500.A 4 e/445: Telegram

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

Summary number 3. The following is the substance of the press communiqué issued last night by the Committee on Tariff Autonomy following its meeting in the forenoon:

“The committee on tariff autonomy held its first meeting October 13th [30th] with the American, Belgian, Danish, French, British, Italian, Japanese, Dutch, Norwegian, Portuguese, Spanish and Swedish delegates present.

Doctor C. T. Wang was elected chairman of the committee.

Doctor Wang, on behalf of the Chinese delegation, presented the Chinese proposals on tariff autonomy, which he had previously submitted to the conference on October 26th, and suggested that paragraphs 1 and 2 of the five proposals be dealt with in committee one, reserving 3 and 4 to be dealt with by committee two, and 5 to be discussed separately afterwards.

Mr. Hioki further elucidated the proposals advocated by him on behalf of the Japanese delegation on October 26th, with the following statement:

‘At [the] first plenary session of this conference, the Japanese delegation had the honor to suggest their alternative plans by which tariff autonomy is to be restored to China. However, as the [presentation] of these plans was of somewhat laconic character, [I] feel it pertinent to add a few words with a view, to elucidating the nature of our proposals.

By the first alternative plan, we suggest the inauguration of a Chinese statutory tariff for general application, together with [a [Page 872]special tariff on certain] articles which are to be agreed upon by treaty separately between China and [the] interested Powers. While the statutory tariff is to be made by China freely as it pleases, such tariff should be so devised as not to hurt the trade relations between China and other countries. In fact, the adoption of a fair and reasonable statutory tariff should reduce to the minimum the number of those countries requiring separate arrangements with regard to special tariffs.

[In reviewing] the history of Japanese recovery of tariff autonomy, I brought out the fact that the revised treaties of 1894 between Japan and [the] Powers did not come into effect until after 5 years from the date of signature and remained in force for the following 12 years. We believe this precedent deserves our attention; China may well take a similar course.

In his speech at the opening session, Doctor C. T. Wang indicated the determination of the Chinese Government to effect the abolition of likin and to bring about the enforcement of a Chinese national tariff law within 3 years. China within such a [preparatory] period may conclude with other Power[s] treaties along the lines of [the] first plan, which will become operative simultaneously with the enforcement of the Chinese national tariff law. The new treaties will supersede the existing treaties between China and other Powers and will remove unilateral restrictions imposed upon China with respect to customs tariff. In case the first alternative is approved by the present conference, it is the intention of the Japanese delegation to suggest that during such period, prior to the enforcement of the Chinese statutory tariff, an interim surtax be levied in accordance with the provisions of article 3 of the Washington treaty.

The second plan suggested by us proposes the establishment of a tariff regime [which] would be, in a general manner, consistent with the stipulations of the treaties of 1902 and 1903 between China and the other Powers. In [case] this plan should be adopted, we would propose the inauguration of a graduated tariff since a uniform tariff at the rate provided for by these treaties is unreasonable and unscientific [and] works to the detriment of trade between China and foreign countries.

When we compare these two alternative plans, it appears to us that the first plan is to be preferred to the second. The latter plan is based on the treaties between China and other powers conclude[d] more than 20 years ago. Their stipulations seem difficult in more [some] cases of being put into practice and not exactly in harmony with the present economic conditions. For instance, these treaties provide for not only the maintenance, but for an increase in the rate, of the existing export duty, [which] is entirely incompatible with modern practices. Moreover, in devising a common schedule of tariff by readjustment of the numerous complicated and conflicting interests of the powers, the plan would encounter serious obstacles, perhaps impossible of being overcome within the time that is at the disposal of this conference. On the contrary, under the first plan, the steps to be taken would be definitely decided upon at this conference. At the same time, it would give each interested Power ample time, during the preparatory period, for [Page 873]arriving at a separate agreement with the Chinese Government on the subject of special tariff, while China, upon the abolition of likin and the removal of other obstructions to trade, will be able to enforce a national customs tariff law with the full accord of the Powers. It is by far the simpler and more practicable means [to] set China on the direct road to tariff autonomy.’

Mr. Strawn, in [behalf] of the American delegation, expressed willingness to go beyond the Washington treaty, and to accord to China relief, but wished to be fully advised as to the plans for the abolition of likin which must be accomplished coincidently with the institution of tariff [autonomy].

Mr. Kauffmann, Danish delegate, who spoke after Mr. Strawn, made a statement virtually to the same effect.

The Belgian delegate accepted in principle the proposal to accord China tariff autonomy enforcement, suggesting that a transitory period should precede it[s] going into force and expressing the hope that this period be as short as possible.

The French delegate [said] that he was prepared to consider it [in] the most friendly and generous spirit and to submit to his Government any reasonable proposals which might be put forward by the Chinese to meet their aspirations in regard to the customs tariff.

Mr. Oudendijk stated that the right of tariff autonomy [is] an inherent sovereign right and that the Netherlands Government would do its best to arrive at a satisfactory settlement of the question.

The Italian [delegate] said that the proposals would be examined in the friendliest spirit and that the complete abolition of likin must precede full tariff autonomy.

The Portuguese delegate said that he expected that the proposals issued at the conference will lead; to complete tariff autonomy.

The Norwegian delegate gave his assent in principle to proposal Number one of the Chinese program but requested more definite information.

The Spanish delegate said that he would give support to all resolutions favorable to China adopted at this conference.

The Swedish delegate withheld definite commitments in the absence of instructions from his Government.

The British delegate took a similar attitude, saying, however, that the British delegation was prepared to discuss the proposals to establish tariff autonomy in the widest spirit but wished time to consider them.

Following the presentation of these views, Dr. Wang read the following memorandum on the abolition of likin:

1. Measures leading to the abolition of likin and the dates.

Inasmuch [as] the Special Conference [on] Chinese Customs, being inspired by the spirit of the Washington Conference [in] its respect for China’s sovereignty, is aiming at tariff autonomy, there should be a determination to abolish likin which prejudices the economic growth of the Chinese people, so that their productive energy may thereby be developed.

On the other hand, likin and commut[ation] tax or duty partaking of the nature of likin hitherto collected by the provinces constitute the main source of revenue for the province[s]. [Page 874]Therefore, it appears impossible to abolish such taxes all at once. It is necessary to divide into different period[s] within which to execute the plan of likin abolition, for the authorities concerned of the Central Government have to examine carefully all the details relating to likin such as the various original denominations, rules governing their collecting, location of the barriers, forms of certificates and passes, and the receipts, et cetera. After such examination, different steps have to be taken.

It is now proposed that, in conformity with the annexed table relating to the procedure for likin abolition, the different provinces should, beginning from December, 1925, and within a period of six months, prepare reports, and, at the same time, commissioners should be sent to the provinces for investigation. The results of the investigations should, within another period of six months, be conjointly examined by the Ministry of Finance and the Commission for the Reorganization of Finance. A fund should be provided enough to compensate likin for one year. At the end of February, 1928, the plan for likin abolition will be completely executed.

2. Means for the compensation of the abolition of likin and the fund for the same purpose.

Although no accurate statistics are available [as to] the revenues derivable from likin for the different provinces, the approximate total amount [is] estimated at 70 million silver dollars per year. It is feared that after the abolition of likin the [provincial revenue] might suffer a great loss. The Central Government should, therefore, provide in advance a special fund to compensate the losses after investigation, and to remit the various [quotas] to the different provinces according to their respective annual deficits resulting from likin abolition. For this purpose, two different periods are proposed. During the first period, a portion of the increased customs revenue derivable from the surtaxes should [be] appropriated for compensation as stated in [the] first paragraph for one year. During the second period, when tariff autonomy [is] put into force, appropriation should be made out of the customs revenue itself. It is evident that after the means for the compensation of likin have been revised, a reliable fund will thereby be secured so that the provincial revenues will not be affected and likin can actually be abolished.’

Following this statement a memorandum was submitted showing in detail the measures to be taken by the Chinese Government in the interim period before the going into force of tariff autonomy, [such as] issuance of bonds for the compensation of likin abolishment and for constructive purposes, distribution of funds to various provinces as compensation for likin, the abolition of inland transit dues—which contemplates a gradual abolishment of all such taxes.”

  1. Telegram in three sections.