Air,
20
ANNEX 4.
Post Office to Foreign Office.-(Received February 8.)
General Post Office, London, February 7, 1921.
I AM directed by the Postmaster-General to refer to your letter of the 17th ultimo, relative to a scheme which has been discussed between the Chinese Telegraph Administration and the Eastern Extension and Great Northern Telegraph companies for the laying of additional cables between Shanghai and Hong Kong and between Shanghai and Chefoo, and for the grant by the companies to the Chinese Govern ment of a loan of 1,500,0007., in consideration for which the companies' exclusive concessions in China, which are due to expire in 1930, should be extended until 1950. At the recent preliminary conference at Washington a resolution was proposed by the United States delegation recommending that Governments should not in future grant exclusive cable or wireless concessions, and should not support their nationals, diplomatically or otherwise, in seeking such concessions from other Governments, except in cases where the traffic is too small to admit of competitive services. This resolution was accepted by the British delegation as being in general harmony with their instructions, and it was also agreed to by the other delegations. It is believed to be on the whole in accordance with British interests, as there have been tendencies on the part of the United States wireless companies to seek exclusive privileges in South America, and (as shown by the enclosures to your letter) on the part of Japan to seek exclusive rights in China, against which the resolution will militate. It would be contrary to the spirit of this resolution to which the United States delegation attached great importance for the British Government to support a scheme for the extension of the exclusive concessions of the Eastern Extension and Great Northern Companies.
It seems clear from the history of the case, as described in your letter and in the memoranda which accompanied it, that the present so-called "monopoly is a monopoly in name only, as in actual practice other companies have been allowed in several cases (indeed in all cases where the company concerned has received sufficiently strong support from its Government) to lay cables and to establish wireless stations for communication between China and other countries.
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The Postmaster-General observes from the telegram of the 23rd November last, a copy of which was enclosed with the Foreign Office letter of the 6th December, that Sir John Denison Pender has suggested that, if there is great objection to the suggested extension of the exclusive concessions, his company might be ready to accept a scheme "for pooling among the consortium Powers." It is not clear whether the suggested "pooling applies only to the loan (the exclusive concessions not being extended at all), or whether it is contemplated that the exclusive conces sions would be extended but would not apply as against the nationals of the consortium Powers (which are understood to include the United States). The Postmaster-General is of opinion that some such modification as that suggested by Sir John Pender would, if feasible, probably be the best solution.
The present exclusive concessions operate not only against foreign telegraph companies but also against other British companies, including wireless companies. The only real risk of serious competition with the present cable service between China and Europe seems to lie in the direction of wireless telegraphy; but it is very doubtful whether it is in accordance with British interests that wireless communica- tion with Europe should be excluded, From this point of view, therefore, the exclusive rights, in any form in which the British Government could agree to them, would probably mean little to the Eastern Company. As regards cable communica- tion the company may well stand on their merits.
The question is one which concerns several Government Departments; and, in the circumstances, the Postmaster-General would suggest that it should be referred as soon as possible to the Imperial Communications Committee.
I am, &c.
G. E. P. MURRAY.
21
ANNEX 5.
Memorandum communicated by United States Embassy.
THE American Embassy is informed that on the 8th January last, the Federal Telegraph Company, an American corporation, signed with the Chinese Government a contract for the construction and opening of wireless stations at Shanghai, Peking, Harbin and Canton for a period of ten years in joint agreement with the Chinese Government, and for a further period of ten years thereafter on a royalty basis.
In this regard the American Government is amazed to learn that His Majesty's Minister at Peking recently advised the American Legation there that. under instructions from His Britannic Majesty's Government, he had protested to the Chinese Government against the American contract above referred to, and had insisted upon its cancellation on the ground that such a contract infringes upon the rights which are claimed to have accrued to the British Marconi Company by virtue of a contract entered into on the 24th May, 1919, which established a joint enterprise under the name of the British Corporation, with certain preferential rights for the supply of wireless equipment to the Chinese Government,
Leaving on one side for the present any discussion as to the propriety of a foreign Government asserting diplomatically as against another nationality the laims of this Corporation, the American Government desires to meet unequivocally and on its merits the claim that any Government can rightfully assert in behalf of the interests of its nationals to exercise any such monopoly or preference for the supply of materials or equipment as would debar American citizens from the right to contract freely with the Chinese Government for any category of supplies. The adoption of such an exclusive or preferential right in behalf of British interests would frankly raise in the mind of the American Government a doubt whether it has quite understood the attitude of His Britannic Majesty's Government during the course of the recent efforts to co-operate in making real and effective the principle of equality of commercial and industrial opportunities in China. The American Government feels that it must in candour make clear its position that such a claim to monopoly or preference in the supply of equipment to any service of the Chinese Government, is, in its view. fundamentally repugnant to the principle of the “ open door and to treaty rights, and that the American Government is not prepared to recognise any claim to contractual rights in favour of any party as valid or effective in excluding its nationals from any field of commercial or industrial activity in China.
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It is thought that His Britannic Majesty's Government may perhaps not be aware that as long ago as 1917 the American Government found occasion to apply this interpretation of the " open door" principle as against the claims of certain of its own nationals under the following circumstances:-
On the 20th October, 1917, by a contract closely analogous to the Marconi contract with the Chinese Wireless Company, the Western Electric Company, an American company, formed with the Chinese Government the China Electric Company, which, according to the provisions of the contract, was to have a preference for the supply of all machinery, apparatus or other materials in connection with the telephone and telegraph systems" required by the Chinese Ministry of Communications. Upon becoming acquainted with this provision, and after consultation with the United States Government, the American Minister at Peking, on the 28th January, 1919, formally notified the China Electric Company that his Government would not recognise or support any such preference as was provided for in the contract of 1917. The position of the American Government in this regard was at that time explained to the Chinese Government also.
No doubt exists in the mind of the United States Government that, with a knowledge of the attitude thus taken, His Britannic Majesty's Government will not be disposed to insist in favour of its nationals upon an advantage which the American Government had previously rejected as unfair and repugnant to treaty rights and the policy of equality in China, when claimed by American interests. Should it be found, however, that this confidence is not justified, and should His Britannic Majesty's Government continue to assert the preference claimed in favour of the Marconi Company, the American Government would be reluctantly compelled to consider, amongst other things, whether the prior rights claimed as accruing to the Western Electric Company under the contract of 1917 are not as fully entitled
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