793.003/1023: Telegram
The Ambassador in China (Gauss) to the Secretary of State
[Received December 4—7:27 a.m.]
1427. For the Secretary and the Under Secretary. Your No. 1170, December 1, 2 p.m., received this morning. I saw Foreign Minister this afternoon and carried out your instructions. He has already instructed Chinese Embassy in reply to our document of November 27 and in reference to coastal trade and inland navigation [that he?] desires simple statement of relinquishment with added clause that China is prepared to take over any American properties that may have been engaged for those purposes and to pay adequate compensation therefor.
He does not wish to postpone this subject for treatment in later comprehensive treaty and when I asked him why he desired to cover matter by exchange of notes instead of an article in the brief treaty along the lines you propose he stated that a forthright relinquishment of these rights in simple language in the exchange of notes would have more popular appeal and appreciation in China than an article in the treaty saying China’s inland and coastal trade are to be regulated by the laws of the country. He pointed out that exchange of notes covers matter of overseas vessels along lines of our proposed draft treaty article and there remains only question of inland and coastal trade which he deemed adequately covered by his answer to our document of November 27. He stated that China does not propose to allow foreign flag vessels in coastal and inland trade.
[Page 386]I pointed out that the last sentence of our draft treaty article seemed merely to ensure that we would be given as favorable treatment as any other nations or not be given treatment less favorable than other nations should China at any time decide in any way to permit the participation of foreign flag vessels of any nation in coastal shipping or inland navigation. He finally said he would consider adding to proposed paragraph in exchange of notes a provision that should China later in any way extend the right of inland navigation or participation in coastal trade to vessels of any third nation such rights would similarly be extended to vessels of the United States.
On question of ports open to overseas trade, he said there is no intention of naming ports but simply to refer to the coastal ports open to trade. May I point out to Department that therefore [heretofore?] Hankow and other lower Yangtze ports have been open to overseas vessels during high water season. When I inquired of Soong whether for example Hankow would be open to overseas vessels for direct delivery and loading of cargo in overseas trade he replied in the negative but showed interest when I commented that in the past this had facilitated foreign trade by permitting direct shipments without heavy cost of transshipments.