Papers Relating to the Foreign Relations of the United States, 1926, Volume I

893.512/497

The British Ambassador (Howard) to the Secretary of State^96a

Washington, December 23, 1926.

No. 816

Sir: I have the honour, on instructions from His Majesty’s Government, to transmit herewith the text of a telegram addressed by His Majesty’s Principal Secretary of State for Foreign Affairs on December 2nd last to His Majesty’s Minister at Peking, copies of which were communicated by His Majesty’s Chargé d’Affaires at that capital on December 18th last to his eleven colleagues representing the Washington Treaty Powers other than China.

This telegram contains a statement of the principles which it is the considered opinion of His Majesty’s Government should in future guide the policy in China of the Washington Treaty Powers.

The annex, to which reference is made in paragraph 12 of the enclosed statement consists of the memorandum communicated to the United States Embassy on May 28th last explaining the attitude of His Majesty’s Government towards the Chinese Tariff Conference. Copies of this document are also transmitted herewith for convenience of reference.^96b

I have [etc.]

Esme Howard

[Enclosure—Telegram]

The British Secretary of State for Foreign Affairs (Chamberlain) to the British Minister in China (Lampson)

For some time past His Majesty’s Government have watched with growing anxiety the situation in China, and they believe that this anxiety will be shared by the Governments of the interested Powers. Five years ago the Powers assembled at Washington and, taking into consideration the circumstances then existing in China, they agreed among themselves, in conjunction with the representatives of the Chinese Government, that their future policy should be guided by certain general principles designed to safeguard the integrity and independence of China, to promote her political and economic development and the rehabilitation of her finances. It was agreed to grant her certain increases on her treaty tariff in order to provide the revenue required for these purposes. It was further agreed that a commission should examine the question of extra-territoriality with a view to amending the system now in force by the elimination of abuses and accretions and by the removal of unnecessary limitations on China’s sovereignty.

Unfortunately the Tariff Conference did not meet for four years, and during that period the situation had greatly deteriorated. During a succession of civil wars the authority of the Peking Government had diminished almost to vanishing point, while in the south a powerful Nationalist Government at Canton definitely disputed the right of the Government at Peking to speak on behalf of China or enter into binding engagements in her name. This process of disintegration, civil war and waning central authority continued with increased acceleration after the Tariff Conference had met until eventually the conference negotiations came to an end because there was no longer a Government with whom to negotiate.

The Commission on Extra-territoriality^96c has meanwhile completed its labours and presented its report, but here, again, we are faced with a similar difficulty due to the disintegration of China. The recommendations contained in the report, while suggesting certain reforms capable of being carried into immediate effect, presuppose for their full execution the existence of a Government possessing authority to enter into engagements on behalf of the whole of China.

During all these civil wars it has been the consistent policy of His Majesty’s Government to abstain from any interference between the warring factions or Rival Governments. Despite the disorders which civil war engenders and the grievous losses inflicted on the vast commercial interests, both Chinese and foreign, His Majesty’s Government have declined to associate themselves with any particular faction or to interfere in any way with the civil commotions. His Majesty’s Government believe that the Powers have adopted a similar attitude and that this is and will continue to be the only right attitude to maintain.

The situation which exists in China today is thus entirely different from that which faced the Powers at the time they framed the Washington treaties. In the present state of confusion, though some progress has been made by means of local negotiation and agreements with regional Governments, it has not been possible for the powers to proceed with the larger programme of treaty revision which was foreshadowed at Washington or to arrive at a settlement of any of the outstanding questions relating to the position of foreigners in China. The political disintegration in China has, however, been accompanied by the growth of a powerful nationalist movement which aimed at gaining for China an equal place among the nations, and any failure to meet this movement with sympathy and understanding would not respond to the real intentions of the Powers towards China.

His Majesty’s Government, after carefully reviewing the position, desire to submit their considered opinion as to the course which the Washington Treaty Powers should now adopt. His Majesty’s Government propose that these Governments shall issue a statement setting forth the essential facts of the situation; declaring their readiness to negotiate on treaty revision and all other outstanding questions as soon as the Chinese themselves have constituted a Government with authority to negotiate; and stating their intentions pending the establishment of such a Government to pursue a constructive policy in harmony with the spirit of the Washington Conference but developed and adapted to meet the altered circumstances of the present time.

His Majesty’s Government propose that in this joint declaration the Powers should make it clear that in their constructive policy they desire to go as far as possible towards meeting the legitimate aspirations of the Chinese nation. They should abandon the idea that the economic and political development of China can only be secured under foreign tutelage, and should declare their readiness to recognise her right to the enjoyment of tariff autonomy as soon as she herself has settled and promulgated a new national tariff. They should expressly disclaim any intention of forcing foreign control upon an unwilling China. While calling upon China to maintain that respect for sanctity of treaties which is primary obligation common to all civilised states, Powers should yet recognise both essential justice of Chinese claim for treaty revision and difficulty under present conditions of negotiating new treaties in place of old, and they should therefore modify their traditional attitude of rigid insistence on strict letter of treaty rights. During this possibly very prolonged period of uncertainty the Powers can only, in the view of His Majesty’s Government, adopt an expectant attitude and endeavour to shape developments so far as possible in conformity with the realities of the situation so that ultimately when treaty revision becomes possible, it will be found that part at least of the revision has already been effected on satisfactory lines. It would therefore be wise to abandon the policy of ineffective protest over minor matters, reserving protest—which should then be made effective by united action—only for cases where vital interests are at stake. Every case should be considered on its merits and the declaration should show that the Powers are prepared to consider in a sympathetic spirit any reasonable proposals that the Chinese authorities, wherever situated, may make, even if contrary to strict interpretation of treaty rights, in return for fair and considerate treatment of foreign interests by them. The declaration should show that it is the policy of the Powers to endeavor to maintain harmonious relations with China without waiting for or insisting on the prior establishment of a strong Central Government.

It is the earnest hope of His Majesty’s Government that the Powers will agree to adopt the principles of the policy outlined above and apply them to the realities of the present situation. Certain recommendations in the reports of the Commission on Extra-territoriality referred to in paragraph 3 above and certain other reforms not covered by that commission’s report but falling under the general heading of extra-territoriality can be carried into effect even in present conditions without great delay. There is, however, one step of more immediate importance which in the opinion of His Majesty’s Government the Powers should agree to take at once. His Majesty’s Government believe that an endeavour should be made to undo the evil results which have flowed from the failure of the Tariff Conference to implement the promises as to tariff increases made by the Powers to China nearly five years ago, and they propose, therefore, that the Powers should agree to the immediate unconditional grant of the Washington surtaxes.

By the China Customs Treaty signed at Washington on the 6th February, 1922,^96d the Powers promised to grant China certain tariff increases (commonly known as the Washington surtaxes) “for such purposes and subject to such conditions” as the special conference might determine. That special conference is the Tariff Conference which, after a delay of nearly four years, met in Peking on the 26th October, 1925, and has now to all intents and purposes definitely failed. The promised surtaxes have not been granted. The foreign delegations were not satisfied with the assurances which the Chinese delegation offered at the session of the 18th March as to the purposes to which the Chinese Government would themselves devote the proceeds of the surtaxes. They were prepared to grant them only upon conditions which ensured that the proceeds would be placed under foreign control and applied—in great part—to the liquidation of the unsecured debt.

From the very outset His Majesty’s Government were opposed to the question of the unsecured debt being dealt with by the Tariff Conference at all, and they frankly expressed this view in a confidential memorandum communicated to the Consortium Powers early in 1923.^96e They foresaw that it might defeat the intentions of the Washington Conference, which were to assist the economic and political development of China and to relax—not to tighten—foreign control. They held that, the object of the concessions proposed at the Washington Conference being to benefit China, the principal purposes to which the customs surtax should be devoted ought to be productive objects, such as railway construction, and social or economic reforms which would be a permanent benefit to China as a whole. The most promising of these reforms was in their opinion the abolition of li-kin, which moreover, was expressly contemplated in the treaty itself.

It has been argued that debt consolidation would also be a permanent benefit to China because it would restore China’s credit. This argument would doubtless be valid if there were a Government in effective control of the whole country, but in China to-day debt consolidation could only enable the faction which happened to be in power in Peking to resort to fresh ruinous and unproductive borrowing. His Majesty’s Government were therefore opposed to making the consolidation of the unsecured debt one of the purposes to be attained by the Tariff Conference, although their own nationals were directly interested in the funding of some of these debts.

A further objection to the inclusion of the unsecured debt among the subjects to be dealt with at the Tariff Conference was brought into relief by the grant in principle of tariff autonomy. That raised at once in acute form the question of control over customs revenues. His Majesty’s Government viewed with grave misgiving the proposal that foreign control should be extended over additional revenues which might be increased by tariff autonomy. In 1921 it was natural that the Powers should demand guarantees for the due fulfilment of the benevolent purposes which the Washington Conference aimed at achieving. But what might have been practicable in 1921 was no longer possible in 1926. It was obvious that China would not now submit to any extension of foreign control either for debt consolidation or for the abolition of li-kin, and it seemed to His Majesty’s Government that for the Powers to unite in an attempt to impose control upon an unwilling China would be entirely opposed to the spirit of the Washington treaties, and to the policy which His Majesty’s Government had consistently advocated. At the same time His Majesty’s Government felt that it was essential that the Washington promises, so long overdue, should be implemented. Accordingly, on the 28th May last, in reply to an enquiry from the United States Government as to the attitude of His Majesty’s Government towards the Tariff Conference, they proposed in a memorandum, copy of which is annexed hereto,^96f that the Powers should abstain from any attempt to exact guarantees or conditions, but should forthwith authorise the levy of the surtaxes.

Owing to the collapse of the conference no action on this proposal was possible. The situation, however, suddenly developed in the very direction which was anticipated when the proposal was made. The Cantonese did, in fact, seize the Washington surtaxes by levying, in defiance of the treaties, certain additional taxes on the foreign trade of the port. His Majesty’s Government have with much reluctance joined in the protest against the new taxes for the sake of maintaining solidarity with the Powers, but they are not satisfied that this is the right policy for the present situation. They regret that they did not more insistently press their views at an earlier stage of the conference, but they think that it is still not too late, despite the protest already made, to return to the alternative course proposed in the memorandum of 28th May. His Majesty’s Government therefore strongly urge that the Powers should now authorise the immediate levy of the Washington surtaxes unconditionally throughout China. They hope that this may provide a basis for regularising the position at Canton.

The principle [sic] objection that will probably be made to this proposal is that in strict logic it would amount to condoning a breach of treaty. This argument, however, does not sufficiently take into account the realities of the situation. The basic facts of the present situation are that the treaties are now admittedly in many respects out of date, and that in any attempt to secure a revision the Chinese are confronted on the one hand with the internal difficulty of their own disunion and on the other with the external difficulty of obtaining the unanimous concurrence of the Powers. The latest instance of this is the failure of the attempt to alter the tariff of 1858.^96g His Majesty’s Government attach the greatest importance to the sanctity of treaties, but they believe that this principle may best be maintained by a sympathetic adjustment of treaty rights to the equitable claims of the Chinese. Protests should be reserved for cases where there is an attempt at wholesale repudiation of treaty obligations or an attack upon the legitimate and vital interests of foreigners in China, and in these cases the protests should be made effective by the united action of the powers.

His Majesty’s Government have consistently carried out the obligation of full and frank consultation imposed upon all the Powers alike by article 7 of the Nine-Powers Pact^96h and it has been their constant aim—sometimes even when this involved a sacrifice of their opinion—to maintain the solidarity of the Powers. It is in pursuance of this aim that His Majesty’s Government are now communicating to the Powers this statement of the principles by which they believe that policy should be guided in future. They feel assured that the Powers will share the anxiety of His Majesty’s Government to act towards China in the spirit which inspired the Washington Treaties, and it is their earnest hope that the Powers will agree that that spirit cannot better be fulfilled than by adopting the policy which is now presented for their consideration.

It seems to His Majesty’s Government that the first step towards the carrying of this new policy into effect should be the immediate unconditional grant of the Washington surtaxes. Lest it be supposed that the grant of the surtaxes might favour one faction at the expense of the others and so provide a further incentive to civil war, His Majesty’s Government deem it important to point out that, as no conditions would be attached to the grant the proceeds of the surtaxes would not necessarily be remitted by the Commissioners of Customs to the custodian banks at Shanghai. It would in each case be for the competent Chinese authorities to decide all questions as to the disposition and banking of these additional revenues. His Majesty’s Government will be glad to learn at the earliest possible moment whether the Powers agree to the unconditional grant of the Washington surtaxes.

1. This paper bears the annotation: “Handed to Secretary of State by British Ambassador this 24th day of December, 1926.”
2. Ante, p. 755.
3. See pp. 966 ff.
4. Foreign Relations, 1922, vol. i, p. 282.
5. Not printed.
6. Ante, p. 755.
7. Malloy, Treaties, 1776–1909, vol. i, p. 222.
8. Foreign Relations, 1922, vol. i, p. 276.