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Indian opium and the prohibition of its import into particular provinces are embodied together in one short sub-section (c) of article 2.
Article 4 embodies the principle of equality of treatment enunciated in article 1, and, being a direct denial of the safeguards claimed by us, practically amounts to an abrogation of all treaty rights accorded to the trade in opium.
Article 6 doals with the increase of the consolidated duty on Indian opium in a manner very different from that contemplated in the draft additional clause put forward by Mr. Max Müller on the 14th November last, which formed Enclosure 3 to my despatch No. 441 above referred to.
Article 7 reserves the right of both countries to benefit by any future policy which the Powers may adopt with regard to opium; it is evidently drafted with The Hague Conference in view and reasons of internationality courtesy alone should have been sufficient to prevent its inclusion.
Such was the estimate 1 formed of the Chinese position from a consideration of this memorandum, and I realise that a great deal of misconception of our attitude in resuming negotiations for an agreement would have to be removed before a settlement could be reached. The whole of the second meeting, which took place on the 14th instant, was, in fact, devoted to demonstrating to Dr. Yen the difficulty of reconciling the views of the Chinese Government as embodied in this memorandum with the statements contained in the Wai-wu Pu's note of the 29th December, 1910, according to which they undertook to resume negotiations on the basis of the proposals put forward in Mr. Max Müller's memorandum of the 1st November without unreasonable modifications, and of two definite further proposals, on which statements my instruc- tious from His Majesty's Government had of course been framed.
I first drew Dr. Yen's attention to the omission from his memorandum of the essential clauses in Mr. Max Müller's proposals regarding the safeguarding of Indian opium against irregular taxation and restriction after import, and informed him that in view of the fact that I bad only authority to negotiate on the basis as set forth above, I must first know the attitude of the Chinese Government towards these points.
Dr. Yen explained that his Government regarded this agreement as a continuation of the 1907 arrangement; the latter had contained no reference to the taxation or restrictions imposed on Indian opium, and so they held it undesirable to include any such reference in the present agreement. They also felt that the Central Government might be able to enforce observance by the provincial authorities of any such clauses, and that in any case the omission of the clauses would redound to the credit of Great Britain.
I replied that the attitude of the provincial authorities had changed since the 1907 arrangement was made, whereas prior to that date there had been practically no cases of interference with Indian opium, they had since made that arrangement a pretext for continual breaches of treaty. The omission of these clauses was tantamount to an abrogation of the existing treaties which had never been contemplated by either Government, and, although I was prepared to recommend an amalgamation and rewording of these clauses as originally drafted, it was essential that the gist of them should be included in the agreement.
The various articles of the Chinese memorandum were then discussed, and the terms to which we took exception were pointed out. I said at once that articles 4 and 7 were entirely unacceptable, the first because it specifically denied the safeguards for which I had just been contending, and the second because it was contrary to the spirit of these negotiations from their commencement. Government had never agreed to any interference by any other Power in their I pointed out that His Majesty's arrangements with China, which arrangements had already been expressly excluded from consideration at The Hague Conference.
As regarded article 6, Dr. Yen explained that the main object of his Government in desiring an increase in the consolidated duty was to render the price of the drug prohibitive, and it was proposed to levy an ad valorem duty based on the average market price of the opium, such average to be fixed every six months on the basis of the preceding half-year.
I pointed out that this course seemed to me likely to lead to endless difficulties, that a specific duty would be preferable, and that in any case it was essential that we should have definite information as to the taxation of the native drug, which at present we did not possess.
Having reviewed the several articles of his memorandum, I again informed Dr. Yen that the liberal offer made by His Majesty's Government to agree to the shortening of
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the period for the import of Indian opium and to the prohibition of import into particular provinces was dependent on the acceptance by the Chinese Government of the terms of our memorandum of the 1st November.
I had the honour to make a summary report on this meeting in my telegram No. 41 of the 14th instant, and I also added that the question of providing adequate safeguards against illegal taxation seemed likely to present serious difficulties. The third meeting took place on the 17th instant, and as I had in the meantime received your telegram No. 24 of the 14th instant instructing me to press for the suspension of the new regulations introduced by the Viceroy at Canton, I was able to inform Dr. Yen, when he urged further objections to the inclusion of any taxation clauses, that I should be unable to sign any agreement which did not provide adequate safeguards against a repetition of the breaches of treaty now being committed by the Canton authorities.
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Dr. Yen assured me in reply that an agreement hard now been reached between the Wai-wu Pu and the Board of Finance on the subject of this Canton taxation, and the latter now recognised that the revenue must be raised by some other means than taxing foreign opium. The matter had, moreover, been brought to the notice of the Prince Regent, and the levy would certainly be put a stop to.
Even after I had read to Dr. Yen the letter addressed to you by the Hong Kong Chamber of Commerce on the 2nd instant protesting against the Canton regulations, he still persisted in his objection to the inclusion of any safeguards against taxation or restriction in the agreement itself. The Chinese Government would, he said, be prepared to give assurances on these points in a separate despatch. He also complained of the vagueness of the wording of clause 1 (d) in our memorandum, and asked what was actually implied by the word "restrictions," and suggested that the word "taxation covered everything to which we objected in the action of the provincial authorities, which action he further alleged to be merely a natural outcome of the anti-opium movement.
I pointed out that the real ground of our objection was that the provincial authorities considered themselves entitled to take independent action far in excess of and contrary to the spirit of the arrangement entered into between His Majesty's Government and the Central Chinese Government. His Majesty's Government had never protested against action taken by the central Government in support of the anti-opium movement, and we had also already declared that any natural restriction of the wholesale trade directly due to extinction of the retail trade in any particular locality would not form the subject for protest. It was, however, clear from what had happened at Canton that "taxation" did not include every form of restriction against which we did feel bound to protest, such as the limitation of the time for boiling and of the amount allowed to be transported into a particular province.
Dr. Yen then made a final suggestion that on confirmation of this agreement we should, in lieu of inclusion of these clauses, accept a formal despatch from the Wai-wu Pu giving satisfaction to our many unanswered protests against illegal taxation and restric tions. I replied that it would be impossible for me to accept anything less than the inclusion of an anti-restriction clause in the agreement itself, though I would be willing to recommend the addition of some such words as "such as have been imposed at Canton" to explain what was meant by "restrictions," and the amalgamation of our four separate clauses into one.
I dwelt again on the liberal nature of the concessions offered by His Majesty's Government to China, but even on this point Dr. Yen was prepared to cavil, for he argued that prohibition of the import of foreign opium into a particular province ought to precerle the total extinction of cultivation in that province."
Dr. Yen then referred to article 4 of his memorandum providing for the applica- tion of all auti-opium regulations to native and foreign opium alike; this article, he said, had only been inserted after careful consideration as being necessary to the success of the anti-opium movement, and it was hoped that we might be generous enough to accept it on the ground that Chinese opium inerchants were suffering a loss fully equal to that entailed on the foreign dealers.
I objected that the effect of this article would really be to cancel the whole agree- ment, and if it had any other meaning it was unnecessary, for the restriction of the wholesale trade was fully provided for by the agreement, and with the retail trade we
were not concerned.
Dr. Yen then wished to discuss the question of increasing the import duty, but I pointed out that we had not yet arrived at a stage when this could usefully be done. The first essential preliminary was the imposition, preferrably by Imperial edict, of an
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