No. 71.
Mr. Holcombe to Mr. Frelinghuysen.

No. 36.]

Sir: Referring to Mr. Angell’s dispatch No. 212, of September 14, which gave the history of the negotiations between the diplomatic body and the foreign office upon the subject of “transit passes outward” for some months prior to June 20, I have now the honor to inclose several papers which have passed between the Chinese and Mr. von Brandt, and which serve to bring the discussion down to the present time.

These papers will serve to show you that no progress has been made in these negotiations since Mr. Angell wrote. It is unnecessary, therefore, for me to do more than to refer you to his dispatch, and to remark that my inclosures form a continuation of the discussion upon two points: 1st, whether foreigners have a right to engage in manufacturing enterprises at the ports; and 2d, as to the dues and duties properly leviable upon native produce bought or manufactured at the open ports and not exported.

I have, &c.,

CHESTER HOLCOMBE.
[Inclosure 1 in No. 36.]

Prince Kung to Mr. Von Brandt

On June 20 a despatch was received from your excellency stating that in view of the difficulty of coming to an understanding on the subject of native produce purchased by foreign merchants, the proper course would be to follow the treaties already in force. The dispatch also contained a categorical restatement of the points relating to the trade in native produce, &c.

With regard to your excellency’s assertion that native produce purchased by foreign merchants at the ports may be used for manufacturing purposes, or that it may be resold at the port, in its original or manufactured state, we have to reply that no explicit statement to this effect is contained in any of the treaties or regulations for trade; your excellency says, in respect to this that there is no reason why the treaties and regulations need not be followed; but we do not know which treaty or regulation it is that you say ought to be followed. The purchase of native produce by foreign merchants, if not exported, but if used for manufacturing purposes, or resold at the port, would be equivalent to allowing foreigners to do the same trade as Chinese merchants, and would be prejudicial to the business of the latter. Moreover, if the goods are not exported, the duty to which they are liable will be lost to the imperial exchequer. In view of this loss to the revenue, and prejudice to the interests of Chinese merchants, it is the duty of the local authorities, in observance of the treaties, and according to circumstances, to decide upon methods of procedure that will meet the necessities of the situation. And it is further desirable that this office should consult with your excellency and the representatives of the other treaty powers with a view to reaching some satisfactory mode of procedure.

In the draft presented to us by your excellency, you presented two propositions which you suggested should be put in operation as a trial; but as it is not clearly stated in any of the treaties and regulations that native produce purchased at a port may be used for manufacturing purposes, or resold at the port, we proposed to discuss [Page 118] with you another method of procedure which had suggested itself to us; but your excellency insisted that our proposition was in contravention of the letter and spirit of the plain language of the treaty, and widely divergent from the practice which had been followed for the last twenty years. We are puzzled to know how this can be.

If it were clearly stipulated in the treaties of the different powers that native produce purchased by foreigners at a port may be used for manufacturing purposes or resold at the port, one naturally thinks that the practice must already have been in operation ever since commercial relations have existed at the open ports. Where is the necessity for stipulating clearly at this time that it be introduced as an experiment? And why the necessity for stating clearly that if either of the parties sees any objections to it (he will be at liberty to denounce it)?

In our many consultations with your excellency, on this subject of regulations for the trade in native produce, we have not failed to be actuated by sincere motives in our consideration of the subject, always hoping that benefit might result to all parties. Hoping that your excellency will consider this subject with an unimpassioned mind.

[Inclosure 2 in No. 36.]

Mr. von Brandt to Prince Kung and the ministers of the Yamên

I have the honor to acknowledge the receipt of your imperial highness and your excellency’s note of July 19, referring to transit-passes outwards and trade in native produce in general, which questious have for some time past formed the subject of my negotiations with the Tsung-li Yamên.

I have placed this note, as well as the proposals handed to me by some of the ministers at the conference held at the Yamên on July 10, before my colleagues, the representatives of the other treaty powers, and I have been authorized by them to make the following statement to your imperial highness and your excellencies.

My colleagues and myself are of opinion that the text of the treaties give to foreigners full liberty to transact every kind of commercial business at the open ports, subject only to such conditions and restrictions as contained in the treaties themselves, or in the rules and regulations agreed upon conjointly since the conclusion of the treaties.

Your imperial highness and your excellencies say in your note of July 10, that such liberty of trade does not exist, because it is nowhere stated in the treaties that goods bought at the port might be sold there or used for manufacturing purposes. But besides that, where permission to trade is granted, such permission must be considered as a general one unless special restrictions are added to it. The rule that native produce carried from the interior to a port may be exempted by payment of the half duty from all inland charges only if bona fide intended for shipment to a foreign port (Chefoo convention of 1876, section III, Art. IV) is in itself sufficient proof that no such obligation to export to a foreign port exists for native produce having paid all inland charges, i. e., having been brought from the interior under payment of them, or having been bought at the port.

The foreign merchant has further not only the right freely to dispose of native produce to foreigners and Chinese alike at the port unless the produce be brought there under transit pass; but he is also entitled to forward it for sale coastwise (see Regulations of October 30, 1861, III, [Mayers, p. 204]) or inland (same Regulations, I, 3), provided he pays in the first instance export duty and coast-trade duty, and in the second one all charges imposed on goods in transitu by the provincial governments.

With regard to native produce being used for manufacturing purposes the French treaty of 1858, Art. VII, the German treaty of 1861, Art. VI, the Belgian treaty of 1869, Art. XI, and the Austro-Hungarian treaty of 1869, Art. VIII, give to the subjects of these powers the right to exercise at the open ports any industry they like, no restriction being attached to this concession, neither with regard to the materials to be used, nor to the disposal of the goods so manufactured.

These are the views held by my colleagues and myself with regard to the trade in native produce, and which we must maintain to express the principles laid down by the treaties and acted upon until lately, when illegal attempts have been made by the Chinese authorities at some of the open ports to put them aside. Under these circumstances my colleagues and myself, while willing and anxious to unite with the Tsung-li Yamên in the discussion and execution of any measures which may be deemed necessary for the protection of the Chinese revenue, or the better and more satisfactory execution of treaty stipulations, do not feel at liberty to enter upon a discussion of those rules and regulations laid down in the treaties which are rightly considered as the basis of the relations between China and foreign powers, and which they have [Page 119] neither the will nor the power to alter or to apply in any other way than explained in this note.

There are, however, two points in your imperial highness and your excellencies’ note of July 19, which my colleagues and myself do not wish to pass under silence, as by doing so your imperial highness and your excellencies might suppose that we agreed with the views expressed in them by the Tsung-li Yamên. The one is the statement that if the right freely to trade in native produce at the port or to subject it to a manufacturing process was contained in the treaties, it would not be necessary to introduce it now as an experiment, or to state expressly in the arrangement under discussion that either of the contracting parties should be at liberty to denounce it; the other, the opinion put forward in the note in question, that it was the duty of the local authorities in certain cases referring to the execution of the treaties to act according to their own views and to the necessities of the case.

With regard to the first point it will be sufficient to draw your imperial highness and your excellencies’ attention to the declaration made by me in my note of November 26, 1880, as well as on other occasions, that the rules contained in sections II and III, and referring more especially to duty-free goods and goods manufactured from native produce were nothing but a reassertion of treaty rights rendered necessary by the persistent efforts of local authorities to ignore them. The denunciation of the arrangement under discussion by one of the contracting parties would therefore have rendered inefficient not those treaty rights, but only such new stipulations as had been embodied in the same arrangement.

With regard to the second point, the independent interpretation of the treaties by the local authorities, your imperial highness and your excellencies will remember that it has been at the express and urgent demand of the Chinese Government that the discussion and settlement of difficulties arising under the treaties has been transferred from the local authorities to the central government and foreign representatives at Peking. Under these circumstances my colleagues and myself have the right to expect that it shall not further be left to the local Chinese authorities to substitute their own individual views for those of the central government, and thereby provoke discussions and conflicts not unlikely seriously to endanger the good relations between China and the treaty powers. My colleagues and myself must insist that in future in all cases referring to the execution of the treaties the provincial authorities shall not any more act upon their own views and responsibility, but upon and under the instructions of the central government.

Having thus laid before your imperial highness and your excellencies the views of my colleagues and myself on the question of trade in native produce, I have the honor to add that your imperial highness and your excellencies, in your note of July 19, have expressed the desire to see the negotiations continued. I shall be most happy to resume the pour parlers on this subject with the Yamên, provided they are carried on with the view of removing the Yamên’s complaints as to the illegal use of transit passes outwards, and’ those of my colleagues and myself with regard to the illegal attempts of local authorities to ignore the stipulations of the treaties referring to the treatment of duty-free foreign imports and native produce and the use or exportation of goods bought or manufactured in the port.

I avail. &c.,

VON BRANDT.

[Inclosure 3 in No. 36.]

Foreign office to Mr. von Brandt

On the 19th of September we had the honor to receive your excellency’s dispatch of September 18, by which you informed us that you had submitted our dispatch (of the 19th July) and our proposals (of the 10th July) regarding the treatment of native produce, which for some time past had formed the subject of deliberation between your excellency and our office, to your colleagues, the representatives of the other treaty powers.

What your excellency says in this dispatch, viz, that according to all the treaties foreign merchants have the right to engage in any kind of trade at the open ports, is, however, only a one-sided hypothetical argument. The tenor and meaning of the treaties and special regulations is quite clear and distinct, and it does not therefore seem to be allowable that by problematical assertions of this kind the danger of manifold misunderstandings should be created.

You further state that the freedom of trade is subject to such conditions and restrictions only as are explicitly contained in the treaties or in some special regulations. If, then, restrictions of trade, in order to be binding, must be explicitly stipulated, how, then, in the reversed case, could it be lawful to claim liberties of trade summarily and as a matter of course even without their having been explicitly stipulated? The [Page 120] matter lies rather thus: That neither liberties nor restrictions of trade, inasmuch as they have not been explicitly stated in the treaties, can be simply and positively claimed by way of inference, by the one or the other party, on the ground of one-sided opinions. Far from this. It is rather necessary that an agreement should be arrived at on the ground of mutual deliberations before it is permitted to act accordingly.

If, as your excellency holds, the simple non-existence of a stipulation in the treaties and special regulations, by which some branch of trade is forbidden, were sufficient in order to infer therefrom that merchants are at liberty to engage in it—in this case anything not mentioned in the treaties and special regulations (and there are a great many such things) would just on this account be permitted; yet what would the foreign powers say were China to take up such a position in her relations with them?

If in Section III, Article IV, of the Chefoo convention it is said that if foreign merchants pay the half duty and take out a transit certificate for this purpose they may then transport the goods to the port, but that this privilege cannot be claimed if the native produce in question is not the property of a British merchant, or if it is not really intended for conveyance to a port, this means only that none but native produce purchased by foreign merchants for exportation to foreign countries enjoys the privilege of the transit certificate and of the payment of the half duty; whereas when this is not the case such produce is subject to the regulations existing for the interior of China; but it follows by no means therefrom that native produce purchased at the port for which no transit certificate has been taken out need not be exported.

The third section and the third paragraph of the first section of the (in Chinese so-called) “General Regulations” (of October 30,1861) further relate to the treatment at the custom-house of merchandise which has arrived from another port, of a manufacturing process, and of a sale of goods which have not been exported at the port of purchase the “General Regulations” do not say anything expressly at all, and it is therefore not admissible to ascribe such a meaning to them.

Your excellency further appeals to Art. VII of the French, Art. VI of the German, Art. XI of the Belgian, and Art. VIII of the Austrian and Hungarian treaties in order to prove that subjects of the above-named countries are “at liberty to engage in industrial enterprises at the open ports;” but this expression relates merely to the execution of sundry labors in general, and means that Chinese and foreigners are permitted to engage themselves as laborers and workmen, and work; but with the manufacturing of goods it has nothing to do, nor does it signify that goods so manufactured may be sold as a matter of course. Each treaty stipulation, in fact, has its own individual meaning, and the different meanings must not be intermixed with each other.

The treaty stipulations convened with different countries must, of course, on both sides, be conscientiously adhered to, and if, in the proposals under consideration, it is said with regard to native produce bought at the port that they shall be put into force provisionally the reason thereof simply is because the treaties say nothing with regard to this point; that, on the other hand, the local authorities have the right in certain cases to adopt measures according to their own judgment. This is expressly stipulated in the treaties concluded with different countries, and is a point which ought always to be adhered to. So, for instance, with regard to the regulations now in course of deliberation in reference to duty-free goods and to the manufacturing of native produce, it must, of necessity, be stipulated that, if the one party should wish it so, the new agreement shall again be cancelled; for the authority of convening treaty regulations rests in the hands of our Yamên and of the representatives of the treaty powers; but whether something is advantageous or injurious can only be determined after the local authorities have put it during some time into practice.

As regards the treatment of native produce, we do desire as soon as possible to come to an understanding with your excellency and to put the new rules into force, but only under the condition that both parties should profit thereby, in order that what once has been stipulated should also remain in force for a long time.

The Prince of
Kung
and the Ministers of the Tsung-Li Yamên