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The first part of clause 7 of the Convention stated that the Governor of Hong Kong complained of the action of the Canton cruizers, and the second part of the Article hinted at an arrangement which would put a stop to smuggling from Hong Kong into China. Sir R. Hart therefore proposed that the Commission should proceed in the order indicated, and that the Hong Kong Commissioner should put forward his proposals first. On the Chinese side there were also proposals to be made, but the Chinese Commissioners were not prepared to state what these were until they had heard what Hong Kong wanted.
Mr. Russell replied that Article VII of the Chefoo Convention had been inserted by Sir T. Wade with a view to relieving the Colony of a grievance, but that a change had taken place in the last ten years, and that Hong Kong had now nothing to complain of. His instructions were to put forward no proposals with regard to the cruizers, but, at the same time, now that the Commission had met, he was prepared to listen to any plan by which the Colony could assist in putting a stop to, or at any rate decreasing, the smuggling of which China complained. It was China who had been pressing for the meeting of the Commission; had it depended on Hong Kong alone the Commission need not have met.
Sir R. Hart said he had not been prepared for this reply, and that he and Shao Taotai would take time to consider what proposals they would put forward.
July 1, 1886.
Present:
Shao Taotai, Sir R. Hart, Mr. Russell, and Mr. Brenan.
Sir R. Hart said he wished to make some preliminary remarks on the history of the opium trade. He spoke at some length, dividing his observations under three periods:----
1. Before the opium was admitted into the Tariff of 1858.
2. Between 1858 and the establishment of the Canton cruizers.
3. Between the establishment of the Canton cruizers and the present time.
Sir R. Hart continued to say that the last phase of the question was the Additional Article of 1885, which provides for the simultaneous collection of the duty and li-kin, or 110 taels in all. With this increased rate there was reason to fear that the proximity of Hong Kong would cause greater difficulty than ever, were it not that in the Additional Article of 1885 there was a clause which led China to hope that an arrangement may be come to with Hong Kong which will put a stop to smuggling.
Mr. Russell interposed that this clause did not put Hong Kong under any obligation. The clause was merely intended to be a recital of Article VII of the Chefoo Agreement.
Sir R. Hart continued that when the Foreign Customs at Canton collected only 30 taels a picul, only a small fraction of the opium consumed in the Province of Kwang-tung was reported there; unless, therefore, some check was put on smuggling the deficiency would be still greater with a tax of 110 taels per picul. Mr. Russell contended that the comparison between 30 taels and 110 taels was unfair. For many years opium imported into Kwangtung had been paying both duty and li-kin to the native offices. The reason why so little opium passed through the Foreign Customs was that the Native Customs underbid the Foreign Customs. Where, on a chest of Malwa, the Foreign Customs levied a duty of 36 taels, the Native Customs gave a rebate of 25 per cent, and levied only 27 taels. It was not to be expected that where a merchant had the choice of two routes he would take the more expensive one.
In answer to a question, Shao Taotai stated that the li-kin in Kwangtung was farmed. The Farmer paid 850,000 taels a-year.
Sir R. Hart went on to explain that what China now wanted was to get 110 taels a-picul on opium leaving Hong Kong. This could be effected in three ways:---
1. China could collect her revenue unaided. This would be a very expensive way, but at the same time it could be made very effective.
2. England could collect it for China in India. This would be the simplest and most inexpensive way.
3. China and England could co-operate, the collection beginning at Hong Kong.
In connection with this third plan Sir R. Hart put forward his scheme for placing Customs hulks in the harbour, and compelling all opium to be discharged into them. (See Sir R. Hart's "Opium, China," 31st October, 1885.)