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Enclosure 1 in No. 1.
Government of India to Mr. Montagu.
Sir,
Simla, May 21, 1919. WE have the honour to refer to your telegram, dated the 20th March, 1919, in which you asked to be supplied with full information regarding shipments and transhipments of opium to Japan and Formosa, and also desired to be furnished with our observations on the measures suggested by Sir John Jordan regarding the control of the export trade to those places either by insisting on consular certificates or by total prohibition of exports to the Far East.
2. Statements showing the quantity of Indian opium shipped to Japan and Formosa since 1913 and of Persian opium transhipped at Bombay for these places are annexed, while a further statement showing the names of shippers and the quantities shipped by them to Kobé, Yokohama, and Saigon is also appended. From these you will observe that the firm of Mitsui Bussan Kaisha (Limited), is responsible for practically the whole of the shipments to Japan, while the Saigon market is catered for by a number of firms. We understand in the case of the shipments to Japan that Mitsui Bussan Kaisha acted as principals, while in the We case of a shipment of 150 chests to Saigon they were acting as agents only. consider it not unlikely that a portion of the opium shipped to Saigon eventually finds its way to Japan and thence into China, but though we have made such enquiries on this point as are possible here, we have not been able to obtain any information on the point.
3. The despatch from His Majesty's Minister at Peking, dated the 30th December, 1918, to which reference is made in your telegram, raises the wider question of the effective control of export to the Far East. In view of certain remarks made in this and subsequent despatches from His Majesty's Minister which appear to suggest that India can legitimately be called upon to make further sacrifices on behalf of China, we consider it desirable to review briefly the measures which have been adopted by us since export to China ceased. As we stated in our despatch, dated the 30th April, 1914, we have throughout been ready to adopt any measure of co-operation and restriction which may be required to secure the preven tion of the smuggling of opium, and in paragraph 2 of that despatch we summarised the action taken by us up to that date:-
'Thus, on the conclusion in 1911 of the agreement with China, we voluntarily placed an absolute limit on our exports to the non China markets, and have consistently acted on the principle that such exports should not exceed We have also the legitimate requirements of the countries concerned. expressed our readiness to adhere to Resolution No. 4 of the Shanghai Inter- national Opium Commission, regarding the prohibition of the export of opium to countries which prohibit its import. Later, on coming to more specific action, we have co-operated in arrangements culminating in an agreement with the Portuguese authorities, which will prevent the use of Macao as a centre for the distribution of smuggled opium. As regards the general regulation of the opium traffic in India itself, it need hardly be pointed out that, although a very large quantity of the drug is produced in this country, the entire trade is under the most effective control, and no opium can leave the country without official authority and otherwise than under the strictest regulations. Finally, by accepting the principle of direct sales to the Government of Hong Kong and the Straits Settlements, we have quite recently indicated our readiness to substitute a system of direct sales at the option of the purchasing Govern- ments, in lieu of the present system of auction sales to private traders.'
4. In subsequent years the system of direct sales has been extended to the Dutch East Indies, British North Borneo, and Siam. At the time when export to China ceased, it was calculated that the average annual consumption of the markets outside China was about 13,200 chests, and we thereupon deliberately limited our exports to that quantity. With every extension of the system of direct sales, the quantity of opium offered at our auctions has been reduced to an extent roughly corresponding to the estimated requirements of the countries with whom these agreements were concluded, with the result that in 1918 only 5.600 chests were auctioned, this figure roughly corresponding to the actual exports from India during that year of 3,790 chests to Saigon and 1,681 chests to Japan. (Apart from these
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quantities small shipments of 70 chests and 47 chests were made during the year to Ceylon and Mauritius, respectively.) In 1919, owing to the shortage of our own stocks, we have gone still lower than this, and the amounts at present being offered for sale at auction have been reduced to 300 chests a month.
5. We may now turn to the obligations which we should be required to under- take under the International Opium Convention of 1912 should this be ratified. The essential relevant obligations are those contained in its article 3-
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The contracting Powers shall take measures-
(a.) To prevent the export of raw opium to countries which shall have
prohibited its entry, and
(b.) To control the export of raw opium to countries which restrict its import,
unless regulations on the subject are already in existence."
We consider that we can reasonably claim that we are already complying with the spirit as well as the letter of this article. Thus, so far as China is concerned, we are not permitting export from India to that country, and it is from the nature of the case impossible for us to take active preventive measures to check smuggling into China even if it were incumbent on us to do so. Apart from China, the greater part of our exported opium is shipped to countries with which definite agreements have been concluded, while as regards other countries our exports have been limited to a figure believed to be well within their legitimate requirements.
6. In fact it appears that the position of nine years ago has recurred. The Central Government in China declares its desire to suppress opium from the highest motives, and we have no reason whatsoever to doubt its sincerity. But the provincial authorities are apparently not all in accord with the central policy, and connive at much illicit cultivation, from which the people derive to a considerable extent a substitute for the opium which India has ceased to send them. We are being urged to take drastic measures, at the sacrifice of Indian revenues, to prevent any of our opium being smuggled by third parties into China. We are most willing to help, as our past policy has fully demonstrated; but we cannot participate more effectively than we are doing now unless China is equal to make its own policy effective. It appears to us that it is unreasonable that we should be asked to make sacrifices, at the cost of the Indian tax-payer, which would not bring at least corresponding benefits to China,
7. We have, as explained above, cut down our auction sales to the limit of what we believe to be the legitimate needs of our non-agreement customers. We recognise, however, that it is desirable to test what their legitimate needs actually are and whether we have over-estimated these or not. The simplest method of effecting this would be an extension of the agreement system to French Indo-China and Japan, as also to our smaller customers, viz., Ceylon and Mauritius. We, on our part, would readily assent to such an arrangement, which, in the case of Ceylon and Mauritius, at any rate, should present no difficulty. If you concur in our views, we suggest that in the case of France and Japan the necessary negotiations should be set on foot in connection with the question of the ratification of the Opium Convention of 1912; we understand that a suggestion has been made that this matter should be considered by a meeting of representatives of all the Powers concerned who are parties to the Peace Conference. If France and Japan can then be induced to say definitely how much of our opium they need for their recognised purposes, we are ready to let them have those amounts at a fair fixed price and to discontinue our miscellaneous auctions altogether. Even if France alone is prepared to enter into such an arrangement, we should be willing to cut down to a very low figure our auctions for the Japanese market, and also to adopt the expedient of export under British consular certificates: though it is not unfair to surmise that Japan will be able to supply any deficiency by purchasing Persian or Turkish opium.
8. The actual price to be charged under agreements such as those which we suggest would be a matter for negotiation. Our general views as to the methods to be adopted for fixing the price of opium under arrangements for direct sales were Since the first placed before you in our despatch, dated the 20th April, 1917. agreements were made, the prices realised at our auctions have risen considerably. and in the latest agreement made with the Straits Settlements the price was fixed at 3,000 rupees a chest. We have recently further raised the upset price at our auctions to 4,000 rupees, and the latest sales have been made at a rate in excess of
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