to Mr. Frelinghuysen.
Peking, October 18, 1882. (Received December 1.)
Sir: On the 21st September I received from Mr. Cheshire, acting consul-general at Shanghai, a dispatch which I inclose. Mr. Cheshire recites the fact that Mr. W. S. Wetmore, an American citizen, resident at Shanghai, and doing business there, had organized a company for the manufacture of cotton yarn. In doing this Mr. Wetmore and his associates acted under the laws and in the enjoyment of a right which they believed to be secured to them by treaty. Shares were issued. Deposits were paid by shareholders to the amount of 100,000 taels, and the company was about to embark in active business. Thereupon a notice appeared in a Chinese newspaper to the effect that Mr. Wetmore’s proposed company was illegal in this, that it was in contravention of a monopoly for the manufacture of cotton cloth, which had been granted for ten years to a Chinese company by the Chinese northern superintendent of trade.
Chinese investors were forbidden to take shares in Mr. Wetmore’s company, “as it never would be permitted to go into operation.” As many of the shareholders were Chinese, and as this announcement inspired a sentiment of distrust, Mr. Wetmore’s enterprise came to a stand-still, and entailed upon him pecuniary loss. Mr. Wetmore asked the intervention of the acting consul-general. That officer reports to the legation that he called upon the taotai and presented the case. He pointed out to the taotai that many branches of manufacture had been established by foreigners in Shanghai, and that Mr. Wetmore had, in addition to his legal rights, only followed many precedents in forming his company.
The taotai informed Mr. Cheshire that he was acting in obedience to the minister superintendent of northern trade, and that his orders made it incumbent upon him to issue a mandate forbidding Chinese to invest in the shares of Mr. Wetmore’s company.
The taotai gave Mr. Cheshire a copy of the decree, a translation of which I inclose, and which presents the Chinese case. It is written by Chang, at present minister superintendent of trade, as well as viceroy of Chihli, who succeeded Li Hung Chang, when that statesman went into mourning. In this decree the minister superintendent states that Li Hung Chang, his predecessor, had, in view of the difficulties attendant upon any new business enterprise, and as encouragement to [Page 130]manufacturers, granted to a Chinese company the exclusive right to manufacture cotton cloth in Shanghai for ten years, and that he had done sounder “the patent, law existing in western countries.” This concession was submitted to the throne, and had received the sanction of the Emperor. The minister superintendent refers to the embarrassments accompanying the efforts of his company to manufacture cotton cloth, partly from the character of the native cotton, partly from the want of experienced artisans and proper machinery. An American named Danforth, “a diligent and careful man,” had therefore been employed to look into these difficulties, and the result of his efforts is that Mr. Danforth believes he can, by an improved loom and other processes, make good cloth out of native cotton. Orders had accordingly been given to carry on the enterprise, when “all of a sudden” his excellency learns that another “factory” is announced in competition.
His excellency does not overlook the fact that while his monopoly covers the manufacture of cloth the company of Mr. Wetmore simply contemplates the manufacture of cotton yarn, branches of industry as far apart as making shoes and tanning leather. But he meets this difficulty by the ungracious intimation that Mr. Wetmore and his associates have “clearly avoided styling theirs a cloth factory with the intent to covertly subvert Chinese interests. His excellency feels that if the new company is not suppressed his labor and trouble will be wholly spent in vain. Its success would prove greatly detrimental to commercial interests in China.” The taotai is therefore ordered to take necessary steps to suppress the new company and protect the monopoly.
The case of Mr. Wetmore is presented fully and clearly in letters from that gentleman which I inclose. Mr. Wetmore is the head of one of the largest mercantile houses in China, and a merchant of high standing. Before starting his company he called upon Mr. Denny, the consul-general, and was informed by that gentleman that there was no reason why it should not be organized, and mills erected in Shanghai for the manufacture of cotton yarn. Mr. Wetmore recites at length the obstacles thrown in his way by the Chinese, to which I allude above in referring to the dispatch of Mr. Cheshire. He avers that the effect of the taotai’s action has been to bring the enterprise “to a deadlock,” and unless he can have assurance of protection he is afraid he “will be compelled to abandon the project altogether.” Such an ending he fears would result in “serious consequences.” He had been acting in good faith as a business man seeking an holiest business purpose. He had the assurance of protection from his consul-general. Under this assurance two-thirds of the shares had been allotted, and machinery telegraphed for. There had been estimates for building and negotiations for land. Mr. Wetmore points out that foreign manufactures of acids, brick, leather, flour, iron-ware, matches, glass, and paper have been permitted in Shanghai. He naturally sees no reason why cotton yarn should be prohibited.
A further dispatch from Mr. Cheshire, dated September 23, recites certain facts and rumors in, reference to the Chinese company monopolized by the Government. * * *
Although these rumors have no bearing upon the point at issue as to Mr. Wetmore’s rights under the treaties, they have some interest as a part of the history of the case.
I have given the subject careful attention, anxious to secure Mr. Wetmore isrights, and anxious also not to do anything that might appear like an attempt to interfere with the internal affairs of China, and [Page 131]especially with any sincere effort on the part of Chinese officials to create new branches of industry, an effort which I would support with entire respect and sympathy.
With this view I read with care the order of the minister superintendent of northern trade, considering every argument advanced by him with interest and in a friendly spirit. But the case appears to admit of no cavil. The right of Mr. Wetmore is assured by treaty. There is no special provision in any convention between the United States and China, but the French treaty contains an express stipulation which Mr. Wetmore enjoys under the “favored nation” clause. In the convention signed at Tien-Tsin, June 27, 1858, and ratified in Peking, October 25, 1860, between France and China, there is this provision:
French subjects and their families may establish themselves and trade, or pursue their avocations in all security, and without hindrance of any kind, in the ports and cities enumerated in the preceding article.
In the treaty signed at Peking, November 2, 1865, and ratified at Shanghai October 27, 1866, between China and Belgium, occurs identically the same provision.
Feeling, therefore, that Mr. Wetmore had been denied his undoubted rights as an American citizen, and that the arguments of the minister superintendent were untenable, I addressed a dispatch to Prince Kung, which I inclose, calling the early and serious attention of his imperial highness to the subject. I pointed out the exact position of American citizens in China under our treaty, as well as their conceded rights under international law. I held that the “monopoly” granted by the superintendent of northern trade was void, as contrary to law. I reminded him that in the United States Chinese subjects had engaged in many kinds of manufacturing and mercantile pursuits, from which they had gained large profits, and that Mr. Wetmore was only asking a privilege and right which had been given in America to a multitude of the prince’s countrymen. I might also have shown the detriment to the best interests of China of the adoption of any system of exclusion or monopoly such as was proposed in Shanghai; that instead of benefiting manufactures, it would stifle them, and that it was a violation of the modern laws of practical economy.
As the question will lead to further discussion, however, it seemed best to reserve these considerations and rest our case upon our undoubted treaty rights.
As illustrating the possible feeling of his imperial highness upon the question thus presented to him, I would call your attention to the dispatch of my predecessor, Mr. Holcombe, No. 92, dated April 29, 1882. (See Foreign Relations, 1882.) In this dispatch Mr. Holcombe sends to the Department copies of correspondence between Mr. von Brandt, the German minister, as representing the diplomatic body, and the foreign office upon a case somewhat akin to that of Mr. Wetmore. The result of this correspondence as summarized by Mr. Holcombe was that the Chinese cabinet contended, first, that foreigners had no right to engage in manufacturing operations in China; and, second, that if they did so goods so manufactured must invariably be exported, and could not be sold. “In the opinion of the entire diplomatic body,” Mr. Holcombe continues, “there is no treaty stipulation which can furnish a just basis for either of these assumptions.” The apprehension was also expressed that there “was no present prospect of reaching a satisfactory arrangement.”
I attach much importance to this case, because it will revive in a practical [Page 132]shape, and as directly affecting American rights, the serious problem referred to by Mr. Holcombe, and which has been in abeyance since the date of his dispatch.
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If there should be any difficulty in convincing the cabinet of the error which has been committed by the minister superintendent in dealing with Mr. Wetmore, my belief and hope are that the ministers of the treaty powers will Unite with me in a general statement of our case, and insist that the real point at issue is not one merely affecting a commercial enterprise in Shanghai, but one that rests at the foundation of all commercial and business relations between Chinese subjects and the citizens of the western nations whose capital, enterprise, industry and genius have done so much to give to China the benefits of an advanced and enlightened civilization.
I have, &c.,