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their power pending the duration of the contract to prevent any other person within China infringing any of these rights causing loss to the company, provided previous application is made by the Chinese company to the Government asking for protection.
39. It is with these rights that the American Federal Company have now collided. The first we heard of this was on the 16th January, when Sir B. Alston telegraphed (his telegram No. 20) that the Chinese Government were concluding an agreement with an American company for the erection of high-power wireless stations in China, which must inevitably raise not only the question of the cable companies monopoly, but also that of China's obligations to the Marconi Company. Simultaneously, the Times" published a message from Peking of the 17th January to the effect that the contract was actually concluded. that it was with the American Federal Wireless Company of San Francisco, and that it was for the installation of a high-power station at Shanghai with subsidiary stations at Shanghai. Canton, Peking and Harbin, at a cost of 1.000.000; the security being the revenue from these stations and complete American control over them for ten years.
40. The matter was discussed at the Foreign Office with Mr. Godfrey Isaacs. the managing director of the Marconi Company, who stated that not only was the contract a violation of the Marconi Agreement with the Chinese Government, but that it also involved the pirating by the American company of certain of the Marconi rights which were their exclusive property outside America in virtue of an arrangement made with the American owners. Mr. Isaacs claimed to have information that the Federal Wireless Telegraph Company was a moribund concern which had been specially revived by the American Government in order to challenge the predominant position which wireless British interests had succeeded in obtaining in China.
41. Sir B. Alston was authorised by the Foreign Office to make the strongest representations to the Chinese Government, pointing out that it would be impossible for British firms to do further business with them if they showed such complete disregard of their solemn obligations. On these instructions Sir B. Alston has acted with vigour. and the net result is that the matter is held up pending a discussion between us and the Americans.
42. In consequence of our action at Peking, the American Government have now made a strong protest through their Embassy in London, charging His Majesty's Government with supporting a monopoly. A copy of this protest is attached hereto (see Annex 5).
43. In support of their attitude, the State Department claim that in an analogous case, that of the (Sino-American) China Electric Company, the American Government in January 1919 refused to countenance a similar preferential right that was claimed in virtue of a contract which that company had obtained in 1917 from the Chinese Government (see Annex 6). The State Department intimate that if His Majesty's Government persist in their attitude they will revive the rights of this China Electric Company, and block the three Marconi contracts that we now bold.
(NOTE. It is doubtful whether in practice this would be feasible.)
44. The issue is thus brought to a head in acute form,
45. In weighing the arguments for and against the American claim, the chief considerations seem to be the following:-
(a.) Are the Marconi rights under their agreement of the 24th May. 1919,
monopolistic?
(b.) If so, is it, in Imperial interests, advisable nevertheless to uphold them despite the traditional policy of His Majesty's Government in China of opposing monopolies as contrary to treaty?
(c.) If it be decided that the rights are monopolistic, and that we can no longer support the Marconi claim, what is the position of His Majesty's Government vis-à-vis Marconi, who negotiated their agreement with the full consent of His Majesty's Government?
(d.) If those rights are not monopolistic, is it advisable to maintain that point of view in face of the attitude of the American Government, thus risking a definite breach with America in China?
46. It may facilitate the consideration of this question of monopoly if a letter is quoted which was recently received from the Board of Trade. The Board bad
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been consulted on the very question whether the rights of the (American) China Electric Company were or were not monopolistic. They replied as follows:-
"They feel considerable doubt whether a company formed to act as an agent for the supply of Government requirements in regard to telegraphs and telephones is such a privileged company as is prohibited by article 14 of the Franco-Chinese Treaty of 1858 and article 9 of the Franco-Chinese Treaty of 1874, which appear to relate rather to organisations which would monopolise all dealings, in particular articles imported and exported. The existence of the China Electric Company or any similar companies would not apparently preclude the importation and sale to Chinese subjects of any class of material, but could only prevent their sale to the Chinese Government except through the agency of the China Electric Company.'**
Foreign Office. February 18, 1921.
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