CO129-491 - Public Offices - 1925 — Page 70

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constitute the first charge on them, would imply the right of the custodian banks to the first handling of the 2 per cent. as well as of the 5 per cent.

Although this argument seems technically unassailable, His Majesty's Govern- ment are prepared to consider any proposals for an equitable solution of this problem. If changes are made, it would seem politic to admit suitable Chinese institutions, such as the Bank of China and Bank of Communications, as well as other foreign banks, to a share in the custody of customs revenues, if this can be done without endangering the safety of these revenues (see the relevant proposals in article 3 of the scheme contained in Annex (M) ).

X. THE CHINESE CLAIM TO TARIFF AUTONOMY.

In view of the general tendency nowadays towards the abolition of restrictions of the kind at present imposed by treaty on China (as illustrated, for instance, by the recent cases of Turkey and Siam), it can scarcely be a matter for surprise that the Chinese should put forward a claim for full tariff autonomy. Nor should we overlook the danger that if we delay too long in facing the issues involved, whether by deliberate intention or through failure to surmount the difficulties inherent in adopting any measures requiring the concurrence of so many Powers, the opportunity If that happens China may one day take still probably open to us may be missed. without thanks or return the concessions which would now at least win her good will, and probably also secure some measure of internal fiscal and administrative reforms of great mutual benefit to China and to the Powers, who profess their desire (a very sincere desire on the part of His Majesty's Government) to help China.

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The immediate grant of full tariff autonomy is, however, out of the question in present state of Chinese administrative and fiscal development. Such autonomy should, in the opinion of His Majesty's Government, only come in carefully defined and regulated stages, accompanied by the progressive reorganisation of the internal fiscal system and the abolition of all vexatious and irregular internal taxation; and it is hoped that the special conference will enable this principle to be confirmed and a start made with its application.

His Majesty's Government have therefore no intention or desire definitely to reject a Chinese request for full tariff autonomy provided it is made plain that such autonomy can only be achieved in stages and in the measure in which the Chinese carry out their part of the programme adopted. Suggestions for the lines such a programme might follow will be found in the scheme contained in Annex (M).

XI. THE BOARD OF REFERENCE.

Under the resolution of the Washington Conference set out in Annex (B), the special conference is entrusted with the duty of framing a detailed scheme for the constitution of the proposed board of reference.

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As will be seen, the special conference has no executive power to set up the board of reference, but only to recommend a scheme for the approval of the contracting States. This limitation on the power of the special conference was imposed at the instance of the American delegation in order to avoid the necessity of submitting the above-quoted resolution to the Senate for ratification.

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The machinery best suited to give effect to the resolution is to be determined mainly from the nature of the duties which the board of reference is to fulfil, i.e., to examine and report on complaints of infringement of the provisions relating to the door" contained in article 3 of the Washington Treaty (see Annex (K)), and of the provisions of article 5 of that treaty relating to railway discrimination. (It may be noted that the interpretation of this latter article is already in dispute between the principal interested Powers and the Chinese Government, who maintain that it does not cover the case of discriminatory railway rates favouring native as against imported goods.)

It will be a matter for the conference to recommend whether the only parties whose complaints can be investigated by the board of reference should be contracting States or whether non-contracting States should be admitted.

Complaints by private persons must first be addressed to their own Government. or to the diplomatic representatives of that Government at Peking, and only such complaints as appear prima facie reasonable and which the Legation is prepared to support will be submitted to the board of reference, and these only in the event of failure to obtain satisfaction by direct representations to the Chinese Government. or other Governments concerned.

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It follows from this that the number of cases that will actually be referred to the board of reference will be limited. In practice the chief value of the board of reference will probably be the fact of its existence, ie., it may be expected that the power of either party to require reference to the board in the last resort will tend to cause the other party to agree to a reasonable settlement. Should this expectation not be realised, and should the existence of the board of reference, on the contrary, lead to the multiplication of disputes, it might eventually be necessary to consider some measure for the purpose of checking frivolous references. But for the present there seems no likelihood of such a measure being required.

It is therefore desirable that the scheme for the constitution of the board should be based on the expectation that it will not at first have a great volume of business to transact. Hence it is not desirable to provide for the permanent paid "whole time members of the board. On the other hand, such complaints as the board will have to deal with will probably be of considerable importance and intricacy, and, while they will usually take the form of differences between two States, the reports of the board may involve questions of principle affecting States other than the actual parties.

The constitution of the board as contemplated by the authors of the proposals (see Annex (J)) appears to have been a permanent panel consisting, say, of one member nominated for a specified period (e.g.. three years) by each of the States which adopt the scheme. From this panel a court of enquiry of, say, three members would be constituted to deal with a particular dispute between two States, two members of the court being the members of the panel nominated by those States, and the third being another member of the panel chosen by agreement between the two other members. In the unlikely event of a failure to agree on the third member, the Permanent Court of International Justice might possibly be invited to make the selection. The only permanent officer of the board of reference would be the registrar. whose business it would be to receive complaints and to convene the court.

The members of the board need not be resident in China (in fact, there are advantages in their being non-residents), and they should in no case be persons in the diplomatic or administrative service of the State by which they are nominated. There is no objection to their holding another judicial appointment, so long as this is quite independent of the Executive. On no account should they be nominated ad hoc by their respective Governments after the dispute has arisen. States which omit to nominate a member might perhaps have the right of selecting an existing member of the panel of another nationality in case of a dispute arising by which they are affected. Some familiarity with Oriental conditions is naturally desirable, and to save time and expense it is desirable that as many members of the panel as possible should reside within easy distance of China. In the event of the conference recom- mending that the non-contracting Powers should be admitted, it will be a matter for consideration whether and in what manner a non-contracting State would be represented on the board.

As the functions of the board are confined to examination and report, there will be no question of awarding costs, and the expenses incurred in any enquiry must be borne by the parties, who should share the cost of any expenses or remuneration of the third member of the court. The question of remuneration and allowances for the members of the board will be a matter for the consideration of the conference, who will no doubt bear in mind the desirability of keeping the cost of administration as low as possible.

The board of reference should be authorised to hear representatives of States no parties to the dispute, in case they consider that the interests of such States are likel to be materially affected by their recommendations.

The British delegates have full discretion to discuss the above and any other suggestions which may be put forward as to the constitution and functions of the proposed board, and to submit such recommendations as may appear to them, after full examination of all the issues involved, best to meet the needs of the case. It is unfortunately possible that the developments which have taken place in the situation in China since the date of the Washington Conference may have considerabl increased the difficulties in the way of establishing the board of reference in ti... manner originally contemplated.

XII RULES OF FUTURE TARIFF REVISIONS.

Under article 4 of the Chinese Customs Tariff Treaty of Washington the special conference is to prescribe rules to govern future revisions of the customs schedule of duties on imports in China, so as to prevent delay."

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