Wells Williams to William H. Seward, September 26, 1868

Mr. Williams to Mr. Seward

Sir: I have the honor to forward to you a series of papers (inclosures A to K) relating to the revision of the British treaty, which, though of considerable length, will repay perusal, and give you a clear idea of the present views of this government upon many points brought to their notice by the British minister, and their decision upon many of those most fully discussed. These papers are connected with the memorial of Tsang Kwohfan, given in my dispatch No. 16, and the sentiments and arguments expressed by him illustrate the train of thought given in the remarks of the Chinese officers in some of these papers.

They divide themselves into three parts: Inclosure A contains the leading points brought before the commission by the English legation as most desirable to be considered in revising the treaty; and inclosures B C are the replies from the Foreign Office, taking up each point in order. The second of these papers was written by Wansiang, and gives the views of this most enlightened and liberal of the Peking ministers upon the general principles of trade and protection of native interests. The effects of a trade carried on in the country itself, in which the foreigner has the advantage over the native in conducting it, are here set forth in a way worthy of your consideration. The commission referred to was mentioned by me in a former dispatch, and consisted of Mr. Hugh Frazer and Mr. T. Adkins on the part of Sir Rutherford Alcock; and two of the oldest clerks in the Foreign Office, aided by Mr. Robert Hart, on the part of Prince Kung. The next five inclosures, D to H, contain the remarks of the British minister upon the preceding papers when he submitted them to his colleagues, and their replies upon such points as demanded particular attention. At the time these documents were submitted to them the details of the discussions had not been very fully understood; and their remarks are therefore valuable, as showing their independent views as to what the trade in and with China most required, as well as their estimation of the labors of the British minister in urging the Chinese authorities to begin these important changes.

The last three inclosures, I, J, K, contain his remarks in again submitting to them his minute to Prince Kung, in which he urges upon this government the need of guarding the trade against unjust exactions, of permitting British merchants to open warehouses in the interior, and of furnishing other facilities in carrying on the trade; and advises them to reconsider other points which they had previously rejected. The reply to this minute has not yet been received.

I think that you will agree with me that these various papers contain clear evidence of the desire of the central government of China, at least, to move on in the march of improvement as soon as they can see their way plain to do so. This is not a little, when you recur to the views expressed in the series of papers given in Mr. Reed’s dispatches, (dispatch No. 33, page 443,) which contain the general opinions on matters of trade and intercourse held by the colleagues and peers of the same officers who now discuss them so much more intelligently. This advance has been in a great measure the result of their constant contact during the last seven years with many foreigners, wherein opportunity has been afforded them to learn the truth about such things as heretofore they had really no means of acquiring correct information, even if they had then had the desire or the permission.

Seeing that the changes proposed in these papers will affect the interests of American trade as soon as they are accepted by the British government, especially the proposition to add the transit duty of two and a half per cent. to the tariff import duty, it is desirable that instructions be sent to this legation giving the views of the department upon this and other leading points, preparatory to the time when they will be submitted by the Chinese for its decision.

I have, in inclosure F, given my own views upon the general bearing of the proposed changes; and if there is ground for encouragement that many of them will be adopted or attempted, patience needs to be exercised in witnessing the slow advances likely to be made. Even if the government is desirous to introduce such as it sees most feasible and necessary, its leading members here in the capital know, far better than we foreigners do, the mass of ignorance, inertness, and prejudice to be encountered in carrying them into execution. In our own country an intelligent people originate and carry on such improvements; in India, an intelligent government is carrying them on over an apathetic, ignorant population, whose posterity will no doubt better appreciate the benefits derived from them; but in China, a hesitating, half-instructed, impoverished government is urged to introduce them among their unwilling subjects, though I think the latter to be the least unwilling. It is not so much the making of a treaty that improves our relations with a country in the position that this now is—and to improve those relations means to benefit both her people and rulers—as it is to help them to carry into effect those measures and enterprises which will do them permanent good.

The likin taxes which are spoken of in these papers are a certain percentage (literally, a cash to a catty, i. e., a cent to a pound) levied by the provincial authorities in times of rebellion upon articles of trade passing through the districts of their jurisdiction to raise funds for its suppression, for in China each province is required to raise and feed its own troops as far as it can. After the disturbances are quelled, this is found to be such a convenient mode of raising revenue, that the likin tax is not only not removed, but sometimes is increased, till trade is crushed and forced to find new channels.

A perusal of these papers shows very distinctly how the Chinese government is bound up by the treaties it has made to pursue a certain course of policy, and in a measure is forced to obey the will of other nations. For instance, most of the propositions contained in inclosure A refer to the reduction or abrogation of duty on certain articles of trade; and most of them are acceded to by the prince and his advisers. But when they propose to double the duty on tea, and silk to increase their own revenue, which is not very great upon a commerce of such magnitude, difficulties are thrown in the way, and the rectification of the tariff is declared to be now unadvisable, and must be deferred sine die. It is objected even to add to the duty on opium, though that is now rather under five per cent.; but as nearly one-third of this import enters clandestinely, it is not probable that an increased duty would help the revenue.

Thus China is placed very much at the mercy of the treaty powers in matters of finance connected with its external and internal trade; their stronger power comes in, to judge whether such a course or such a change is proper or not, and she must act accordingly. It places her in a position which may now be the best for her welfare, but will greatly cramp her action and development in future, if she improves in the way now opened out to her.

The extension of trade in the interior, by allowing foreigners to remain at the entrepôts and conduct their trade with the producers as much as they can, is an advance which promises the greatest benefits, for it will tend to bring natives into more constant contact with foreigners, and thus afford opportunity for each to better understand the other. One great cause for the mutual distrust now felt between them arises from their mutual ignorance; and contact in traffic more than some others insures mutual forbearance and trust. In the interior, this contact cannot be carried out extensively without a knowledge of each other’s language; and this will involve other results as it becomes general.

There is no limit, it may be almost said, to the degree which the treaty powers may interfere in the domestic affairs of China, for one thing involves another, and every advance compels some change in a new direction. Thus, if an officer acts in an arbitrary manner, and does things that continually interfere with trade and other rights, his removal is urged upon his superiors as necessary to mutual peace, at the place. This removal may not, however, please the gentry who urged him to adopt these measures, and his successor may find it no easy matter to please the class with whom he is probably in sympathy, and retain his official position. The carrying out of these treaties is likely to affect the whole fabric of Chinese society, and there is some danger of a reaction if the usages and principles of western countries be applied too stringently to this.

I believe this tutelage, with all its responsibilities, is the best way now available to elevate the Chinese to their proper place among the nations of the earth. They have made great progress since the ratification of the last British treaty in 1860, but the point they started from then was very low down; they knew almost nothing of the duties and rights involved in them, and would never have carried them out any better than the former treaties, had not foreign representatives seated themselves in their capital to see that this was done.

In carrying on this toilsome work, I wish to bear my testimony to the efficiency and general justice of the British government and its officials in China. Nearly every privilege possessed now by Christian nations in this empire has been obtained and maintained by them; and their present influence in the councils of its rulers is honorably used for the general welfare. It is upheld and strengthened by a trained body of consular officers versed in the language, and who, learning their duties in the lower grades of the service, are promoted as they prove themselves worthy to fill consular functions. It is much to be desired, for our own reputation, that Congress would institute a similar service for the American consulates, and raise up a body of men able to conduct intercourse with native officials in their own language.

I have the honor to be, sir, your obedient servant,

A.

Minutes of a meeting of the commission, May 4, to recapitulate the British demands. (This table of proposals was laid before the Chinese members in Chinese.)

I.—Likin Taxes and Inland Transport.

That no levy of taxes whatever may be permitted, whether upon foreign goods or Chinese produce forming a part of foreign export trade, within a radius of 30 li (10 miles) from the custom-house at each port opened by treaty.

To take into consideration whether sums received on account of transit dues might not be divided among the treasuries of the different provinces through which the goods may pass, with advantage, as tending to give the provincial authorities a direct interest in the increase of foreign trade.

II.—Tariff.

IMPORTS—HOUSEHOLD STORES AND SHIPS’ STORES.

1. In addition to the second rule in the tariff, providing that household stores and ships’ stores should not pay duty, it shall be allowed that all articles destined for foreigners’ consumption exclusively, and not for sale to Chinese, shall be duty free. Under the head of ships’ stores shall be classed all stores used in docks for the repair of foreign ships, and stones and machinery used exclusively in the dock establishments.

The importation of these to be limited to dock companies under a license, and a sufficient bond not to lend their names, and not to import for sale to Chinese.

2. Foreign goods imported in Chinese junks shall be subject to the same duty as if imported in foreign vessels; and to effect this, such importations shall be placed under the supervision of the imperial maritime customs.

3. Guano and manure shall be free.

4. Foreign coal shall be free of duty.

5. Woolen and cotton goods shall be reduced to a standard of 2½ per cent. ad valorem.

6. White pepper shall pay 4 mace, and black pepper 3 mace, per pecul.

7. Watches shall pay a duty of 5 per cent. ad valorem, as clocks now do.

8. Tin plates to pay 2 mace per pecul.

9. A conference shall be held at Shanghai between her Majesty’s council, assisted by the Chamber of Commerce and the commissioner of customs, to arrange an equitable tariff of timber duties on a basis of 5 per cent. ad valorem.

10. Foreign salt shall be allowed to be imported under special provisions, to secure the Chinese government from loss by the competition with native produce.

EXPORTS.

11. Foreign grain landed and stored shall be re-exported free of duty.

12. Tea shall pay 5 per cent. ad valorem.

13. The duty on native coal shall be reduced.

14. Coal shall be exempt from coast trade duty.

III.—Payment of Custom Dues.

1. At each port the amount to be paid as customs duties in the currency of the place, as compared with the established standard, shall be fixed.

2. Government assayers shall be appointed, to assimilate the currency of the open ports.

3. Drawbacks for duty on goods re-exported shall be made payable in silver on presentation at the government banks.

4. No limitation shall be placed upon the time during which duty will be returned upon re-exported goods.

IV.—Facilities of Transport, etc.

1. British merchants shall have a recognized right to have unimpeded access, and carry their own articles of commerce, whether foreign goods or Chinese produce, in which they have a bona fide interest in their own vessels, whether propelled by oars, sails, or steam, through the interior, to and from specified marts and producing districts, under customs regulations and permits to be agreed upon between her Majesty’s minister and the Foreign Office.

2. The places and districts to which access is required shall be specified; three points have been already mentioned—the Yaugtsze river above Hankau, the Poyang lake, and the North, East, and South rivers of Canton.

3. British merchants availing themselves of this right of navigation shall be permitted to own warehouses at points where the convenience of their own commerce may require them; and for this purpose a license shall be given by the consul at the nearest treaty port, who shall exercise due circumspection in the issue of such license, and have the power to cancel it.

4. Such foreign employés as may be required for the supervision of these houses shall be permited to reside in them, and suffer no molestation from officials or people.

5. To prevent possible inconvenience from the operation of the exterritorial clause, there shall be a consular agent at certain central points, to be hereafter determined; and whatever his nationality, he will be empowered, by the, concurrence of all the treaty powers, to take cognizance of all misconduct or infringement of treaty on the part of foreigners.

V.—Landing-stages—New Ports.

1. Landing-stages for goods, produce, and passengers, shall be permitted at the following places on the Yangtsze river, between Wusung and Hankow, viz: 1. Hwang-Chau; 2. Wu-such; 3. Tung-lin; 4. Ngan-king; 5. Ta-tung; 6. Wu-hu; 7. I-ching; 8. Kiangyin; 9. Wu-sung, besides the open ports of Kinkiang, Nanking, and Chinkiang. The use of these stages shall be accorded to British vessels under license and regulations hereafter to be settled by the British minister and Foreign Office in concert.

2. The port of Wan-chow shall be regularly opened to foreign trade, but no demand shall be made for separate foreign concession or settlement, and it is rather to be regarded as a port of call for foreign shipping, where they may take in or discharge cargo.

VI.—Bonded Warehouses.

A system of bonded warehouses shall be established at the open ports, either by govment warehouses, or permission to merchants to bond goods in their own godowns, whenever a majority of two-thirds of the mercantile community shall represent such an arrangement to be desirable.

VII.—Coal Mines to be worked.

It is important to provide for the large number of steamers running on the coast a sufficient and cheap supply of coal. This can only be done by opening native sources; and therefore (referring to a previous dispatch of Sir E. Alcock) the following proposal is added: Permission shall be given by the Chinese government and high provincial authorities to foreigners to work certain specified coal mines by foreign machinery and agencies under regulations.

VIII.—Monopolies.

All monopolies being strictly interdicted by treaty, it is deemed unnecessary to make any further provision on this head. But as certain monopolies have been persevered in to the great injury of foreign trade, and entailing pecuniary loss on merchants individually, notably in the article of camphor at Tamseng, of rice at Taiwan, and (there is reason to believe) of iron at Amoy, the British minister deems it advisable that all such attempts at monopoly should be put down and formally prohibited, either by official injunctions upon the high provincial authorities or by imperial edict; and that these three should be more especially denounced.

Further, as this will not indemnify merchants who have actually suffered by such breach of treaty stipulations, that indemnity should be paid, where any clearly avouched loss can be established, in like manner as means of exaction and squeezes, whether by the illegal levy of transit dues or li kin taxes on foreign goods at the ports.

Reply of the Foreign Office to proposals for revision of treaty.

On the 2d of January the Foreign Office received your excellency’s memorandum containing five clauses for a revision of treaty, and on the 4th of May a memorandum containing 29 clauses of a like import. The prince has carefully considered both these documents. The expression of sympathy with China therein contained are gratefully acknowledged as evidence of your excellency’s friendly feelings, and of your generous interest in our affairs. Mr. Burlingame’s mission to the friendly foreign states last year will certainly bring about a mutual understanding and increase those friendly feelings.

Now, with regard to the war taxes, the fundamental revenue of China is the land tax; the system of popular loans is unknown. In time of war his Majesty has, out of compassion for the sufferings of his people, remitted the land tax wholly or partly in the disturbed districts; and as a temporary measure the national necessities must be supplied by these extraordinary levies. Even now military operations are not ended, and funds are still much required. Indeed, the apprehension that the people will not be able to bear their burden is a source of constant anxiety to the government. As peace returns and order is restored, their taxes will surely be reduced or entirely removed. Besides, the foreign merchants, relieved of all taxes on their inland trade by the payment of a full and half duty, have the advantage of the native merchants, on whom these war taxes have been levied in full.

It may be true, as your excellency states, that British merchants have sustained heavy losses during the past two years, but the increased number of ports has increased the foreign merchant’s trade expenses, while competition has tended to restrict his business. The reckless competition of so many foreign merchants must inevitably diminish the profits of trade. The prince thinks that your excellency’s experience in China will have shown this.

With regard to the complaints of the foreign merchants of inland exactions, the proclamation which your excellency has approved, and which is about to be issued at all the barriers, will remove that evil. Previous complaints may have arisen from the merchants having allowed this produce to be separated from their transit papers, as well as from an actual illegal levy, but authentic cases shall be settled on their individual merits.

Ever since the opening of the Yangtsze river the native trade there has declined, and in November of last year Tsang Kwohfan presented a petition from the native merchants begging, as remedial measures, for the withdrawal of the right to navigate it and to carry on inland traffic. These statements seemed to the prince reliable and worthy of attention, but in view of the difficulty your excellency would have of dealing with their request, though pitying the decadence of their commerce. These feelings I trust your excellency will also appreciate. If mutual advantage is to result from the present revision, consideration must be shown to the native merchants as well as to favor the foreigner.

The five points of the memorandum as contained in the 29 clauses have been repeatedly discussed by our commissioners and Messrs. Fraser and Adkins, and are now replied to seriatim.

1. Repayment in full of exactions on foreign trade in the interior.

A proclamation will be issued from this office requiring the authorities at the barriers to act in accordance with treaty, thus avoiding illegal levies in future. Previous claims will be treated as they are found to be acts of extortion by officials, or the result of the separation of the goods from their transit papers.

2. No levy of likin to be made on produce for export, or on foreign imported goods, within a radius of 30 li, to be measured from the custom-house at each port.

The war expenses of foreign countries are met by loans negotiated with the merchants. Having no such resource, China is compelled to resort to the likin. The import comes on the native, and not on the foreigner. Endless confusions and evasions would result from the adoption of this suggestion to do away with the likin within 30 li, (10 miles.) The military supplies, too, would be interfered with. After all, this is a matter for the consideration of China herself. With the disbanding of her armies and restoration of tranquillity alterations may be made in her fiscal arrangements, and out of consideration for the merchants the li-kin will be abolished.

3. That the inland transit dues leviable by treaty be divided among the treasuries of the provinces through which the goods pass with advantage, as tending to give the provincial authorities an interest in encouraging trade.

These dues as levied by treaty are applied by China for military purposes, or are remitted to the treasury, as the case may be. How, then, can the several provinces help themselves? As to fostering commerce, if the foreign merchant has proper papers, he may pass through many provinces and be protected in all alike. No official will dare to make any distinction, no matter whether any duties had been paid within his particular jurisdiction or not. The Foreign Office are issuing a stringent proclamation on this point, about which there need be no further anxiety.

4. In addition to ships’ stores and household stores, declared to be free by rule II of the tariff, goods imported for foreign consumption, and not for sale to the Chinese, to be duty free.

The intention of this rule in the tariff was to admit such articles for personal use duty free, but to impose a duty on those intended for sale. A list of articles so required for personal use will be drawn up, and regulations issued, to avoid confusion.

5 and 6. Under the head of ships’ stores come all stores used in dock for repairing foreign ships, and stores and machinery used in docks, to be imported only by dock companies established under license, and guaranteed for use of dock, not for sale. The opening of a miscellaneous store to be also under license.

As a dock is a trading establishment, it is considered that, except ships’ stores and machinery used in repairing ships, all materials used for building new vessels should pay a duty of five per cent. on the value of the vessel constructed. The necessary securities and regulations to be made permanent after three years, if satisfactory.

7. Manure and guano to be imported free.

Free, the discharge being under permit.

8 Foreign coal to be free. Free under permit.

9. Duties on cotton and woolen goods to be reduced to two and one-half per cent. ad valorem.

There are many varieties of these goods; their several values can be estimated with a view to a reduction of duty.

10. Watches, like clocks, to pay five per cent. ad valorem.

A reduction of duty to this amount can be granted.

11. Tin plates to be reduced to two and one-half per pecul. Reduction in accordance.

12. Timber to pay ad valorem five per cent.; the valuation to be made by the consul, commissioner of customs, and Chamber of Commerce at Shanghai.

Tariff rate can be reduced, but not to reckon ad valorem.

13. White pepper, four mace; black pepper, two mace.

14. Foreign grain to be re-exported free. [Conceded under permit.] Foreign salt to be imported under such rules as would prevent injury to the salt revenue.

The regulations in force in Kiangsu and Chehkiang are suggested as available.

The salt tariff is wholly imperial, and is a matter under special government control.

The traffic in salt is not an ordinary one; not even the highest officers in the state can engage in it at their pleasure; much less can the merchants take upon themselves to do so. This item cannot be admitted.

15. Tea to pay an ad valorem duty of five per cent.

The Foreign Office contemplates an increase of duty on tea. A separate list is made of the articles on which an increased duty is contemplated.

16. Duty on native coal to be reduced.

17. Coast-trade duty to be abolished.

18, 19. Currency to be assimilated to the Canton standard, and assays made at the ports to that end.

Shall be done.

20. Drawbacks to be made payable in cash.

The payment of drawbacks in cash will confuse the accounts, and will be troublesome from the fluctuations in the value of specie: but if this is absolutely necessary, the limit of the drawback will be only three months.

21. British merchants shall have the right to have unimpeded access, and carry their articles of commerce, whether foreign goods or Chinese produce—their own property—in their own vessels, whether propelled by sails or steam, through the interior, from specified marts and producing districts, under customs passes (Canton,) and regulations to be agreed upon between her Majesty’s minister and the Foreign Office. (The places and districts to which access is required shall be specified; three points are now indicated, viz: the Yangtsze above Hankow, the Poyang lake, the waters above Canton.)

The places named are on the inner waters, whither foreigners can proceed under proper customs passes. The use of steamers is inadmissible. The coast and (Yangtsze) river trade is already in the hands of foreigners; with steamers on the inland rivers and lakes, they would usurp the entire trade of the empire. Such preference given to the foreigner over the native would not be fair. The latter have no steamers running on the inner waters, and the foreigner availing himself of the inland traffic must use the native means thereto.

22. Inland residence at marts and en route.

Such foreign employé’s warehouse can be built at the open ports. Such establishments in the interior would injure native commerce, and both parties would have trouble, from the necessity of surveillance in an extensive and thickly populated country.

23. Jurisdiction of a foreign official was not discussed.

24. Opening of places above Wusung as landing stages.

It is not advisable, perhaps, to establish jetties on the river in addition to the four ports of Chinkiang, Nanking, Kinkiang, and Hankow. In the year 1862 Sir Frederick Bruce was anxious for liberty to trade temporarily at Ta-tung, Wuhu, and Nanking; but the matter was dropped, as Sir F. Bruce could not entertain some transit duty arrangements proposed in Hupeh. The present requisition for landing places may be met by the establishment of custom-houses for the levy of duty at these three places. But as the necessary funds will not be forthcoming, for the duties collected will probably not suffice to pay the expenses, it will be necessary to consider maturely as to the mutual advantages of the measure.

25. A port to be opened on the coast—Wanchow.

Yes; in exchange for Kiungchow, which has never been used.

26. Bonded warehouses where desired by a majority of merchants.

Where a majority of merchants are willing, the superintendent of customs and the commissioner can establish official bonded warehouses, under regulations.

27. On account of the large consumption of coal, it is advisable to allow foreigners to work native coal mines with foreign appliances; the mines in Wan-ping-hien are indicated. [The coal districts of China are her own estate; the working of these, whether with or without foreign aids or appliances, must be left to the minister of the southern ports, who will act as local circumstances require; he will have regard to the sovereign power of China and to the requirements of trade.]

28. Monopolies of camphor and rice.

Camphor wood is used in the government works, and has hitherto been considered to be government property. The camphor trade is not an ordinary monopoly. The merchant shall be at full liberty to purchase what he requires, without official interference; but to avoid trouble, the foreigner must not go among the savages to get the camphor for himself.

The liberty to export rice depends on the abundance or scarcity of the season. In a time of scarcity the prohibition to export will fairly lie on native and foreigner alike; it will not be specially directed at the foreigner.

29. International commercial code.

The establishment of such a code would be very advantageous, and the minister’s superintendent shall depute some properly experienced officer to confer with the chief judge on the matter.

The 29 articles laid before the commission by Mr. Fraser have been carefully considered by the prince and his colleagues. Certain articles were found to be inadmissible, but everything which was not detrimental to the sovereign power of China, while it was advantageous to the foreign merchant, has been conceded; of this a detailed statement, with remarks, has been already submitted to your excellency.

The prince has received various representations from superintendents of customs and from the mercantile communities, embodying numerous demands on your excellency; but, lest you should have difficulty in dealing with them, they have not been mooted, and a reply is requested on the points already conceded.

In the reduction of duties or abolition of them, and in putting a stop to inland exactions by proclamation, China has dealt liberally by the men from afar. The merchants (on their part) must not pervert this consideration for their commerce into a means of injuring the revenue.

In the proclamation just issued, lest the foreign merchant should suffer by being wrongfully taxed, a broad distinction has been made between him and the native trader. It would be to the advantage of both parties, and save much future confusion, if the merchants themselves would observe such distinctions. For instance, when a native craft runs under a foreign flag, there is no means of ascertaining whether she is really under a foreign charter and with a flag issued by the consul, or whether a native merchant, in fraudulent collusion with a foreigner, has obtained the flag to enable him to smuggle the more easily. Then, Chinese-owned cargoes, leaving or entering port in foreign ships, assume a quasi foreign character, and as such pay duty according to a lower tariff scale.

These two grievances, by which a foreigner gains no advantage while our revenue suffers, arise from the want of a marked distinction between the foreigner and native. It is now suggested that your excellency instruct the merchants that in future the consular papers of a native craft chartered by a foreign merchant must bear the seal of the superintendent of customs before the charter can be effected, and that the want of such papers and seal renders vessel and cargo liable to confiscation; also that Chinese consignees themselves shall report at the customs and pay the duties on goods coming to them in foreign ships, without being backed by the foreigner; non-compliance to subject the Chinese to a penalty of a double duty and the foreigner to be fined by his consul to the amount of a full duty on such goods. Were this done, while the native and the foreigner would each retain their own special advantage in any transaction, the complications arising from a confusion of interests would be avoided, and no wrong be done to the national revenue; the honor and good faith of the foreign merchant would be made apparent, and there would be no anxiety as to illegalities eventually arising from these present concessions. But the foreign merchant will make a poor return to China if, in spite of her liberality to him, he insists on abetting the native in his frauds, while in the future conduct of business difficulties will certainly arise. The above is submitted for your excellency’s consideration.

Memorandum of increase of duties proposed by the Foreign Office.

Tea, present duty, 2.5 taels per pecul; proposed duty, 5 taels per pecul. Silk, raw, present duty, 10 taels per pecul; proposed duty, 20 taels per pecul.

C.

1. The three memoranda formerly sent will have already been taken note of by your excellency. We now again proceed to address you on the points still under consideration.

2. [a.] Heretofore, Chinese merchants taking foreign goods into the interior, and who had not procured transit certificates from the customs, have, of course, had to pay duties and taxes at every office and barrier passed by them. Even in the case of foreign merchants themselves, those who take foreign goods into the interior without transit certificates are rightly subject to the same treatment.

[b.] Your excellency now wishes foreign and native merchants to be on the same footing [in respect of privileges to be enjoyed by those] who take foreign goods inland

[c.] After much consideration [we have resolved to propose that] opium excepted, all foreign goods, on arrival in port, shall pay to the customs, at one and the same time, both tariff, import duty, and treaty transit dues; and that thereafter, no matter whether found in the hands of native or foreign merchants, such goods, if covered by transit certificate, shall be entirely exempt from every species of taxation. The transit certificates shall be issued [at the time of payment of duties] alike to natives and foreigners; and should there be any violation of regulations, the native merchants will be subject to the same penalties as the foreigner.

3. But as regards the foreigner, who in China engages in trade in native produce, nothing is easier at present than for the native merchant to be placed, through his operations, at a disadvantage that is far from fair. For—

[a.] The foreigner who takes Chinese produce to foreign ports interferes in no way with Chinese trade, and in his case no comparisons need be made between him and the native in respect of the duties paid by each.

[b.] But when the foreign merchant either, first, buys produce in the interior, conveys it to a treaty port for sale; or second, having bought produce from the interior, sells it at the port without shipping it to another port, the fact is that such produce, on the road from the place of purchase to the port, has been freed from the many taxes at the many places to which produce in the hands of native merchants is liable; and the result is that not only is Chinese revenue thereby a sufferer, but Chinese native trade, properly so called, is affected most detrimentally.

4. Under such circumstances, we cannot but propose that some distinction be made. No new rule is required for such foreign merchants as, first, buy produce in the interior themselves, and ship it to foreign ports; or, second, who buy produce at the ports which while in the hands of Chinese had, in coming from the interior, paid inland dues, and ship the same either to foreign countries or to other Chinese ports; for in respect of such doings the treaty provision is ample enough.

5. But as regards those foreign merchants who have bought produce in the interior and brought the same to a treaty port under a transit pass, paying simply a transit due—if they then sell it to Chinese merchants it will have thus been enabled to avoid the many inland taxes levied at many points; and even if the same goods should be shipped to another treaty port, and be thereafter—as present regulations provide— subject to local taxation in common with all other Chinese goods, they will still have avoided the special taxes that they ought by rights to have paid during the first part of their journey from the place of production to the port of shipment. In both the cases referred to, the goods can be laid down for a less price than if they had been all along in the hands of a native merchant. Hence the necessity for a fair rule insuring for each merchant similar treatment.

6. But here is the difficulty: How are we to know what goods are to go to foreign countries; what to other Chinese ports; or what are to be disposed of at the first port to Chinese? This difficulty of dividing the various kinds of produce into classes to receive different treatment according to difference of distinction, opens a door to abuses, and necessitates the establishment of some special regulation for the repression of fraud.

7. What we have to propose, then, is this: That native produce brought from the interior under a transit pass by foreign merchants on arrival at the barrier nearest the port shall then pay there both transit due and tariff export duty; and shall in addition lodge a separate amount equal to the transit dues as a temporary deposit. Produce which shall thus have paid at the barrier transit transit dues and export duties, and lodged an additional amount equal to the transit dues as a deposit, can thereafter be treated as follows:

[a.] If, within a term of three months, it is shipped to a foreign port, the amount deposited will be returned.

[b.] If, within a term of three months, it is shipped to another Chinese port, the amount of deposits will be retained and entered in the accounts as a set-off against the many taxes avoided when protected by a transit pass.

[c.] If the term of three months expires without the shipment of the produce to either a foreign or native port, it may safely be inferred that it has been sold to Chinese at the port. Such a sale in our opinion would, properly speaking, render the goods liable to confiscation; but we also think that a difference may fairly be made between produce thus sold at a port after payment of a transit due, and produce sold while under the protection of a transit pass, but before payment of the transit due, and in reference to which latter the treaty states that sale in transitu will render them liable to confiscation. In this case too, then, the amount deposited ought likewise to be retained and entered in the accounts as a set-off against all the taxes that the improper use of the transit pass had enabled the goods to avoid. (Produce sold in transitu is of course to continue liable to confiscation.)

The mode of treatment which we thus propose is to meet the case of the foreign merchants who (in addition to carrying on their own foreign trade) desire also to engage specially in native business; such, of course, in fairness to the Chinese merchant, ought to be placed on the same footing as the natives who engage in the same business.

8. Produce purchased at the ports by the foreign merchant will simply have to pay its export duty at the time of shipment, as provided for by treaty.

9. The transit memorandum taken into the interior by foreigners who wish to make purchases inland, ought to be limited as to the time for which it is to continue valid.

10. Should the special tax barriers be hereafter abolished, and the old custom-houses re-established in the interior and along the Yangtsze, we might again rearrange these matters; in any case, the object in view is simply to place the Chinese and the foreigner on the same footing, so that neither may find himself more heavily or more lightly weighted than his competitor.

11. With regard to the special taxes levied and contributions called for by the Chinese government, [we have to repeat that] they result from the military necessities of the country. While the custom-houses in the interior are unable to be opened on the former scale, the government Could not but place the burden on the trading communities; hence the less or more numerous inland barriers, and hence the lighter or heavier contributions demanded; hence, too, the fact that their continuance or disappearance has been altogether a matter of uncertainty. The more or less pressing nature of military requirements has called for concomitant increase or diminution; if troubles were altogether at an end, and supplementary details arranged for, the barriers would of course disappear one after another, and indeed already from time to time, in proportion as quiet has been restored, many have been abolished. But on this point we need not trouble your excellency by restating what has often been said before.

12. Your excellency has, amongst other things, proposed that the duties on several kinds of foreign goods shall be decreased; and on this point we are of opinion that— opium excepted, about which there is a special regulation—the tariff of imports and exports ought to be carefully revised, and the duties on all commodities be fairly fixed, so that each may be as much as possible in accordance with the principle on which the tariff is based, and represent five per centum ad valorem.

13. We now await your excellency’s reply on the subject of the present communication, and also in respect of the matters treated of in the three memoranda formerly sent. We beg that you will soon favor us with that reply, for the ministers of the other treaty powers may have to be communicated with in order that the arrangements concluded between us may take effect on all.

K.

Separate memorandum on revision of the tariff, accompanying note of September 8, 1868.

The British minister, in his note communicated last November to the Foreign Office, classing under five heads the objects chiefly to be desired for the removal of the principal grievances of the merchants by the correction of abuses in the levy of taxes, in connection with the grant of greater facilities of trade and residence in the interior, did not propose any general reduction of the tariff, or even an equalization of rates to the original standard of five per cent. ad valorem. He contented himself with specifying some 10 or 12 articles, on which the duties pressed unequally and injuriously, without benefiting the revenue in any material degree. The yamun has met this proposal liberally, in consenting to the reductions suggested; but they propose that the duty be doubled on tea, and silk, and opium, with or without a general revision and equalization of the tariff rates, so as to bring all other articles on the large list to an average of five per cent.

To propose to double the duties on nearly the only great staples of export and import is to raise the whole question of the expediency of a fundamental change and readjustment of the duties, which for various reasons is more than doubtful. In the opinion of the undersigned, as in the opinions of the other foreign representatives, the present time is not favorable for so large an undertaking. The tariff attached to each treaty is regulated by the special conditions and exigencies of trade in each country; and thus it would be necessary to revise each separate tariff, if any extensive changes were made now, before they could take effect. On the other hand, although one of the Chambers of Commerce proposed a general reduction to two and a half per cent., it is stated in the majority of the memorials that the tariff, on the whole, is satisfactory, and the only modifications suggested were in the few articles already specified, and involved ved no general revision.

Under these circumstances, it being in the general opinion undesirable to attempt a revision of the whole of the tariffs, and as any proposition without this to double the duties on the three principal articles of the import and export trade would be generally condemned as impracticable, the question of further changes may be considered at rest for the present. But as regards the future, it may still be worthy of consideration whether, in the interests of China and foreign powers alike, great changes, both in principle and detail, might not be introduced with advantage, first, by simplification; and secondly, by a readjustment of rates. Nearly two-thirds of the whole export and import duties, taking the returns of 1866–67, are at present realized on three articles. Among the exports tea and silk furnish 3,330,000 taels [$4,657,300] out of 4,700,000 taels, [$6,573,420;] and in imports opium yields 2,000,000 taels out of 3,200,000 taels, [$4,475,520.] The remaining thousand articles in the tariff only produce about one-third, a fact that undoubtedly suggests simplification. The duty on tea is now some 10 per cent. ad valorem, or nearly double the original contemplated rate of five per cent., and it falls very unequally on the different kinds, inferior and superior. On the former it often amounts to 30 or even 35 per cent. It is true that silk, both raw and in piece, is only taxed about two and a half per cent., and might well bear increase; but even if doubled, the gain to the revenue would only be 300,000 taels. And the present tariff rate on opium, which next to tea yields the largest share of the whole customs revenue, is a little over seven per cent. An equalization of these rates to five per cent. would, therefore, produce a very considerable reduction of the revenue.

In the way of simplification, however, a great work might be done at no cost to the Chinese revenue. It may be shown that there are some 500 out of 600 articles enumerated among the reports on which it is not worth while to collect duties, and about 400 out of 500 articles in the imports on which duty is collected to no purpose. The result, therefore, of reducing the number of articles, according to the present tariff, to 100 each of import and export, striking out the other 400 imports and 500 exports, would be a nominal loss of only 200,000 taels annually, which would probably be more than covered by saving in the expenses of collection.

This process of simplification might be carried much further, and the imports be reduced on the tariff list to textile fabrics, metals, and opium; and the exports to 11 articles, not 20 altogether, with a loss to the revenue of 65,000 taels on imports and 380,000 taels on exports—total of 445,000 taels, or little more than five per cent. on the whole revenue, which might easily be met by raising the tariff rate on raw silk and piece goods to the original standard of five per cent., giving an addition on silk of 330,000 taels, and on piece goods of 120,000 taels—in all, 450,000 taels.

There may be objections of a practical nature to any such sweeping measure of simplification in the tariff derived from the intermixture of the native with the foreign trade, native merchants doing a large coasting business in foreign ships; and of course it would be necessary to take into account the revenue yielded by this native trade— both that portion carried on in foreign bottoms and the still larger part in junks, because if 900 articles were made free in foreign vessels, the same would have to be done for the junks, or the native trade in them would be destroyed by a differential duty, exposing them to a ruinous competition. What duties the junk trade yields can, of course, only be ascertained by Chinese authorities, but probably it is not very large. Such information would be desirable. The export duty on sugars and 17 other articles of Chinese produce, going from one Chinese port to another in foreign vessels, may be estimated at 472,000 taels; and if limited to some 20 articles, there might be a loss of about 142,500 taels.

If, on the other hand, the object were to increase the revenue with the greatest simplification, tea, silk, and opium are all articles of luxury, which might bear a considerable increase of duty, so as even to double the present revenue without probably diminishing, in any perceptible degree, the consumption, and therefore without injury to trade, save that it might somewhat check further demand and expansion. But such increase would be strongly resisted by the whole mercantile class of all nations interested in the trade with China; and probably, therefore, by their respective governments, unless it could be shown that they would obtain some compensating advantage of a very undoubted character, fully equivalent in value to what they might lose— which the Chinese government might be little disposed to grant, even for a large increase of revenue, such as inland river navigation, railroads, and telegraphs.

The revision of the tariff would seem to be a matter, therefore, that may wisely be left for further consideration, and the influence of time and progress in other directions. If, at some future period, the native and foreign customs services should be joined together as a measure of administrative simplification and economy, and the preventive service should also become effective with steamers, it might then be safe to increase the duty on opium without giving a premium to smuggling; and also to take into consideration what corresponding changes could be advantageously made by common consent and the aid of a general revision of the present tariff.