Papers Relating to the Foreign Relations of the United States, Transmitted to Congress, With the Annual Message of the President, December 6, 1886

No. 44.
Mr. Denby to Mr. Bayard.

Legation of the United States,
Peking , December 18, 1885. (Received February 18, 1886.)

No. 57.]

Sir: Before leaving the United States I was directed to report on the likin tax. During the short time I have been here I have given the subject all the attention that I could, and have availed myself largely of the information and learning of the secretary, Mr. Rockhill. I have now the honor to inclose a memorandum, which gives a complete history of the subject, with such recommendations as seem to me advisable.

I have, &c.,

CHARLES DENBY.

memorandum on likin taxation.

I.

Between 1643 and 1844 the Government of China, desiring to cover the losses arising to the public exchequer from the necessity of having to remit the land tax, wholly or partially, in the disturbed districts, and in view of the absolute necessity of raising funds for the pay of the soldiery (decree September 23, 1879) instituted the “likin” tax, or a tax of .001 on the tael.

It might be supposed, if we consider but the name (li, .001 of a tael, kin, money coin), that it was an ad valorem duty; but such does not appear ever to have been its character. In its present form, which dates from about 1880, when it became a universal tax, it is a specific rate per bale, piece, or picul, as the case may be. Originally of a temporary character (decree February 11–12, 1882), it has become a permanent and universal tax, which has gradually become intolerably burdensome to native and foreign trade alike.

The amount and mode of the collection of likin varies in the different provinces, in each of which this service is under the direction of the provincial high authorities. In each province there is a likin central office (Tsung Likin Chii) under the direction of a high official, and he establishes subsidiary stations throughout the province along the routes frequented by trade, and intrusts the management of each to a deputy (wei-yiian), who reports to the central office, and is independent of the local officials. Each deputy transmits his accounts to the central office, and there does not appear to be any means of controlling them. In many cases, especially at the large ports, the collection of likin on a certain article of trade is farmed out, the contractor paying a fixed sum per annum to the provincial authorities, generally a very small percentage of the sums collected, and retaining the balance for himself.

The likin barriers have gradually increased until they are thickly distributed throughout the provinces, the number of deputies (wei-yiian) deputed to manage them is excessive, and the expenditure thus unnecessarily incurred is very large. * * * The imperial commands have been issued directing governors-general and governors to apply themselves with genuine zeal to the task of withdrawing or amalgamating these collectorates. Habit and long custom have, however, in many instances, prevailed, and the desire of standing well with their subordinates has often induced their chiefs to help them with appointments to these collectorates. (Decree December 29, 1884; see also decree September 23, 1879.)

Great Britain, by the treaty of Nanking (August 29, 1842, Article X), founded the transit pass system, which has since been adopted by all of the treaty powers in. China, the object of which was to exempt by the payment of a transit duty (fixed at half the tariff duty) all foreign goods from all inland taxation.

This system would have been of the greatest assistance to foreign trade, as well as to native, but for the determined opposition of the provincial authorities. * * *

A few of the irregular or arbitrary modes of procedure of the local authorities in connection with foreign goods under transit pass may here be mentioned, and among these I will not even consider the categorical refusal of the local authorities (as at Kini Chan) to recognize transit passes, “upon the arrival inland of any merchandise protected by a transit pass the likin officials at the place of designation proceed at once to exact a ‘consumption tax,’ and it must be paid by either the seller or the buyer before the goods can be transferred. This tax is quite arbitrary, and upon bases quite unknown to the seller. It may be light and not appreciably advance the cost of the goods. It may also be and often is exorbitant, and amounts to a prohibition of sale without actual loss.

“When the goods have arrived at the terminus indicated in the pass, they become ‘uncertificated,’and, if forwarded further inland, must pay likin at every barrier passed. If twenty such barriers intervene between the point indicated in the pass and some city further inland to which it is desirable to transport the goods for a market, at every one of the twenty barriers likin must be paid.

“There are yet to be adduced evils in the system certainly not less than the foregoing. They are the uncertainty in valuation and the apparently arbitrary way in in which rates are decided upon.* * * Receipts for payment are refused, * * * so that there can be no proof of illegal exactions, if complaint is made.* * * I have known of 15 taels having been paid to get goods passed at Quai-Chow, while a memorandum of the payment of 1 tael 5 mace (tl. 1–5) was only affixed to the boat containing the goods.” (I. F. Shepard, United States cousul at Hankow to Minister Seward, No. 35, November 12, 1879.)

While the taxing of uncertificated goods certainly appears irregular, still it is a right claimed by China, as may be seen by reference to the memorandum of the Tsung li Yamên to the Chinese ministers abroad, in March, 1878, quoted further on.

A more convincing proof of how hopeless it is to expect a development of an import trade until some alteration takes place in the transit pass system is derived from the following list of goods sent up country from Takhoi under transit pass during the year 1884 (Clement F. Allen, H. B. M. consul, Takhoi, trade report for 1884):

White shirtings, pieces, 50; Yarn, piculs, 51.30; longells, pieces, 100; needles, mille, 280.

A proof of the baneful effect of likin taxation over foreign trade may be shown by the recent increase in the amount of likin levied on kerosene oil at Canton.

Under the tariff the import duty on kerosene oil is fixed at 5 per cent, per case, but since 1882 a likin has been levied on kerosene at Canton of 40 cents per case, on the grounds set forth in the annexed proclamation, by which the petitioner is granted the right to collect this likin in consideration of the annual payment to the provincial authorities of $31,000. In the latter part of 1884, or the commencement of 1885, another likin tax was imposed upon kerosene of 30 cents per case, thus making at the port of entry alone a total tax of 47½ per cent, as against 7½ per cent, as contemplated by the treaty for import tax and transit dues.

This case serves also to show how thoroughly worthless is the system, for supposing the normal importation of kerosene oil into Canton to be 500,000 cases, and this is believed to be a close approximation, the extra tax of 40 cents per case would yield the monopolist $200,000 per annum, whereas he only pays $31,000 per annum to the Government or about 6 per cent., the balance being retained by him.

One of the chief grievances which the Chinese authorities have against the transit pass system is the abuse which foreign merchants make of the privileges which the passes accord them, and the facilities they afford Chinese merchants, whose agents they are, of bringing from the interior under transit pass goods which they have no intention of exporting, and in the ownership of which the foreign merchant has no part.

The following case is a good example of the practice:

“Foreign opium imported into Shanghai is placed in bond and the duty of 30 taels per picul (133⅓ pounds) is paid when delivery is taken, and in some cases, to avoid the likin tax, which is a high one, certain foreigners clear the opium at the customhouse, thus representing that they are the bona fide owners. It is taken to a hong over which hangs their sign, and here it is retailed to the (Chinese) shop-keepers. For the use of his name the foreigner receives a commission on every chest so disposed of, and this whole system is simply a transparent fraud upon the revenue of China, so long as the present regulations exist.” (Acting Consul-General E. J. Smithers to Minister Denby, No. 154, November 19, 1885; see also for parallel cases Shanghai Taotai to Consul-General Mayers, August 15, October 16, 1876. Mr. Consul Shepard to Mr. Young, April 7, 1884. Mr. Vice-Consul Bergholz to Mr. Smithers, No. 95, July 27, No. 97, August 14, 1885; conf. also H. B. M. consul at Wuhu, trade report, 1884, p. 61.)

Putting aside the question of foreign trade, and only considering the likin question as part of the internal revenue system of China, we find that as a whole it works most unsatisfactorily, and that the abuses in connection with the stations for the collection of likin are very numerous. (Decree November 13, 1879.)

In an imperial edict of January 24, 1876, referring to the petition of the censor, Hwang Hwai Shen (published February 13, 1876), it is stated that the higher officials connected with the likin offices avail themselves of their positions and of the great number of officials attached to likin stations to provide expectants for office; that even if these officials commit no wrong, yet their excessive numbers alone cause very great expense, but moreover the greatest extortions by the watchmen and guard-boats are reported, as, for instance, the seizure of goods before they have arrived at a station, on pretext that they have been smuggled, or the stoppage of goods which have already been examined and are furnished with receipts for the dues paid. In other cases great sums have been extorted from personal luggage or from goods which are duty free, and a declaration has been demanded from the owner that no illegal payments had been exacted from him. Should he refuse to do so his goods are brought to the principal station and there detained. The owner is subjected to torture, and finally the goods are confiscated without consideration of the fact whether dues have been paid or not, or they are perhaps returned to him after a fine of eight-tenths of their value has been levied.

The censor Ko Ching, addressing the throne on the abuses in the likin collection in Kuang-si (Peking Gazette, April 20, 1881), says that all sorts of abuses are rife in the collection of the tax; for example, goods which remain unsold on the expiration of one hundred days are liabla to a second likin charge.

In a memorial from Chang Kai-Sung, governor of Kuei Chow (Peking Gazette, August 17, 1884), referring to the vexatious exactions in the collection of likin revenue, he states that three abuses must be specially guarded against:

• First. The vexatious taxing of porters and bearers of loads who are called upon, under the name of lo-ti or tax at the place of deposit to pay duty on the most trifling and petty commodities.
• Second. The vexatious delays that are caused by underlings who do everything to hinder the free passage of goods, and the heavy fines inflicted by collectors who put these fines in their own pockets.
• Third. Private taxation under public names, and the erection of subsidiary barriers where duties are levied a second time.

A censor, Hu Ting Kwei, writing in 1875, calculated that the likin on salt alone, if faithfully returned,” ought to yield 12,000,000 taels, and that the levy on miscellaneous goods should probably “be about the same amount. As it is, the likin on salt, opium, and miscellaneous goods does not probably yield over 18,000,000 taels. (See Jamieson, “The Revenue of China,” page 35.)

II.

The position taken by the Chinese Government in regard to the likin question is clearly set forth in a memorandum sent by the Tsung-li Yamên to the Chinese misisters abroad in March, 1878, and which they communicated to the different Governments to which they were accredited.

As regards likin the memorandum says: “Likin is continually objected to by foreigners. But is it not just as well known that Chinese merchants are opposed to it too, and that the Government regards it only as a temporary expedient? “Independent powers must be guided by national necessities in fixing their taxation. In these troublesome times the demands on the Government are very heavy, and it is impossible to avoid having recourse to special measures; we maintain that all such matters should be left to be determined by China herself, and that the foreigner has no more right to interfere with or object to them than China would have to interfere with or criticise the action of a foreign Government in raising loans or increasing taxes. If foreign merchants desire to escape the likin they can escape it. All they have to do is to supply themselves with transit certificates when taking foreign goods into the inferior or bringing native produce out of the interior; if they do not carry transit certificates they must pay the likin, for in the absence of transit certificates all goods are alike and indistinguishable and must in the interior pay likin according to the rule of the locality.”

And farther on the same paper, summarizing the position taken up by China on the question, says: “In the matter of likin and taxation generally we hold that; China, as an independent state, has the right to levy whatever taxes she pleases, in whatever manner she may think best, and we consider it unfair on the part of other Governments to question our proceedings or put difficulties in our way, seeing that we only collect special taxes because special circumstances call for them.”

To the arguments put forth by China it maybe replied that, if China, in claiming the sovereign right to levy whatever taxes she pleases, and, in such a way as best suits her purposes, asserts her right to interpret as she pleases the agreements by which she has entered the commercial union of nations; we must categorically deny it her, for this right belongs to none of the contracting parties. If, moreover, we admit her claim to subject foreign goods on which the full duty at the port of entry has been paid to such additional taxation as she may choose to impose, it is as if we allowed her the right to tax ad libitum foreign goods and virtually suppress foreign trade.

Referring to the transit question, the same memorandum remarks:

“As regards transit inwards foreigners have maintained that to say goods are exempted en route from a port to the place mentioned in the transit certificate is not enough. They have held that foreign goods which have once paid transit dues cannot subsequently be called upon to pay any local charge whatever. To this interpretation we cannot agree.* * * In a word, as we understand the inward transit privilege, a certificate only protects goods from charges en route from port to place; but this is already a great privilege, for on payment of transit dues the foreigner can at pleasure send his goods to any market, however distant, without further liability to taxation.”

This right of taxing foreign imports when they have become uncertificated cannot be admitted by foreign powers. It takes away nearly all the advantage of the transit pass system, and allows China to levy in very many cases likin on foreign imports to such extent as she sees fit, and thus exclude them from the market.

The position held by foreign powers is, that the transit dues once paid the goods are free from all other inland taxation of whatever nature it may be. They have been willing to see this transit duty increased to 5 per cent., but it must be the sole duty leviable from the moment the merchandise leaves the port of entry until it enters the consumer’s hands. “The duties once paid on goods at the port of discharge, their owners should have a right to carry them to the interior wherever they liked; so that wherever found the presumption would be that the goods were there rightfully, and that the customs officials were neither guilty of negligence or corruption in permitting them to pass duty free.” (O. M. Denny, United States consul at Tientsin, to Minister Seward, No. 29, December 24, 1879.)

In regard to native produce under transit pass outwards, the memorandum says:

“As regards native produce outwards, the case is just the same as with foreign merchandise inwards. The transactions differ, but the amount of the duty charged is the same, for just as a foreigner can take foreign goods to any part of China on payment of a full and half duty, so he can go to any part of China and thence take Chinese produce to a foreign country on payment of a similar full and half duty.”

But it must be borne in mind that “the produce that is entitled to transit privilege can only be such produce as is intended for foreign export.”

III.

The history of the negotiations between the foreign representatives, at Peking, and the Chinese Government in reference to the likin question are, briefly, as follows: In 1876 the German minister, Mr. von Brandt, brought up before the Tsnng-li Yamên the question of the right of China to levy likin within the foreign settlement of Shanghai (the only settlement at the time with defined limits) on foreign merchandise, having paid regular duty prior to its being entered for transit. This was a right claimed by China on the ground that local authorities at each of the treaty ports were allowed to levy dues, and that foreign concessions at the several open ports were still Chinese territory. (Précis of conversation between Mr. v. Brandt and the foreign office, 17th June, 1876.)

The negotiations resulted in the Chinese Government agreeing that “from and after the 1st day of the 1st moon of the 3d year Kuang Hsii (February 13, 1877), no likin taxes should be levied upon bona fide foreign merchandise imported by foreign merchants within the limits of the foreign settlements at Shanghai, whether sold to Chinese or foreigners. (Prince Kung to Minister Seward, December 12, 1876.)

By this agreement it appears that China did not intend to relinquish her right to levy likin on opium within the limits of any of the settlements at treaty ports; and she has exercised this right down to the present day with the approval and sanction on different occasions of the British and German ministers. (Article XLVI, British treaty of Tientsin, clause 3, section 3, Chefoo convention. Mr. v. Brandt to foreign office, 22d day, 10th month, 2d K. S.)

The issuance, August, 1885, by the Shanghai consular body, of legitimation tickets to likin runners has been a further acknowledgment on the part of the treaty powers of this right. The question has, however, been again brought under discussion by the British consular authorities asserting that the levy of likin on opium within the settlement was an infringement of treaty rights.

The new opium convention between Great Britain and China will settle the question by the levy of a communication tax of 60 taels per chest (exclusive of 30 taels import duty), which is to free the drug from all further taxation.

On March 20, 1877, Mr. von Brandt addressed a note to the Tsung-li Yamên, in which he requests it (1) to take the necessary steps in order that on German goods conveyed into the interior without a transit pass, no other duties be levied than those which existed at the time of the conclusion of the treaty; (2) to take care that in the district within the nearest customs station in existence, no other duties be levied but the import duties. To this note the Tsung-li Yamén replied on the 25th March, 1877, stating that Article XXVIII of the English treaty of 1860 is observed by all treaty powers. This stipulates that if merchants desiring to convey imports inland pay a single duty (shui) at the different secondary barriers (tze kow), no further duties shall be levied. Under tze how in the treaty all customs stations and barriers are to be understood. Consequently, if merchants do not desire to make the one payment they must pay shui at every customs station and likin at every barrier. Article I of the general regulations for open ports for 1861 also declares this. It is further said that goods to be conveyed inland, unless provided with a duty certificate, must pay on the way likin and other duties.

As to the second demand of Mr. von Brandt, the Yamên states that nowhere in the treaties is it claimed that the limits of the port extend to the nearest customs station.

Mr. von Brandt, in his reply to this note (April 11, 1877), states that he does not wish to commence negotiations on the questions referred to, and that Germany would prefer to settle the question of the levying of taxes on foreign goods together with the other treaty powers by a joint arrangement with the Chinese Government.

On the 23d of September, 1879, the diplomatic representatives of England, Germany, the United States, Holland, Peru, Italy, Japan, Russia, Belgium, Spain, and France held a meeting at Peking and decided to discuss, in common with the Chinese Government, the questions of likin taxes, the transit pass system, the judicial system, and official intercourse. (Minister Seward to Secretary Evarts, No. 4$2, September 24, 1879.)

On the 22d November, 1879, the foreign representatives presented to the Tsung-li Yamên a list of twenty grievances to which foreign trade was subjected. The grievances which have their source in the system of likin taxation are:

(1) That taxes of different kinds are levied on foreign imports at some ports as soon as they pass into native hands.

(2) That levies are made on foreign imports in the interior which are not properly transit, duties, or are in excess of the transit duties, which were levied when the treaties were made.

(3) That at several of the open ports, inward transit passes are either not issued at all or that the issue is fettered by arbitrary and unnecessary conditions.

(4) That inward transit passes when issued at the port are not respected in the interior of the Empire.

(5) That foreign imports forwarded inland under transit passes are often vexatiously detained by the officers at the stations in order to extort illegal fees or to further the interests of Chinese guilds, who have made special arrangements with likin collectorates or other Chinese officers.

(6) That the protection of the transit-duty certificate is denied to imports when they have passed the barrier nearest the inland market to which they may be consigned under the certificate.

(7) That the exercise of the right of foreigners to visit the interior for purposes of trade is unfavorably affected by the want of proper regulations for the temporary-storage or transport of their goods.

(8) That all over the Empire tax stations are constantly opened without due authority.

(9) That the tariffs under which inland duties are levied are neither published nor for sale.

(10) That very frequently no receipts are given for duties levied.

(11) That officials guilty of levying illegal taxes are rarely, if ever, punished.

(12) That the recovery of illegally levied duties, even if the fact itself be acknowledged by the Chinese authorities, is, if not impossible, at least very difficult, and in the best case attended with vexatious and unnecessary delay.

(13) That difficulties are frequently thrown in the way of foreigners asking for transit passes to bring down Chinese produce from the interior, and that in many instances such passes are either entirely refused or granted under conditions arbitrarily imposed.

(14) That on native produce, and especially on silk, duties are levied after sale and before the goods are delivered to the purchaser, and that the levy of these duties is farmed out to certain companies, which are enabled thereby to monopolize the trade in certain articles.

This list was followed on the 22d December by a note from Her Britannic Majesty’s minister, Sir Thomas Wade, the chairman of the committee on likin, requesting the Yamên to appoint a day for the discussion of the questions referred to in the list of grievances. The Yamên allowed the whole question to drag, but finally replied that they begged the foreign representatives to wait until they had answered the note of November 22, 1879, before asking them to appoint a day for the discussion of the questions involved.

On the 19th January, 1880, the Tsung-li Yamên sent its reply to the note of November 22, 1879. The Yamên states that “more than half of the twenty grievances mentioned in their excellencies’ note refer to the collection of the duties and transit dues. This Yamên has three plans in mind upon the subject:

• “(1) The present regulations may be carried into effect. The high provincial authorities will, on the one hand, be instructed by this Yamên to direct their officials to act in good faith in obedience to them, and, on the other hand, your several consular officers and merchants will be instructed by your excellencies to scrupulously obey them.
• “(2) The regulations heretofore agreed upon between this Yamên and his excellency the British minister, Sir Rutherford Alcock, may be put in force.
• “(3) The stipulations in the several treaties that foreigners shall not be subject to Chinese jurisdiction may be stricken out, and foreigners in China shall be subject to Chinese authority at all places and always, and be dealt with as Chinese subjects.”

On March 20, 1880, Minister Seward writes to Secretary Evarts (No. 632) that no progress has been made in the negotiations. “The foreign representatives appear disposed to believe that the present moment is inopportune to press matters, because of the assumed strength of the reactionary party.” Mr. Seward thinks it better to proceed with the discussion, and to draw away from it at a later moment if it should seem necessary for reasons to be advanced by the representatives.

On the 9th of April, 1880, the Tsung-li Yamên express their willingness to meet the foreign representatives whenever convenient, and the latter fix the 20th instant. At this meeting the diplomatic body stated the conference was not so much to define the intent of existing stipulations as to reach a basis for further stipulations which would be satisfactory to both sides. The Yamên agreed to take up the conference on these lines. (Minister Seward to Secretary Evarts, No. 665, April 23, 1880.)

Her Britannic Majesty’s minister, Sir Thomas Wade, who had been chosen chairman of the committee on likin, after several conferences with the Tsung-li Yamên on the question of the inland taxation of imports, reached the conclusion that China would be willing to assent to the imposition of a fixed duty (higher than the existing tariff), on the payment of which the goods imported would be exempted from all further taxes of every kind, no matter into what part of the Empire they might be carried. The rate of duty would probably be between 7½ and 12½ per cent.

Sir Thomas expressed, however, the fear that likin would nevertheless be laid to a greater or less extent on foreign goods so long as it should be laid on native goods. (Minister Angell to Secretary Evarts, No. 58, November 30, 1880.)

On the 13th December, 1880, the Tsung-li Yamên wrote to Sir Thomas Wade and proposed that the duty on foreign imports be fixed at 11.5 taels (11½ per cent.). On the 4th January, 1881, the foreign representatives rejected this proposition as unsatisfactory.

In the mean while the negotiations with the Yamên on the question of inland taxation of native produce under transit pass outward was being conducted by Mr. von Brandt. He had suggested to his colleagues that the Chinkiang rules of 1877 be taken as a basis, and he drew up the annexed scheme, which was accepted as a basis of discussion by the Yamên, who asked that time might be given them to refer the project to the high provincial authorities for their opinion on the question.

On the 27th September, 1880, the Tsung-li Yamên sent Mr. von Brandt the above-mentioned rules slightly amended, but in an interview which the German minister had with them on the 19th November they announced that the opposition of the provincial authorities to Rules II and III, 1 and 2, was so strong that they could not assent to them. The foreign representatives agreed, however (November 22), to urge these rules on the Yamên in a slightly-amended form, which they drew up in a meeting held January 4, 1881.

Mr. von Brandt seemed to be on the verge of a tolerably satisfactory argreement with the Yamên, when suddenly the Yamên came forward with so important and unacceptable modifications that the diplomatic body, in the meeting of July 11, 1881, agreed that it was useless to prolong negotiations on such a basis.

The Tsung-li Yamên insisted on two concessions: (1) Foreign goods admitted free of duty, shipped coastwise, should pay coast-trade duty; (2) Goods manufactured from native produce bought at the port should be subjected to the same restrictions as goods manufactured from produce brought down under transit pass.

While these negotiations between Mr. von Brandt and the Yamên were going on, Sir Thomas Wade was busy with the likin question. On July 7, 1881, he wrote to the Yamên that the foreign representatives could not accept the 10 per cent, import duty in lieu of likin, to which the Yamên had finally agreed, unless certain other provisions asked for in the collective note of the 22d November, 1879, were conceded. The diplomatic body was of opinion that if certain safeguards could be secured it would have been worth the while to have tried as an experiment, say for five years, the scheme proposed. But it deemed it necessary to have some sort of court of reclamation in which redress could have been claimed if likin had really been assessed. “But it must be confessed,” writes Minister Angell to Secretary Blaine (No. 217, September 24, 1881), “that it is very doubtful whether for some time to come the Government can prevent the levying of likin. The people hate the tax and would gladly be rid of it. But it is extremely convenient for the local authorities, and the whole weight of the influence of the provincial officials will be thrown in favor of the continuance of it.”

On August 1, 1881, the Tsung-li Yamên answered Sir Thomas Wade’s note of July 7, and stated that while they had agreed to the 10 per cent, duty, still, in view of the foreign representatives insisting on certain other provisions for the protection of trade in the collective note of the 22d November, 1879, any provisional experiment of the 10 per cent, duty scheme would be premature.

After this little or no progress was made in the negotiations. On September 18, 1881, Mr. von Brandt writes to Prince Kung that he is willing to continue the negotiations if they are carried on with a view of removing the Yamên’s complaint as to the illegal use of transit passes outward, and those of his colleagues and himself in 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.

Under date September 29, 1881, Prince Kung, replying to the above note, lays down as a general principle that “neither liberties nor restrictions on trade, inasmuch as they have not been expressly stipulated 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 deliberation before it is permitted to act accordingly.” (Prince Kung to Mr. von Brandt, September 29, 1881.)

After this nothing of any importance has occurred in the way of a settlement of the pending difficulties. Minister Young, writing to Secretary Frelinghuysen under date June 13, 1884 (No. 462), remarks: “The whole (transit pass) system sadly needs revision and readjustment, but it is too much to expect that the Government of China will take official measures to put an end to the violation of the treaties by the local officers in this direction until it has a practical assurance that foreign powers will no longer permit abuses of the privilege by their people.”

Again, Mr. Young, under date August 6, 1884 (No. 492), writing to Secretary Frelinghuysen, remarks: “The general question of likin concerns all interests in China, and must be a matter of joint action. I doubt if there will be any settlement until we have a new treaty, and one which will be unmistakable as to all questions of manufacture and trade.”

On the 30th of September, 1884, Mr. Secretary Frelinghuysen (No. 344), acknowledging Minister Young’s dispatch No. 492, writes: “In view of the long-standing controversy as to likin * * * it certainly appears desirable that some conclusion shall be reached which will remove the merits of the question from the domain of doubt.

“In case you find the way favorably open for the discussion of a special treaty engagement which shall concede what we have always claimed in the premises, you should use your good endeavors to promote such a result.”

On April 27, 1885, the diplomatic body at Peking had a conference at which the transit-pass system outwards was discussed, as well as the practice of levying taxes on foreign goods at the ports of entry for municipal and other purposes. The failure of the Chinese Government to observe treaty stipulations in these particulars was admitted, but as all communications hitherto made to the Yamên had produced no result, it was deemed best that the representatives of all the foreign powers at Peking should refer to their respective Governments for instructions, with a view of securing a modification of the present treaties or their more rigid enforcement. (Mr. Chargé d’Affaires ad interim Smithers to Secretary Bayard, No. 11, May 1, 1885.)

Summing up the results of six years’ negotiations between the foreign representatives at Peking and the Chinese Government, we, find that with the exception of the more rigid observance of some of the treaty stipulations in regard to transit passes, China has not abandoned one of the rights she has always claimed, and that under existing treaties nothing materially advantageous to foreign trade can be arrived at.

The recent opium convention between Great Britain and China, by which a duty of 110 taels per chest of opium is to exempt the drug from all further taxation, is a step in the way of the 10 per cent, duty on foreign goods proposed by the conference in 1880. An opportunity will thus be afforded us, in case the arrangement comes into force, of ascertaining whether this system can prove a permanent solution of the likin difficulty. The experience of late years teaches us that as long as the provincial governments of China are strongly opposed to a measure, the central Government is not in a position to enforce it, and we know that any measure which will occasion a reduction in the revenues which they derive from likin has and always will meet with their determined opposition.

A partial solution of the difficulty might be the abolition throughout China of likin on miscellaneous goods, but, for the reasons offered above, this would very probably work in a most unsatisfactory manner, even if meeting with the full assent and aid of the Peking Government. This, moreover, would be a concession to foreign trade greater than could be expected, for it would only foster foreign trade to the prejudice of the native one, which would still be subject to the likin taxation.

The natural solution of the difficulty is in the adoption by China of Western financial and commercial methods, which will give that elasticity to her revenue system which it most utterly lacks at the present moment. Unless China adopts a liberal and progressive policy, and, putting aside some of her prejudices and dislike for ideas and methods of which she has not been the originator, freely takes from civilized nations the means which they can offer her of developing the natural resources of the land and increasing its wealth, all suggestions in the way of radically ameliorating her condition will prove useless.

All of which is respectfully submitted.

CHARLES DENBY.