Commercial Treaties

I

Introduction

Commercial Treaties, formal agreements concluded between states for the purpose of establishing mutual rights to, and regulating conditions of, trade and navigation in the territories of the signatories. Provisions often cover the rights of nationals of one party to reside in the territory of the other and to acquire and hold property there; consular jurisdiction; rights of asylum in time of war; fishing rights; regulation of free ports; and conditions governing the collection of debts due a foreign trader and those governing the taxation of foreign investors.

II

Conditions of Treaties

Present-day commercial treaties are ratified according to the constitutional procedures of the participating parties. The treaties may be terminated unilaterally on notice of six months or a year. However, termination also may occur if the time period during which the treaty is in force expires, if the same parties negotiate another treaty on the same subject, or if the political status of a signatory changes. The outbreak of war suspends but does not terminate commercial treaties. If a dispute arising among signatories over the interpretation of commercial treaties cannot be settled by direct negotiation, it may be settled by rules of international law. Such disputes must be submitted to the International Court of Justice if the signatories have mutually accepted the jurisdiction of that court in advance (see International Court of Justice, United Nations).

III

Trade Agreements

In addition to formal agreements between modern states having important economic ties with each other, less formal and durable agreements relate to such matters as tariff rates, navigation dues, customs formalities, air-transport clearance arrangements, quantity restrictions on trade in specific commodities, regulation of commercial, financial, transportation, and communication facilities, standards of commercial and maritime law, commercial arbitration, patents, trademarks, and copyright.

Reciprocal trade agreements characteristically provide that import duties on products originating in the signatory countries be lower than the duties on the same classes of articles imported from other nations. Although tending to discriminate against third countries, such special arrangements can be justified when political, economic, and geographical ties are particularly close, as in the Commonwealth of Nations or among Latin American countries. The advantages thus obtained are offset in part through operation of the most-favored-nation clause.

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IV

Most-Favored-Nation Clause

The most-favored-nation clause stipulates that a nation will extend to other signatories treatment comparable to that accorded any other nation with which it has, or may have in the future, a commercial treaty. Under such a clause, all existing rights and privileges granted to other nations became immediately applicable to the signatory nations, and all rights and privileges granted to other nations in later treaties become applicable to the parties to the most-favored-nation agreement as soon as those treaties take effect. The clause may be either unconditional, that is, applicable to all subjects omitted from the negotiations as well as to those included; or conditional, that is, limited to particular items or areas of trade. The basis for restriction of the applicability of the clause is the theory, once widely held, that concessions granted to one nation in return for special advantages should not be granted to other nations without similar considerations. Although a conditional form of the most-favored-nation clause was at one time included in most commercial treaties made by the United States, the simpler unconditional and mandatory form has been used in all U.S. commercial treaties concluded since 1922.

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