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methods of levying taxes on goods shipped from Hong Kong and Macao to the west coast in native bottoms."

Considering as I do that the Tariff question is the first to be settled, and that it should be satisfactorily settled before we take any measures to assist the Chinese Government in protecting their legitimate Customs revenue, I confess that the statements in Sir T. Wade's Memorandum of the 30th November, as well as in his earlier Memorandum of the 28th of February, as to the impracticability of checking the unlawful exactions of Chinese Custom-houses, and the impositions of ad libitum fees at the port of destination, are very discouraging.

"The real cause of complaint," he observes, "is that the junk trade is worried by both cruisers and Custom-houses--the latter being exclusively Chinese, the dues or duties demanded of the junks are certain to be in excess of what is just-at least of my measure of what is just."

Again, with reference to his proposal for the establishment of a Branch Inspec- torate near the Colony,* he states, "If it be urged that when the duties have been collected by the Branch Inspectorate the imports are not secured against an ad libitum levy of fees, &c., in addition when they reach their destination, I reply that I cannot indeed guarantee that the Chinese will not do whatever seems good to them, where the foreigner has no agent to watch them."

In his Memorandum of the 28th November, Sir T. Wade repeats that he has no faith in the adherence of the Revenue Stations to a Tariff, and that as to Chinese produce brought in junks to Hong Kong, he does not see his way to any arrangement that will secure it against the levy of dues which, according to our ideas and practice, must be esteemed arbitrary exactions, a quota of which passes into the private purse of the Canton Superintendent, who, as a member of the Imperial household, is not lightly taxed for jewels and other requirements of the Court; and he adds that if, thanks to our intervention, these illegal exactions cannot be levied at the three stations, they will not improbably be levied at those points of the coast not open to foreign trade.

If there really be no means of checking the rapacity and malpractices which Sir T. Wade describes, it becomes a question whether on the whole it might not be better to leave things in statu quo, now that Governor Hennessy reports that all complaints have ceased.." Le mieux est l'ennemi du bien."

Owing to the peculiar condition of the Colony,* I admit that we are under a moral obligation to assist the Chinese Government in securing itself against loss of revenue from smuggling carried on between Hong Kong and the mainland of China, but there is a corresponding moral obligation on the part of the Chinese Government not to deceive and injure us while availing itself of our friendly support and assistance.

The mode of proceeding which I would suggest is, in the first place, to approve of the substance of the new Rules proposed by Sir B. Robertson (with the amend- ments which I have recommended if approved of), but to insist on the tariff question being discussed, and if possible settled, as a preliminary to the adoption of any Rules; and it should be made a condition of our co-operation in the collection of the Chinese revenue, that the Chinese Government hold themselves responsible to make restitution on proof of any illegal exactions, either at the three stations or at the port of destination, and also to punish the offenders.

If we do not insist on these safeguards, I fear that as I have before suggested, the new Rules will only assist the Chinese authorities to " squeeze" the Colony with greater case, precision, and economy.

(Signed)

Foreign Office, December 26, 1877.

* Memorandum of February 28.

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