No. 77.
Mr. Young to Mr. Frelinghuysen.

No. 120.]

Sir: In my dispatch No. 69 I sent you a copy of a note addressed by the legation to his imperial highness Prince Kung, concerning Mr. Wetmore’s interests in Shanghai, and discussing the right of Americans to engage in manufactures at the open ports.

I have now the honor to inclose a copy of a reply from his imperial highness and my answer to the same.* * * The position of the Chinese Government on this question of the rights of foreigners to manufacture is expressed in these various communications with more frankness than has yet been shown. It is not now so much a difference of opinion as to the construction of treaty phrases as the dread of danger to the laboring interests and the revenues of China from the introduction of foreign machinery. His imperial highness points to our tariff system and our protection of home industries as a precedent, and intimates that any policy of commercial exclusion on his part would be following our example.

According to the prince, we impose a heavy duty upon certain manufactures in order that their unrestricted import should not interfere with our own laborers. China, on the contrary, imposes light duties. The question of manufactures is one involving, first, the revenues of the Empire, and second, the welfare of the working people. If, for instance, there should be an uncontrolled manufacture of cotton, silk and satin at a fort like Shanghai, the foreign machinery would so far surpass the antique and Clumsy methods now in use that millions of Chinese weavers would be thrown out of employment. This argument is presented with even more feeling in the letter addressed by the viceroy of Nanking to the vice-consul-general.

Chinese [says the viceroy], require many days to do what a foreigner can do in a few minutes. Chinese use much labor and expense, whereas the foreigner, saving money and time, can sell at any price. Of course we cannot compete with him. The consequences would be that the Chinese workmen would give up working; and what could I do with all these millions of men who have lost their work? The stronger would become the robbers, and the weaker beggars, and the local authorities would not be able to keep them in check. They would be robbing and stealing, and the state of affairs would be worse every day.

Of course, the only reply can be, “Here is the treaty and we stand by it.” At the same time there is something pathetic in the viceroy’s appeal. While the fallacy of these apprehensions is known to students of modern political economy, we should remember that the knowledge only came in recent years, and that there are even now ruling minds in states of the highest civilization who hold the opinions of the viceroy and the cabinet. The history of commerce and trade is the history of a struggle between these arguments and a more enlightened public opinion. The invention of the spinning jenny, to take a single illustration, which revolutionized the cotton industry and laid the foundation of the stupendous trade in cotton which England now controls, led triots. Mobs of anxious weavers, moved by fears like these which agtate the Nanking viceroy, searched the country and destroyed ever spinning jenny that could be found.

[Page 192]

It is difficult to answer or remove apprehensions of this nature, but in my response to his imperial highness I pointed out their groundlessness, and even intimated that there was more reason for fear on the part of the western nations as to the effects of improved machinery in Chinese hands upon their own industries. The cheapness of labor, the thrift, patience, industry and skill of this peculiar people once applied to the manufacture of cotton and silk by the methods used in England and France, would make it difficult for Manchester and Marseilles to hold their own. I note an apprehension of this kind in California in the form of a new movement demanding that Congress should prohibit the importation of all Chinese manufactures.

There is another feature in this correspondence worthy of scrutiny. His imperial highness sent recently to the foreign legations a reply to our joint note upon the construction of the treaties. It formed an inclosure to my dispatch No. 116. He now sends a special note to the American Government. It is an entreaty as well as an argument. It is an appeal to the United States to look with humanity upon China, and not join with the other powers in forcing upon her a policy which her rulers believe would mean privation to millions, the disintegration of her social system, the disbandment of her laboring classes to be no longer patient, law-abiding workingmen, but driven to beggary and rapine.

The Department will, I trust, consider that my reply to his imperial highness shows that the legation is not indifferent to this appeal, and not unwilling to consider the embarrassments of statesmen called upon to govern a vast population. At the same time this opens a large question and one that cannot be too carefully studied.

The legation, as you are aware, in dealing with China, has, by a custom that now has almost the force of law and tradition, acted in harmony with the other powers, furthering what is known as the policy of co-operation. Many advantages have come from this; foreigners have stood upon so uncertain a ground that union and confidence in each other became necessary for their protection.

I am disposed to believe from the tone of this dispatch that China would like us to abandon this policy, as we did in Japan, when we signed our latest convention with the Mikado. So far as it means the union of the foreign powers to maintain treaty privileges and protect their citizens against a vast, impulsive, suspicious population, it is the instinct of self-preservation, and we have had as much to gain by it as any other power. There was in some respects a departure from it when we inserted the opium clause in our treaty. * * *

The Government with whom we have been most in sympathy is Germany. This goes back to 1869, as you will see in a dispatch addressed by Mr. Fish to Mr. Bancroft, No. 148, and dated in August of that year.

The German chancellor, Bismarck, as it there appears, was anxious that America and Germany should act together in Asiatic questions, and Mr. Fish assented so far as to unite with the Germans in their efforts to obtain from China a port or an island as a coaling station. He also used his good offices to induce France during the war with Germany to consent to a neutralization of the Pacific Ocean, although the effect of such an act would have been to the advantage of Germany as the smaller naval power. In recent years Germany has shown activity in the East. Her policy has been eager, decisive, and peremptory, going so far within the past few weeks as to land troops on Chinese soil, and prevent the Chinese from carrying out their interpretation of the treaties. The advance of German influence in the East has been marked and [Page 193]steady. As Germany has never shown any yearning for colonial acquisitions, and her commercial interests in China are much less than those of England and the United States, I am disposed to regard her vigorous interference in Asiatic affairs as an expression of the national energy. * * *

England has large interests in China. She has the greater part of the carrying trade. She is bound to protect her opium monopoly. It is necessary for that protection that she should watch and direct every change in the fiscal system of this Empire. * * * The dispatch of Prince Kung, and the firmly expressed opinion of the Government, leave two courses open to the Department. The first is to stand by the treaties, and exact their scrupulous observance. The second is to take counsel with China as to her hopes and fears concerning foreign manufactures and make a new convention, granting her request for their suppression.

All of this is for the Department in its wisdom to determine. It only remains for the legation to insist upon the treaties and to protest against the extreme unfriendliness of such an action as the interference by the viceroy of Nanking with Mr. Wetmore’s business in Shanghai. In all our discussions with the cabinet it has been my aim to keep these two questions apart, namely, our rights under the treaties as they are, and China’s undoubted right to ask for an amendment of any covenant which experience proves to be oppressive.

In this spirit I have asked his imperial highness to consider the gravity of the recent transactions in Shanghai, about which I have written you so fully, and to note the sense of wrong felt by the legation as to the conduct of the provincial authorities. I have done this most disagreeable duty with reluctance, and trust that my manner of doing it will meet with your approval. I have the utmost sympathy and respect for the perplexities of statesmen, who have the severest task in the problems of government ever given to the rulers of men. I value the desire of the Chinese to be on terms of close intimacy and friendship with the United States, and their wish to seek our counsel and aid. I believe in the sincerity of this feeling, and that its encouragement will add to our influence in Asia. This has been my constant aim in performing the duties of minister, and I am strengthened in it by the knowledge that it expressed the wishes of the Department. You can, therefore, understand the regret with which it has been my duty to address the cabinet the dispatch which I inclose. I could not feel, however, that any less firm a tone would have been consistent with the dignity of the Government. I am in hopes that the prince will see that the emphasis with which I dwell upon the conduct of his subordinate officials is not inconsistent with a sincere friendship for China.

I have, &c.,

[Inclosure 1 in No. 120.]

Prince Kung to Mr. Young.

Upon the 24th November I had the honor to receive your dispatch in respect to the contemplated establishment of a cotton-yarn company by foreign merchants at Shanghai. In it you remarked that you could not accept the interpretation put by this office upon the words kung tso as found in the treaties; that the equivalent expression as found in the foreign texts was very broad, and included all the various avocations [Page 194]pursued by the several classes of men; that if this were not conclusive, further evidence existed in the fact that all the treaties contained a stipulation allowing foreigners to employ all classes of Chinese laborers at the open ports, and hence to allow them to engage in manufactures, &c.

In response, I beg to say that as I have addressed the several foreign representatives, expressing at length my views as to the meaning of the phrase kung tso found in the treaties, it is unnecessary to repeat that here. But as in the matter of the cotton-yarn company at Shanghai you hold that this phrase kung tso, as found in the treaties, authorizes the manufacture of native produce by foreigners, I must go further into the argument in order to supplement my earlier dispatch in points not therein touched.

While, then, the phrase kung tso is exceedingly comprehensive in its meaning, it must be understood to refer exclusively to manual labor, and cannot be held to include also the materials to which that labor is applied. In regard to the monopoly granted for a term of ten years to a Chinese company for the manufacture of cotton cloth, this action was taken under a decree from the throne by the northern superintendent of foreign trade, and was not an arbitrary assumption of power by local officials; appropriate regulations were framed to prevent other parties from engaging in such an enterprise, and these regulations included not only foreigners but also Chinese in their application. Hence, there was no discrimination against foreigners.

Your dispatch maintains that the establishment of the cotton-yarn factory would work no detriment to the customs revenues nor to native industries. It is a manifest, well-established fact that the rate of duties levied upon foreign imports in all countries has a close connection with the prosperity of the native industries in such countries. Thus your own Government, in order to develop its manufactures, levies a heavy duty upon all imports from foreign ports, to the end that native manufactured articles may not sutler by the competition in point of price. The tariff of duties as fixed between China and foreign powers is exceedingly light, and having been fixed, a change would be difficult. As foreign profits are very large because of this light tariff, therefore no permission to manufacture was embraced in the treaties, and in view of the interests of the revenue and native industries it would be difficult to grant any such permission now. Suppose, for example, foreigners were allowed to undertake the manufacture by machinery of silk and satin goods at the ports in China, the revenues of the Government would not only suffer, but a serious competition would arise with all Chinese who are exclusively engaged in silk manufactures with manual labor, and who depend upon the profits of this industry for the support of their families; and as a result they would be deprived of all means of support by the destruction of their business.

Your excellency will consider this question with an impartial mind, as though China were your own country, and you cannot fail to agree with me as to the merits of the controversy without further argument on my part; and I must beg you to instruct your consular authorities to notify the parties in interest to cease from the project in contemplation. This will be in conformity with the spirit of the treaties and will not interfere with the means of livelihood of Chinese subjects, and thus Chinese and foreigners, merchants and people, will each be allowed a means of support, which is an end much to be desired.

[Inclosure 2 in No. 120.]

Mr. Young to Prince Kung.

Your Imperial Highness: I am in receipt of the note of your imperial highness and their excellencies, the ministers of the yamên, dated January 22, 1883. In this note your imperial highness reaffirms the construction placed upon the treaties as to the meaning of the provision under which foreigners claim the right to manufacture at the open ports. You contend that the right therein granted was simply the privilege to engage in manual labor, but not to establish manufactures or to pursue any profitable industry.

You claim that Mr. Wetmore, in starting his company for the making of cotton yarn in Shanghai, was infringing upon a patent or monopoly granted by the northern superintendent of trade for the weaving of cotton cloth, and that his enterprise was therefore illegal. You call attention to our tariff system, and hold that the American policy of protection is one that China has a right to adopt in regard to her own industries. Finally, you express the apprehension that, should foreign manufactures, with the appliances of modern machinery, be permitted in China, the result would be disaster, ruin, starvation to millions of your countrymen. You ask me to consider these arguments with an impartial mind, and to issue orders to American citizens forbidding them to engage in manufactures.

I will say in the beginning that my Government is anxious to consider well, and in [Page 195]a spirit of sympathy and friendship, the problems attending the government of a vast population, and that it asks of China no advantage which it would not strive to return. In the same spirit let me revert to the various arguments contained in your dispatch.

The meaning of the treaty under which foreigners claim the right to manufacture at the open ports is clear. The explanation of your imperial highness is not sustained even by the accepted standards in your own language. There can be no question as to the French text, and that version, as your imperial highness is aware, must be taken as expressing the true interest of the parties in covenant. This view is strengthened by asking what was in the mind of the signers of the treaty. They meant to secure for their countrymen the privileges which are claimed, the right to manufacture and to enjoy the fruits of their labors. They felt that the exercise of that right would be an advantage to China, adding to her wealth, her revenues, her productive power. There was a tangible purpose in that, something that could be expressed in a treaty, and which statesmen would regard as worthy of a place there. Your imperial highness merely understands that this provision grants foreigners the right to engage in manual labor. No statesman would have signed so frivolous and valueless a provision. What we claim now is a natural, intelligible privilege. What you concede is nothing, and no such concession was ever in the minds of the signers of the treaty.
As to the proposed company for the manufacture of cotton yarn in Shanghai, your imperial highness says that this company was opposed because it was in contravention of a patent or monopoly granted to a Chinese company by the superintendent of northern trade. To this answer must be made that such a monopoly is not in accordance with the treaties Some consideration must be given to the argument that, in granting this privilege to the Chinese company, you are following the patent system in force in many western countries. It is a satisfaction to see this recognition of the advantage of a patent-law system. A policy of this kind, generous and comprehensive in the benefits of which all could share, would be regarded with favor by the United States. If such a system had been in existence, if Mr. Wetmore had known that, in venturing upon his enterprise, he was violating a law or a right, he would never have made the experiment. The hardship, so far as he is concerned, lies in this: Having in good faith, relying upon the treaties and the protection of your Government, entered upon a calling that would have benefited Shanghai, having in doing so incurred expense and trouble, he was suddenly forbidden to continue his arrangements. If China will adopt a patent law in consonance with the treaties, the nature of which all men can know, honest, well-meaning merchants like Mr. Wetmore will not be embarrassed But to promulgate a special law as an injury to a foreign interest is not a friendly proceeding, nor is it the way to establish a patent system that will benefit China and meet the recognition of the treaty powers.
Your imperial highness contends that China, like the United States, should be permitted to protect her own manufactures. My Government would never deny that undoubted right to any sovereign power, and has ever been willing, as was shown in the recent convention with Japan, to deal with the eastern nations in the most liberal spirit. But a policy of protection is one thing and a policy of exclusion is another, and we should look with concern upon a fiscal system in China which, under the pretense of fostering certain industries, was in reality closing the country again to the advantages of western civilization. In this, however, we are governed by the treaty. If the treaty proves burdensome and oppressive to China in the commercial system, the true way is to make representations to my Government through your legation. As the treaty now stands, all that remains is for us to observe it.
Your averment that the introduction of foreign machinery into China, and especially for the working in silk and cotton, would deprive millions of their livelihood and lead to endless disasters, I note with interest and sympathy. My Government would feel that we were doing China a most unfriendly act to propose such a policy, and would disdain any advantage that would bring misery upon your people. If the use of foreign machinery is fraught with such terrible consequences, I might ask your imperial highness why a monopoly has been granted to a Chinese company to introduce into Shanghai the appliances whose advent is so much deplored. With that, however, I have no concern; and I pass to the higher question involved. I do not see any reason for the apprehensions of your imperial highness either as to the effect of the introduction of machinery upon your industries, or as to the skill and ability of your countrymen in holding their own against competition. The same fear, namely, that improved machinery would ruin labor, has been felt in other nations, in England, France, and the United States. There is scarcely a labor saving invention now in use that has not met with the opposition of the working classes; in some cases with riot and bloodshed; and yet experience has invariably shown that the effect of new inventions has been to help the workingman and add to his ease and comfort and worldly advantage. Your imperial highness has only to look at what your countrymen have done in Hong-Kong, Siam, and Burmah, the East Indies, Netherlands, [Page 196]and California, to feel assured that Chinese industry and thrift can maintain themselves against any opposition, and that you have no reason to dread the introduction into China of the ingenious agencies of western science and art. I am convinced that the more this question is studied by your imperial highess you will fine that the policy laid down in your dispatch is based upon a wrong conception of the laws of industrial prosperity, and that experience will also show, as the history of civilization clearly teaches us, that the adoption of a generous commercial and fiscal system will not only benefit the laboring classes, but add to the wealth of the nation and the revenues of His Majesty.

Having thus considered in a friendly spirit the points presented by your imperial highness in response to my note, it is my painful duty to call your attention to Certain incidents and transactions in Shanghai which the legation must regard as the expression of unfriendliness towards our Government, an interference with the treaty rights of an American citizen, and an abuse of the forms of Chinese law to destroy American interests.

I have had occasion to call your attention to the proposed enterprise of Mr. Wetmore, an American merchant, doing business in Shanghai, for the manufacture of cotton yarn. Your imperial highness, in a dispatch dated October 18, 1882, gave your reasons for regarding this scheme with disfavor, and to this the legation replied in a dispatch dated November 23, 1882. I have not pressed the discussion of the questions which arose in these dispatches, because they were involved in the negotiations now pending between your imperial highness and the diplomatic body, as to the real meaning of the treaties under which foreigners claim the right to manufacture. The final decision of that debate and the ultimate accepted interpretation of the treaties will determine the right which Mr. Wetmore claims. I have permitted Mr. Wetmore’s case, therefore, to rest in abeyance, and not without reluctance, because he has suffered annoyance and pecuniary loss, and has been treated with injustice. I felt, however, that every consideration was due to the embarrassment of your imperial highness in determining an intricate and important question.

Matters were in this position, all questions in controversy the subject of friendly correspondence, all parties seeking an honest and amicable understanding, when news came to the legation that a secret order had been issued by the viceroy at Nanking for the arrest of the compradore of Mr. Wetmore’s firm and his removal to Nanking to be tried for having taken part in the Taiping rebellion.

If this compradore had committed any crime against China, and more especially against the person and authority of His Majesty the Emperor, it would have been the duty of American officials not to have interfered with the execution of your laws. Mr. Wetmore, however, represented to the legation that the compradore had been in his service for many years; that he was a man of character and fidelity, kind to the poor and loyal to the throne. His arrest, considering the important position of a compradore in foreign business houses, was another injury to the business of Mr. Wetmore, which had already suffered from the action of the taotai in publicly forbidding Chinamen to invest in the shares of this company. Mr. Wetmore further averred that the charge against the compradore, namely, that he had taken part in the rebellion, was frivolous and false, and that the real motive for the viceregal warrant was to punish the compradore for having taken shares in his employer’s company. It was difficult to believe that a merciful and magnanimous Government would seriously think of punishing an humble compradore who had never left his house, had performed all the duties of a good citizen and faithful subject, and had never before been charged with complicity in a rebellion which was suppressed seventeen years ago. It was equally hard to believe that so eminent a man as the viceroy, his long life rich with services to the state and crowned with honor and dignity, could permit such a charge against a fellow subject merely because he had made an investment in an American company.

While the motive inspiring the warrant was in doubt, this legation, refusing to credit the suspicions of Mr. Wetmore as to its integrity, there came further evidence to show that the real purpose of the viceroy in issuing it was to punish the compradore for taking these shares, and thus by an act of injustice and terror prevent other Chinese from following his example. Proposals were made to Mr. Wetmore to the effect that if he would sign a bond agreeing to withdraw his company and return the money advanced by the shareholders, the warrant against the compradore would be withdrawn. I inclose for the information of your imperial highness copies in Chinese text of these propositions.

These proposals left no doubt upon the mind of the legation as to the animating cause of the viceregal warrant, and were read with astonishment and indignation. If this compradore had been guilty of the crime charged against him, if there were reasons to suppose him guilty, and the Government was no longer disposed to view complicity in the rebellion with mercy, then justice should have had its course. To propose to arrest justice and allow a grave crime to go unpunished, merely because the criminal withdrew his shares in a certain company, was adegradation of your [Page 197]law. To do this, to injure an American citizen, was an act of violence in the highest degree unfriendly to my Government, and an infringement of the letter and spirit of our treaties.

This act was followed by other decrees. The first was a mandate forbidding Chinese houses from using the electric light; then came a decree directing the house of Russell & Co. to cease the manufacture of silk filatures.

The result of these orders was that the compradore was taken before the taotai and discharged. The decrees against the electric light and the silk filatures were withdrawn. But the effect was to inflict upon Mr. Wetmore great loss and damage and to do so in a way to bring contempt upon your laws and compel us to question the candor and friendship of your authorities.

There must necessarily follow grave considerations. There are questions between your Government and mine as to the exact meaning of treaty provisions. There are honest differences of opinion which may arise between any Governments, however friendly. You are striving and we are striving to come to an honorable understanding. If you are right, we accept the consequences. If you are wrong, your Government is held by its covenants. If it should be found that existing treaties do harm to China, you have only to make representation to my Government to receive prompt and friendly consideration, and to be assured, as I have before said, that the United States desire no convention with China the benefits of which are not reciprocal. This is the honest, candid, straightforward way of doing business, and in this spirit we have been trying to conduct our discussions. But while these discussions are in progress, for a provincial authority suddenly to issue a decree, the effect of which is to injure an American merchant, is an act of grave discourtesy, not alone to my Government but to the imperial cabinet. When, in addition to this, the compradore of an American firm is threatened with arrest upon a capital charge and offered his freedom if he will aid in the destruction of his employers’ business, thus showing that the capital charge was a dishonest and unfriendly pretext, it must be regarded as a most serious matter and one that cannot be viewed by my Government without sorrow and concern.

If the proposed company of Mr. Wetmore was regarded as a violation of the monopoly or patent granted to another company, the treaties offered a certain and honorable method of redress. It would have been proper to have asked from Mr. Wetmore a bond to guarantee any losses that his company might entail upon Chinese merchants, subject to an appeal to Peking. That would have been a lawful proceeding, and one which the legation would have approved. It is now my duty to ask from your imperial highness a rigid inquiry into these unfortunate transactions. I must request you to visit with just censure those officials who have abused the machinery of imperial justice to oppress and destroy an American interest. I must ask your imperial highness to instruct the provincial officials that, until there is an understanding as to the meaning of treaties, there must be no interference directly or indirectly with Americans doing business in an honest way. I must observe that the whole course of the officials in Shanghai threatens a most serious complication, and it is within the province of your imperial highness to end it by an act of enlightened firmness, honorable to both nations, and showing the world that the Government of His Majesty will never permit good relations so long existing and so highly valued by the United” States, to be put in peril by the caprice of provincial authorities.

I am sure in concluding this disagreeable task that my Government will be disappointed if I am not enabled at an early day to report that you have made a thorough investigation of these events and that you have made it impossible for your laws to be used to oppress American citizens claiming their just rights under the treaties. The question of reparation to Mr. Wetmore for loss and injury to his business is for the present reserved. Your imperial highness cannot fail to see that such a question must arise as a consequence of these extraordinary proceedings.

I have, &c.,