693.003/800: Telegram

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

1134. 1. Vice Minister for Foreign Affairs of the Peking Government December 8th asked my sympathetic consideration of a proposal for acquiescence by the powers in certain tariff arrangements which it was hoped could be arrived at between delegates of North and South. He outlined the project only in vague, general terms stating that it would be more fully explained to me by the officiating Inspector General of Customs.63

2. On December 21st Edwardes called, under instruction of the Wai Chiao Pu, to discuss this project with me and permitted me to read a memorandum of it of the following general purport: intra-regional tariff autonomy, as recently considered by the Nanking Government, is impracticable and economically unsound. It does not envisage special pro quo [quid pro quo?] arrangement between China and other countries beneficial to the trade of those concerned. China has no national tariff at present; there should be such in which duty on all kinds of goods is specifically laid down. China has a perfect right to compile her own tariff and there should be no question of any international tariff conference to assist her in its compilation. It is impossible however during present unfortunate political strife for any single government now functioning in China to compile national tariff since other governments would repudiate it. Two or three representatives from each of the governments functioning in [Page 377] China should meet in the interests of Chinese national fiscal economy at Shanghai and there compile a national tariff in an entirely nonparty spirit. The Maritime Customs would be available for exports [experts?] and for such information as the Commission might require as also for assistance in making necessary arrangements to bring together such a commission.

When the national tariff is compiled in accordance with the idea that it be used as a means of obtaining quid pro quo arrangements with the various powers the tariff should be sent individually to the representatives of all foreign governments for study accompanied by a definite offer on the part of China that if any articles in the tariff are found to be detrimental to the trade of the countries concerned China is willing to enter into reciprocal arrangements with a view to bettering economic relations between that country and China.

The question arises as to how this tariff is to be presented to each of the foreign powers since recognition of territorial rights of the different governments in China has not yet been settled. Unless some united commission is appointed expressly to deal with foreign affairs, the tariff conference (local Chinese conference by commissioners described above), which will be composed of duly accredited representatives from all the governments functioning in China, might assume in any negotiations with any individual powers or any combination of powers the rights and functions of a united foreign affairs commission so far as the tariff and economic relations are concerned, seeing that tariff affairs are fundamental and their settlement is essential to the future welfare of China.

Question of tariff autonomy should be approached by stages, first stage being acceptance by the powers of collection by China customs administration of existing two and one-half percent surtax. When this is established China might reasonably approach the diplomatic body with the request that until national tariff has been properly compiled and promulgated, the arrangement as recommended by America, Great Britain and Japan bases [basis?] 1926,64 shall be enforced, all other existing taxes by the Maritime Customs to remain unchanged with the exception of two and one-half percent surtax which would be abrogated in favor of the increased import duty. Until all China is united, Maritime Customs should meet all obligations secured thereon from this collection and should hand over the surplus monthly to the governments in control of the collecting ports. [Page 378] It is computed that available surplus would be some sixty million Haikwan taels per annum on the basis of the 1926 customs returns. Question of abolition of likin is a purely internal affair of the various governments in China. Although the difficulty tantamount almost to impossibility of effecting total abolition of likin should not be minimized.

3. [Paraphrase.] I am informed by Edwardes that in this project, which is heartily approved by the Peking Government, a member of Customs is acting as intermediary with the Nanking authorities. Edwardes informed me at that time and later that a point has been reached in these informal negotiations at which the Southern regime has voiced its approval in principle, but is still undecided as to the practical problem of how, without impairment to its claims to national authority, to take part in the arrangement.

4. Prior to my return to Peking, Edwardes stated, the proposal had been explained by him to the other ministers who in any considerable degree were interested and all had been found favorably disposed toward it with the exception of the Japanese, who at first had taken an unsympathetic attitude but later had given what appeared to be an indication that it might be considered favorably by Japan.

5. Without hesitation I informed Edwardes that the United States Government, I felt sure, would approve the proposal in principle, but that for reasons arising from the treaty-making system in the United States, I was doubtful whether it would be practicable for our trade to be subjected by us to any interim surtaxes during the period between the present time (when, by virtue of broad construction of the Washington customs treaty,65 we are making no objection to the two and a half percent surtax) and the date of exchange of ratifications of a new treaty by which “tariff autonomy” is accepted.

6. Before it had been possible for me to consider this matter fully and report to you, it became necessary to consider it in the light of the Department’s 418, December 18, noon.66 My original belief that the plan is deserving of the full support of the United States is confirmed by such reconsideration.

7. Although appearing to restrain my judgment that it may not be misguided by false hopes, it is my belief that this project, with the measure of success it has already achieved, is the most hopeful and concrete basis for constructive action for the solution of the present chaotic condition in China that has been suggested thus far. Only through developing cooperation in meeting problems of a [Page 379] national character having a definite relationship to the actual internal conditions of China can there be any prospect of bringing about any degree of unification. Not only would agreement in regard to some phase of fiscal arrangement afford such an opportunity, but, once effected, it would constitute a continuing incentive for the maintenance and development of cooperation. On the other hand, no such purpose would be served by an ephemeral and purely localized combination for the sole purpose of contesting and probably terminating the existing treaty rights of one or more powers.

8. Furthermore, the project presents a means of meeting the main difficulty anticipated in executing the plan of negotiations on tariff matters as discussed by me with you last October. It will be recalled that although suggesting that the effort would be worth making I conceded that the chances were against the possibility of being in a position to negotiate with the several factions jointly or to undertake preliminary conversations with either faction without encountering partisan opposition of the other. By reason of its recognition as the representative body with which negotiations for the purpose we have in view could be carried on, the Joint Commission created pursuant to the present plan would solve this difficulty.

9. Accordingly, with a view to its potential value as a stabilizing agency in the affairs of China and with a view to its direct applications to us in promoting the plans which we have for adjusting tariff questions with China, it is recommended that I be directed by you to make known in any appropriate way your approval of the project and to make the influence of the United States Government available for the support of the project. [End paraphrase.]

  1. Telegram in three sections.
  2. A. H. F. Edwardes.
  3. See “Washington Treaty Surtaxes” in sec. ii of the report submitted to the Secretary of State on July 8, 1926, by the American delegation to the Special Conference on the Chinese Customs Tariff, Foreign Relations, 1926, vol. i, pp. 767, 833. See minutes of meetings of Sub-Committee to Draft a Resolution on the Levying of the Interim Surtaxes, The Special Conference on the Chinese Customs Tariff October 1925–April 1926 (Peking, 1928), pp. 382 ff.
  4. Foreign Relations, 1922, vol. i, p. 282.
  5. ibid., 1927, vol. ii, p. 366.