The Secretary of State to the Ambassador in China ( Johnson )
60. Reference your 129, March 23, 9 a.m.,52 and Shanghai’s 140, March 20, noon, and 144, March 24, noon,53 transmitting information from the Acting Commercial Attaché in regard to the proposed increase in Chinese tax on cigarettes.
- A careful examination of these telegrams and other pertinent correspondence indicates to the Department that the proposed increased tax on cigarettes may have two effects both of which would be distinctly detrimental to American exports to China: (1) the imposition of the consolidated tax of Chinese $800 per case on those cigarettes in grade 1 which are imported and have paid the customs import duty (Section 4 paragraph 2 of your telegram) would it seems affect very seriously exports of American cigarettes to China; and (2) the high percentage of increase in the tax on cigarettes in the new grades 2 and 3 would, it is believed, have a decidedly adverse effect on exports of American leaf tobacco to China inasmuch as it is understood that a large proportion of the leaf used in these cigarettes is imported from America.
- With reference to paragraph 5 of your telegram, the Department is of the opinion that the absence of treaty grounds for making a formal protest should not necessarily prevent representations being made when, as it appears in this case, American export trade interests are threatened by a prospective course of action to be adopted by the Chinese Government. This Government, being desirous of decreasing [Page 649] and removing barriers to an exchange of goods in foreign commerce, is disposed to take all practicable steps toward dissuading other governments from imposing additional restrictions upon foreign trade.
- The Department therefore desires that you make a thorough investigation of the matter and, in the event your investigations confirm present indications that the proposed tax increase would, if implemented, impose burdensome restrictions upon American exports of cigarettes and leaf tobacco to China, you should take all practicable steps, including appropriate representations to the Chinese Foreign Office, toward safeguarding the American interests concerned and toward dissuading the Chinese Government from taking action restrictive of trade between the United States and China.
Please keep the Department promptly and fully informed.