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vital interests of foreigners in China, and in these cases the protests should be made effective by the united action of the Powers.
15. His Majesty's Government have consistently carried out the obligation of full and frank consultation imposed on all the Powers alike by article 7 of the Nine-Power Pact, and it has been their constant aim-sometimes even when this involved a sacrifice of their own opinion-to maintain the solidarity of the Powers. It is in pursuance of this aim that His Majesty's Government are now communicating to the Powers this statement of the principles by which they believe that policy should be guided in future. They feel assured that the Powers will share the anxiety of His Majesty's Government to act towards China in the spirit which inspired the Washington treaties, and it is their earnest nope that the Powers will agree that that spirit cannot better be fulfilled than by adopting the policy which is now presented for their consideration.
16. It seems to His Majesty's Government that the first step towards the carrying of this new policy into effect should be the immediate unconditional grant of the Washington surtaxes. Lest it be supposed that the grant of the surtaxes might favour one faction at the expense of the others and so provide a further incentive to civil war, His Majesty's Government deem it important to point out that, as no conditions would be attached to the grant, the proceeds of the surtaxes would not necessarily be remitted by the commissioners of customs to the custodian banks at Shanghai. It would in each case be for the competent Chinese authorities to decide all questions as to the disposition and banking of these additional revenues. His Majesty's Government would be glad to learn at the earliest possible moment whether the Powers agree to the unconditional grant of the Washington surtaxes.
ANNEX.
Memorandum communicated to United States Embassy, May 28, 1926.
HIS Majesty's Government have received through the United States Embassy in London a message from the United States Government enquiring whether His Majesty's Government endorse the attitude ascribed to the British delegation at Peking of desiring to abandon the negotiations at Peking and break up the Tariff Conference; and expressing the hope that His Majesty's Government will continue to co-operate with the other interested Powers in bringing to a conclusion the task which was begun last October.
2. His Majesty's Government desire to assure the United States Government that the report received by them that the British delegation desire to withdraw from the negotiations at Peking appears to be based on a complete misunderstanding. His Majesty's Government have no intention whatever of breaking up the Tariff Conference. It is true that the question has been considered whether at the present juncture it might not be convenient to arrange a brief suspension of the conference over the summer months. It was realised, however, that in existing circumstances suspension of the conference might prove to be more prolonged than was intended, and in order to prevent the possibility of misunderstanding as to the sincerity of the Powers, His Majesty's Government considered it to be of the greatest importance that, before even such a brief suspension as above contemplated took place, there must first be a complete liquidation of the promises made at Washington.
3. The British delegation in Peking fully shared this view, and appreciated the prime necessity of liquidating the Washington Treaty. A considerable interchange of views has, however, taken place between the Foreign Office and the delegation in regard to the proceedings of the conference on the subject of the unsecured debt; and it is probable that the misunderstanding to which reference is made above has arisen in consequence of the attitude which the delegation has been instructed to take on this matter, and which was formally stated by the chief British delegate at the meeting at the Netherlands Legation on the 6th May.
4. The United States Government will no doubt recollect that His Majesty's Government were from the first averse to the imposition on the Chinese Government of any scheme of consolidation of the unsecured debt as part of the work of the Tariff Conference, and that they only agreed later and with great reluctance to the discussion of any such scheme at the conference. If the schemes of the foreign delegations for
the consolidation of the unsecured debt should postulate too strict a control over China's customs revenues (shortly to be increased by tariff autonomy) His Majesty's Government are afraid that a dangerous deadlock may arise, for the discussions on this subject show that the Chinese, though willing to bind themselves to devote a proportion of their revenues to the unsecured debt, have declined to allow the details of debt consolidation to be dealt with by the Tariff Conference, and will refuse to submit to any extension of foreign control--for that or any other purpose-over
China's custome revenues.
5. His Majesty's Government, after full consideration and prolonged consultation with their delegation in Peking, have come to the conclusion that, while they are ready to agree to any reasonable scheme for dealing with the unsecured debt put forward by the Chinese and agreed to by the other Powers, it would not be right to associate themselves with any attempt to force upon the Chinese a greater degree of foreigu control over the revenues required for that purpose than they are prepared voluntarily to concede. A policy involving increase of foreign control, and capable of being regarded as an encroachment on that sovereignty and independence of China which the Powers agreed at Washington to respect, is so fundamentally opposed to the traditional policy of the United States towards China that His Majesty's Government are disposed to believe that the State Department will share their anxiety on this subject.
6. It is true that His Majesty's Government originally desired to exact proper guarantees from China in regard to the abolition of li-kin as a condition precedent to the grant of the Washington surtaxes, but they have come to the conclusion that, in the altered circumstances and changed atmosphere of to-day, any attempt to insist upon guarantees against the will of the Chinese Government would only result in postponing indefinitely the liquidation of the Washington promises. They are as anxious as the United States Government fully to implement these promises at the earliest possible moment, and believe that it would be contrary to the intentions of both Governments, both at and subsequent to the Washington Conference, to subordinate the fulfilment of these promises to the imposition upon China of a scheme for the consolidation of her unsecured debt and extension of foreign control over her customs revenues. Any failure to implement the Washington Treaty might create a very dangerous situation, and His Majesty's Government now therefore hold the view that if any reasonably satisfactory assurances are given by the Chinese Government as to the use which it proposes to make of the new revenues the Powers should accept such assurances, abstain from any attempt to impose control or exact guarantees, and forthwith authorise the levy of the surtaxes. They feel confident that a policy, so closely in accord with the friendship and generosity always displayed by the United States of America towards the people of China, will receive the full and cordial support of the United States Government.
Foreign Office, May 28, 1926.
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