[This Document is the Property of His Britannic Majesty's Government.]
CHINA TRADE.
CONFIDENTIAL.
No. 1.
509
[September 10.]
SECTION 2.
Sir,
India Office to Foreign Office.-(Received September 10.)
India Office, September 9, 1904.
I AM directed by the Secretary of State for India in Council to acknowledge the receipt of your letter of the 5th ultimo, on the subject of a note from the Chinese Minister, inviting an exchange of views respecting the taxation of opium in China.
In reply, I am to make the following observations, which Mr. Secretary Brodrick considers might, if Lord Lansdowne sees no objection, form the basis of the answer to the note.
The Chinese Minister, in suggesting that the present taxation of foreign opium, comprising the import duty of 30 taels and the li-kin duty of 80 taels, should be raised, does not allude to the competition to which foreign opium is exposed from the indigenous drug, which is much more lightly taxed. It has been frequently represented to the Chinese Government, in connection with the attempts of the provincial authorities, to levy further dues on imported opium, that, until equality of taxation is established for the home product and the imported article, the Chefoo Convention inhibits increased taxation of the latter.
The same considerations prevent the acceptance of the suggestion of the Chinese Minister that the Chefoo Convention should be amended in the direction of increasing the duties leviable thereunder, while nothing is proposed with regard to bringing native opium under equal taxation. Not only would this be unfair to the Indian producer, but it might also be injurious to the revenues of the Chinese Government, if native opium were thereby assisted to supplant Indian opium.
It must be recognized that the Chinese Government is at liberty to terminate the arrangements established by the additional Article to the Chefoo Convention, in which case the import duty of 30 taels, as fixed in 1858 in connection with the Treaty of Tien-tsin, would alone remain for collection at the ports. There might then be a question of revising the rate with reference to any change which might be found to have occurred in the price of opium. It is understood, however, that the Chinese Government does not intend to withdraw from the Convention, but desires to continue the arrangements by which li-kin, in the form of a surtax, is collected along with the import duty at the ports.
As the present surtax of 80 taels is much in excess of any li-kin which the provincial authorities are able to collect on home opium, the Convention, though termed "unyielding" in the note, is not without solid advantages to the Chinese Government. It may also be remarked that, if the surtax on opium were fixed on the same principle as that adopted in the Mackay Treaty for the conversion of li-kin on other dutiable commodities, it would be limited to one and a-half times the duty proper. The present surtax on opium is actually two and two-thirds times the duty.
It may be presumed that these considerations were not overlooked when opium was omitted from the scheme for making the general tariff an effective 5 per cent. sanctioned by the Peking Protocol of the 7th September, 1901. In conformity with this omission, section 4, Article VIII of the Mackay Treaty provides that "foreign opium duty and present li-kin, which latter will now become a surtax in lieu of li-kin--- shall remain as provided for by existing Treaties."
As no change has taken place since this Treaty was negotiated in the relative taxation upon foreign and native opium, or in the conditions under which they compete in the China market, and as no proposals are made for establishing equality of taxation, the suggestion of the Chinese Minister should not, in Mr. Brodrick's opinion, be entertained. It would be another matter if, with the objects of increasing the revenue and of restricting the consumption of opium, the Chinese Government had proposed to undertake the effective control of the opium trade by means of a State monopoly, extending to the native-grown product, and placing the latter, in respect of enhanced taxation, on equality with the foreign article. In the event of proposals of this nature being made, I am to invite reference to my letter, dated the 11th June, 1902, as to the conditions which the Government of India consider indispensable.
[2156 k-9]