500.A 4 e/321: Telegram

The Minister in China (MacMurray) to the Secretary of State

388. 1. Although a mandate of September 5 appoints a Chinese delegation to the Special Conference, 12 persons (including Ministers of Foreign Affairs, Finance, and Communications, the Chinese Minister to the United States, Liang Shih-yi, W. W. Yen, C. T. Wang and Admiral Tsai), I understand that it is the Government’s intention to give plenipotentiary powers to 6 of the 12, the others constituting something in the nature of an advisory commission.

2. Hawkling Yen has been appointed secretary general of the Chinese delegation. He thinks, though it has not yet been determined, that this involves his becoming secretary general of the conference.

3. Arrangements are being made for the holding of plenary and committee meetings and for large force office room for the several delegations in what used to be the Presidential Palace.

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4. While I hope soon to be in a position to give more definite information as to the plans of the Chinese Government in regard to the conference it may be useful to the Department to know what I gather to be the tentative program of the administration. There has been worked out (apparently under the inspiration of W. W. Yen and Liang) a fairly coherent project involving the following points:

Renunciation in principle by the treaty powers of all right of restriction upon the customs tariffs leviable by China.
Undertaking by the Chinese Government to levy, at any rate for a specific period of years and after a transitional period of perhaps two or three years, graduated “scientific” tariff involving a free list and some four or five classifications up to rate of 30-odd percent on luxuries which my Chinese informants state would be in all tantamount to an average of between 8 and 9 percent on imports.
Likin and other internal taxes on trade to be abolished forthwith.
Arrangements to be made by the Central Government with the several provinces whereby in exchange for the abolition of internal taxes, provinces would receive in due ratio an equivalent portion of increase in customs revenue amounting to approximately 60 percent of the anticipated Mexican dollars 100,000,000 annually to be collected by the customs.
The remaining 40 percent of increase to be devoted to purposes of a loan for the funding of the external debt, domestic obligations of the Government being taken care of separately by charges upon the salt and other revenues.

5. In the course of informal conversations I have taken occasion to intimate that in exercising its prerogative in initiating agenda of the Special Conference the Chinese Government would be well advised to avoid presenting at the outset the point-blank issue as to what the Chinese call “tariff autonomy” lest a somewhat academic point should thereafter overshadow the conference and create an atmosphere of antagonism between Chinese and foreign opinion. It is my impression however that as a result of pressure which this administration is not courageous enough to oppose, the Chinese will find themselves impelled to make the best compromise they can between a sweeping claim for idealistic formula of “tariff autonomy” and a practical proposal for tariff arrangements which the powers could accept without too great an apprehension that present or a future administration would tax foreign trade out of existence under the plea of financial necessities and with complete disregard of the consequences that might thereafter recoil upon a succeeding administration.

6. The above prognostications and suggestions are made purely tentatively in order to enable the Department and Strawn to consider the matter as fully as may be possible in the light of information at hand to date. I assume that the Department has kept Strawn fully [Page 849]advised of the abnormal political or psychological situation which must necessarily constitute a background to the work of the conference.