Cyclopædia of Political Science, Political Economy, and the Political History of the United States

Edited by: Lalor, John J.
(?-1899)
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First Pub. Date
1881
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New York: Maynard, Merrill, and Co.
Pub. Date
1899
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Includes articles by Frédéric Bastiat, Gustave de Molinari, Henry George, J. B. Say, Francis A. Walker, and more.
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RECIPROCITY

III.124.1

RECIPROCITY is a relation between two independent powers, such that the citizens of each are guaranteed certain commercial privileges at the hands of the other. Up to the middle of the present century the term referred almost exclusively to the grant of privileges to foreign shipping. The earlier English policy had been very illiberal in this respect, carrying out the principles of Cromwell's navigation act, and of the colonial system of the last century. But as time went on, it became more important for England to extend her carrying trade in foreign lands than to monopolize it in her own; and in the early part of this century, under the influence of statesmen like Huskisson, reciprocity treaties were concluded with the leading maritime powers, by which each of the contracting parties admitted the other's ships in its ports to the same privileges as its own in the matter of the international carrying trade. This system aroused much opposition at different times in England; and in the United States was strongly opposed by Webster; but it soon became the prevailing one.

III.124.2

—The commercial treaties of earlier times aimed at securing special privileges and discriminating rates of duty. The one most commonly referred to as a type of them all is the Methuen treaty of 1703 between England and Portugal, by which England made special rates for Portuguese wines, and Portugal removed her prohibition of the import of English woolens. The same general principles, but applied with far sounder judgment of political and social needs, appear in the series of German treaties beginning with that between Prussia and Hesse in 1828, culminating with the establishment of the Zollverein, and ending with the treaty between the Zollverein and Austria in 1853.

III.124.3

—The treaty between England and France in 1860 was the beginning of a new order of things. Preceding treaties had been dictated by special reasons of social policy: this was intended and understood as an attempt in the direction of free trade. France had an almost prohibitive tariff; Napoleon wished to reduce it, but in the existing state of public opinion dared not do so without the appearance of international co-operation. He had in view the general development of French commerce, but he wished to be able to show definite advantages to distinct interests. The treaty with England, arranged in 1860 by Chevalier and Cobden, was the first result of this policy. The English tariff was already on a revenue basis; yet in return for the important French concessions it was still further reduced on French articles of export. But what distinguished this treaty from preceding ones was the fact that these reductions were not bargained for as special and exclusive privileges. This treaty was intended to become part of a system; it was contemplated that both England and France would make similar treaties with other nations, and in view of this it was provided, that in case either of the contracting powers should subsequently grant to a third power conditions more favorable in any respect, the other should have the benefit of such conditions. This provision constitutes what is known as the most favored nations clause; it was incorporated in subsequent treaties, as had occasionally been done in previous treaties, and soon became the important element in them; for by it a special concession made in favor of any one nation at once inured to the benefit of all who had similar treaties. It is this provision that distinguishes the modern European reciprocity system, and has caused that system to work so strongly in favor of free trade.

III.124.4

—The gain to the commerce of France and England was so great that other nations hastened to secure the same advantages. Similar treaties with France or England were made by Belgium in 1861, Prussia in 1862, Italy and Spain in 1863, Switzerland in 1864, and by most of the other European states in 1865 and 1866. Even Russia ultimately secured at the hands of some of the powers the benefit of the most favored nations clause, though without much reciprocity on her part. Within ten years the system seemed to be firmly established all over Europe, and to insure steady progress in the direction of free trade. (For certain special statistics, see Leone Levi in Journ. of Stat. Soc., 40, 1; for discussion of principles, a work entitled "Letters on Commercial Treaties," etc., "by a disciple of Richard Cobden.")

III.124.5

—But several circumstances combined to stop this progress, and to a certain extent unsettle the system. The first of these was the downfall of Napoleon III. He had not only started the system, but had by his strong influence done more to extend it than most people were aware of. It had never been really popular in the sense of calling forth general enthusiasm. It savored too much of bargaining, too little of principle. And it was rendered less popular than ever by wars like that of 1870, which intensified the opposition of national feeling, and substituted a spirit of embittered rivalry for one of mutual help. This acted against the reciprocity system in a variety of ways. Increased military expenditure demanded larger revenue; and nations chafed under treaty restrictions which hampered them in raising this revenue. The commercial treaties looked toward free trade; but national pride and the constant possibility of war led men to demand a protective system. While men's minds were in this state came the crisis of 1873; and public feeling was only too ready to attribute the hard times which followed to the one tangible grievance of foreign competition, and to seek to be rid of this grievance in all possible ways.

III.124.6

—The diplomatists were mainly free traders; and it was some time before they understood the strength of the feelings they had to contend against. The failure of the English negotiators in 1876 to obtain some expected concessions from France, began to reveal the true state of the case. The termination in the same year, by the action of Italy, of the French-Italian treaty, and the rejection by France of a proposed compromise treaty in 1877, were equally significant. Of still greater importance was Bismarck's change of attitude in 1878. Ever since the year 1818 the Prussian government leaned toward a free trade policy, much more so than any other great power except England. In 1862 their steps in support of the reciprocity system had been bold in the extreme. Now, such a change on the part of Prussia, as well as France and Italy, rendered the future of the system extremely doubtful.

III.124.7

—To understand the negotiations which followed, we must observe that in the application of these treaties of commerce, two different courses had been pursued by different states. One group of states, headed by England and Prussia, had no sooner made a concession to a single nation, than they modified their whole tariff in accordance with it, so that all nations, even those outside of the system, at once had the benefit of the change. Another group, represented by France, left their general tariff unchanged, but in the collection made a deduction of that amount in favor of nations having the benefit of a treaty. Spain went so far in this direction as to have two tariffs, the lower for "most favored nations," the higher for all others.

III.124.8

—As long as the statesmen on both sides were animated by common aims, this distinction made very little difference. But when it became a matter of international bickering the nations of the first group found themselves at a great disadvantage. What special privileges are you offering us under the treaty? French negotiators constantly asked of the representatives of those nations which had reduced their general tariff. To this question there was no thoroughly available reply; and it was this diplomatic helplessness that led to the "fair trade" agitation in England, and to a full discussion of certain points in the theory of reciprocity into which we can not here enter. (Westminster Rev., 112, 1; Contemp., 35, 269; Nineteenth Cent., 5, 638, 992; 6, 179; Fawcett, "Free Trade and Protection," last chapter.)

III.124.9

—In the year 1881 a number of French treaties were about to expire; and it was felt that a critical point had come in the history of the system. After some difficulties, particularly in connection with the Italian and Swiss treaties, they were nearly all renewed on the basis of increased duties on either side. The treaty with England was not renewed, but a special act was passed placing England on the footing of the most favored nations. On the whole, it may be said that the continuance of the system has been secured, but its efficiency in the direction of free trade destroyed.

III.124.10

—The United States has never been in any way connected with the system. At the time of its adoption and growth, American tendencies were all in the direction of increased duties. Our reciprocity treaties have all belonged to the earlier type of special arrangements. By far the most important of them was the one with Canada, proclaimed Sept. 11, 1854, and terminated March 17, 1866, on notice given by the United States one year previous. By the terms of this treaty food products of all kinds, nearly all raw materials, and some half-manufactured articles, were allowed to pass free from one country to the other. The dissatisfaction with the treaty arose from the owners of mines, timber, etc., in the United States, who found the price of their products kept down by Canadian competition. A memorial in favor of its renewal was presented to the United States government by the national board of trade in 1873, but without calling forth vigorous general support.

III.124.11

—A similar treaty was concluded with Hawaii in the summer of 1876, for the benefit of certain business interests of the Pacific states, particularly the sugar refiners. It was severely criticised by Secretary Sherman, after having been in operation about two years; but it now seems to have accomplished what was expected of it. The position of the United States government on the subject of commercial treaties is illustrated by the fact, that, when the Hawaiian authorities attempted to negotiate a similar treaty with Germany in 1879, they were checked by an intimation from the United States that the value of those privileges lay largely in their exclusiveness, and that the treaty must guarantee the United States exclusive rights.

III.124.12

—In, the years succeeding the exhibition of 1876, strong efforts were made by French exporters to secure reciprocity privileges from the United States. It was hoped that if France would place America on the basis of the most favored nations, America would lower its duties on French wines and silks. In spite of the repeated efforts of the French manufacturers' agent to secure public sentiment in its favor, the subject was never officially taken up.

ARTHUR T. HADLEY.

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