FORBES, Chairman to William H. Seward, November 22, 1879

Mr. Forbes to Mr. Seward.

Sir: The recent suit in the mixed court of two British subjects, Messrs. Duff and David, against the association known as the Swatow Guild, has brought to light certain facts which are of grave importance and cause deep anxiety to the mercantile community of Shanghai. Any discussion of the merits of the case itself is, at present, beyond the province of this chamber, but the committee feels that no time should be lost in protesting against the disregard of treaty stipulations involved in the position held by the Swatow Guild, under sanction of the Chinese authorities.

The committee has reason to believe that the collection of the lekin tax on opium at Shanghai and Chin Kiang is entrusted to members of the Swatow Guild, either as direct agents for the authorities, or, more probably, as farmers of the revenue in question. To whatever extent this arrangement may be officially undeclared or disguised, the power exercised by the guild is so far effectual that payment of lekin is said to be refused from China outside of the association, who are further liable to be denounced for attempting to smuggle the very drug on which the tax has been declined. The result is that the members of the guild, being enabled to close to others the only lawful outlet for opium, have acquired for themselves a practical monopoly of the trade at this port.

Unfortunately, legal evidence about matters in which the local authorities are interested is never easily obtained in China, and, in this instance, is now impossible to produce. The reason is not far to seek. Since the proceedings in the mixed court the Taotai has issued a proclamation in which he declares the statements of the plantiffs in this case to have been unfounded and malicious, and warns his people to beware of bringing wanton and calumnious accusations in the future. To the Chinese, who are accustomed to read between the lines of such documents, this proclamation is a significant hint to say nothing at all, and the committee has therefore not been surprised within the last few days to be met with blank assertions of ignorance from trustworthy natives who were previously ready to give full information.

The difficulty of obtaining evidence is further complicated by the fact that the Swatow Guild has been for many years in undisputed enjoyment of its privileges, which, as the committee is informed, date back to an arrangement made when His Excellency Ting-Jih-Chang was Taotai of Shanghai. However this may be, it is notorious that for a long time past Swatow men have been the exclusive traders in opium here, either as principals or as brokers for non-members of their guild, and the quiet acquiescence of other Chinese merchants in this state of things goes far to prove that it has official sanction. It is probably not too much to say that the arrangement is accepted by every one who is not ready to take the risk of evading the lekin tax altogether.

The committee has been verbally informed by Mr. Davenport, Her Britannic Majesty’s consul here, that he is sending to His Excellency Sir Thomas Wade such information as he has been able to procure, including, the committee understands, certain important admissions by the present Taotai as to the connection between the Swatow Guild and the opium lekin office. I can only regret that circumstances have precluded the committee from supplementing Mr. Davenport’s statement by any direet evidence.

It hardly needs argument to show that a trading guild allowed to farm the inland revenue on commodities in which it deals, is a privileged corporation within the meaning of the treaties, and there is no reason why, if found to work successfully in the case of opium, the same system should not be extended to tea, silk, and piece goods. There are indeed serious grounds for belief that fiscal arrangements of this kind at the outports have had much to do with the virtual banishment of foreign importers, which it has been the fashion to ascribe to the greater prudence and economy of the native trader.

The Canton Co-hong monopoly, in spite of its one advantage of a collective responsibility enforced by the Chinese Government, was found so intolerable that it was solemnly abolished by treaty. It would appear, however, that the establishment of lekin, in the face of the treaties, has gradually led to other equally illegal combinations which, in port after port, and in one thing after another, threaten to hedge in foreign trade with privileged guilds, worse than the old Co-hong in proportion, as the interests affected are larger and more difficult to combat, because while effectually screened they are not officially recognized before foreign powers.

If any additional motive were needed for a vigorous declaration of treaty rights with regard to lekin, the committee would respectfully urge that it may be found in the tempting facilities offered to the collectors of this tax for the evasion or open disregard of other vital stipulations. The committee cannot conceal its anxiety lest, if the present opportunity be allowed to pass without dealing firmly with this question, the development of foreign trade may be still further crippled, if not entirely arrested, by such underhand influences. This statement is submitted in the hope that your excellencies and your colleagues may feel that the circumstances are such as to call for a prompt consideration of an undoubted grievance.

I have, &c., &c.,