CO129-383 - Public Offices - 1911 — Page 573

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recommend that further sales of uncertificated opium by the Government of India should be postponed until the result of the negotiations on this point were known.

At my next interview with the Chinese delegate I put before him the proposal to list the stocks on the 1st July instead of on the date of signature and explained its advantages. It would, I pointed out, enable the principal portions of the agreement to come into force at the same date and thus simplify its working, and if it were feared that it would enable more opium to enter China now, this would be met by a corresponding reduction in the imports of subsequent years. If my original proposal were followed, it would be necessary to arrange for the admission into China of uncertificated opium during a period of say two months after the signature of the agreement.

Dr. Yen submitted the two proposals to the board, who decided to refer them to Mr. Algen, the inspector-general of customs; as a result of a consultation with Mr. Algen, Dr. Yen announced that the Chinese Government favoured the listing of stocks on date of signature and put forward a proposal which contained a number of vexatious restrictions both on stocks and on uncertificated opium arriving subsequently to signature-as, for instance, that all uncertificated opium in bond should either pay duty at once or be transferred to Shanghai to be bonded there, and that from the date of signature uncertificated opium should be imported at Shanghai only; moreover, no account was to be taken of opium in stock at Hong Kong.

interference with I pointed out that I had no power to agree to any unnecessary stocks of opium which were legitimately in existence in China, and that Canton and Shanghai at least must be recognised as ports of entry for uncertificated opium. I urged him, therefore, to draw up a reasonable proposal which would include Hong Kong and would be free from any restrictions on the trade other than those necessary to ensure effective customs control.

This produced a memorandum in writing (copy enclosed) which still contained many of the unnecessary features of the first proposal, and when Dr. Yen maintained in answer to my objections that the inspector-general of customs insisted on the restrictions, I requested that Mr. Algen should be invited to attend the next meeting as I felt sure that the position from our point of view had not been fully explained to him. Dr. Yen agreed to this course after some demur, and I then embodied in a counter- memorandum (copy enclosed) such portions of the Chinese proposal as I considered might be accepted, together with a statement of the Government of India's proposal for listing on the 1st July. This memorandum after having been communicated to the Chinese delegate was discussed at length with him and Mr. Aglen at a meeting held on

the 19th instant.

I found that Mr. Aglen was in doubt as to the degree of control which his department would be allowed to exercise over stocks in Hong Kong, and was, accordingly, anxious to have these stocks removed into Chinese ports as soon as possible after listing. This seemed to me to be not unreasonable, but Dr. Yen's proposal to compel all uncertificated opium in Hong Kong to be removed to Canton within two days after listing, I objected to as impossible under any circumstances, and insisted that the merchants must be allowed a reasonable time to re-export for moving their opium into any treaty port. Mr. Aglen urged that it would always be open to the merchants to re-export in bond from Canton to other ports, but I repeated that their vested interests could not be penalised by the unnecessary expense which would be involved in sending opium from Hong Kong to northern China ports via Canton.

Mr. Aglen then raised the point of opium in stock at Macao and in Indo-China which might be considered as being intended for the China market, and urged that Portugal and France might insist on similar privileges being accorded to stocks in these places. I replied that it was impossible to provide for every contingency, that I thought it in the highest degree improbable that either France or Portugal would make difficulties for the Chinese Government over the question, either by claiming privileges for their stocks or by lending the names of their nationals for the purpose of evading a higher rate of duty, and that in any case it would be impossible to postpone this agree- ment in order to allow of negotiations with those two Powers.

I finally offered to recommend that all uncertificated opium in Hong Kong should be required to move into a treaty port within a reasonable period after listing, such a period I placed at fourteen days. I pointed out, at the same time, that the proposal to list on the 1st July would not be surrounded by so many difficulties, but found that this latter proposal had even less chance of acceptance, for the Chinese delegate evidently regarded it as certain that in the two months between the date of signature and the 1st July all the existing stocks might find their way out of bond and so deprive the

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Chinese Government of any chance of obtaining a reduction in the succeeding year's imports. I even suggested that in order to obviate this a list might be taken on the date of signature as well as on the 1st July, but without any effect.

Finally Doctor Yen undertook to draw up yet another proposal based on the results of this discussion, but to my despair be added that he wished to make it quite clear that whatever method of listing were agreed upon the effect would be to confer on un- certificated opium so listed and marked not the same treaty rights and privileges "as certificated opium" but merely the same treaty rights and privileges" as heretofore."

Once again, as so often before in the course of these negotiations, the Chinese Government had without any warning changed its attitude on a fundamental point. The excuse put forward by Doctor Yen on this occasion was that an undertaking to exempt the large quantity of opium comprised in the stocks from the increased rate of duty would entail a heavy loss to the revenue and would require further consultation with the Board of Finance with its inevitable delays.

I pointed out that, besides being a deliberate departure from an understanding already arrived at, it was impossible to make any agreement of this kind retroactive and so impose upon opium already in the country a higher rate of duty; while to attempt by means of a quibble in wording to attain the same end by leaving these stocks to the tender mercies of the provincial taxgather-which was what "the same treaty rights as heretofore" amounted to--was nothing less than an indirect attack on the principal object of the agreement. I warned Doctor Yen that insistence on this alteration would wreck the negotiations.

The next meeting was held on the 22nd instant, and Dr. Yen presented what purported to be the final Chinese offer for the solution of the question of stocks; it contained three important departures from my proposal, namely:-

1. The treatment guaranteed to listed stocks was not that of certificated opium, but was to be merely "as heretofore";

2. The corresponding reduction in the Indian exports was to commence in 1911 instead of in 1912; and

3. The deduction of 5,000 chests in respect of last year's shortage was omitted, while the period for the removal of Hong Kong stocks to Chinese ports was limited to seven days.

I at once offered to recommend acquiescence in 2 and 3, if by so doing an immediate settlement could be obtained, but on the first point I repeated that it was impossible for me to yield.

Dr. Yen then referred to the desired exclusion of Canton and Shanghai from the provincial prohibition clause, and said that the board were now prepared to grant this provided that the proposal regarding stocks were accepted as it stood.

I replied that I had reached the limit of concession with regard to stocks, the equality of treatment between these and certificated opium went to the root of the whole agreement and admitted of no alternative.

Dr. Yen again referred to the revenue question, which, though not affecting the Wai-wu Pu, still was a matter of concern to the Board of Finance, which had had to reimburse the Canton Viceroy and others for the withdrawal of their illegal taxation, and maintained that opium which only paid 110 taels import duty could not reasonably expect the same privileges as opium which paid 330 taels.

I pointed out that it was not a question of privileges, but of treaty rights, and that the employment of admitted illegalities as arguments in negotiation was, to say the least, novel.

Finally, Mr. Ivan Chen, the late Secretary to the Chinese Legation in London, who had been associated with Dr. Yen as Chinese delegate since the 19th instant, having asked whether an increase in the proposed new rate of consolidated import duty could be agreed to as some compensation for loss of revenue on the stocks, I consented to recommend a further increase of duty up to 350 taels in addition to the two concessions regarding the stocks, provided that the Chinese Government would accept without further delay the exclusion of Canton and Shanghai and equality of treatment for stocks and certificated opium,

Although I urged the necessity for a speedy decision, if the proposal to commence the reduction in the Indian export this year were to remain feasible, it was not till late in the evening of yesterday that I received from the Chinese delegate an assurance that the exclusion of Canton and Shanghai would be accepted provided that His Majesty's Government could agree to the Chinese proposal regarding stocks as amended to provide for the desired equality of treatment.

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