Thomas Wade to the Tsung-li Yamên, July 7, 1881

The British minister to the Tsung-li Yamên.

The undersigned has the honor to request the attention of the ministers of the Tusng-li Yamên to the following observations on the subject of taxation of imports inland.

The disputes arising out of the taxation of imports protested against by foreign representatives, as in contravention of the treaties, had extended over a long period. They may be said to have commenced, indeed, from the day that the treaties of 1858 came into operation. There had been other questions with regard to which foreign representatives conceived themselves equally entitled to complain. In order to the consideration of these they assembled in Peking in the autumn of 1879, and upon the —— November of that year they communicated the result of their deliberations to the Prince of Kung in a collective note.

The negotiation of the changes desired was intrusted to different ministers. That regarding inland taxation of imports was committed to the undersigned; his brief, so to speak, being a memorandum in twenty articles, in which the difficulties alleged to embarrass both the import and the export trade were set forth. The memorandum had formed an inclosure in the collective note of the representatives.

So far as imports are concerned, the grounds of complaint exposed in this memorandum might be stated generally under two heads:

• The taxation of imports in excess of treaty provisions both at the ports and inland.
• The neutralization of the safeguards plainly provided by the treaties against excessive taxation inland, either by the act or the neglect of the Chinese authorities. By the treaties but two forms of taxation are recognized. The tariff duty imposed at the port of entry, when the imports are landed, and the transit duty, equal to a half tariff duty, the payment of which is optional, but the certificate attesting payment of which is held under some of the treaties to free the imports certificated from all further imports possibly leviable.

But the Chinese authorities, to state the case summarily, have conceived themselves at liberty to impose inland taxation without limit on imports, and the methods of levying this or other taxation when denounced as objectionable by the foreigners, have been defended by the Chinese authorities as in no way opposed to the treaties. In particular has the interpretation of the transit duty clauses proved matter of endless contention.

In a reply to the collective note dated ——, the Tsung-li Yamên informed the foreign representatives who had signed it that there were three courses open to them, the abandonment of the exterritoriality clauses, in which case natives and foreigners would be treated alike; adherence to the existing treaty provisions, or acceptance of the modifications of treaty stipulations accepted by the late British minister, Sir Rutherford Alcock, in his convention of 1869.

The certainty that it would be in vain to expect acceptance of the first of these propositions by any one of the treaty powers has practically excluded it from consideration, and as regards the second, the undersigned has but expressed the unanimous feeling of his colleagues, when he has declared that nothing would be more satisfactory than adherence to the existing treaties, could but a common understanding be arrived at regarding the meaning of some of their most significant provisions. That such an understanding was clearly impossible, so long as the provisions in question were so differently interpreted by the Government of China and foreign powers.

There remained the convention of 1869 which, though it had been, in some quarters, considered open to objection, was nevertheless admitted to contain much that might be safely accepted. The Tsung-li Yamên manifestly entertained the opinion that this convention must be adopted as a whole or not at all.

It is not necessary here to retrace further the history of the undersigned’s conferences with their excellencies the ministers upon the subject. Upon the 29th June, 1880, the undersigned put the following plain questions to their excellencies: Is there no arrangement under which by a single payment of import duty at the port of entry all further charges may be avoided? The object of the undersigned, as he observed, was not more the alleviation of trade from taxation, which the importer regarded as violation of treaty, than the termination of those ever-recurring discussions to which such taxation gives rise.

The answer of their excellencies was in effect that to secure this end, they saw no means but the one, an increase of the import duty.

This involving a reference on the part of the undersigned to his colleagues, and on the part of the Tsung-li Yamên to the provincial governments, a considerable time elapsed before negotiations were resumed. When they were, the position of the question was, in a few words, as follows: It was contended by the Yamên that, from inquiries in the provinces, the lekin now imposed on foreign imports amounted to something like three times the tariff duty. In other words the tariff duty being generally taken to represent some 5 per cent. ad valorem, the lekin and tariff together might be stated at 20 per cent, ad valorem. Their excellencies, after some intermediate propositions, declared themselves ready to advocate a single payment of Hi per cent, as the equivalent of the present tariff duty plus inland taxation.

The undersigned and his colleagues, being of opinion that if the half tariff duty, now paid only at the option of the importer when he elects to certificate his goods inland, were levied simultaneously with the tariff duty, the Chinese exchequer would receive not only far more than now falls to its share, but to the full as much as it is fair to impose upon imports, were nevertheless prepared to make an effort to meet the Chinese Government. But the rise to 11½ was at once pronounced excessive, and the proposition was rejected accordingly.

The undersigned having vainly suggested 8 per cent., 8½ per cent., or even 9 per cent., as a maximum of increase, was finally given to understand, on the 28th of March last, that their excellencies were prepared to agree to 10 per cent, ad valorem as the amount that should include tariff duty and all other charges.

As their excellencies are aware, the adoption of this or any other change so important depends not only upon the acquiescence of the foreign representatives now in China, but upon the assent of all foreign governments having treaties with China, and as the Chinese secretary and assistant Chinese secretary at the British legation were instructed on the 21st May to intimate to their excellencies, it will be essential that the Tsung-li Yamên should state explicitly to what extent the Chinese Government is prepared to go in the emancipation of the import trade, supposing that foreign governments agree to this last proposition, which is in effect to double the import duty. To state the question in other terms: before they consent to any increase of the taxation to which they believe imports under the present treaties liable, foreign governments will require the most explicit assurance that by such increase imports shall be freed from all other imposts, no matter what their denomination, and no matter in what part of the empire or in whose hands, native or foreign, they may be found.

It may be at the same time considered certain that the increase of the import duty, if sanctioned at all, will not be sanctioned otherwise than as an experiment for a stated term of years. It will be regarded, and had accordingly better be described, as a provisional increase (or an increase upon its trial).

The Chinese Government will be expected to undertake that, if, when the conditions of exemption from further taxation shall have been agreed upon, it can be proved that imports are none the less taxed in excess of the limit agreed to, the excess shall be made good without delay to the party, interested; and that to this end some system of joint investigation is to be established.

The Tsung-li Yamên was further reminded on the —— that there are other provisions claimed for the protection of trade in general in the collective note of November —, 1879, some of which have not been as yet conceded, and the support of the proposition to increase the import duties is not to be counted upon until reasonable satisfaction on these points be secured.

The taxation of opium has of necessity been referred to, both directly and indirectly, in the discussions above referred to, and their excellencies have more than once observed that the trade in opium is exclusively a British question. It has further been urged by their excellencies that its position differs from that of any other item of the import trade within the scope of the collective note, in this, that the undersigned had individually engaged to regulate the taxation of the opium trade.

It is perfectly true that the opium imported into China is almost exclusively the produce of British India. It is also true that the undersigned did independently engage to attempt the regulation of its taxation. But it is none the less true that opium is in the tariff of almost every treaty power, and that, although there is reason to believe that whatever the British Government may eventually agree to regarding opium will not in the end be objected to by any other treaty power, it is perfectly open to any treaty power that may consider its treaty rights insufficiently respected to decline, until they be respected, the adoption of any arrangement affecting opium taxation that may be sanctioned either by Great Britain or any power. As their excellencies are well aware, the undersigned has not used this argument for the purpose of obtaining any advantage for the opium trade, but as one which it behooves the Government of China not to lose sight of when considering the complaints concerning the import trade advanced by the powers in general.

The undersigned has to express his regret that the ministers of the Tsung-li Yamên have had to wait so long for fulfillment of the promise of the undersigned that he would address their excellencies a note in this sense. For the delay which circumstances have made unavoidable, none is responsible but the undersigned.