893.74/351
The Secretary of State to the British Chargé (Chilton)
Sir: Replying to your note (No. 583) of July 12, I hasten to advise you that, apart from certain inaccuracies in citation and quotation, the provision of the Federal Telegraph Company’s contract, concerning which you inquire, is substantially correct. Article XIV of the supplementary Articles to Agreement of January 8, 1921, between the Federal Company and the Chinese Government, dated September 19, 1921, reads as follows:
“The Government agrees that all moneys and income accruing to it from the operation of said stations or from the operation of the China Federal Radio Administration shall be immediately upon the [Page 811] receipt thereof deposited in the Asia Banking Corporation, or such other bank or banking institution as may be from time to time designated by the Federal Telegraph Company, and that all radio messages from China and for the United States of America are to be handled exclusively by the Federal Telegraph Company for a time twenty (20) years from the date of the completion of the last station erected and provided for under the agreement of the 8th day of January, 1921. It is further agreed that for and throughout said twenty (20) year period, the land upon which said stations are constructed, and all buildings and improvements thereon, shall be kept and maintained free and clear of all liens, charges, and incumbrances of every kind and character whatsoever excepting only the lien of the bonds hereby secured, and the obligations of the Government to the Federal Telegraph Company.”
For your information there are enclosed herewith prints of the texts of the Federal Telegraph Company’s original Agreement of January 8, 1921, and of the Supplementary Articles of September 19, 1921.22
In reference to your comment that the clause relating to the handling of Chinese-American traffic would appear to be inconsistent with the assurances given by Mr. Harrison orally, and in his letter of June 28, to Mr. Craigie, I would point out that Mr. Craigie’s oral inquiries, and his letter of June 22,23 alike referred not to the terms of the existing contracts of the Federal Telegraph Company, but to such amendments to those basic contracts (of January 8, and September 19, 1921) as were at the moment under discussion between that company and the Chinese Government; whereas the provision cited in your note is contained (as you have been correctly advised by the British Legation at Peking) in the second of those basic agreements, concluded in September, 1921.
Let me take occasion to add a confirmation of Mr. Harrison’s reply to the effect that the amendments proposed by the Federal Telegraph Company to the Chinese Government are not such as substantially to affect the contract or be incompatible with any arrangements, on the basis of the recommendations of the radio experts, dated February 4, 1922, which may eventually be arrived at.
As regards your comment that the clause in question, in the Federal contract of September 19, 1921, would appear to be inconsistent with the statement contained in Section 2 of the memorandum drawn up by the experts in Washington on February 4, 1922, to the effect that “the existing Federal concession contains no monopoly or exclusive privileges,” I would in the first place point out that in the quotation furnished by the British Legation, the name of the Federal Chinese Radio Administration was substituted for that of the Federal Telegraph Company. The error in the quotation has perhaps [Page 812] contributed to a misconception which appears to have resulted from considering the clause in question apart from its context. Upon examination of the enclosed copies of the contract of January 8, 1921, and the Supplementary Articles of September 19, 1921, it will be apparent to the British Government that the service in connection with the stations contemplated to be erected under the contract is to be carried on by the China Federal Radio Administration, and not by the Federal Telegraph Company, which is not, as such, to operate in China. It will thus be clear that the meaning of the clause in question is that all radio messages transmitted to the United States by the China Federal Radio Administration, from the stations constructed for that Administration by the Federal Telegraph Company, are to be received and handled in the latter country exclusively by the Federal Telegraph Company for the period specified. It is in fact merely an arrangement by which the stations in China, in which the Federal Company is interested jointly with the Chinese Government, are, as regards their traffic to the United States, to work in circuit with the stations operated in the United States by that Company. It is obvious that such an arrangement does not operate to exclude the possibility of operation of other circuits that may be established. This Government does not therefore conceive that a traffic arrangement of this character constitutes a monopoly or exclusive privilege, in contradiction to the assurance given by the American expert and quoted in your note of July 12, nor that it would constitute a monopoly in China, or, it may be remarked, in the United States.
The British Government is perhaps aware that, from the beginning of the Federal Company’s negotiations with the Chinese Government, this Government has given appropriate diplomatic support upon the express condition that the project should involve no monopolistic element or abridgment of equality of opportunity. The British Government may be assured that this will continue to be the policy of the Government of the United States.
Accept [etc.]