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The British delegates should be careful to ensure that the rules prescribed by the general conference under article 4 should be of a general character and should not be of a kind which might embarrass the Revision Committee, since the latter body will have no power to alter the rules except in so far as this power is expressly conferred on it by the rules themselves.
The question will arise whether the tariff revisions decided on by the Revision Committee at its periodical meetings can, in future, come into effect without ratifica- tion by the Powers represented on the committee. This is a point of some importance. Under article of the Washington Treaty, the Powers, including China, expressly agreed beforehand to accept the tariff rates fixed by the Revision Committee. But this provision, inserted mainly in order to avoid the delay which would have been involved by the necessity of ratification by the Governments of the revised rates of duty. applies only to the first revision which took place immediately after the Washington Conference; it is not repeated in article 4, which deals with the future periodical tariff revisions in general, and which only states that "in order to prevent delay rules should be drawn up by the Special Conference for such revisions.
In the opinion of His Majesty's Government it would be in accord with the sipirt of this provision that the special conference should agree that the stipulation of article 1 referred to above should be regarded as applying not only to the first, but to subsequent tariff revisions. But it is very doubtful if a provision to this effect in the rules would have any binding force unless the rules themselves are submitted for ratification by the Powers, which is clearly not the intention of article 4. It is left to the discretion of the British delegates to deal with this difficulty in any manner which may command general approval, e.g., by a protocol covering this special point, to be signed at the conference and submitted for ratification in the usual way, or by embodying the whole of the rules in such a protocol, or by some other appropriate device. If, on consideration, the British delegates think it best not to raise the point and no other delegate raises it, His Majesty's Government would be content that the undertaking should be inserted in the rules for what it may be worth, though they apprehend that some difficulty might arise at a future date with the United States similar to that which they understand arose over the result of the 1918 revision. A possible alternative would be to provide in the rules that the revised tariff should be published and should take effect two months after publication, without any mention of ratification, leaving it to be inferred that the revised tariff would automatically take effect without any further approval.
A set of draft rules, framed by His Majesty's commercial counsellor in China, the British member of the Tariff Revision Committee, are attached (see Annex (L)).
CONCLUSION.
Apart from the above consideration of the issues likely to come before the conference. His Majesty's Government hope that opportunities may be provided at the conference of restoring and strengthening the traditional friendliness of Anglo-Chinese relations and of making some attempt to unite conflicting Chinese elements in the work of effecting, with foreign assistance and co-operation, the fiscal and financial reorganisation and general reconstruction of China. For this purpose His Majesty's Government for their part would welcome any enlargement of the scope of the conference as defined in the Washington Chinese Customs Treaty which may be necessary.
With a view to facilitating the examination of the problems under consideration and of elaborating in more concrete form and in greater detail the general policy of His Majesty's Government as outlined in these notes, a scheme for the abolition of internal taxation and fiscal and financial reconstruction in China, drafted in the form of a treaty in fulfilment of the objects contemplated in the Washington Chinese Customs Treaty, has been prepared and is attached. as Annex (M), to these notes. The principal elements of this scheme are, to free, so far as may be possible, all goods, Chinese or foreign, from all forms of vexatious and irregular internal taxations, to consolidate the debt on the security of the customs revenues as increased by the surtaxes, to furnish both Central and Provincial Governments with reasonably adequate revenues on lines attractive not only to the former but also to the latter, and to provide such guarantees as it may be possible to devise that the arrangements made will be effective: the principle of allocating a pro ratá share of the customs revenues to the provinces is carried out by assigning to the Provincial, Adminis- trations the proceeds of transit dues collected by the maritime customs, thus
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preserving the integrity of the customs revenues proper (the proceeds of the import and export duties) as national revenues accruing to the Central Government for the service of the national debt and other approved purposes; and solutions of minor outstanding questions are worked in as occasion arises.
It should be made clear that this scheme in no way represents a direct objective to be sought at the conference, but that it is merely intended to serve as a compendium of desiderata and as a guide for the use of the British delegates if the negotiations proceed or can be guided on lines in any way relevant thereto. This may not be easy to arrange, since the scheme goes in some ways beyond the provisions of the Washington Treaty, notably in its recommendations of an increase of taxation on wines and tobacco and the formulation of a programme leading by progressive stages to full tariff autonomy. In regard to some of its other proposals, e.g., increased foreign assistance in the collection and custody of China's national revenues, it will, moreover, probably be impolitic for the British delegation to take the lead. The Chinese will, indeed, doubtless have their own proposals to put forward, and the more it may prove possible for the British delegates to support and build on such Chinese proposals the better. The scheme gives some general indication, however, of the lengths to which His Majesty's Government are prepared to go in promoting the reorganisation and reconstruction of China and the revision of the tariff aspect of the Commercial Treaties. Save in exceptional circumstances, the delegate should, of course, telegraph home for instructions before definitely accepting any decisions going beyond the scope of the provisions of the Washington Chinese Customs Treaty. It has been the view of His Majesty's Government that the surtaxes contemplated in article 3 of the Chinese Tariff Treaty are intended to represent an instalment of, and to form part of, the full Mackay Treaty rate of 12 per cent. The British delegates need not, however, feel precluded from considering the concession of an alternative point of view, should it appear that some commensurate advantage could be obtained, either in the way of internal taxation reforms or otherwise. Similarly, while His Majesty's Government hold that the meaning of article 7 of the treaty is that transit pass dues shall remain at their existing figure pending their abolition on the fulfilment of the relevant conditions of the Mackay Treaty, the British delegates are not precluded from considering proposals for an eventual increase in transit dues collected by the customs administration from their present rate in order, if necessary, to increase the revenues from the taxation of trade to be allocated to the provinces, and thus secure provincial co-operation in making and maintaining reforms of internal taxation on the lines suggested in the scheme. But the sum of such transit dues and of the import or export duties levied on the same articles must not of course exceed the figure recognised as the limit of the taxation which can properly be borne by the articles in question witho undue prejudice to their sale and consumption.
Foreign Office, September 21. 1925.
[13577]
D 2