Foreign Relations of the United States, 1901, Appendix, Affairs in China, Report of William W. Rockhill, Late Commissioner to China, with Accompanying Documents

Mr. Rockhill to Mr. Hay.

No. 114.]

Commissioner of the United States to China,
Peking, June 11, 1901.

Sir: The diplomatic corps held a meeting to-day to consider the question of the revenues to be set apart by China for the payment of the interest and amortization of the indemnity debt, the discussion of this subject having been suspended sometime ago on account of great divergence of views between the various representatives.

The French minister stated to-day that he was authorized by his Government to examine the resources of China best suited to this purpose; that his Government believed that revenues which could be placed under the control of the Chinese Maritime Customs presented the best guaranty, and that it would, therefore, be pleased to see the tariff on imports increased to 10 per cent. If, however, this could not be, the French Government was willing to accept the revenue derived from the salt gabelle, which had been offered for this purpose by the Chinese plenipotentiaries in their note of May 11, 1901, copy of which I inclosed you in my dispatch, No. 86, of May 16.

The Russian minister stated that he had the same instructions; that his Government also desired an increase of the tariff on imports, but would accept the revenue offered on the salt, on condition that in case the payments on account of interest on the indemnities were not regularly made, the powers would consider the eventual increase of customs dues on imports up to 10 per cent, the increase derivable from this source to be entirely affected to the payments on account of the new debt.

I stated that the Government of the United States agreed with the French and Russian Governments in considering that the best possible security for the payments on account of the loan would be revenues placed under the control of the Maritime Customs, and that it would agree to an increase of the tariff to 10 per cent on the following conditions:

• First. General revision of the tariff and conversion of ad valorem into specific duties.
• Second. Removal of the prohibition on the exportation of rice.
• Third. Abolition of all likin, including transit dues and all inland taxation of every kind on all foreign imports.
• Fourth. Revision of the tariff of likin charges on native produce destined for exportation, especially tea, raw cotton, and silk, and other important articles of export trade; and
• Fifth. Participation by the Chinese Government in improvements of the waterways leading to Shanghai and Tientsin.

These suggestions of mine had been made known to the representatives of the powers a few days ago, in a memorandum which I had submitted to them individually, a copy of which I inclose herewith for your consideration.

The Japanese minister fully approved of the suggestions contained in my proposal, and submitted the advisability of an international committee being appointed to carry out the revision of the tariff on the lines indicated by me. Until the completion of the work of this committee import dues would be levied on an ad valorem basis.

The British minister objected to any partial reduction of the likin. His Government, he said, would only consider the total abolition of the whole system, besides a number of other compensations, including river improvements on the Shanghai and Tientsin rivers, and also on the Yangtze, protection of trade-marks, and probably other questions, as compensation for the increase of import duties to 10 per cent. He objected, furthermore, to my proposition for the reason that part of the likin was already pledged for the payments on account of the Anglo-German loan of 1898., and that the transit dues, of which I ask suppression, were also hypothecated with the general revenues of the customs.

He contended also that the elevation of the tariff on imports would not supply sufficient revenues to pay the annual sums needed, which will amount to a little under 19,000,000 taels. The salt revenue offered by the Chinese Government seemed to him to be the best fund to apply to this purpose, and offered sufficient security.

In view of the strong opposition I met with on the part of the British minister to consider any partial abolition of the likin, and of the general disinclination on the part of all my colleagues to avail themselves of the opportunity offered them now to settle any of the questions affecting trade, I felt compelled to accept the revenues offered us on the salt gabelle, to wit, 11,000,000 taels a year. These, added to the amount which will probably be derived from the native customs at the treaty ports when placed under control of the Maritime Customs, plus the available balances in the hands of the Maritime Customs, will make up a sum of 17,000,000 taels a year.

All the ministers agreed, furthermore, with the exception of myself, to raise the tariff on imports to 5 per cent effective ad valorem. This will give about 2,000,000 taels a year additional. This I declined to agree to, and stated that the commercial compensations we would ask would be the same as if the tariff were raised to 10 per cent. Finally, to bring the matter to a close, I agreed to accept, subject to your approval, and as compensation for our accepting a 5 per cent effective:

1. That the present customs dues on imports should be converted from ad valorem into specific ones, and that an international commission should be appointed for this purpose; pending the results of this work all customs duties on imports shall continue to be levied on ad valorem basis;

2. The improvement of the waterways leading up to Shanghai and Tientsin, with the financial participation in this work of the Chinese Government; and

3. That the regulations at present in force concerning inland navigation by foreigners for purpose of trade should be revised so as to open this trade to all classes of shipping.

This latter provision met with the strongest opposition from the Russian minister, who opposed it because it tended to reopen discussion at a moment when it was most desirable to bring negotiations to a close. * * * The revision I asked for would be of great value to Great Britain, Germany, France, and Japan, and would tend to improve trade generally. I inserted it more to secure the support of my colleagues from those countries on the other points than for any direct advantage our trade would derive from it. * * *

The revision of the tariff on the lines indicated is one of the desiderata you mentioned to me in your telegram of April 11 last, as is also the revision of the inland navigation rules and the conservancy work on the rivers. I trust, therefore, that my action may meet with your approval. I regret deeply, however, that more could not be done for trade interests at the present moment, but all my colleagues are instructed to keep the settlement of the indemnity question separate from commercial ones. This, of course, will ultimately prove detrimental to a satisfactory settlement of the latter, for a powerful leverage on China will be lost.

The Russian minister submitted his proposal concerning the eventual increase of the tariff on imports in the following terms, which met with no objection from the representatives of the powers, and which I submit to you, subject to your approval. It is as follows:

The diplomatic corps proposes that in case of irregularity in payment on the part of China the deferred payments on account of the loan shall be guaranteed by the eventual raising of the customs dues on imports up to 10 per cent. In this case the increase of revenue thus produced would be entirely applied to the loan.

It is nevertheless understood that each Government shall have the right to formulate its reserves when the discussion of the eventual increase of the duties on imports above 5 per cent ad valorem is about to be undertaken.

I have the honor, etc.,

W. W. Rockhill.

[Translation.]

Memorandum presented to the Diplomatic body by the United States Plenipoteniary.

The commission charged with studying the question of the payment of indemnities, after devoting its attention to an examination of the various Chinese revenues which might be used for that purpose and inquiring into the methods of administration and the possibility of exercising any control over them, expressed the opinion that “le revenu le plus sûr de la Chine est constitué par les douanes maritimes sous le controle d’ une administration étrangère. Les événements de 1900 en ont montré la solidité.” * * *

If, as is the case, other Chinese revenues than those collected by the maritime customs must be applied to the payment of the interest on the indemnities, and if the powers remain absolutely opposed to any foreign interference in the administrasion of China’s revenues, then the only guaranty we can possibly get, and guaranty we should have, that the pledged revenues will be honestly collected and devoted to the purpose of the debt, is to place them under the absolute control of this reliable service.

The representatives of the powers and the Chinese Government are in agreement that the customs duties on native shipping shall be collected and the service generally managed at all open ports by the maritime customs. It is confidently expected that in their hands this revenue will amount to nearly 5,000,000 taels, which, if we may judge by the success which has attended its collection at Kowloon and Lappa by the foreign customs, may be still considerably increased, perhaps doubled or trebled, within a few years.

It has been furthermore suggested by the Chinese Government, and most of the representatives of the powers accepted the suggestion—in principle at least—that the customs tariff on foreign imports should be raised to an effective 5 per cent ad valorem. But if this measure were agreed to by all the treaty powers, it would still only produce a fraction of the sum annually needed to meet the payments on account of interest on the indemnities—over 65 per cent of the amount would still have to be provided for.

Another suggestion made is that the customs dues on imports should be raised to 10 per cent. Basing the calculation on the average returns for the last three years (1898–1900), and excluding from its operation rice and opium, we find this would probably yield an annual increase of 11,500,000 taels, which, added to the unassigned balance of revenue of the Maritime Customs, plus the customs on native shipping, would produce very nearly 18,000,000 taels a year, the amount which will probably be needed for the payments on account of interest on the indemnities. If this amount should fall short in the next few years, while the administration is being organized, it is always possible to take the small balance needed from the salt gabelle, or such other source as the Chinese Government might agree to pledge for this eventuality. But, for the reasons stated above, this seems highly improbable, and it is expected that a large surplus will be derived from these sources in a few years.

The raising of the import duties to an effective 5 per cent ad valorem, or to 10 per cent, is, however, opposed by some of the powers and by the whole foreign mercantile interests, unless offset by the removal by the Chinese Government of some of the obstacles in the way of trade extension.

The principal desiderata of the foreign commercial world are:

• First. Abolition of all likin, or if that can not be secured, the reform of the likin administration and the regulation of likin dues.
• Second. Revision of the tariff and the substitution of specific for ad valorem duties.
• Third. Revision of the regulations now in force for the navigation of inland waters by foreign ships for purposes of trade.
• Fourth. Improvement of the waterways giving access to the more important commercial cities.

Should the powers agree to an increase of the tariff on imports to 10 per cent, it is suggested that the following compensation be insisted on from the Chinese Government:

• First. General revision of the tariff, and conversion of ad valorem into specific duties.
• Second. Removal of the prohibition on the exportation of rice.
• Third. Abolition of all likin, including transit dues and all other inland taxation of every kind on all foreign imports; opium to remain subject to the duties and charges now imposed on it.
• Fourth. Revision of the tariff of likin charges on native-owned produce destined for exportation, especially tea, raw cotton, silk, silk cocoons, and other important articles of trade.
• Fifth. The participation by the Chinese Government in the works needed to improve the waterways leading to Shanghai and to Tientsin. The annual quota of the expenses for such works to be borne by China shall be paid out of the revenues pledged for the payment of the 1900 indemnities, but if these are at any time insufficient for that purpose, the Chinese Government shall pledge itself to make good the sum out of any other unassigned revenues it shall see fit to use for that purpose.

W. W. Rockhill.

Peking, June 4, 1901.