:
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can be removed from the warehouse, constitutes a violation of our treaty rights against which we should protest.
Clause 4 might possibly be interpreted as creating a monopoly as the importers can only sell to merchants who hold the necessary permit from the Kuang Yuan office, but firstly I would point out that the number of merchants who can obtain permits is not limited, and secondly, that this legation has always felt some doubt as to the expediency of protesting against any system of licensing of dealers in raw or prepared opium as constituting a monopoly in the sense of the French Treaty of 1858. I have therefore in the representations I have made to the Wai-wu Pu refrained from raising the question of a monopoly. Regulation 5 is to my mind unobjectionable, but regulation 6 gives ground for a protest, as it imposes a heavy additional tax on foreign opium in a treaty port, and therefore infringes the additional article to the Chefoo convention. You will remember that at the close of 1908 and beginning of 1909, there was a long correspondence between Sir J. Jordan and the Wai-wu Pu respecting a proposal to levy an additional tax on foreign opium. The Wai-wu Pu maintained that the Chinese Government were free to tax foreign opium, upon which duty and li-kin had been paid, to the same extent as native opium, as soon as the chests or packages were open, whether in the treaty ports or in the interior. Sir John Jordan replied that the additional article provided that foreign opium, after payment of duty and li-kin, is free from all taxation whatsoever in a treaty port, and added that he would in practice insist on the due observance of this view. The Chinese Government, however, never admitted that they were in the wrong, and there the matter rested. Here, however, we have a legitimate ground for protesting, though as I have before pointed out, there may be some difficulty in practically exempting foreign opium from a tax levied on prepared opium. As far as I can judge, I see no legitimate reason for protesting against regulations 7-14, though clause 12 might possibly be used to give colour to the complaint that the tax is really levied on raw opium.
In reply to further telegrams from His Majesty's consul-general at Canton, who informed me that he was proceeding to Hong Kong to discuss the question, I telegraphed that I could not entirely endorse certain of the statements in his despatch, and that though he was correct in stating that the additional article contemplated non-differential taxation of opium on arrival at place of consumption in the interior after the package had been broken, we had always held that it prevented any additional taxation of foreign opium in a treaty port, and that, until otherwise instructed, we must continue to uphold that view vis-a-vis the Chinese Government.
As I have already informed you by telegram, I made further representations at the Wai-wu Pu yesterday afternoon on the subject of these new regulations. I referred to my note of the 20th April, enclosed in my despatch No. 110 of the same day, in which I had informed them that my Government, before consenting to a prolongation of the three years' agreement for the progressive reduction of the export of opium from India, would require to be satisfied that there was no improper interference with the wholesale trade of the importing merchants in treaty ports. The present additional taxation was a breach of the additional article, and was inflicting unnecessary loss on the opium importers, and I urged that orders should be sent to the Viceroy to suspend the operation of the tax, at all events as far as foreign opium is concerned, pending a reference of the whole question to His Majesty's Goverument. The officials of the Wai-wu Pu, however, refused to admit that the additional tax was illegal, as it was levied on prepared opium, ie., after the package had been broken. They had however, tele- graphed to the Viceroy to forward a report, and they would now inform him of the substance of my representations.
Since beginning this despatch, I have received from the chairman of the Houg Kong Chamber of Commerce a copy of the letter which he sent to you on the 14th June. After perusal of this one-sided statement of the case, I do not think it necessary for me to add anything to what I have already written. There seems to be a general impression abroad that the difficulties in which the opium importers now find them- selves are just as much due to their own improvident speculation as to the issue of these new regulations at Canton, and this view is very well expressed in the enclosed article Capital and Commerce," of the 17th June, a weekly journal on finance and commerce, published under English auspices at Shanghai.
I have, &c.
from
W. G. MAX MÜLLER
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Enclosure 1 in No. 1.
Sir F. May to Mr. Max Müller. (Telegraphic)
June 11, 1910. ÖN behalf of local merchants, protest strongly against restrictions imposed by Government of Canton on raw opium trade violating treaty as follows :-
Every importer of raw opium after prescribed customs duty and li-kin have been paid, must report to mercantile office called Kwangyun general office quantity of opium imported and the place where stored. Importer not permitted to sell any raw opium except to holder of permit from Kwangyun office All purchasers of raw opium must have permit as aforesaid, and has to pay Kwangyun additional duty at rate of 30 cents per tael on half weight and dimension of raw opium purchased before they can move opium from warehouse at any place of import in Kuangtung province. All native dealers in raw opium must, within five days from the 7th June, take out licenses granted by the Kwangyun to deal in raw opium. Purchasers of raw opium must prepare within three days, and may not keep privately or keep in store. Kwangyun general office is a firm which has dealt with opium for some time past, and under above regulations is constituted monopolist of entire Kuangtung province. result of investigation, support strongly chamber of commerce's protest against monopoly and tax.
Enclosure 2 in No. 1.
Consul-General Jamieson to Mr. Max Müller.
As
(No. 15.) Sir,
Canton, June 8, 1910. AS I have no doubt that you will be approached by those interested in the matter of the newly instituted tax on boiled opium, which formed the subject of my despatch No. 13 of the 11th May, I have the honour to report the result of conferences I have had with the farmer of the tax, and with a representative of Messrs. Sassoons from Hong Kong
The tax, which is at the rate of 30 cents on every Chinese ounce of prepared opium, came into force yesterday (the first day of the 5th moon), and works out roughly to 300 dollars per chest on the equivalent of raw opium. Seventy per cent. of the proceeds go to the provincial Government and 30 per cent. to the farmer for collection expenses. I received last night a strong telegram of protest against its imposition from the British opium firms in Hong Kong, who stated that deliveries had been stopped in consequence, and to-day their representative discussed the situation with me at great length. I endeavoured to impress upon him that, by treaty, we have no grounds of protest unless taxation were differential. In the present instance, the tax being levied on the actual weight of prepared opium, and collected from the boiler who recovered from the smokers, I pointed out to him that I could not reasonably interfere. Part of the procedure laid down is the furnishing by the wholesale dealers of periodical statements of their stocks and sales, and to this also I said that I could not raise objection. Stress was laid on the point that, in the opinion of the opium firms, it was my duty to press for the abolition of additional taxation of any kind, on the plea that it tended to strangle trade. With this view I refused to concur, contending that it was open to the Chinese Government to deal with the suppression of opium smoking in any manner they saw fit, so long as equality of treatment between foreign and native raw opium obtained. In the course of argument I adduced several illustrations of what conceivably might, but of course never would, happen without our being in a position to remonstrate. Inter alia, cited a licence fee of 500 taels on every smoker, and committed myself to a statement that, in the extremely unlikely event of every ounce of Chinese opium having ceased to exist, and no further supplies being grown, the Chinese Government could, with a perfect show of right, approach the British Government with a request that the sale of British opium cease. This statement created so startling an impression that I daresay it will be widely quoted. It is, of course an individual diagnosis of a suppositious case, and, if erroneous, can at once be rejected by my superiors.
The farmer of the tax gave full assurances that it would, in the province of Kuangtung, be a single levy on prepared opium only, and that unbroken packages of raw opium would not be interfered with in transit. I have received similar assurances
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