Papers Relating to the Foreign Relations of the United States, Transmitted to Congress, With the Annual Message of the President, December 2, 1878

No. 19.
Mr. Kasson to Mr. Evarts.

Legation of the United States,
Vienna, November 10, 1877. (Received December 3.)

No. 24.]

Sir: In my dispatch No. 23, I called your attention to the rupture of the negotiations for a new commercial treaty between this empire and that of Germany, and to the political significance and influence of this failure, especially upon the relations of Austria and Hungary.

In view of the effort already indicated to revise our own tariff by the American Congress, it may be useful to call your attention to the effect of some of the provisions for free-trade introduced into the Austro-German commercial treaty of 1867, on account of which Austria has denounced that treaty. I also inclose herewith original text and translation of the new tariff bill proposed to Austria-Hungary by the government, with a view to obviate the injuries to Austrian industry brought on by the too liberal provisions of the treaty of 1867.

I. The most startling commentary on that very liberal treaty is found in the aggregate result to Austria of less than ten years’ operation under it. This result is summed up in an augmentation of 6⅓ per cent. of Austrian Exports to Germany; of German exports, on the other hand, to Austria there was an augmentation of about 94 per cent. This was certainly a loud enough warning to awake the dullest statesman to the necessity of a change of policy by Austria.

There was one special provision of the treaty which was disastrous to certain Austrian manufacturing interests, arising from an unguarded clause, which allowed goods sent from Austria to Germany to undergo a finishing process, to be reimported into Austria duty free. The sagacious manufacturers along the Rhine sent their raw goods, subject to slight Austrian duty, into this empire, whence they were reforwarded to Germany for the finishing process, under the treaty, and then returned duty free, ready for market, offering a ruinous competition to Austrian fabrics.

In the last year for which I have seen the statistics, about 20 per cent. only of the whole German international trade was with Austria; while about 33 per cent. of that of Austria was with Germany. Thus upon (say) one-fifth of her foreign commerce Germany, under this free trade, gained over 90 per cent.; while Austria, on one-third of her foreign commerce, with the same free trade, gained an insignificant 6 percent.; at the same time she necessarily lost also so much of her home market as the Germans gained.

Again, while Austrian duties were collected in silver and German in gold, there was another relative loss to Austria of about 15 per cent. of the duties assessed. Austria, having only the silver standard, suspended payment, even in silver, in 1848, and, notwithstanding the late relative depreciation of silver, has never since been able to resume specie payments. As the poorer money always expatriates the more valuable, silver has ceased to circulate, and the people have only irredeemable paper for their use. The paper is depreciated because it is unredeemable in silver; and the silver is depreciated because it is not the equivalent of gold; consequently, this empire, having been compelled to effect loans in the money recognized by Europe as the best, is obliged in turn to buy gold of Europe at a serious loss to pay the interest on her gold debt. Gold not being her standard, her custom duties are hitherto payable in silver. To remedy this evil and to lighten this burden, she notified Germany that henceforth herself, also, must collect duties in gold; to which naturally Germany objected, as it was so much increase of duty as was equivalent to the premium on gold.

II. On the other hand, Germany finds herself impeded in respect to her liberty of action vis-a-vis with France, owing to the “most favored-nation” clause of her treaty. Austrian wines are allowed to come in at a low rate, and this is understood to bind German action in respect to French wines. The German Government, upon this and some other points, desires to recover liberty of action.

In fact, it is believed here, in many quarters, that both governments feel the necessity of retracing their steps taken under the free-trade impulse of the last decade, from 1860 to 1870. I concur in this belief. Austria has been so seriously injured by the provisions of her treaty, that she has abundant reason for demanding its termination. Germany desires new arrangements with France; and, while recovering her liberty of action, prefers that the responsibility of terminating this free-trade treaty should rest with Austria, that she herself may then increase her tariff, with reference to German interests, without advertising an abandonment of the free-trade policy.

III. As far as my observation extends, the European governments (continental) are very generally reviewing all their commercial relations and interests in the sense of self-protection. The era of extraordinary development of both production and consumption, beginning in the last decade and extending in this until 1873, rendered the nations inattentive to the inevitable results, when both supply and the power of fabrication should overpass the legitimate demand for them. This period was reached before, but not discovered until 1873. The surplus of both power and production then ascertained must be used or disposed of at whatever loss. In the effort to find a market for this surplus it necessarily followed, first, that the lowest barrier (by custom charges) would first and longest receive the overflow which the home market refused; and, second, that the lowest cost of production would first supply, and latest withdraw from, the country having the low barriers. So, in the ultimate solution, free-trade subjected its jurisdiction to the industrial control of that country which provided its supplies at the lowest cost, and the home competition was nullified or destroyed in the emergency which pressed hardest on the country; and home resources were diminished and home independence overthown. Such has been the experience of Austria, from which she hopes now to recover by better arrangements for resisting foreign aggression upon her industries.

IV. The conclusions which I draw from my observation of the present commercial movements and their causes are as follows:

• First. Customs duties should be collected in the best and least variable standard money used by any of the commercial nations with which we have intercourse.
• Second. The customs barrier should be always sufficiently high to prevent the overflow of other nations from inundating the home industries which are necessary to national independence, so that they cease to be maintainable.
• Third. That for general application the “most-favored-nation” provision is the safest for the basis of commercial treaties, as it leaves free the national right of adjusting tariffs according to national interests, which do not always continue the same.
• Fourth. That for special relations with certain countries, “reciprocity” treaties, being free from the jurisdiction of the “most-favored-nation” clause, afford the means for developing national trade in special and profitable interests by a mutual purchase of special privileges.

V. I beg to call attention to the proposed stipulations in the new tariff bill of this empire, intended to secure the “most-favored-nation” treatment for Austrian ships and merchandise by foreign nations in the absence of a treaty. Also to provisions of Article XIII, in respect to coin offered for duties.

It is proposed that this tariff shall take effect on the 1st of January next.

I am, &c.,

JOHN A. KASSON.

[Inclosure in No. 24.—Translation.]

projet of a bill for the general customs tariff of the austro-hungarian empire.

• Article I. The provisions of this law apply to the general departments of customs and commerce of the Austro-Hungarian Monarchy, and have no force outside of the customs jurisdiction, nor in the special department of customs of the Kingdom of Dalmatia.
• Article II. All goods imported are subject to duty if not expressly declared free, and are subject to that duty which is prescribed in the accompanying tariff of entrance duties to which the goods belong. Where it is not expressly otherwise provided in the tariff, goods subject to the excise of consumption are further liable, according to the relative legal provisions) to the internal duties of consumption, and the additional payments of the state, land, or district duties. For the through shipment of goods there is no duty. In exportation those objects only which are mentioned in the accompanying tariff of export duties are subject to such duty as is therein prescribed.
• Article III. Goods which come from states which treat Austrian and Hungarian ships, or the goods of Austrian and Hungarian manufacture, less favorably than those of other states are subject in importation, in addition to the duty contained in the tariff, to an additional tax of 10 per cent. of the regular duty, and if they are declared tree of duty in the tariff, to a specific tax of 5 per cent. of the commercial value of the goods, to be fixed according to ordinance.
• Article IV. An alphabetical list of goods, to be issued according to ordinance, will fix the detailed order of the different objects in their proper positions in the tariff of customs according to its meaning and acceptation; when necessary the same can be enlarged and changed. In the same manner newly discovered chemical products, being unplaced in the tariff, would belong to the table of rates 64, E) 3, shall be placed with regard to their composition and use in another table of rates.
• Article V. Goods composed of different stuffs which do not belong to small ware (T, div. 61), or are not otherwise taxed in the tariff, as well as mixtures whose component parts belong to different tables of rates, are to be taxed according to their chief constituent parts, and if the same is doubtful according to that constituent part which is taxed highest in the tariff. More detailed regulations are reserved for special ordinances.
• Article VI. The import and through transit of articles of the government monopoly (cooking salt, gunpowder, tobacco, and tobacco goods) is only allowed by permission of the competent authorities. The government is empowered according to ordinance to limit the trade in certain goods for public reasons, and especially for sanitary and precautionary reasons. Until further notice the rules bearing on this subject remain in force.
• Article VII. The following articles are duty free:

  1. Articles for the personal use of the Emperor.

  2. Articles for the personal use of diplomatic personages, accredited to the imperial royal court, in accordance with special regulations.

  3. Leaf-tobacco for national factories; further, cooking salt, gunpowder, and articles of tobacco for the national stores, or bought by inhabitants of the duty-free districts from the depots of consumption there.

  4. Products of the government mines from the imperial royal factory in Trieste.

  5. Military articles, such as uniforms, articles for armament, weapons, munitions, army supplies (including bedding, medicinal and hospital requisites): further, horses passing between bodies of troops or marine establishments in and out of the customs districts, blasting-powder and explosive material for military technical experiments of army organization.

  6. Official requisites which are sent by state officials from abroad into the customs jurisdiction.

  7. The possessions of emigrants from abroad and from without the customs jurisdiction into it; also machines, and parts of machines, factory and hand tools belonging to the same, so far as these articles are intended for their Own use, appear to be appropriate to their circumstances and show evidence of continued use; articles of dowry for persons who, in consequence of their marriage, emigrate into the customs jurisdiction, as far as they are appropriate to their circumstances. From this exemption from duty are, however, excepted all articles subject to a tax for consumption, cattle, unfinished cloths, and half manufactured articles; further, raw goods.

  8. Articles of inheritance, such as furniture, house, bed, and kitchen articles, clothing, bed, body, and table linen, used factory and hand tools; &c., in so far as they serve the personal use of the heirs and are appropriate to their circumstances. From this exemption from duty are excepted the articles named in article VII, section 3.

  9. Articles of art and science which are for collections of public scientific and artistic establishments, works of Austrian and Hungarian artists residing abroad.

  10. Anatomical preparations, skeletons, corpses.

  11. Old articles (antiques, antiquities), if their form allows of no doubt that their value consists chiefly in their age, and are intended for no other purpose and use than for collections.

  12. Articles of judicial procedure.

  13. Decorations bestowed, according to ordinance the right is reserved to arrange the formalities with regard to Article I, and moreover in accordance with the necessary proofs and conditions. For the present, the actual rules in this respect remain in force.

• Article VIII. Further, the following articles are duty free:

  1. Effects of travelers, such as underclothing, clothing, bedding, traveling gold and silver ware and other articles of value, tools of the workmen, as well as the articles and instruments of artists, clothing of carriers and sailors, books, articles of nourishment, medicines for use during the journey, tobacco to an amount specially provided for (at present not more than 35 grams or 10 cigars), in as far as these articles are intended for the personal use of the traveler, and as regards quality and quantity are appropriate to the position and other circumstances of the traveler. Also the duty-free entry of household utensils and furniture is allowed to travelers and persons in the public service who propose to stay more than one year in Austro-Hungary and give credible proof of this intention. The same favor can also be accorded to natives who, after a residence of more than a year outside of the customs jurisdiction, return to it.

  2. The means for transportation, such as carriages of travelers, wagons for the transportation of persons or goods, sleighs and wheelbarrows, baskets, buckets, and similar articles for carrying burdens, animals for draught and burden, vessels (the latter inclusive of the goods on them, in as far as the ships belong to foreigners, or in as far as domestic ships carry the same or similar goods as they had on board at their departure), on the condition that the wagons for persons bear plain traces of use; and, moreover, when it appears from the persons and goods carried, the place of destination, the direction, the means of transport, the manner of transportation, that the transportation of persons or goods is intended and that it is not for the purpose of a duty-free introduction of the means of transportation.

  3. The provisions of in and out going ships, in which, also, the beer for the ships and boats on the Danube is included.

  4. Sample cards and samples in pieces or patterns which are only to be used as such, excepted, however, all samples of tobacco and eatables.

  5. The wrappings, &c., in which the dutiable goods are packed, excepted the cases. a When the same, according to the rules concerning the tare, must be reckoned as belonging to the goods. b When the goods are found in wrappings and conditions in which, according to their form and nature, they are not usually packed, and which are taxed higher than the goods themselves.

  6. All goods which weigh less than 25 grams, or those on which the duty would be less than 2 kreuzer. In cases of abuse this alleviation as regards single persons or certain boundary tracts can be for the time suspended.

  7. Goods which are injured wholly in official stores. In so far as the goods are injured in such a manner that they are no longer fit for their originally destined use, as, for instance, on wine, which can be used as vinegar, the competent financial authority can allow the proper reduction of duty.

• Article IX. Free of duty are, further:

  1. The articles necessary for the building and fitting up of ships according to the meaning of the law of the 30th of March, 1873.

  2. Goods and articles imported into the customs jurisdiction for improvement, repairs, and dressing, under the condition that the export of the improved, repaired, or dressed goods and articles occurs within a certain time, fixed in advance by the financial authority, and the identity of the imported and exported goods can be proved.

  3. Goods and articles which are exported beyond the customs jurisdiction for improvement, repairing, or dressing, and are again imported into the customs jurisdiction improved, repaired, and dressed, under the conditions in 2.

  4. Goods, with the exception of articles of consumption, which were exported from the customs jurisdiction to foreign markets and fairs, or to an uncertain sale, and are brought back unsold. The rules governing these transport alleviations are made according to ordinance. Goods, which were sent abroad for sale, and return unsold, on account of unforeseen difficulties, without having been in free circulation, on their re-entrance can be freed from duty by special permission of the competent financial authority.

• Article X. In the frontier districts are duty free:

  1. Regarding the agricultural trade on landed property, which is divided by the customs frontier, the cattle and implements belonging to it, as well as the seed for planting; further, the products of the cultivation of it, and the live stock.

  2. Cattle that cross the boundary for pasturage or work, returning again, inclusive of the products gained during the pasturage, such as milk, butter, cheese, wool, and the young cattle grown in the mean time.

• Article XI. In the presence of probable circumstances, truly proved by witnesses, the following articles can be entered free of duty, or at a reduced duty, by the financial authorities in charge:

  1. The articles of adornment for poor churches and chapels of the different religions; then the material for the construction or repairing of such churches and chapels.

  2. Articles of nourishment, clothing, and building material, presented to the domestic inhabitants, injured by fire, or the other elements, for their sustenance, or the reconstruction or repairing of their dwellings.

  3. Old articles, bearing traces of use, which persons without means receive as gifts from abroad.

• Article XII. The government is empowered, in consequence of international stipulations, by which the certainty of railroad communications is proposed, so that a common frontier and trade station is necessary inside the customs jurisdiction, to allow the duty-free importation of—

  a) All materials, implements, and other articles necessary for the construction and arrangement of the junction-station, as well as the road between it and the frontier, as far as the ordering of those necessities is in the hands of foreign officials, or the foreign railroad contractors, in consequence of the stipulated undertaking of the necessary buildings.

  b) For all the rolling-stock, implements, and material necessary for the foreign railroad contractors to the completion of their contracts, inclusive of articles necessary for keeping the road in order; further, the same articles necessary for the service of the foreign frontier officers, in quantities proved necessary for their purposes.

  c) The effects, as well as the utensils for the service of the officials and servants, of the foreign railroad direction, and of the branch of service of the neighboring state employed in the domestic customs department.

• Article XIII. The amounts given in the tariff of duties, inclusive of the weighing, sealing, and invoice charges, with the exception of sums under two gulden, are payable in gold. Special regulations decide on what terms silver can be used for the payment of duties. The agio to be paid on these occasions will be settled and published from month to month according to the mean course of gold in the preceding month. The value in gulden (gold) of the home and foreign gold coins, at which they will be taken and given on the payment of duties, will be fixed according to ordinance.
• Article XIV. If on calculation of the custom duties fractions exist less than a kreuzer, those which are less than half a kreuzer are to be ignored, and those which are half a kreuzer and more to be considered a whole kreuzer.
• Article XV. Besides the charges prescribed in the tariff of rates (duties, license charges, additional consumption duties), the following extra charges are to be made in the customs affairs:

  1. The weighing charge is 5 kreuzer per 100 kilograms of raw weight of those goods whose weight is taken as an act of official duty, or at the desire of the interested party. For ascertainment of the weight by calculation for testing wastage, and for weighing with private scales, as, for instance, in the customs revision in railroad stations, no weighing charge is to be made. In reckoning weighing fees, weights under 50 kilograms will be free, weights of 50 kilograms and over will be considered 100 kilograms; when the entire weight of the goods is less than 50 kilograms, 3 kreuzer are to be paid as the weighing charge.

  2. The sealing charge is 2 kreuzer for every lead and 1 kreuzer for every wax seal. Goods intended for through transportation provided with the proper certificate are exempt from the sealing charge, and for the customs closing of the holds of ships and of the space for freight in railroad cars, &c., no sealing charge is payable.

  3. The certificate charge is 10 kreuzer for the certificate to be given to accompany foreign non-dutiable goods. When through goods, under a change of the original destination, shall be intended for importation, the proper extra charges are to be subsequently paid. In the interior, in the traffic along the customs line, as well as in the management of it, neither sealing nor certificate charges are to be made.

  4. The storage charges for goods which are stored in official depots, in the proportion to be arranged by special ordinance with regard to local and other circumstances, yet as a rule not over 1.6 kreuzer per 100 kilograms of raw weight and the day of the storage. In cases of extraordinary accumulation of goods, the depot fees can be raised to 2.4 kreuzer for 100 kilograms and the day of the storage. In regard to the emoluments for official duties which are done outside of the official places, the charges for official declarations of goods, and the special water, harbor, and ship duties, the rules remain as hitherto. In regard to the payment of fractions under a kreuzer, the rules contained in Article XIV regarding extra payments remain in force.

• Article XVI. The determination and changing of the tare will be arranged according to ordinance with regard to the customary modes of packing and their relative weights in traffic. For goods on which the duty does not exceed 3 gulden per 100 kilograms, and for the actual inclosures of liquids, there is no tare rate.
• Article XVII. This law goes into effect on the 1st January, 1878. At this time the customs tariff of 5th December, 1853 (R. G. Bl., No. 102, 854), the ad interim customs tariff of the 30th June, 1865 (R. G. Bl., No. 39), and all laws and regulations relating to them, as far as they are in contradiction with this proposed law, lose all force.
• Article XVIII. The minister of finance and the minister of commerce are charged with the execution of this law.