CO129-521-12 Chinese Customs- proposed agreement with Hong Kong 2-4-1930 - 16-6-1930 — Page 3

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I think it is important, before the

interdepartmental meeting, to arrive at some

fairly definite C.O. policy on this question.

I therefore venture to set the ball rolling with

the following comments, and at the same time,

for greater clearness, attach a memorandum

summarizing the course of the negotiations up

to date.

There are two main questions:

(1) Is

it important that there should be an agreement

PA DEFBAment at all? (2) What is to be our

attitude as regards Article V?

(1) The official opinion at Hong Kong

an opinion apparently shared by a considerable

section among the merchant community

-

is that

if the negotiations break down only China will

suffer and that there is little danger of a

reaction dangerous to British interests. In the circumstances they very naturally feel that

they should go all out for what they can get

from the Chinese Government. "A defeatist

policy will of course bring defeat".

Sir M. Lampson and the Foreign Office,

on the other hand, regards the matter as one of

great importance to British relations with

China in general. From various reports

which we have received and indeed, as Foreign

<

Office point out, on a priori grounds

-

it

is clear that thereis an enermous and probably

increasing smuggling trade with Hong Kong as its

centre. From the Chinese Government point of

view,