CO129-373 - Public Offices - 1910 — Page 13

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Dairen is, generally speaking, the Japanese port of Manchuria, Newchwang the foreigners port, and in order that the principle of equal opportunity, which Japan professes, may be observed, there should be maintained a certain equalisation of conditions at each port balancing their respective relations to an inland trade centre such as Mukden.

Newchwang, 137 miles nearer Mukden, has the natural advantage of proximity (as the Asiatic Petroleum Company admits). The Japanese authorities resort to the method of differential railway rates to redress in some degree the disadvantage here suffered by Dairen. If this differentiation of rates produces a general equality between the ports it appears to be justified. If, being pushed beyond the reasonable limits, it places Newchwang at a disadvantage, it is unfair.

The present case seems therefore to be largely a question of fact. Is the Asiatic Petroleum Company being placed on a level or at a disadvantage with any oil company at Dairen by the differential rates? At first sight, in view of the fact that kerosene does not pay heavier total freight from Newchwang than from Dairen to Mukden, that it is doubtful whether the higher sea freight to Newchwang (alluded to by His Majesty's consul at Newchwang) can properly enter into the calculation, seeing that Japan's agreement to equality of opportunity in Manchuria can hardly extend to the sea, one has some difficulty in alleging unfair discrimination, the balance of advantage seeming still to favour Newchwang; but it is only the man on the spot who can decide, and I therefore think it would be well worth while to enquire the opinion of His Majesty's consul at Dairen before action proceeds, the more so, as the present matter is part of the big question of whether Newchwang is to be wiped out of existence by the competition of Dairen.

Mr. Gordon, in his memorandum of the 24th November, 1909, reporting the schedule of rates now complained of, states that "Newchwang obtains further relief, and rates to and from that port are cheaper than to and from Dairen as far as Kung-chu-ling (399 miles)." His figures show that rates to Mukden for third-class goods are cheaper from Newchwang than from Dairen, and it may therefore be asked whether any special reason exists why kerosene should exceptionally be required to pay equal rates. We might perhaps argue from the better treatment of the majority of goods against the less favourable treatment of kerosene.

I have said above that Dairen is, generally speaking, the Japanese port of Manchuria. The fact that this is only generally and not absolutely true is a weak point. In reality foreigners are as free as Japanese to establish themselves at Dairen, and we have the Standard Oil Company, the American rival company, about to do so. Such advantages as Dairen may offer over Newchwang are therefore open to our merchants as to the Japanese (with the exception that foreign businesses long established at Newchwang cannot be shifted without loss), and there may, in fact, bë some British firms already settled at Dairen who benefit by any discrimination against Newchwang, and who would not welcome a protest in favour of Newchwang. This possible conflict of British interests as between the ports is a point where Mr. Parlett's local experience would be valuable. I presume that it would, nevertheless, be true to say that British trade has at present more interests at Newchwang than at Dairen ; but even with the equality of treatment which we seem entitled to claim, Newchwang is likely to lose the battle with Dairen in the end.

E. M. H. H.

May 26, 1910.

(No. 33.) Sir,

Enclosure 2 in No. 1.

Consul Parlett to Sir C. MacDonald.

Dairen, June 17, 1910. I HAVE the honour to enclose, for your Excellency's information, a memorandum on the subject of the alleged discriminatory railway freights along the South Manchurian line. A short supplementary memorandum is also attached.

Though inclined to admit in theory the partial justice of the Newchwang contention in the matter of sea freights, I am of opinion that in practice the exact assessment of the amount of compensation which that port can justly claim on this account would be almost, if not quite, an impossibility. Freights, presuming that they are univer-ally unfavourable to Newchwang, are only one of the many factors

in the situation. Natural advantages must also be taken account of, and the sum total of these are, in my opinion, in favour of Dairen. Yet Newchwang can surely not expect to claim compensation because of them. Nor can she fairly ask that any allowance should be made for the higher insurance and interest probably charged on her cargoes. The question is altogether of so complicated a nature that action might, I think, well be deferred until it can be clearly proved that, owing to land and sea freights combined or to measures obviously hostile taken by the Japanese, the existence of the northern port is menaced. I would therefore venture to recommend that the question be again referred to Newchwang, with a request for more explicit information on the following points :-

1. Exactly how far the trade of that port has been injured by the so-called discriminatory rates.

2. What remedy is proposed and exactly on what basis it should be assessed. This, of course, is on the presumption that His Majesty's Government wishes to reconsider the question.

The papers in original sent by your Excellency are also enclosed.

I have, &c.

HAROLD G. PARLETT.

Enclosure 3 in No. 1.

Memorandum on the Subject of Discriminatory Rates along the South Manchurian

Railway.

IN the case at present under discussion two points call for consideration. They

are -

1. The general question of discrimination; and 2. The specific instance of kerosene.

With regard to the first, the contention of the Newchwang merchants is that no freight tariff can be equitable which does not give them the full advantage of their greater proximity to the Manchurian trade centres. In other words, they advocate a mileage system. To this the Japanese unequivocally refuse their consent, asserting that a tariff calculated solely according to distance would hopelessly handicap Dairec. Instead, they maintain that true equality of opportunity is given if the rates between Dairen and Newchwang, on the one hand, and any point in the interior, on the other, are the same (e.f., memorandum in my despatch No. 34 of the 25th July, 1907). This is an argument His Majesty's Government has consented to regard as legitimate (vide enclosure in Foreign Office despatch No. 1, Consular, to Tokyo of the 3rd January, 1908, and No. 6 from Tokyo to Dairen of the 5th March, 1908). The Japanese position is now further strengthened by the admission of the Board of Trade that the system complained of by Newchwang is actually in practice in England and elsewhere. At first sight it would therefore seem as if the question were definitely settled, and that no action could be taken till Newchwang paid higher total (not proportionately higher) rates than its rival.

A new element is introduced by Mr. Wilkinson's plea that Newchwang pays higher sea freights. I assume that this is correct. Mr. Hobart Hampden, commenting on this point, doubts if they can properly enter into the calculation. In theory, venture to say they can. It seems to me that, if the Japanese are justified in resorting to so-called differential rates to redress the disadvantage Dairen suffers in being more distant by land from Manchurian markets, Newchwang may also with justice plead that some allowance should be made for the fact that she is more remote from the trade centres oversea. Surely, if this point is not conceded, equality of opportunity can scarcely be said to exist. I used the words "in theory" above advisedly, because, granting for the moment that His Majesty's Government admitted Newchwang's contention, it would, in my opinion, be in practice a most difficult thing to assess exactly the allowance that Newchwang could equitably claim. It is not only sea freights that handicap her in her competition with Dairen. The latter has certain

* This could, it seems to me, be in any case for freight alone, and could not include insurance, interest, &c., which are probably higher in the case of Newchwang.

[2862 h-4]

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