Sir,
2
Inclosure 2 in No. 1.
China Association to Sir N. O'Conor,
China Association, Shanghae Branch, May 28, 1995. MESSRS. BUTTERFIELD AND SWIRE have presented to the Shanghae Com- mittee of the China Association a copy of their communication to you, dated the 16th instant, referring to certain possible effects of the cession by China to Japan of the Island of Formosa; and I am instructed by the Committee to recommend to your earnest and most favourable consideration the important questions raised therein.
The Committee, having carefully studied the terms of the Treaty and Tariff Con- vention existing between Great Britain and Japan, with the object of ascertaining in what manner British trade with Formosa will be affected by the acquisition of that island to Japan, have formed the following conclusions, which they desire to submit to you :-
1. If Japan agrees to recognize the open ports of Formosa under the Treaty between Great Britain and China, as open ports under the Treaty between Great Britain and Japan, existing conditions in regard to trade will be unchanged, except in the important particulars to be referred to hereafter.
2. Import and export duties chargeable in Formosa will, under Article I of the Tariff Convention of 1866, he levied equally upon Japanese as upon British subjects; but it will be apparently within the power of the Japanese Government to dispense with customs duties on trade between Japan and the new possession of Formosa, while enforcing them on all imports and exports from and to other places. The serious effect of the exercise of this dispensing power upon the trade of all countries, except Japan, with Formosa will be at once apparent.
3. The right of carriage by British vessels of merchandize from ports in Formosa to ports in Japan, now open to foreign trade, is secured under Article X of the Tariff Convention of 1866, affirmed by Article XI of the Revised Treaty of 1994; but this right is temporary only, as will be shown.
4. In event of Japan treating Formosa as an integral portion of the Japanese Empire, there can be little doubt that the conditions governing foreign trade with that island may be changed to the material disadvantage of existing British interests.
5. The Revised Treaty with Japan, 1894, contains in Article III a reservation of very considerable significance, providing that the subjects of each nation "shall have liberty to come with their ships and cargoes to all places, ports, and rivers in the dominions and possessions of the other, which are or may be opened to foreign com- merce, and shall enjoy," &c. This condition opens every port in Great Britain and her possessions to Japanese vessels, but without reciprocity; because British vessels will not be at liberty to enter any other than those ports which now are, or may be hereafter, opened in Japan and her possessions to foreign commerce.
6. With the acquisition of Formosa, Japan might advantageously be invited to define the "coasting trade" referred to in Article XI of the Revised Treaty of 1894 If the trade between Formosa and Japan is to be included, British vessels, which now perform about 65 per cent. of the carrying trade, will be entirely shut out by the operation of Article XI of the Revised Treaty.
If these conclusions are justified the Committee desire to convey to you their sense of the gravity, in relation to established British interests, of the possible changes fore- shadowed in Messrs. Butterfield and Swire's letter; and their hope that the presentation of these matters to you may have the effect of protecting those interests to the utmost
extent.
I have, &c. (Signed) W. H TALBOT,
Honorary Secretary.
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