Papers Relating to the Foreign Relations of the United States, 1921, Volume I

893.74/66: Telegram

The Secretary of State to the Ambassador in Great Britain (Davis)¹²

Washington, February 11, 1921—4 p.m.

85. An American corporation, the Federal Telegraph Company, on January 8th last signed with the Chinese Government a contract for the construction and operation of wireless stations at Shanghai, Peking, Harbin, Canton, for a period of ten years in joint account with the Chinese Government and thereafter for a further ten years on a royalty basis.

This Government has learned with amazement that the British Minister at Peking recently advised the American Legation that under instructions of his Government he had protested to the Chinese Government against this American contract and had insisted upon its cancellation on the ground that it infringes upon the rights claimed to have accrued to the British Marconi Company by virtue of a contract of May 24, 1919, establishing a joint enterprise under the name of the Chinese National Wireless Telegraph Company as a Chinese corporation with certain preferential rights for the supply of wireless equipment to the Chinese Government.¹³

Leaving aside for the present any discussion of the propriety of the British Government asserting diplomatically as against another nationality the claims of a Chinese corporation this Government desires to meet unequivocally and on its merits the claim that any Government can rightfully assert in behalf of the interests of its nationals any such monopoly or preference for the supply of materials or equipment as would debar American citizens from the right to contract freely with the Chinese Government for any category of supplies. The assertion of such an exclusive or preferential right in behalf of British interests frankly raises in the mind of this Government a doubt whether it has correctly understood the attitude of the British Government during the course of recent efforts to cooperate in making real and effective the principle of equality of commercial and industrial opportunity in China. This Government must in candor make clear its position that such a claim to monopoly or preference in the supply of equipment to any service of the Chinese Government is in its view fundamentally repugnant to treaty rights and to the principle of the open door; and that it is not prepared to recognize any claim of contractual rights in favor of any party as valid or effective to exclude its nationals from any field of commercial or industrial activity in China.

The British Government may perhaps not be aware that as long ago as 1917 this Government found occasion to apply the same interpretation of the open door principle as against the claims of certain of its own nationals. On October 20th of that year (by a contract closely analogous to the Marconi contract for the Chinese Wireless Company) the Western Electric Company formed with the Chinese Government the China Electric Company which the contract provided should have a preference for the supply of all “machinery, apparatus or other materials in connection with the telephone and telegraph systems” required by the Chinese Ministry of Communications. Upon learning of this provision and after consultation with this Government the American Minister at Peking on January 28, 1919, formally notified the China Electric Company that it would not support or recognize any claims to such preference as was provided in the contract.¹⁴ This position was also explained to the Chinese Government.

This Government cannot doubt that with a knowledge of the attitude thus taken the British Government will not be disposed to insist in favor of its nationals upon an advantage which the American Government had previously rejected as unfair and repugnant to treaty rights and the policy of equality in China when claimed by American interests.

Should this confidence be disappointed, however, and should the British Government continue to assert the preference claimed in the interests of the Marconi Company, this Government would reluctantly be compelled to consider among other things whether the prior rights accruing in favor of the Western Electric Company under the contract of 1917 are not as fully entitled to international recognition and must not therefore be held to constitute such a preference for the supply of telephone and telegraph equipment as would invalidate the Marconi agreements of August 27, 1918, for the sale of wireless telephone equipment,¹⁵ of October 9, 1918, for the establishment of wireless telegraph communications between Kashgar and Sianfu,¹⁵ and of May 24, 1919, for the formation of the Chinese National Wireless Telegraph Company.^15a

Such a position would be frankly distasteful to this Government which as above indicated has itself maintained and has assumed a whole-hearted sympathy on the part of the British Government in the attitude of scrupulous avoidance of any claims to special or exclusive privileges in China.

You will incorporate the above in a memorandum to the Foreign Office and take such means as your discretion suggests to impress upon it the feeling of this Government that this matter is one of primary importance to the cooperation between the two countries in the Far East. You may also orally advise the Foreign Office that this Government has notified the Chinese Government of its attitude in this matter.

It is to be expected that as in the case of the contract for airplanes refused recently by the Curtiss Company and subsequently considered for adoption by the Handley-Page Company, but which did not receive support of the British Government, and is now being proffered to American manufacturing interests, Great Britain may change its stand to one of objection on the contention that an arrangement of this nature cannot compatibly be supported by the American Government in view of the consortium agreement. The Embassy should naturally avoid raising this consideration, but if the British Foreign Office takes up this question it may be stated that the American Government has from the beginning made a condition to its approval of the Federal Telegraph Company’s contract, that its terms prove to be compatible with this Government’s policy in regard to the consortium and that it not entail any monopolistic features. The American group of the consortium and the Department of State are now considering the compatibility of the contract in question with the consortium policy. You are furthermore instructed to make it entirely clear that the American Government considers the question involving the consortium as absolutely separate and distinct from the claim of the British Government to exclude American interests from undertaking wireless enterprises in China on account of the claims by a British company to any priority of rights.¹⁶

Colby

12. Substantially the same telegram, Feb. 14, to the Minister in China as no. 65, with instructions to transmit by mail to Tokyo.
13. For pertinent clauses of the agreement, see footnote 5, p. 408.
14. See footnote 2, p. 406.
15. Not printed.
15. Not printed.
16. Pertinent clauses of the agreement of May 24 printed in footnote 5, p. 408.
16. Last paragraph paraphrased.