William H. Seward to ( Note .—For the reply of the Tsung-li Yamên to this introductory note, see inclosure No. 2 with Mr. Seward’s No. 523, later on in this volume.), November 21, 1879

No. 134. Mr. Seward to Mr. Evarts.

Sir: Recurring to my dispatches numbers 482 and 499, I have now the honor to transmit to you certain papers, as follows, which exhibit the action of the foreign representatives at this capital, in conference assembled, in regard to commercial grievances:

• A note verbal submitted to the conference by the German minister.
• A protocol signed by all the representatives.
• The statement of grievances referred to in the protocol.
• A note to the foreign office transmitting the statement of grievances.
• In this connection I hand to you, also:
• A general introductory note mentioning the fact that the foreign representatives had been in conference, and their intention to address themselves to the foreign office in regard to the three questions, trade, justice, and intercourse, which they have had under consideration.

In reporting to you, regarding trading questions, I cannot do better than to state, at the outset, the interpretation of the treaties to which the greater number of representatives adhere the provisions of the Chefoo Convention, showing an adjustment of certain difficulties arising in the course of trade, proposed by the British minister, but not ratified as yet by his government; and, lastly, the views of the Chinese Government as set forth in a circular letter addressed to Chinese ministers abroad in March of last year.

1st. The intent of the treaties as generally read.

After the Chefoo Convention was made in the summer of 1876, the foreign representatives then present here, the English minister of course excepted, concluded to address their several governments setting forth the unsatisfactory nature of the adjustment of trading questions proposed in the convention. My own advices on the subject will be found more particularly in my dispatch No. 177, dated December 5, 1876. With that dispatch I transmitted to the Department a protocol signed by my colleagues of Russia, Germany, Spain, and France, and myself & large part of which is devoted to the subject now in hand. I quote from the protocol, to indicate the views held by the representatives named, as follows:

The stipulations of the treaties, regarding of course the most favorable stipulations of the several treaties as applying to all of the foreign powers, may be summarized thus:

Imports, on which the import duty has been paid, can be sent inland without being subjected to any other tax than the transit duties, which may be levied according to the tariff in force at the conclusion of the given treaty (practically the earliest treaty), and may not be raised in future.

On native produce, transported from the interior to an open port, or on imports sent inland, these transit duties may be discharged by one payment.

The amount of such payment has been fixed, for imports sent inland and for produce bought in the interior by a foreigner for exportation, at one-half the import or export tariff duty.

In the case of imports the rights and privileges granted by the treaties attached to the goods themselves, and not to the person of the proprietor, whose nationality is of no importance.

All other taxes, lekin included, must be considered illegal.

2d. The proposals of the Chefoo Convention.

These are contained in Section III of the convention, and are as follows:

I. With reference to the area within which, according to the treaties in force, lekin ought not to be collected on foreign goods at the open ports, Sir Thomas Wade agrees to move his government to allow the ground rented by foreigners (the so-called concessions) at the different ports to be regarded as the area of exemption from lekin; and the Government of China will thereupon allow I Chang in the province of Ha-Pei Wu-Hu, in Au Hni, Wen-chow in Che Kiang, and Pei-Hai (Pah-hoi) in Kwangtung to be added to the number of ports open to trade, and to become consular stations. The British Government will further be free to send officers to reside at Chung King to watch the condition of British trade in Sze-Chǔen. British merchants will not be allowed to reside at Chǔng King, or to open establishments or warehouses there, so long as no steamers have access to the port; when steamers have succeeded in ascending the river so far, further arrangements can be taken into consideration.

It is further proposed as a measure of compromise that at certain points on the shore of the great river, namely, Ta Tǔng and Ngan-Ching in the province of An Hui; Hu-Kǒuw in Kiang-Si; Wu-sueh, Lu-chi-kow, and Sha-shih in Hu-Kuang, these being all places of trade in the interior, at which, as they are not open ports, foreign merchants are not legally authorized to land or ship goods, steamers shall be allowed to touch for the purpose of landing or shipping passengers or goods; but in all instances by means of native boats only, and subject to the regulations in force affecting native trade.

Produce accompanied by a half-duty certificate may be shipped at such points by the steamers, but may not be landed by them for sale, and at all such points, except in the case of imports accompanied by a transit-duty certificate, or exports similarly certified, which will be severally passed free of lekin on exhibition of such certificates, lekin will be collected on all goods whatever by the native authorities. Foreign merchants will not be authorized to reside or open houses of business or warehouses at the places enumerated as ports of call.

II. At all ports open to trade, whether by earlier or later agreement, at which no settlement area has been previously defined, it will be the duty of the British consul, acting in concert with his collegues the consuls of other powers, to come to an understanding with the local authorities regarding the definition of the foreign settlement area.

III. On opium Sir Thomas Wade will move his government to sanction an arrangement different from that affecting other imports. British merchants when opium is brought into port will be obliged to have it taken cognizance of by the customs, and deposited in bond, either in a warehouse or a receiving hulk, until such time as there is a sale for it. The importer will then pay the, tariff duty upon it, and the purchasers the lekin, in order to the prevention of the evasion of the duty. The amount of lekin to be collected will be decided by the different provincial governments according to the circumstances of each.

IV. The Chinese Government agrees that transit-duty certificates shall be framed under one rule at all ports, no difference being made in the conditions set forth therein, and that so far as imports are concerned the nationality of the person possessing and carrying these is immaterial. Native produce carried from an inland center to a port of shipment, if bona fide intended for shipment to a foreign port, may be by treaty certificated by the British subject interested, and exempted by payment of the half-duty from all charges demanded upon it en route. If produce be not the property of a British subject, or is being carried to a port not for exportation, it is not entitled to the exemption that would be secured it by the exhibition of a transit-duty certificate. The British minister is prepared to agree with the Tsung-li Yamên upon rules that will secure the Chinese Government against abuse of the privilege as affecting produce.

The word nei ti, “inland,” in the clause of Article VII of the rules appended to the tariff regarding carriage of imports inland and of native produce purchased inland apply as much to places on the sea-coast and river shores as to places in the interior not open to foreign trade, the Chinese Government having the right to make arrangements for the prevention of abuses thereat.

Upon these proposals the foreign representatives of 1876 remarked, in the protocol already quoted from, as follows:

The right of the Chinese Government to levy lekin taxes is thus formally recognized. From the operation of the rule, are to be excepted only the so-called foreign concessions, i. e. (with the exception of that of Shanghai, within which a certain number of Chinese live, and which may be considered as possessing a local consumption of its own), the small area occupied exclusively by foreigners, and, for certain ports, hardly more than the houses inhabited by them.

The transit-pass system, moreover, is rendered less secure. This will be understood when it is remembered that the transit charge (half-tariff charge) is properly a commutation of the transit dues, and that the treaties expressly denounce as illegal the collection of any other dues on foreign goods or foreign-owned native produce. If the right to buy lekin taxes is admitted, they may be imposed on goods and produce without regard to transit passes (that is to say, on goods and produce which have already paid the commutation charges as well as upon those which have not).

While no advantage has been obtained by the Chefoo convention with respect to the complaints against the levy of illegal taxes, an approval of its stipulations would prove injurious to trade, and would deprive foreign powers of the right to protest against unfair taxation; by such approval they would, on the contrary, bind them-selves to recognize the unlimited imposition of lekin by the Chinese Government.

3d. The position of the Chinese Government.

This is given in the circular of 1878, a copy of which was transmitted to the Department from Shanghai a few weeks since, and an additional copy of which will be found herewith.

We hold that by the treaties foreigners—

• May import foreign goods into China on payment of the tariff duty.
• May convey duty-paid foreign goods into the interior, and either, as Chinese merchants do, pay duties at each custom-house, and taxes at each barrier passed, or by payment of the tariff transit due, may free their goods from such duties and taxes, en route to any places, however distant, named by them, and entered in their transit certificates.
• May purchase native produce in the interior, and, if intended for foreign export, and supplied with transit certificates, may bring it to a treaty port exempt along the route from all duties and taxes, it being merely charged the commutation half-tariff transit due at the barrier nearest the port. If not provided with transit certificates, such produce has to pay all duties to which it is liable when in the hands of native merchants.

You will observe that radical differences in the construction of the treaties are thus exhibited—

1st. As to lekin taxes.

Foreign representatives generally claim that no taxes or dues whatever may be levied upon our imports, excepting tariff import duties and transit duties, and that these latter may be commuted by a single payment, the rate of commutation being one-half the tariff import duty.

The Chinese assert, on the contrary, the right to levy any taxes which they see fit on imported goods, after the import duty has been paid, excepting only goods covered by transit passes while so covered. On foreign-owned produce for exportation they make the same claim.

2d. As to ownership.

They admit the right of foreigners to take out inward transit passes, but do not admit that natives may. They thus make the privilege of the treaties personal to the foreigner and deny that it attaches to the goods.

It must be acknowledged that if the Chinese view is accepted, the efforts heretofore made to secure by treaty stipulations foreign imports and foreign-owned native produce from undue and irregular taxation have proven more or less futile. For if imports may be taxed either at once after they have been landed and passed the customs proper, or after they have reached an inland center, being so far protected by transit passes, then the government may really levy what duties it pleases before allowing such goods to reach the consumer. And similarly, if native produce can be taxed before the transit begins, or at any time, if not covered by passes, then it is subject to such levies as may be demanded up to the moment when the foreigner tales it into his actual possession under certificate or exports it.

That the framers of the treaties did not intend such an abortive system will be seen at once upon roading the treaties. The French text is especially clear. I quote from it as follows:

Art. XXIII. Toutes inarchandises francaises, après avoir acquitté dans l’un des ports de la Chine les droits de douane liquidés d’aprés le tariff, pourront être transporters dans l’intérieur sans avoir á subir aucune autre charge supplémentaire que le paiement des droits de transit suivant le taux ntodéré actuellement en vigour, lesquels droits ueseront susceptibles d’aucune aiiginentation future.

Sides agents de la douane chinoise, contrairement á la teneur du présent traité, exigeaient des rétributions illégales, ou prélevaient des droits plus élevés, ils seraient punis suivant les lois de l’empire.

This article refers, of course, to imports only. In regard to exports, it may be said that there is no express provision against the levy of duties upon native produce before it passes into foreign hands (or thereafter, unless it is covered by certificates), but that we may clearly, upon the broadest grounds, demand that no duties shall be levied upon such produce in excess of the tariff and transit duties, differentially, that is to say, which are not levied irrespective of the purpose to export the goods, and uniformly.

It is my impression that I sent to the Department from Shanghai a printed transcript of the articles of all the treaties which refer to the transit-pass system, duties, &c.

At any rate, a compilation of the treaties themselves, edited by Mr. W. F. Mayers, and published at Shanghai in 1877, was transmitted to the Department from Shanghai in that year, at my request and, referring to it, I may, without further discussion, call your attention to the following stipulations:

It will be evident to you, from what has preceded, that the attitude of the English legation has occasioned much anxiety to the representatives of other powers. The fact that the English minister felt able to enter upon a general discussion of the business, or, at least, was prepared to take part in the recent conference, was not altogether conclusive that his government had abandoned the Chefoo convention, for it might be that he hoped to win the others over to his position. And, so far as I was concerned, a further element of uncertainty was imported into the business by my knowledge that the German minister, while on leave of absence recently, had visited London and met the English minister, who was also on leave. It was possible for me to suppose, under these circumstances, that the two had, in concert with their respective governments, agreed upon a programme to be carried out here, which agreement, for whatever reason, they thought best to keep to themselves until the right moment should arise to disclose it.

Under all the circumstances it appeared to me wiser not to take an active part at first in the discussion of trading questions. I asked, therefore, at the outset to be excused from acting upon the committee appointed to consider commercial questions, reserving my interference until they should come before the full body of representatives. As it happened, however, the committee on commercial questions concluded, at their first meeting, to invite me to attend their sessions, and to take part in their deliberations, and I was not a little pleased to note at once upon doing so that the whole matter was being discussed as if no previous arrangements, whether of the British minister, or of the British and German ministers together, would interfere.

An inspection of my correspondence from Shanghai and from this capital will show that the position taken up in the protocol of 1876 was essentially that to which I have long adhered. I entered the conference, then, with no uncertain views, and disposed, moreover, to distrust the utility of any proposal which should look to a change of existing stipulations. I could not see that the Chinese Government would have less difficulty in the execution of any new proposals to which we could assent tan in the execution of existing stipulations. And moreover, the whole structure of our relations with this empire is unusual and abnormal, and I could but fear that the displacement of this or that part of it might result disastrously. While disposed, however, to take a conservative course, it was only the part of wisdom to enter with my colleagues upon a further study of the whole business lest some feature of it might have escaped my attention, and in order that no proposals to improve matters should pass without consideration.

It would be idle to attempt to review in this letter all the proposals which were advanced, whether on the part of those who have been longer on the scene or those who have had less experience in this singular land. It is sufficient to say that at an advanced moment it became evident that while the tendency of opinion was favorable to new treaty stipulations, much divergence of views existed as to the changes which were necessary, and that we could not hope to reach any agreement in the limited time at our disposal. It happened then that the German minister came to me and stated that which at London, on the occasion of which I have already alluded, he had placed before our colleague, the British minister, and the British foreign office, a plan for the adjustment of matters within the lines of existing stipulations; that the substance of this plan had been communicated from Berlin, without reference to its origin, to other powers and had already been accepted by several. He then put the plan into my hands, and asked if I would unite with the British minister and himself in urging its adoption by our remaining colleagues. The document referred to will be found among the inclosures transmitted herewith. I responded at once that I did not regard his proposals as entirely satisfactory, but that I would give them candid consideration. I added, however, that I entertained doubt whether we were proceeding wisely. The time had nearly arrived when several of our colleagues having their residence at Shanghai or elsewhere must leave Peking for the winter, and that in my opinion it would be desirable to prepare as a first step a declaration of grievances. Having done this we could take time to consider remedies. Mr. von Brandt accepted my suggestion at once, and the result was the introduction by him, at the next meeting of the diplomatic body, of the note verbale which forms inclosure No. 1 with this dispatch.

The proposition to prepare a statement of grievances, and to transmit the same to the foreign office as a preliminary step to the further discussion of the business, was accepted by the conference, and we proceeded at once to review the statement prepared by Mr. von Brandt, with the result shown in the protocol, and the note to the Yamên. (In-closures Nos. 2, 3, and 4.) It happened at the moment when this proposal was advanced before the conference that a letter was placed before us addressed to the doyen of the diplomatic body by the Chamber of Commerce at Shanghai, advocating the view that new treaty stipulations are not so much needed as the right enforcement of existing stipulations. It was undoubtedly of influence in determining the conference to accept the plan presented by Mr. von Brandt.

Under this new phase of the business, it is likely that a discussion will be brought about between the diplomatic body and the foreign office directed, in the first instance, to the accuracy of the statement of grievances. This discussion will necessarily involve questions as to the facts declared, and questions as to the meaning of the treaties. It will naturally lead to a further discussion in regard to remedies, and before this takes place it will become necessary for the foreign representatives to decide whether they will stand for the execution of the treaties or propose new arrangements. My own disposition still is to stand for the execution of the treaties. I do not for a moment suppose that we can secure the perfect execution of the treaties. Illegal taxes will be levied in spite of all that can be done by us. But it may be that we can so defend the transit-pass system that excessive levies will be prevented; that, intact provincial levies will be brought so low that there will be no occasion to evade them by taking out transit passes. To effect this, much vigilance will be required, but it is to be remembered that the struggle against such levies is one with which the central government sympathizes in a measure. They are imposed in the provinces, often without the knowledge of the general government, often perhaps in excess of the intentions of the higher provincial authorities. As against such levies we can always plead while standing on liberal ground. It is competent for us, for instance, to say that while we are familiar with high tariffs, we at least levy all our duties once for all, and in accordance with the tariffs carefully considered and solemnly proclaimed. And, indeed, if we cannot secure good results under the present treaties, how may we do so? If there is not good faith and competence in the government as respects present stipulations, will there be better faith or more competence if other stipulations are made?

The situation as respects trade is like the situation as respects jurisdiction. We have imposed the extraterritorial system upon China, because we cannot trust their jurisprudence. We have imposed treaty tariffs and transit arrangements, because we cannot trust their fiscal and administrative system; we meet many evils under the extraterritorial system and many under the system of treaty tariffs, but both were imposed because of the necessities of the case, and both are of measurable advantage. We must make the most of them until the days of better administration arrive, and those days will arrive the sooner if we stand firmly for the rights accorded to us by treaty. Attempts to revise, diplomatically, arrangements which are not logical when regarded from the point of view of the sovereign rights of the state, may bring about a greater degree of confusion than at present exists, to the injury, as we may well believe, of native as well as of foreign interests.

While holding these views, I feel bound, of course, to study the subject further, with my colleagues, and without them, I shall feel bound, too, to take no step looking to a change of treaty, without first reporting to yourself for instructions all the facts and considerations involved.

I respectfully ask for your approval of the action taken by me as reported in this despatch.

I have, &c.,

Note verbals of the German minister.—Translation.

The minister of the German Empire has the honor to submit to his colleagues, the representatives of the other treaty powers now assembled at Peking, the following ing suggestions:

The discussions which have been going on during the last six weeks on the subject of inland taxation have shown that while there exist nearly unanimous views on the necessity of taking steps to do away with the defects of the present system, and while there exists even a certain degree of unanimity with regard to the measures to be recommended for this purpose, the working out of the details of any scheme, either to be proposed immediately to the Chinese Government or to be submitted Just to their home governments for their approval and sanction, is a question not to be disposed of within the limit of time at the disposal of the conference.

Under these circumstances, the minister of the German Empire ventures to submit to his colleagues the proposal that what should be done first ought to be, to lay before the Tsung-li Yamên a statement of the grievances under which foreign trade, import and export, is suffering. In this way the discussion would be opened, first on the grievances themselves, then on the remedies to be applied, and it would be possible to obtain from the Tsung-li Yamên a statement of the views of the Chinese Government on these points, perhaps even certain proposals for reforms or alterations of the existing system, without binding the foreign representatives or the treaty powers to any definite line of action as would be the case if the discussion was opened by elaborate proposals being laid before the Tsung-li Yamên.

Once the discussion engaged, the foreign legations in China would be at liberty to act as they thought fit, and either to arrive at an immediate understanding with the Yamên on the basis of the now existing treaties, or, should a departure from this basis prove necessary or desirable, to ask for the instructions of their, governments. In either case, the material collected during the discussions of the present conference will be of the greatest value.

Should this view meet with the approval of his colleagues, the minister of the German Empire would propose that the joint statement, to be laid before the Tsung-li Yamên, should mention the following facts:

• That, contrary to the treaties, in which it is stipulated that foreign goods once having paid the import duty shall pay no other taxes before they reach the first barrier in existence at the time of the conclusion of the treaty, taxes of different kinds are levied on foreign imports at many places as soon as they leave the hands of the foreign importer, often even before the Chinese purchaser is allowed to take them out of the foreign “godown.”
• That, contrary to the treaties, by which it is stipulated that none but transit duties and only those which existed at the time of the conclusion of the treaty shall be levied, other duties and taxes are levied on foreign goods.
• That, contrary to the treaties, at several of the open ports, and in some of the provinces of the empire, transit passes are either not issued at all, or that arbitrary and unnecessary conditions are imposed in the issue of passes, or that, when issued at the port, they are not respected in the interior of the province.
• That, contrary to the treaties, foreign imports forwarded inland under transit passes are often stopped and vexatiously detained by the officers at the stations in order to extort illegal fees, or to further the interests of Chinese guilds having made special arrangements with Lekin collectorates or other Chinese offices.
• That, contrary to treaty, taxes are often levied on foreign imports carried inland under transit passes immediately after their arrival at the place of destination, or when broken up into parcels for local consumption.
• That, contrary to the laws of the empire, tax stations not authorized by the Chinese Government or the highest provincial authorities are constantly opened.
• That, contrary to the laws of the empire, the tariffs under which inland duties are levied are neither published nor for sale.
• That, contrary to the laws of the empire, very frequently no receipts are given for duties levied.
• That, contrary to the treaties and to the laws of the empire, officials guilty of having levied illegal taxes or disregarded transit passes are not punished.
• That the recovery of illegally-levied duties, even if the fact itself is acknowledged by the Chinese authorities, is, if not impossible, at least very difficult, and in the best case accompanied with unnecessary and vexatious delay.
• That, contrary to the treaties, every difficulty is thrown in the way of foreigners asking for transit passes to bring down Chinese produce from the interior, and that in many instances such passes are either entirely refused or granted only under conditions arbitrarily imposed or contrary to treaty.
• That, contrary to the treaty, on native produce, and especially on silk, differential duties are levied when sold to foreigners, and that the levy of these duties is farmed out to certain companies, which are enabled thereby to monopolize the trade in certain articles.
• That, contrary to treaty, attempts are made at several ports to levy inland transit duties on exportation of produce bought in the port.
• That, contrary to treaty, attempts are made at some of the open ports to levy coast-trade duty on goods duty-free by treaty.
• That while the treaties grant to foreigners the right to visit the interior and freely to trade there, the action of the Chinese authorities tends to render the right illusory by depriving them of safe means for the transport or the storing of their goods, in refusing to allow them to use their own native-built boats or hire houses for short periods.
• That, contrary to treaty, the respective value of foreign coins and native taels is fixed arbitrarily and in excess of their true relation to each other, so that by these means a burdensome and illegal tax, amounting often to as much as 12 per cent. on a hundred dollars’ worth of goods, is imposed on foreign trade.

A declaration might be appended to such a statement of grievances, setting forth that the foreign representatives, while demanding redress and a stricter and better execution of the treaties, are perfectly willing to listen to any proposals the Chinese Government might have to make to them, and to redress on their side any abuses which the Tsung-li Yamêa might have to complain of on the part of foreign merchants.

Statement of grievances referred to in the foregoing protocol.

• That taxes of different kinds are levied on foreign imports at some ports as soon as they pass into native hands.
• That levies are made on foreign imports in the interior which are not properly transit duties, or are in excess of the transit duties which were levied when the treaties were made.
• That at several of the open ports, inward-transit passes are either not issued at all or that the issue is fettered by arbitrary and unnecessary conditions.
• That inward-transit passes when issued at the port are not respected in the interior of the empire.
• That foreign imports forwarded inland under transit passes are often vexatiously detained by the officers at the stations in order to extort illegal fees or to further the interests of Chinese guilds who have made special arrangements with lekin collectorates or other Chinese officers.
• That the protection of the transit-duty certificate is denied to imports when they have passed the barrier nearest the inland market to which they may be consigned under the certificate.
• That the exercise of the right of foreigners to visit the interior for purposes of trade is unfavorably affected by the want of proper regulations for the temporary storage or transport of their goods.
• That all over the empire tax stations are constantly opened without due authority.
• That the tariffs under which inland duties are levied are neither published nor for sale.
• That very frequently no receipts are given for duties leaded.
• That officials guilty of levying illegal taxes or disregarding transit passes are rarely, if ever, punished.
• That the recovery of illegally-levied duties, even if the fact itself be acknowledged by the Chinese authorities, is, if not impossible, at least very difficult, and in the best case attended with vexatious and unnecessary delay.
• That difficulties are frequently thrown in the way of foreigners asking for transit passes to bring down Chinese produce from the interior, and that in many instances such passes are either entirely refused or granted under conditions arbitrarily imposed.
• That on native produce, and especially on silk, duties are levied after sale and before the goods are delivered to the purchaser, and that levy of these duties is farmed out to certain companies, which are enabled thereby to monopolize the trade in certain articles.
• That at certain ports, in excess of the export duty, a half tariff duty has been demanded upon the exportation of produce which has been bought at the port.
• That in some instances half tariff duty is levied on exportation upon goods that have been manufactured out of native produce in the port itself.
• That in some instances export duty is levied on produce duty-free by treaty when it is carried coastwise.
• That in some instances differential duties to the prejudice of the foreigner are levied on native produce carried coastwise, in excess of the export and coast-trade duties.
• That the respective values of foreign coins and native taels are fixed arbitrarily and in excess of their true value, thereby imposing a heavy burden on foreign trade.
• That the tonnage dues are applied but in part to the provision and maintenance of lights, buoys, beacons, and the like.

The Tsung-li Yamên to the Chinese ministers abroad.

the chinese circular of 1878.

[Dispatch No. 181.—Inclosure.]

1. Since the treaties of Tientsin were ratified, China’s relations with foreign powers have invariably been conducted in accordance with their stipulations. Whatever complaints there may have been on the part of foreign governments on this head, have, in the main, been occasioned by accidents to individuals and the incidence of taxation. As regards the first class of complaints, it must be remembered that such things may occur in any country, and that no amount of foresight can effectually guard against them; while as to taxation, it is where there are no treaty provisions, or where treaty provisions are read two ways, that differences occur.

2. Treaties may be revised once in every ten years, and such additions, abrogations, or modifications as are introduced depend upon the voluntary assent of the contracting powers. The first revision of the British treaty was concluded by the Yamên and the British minister in 1869; but notwithstanding that friendly negotiations had extended over as much as two years, the British Government refused to ratify the arrangements of its representative, and the revised treaty has never been in force. For a year past the revision of the German treaty has been going on. Among the proposals of the German minister there are some to which it is impossible for China to assent; and so, although there has been much discussion, no settlement has yet been arrived at. In this matter of treaty revision, a mutual interchange of views is a preliminary of much importance, and it appears to us that there are four cardinal points regarding which, it would seem, that we have, up to the present, failed to make the Chinese views understood. They are—1. Transit; 2. Lekin taxation; 3. Exterritoriality; 4. The most-favored nation clause. We propose to state our views in connection with them for your excellency’s information.

3. As regards dues and duties paid by foreigners generally, we hold that by the treaties of Tientsin foreigners—

• Can import foreign goods into China on payment of the tariff duty;
• Can re-export duty-paid foreign goods to a foreign country, and obtain drawback of the import duty originally paid;
• Can convey duty-paid foreign goods into the interior and either, as Chinese merchants do, pay duties at each custom-house and taxes at each barrier passed, or, by payment of the tariff transit due, can free their goods from such duties and taxes en route to any places, however distant, named by them, and entered in their transit certificates;
• Can purchase native produce in the interior, and, if intended for foreign export and supplied with transit certificates, can bring it to a treaty port, exempt along the route from all duties and taxes, by simply exhibiting the certificate at each custom-house and barrier passed, it being merely charged the tariff transit due at the “last barrier” (i. e.,, the barrier nearest the port); or, if not provided with transit certificates, then such produce has to pay such duties and taxes to which Chinese merchants are liable;
• Can export native produce on payment of an export tariff duty;
• Can convey native produce from treaty port to treaty port on payment of an export duty at the port of shipment, and a coast trade half-duty at the port of discharge;
• Can, after payment of the coast trade half-duty as above, convey such native produce into the interior on the payment of the duties and taxes at the custom-house and barrier passed en route, in the same manner as Chinese merchants.

The above is, in a general way, what foreigners trading in native and foreign goods are entitled to as regards payment of duties in accordance with treaties and regulations.

4. As regards transit inwards, however, foreigners have maintained that to say goods are exempted en route from a port to the place mentioned in the transit certificate is not enough. They have held that foreign goods which have once paid transit dues cannot subsequently be called upon to pay any local charge whatever. To this interpretation we cannot agree. By the treaties foreigners have the option of taking out or not taking out transit certificates. If transit certificates are applied for, the treaty stipulations require that the place to which the goods are going must be named and entered in the certificate. Why is this so? It is because the certificate is only to free the goods from the treaty port to the place named in the certificate; arrived there, the certificate becomes waste paper, and the goods thereafter differ in no respect from ordinary uncertificated goods. Again, the foreign merchant, having the option of taking out or not taking out transit documents, it thence results that foreign goods of two kinds are found at the same place in the interior at the same time, namely, certificated and uncertificated. The certificated goods traveling in a given direction under certificate from the treaty port to a place named, are by treaty exempt from taxation everywhere en route; while the uncertificated goods, transported in any direction at pleasure, are everywhere liable to the incidence of local taxation. When the certificated goods have arrived at their place of destination, and by the canceling of the certificates have become uncertificated, they, like all other uncertificated goods, are thenceforth liable to taxation.

The certificate once canceled on arrival at the place of destination, how can it be possible to distinguish, among equally uncertificated goods, which had paid and which had not paid transit dues? It is evident, therefore, that complete exemption from taxation everywhere, and for all future time, is not the meaning of the treaties, but simply that goods are to be freed from all taxes en route. In a word, as we understand the inward-transit privilege, a certificate only protects goods from charges en route from port to place; but this is already a great privilege, for on payment of transit dues, the foreigner can at pleasure send his goods to any market, however distant, without further liability to taxation.

5. As regards transit outwards, foreigners have held that goods may be brought down under transit certificate even when not intended for foreign export, but meant for resale in China; and have gone so far as to say that, even without certificates, no tax ought to be charged in the interior on goods ordinarily exported to foreign countries. Now, as Chinese merchants have to pay all taxes en route it is obvious that the only way foreigners could bring down goods free would be under certificates; and therefore, without certificates, goods must pay, no matter what may be their subsequent destination. And again, since native trade would be subjected to unfair competition if foreigners were permitted to bring down produce under transit certificate and then send it to another part of China for sale, it follows that the produce that is entitled to transit privilege can only be such produce as is intended for foreign export. In a word, as regards native produce outwards, the case is just the same as with foreign merchandise inwards, the transactions differ, but the amount of duty charged is the same; for, just as a foreigner can take foreign goods to any part of China on payment of a full and half duty, so he can go to any part of China, and thence take Chinese produce to a foreign country on payment of a similar full and half duty.

6. Lekin is continually objected to by foreigners. But is it not just as well known that Chinese merchants are opposed to it too, and that the government regards it only as a temporary expedient? Independent powers must be guided by national necessities in fixing their taxation. In these troublous times the demands on the government are very heavy, and it is impossible to avoid having recourse to special measures; we maintain that all such matters should be left to be determined by China herself, and that the foreigner has no more right to interfere with or object to them than China would have to interfere with or criticise the action of a foreign government in raising loans or increasing taxes. If foreign merchants desire to escape the Lekim, they can escape it; all they have to do is to supply themselves with transit certificates when taking foreign goods into the interior, or bringing native produce out of the interior; if they do not carry transit certificates they must pay the Lekin, for, in the absence of transit certificates, all goods are alike and indistinguishable, and must in the interior pay Lekin, according to the rule of the locality.

7. As regards jurisdiction, i. e., exterritoriality. By the treaties, foreigners in China are not amenable to the jurisdiction of the Chinese authorities, i. e., they are exterritorialized. As they have disputes among themselves, their own authorities are to settle them; if they commit an offense, their own authorities are to punish them according to their own national laws. But foreigners claim much more than this; they interpret this exterritorial privilege as meaning not only that Chinese officials are not to control them, but that they may disregard and violate Chinese regulations with impunity. To this we cannot assent. China has not by any treaty given foreigners permission to disregard or violate the laws of China; while residing in China they are as much bound to observe them as Chinese are. What has been conceded in the treaties in this connection is merely that offenders shall be punished by their own national officials and in accordance with their own national laws. For example, if Chinese law prohibits Chinese subjects from going through a certain passage, foreigners cannot claim to go through that forbidden passage in virtue of exterritoriality. If they go through it, they thereby break a Chinese law; their own national officials are to punish them in accordance with such laws as provide for analogous cases in their own country. In a word, the true meaning of the exterritoriality clause is, not that a foreigner is at liberty to break Chinese laws, but that if he offends, he shall be punished by his own national officials.

Again, seeing that China has agreed that the judicial powers shall be exercised by foreign consuls within Chinese territory, foreign governments should, on their side, take care that none but good and reliable men are appointed to these posts. Several states, however, appoint merchant consuls. Now, in so far as concerns that part of a consul’s duty which comprises the reporting and clearing of ships, and the shipping and discharge of sailors, China does not object to its being discharged by merchant consuls. But in China a consul’s duties comprise judicial functions as well, and the importance of such functions is such as to seem to demand the appointment of bona fide officials to consular posts; moreover, where cases regarding joint investigation occur, it is neither convenient nor dignified for a Chinese official to sit on the bench with a merchant consul who may have been fined for smuggling the day before, or who, in his mercantile capacity, may, perhaps, be personally interested in the case at issue.

8. The most-favored-nation clause is found in all the treaties, and it is well that it should be so, for it is difficult for China to distinguish between foreigners, or say which belongs to which nationality; and so much is this so, that even non-treaty power foreigners are trusted like the others. The object of the foreign negotiator in introducing this clause was to prevent his own nationals from being placed at a disadvantage as compared with others, and to secure that all should be equally favored. Now, this is precisely what China desires. But foreign governments, although their objects in negotiating for the most-favored-nation clause were similar to those of China, are not always fair in their interpretation of it. For example, if China, for a consideration, grants a certain country a new privilege on such and such conditions, this would be of the nature of a special concession for a special consideration. Should other countries come forward and, in virtue of the most-favored-nation clause, claim to participate in the new privilege, although China need not necessarily exact a similar consideration in return, yet it would be only just to expect that in enjoying the privilege they would consent to observe the conditions accepted by the power to which it was originally granted. But, far from this being the case, there are some who, while demanding the privilege, refuse to be bound by the conditions attached to it. This is the unfair interpretation to which China objects. In a word, as regards this most-favored-nation clause, we hold that if one country desires to participate in the privileges conceded to another country, it must consent to be bound by the conditions attached to them, and accepted by another.

9. Over and above the four points commented on, there is the missionary question. China, recognizing that the object of all religious systems is to teach men to do good, has by treaty assented to missionaries coming to teach their doctrines in China, and has also guaranteed protection to them and to their converts. But among the missionaries are some who, exalting the importance of their office, arrogate to themselves an official status, and interfere so far as to transact business that ought properly to be dealt with by the Chinese local authorities; while among their converts are some who look upon their being Christians as protecting them from the consequences of breaking the laws of their own country, and refuse to observe the rules which are binding on their neighbors. This state of things China cannot tolerate or submit to. Under the exterritoriality clause foreigners are to be dealt with by their own national authorities; but, as regards Chinese subjects on Chinese soil, it is only the Chinese authorities who can deal with them; and Chinese subjects, whether Christians or not, to be accounted good subjects, must render an exact obedience to the laws of China. If any offend against those laws, they must, one and all, Christians and non-Christians alike, submit to be dealt with by their own native authorities, and the foreign missionary cannot be permitted to usurp the right of shielding them from the consequences of their act.

10. In order that negotiations for treaty revision maybe facilitated, what is required is reciprocal consideration and mutual forbearance.

We accordingly address to your excellency this communication. To recapitulate:

• In the matter of inward transit, we hold that certificates only cover goods from a treaty port to the place named in the certificate, exempting them from all taxes en route, and that, arrived at that place, they thereafter differ in no respect from uncertificated goods, and must, like all uncertificated goods, pay whatever charges the barriers passed thereafter may collect.
• In the matter of outward transit, we hold that, produce not yet bought by foreigners, or bought but not covered by transit documents, is liable to all local charges; and that goods brought down under transit passes for foreigners must be sent to foreign countries, and cannot be allowed to go to other Chinese port for sale, to the disadvantage of native-owned goods which have not had the benefit of transit pass.
• In the matter of Lekin, and taxation generally, we hold that China, as an independent state, has the right to levy whatever taxes she pleases, in whatever manner she may think best; and we consider it unfair on the part of other governments to question our proceedings or put difficulties in our way, seeing that we only collect special taxes because special circumstances call for them.
• In the matter of jurisdiction, we hold that the exterritoriality conceded in the treaties does not free the foreigner from observing the rules which Chinese have to observe; and, seeing that consuls have judicial powers, we think the importance of the trust requires that they should be bona fide officials, and not traders.
• In the matter of the “most-favored-nation” clause, we hold that, when any country claims to share the privileges conceded to another, it is hound to observe the conditions accepted by that other likewise.
• In the matter of the missionary question, we hold that within Chinese territory it is only the Chinese officials who can be allowed to exercise authority over the Chinese people; and that, Christians or not Christians, Chinese subjects must, one and all, pay due respect and obedience to the laws of China.

What China wishes to do is to carry out the treaties in such a way as to give full effect to all their stipulations, and place all foreigners in China on the same footing; but she cannot allow those treaties to be wrested to mean something essentially unfair to the Chinese people, nor, in attemping to adjust national resources to national wants, can she assent to any interference with her sovereignty as an independent state. What the treaties aim at is the maintenance of peaceful relations, and it will be found that nothing contributes to this end more powerfully than a due recognition by either state of the independence and sovereignty of the other.

Your excellency will go in person to the foreign office and read this dispatch to the minister of foreign affairs, and, if requested, leave a copy.