Mr. Denby to Mr. Blaine.

No. 1495.]

Sir: The question of likin has been very often discussed by my predecessors and myself. It is the most important commercial question with which the foreign representative in China has to deal, and therefore, in view of recent events, I beg to offer a few observations thereon.

No scheme for injury to foreign commerce could have been devised which would compare in efficiency with this system of internal taxation. When we look at the immense extent and fertility of China it will be readily seen that the foreign imports, which in 1890 amounted to Kk. Tls. 127–093–481 (United States currency $161,408,720.87), bear a small proportion to the amount that ought reasonably to be expected. I do not mean to say that foreign trade was entirely represented by this sum, because there was a great trade in junks, but this sum is the value of goods carried in foreign bottoms. Roughly speaking China has 400,000,000 people. Its extent is 1,350,000 square miles. Its population is, on the average, 288 per square mile. If there were no artificial barriers to the sending of foreign goods into the interior foreign trade would assume immense proportions.

Likin was devised in China about sixty years ago to meet temporary necessities. It has now become the favorite weapon of the Chinese for the crippling of foreign commerce. All the routes pursued by trade, whether by land or water, are interspersed at frequent intervals by barriers at which an internal tax is collected. I have seen it stated that between Canton and Pesé, on the West River, there are one hundred customs barriers in a distance of 900 miles.

A partial remedy for these difficulties was provided in the Chefoo convention and in our treaty of 1858 (See Treaties 1776–1887, p. 177). By this treaty merchandise imported to or exported from the interior might pay one-half duty and be absolved from payment of likin. The duty on foreign goods imported thus in the average was per cent. To entitle foreign goods brought from the interior to “transit passes” they must be intended for export.

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It is plain that this restriction is injurious, because the benefits of the local trade, which is vastly greater than the foreign trade, are thereby denied to foreigners. Another objection is that the transit passes cover the goods only to the exact point named and not to points of redistribution. The Chinese officials, in some cases, in order to discourage the use of transit passes and to secure the payment of likin to themselves, have reduced it to a point below 2½ per cent. Native merchants, on the other hand, have sometimes shipped sugar from Swatow to Hongkong and then brought it back to China as a foreign article, by which scheme it has avoided likin. I notice that something of the same character was recently done in the United States in order to save freight.

Likin difficulties are becoming so numerous in various parts of China that a radical change of the system is desirable, but it is by no means certain that any change can be effected.

As to opium, you are well aware that, by the additional articles to the Chefoo convention, signed at London, July 18, 1885, it is provided that this article shall pay a tariff duty of 30 taels per chest of 100 catties, and 80 taels per like chest as likin, and shall thenceforth be subject to no other tax when transported into the interior. If such an arrangement could be made as to all foreign goods it would result in great benefit to foreign trade, would prevent many local disturbances, and would give security to the introduction of foreign imports into the interior.

Singularly, when this scheme was inserted some years ago in what is called the “Alcock convention,” the boards of trade and the merchants generally opposed it and secured its rejection. They then preferred to rely on the transit pass system, and were not willing to submit to any additional burden on trade.

With the experience now before the mercantile community, I believe that it would be willing to sanction the payment of a fixed sum as likin, in addition to the tariff duty. At the meeting of the diplomatic body hereinafter mentioned, it seemed to be the general impression that good would result from such a change.

If the present system, as provided for in the treaties, were acted up to by the local authorities, there would be a measure of satisfaction but, notoriously, every possible hindrance is made to the use of transit passes. Ingrained in the Chinese nature, official and private, is the love of a “squeeze,” which the transit pass system prevents, as the taxis collected by the foreign customs.

I have received from the consul at Canton, Mr. Seymour, quite recently, three dispatches detailing action of the local authorities hostile to the transit pass system. On the 19th instant, I received from him a telegram, which reads as follows:

Since January transit pass trade squelched by likin notices seizures, arrests with viceroy’s approval.

In one of these dispatches he informs me that 900 cases of American kerosene, though covered by transit passes, had been required to pay 20 cents per case likin at the point of destination. This lot of kerosene was the property of a British firm; nevertheless, as it is an American product, I am justifiable in taking action.

In another dispatch he informs me that in 1891 there were sent from Canton to the interior about 3,000,000 gallons of kerosene, and through Pakhoi about 170,000, making in all 3,170,000 gallons.

The refusal of transit passes to some extent imperils this great trade.

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Of course, such refusal does not necessarily destroy the trade, because it has shown that it possesses vitality, and would probably survive the imposition of likin dues.

I mention, en passant, that the authorities have concocted at Canton a new device to injure the foreign carrying trade. They have reduced export duties on goods carried in native junks, and thereby aroused the ire of the Hongkong Chambers of Commerce, but this matter must be reserved for a separate dispatch, if one be necessary.

Mr. Seymour urgently requests, in a dispatch sent to the Department, of which he forwarded a copy to me, that the whole diplomatic body should take up the question of transit passes, the question being of common interest, etc. On receipt of this telegram and these dispatches, I had a consultation with the dean and procured him to call a meeting of the foreign representatives for the 21st instant, to take appropriate action. This meeting took place yesterday. The French, German, and British ministers had received dispatches and telegrams similar to mine.

The meeting resolved that identic notes should be sent to the yamên, complaining of the action of the likin authorities at Canton and demanding that the transit-pass system should be maintained in full force. A copy of the said note will be forwarded to you.

I have, etc.,

Charles Denby.