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position contained in our telegram* of the 26th August, 1913, though we shall be glad to give our very careful consideration to any further information which can be obtained from the Foreign or Colonial Offices. We observe that Sir John Jordan has quoted the opinion of the Hong Kong Chamber of Commerce to the effect that the requirements of the non-China countries are not more than some 9,000 chests. We are not aware of the facts on which this opinion is based, or how far it may have been influenced by the presence at Hong Kong of about 4,000 chests of uncleared certified opium and by the fact that the requirements of uncertified opium in that colony are only 660 chests a year. It is sufficient to refer to the incontestable fact that the temporary reduction of exports in 1918 to 9,000 chests caused serious inconvenience to our non-China customers.
17. We would invite particular attention to the letters of the 5th February, 1913, and the 5th March, 1913, from the Governor of the Straits Settlements to the Colonial Office, in which it was maintained that an export of 13,200 chests a month was no more than sufficient to meet legitimate requirements, and that any information to the contrary must proceed from interested sources, a matter of which we ourselves have had ample experience in dealing with the merchants who control the China trade. Ав regards the presumption that opium is still being smuggled from other markets to China, we would observe that the temptation to smuggle must, in theory, always exist so long as the Chinese consumer is willing to pay a price far in excess of that which can be obtained for the drug in other countries. The experience of the past year shows that we should have to reduce our uncertified exports almost to vanishing point before this discrepancy in price were removed. In practice, however, this tendency can be, and is to a very large extent, nullified by the action of the Governments of the non-China countries, and we need hardly add that in such action we are at all times perfectly ready to co-operate. One of the great smuggling centres in the past was Macao, the case of which has now been disposed of by the convention lately concluded between His Majesty's and the Portuguese Governments. The Singapore and the Hong Kong
Please refer to your telegram of 1st August regarding uncertified opiam. We have given the matter further careful consideration, and hold by second conclusion mentioned by you, namely, that 13,200 chests probably did not adequately cover consumption of non-China marketa in 1912. This has been our contention throughout (vide paragraph 4 of our despatch of the 18th July, 1912, and paragraph 5 of our despatch of the 17th January, 1913), and we see nothing in any subsequent facts which would justify a change of opinion. The main reasons why we consider that 13,200 chests were insufficient to meet legitimate requirements in 1912 are as followa ;—
(1) Figure of 14,000 cheats mentioned in our telegram of the 12th July, 1911, regarding sales for 1911, was based on average consumption of non-China markets for five years ending 1909. The reduction to 18,200 for 1912 offered in our telegram of the 3rd November, 1911, was, as stated therein, made purely as evidence of our sincere desire to help China, although information which you had furnished us up to that date would have justified a figure of at least 14,000 chests.
(2.) The calculation referred to in our telegram of the 3rd November, 1911, contained items of 3,180 chests for Straits Settlements and 900 for Hong Kong, nothing at all being reckoned for Macao. A stated in our telegram of the 27th July, 1913, the latest information then available showed that, so far as those three countries are concerned, our calculation underestimated requirements by 680 chests.
(3.) As regards remaining countries, we have no information subsequent to that furnished by you in 1911, but we see no reason to believe that consumption therein has diminished. On the contrary, we under- stand that since 1908 one of our important customers, the Government of Dutch East Indies, have been gradually exteading area in their monopoly, and that requirements bave accordingly increased.
(4.) There is substantial evidence that our non-Uhina customers, being unable to obtain efficient opium from us, have been obliged to buy Persian and Turkish opinia, although not so suitable for consumption as Indian opium. In this connection, please see paragraph 5 of our despatch of the 18th July, 1912, and paragraph 9 of despatch of the 17th January, 1918.
Recent figures show that transhipments of Persian and Turkish opium at Bombay for Singapore and Hong Kong have stil! further increased, number of chests so transhipped during first seven months of 1913 were 1,905 Persian and 783 Turkish. Moreover, these transhipments do not represent the whole trade in Persiau opium with Far East, for we learn from political resident in Persian Gulf that during the past twelve months Persian opium merchants have taken to shipping opium via Port Said in German vessels in preference to transhipping at Bombay. We regard the competition of Persian and Turkish opium as serious, and we were informed in February last by the Holland-Bombay Trading Company, who act as agents for the purchase of opium for the Government of Dutch East Indies, that if the market at Calcutta continues to be restricted, they will have no alternative but to start buying Persian and Turkish opium-a measure which, as mentioned in paragraph 9 of our despatch of the 17th January, 1913, the Straits Government have already resorted to.
2. Our export trade to China has cessed; and as far as our information goes, the sinuggling difficulty is at an end, and we respectfully urge that the temporary sacrifices we made in respect of the nou-China trade as a concession to apprehensions that the efforts of China might otherwise be prejudiced, should not now be pressed against us and our remaining legitimate revenue needlessly sacrificed. We see no reason at present to think an export of 13,200 excessive. On the contrary, we regard it as an absolute minimum which should perhaps be raised hereafter unless of course there be future alteration in the circumstances and demand of the consuming countries concerned. In this connection, see our telegram of the 11th July,
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Governments possess opium monopolies, and so also, we believe, does the Government of the Dutch East Indies. Moreover, a system of all-round direct sales is, as your Lordship is aware, now under consideration, with our full acquiescence, and this, if carried into effect, should entirely remove even the present theoretical possibility of smuggling. Meanwhile, we shall await with interest the reply to the enquiry, suggested in paragraph 4 of Sir Thomas Holderness's letter of the 16th January, 1914, to the Foreign Office, as to the information upon which Sir John Jordan bases his assumption that the smuggling of uncertified opium continues, and hinders the disposal of the certified stocks now lying in the treaty ports.
18. Finally, we come to the argument or rather the vague impression, as we should prefer to describe it-that India has gained enormously from the inflated revenue received from opium under the special conditions of the last few years, and can well afford to forego a portion of the profits thus obtained. The facts are these: In the last five years of the pre-restriction period, the average net revenue from opium (including both the China and the non-China trade) was just over 3 million pounds a year, of which three-fourths or about 23 million pounds appertained to the China trade. During the six years from 1907-8 to 1912-13 inclusive, ie., up to the year in which the exports to China were finally discontinued, the total revenue has amounted to a little over 7 million pounds in excess of the aggregate net revenue which would have been obtained had the previous average for the entire foreign trade held good; i.e., from a money point of view the future profits of the China trade have been bartered for a sum representing less than three years' purchase. We cannot think that this can be regarded as a Indian revenues transaction financially favourable to India and justifying a charge upon which would not otherwise have been sustainable. Still less does it imply the presence at this date of any surplus resources or reserves of borrowing power.
19. There are other points which we might touch upon, but we refrain from doing so because we are aware that they have not escaped your Lordship's attention. What most important question, we desire to do now is to emphasise the fact that this, a materially affecting the financial interests of India and involving grave political issues in this country, and that India's rights and claims ought not to be ignored or to receive other than the most full and sympathetic consideration. Any other course would not fail to provoke the exasperation of Indian opinion by the subordination of the treaty rights of India to purely British political and commercial interests, and would be most prejudicial to the internal situation.
We have, &c.
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HARDINGE OF PENSHURST. BEAUCHAMP DUFF.
R. W. CARLYLE. HARCOURT BUTLER. SYED ALI IMAM.
W. H. CLARK.
R. H. CRADDOCK. W. S. MEYER.
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