693.003/577
The Chargé in China (Tenney) to the Secretary of State
Peking, April 7,
1920.
[Received May 25.]
No. 3207
Sir: I have the honor to enclose herewith
the translation of a note received from the Chinese Foreign Office
on February 27, 1920, in which the Ministry announces the intention
of the Government to proceed at once with the increasing of import
duties and the abolition of likin. The note recounts recent
suggestions made to the Government that steps be taken to implement
Article VIII. of the British Commercial Treaty of 1903 [1902], and gives an undertaking that after
the abolition of likin and the increase of import duties;
“likin will not again be levied, either
directly or indirectly, in the interior of China on goods of
foreign nations on which there has already been paid the
increased import duty”.
Throughout the note no reference is made to an increase in the export
tariff, probably because with the present charge of two and one-half
per cent for an outward transit pass, the proposed maximum of seven
and one-half per cent is already attained, but I do not feel that
any significance need be attached to this omission.
Exactly one month previous to the date of this note Mr. P’an Fu, Vice
Minister of Finance, called at the Legation and announced the fact
that the Government was going to take this step toward the abolition
of inland taxation of commerce. He stated that he feared Japanese
opposition and asked for the support of this Legation, of which he
was thereupon given assurance.
Under date of March 17, 1920, the Dean of the Diplomatic Body
circularized a communication received from the British Chargé
d’Affaires in which the latter pointed out that the Chinese
Government in its note desired a second revision of the import
tariff in order to secure an effective five per cent and that it
further desired
[Page 732]
that this
revision should take place before the date recommended by the Tariff
Revision Committee, i.e. two years after the ratification of peace,
on the plea that this higher valuation would be needed in addition
to the surtax to compensate for the loss of likin receipts. While
opposing any advancement of the tariff revision the British Chargé
d’Affaires recommended that the Diplomatic Body assure the Chinese
Government as follows:
- “(A) That each of the Treaty
Powers will be prepared to nominate a representative to
commence the work of bringing the tariff to an effective
5% on a specified date (say August 1st, 1921);
and
- (B) That the levy of a surtax
(say equivalent to one and one half times the said duty)
will be agreed to. This assurance is based upon the
understanding that the abolition of likin and all other
exactions to which Chinese and foreign goods are now
subjected, whether at the place of production, in
transit, or at destination, will be guaranteed by the
Chinese Government on the enforcement of the tariff as
revised.”
Since the Legation has already had occasion to transmit to the
Chinese Government from the Department of State expressions of the
sympathy of the American Government with this reform I should have
felt no hesitation in joining my colleagues in giving this assurance
at once, but they deemed it necessary to refer the matter to their
respective Governments.
With especial regard to the Department’s instruction No. 529, of
January 8, 1909,82
(File No. 788/193) in which reference is made to the possible
necessity for concluding a loan in connection with this project, I
have the honor to observe that while the visit of Mr. Thomas W.
Lamont has been an occasion for discussing loans for various other
purposes it has not, to my knowledge, been proposed to use any
portion of the mooted reorganization loan in connection with the
abolition of likin.
It must be conceded that at the present time the Central Government
does not appear to possess the power necessary to uproot what is
probably one of the most vastly ramifying vested interests in the
world, the system of provincial taxation of trade in China. The
independence and truculence of the innumerable military leaders who
rear their heads throughout the Republic have their origin in this
source of revenue. Nevertheless, it is my considered opinion that
the attempt to effect this reform would prove in the end an
excellent means of solidifying the position of the Government. The
measure is one whose propriety no one could impugn, and it would
have behind it the moral force of an international engagement that
must be carried out. I have the honor therefore, to request that the
Legation
[Page 733]
be authorized to
give to the Chinese Government the assurance suggested by my British
colleague.
I have [etc.]
[Enclosure—Translation]
The Chinese Ministry of
Foreign Affairs to the American Chargé
(Tenney)83
Peking, February 27,
1920.
No. 1133
Sir: The Chinese Government has long
had in mind the question of the abolition of likin. As the
question, however, concerns the annual income of the Central
Government, and as the Provinces depend on likin largely for
their administrative expenses, it has naturally been found
difficult to arrange for its abolition, unless some other
reliable form of income were found to take its place. In May of
last year (1919) this Ministry received from the Ministers of
the Powers which had sent representatives to sign the revised
tariff agreement communications stating that the matter of the
levying of internal duties in China was one which was having an
extremely injurious effect on the advancement of trade between
China and foreign nations, and that they greatly hoped that some
method might be devised for the abolition of such duties. Again
on January 22d of the present year (1920) the British Minister
addressed a Note to this Ministry in which he stated:
“The Association of the British Chambers of Commerce in
China at the time of the recent conference at Shanghai
advocated the carrying out of the various clauses of
Section 8 of the Commercial Treaty of the 28th Year of
Kuanghsü (1902), with the proviso that, before giving
the necessary consent to an increase in the import
duties, the various Treaty Powers should obtain from the
Chinese Government satisfactory guarantees that the
Government would not in future proceed to levy any other
form of either direct or indirect taxation on goods;
reminding the Government, also, of the earnest hope of
everyone,—namely, that the Chinese Government should
become united, a question which necessarily preceded any
discussion of revenue collection, for the reason that
without a united Government there could be no uniformity
of revenue collection.”
For this advice the Chinese Government is very grateful. It has
to observe that the question of arranging a method for the
abolition of likin and the increasing of import duties is one
which is engaging the attention at the present moment of the
various departments of the Government concerned. It can be
clearly stated in advance, that when, in future, the time comes
that likin is actually abolished and
[Page 734]
import duties are increased likin will not
again be levied, either directly or indirectly, in the interior
of China on goods of foreign nations on which there has already
been paid the increased import duty. The praiseworthy sentiment
expressed by the British Minister that schemes for a uniform
collection of revenue must be preceded by plans for a unified
Government meets with the hearty concurrence of the Chinese
Government. There are, however, at present certain circumstances
in the internal administration of China which unavoidably
prevent the unification of the country by force. On the other
hand, there has been in the past unity as regards foreign
questions. In view, moreover, of the fact that the abolition of
likin and the increasing of import duties is a national project,
the Chinese Government profoundly believes that the Northern and
Southern Provinces cannot but act in accord in this
matter,—this, it is believed, can also be confidently stated in
advance.
There is still another phase of the question that demands
consideration:—After import duties have been increased and the
Chinese Government has completely abolished likin, and it is
found, after due consideration of the true circumstances of the
matter, that the additional import revenue is not sufficient to
make up for the losses arising out of the abolition of likin,
the Chinese Government naturally cannot but make some
arrangement for making up the deficit. In consideration of the
fact that the Ministers of the various Powers concerned agreed,
at the time, that, in view of the fact that the fixing of prices
of commodities under the Revised Tariff had been made during the
period of the European War, last year, they were to be subject
to further revision two years after the conclusion of peace,
therefore the Chinese Government considers that before the
procedure now in contemplation for the increasing of import
duties and the abolition of likin has actually been put in force
it should request the various foreign Powers concerned to take
part in a prior revision of the import tariff to make the listed
values of commodities correspond with actual values, and to
raise an income sufficient, also, to compensate for the loss due
to the abolition of likin.
In view of the foregoing considerations, the Chinese Government
expresses the hope that the American Government will carry out
the arrangement above proposed, so that the friendly relations
of the two nations may be strengthened. This Ministry has the
honor to bring to your attention, Mr. Chargé, the fact of the
Chinese Government’s intention to proceed at once with the
increasing of import duties and the abolition of likin, and has
the honor to request that you inform your Government
accordingly.
(Seal of the Ministry of Foreign
Affairs)
