The British Ambassador (Lindsay) to the Secretary of State

No. 179

Sir: I have the honour to refer to your note of April 19th in which you expressed the opinion that the United States Government would be disposed to view with favour the suggestion that they should furnish the Government of Hong Kong with copies of all export licences issued in respect of shipments of arms to Hong Kong. At the same time you enquired whether, if the United States Government were to adopt this system, a similar arrangement would be enforced in respect of arms and munitions of British or other origin.

I have now been instructed by His Majesty’s Principal Secretary of State for Foreign Affairs to inform you that this suggested procedure has been in force in the case of exports of arms from the United Kingdom for more than a year; consequently the loophole which His Majesty’s Government in the United Kingdom and the United States Government are equally concerned to close has, in fact, already been closed to British exporters.
His Majesty’s Government are now willing to intimate to those foreign governments, who have instituted an export licence system, that after a certain date the Governor of Hong Kong will be instructed to require, as evidence that arms consigned to China via Hong Kong are entitled to “in transit” status, the production of copies of the export licences issued; they would also suggest to those Governments that copies of the licences should be forwarded direct by the issuing authority to the Governor of Hong Kong.
In the case of those countries which have not instituted the export licence system the above procedure would obviously not be applicable. His Majesty’s Government could not, however, view with equanimity a situation whereby the export of arms from Belgium and Switzerland—the two countries primarily concerned—would be in a position to benefit at the expense of exports from those countries which have instituted a licence system. They would therefore propose, if the procedure outlined above is adopted, to instruct the Governor of Hong Kong to require, in the case of exports from Belgium or Switzerland, the production of a through contract made between the exporter in Europe and the final importer in China before affording any consignment transit facilities. In point of fact the volume of trade emanating from these two countries has not been large in recent years. Statistics covering the 18 months ending 31st December, 1934 show that no arms exported from Switzerland passed through the colony during that period, while arms in transit from Belgium accounted for a value of some £14,500 in relation to a total trade of £828,000.
In view of the above explanations, I have been instructed to enquire whether the United States Government would be prepared to accept the procedure suggested in my note No. 76 of 27th March.

I have [etc.]

R. C. Lindsay