No. 33.
Mr. Young to Mr. Frelinghuysen.

No. 297.]

Sir: In various dispatches to the Department I have endeavored to keep you informed as to the growth of our petroleum trade, and of the policy adopted by the legation to insure its protection and encouragement.

The subject came to my attention in certain correspondence with the consul-general at Shanghai. That gentleman reported acts of interference with the sale in Shanghai and elsewhere, especially Nmgpo. I was led to apprehend that there would be a general assault upon petroleum through local Chinese agencies, with which we could not interfere.

I addressed the foreign office, and from the tone of the answer of Prince Kung I came to the conclusion that there was no opposition to petroleum on the part of the Government; that, on the contrary, the Government was disposed to encourage the trade; and that all we had to fear was the ignorance of minor officials, arising out of the conservatism of the Chinese character.

This opinion I expressed to the Department. But to fortify the legation in its judgment, I addressed to all the consuls within our jurisdiction a letter of inquiry as to the exact condition of the trade, whether it was increasing or decreasing, and what had been the effect of any hostile proclamations against its use on the part of the Chinese authorities.

The hope which I expressed in these dispatches has thus far been justified by events, namely, that “the objections arising from ignorance and fear” would exhaust themselves; that, in spite of official opposition, the trade has steadily grown, especially in the interior; and that it was the part of wisdom not to excite the animosity and suspicion of the authorities by undue remonstrance.

The legation, in a steady pursuit of this policy, has the gratification to say that we have had no report from any consular officer, with one exception, indicating a desire on the part of the minor authorities to interfere with the sale of petroleum. My hope is that the close of the year will show an advance over the imports of last year.

The conclusion we draw from this is that petroleum is working its way into the confidence of the people, and that no action on the part of the legation is necessary, except to watch the course of trade and not trouble the Government.

I said that with one exception the consuls had made no report indicating a disposition to interfere with the trade. This exception has been found in Canton. It seems from the reports of Mr. Consul Seymour that the governor of Canton has granted to a local company the monopoly to sell petroleum.

I have had occasion, in my correspondence with Mr. Seymour, to deplore the existence of this monopoly, as an experiment which could be of no ultimate advantage to China and might in the end injure our trade. I have counseled him to do what lay in his power to terminate it, but could do no more than give counsel, as we had no ground for formal [Page 49] remonstrance. After the petroleum passed into the hands of the Chinese the merchants could sell it at the price they pleased.

It seems, however, that the governor, in order to increase the revenue, imposed a tax upon its sale, or rather its importation into Canton, of 40 cents a case. Under the treaty such a tax is inadmissible, for it virtually increases the impost 300 per cent. The treaty admits petroleum at a duty of 5 per cent, ad valorem. This additional tax quadruples that sum.

I still cherished the hope that Mr. Seymour, by personal representations to the Canton viceroy, could show reasons for removing the tax.

As Great Britain, through her Hong-Kong interests, was concerned, I conferred with Sir Harry Parkes, Her Britannic Majesty’s minister. In my first interview with his excellency I found, to my gratification, that he was disposed to act with our legation, but he was just taking charge and had not time to look into the matter. In my second interview he informed me that he was about to go to Corea, and would be gone for some weeks. I therefore resolved to address the yamên alone.

In my note to his imperial highness I present the question in two phases. First comes our undoubted right under the treaty to resent any action on the part of the Government which violates the treaty, and to demand from the viceroy the restoration of the sum unjustly levied, with interest upon the same at the rate current in Chinese money markets.

The language of the treaty upon which I relied read as follows:

At each, of the said five ports, citizens of the United States lawfully engaged in commerce shall be permitted to import, from their own or any other ports, into China, and sell there, and purchase therein, and export to their own or any other ports, all manner of merchandise of which the importation or exportation is not prohibited by this treaty, paying the duties which are prescribed by the tariff hereinbefore established, and no other charges whatsoever.

Having made this demand in the most positive manner, it seemed wise to call the attention of his imperial highness to other features of the question as they concerned the Chinese themselves: that the trade was an advantage to China; that it interfered with no interest, was a blessing to the poor, as had been found in other countries; and that any effort to stifle the trade by these vicious local monopolies would be a serious loss to the imperial revenues.

* * * * * * *

The Chinese authorities are considering with care the propriety of certain general rules governing the sale of petroleum, and especially the grade or fire test which should be exacted from imported burning oils. In this question, one of much importance, I have taken a deep interest. To impose a higher test than is accepted in Japan or in European countries would injure the trade.

* * * * * * *

It would be an advantage to the petroleum trade if we could induce the Chinese Government to adopt careful and at the same time not restrictive rules as to its importation and sale, such as are seen in India and Java, and I hope in Japan.

We have no right to interfere with the rights of the Chinese to interpose proper sanitary and police regulations upon the sale or use of any article that may do their people harm.

If they feel that petroleum does harm, leads to conflagrations, as has happened in densely settled communities (the houses built of slender, flimsy, combustible material—not houses in reality, but the camping [Page 50] grounds of one generation, and only intended to serve its time), we must expect opposition.

Advice and experience may control that. Better than advice and experience would be for those who direct the petroleum interests at home to take special pains in educating the people to handle it. * * * The burning oil should not be of too low a grade. The fire test should be as safe as that imposed upon oils in America.

Pains should be taken to see that the people were supplied with lamps perfectly safe and at the same time cheap. This does not mean that the exporters of oil should make and sell lamps, but they should see that a lamp suited to the Chinese market was either made at home or the people here taught to make it themselves.

And in this, those interested in petroleum must consider that China has large classes of very poor people. So carefully have these thrifty, patient, and ingenious people handled the conditions of life, that what you regard as poverty at home would be “living in comfortable circumstances” here. To supply the wants of that class should be the aim of the petroleum interest, and if that problem could be solved there would be a vast trade.

In the month of December last I addressed a circular to all the consulates.

* * * * * * *

The interesting information which this dispatch elicited was of so much value that, as I am hopeful of confirming the impression that there has been no strenuous opposition to petroleum on the part of the local officials, and that none would be shown during the year now coming to a close, I have ventured to send to the consuls another dispatch asking for information.

Trusting that my action in the various phases of this most important question may meet with the approval of the Department,

I have, &c.,

[Inclosure in No. 297.]

Mr. Young to Prince Kung.

Your Imperial Highness: Several reports have been made to this legation by Mr. Consul-General Denny, at Shanghai, Mr. Consul Seymour, at Canton, and certain American merchants doing business at these ports, in reference to the action of his excellency Viceroy Tseng, predecessor of his excellency Viceroy Chang, the present incumbent at Canton.

From these reports the following facts appear:

The United States merchants have been sending to China shipments of petroleum, which, as your imperial highness knows, is not only one of the largest and most valuable of our mineral resources, but a valuable part of our commerce with China.

As a fact, I may say that we supply petroleum to all the world. A recent discovery, in general use for less than a quarter of a century, it has been found one of the most beneficent agencies in nature, as a burning oil, a medicine, a fuel, and in other forms.

The apparently inexhaustible quantity found in the petroleum regions has made the production so cheap as to bring the cost within the reach of the poorest classes.

This is shown in the consumption of the oil in other Asiatic countries, especially in Java, India, and Japan, where its introduction has done great good to the poor.

Under the treaties the duty upon petroleum is 5 per cent, ad valorem, and American merchants are entitled to import it, paying this rate and no more.

[Page 51]

This tariff has prevailed and now prevails at all the ports of China open to foreign trade, with the exception of Canton.

The former viceroy, some months ago, directed the imposition of a local tax upon all petroleum received in Canton of 40 cents a case. This tax is in addition and four times as large as that authorized by the treaty.

It was imposed, also, without giving the merchants any notice, so as to guard them in ordering shipments from home. It has thus entailed severe loss, amounting in the case of one firm to several thousand taels.

It furthermore seems that this tax has grown out of the fact that the recent viceroy granted to certain merchants in Canton the monopoly of selling kerosene for a yearly payment of $31,000. From this monopoly they gain a revenue of $200,000, at the expense of the imperial treasury, in diminishing the revenue that would accrue from petroleum in the ordinary course of a great and increasing trade, and which can only waste and die under this new burden, and also the comfort of your poorer people, who, because of this burden and the withdrawal of trade sure to follow it, will be unable to use petroleum.

The only expression of opinion I have been enabled to gather as to the reasons for this act is found in a copy of a letter addressed by his excellency Tseng to the British consul at Canton.

“The viceroy would observe,” says his excellency, “that once foreign goods have entered China and become the property of Chinese merchants, the method and amount of their taxation are matters wholly and solely within the discretion of China.”

Your imperial highness will see at a glance that the question is far different from that presented by the viceroy. In Article V of the treaty signed in 1844 by my predecessor, Mr. Cushing, and his excelleney the late Tsi Yeng, acting in the name of the throne, it is especially provided:

“At each of the said five ports, citizens of the United States lawfully engaged in commerce shall be permitted to import, from their own or any other ports, into China, and sell there, and purchase therein and export to their own or any other ports, all manner of merchandise of which the importation or exportation is not prohibited by this treaty, paying the duties which are prescribed by the tariff hereinbefore established, and no other charges whatsoever.”

Under the provisions of this treaty American merchants may sell or purchase any manner of merchandise not forbidden by treaty, paying the duties prescribed, “and no other charges whatsoever.”

In Canton, therefore, we have an undeniable and flagrant violation of this treaty. A tax has been imposed virtually adding 300 per cent, to what the law requires.

It is, therefore, my duty to demand from your imperial highness the abrogation of this decree of the viceroy, as an invasion of treaty engagements.
A return to the merchants who have suffered from this illegal act of the sums so exacted, with proper interest upon the same, to the end that no loss may fall upon them because of the action of the viceroy and the Chinese who hold the Government monopoly.

These are the only questions in which my Government has a direct interest. But one or two observations may not be without value as to the nature of the monopoly created in Canton. I have referred to the beneficent nature of petroleum; that it is one of the blessings of modern society, and that China has much to gain by its universal dissemination. China is far behind other Asiatic nations in the enjoyment of this valued product. The figures show that Java, with a population of 19,000.000, imports annually 1,900,000 cases; Japan, with 26,000,000, 1,800,000; and India, with 240,000,000, 1,500,000.

The low proportion of the Indian demand may be partly accounted for by the extreme poverty of large numbers of the Hindoos, who have difficulty in obtaining the means of existence. China, a rich country, with unbounded resources and a wider distribution among the people of the means of life, and a population believed to be far larger than that of the other three countries combined, takes only 900,000 cases of petroleum, 1,000,000 less than Java, 900,000 less than Japan, 60,000 less than India.

If monopolies like those in Canton are created, your imperial highness cannot fail to see that you are imposing a new tax upon your people. If petroleum were an article which your own mineral resources could supply; if there was anything in China which would do as much good at so low a price if it could be manufactured; if there were any Chinese interest to be served by it, this legation could look with forbearance upon any attempt to nourish and protect your interests.

It is a product of nature. It competes with no Chinese interests or industry. It is entirely for the advantage of your people, as it has proved to be to all classes of people throughout the world. There is every reason, therefore, why monopolies like the one in Canton should be suppressed. The first is the injury to your own people in keeping from them an agency that would add so much to their comfort and happiness. The second is the injury it must do to your treasury. We have a large trade, the revenue from which is an important factor in His Majesty’s exchequer. Were petroleum [Page 52] to be consumed throughout China in the same proportion as in Java and Japan, the trade would grow to a vast extent, to your enhanced gain. These monopolies encouraged, this profit to China would disappear altogether.

I volunteer these considerations to your imperial highness, not that they have any special bearing upon the immediate question which inspires this dispatch, but I am persuaded they will strengthen your imperial highness in your natural inclination to take an enlightened view of a most important subject. My duty is to point out to the cabinet the very grave wrong that has been done to our interests in Canton by the undeniable violation of treaty, and to repeat my demand that the additional tax be withdrawn from petroleum in American ships, and that what has been unlawfully exacted shall be repaid without delay, and with interest, at the rate now current in the money markets of China, from the time it was imposed.

In making this communication, I tender, &c.,