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16.

foreign rights acquired under the old régime but it considers

that they are modifiable when they conflict with the territorial

supremacy of the state. Freedom of trade, for instance, cannot

be maintained if rigid control is considered essential to the

well-being of the country. Exterritoriality is a conditional

aurrender of sovereignty subject to cancellation so soon as

foreign powers can safely trust the persons and the property

of their nationals to the laws of the country.

39.

The counter-argument of course is that international

custom demands that the views of the foreign powers should first

be sought and given due consideration, but it is a barren line

of argument for it leads to the reply that since the foreign

powers concerned decline to recognize her, anchoukuo has no

means of negotiation and therefore must act according to the

light as she sees it.

40. The net result is a vicious circle caught up in which

the foreign merchant has seen his rights disappearing and his

trade dwindling. It is not so much a matter of discrimination

as of the incompatability of totalitarianism with free trade and

the open door. The anchoukuo Government profess to welcome the

co-operation of the foreign business-aan and it is probable that they are sincere but the conditions attached involve too many risks, at the moment at all events, for the foreign capitalist lightly to venture in though, again, it must be admitted that the local subsidiary of the British American Tobacco Company,

which has formed itself into a Manchoukuo Company, has up to

date been well treated.

(4) Exterritoriality:

41. Cases arising out of exterritoriality have been so

fully reported by this office and the Harbin Consulate-General that only a brief summary is given here. The manager of the

Chartered Bank in Harbin was summoned to attend an examination

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