500.A 4 e/412: Telegram

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

449. My telegram number 388 September 10, 11 a.m.

It would appear that no such definite program as outlined paragraph 4 has been adopted. Various members Chinese commission have from time to time intimated their desire to talk over confidentially with me in advance the conference plans of the Government but up to the present time have either postponed actual discussion or spoken in obviously evasive generalities. It seems clear that the Government is still undecided upon its course of action.
From reliable informants in intimate relations with the Ministry Finance I learn that the financial authorities of the Government are wholly skeptical of the practicability of proposals for so-called tariff autonomy and regard as the crux of the problem the possibility of inducing the powers to consent to interim surtax of 5 percent instead of 2½ provided by the treaty. Could they obtain this they would propose to use entire revenues from this surtax as the basis for a loan, bulk of which would be devoted to the funding of unsecured foreign and domestic debts and the balance to (a) preparations for the abolition of likin, (b) administration purposes and (c) constructive purposes. Apparently the measures contemplated under (a) [Page 858]would consist of experiments in arrangements with various provinces for the abandonment of internal taxation on the movement of trade in return for a subsidy out of the customs surtax revenues; and the constructive measures contemplated would not consist in the building of railways or similar undertaking but in carrying out of ordinary functions of government now neglected because of lack of funds.
These plans of the financial authorities evidently represent what the administration in power would desire to obtain for itself from the conference with a view to rehabilitating its credit deficiencies, consolidating its tenure of power and for that purpose realistically accepting comparatively slight immediate advantage in preference to any prospects of more far-reaching better success in the future. These wholly practical purposes of the financial authorities are sharply contested by the diplomatic and political elements which are anxious to conciliate nationalistic feeling by forcing the issue on the question of tariff autonomy.
In consequence of this confusion of purposes it now seems probable that the Chinese will enter the conference without any definite program of action asking initially that the principal [principle of?] tariff autonomy be conceded but presenting no concrete plan by which foreign trade would be safeguarded against arbitrary exactions by either central or local authorities whether at the ports or in transit through the interior. It is to [be] apprehended that the insistence of the idealists upon an unqualified concession of tariff autonomy such as none of the powers could accept in justice to their own legitimate interests may precipitate a situation in which a new outburst of demagogue fervor may make it impossible for the more practical elements of the Chinese Government to propose any satisfactory conditions for such a concession.
In anticipation of the possibility of obtaining tariff autonomy the Government is considering and has allowed to become public a [apparent omission] of regulations governing levy of tariffs which contemplate imposition of duties ranging up to 40 percent and higher in case of wines and tobacco. Tariff attached to these regulations has not been made public. I understood however that the duty on cotton goods has been reduced to less than present 5 percent as bait to England and Japan whereas very high rate on tobacco was explained to my informant by a Chinese official with the statement that this item principally interests us [U. S.?] which is already benevolently disposed. I should welcome such instructions or suggestions as the Department may be able to give for guidance of delegation in meeting such forms of discrimination which cannot be met by most-favored-nation clause.

Copy by mail to Tokyo.