6
The chief difficulty in this connection was that the Customs could not collect such a tax unless it had been agreed to, formally or informally, by the Treaty Powers or unless it was a case of force majeure. That is to say, the Customs could collect the tax if the Inspector-General could maintain that, only by obeying the order of the local authorities could he hope to save the Customs Administration from destruction. Such a situation, however, did not arise, and there was nothing for it, therefore, but to await developments.
XIX.
On the 8th October a Diplomatic Body meeting was held to consider the new taxes, and the Ministers of the other Powers were all in favour of making a joint protest. His Majesty's consul-general at Canton pointed out that a protest not backed by force would be entirely ineffective, and would merely tie the hands of the We felt that it Powers in regard to securing collection by the Maritime Customs. would be a great mistake for the Powers to register a united protest, and Sir R. Macleay was instructed to do his utmost to dissuade his colleagues from this course. If, however, they persisted, we thought it better not to refuse to take part in a joint diplomatic protest, however ineffective it might be; but we felt that everything was to be gained by delay as time was working on our side. Sir R. Macleay was therefore instructed to ascertain from his colleagues what effect they expected a protest to have, and, in the probable event of its being ignored, whether they were prepared to back it up in any way and, if so, what action they were prepared to take to that end.
XX.
A further meeting of the Diplomatic Body was held on the 20th October, and Sir R. Macleay reported that his colleagues realised that a protest would be ineffective and that their Governments would not take any action to support it. They seemed impressed with the argument that every effort should be made to prevent the estab- lishment of a rival organisation that might prove a menace to the Maritime Customs Administration, and they received favourably a suggestion that the Powers might accept the new taxes on receiving guarantees that they would be levied in lieu of li-kin. Nevertheless, they considered that a protest should be made in order to safeguard the important principle at stake.
The way now seemed clear for united action. It seemed that the Powers were ready to join with us in our endeavours to secure collection by the Customs and subsequent regularisation, while we, for our part, were prepared to join in a suitably worded protest, or, preferably, a statement reserving our treaty rights.
XXI.
A further telegram from Sir R. Macleay, however, dated just a week later (Peking telegram No. 392 of the 27th October), conveyed the disappointing intelligence that the United States Government was definitely opposed to collection by the Customs, and that the Japanese Government took much the same view. There was no prospect of joint action, and Sir R. Macleay considered that we must either act alone or seek unity of action by conferring with the American and Japanese Governments. This, however, would involve indefinite delay during which time the rival organisation would get firmly established and it might be too late to save the Customs. Before definitely recommending isolated action Sir R. Macleay wished to receive further information as to the prospects of our being able at this late hour to induce the Cantonese to entrust the entire collection to the Maritime Customs.
XXII.
The danger now seemed very pressing The separate organisation for the collection of the new taxes had been successfully set up on the 11th October, and was getting well established and gaining confidence. The Canton Government had also established an inspection corps for the examination of all goods and passengers "for the protection of revenue and prevention of illegal or enemy activity."
Inspectors were stationed on British wharves, contrary to extra-territorial rights as hitherto interpreted, and proposed to board and search all incoming steamers. It seemed as if a deliberate attempt were being made to usurp the functions and undermine the authority of the Maritime Customs.
XXIII.
Our instructions to Mr. Brenan were that we were anxious to convince the Cantonese that we would sympathetically consider any reasonable proposals in this as in other matters, even if contrary to strict treaty rights, in exchange for fair and considerate treatment of British interests by them, and at the same time to persuade them that if they were unreasonable this would only create friction and so impede the achievement of their own projects. We were prepared to acquiesce in the stationing of inspectors on British wharves (it seemed that the immunity hitherto successfully claimed was the kind of privilege that we must be prepared gradually to relinquish in future), but we would only acquiesce in searches of British ships if this were done in collaboration with or under the direction of the Maritime Customs.
XXIV.
We further suggested to Sir R. Macleay that it seemed impossible to defer any longer taking such action as might be open to us to avert the growing danger to the Maritime Customs, and we outlined the following policy for his consideration:—- He should explain fully to his colleagues that we acquiesced in these taxes on the ground that tariff increases had been promised to China five years ago and not granted, that our main objective, therefore, was to secure collection by the Customs so as to save the Customs Administration, but that it might be possible to make some arrangement for liquidating the unsecured debt out of the existing customs revenues which were subject to the Custodian Bank Agreement of 1912. colleagues did not concur in this policy we would still join in the protest they desired to make provided it were so worded as not to prevent us pursuing our own policy single-handed. We would then issue a statement explaining our policy and reserving our treaty rights in the following terms:-
+
If his
His Majesty's Government have had under consideration the action of the local authorities at Canton in levying certain taxes styled Production and Consumption Taxes on the foreign trade of the port. Such taxes are not sanctioned by any of the treaties between China and the foreign Powers. They cannot, therefore. legally be levied except with the assent of the Treaty Power or Powers concerned. His Majesty's Government have, however, taken into consideration the fact that tariff increases were promised to China five years ago and that circumstances have prevented the implementing of these promises. As the abnormal conditions now prevailing in China may operate still further to delay the negotiation of tariff increases, His Majesty's Government do not propose to resist the levy of these taxes, and, provided that arrangements are made, in so far as British merchants and British goods are concerned, to entrust the levy of the taxes to the Maritime Customs Administration, His Majesty's Government are prepared to instruct their nationals to acquiesce in and do their utmost to facilitate the collection of the taxes. This acquiescence, however, must not be construed as signifying any diminution of the rights conferred or the obligations imposed by the treaties now in force between China and Great Britain. His Majesty's Government have adopted this conciliatory attitude from a desire to assist China through the difficulties of a period of transition and in the expectation that the Chinese authorities will respond to the friendly feeling thus shown and find some means to regularise the position."
XXV.
In his reply of the 1st November it appeared that Sir R. Macleay had changed bis mind. He now suggested that we should join in a pro forma protest, without making the explanations of our policy or issuing the separate statement quoted in paragraph XXIV, and that we should inform the Canton Government that we would acquiesce on condition that the collection of the taxes would be entrusted to the
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