In addition to the bare recital of the facts as detailed in the enclosed
memorandum, I should perhaps say that in the event of any contract being
made by an American firm for the supply of airplanes to China, this
Government would of course feel obligated to scrutinize the contract
itself and the contemplated financial arrangement thereunder, with a
view to satisfying itself that the planes were not in fact intended for
military uses, and that the arrangements for purchase did not involve
any infringement upon the field of activities reserved to the
Consortium.
I am returning herewith a copy of the statement which you enclosed with
your letter.34
[Enclosure]
Memorandum
On May 5, 1919, the diplomatic representative of the United States
Government at Peking joined with the diplomatic representatives of
the other Allied and Associated Governments including Great Britain,
France and Japan in a declaration to the Chinese Government that
they would restrict shipments of arms and munitions of war to China
until it should become apparent that such shipments would not be
used merely to continue civil strife in China.35
This Government construed this undertaking to cover all raw materials
and machinery that might be used in the manufacture of [Page 538] munitions of war as also
such instruments as airplanes which would readily lend themselves to
a use wholly military. Under this interpretation of the embargo,
airplanes were listed by the War Trade Board as requiring an export
license for shipment to China, and no such licenses were in fact
issued by it.
On October 1, 1919,—five months later—Messrs. Vickers Limited, a
British company, signed a contract with the Ministry of War of the
Chinese Government for the supply of commercial airplanes and the
construction of the necessary airdromes, hangars, et cetera, in
connection therewith. This contract called for a loan of £1,803,300
at 8%; and in the London papers October 14, 1919, was advertised an
issue to the public of Chinese Treasury notes securing this loan,
under a license of the British Treasury, dated September 18,
1919.
Upon learning the details of the Vickers contract, the Department of
State on November 17, 1919, telegraphed to the American Embassy at
London36 informing it of the Vickers contract
and directing it to make inquiry of the British Government as to the
interpretation which it had placed upon the embargo of arms to China
in view of the Vickers contract.
In reply to this inquiry the American Embassy at London was informed
by the British Foreign Office that the British Government had
approved of the contract, inasmuch as it was for commercial
aeronautical material wholly unsuited for any military
purposes.37 As a matter of fact it appears that some
of the airplanes which were delivered to the Chinese Ministry of War
under this contract were actually used in the fighting which
occurred in the vicinity of Peking during the months of July and
August, 1920, between the military forces of the so-called Anfu and
Chihli factions, and that General Chang Tso-lin, Military Governor
of Manchuria, subsequently captured them and carried them away from
Peking.
It appears that in August, 1920, certain American interests entered
into negotiations with the Chinese Ministry of the Navy for the sale
of a quantity of airplanes. No encouragement was given by this
Government to these negotiations, which it understood were never
consummated by reason of certain difficulties between the American
company interested and the persons acting in its behalf in China;
and upon the breakdown of these negotiations no effort was made by
this Government to bring to the attention of other American
manufacturers the opportunity for obtaining a similar contract. It
is further understood that it was this same contract which was
thereafter offered to and accepted by the Handley-Page firm, through
[Page 539] the action of Captain
I. V. Gillis, formerly Naval Attache at Peking, who had been one of
those acting in behalf of the American firm to whom the contract had
been offered in the first instance.
On September 17, 1920, just one year after the approval by the
British Government of the Vickers contract, in consideration of the
fact that other Governments had permitted their nationals to enter
into contracts with the Chinese for commercial airplanes, this
Government instructed its diplomatic representative in Peking38 that it no
longer felt warranted in interposing objections to its nationals
doing likewise in case the airplanes were for strictly commercial
use.
