Mr. Rockhill to Mr. Hay.

No. 117.]

Sir: After telegraphing you on the 11th that it seemed highly probable that I could obtain as commercial compensations for agreeing to an increase of the tariff on imports to a 5 per cent effective—first, the revision of the tariff on imports with the substitution of specific for ad valorem duties; second, the participation by the Chinese Government in the work of improving the waterways leading to Shanghai and Tientsin; and, third, the revision of the regulations now in force governing inland navigation by foreigners so as to allow shipping of all classes to engage in it—a communication was sent around to the foreign representatives by the Russian minister, a translation of which I herewith inclose. In this he states that he will not agree to submit to his Government any proposition tending to secure the revision of the regulations concerning inland navigation by foreign shipping.

In view of this declaration by Mr. De Giers, I again telegraphed you asking if I could accept the two other commercial compensations. * * *

I am, etc.,

W. W. Rockhill.
[Inclosure.—Translation.]

Mr. Minister and Dear Colleague: As I declared to my honorable colleague in the meeting of this morning, my Government considers that it would be preferable to guarantee the payments of the Chinese debts by taxes and duties collected in the open ports, and particularly by the revenues of the customs, instead of having recourse to internal taxes, which might easily lead to an intervention in the internal administration of the Chinese Empire.

Nevertheless, in view of the difficulty surrounding an increase of customs dues to 10 per cent ad valorem, and with the object of bringing the question of indemnities to as prompt a settlement as possible, my Government has consented, as a concession on its part, to accept as a source of revenue the salt gabelle as it is in operation at present under Chinese administration, and without any foreign control.

I was happy to see the unanimity which the diplomatic corps was able to reach as to this source of revenue, as also on those derived from the native customs and the available balances of the maritime customs. Concerning these resources and the reservation made as to them, which I drew up in a special formula, agreement was reached ad referendum.

As to the proposition of the German minister to add to these resources the increase of the tariff on imports to a 5 per cent ad valorem effective, it would also have been accepted by the diplomatic corps if his excellency Mr. Rockhill had not laid down conditions. These conditions present, in my point of view, the serious inconvenience of reopening discussion and provoking thereby loss of time, which my Government had precisely in view to obviate when accepting the salt revenue as one of the sources of payment. For that reason I did not think I could accept these conditions even ad referendum, holding that they ought to have been sufficient to secure the acceptance of the increase of the customs tariff to 10 per cent.

Nevertheless, as some of my honorable colleagues have shown insistence in the matter, I will consent to submit to my Government, without in any way prejudicing its opinion, the two following points as conditions to the raising of the customs dues to 5 per cent effective:

1.
The transformation of all duties on imports actually levied ad valorem into specific duties, the nomination of an international commission for that purpose, and, while waiting for the result of its work, the levying of ad valorem duties; and
2.
The improvement of the Peiho and Whangpoo rivers, with the financial participation of the Chinese Government.

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But so as not to compromise the results already obtained, it is impossible for me to submit to my Government, as a condition to the raising of the tariff to 5 per cent, the revision of the regulations of navigation on Chinese inland waters.

Please accept, Mr. Minister and dear colleague, the assurances of my highest consideration.

M. de Giers.