which is so essential

"League of Nations, The World Economic Conference, Geneva, May 1927: Final Report.