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Nevertheless, we appreciate that the application in detail of this principle will be for consideration in the later comprehensive treaty, and we would be willing to begin the second sentence of this article with the words "Pending the conclusion of the comprehensive treaty mentioned in Article 8" provided the words and the carrying on of commerce" are retained.
12. We agree to the proposed change in the first sentence of Article 7. This will avoid necessity for reservation in respect of Chinese consuls in India.
We see no reason for the omission of the words "and companies" in the second sentence, or for the omission of the words "any of" in the fourth sentence unless it is to serve a restrictive purpose with which we could not agree. Please enquire what the purpose of these proposed amend- ments is.
13, We have no objection to the proposed addition in clause 2 of article 8 or to an exchange of notes subject to the following observations on the matters for inclusion therein.
14. Since the Chinese Government are agreeing in Article 6 of the treaty to open all parts of the country to nationals of His Majesty or residence and commerce, we welcome the proposal to declare the abrogation of the "treaty port system" which confined foreigners for these purposes to certain cities. You should so inform the Chinese Government in these terms with a view to eliciting whether they have some ulterior purpose in raising this point of which we are not aware.
15. We agree to the abolition of the special courts in the international settlements.
16. As regards coastal trade and inland navigation, you should in the first instance speak to the Minister for Foreign Affairs on the lines of paragraph 3 of my telegram No.1485 [of November 17th]. In India as well as in the United Kingdom and the Colonies Chinese shipping is permitted to engage in these trades; and in further support of our contention that our rights in China have not in the past been unilateral you can quote Article 12 of the Burma Convention 1894, granting to the Chinese shipping rights on the Irrawaddy. If however Chinese Government insist on the inclusion of this subject in exchange of notes, we would be willing to comply on following lines. We would state that we do not reserve any unilateral treaty rights which we possess in respect of coastal trade and inland navigation. In return for this the Chinese Government would make a statement to the effect that while reserving the right to limit these trades to the Chinese flag they would permit the existing practice to continue pending further arrangements. For your own information we should be prepared in the last resort to accept the latter undertaking in respect of coastal trade only...
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