12
tions for the termination of the boycott, suspended since the end of July, should be reopened.
13. On the 13th September the Governor of Hong Kong sent a telegram to the Colonial Office, in which he reviewed the situation in the light of the developments recorded above. In this telegram he stated, among other things, that he regarded the Cantonese undertakings as obviously insincere, and he disagreed with Mr. Brenan's suggestion for the resumption of negotiations. On the contrary, he considered that the critical situation of the Cantonese forces and the hazardous political conditions in Kwangtung afforded His Majesty's Government a unique opportunity of bringing about the rapid termination of the boycott by independent warlike action, without running more than a minimum of risk of creating an unfavourable effect either upon foreign Powers or on the situation elsewhere in China. He recommended, therefore, that unless satisfactory replies were received within a few days to the consul-general's two notes of the 10th September we should demand within twenty-four hours an undertaking that all British ships on the Yang-tsze and elsewhere would be respected by Cantonese troops, and that all anti- British manifestations on territory controlled by the Cantonese Government should cease forthwith; failing which we should take such action as might seem to us proper. He considered that the mere threat would suffice, but if it did not he submitted that we should then proceed to close the ports of Canton and Swatow by naval action. Sir R. Macleay concurred in Sir C. Clementi's recommendations, and at the same time suggested that His Majesty's Government should consider the desirability of affording moral and material support to Marshal Sun Chuan-fang against the Cantonese forces.
14. His Majesty's Government found themselves unable to agree to these recommendations. It was the considered opinion of the Committee of Imperial Defence in March 1926 that the only practicable measure against Canton would be a blockade; that a blockade would necessitate prior international agreement; and that should such a blockade fail offensive actica in China on a large scale was not possible for the British Empire acting alone, and could only be international. Such international co-operation would be impossible to secure. His Majesty's Government also considered that to support Marshal Sun Chuan-fang would involve a reversal of their long-standing policy not to identify themselves with any of the conflicting factions in China, and might involve far-reaching and dangerous consequences.
The whole situation was again reviewed on the 20th September by the three service Departments, who stated that they were satisfied that the conclusions arrived at by the Committee of Imperial Defence last March continued to govern the situation, both in China generally and at Canton in particular from their respective points of view. This decision was communicated to Sir R. Macleay and Sir C. Clementi on the same day, and they were at the same time informed that the service Departments were considering what, if any, other measures short of a blockade it would be practicable to take in case of necessity.
15.
16. In the meantime, Mr. Brenan reported that he had received fairly satis factory replies to his two notes of the 10th September and His Majesty's Government decided not to pursue the matter further.
17. On the 18th September there was an important new development. On that date Mr. Brenan received a note from the Cantonese Government stating that arrangements had been made to end the boycott on or before the 10th October (most probably at the end of September), and that the proper Chinese authorities would levy a special consumption tax of 2 per cent. on ordinary imports and 5 per cent. on imported luxuries, together with a special production tax of 21 per cent. on exports. The customs authorities would be asked to assist in the collection of these taxes. It was explained verbally to Mr. Brenan that the proceeds of these taxes would be used to liquidate the boycott organisation, and that the taxes would be levied on goods of all nationalities. His Majesty's Government were not asked to agree, but simply not to raise objection.
18. About the same time Mr. Brenau reported that the pickets had been removed from the Shameen bridges and the approaching termination of the boycer announced in the Canton press; that the arrangements previously reached for non- interference by the pickets on the river continued to be observed; and that Hong Kong steamers were getting Chinese passengers and deck cargoes. He had some confidence, therefore, that the Cantonese undertakings would be carried out, though it was likely that the agitation against dealing with British goods might continue for some time after the actual raising of the boycott.
13
19. Sir F. Aglen, the Inspector-General of Customs, who happened to be on leave in this country, was consulted in regard to the Canton taxation proposals. He was, of course, greatly perturbed, and anticipated that if the Powers acquiesced in the levy of these taxes there would be incalculable complications throughout China in regard to tariff and customs problems. His inclination was to refuse to allow the Customs Administration to take any part in the collection of the new taxes unless he were first assured that all the interested Powers were agreeable, but in the last resort he would probably yield to force majeure.
20. In the view of the Foreign Office, however, the paramount consideration was the possibility of a termination of the boycott; and the substitution of these relatively moderate taxes for the much more extensive illegalities of the Strike Committee seemed a small price to pay for the resumption of trade between Canton and Hong Kong, provided, of course, that the boycott was actually raised and that) anti-British agitation ceased. It however appeared that the Cantonese Govern-" ment were carefully distinguishing these proposed taxes from the so-called Washington Surtaxes, to which they are identical in scale, and were insisting that they were to be regarded as purely internal taxes, one of the purposes of which would be to finance the abolition of li-kin. The reasons for this attitude on the part of the Cantonese Government were probably the following:-
(1.) That the revenue accruing from an internal tax is incontestably their own
to do as they like with.
(2.) That in regard to internal taxation no question as to the rights of the
Central Government can arise.
(3.) That they do not desire to concern themselves with the Washington Surtaxes or, indeed, with Tariff Conference matters at all until they themselves are recognised as the Central Government.
(4.) That even in that event they may, as Nationalists, decline to accept tarifi
increases from the Powers.
21.
In these circumstances, it appeared to the Foreign Office that the wisest policy would be to adopt a passive attitude and to wait and see whether the boycott was actually raised before coming to a definite opinion in regard to the levy of the new taxes. Mr. Brenan was accordingly instructed to reply to the Cantonese note of the 18th September by a formal acknowledgment in which he would welcome the assurance given to terminate the boycott on or before the 10th October, but to make no reference whatever to the taxation proposals. He was at the same time given discretion to intimate verbally that the acquiescence of His Majesty's Government in the levy of the new taxes would be dependent upon the taxation being levied on goods of all nationalities and upon the effective calling off of the boycott; that if the Cantonese collected these taxes with the assistance of the Customs the position should be regularised by subsequent negotiations; and that if the Powers acquiesced in the levy of these taxes they would probably be forced to admit similar claims on the part of other local authorities in China, and indeed perhaps to recognise frankly that these taxes were, in effect, the Washington Surtaxes, to which they accurately corresponded in scale.
22. On the 1st October Mr. Brenan reported that he had formally acknowledged the note of the 18th September, but that he had not so far given the verbal explana- tions described above. "He stated that the pickets were gradually being withdrawn. but that he was a little apprehensive lest anti-British agitation should nevertheless persist and make the full resumption of trade impossible. He had therefore con- fined himself to informing the Minister for Foreign Affairs that, in his personal opinion, the attitude of His Majesty's Government to the new taxation proposals would be dependent upon the extent to which the Cantonese Government curbed this agitation, and he called upon them to issue a proclamation promising protection to those who dealt in British goods. He proposed to defer committing His Majesty's Government any further until he saw how the situation developed.
23. Meanwhile, Sir R. Macleay reported that his foreign colleagues had shown great anxiety to learn what attitude His Majesty's Government were adopting towards the taxation proposals, and enquired what answer he should give them. He was told to reply that His Majesty's Government desired first to be assured that the Cantonese Government really intended to bring the boycott to an end, and that if they found that the boycott was raised they would probably be disposed to acquiesce in the new levies, but that they would require much fuller information than they then possessed in regard to the Cantonese proposals before they could come to a final decision,
D 2
[15319]
533