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sul to the amount of a full duty on such goods. Were this done, while the native and the foreigner would each retain their own special advantage in any transaction, the complications arising from a confusion of interests would be avoided, and no wrong be done to the national revenue; the honor and good faith of the foreign merchant would be made apparent, and there would be no anxiety as to illegalities eventually arising from these present concessions. But the foreign merchant will make a poor return to China if, in spite of her liberality to him, he insists on abetting the native in his frauds, while in the future conduct of business difficulties will certainly arise. The above is submitted for your excellency's consideration.

B No. 3.

Memorandum of increase of duties proposed by the Foreign Office.

Tea, present duty, 2.5 taels per pecul; proposed duty, 5 taels per pecul.
Silk, raw, present duty, 10 taels per pecul; proposed duty, 20 taels per pecul.

C.

1. The three memoranda formerly sent will have already been taken note of by your excellency. We now again proceed to address you on the points still under consideration. 2. [a.] Heretofore, Chinese merchants taking foreign goods into the interior, and who had not procured transit certificates from the customs, have, of course, had to pay duties and taxes at every office and barrier passed by them. Even in the case of foreign merchants themselves, those who take foreign goods into the interior without transit certificates are rightly subject to the same treatment.

[b.] Your excellency now wishes foreign and native merchants to be on the same footing [in respect of privileges to be enjoyed by those] who take foreign goods inland [c] After much consideration [we have resolved to propose that] opium excepted, all foreign goods, on arrival in port, shall pay to the customs, at one and the same time, both tariff, import duty, and treaty transit dues; and that thereafter, no matter whether found in the hands of native or foreign merchants, such goods, if covered by transit certificate, shall be entirely exempt from every species of taxation. The transit certificates shall be issued [at the time of payment of duties] alike to natives and foreigners; and should there be any violation of regulations, the native merchants will be subject to the same penalties as the foreigner.

3. But as regards the foreigner, who in China engages in trade in native produce, nothing is easier at present than for the native merchant to be placed, through his operations, at a disadvantage that is far from fair. For

[a.] The foreigner who takes Chinese produce to foreign ports interferes in no way with Chinese trade, and in his case no comparisons need be made between him and the native in respect of the duties paid by each.

[b.] But when the foreign merchant either, first, buys produce in the interior, conveys it to a treaty port for sale; or second, having bought produce from the interior, sells it at the port without shipping it to another port, the fact is that such produce, on the road from the place of purchase to the port, has been freed from the many taxes at the many places to which produce in the hands of native merchants is liable; and the result is that not only is Chinese revenue thereby a sufferer, but Chinese native trade, properly so called, is affected most detrimentally.

4. Under such circumstances, we cannot but propose that some distinction be made. No new rule is required for such foreign merchants as, first, buy produce in the interior themselves, and ship it to foreign ports; or, second, who buy produce at the ports which while in the hands of Chinese had, in coming from the interior, paid inland dues, and ship the same either to foreign countries or to other Chinese ports; for in respect of such doings the treaty provision is ample enough.

5. But as regards those foreign merchants who have bought produce in the interior and brought the same to a treaty port under a transit pass, paying simply a transit due-if they then sell it to Chinese merchants it will have thus been enabled to avoid the many inland taxes levied at many points; and even if the same goods should be shipped to another treaty port, and be thereafter-as present regulations providesubject to local taxation in common with all other Chinese goods, they will still have avoided the special taxes that they ought by rights to have paid during the first part of their journey from the place of production to the port of shipment. In both the cases referred to, the goods can be laid down for a less price than if they had been all along in the hands of a native merchant. Hence the necessity for a fair rule insuring for each merchant similar treatment.

6. But here is the difficulty: How are we to know what goods are to go to foreign countries; what to other Chinese ports; or what are to be disposed of at the first port

to Chinese? This difficulty of dividing the various kinds of produce into classes to receive different treatment according to difference of distinction, opens a door to abuses, and necessitates the establishment of some special regulation for the repression of fraud. 7. What we have to propose, then, is this: That native produce brought from the interior under a transit pass by foreign merchants on arrival at the barrier nearest the port shall then pay there both transit due and tariff export duty; and shall in addition lodge a separate amount equal to the transit dues as a temporary deposit. Produce which shall thus have paid at the barrier transit transit dues and export duties, and lodged an additional amount equal to the transit dues as a deposit, can thereafter be treated as follows:

[a.] If, within a term of three months, it is shipped to a foreign port, the amount deposited will be returned.

[b] If, within a term of three months, it is shipped to another Chinese port, the amount of deposits will be retained and entered in the accounts as a set-off against the many taxes avoided when protected by a transit pass.

[c.] If the term of three months expires without the shipment of the produce to either a foreign or native port, it may safely be inferred that it has been sold to Chinese at the port. Such a sale in our opinion would, properly speaking, render the goods liable to confiscation; but we also think that a difference may fairly be made between produce thus sold at a port after payment of a transit due, and produce sold while under the protection of a transit pass, but before payment of the transit due, and in reference to which latter the treaty states that sale in transitu will render them liable to confiscation. In this case too, then, the amount deposited ought likewise to be retained and entered in the accounts as a set-off against all the taxes that the improper use of the transit pass had enabled the goods to avoid. (Produce sold in transitu is of course to continue liable to confiscation.)

The mode of treatment which we thus propose is to meet the case of the foreign merchants who (in addition to carrying on their own foreign trade) desire also to engage specially in native business; such, of course, in fairness to the Chinese merchant, ought to be placed on the same footing as the natives who engage in the same business.

8. Produce purchased at the ports by the foreign merchant will simply have to pay its export duty at the time of shipment, as provided for by treaty.

9. The transit memorandum taken into the interior by foreigners who wish to make purchases inland, ought to be limited as to the time for which it is to continue valid. 10. Should the special tax barriers be hereafter abolished, and the old custom-houses re-established in the interior and along the Yangtsze, we might again rearrange these matters; in any case, the object in view is simply to place the Chinese and the foreigner on the same footing, so that neither may find himself more heavily or more lightly weighted than his competitor.

11. With regard to the special taxes levied and contributions called for by the Chinese government, [we have to repeat that] they result from the military necessities of the country. While the custom-houses in the interior are unable to be opened on the former scale, the government could not but place the burden on the trading communities; hence the less or more numerous inland barriers, and hence the lighter or heavier contributions demanded; hence, too, the fact that their continuance or disappearance has been altogether a matter of uncertainty. The more or less pressing nature of military requirements has called for concomitant increase or diminution; if troubles were altogether at an end, and supplementary details arranged for, the barriers would of course disappear one after another, and indeed already from time to time, in proportion as quiet has been restored, many have been abolished. But on this point we need not trouble your excellency by restating what has often been said before.

12. Your excellency has, amongst other things, proposed that the duties on several kinds of foreign goods shall be decreased; and on this point we are of opinion thatopium excepted, about which there is a special regulation-the tariff of imports and exports ought to be carefully revised, and the duties on all commodities be fairly fixed, so that each may be as much as possible in accordance with the principle on which the tariff is based, and represent five per centum ad valorem.

13. We now await your excellency's reply on the subject of the present communication, and also in respect of the matters treated of in the three memoranda formerly sent. We beg that you will soon favor us with that reply, for the ministers of the other treaty powers may have to be communicated with in order that the arrangements concluded between us may take effect on all.

AUGUST 1, 1868.

D.

LING-KWANG-Sz', August 5, 1868.

MON CHER COLLÈGUE ET DOYEN: It will be in your recollection that in November last I placed in the hands of the foreign representatives in Peking, a memorandum on

the present condition of the Chinese empire and its internal administration in connection with a revision of treaties. My object in taking this step, as I stated, was by a free exchange of opinions to arrive at a mutual understanding on the important question of a revision of treaties. Although no written communication was received from any of my colleagues on the subject, I was led to conclude, from what passed in conversation, that there was a very general opinion of the impolicy, in the present state of the empire, and during the minority, of seeking any such modifications of existing treaties as would necessitate fundamental or sweeping changes in the government and administration, to give them effect.

Entirely in accord with what I believed to be the general sense of my colleagues, I presented, in the following month, (December,) a note to the Foreign Office, referring to the approaching period fixed by the treaty of Tientsin for a revision, if demanded on either side, of the commercial rules and tariff, and suggested that a mixed commission should be appointed, to sit at Peking and make a preliminary inquiry into various alleged abuses, and failure in giving effect to treaties, and to consider the best means of removing such grounds of complaint, if fonud to exist, and affording, in compensation for loss and damage already sustained by the foreign trade, increased facilities for its extension.

The Foreign Office assented to my proposition, and for the last six months a mixed commission, consisting on the British side of Mr. Fraser, the senior secretary of the legation, and on the other part of two Chinese secretaries and Mr. Hart, inspector general of customs, has been sitting.

I caused a full exposition to be laid before the commission of all the grievances detailed in the printed memorials of the merchants, with which you are acquainted, and submitted various propositions calculated, in my opinion, to remove prevailing abuses and restrictions on trade, hitherto preventing its development, in violation of the spirit if not in all cases of the letter of treaties. The result has been a declaration on the part of the Foreign Office of its willingness to accede to many of the proposals made, to some unconditionally, to others subject to certain modifications in the tariff and trade regulations.

I have hitherto kept you, our Doyen, and my colleagues generally, informed of the steps I was taking, and the object I proposed to accomplish through the commission, and this with the utmost frankness: first, because any idea of obtaining exclusive advantages for British trade or interests was precluded by the favored-nation clause in all the treaties, and therefore there could be nothing to conceal; and second, because any good obtained for Great Britain must be for the common benefit of all, and consequently whatever might be done must in the end be acquiesced in by every other treaty power before any changes or modifications could be carried into effect.

The labors of the commission having now taken a definite shape, I am enabled, in further development of these views, to communicate the result, and invite the co-operation of my colleagues by the expression of their opinion as to the acceptability of such measures as are proposed for the purpose of giving fuller effect to existing treaties and increased facilities for trade.

I may premise, by way of explanation, that the greatest burdens and restrictions upon trade, and those the most loudly complained of by the several mercantile communities in China as a violation of treaty stipulations, were all connected with the li kin taxes at the ports and other localities, and the mode of collecting the transit dues. And it was precisely under these two heads that the greatest difficulties have been experienced in arriving at any satisfactory settlement.

Under both these divisions there was, in practice, a wholly irresponsible and arbitrary power of taxation exercised by the provincial anthorities, which rendered perfectly valueless all limitation of tariff rates. At the ports, the moment that foreign goods passed into Chinese hands they were liable to a perfectly unlimited and varying taxation. In the interior the same evil was perpetuated, and transit certificates did not suffice to cover foreign goods in their passage to places of consumption, even in foreign hands; and in Chinese hands they were at the mercy of the taxing authorities. The same applies to tea and silk on their way to the treaty ports. Under such a régime, the tariff rates fixed by treaty ceased to be any protection, and the whole object of their stipulation was defeated. Duties to any amount might be levied at the caprice or according to the wants of the provincial authorities, even to a prohibitive extent. And they have in effect constituted so heavy a burden as in many branches of trade to have inflicted the most serious injury, and proved to be all but prohibitive. After long discussion, it has been admitted that treaty rights were violated by such proceedings, and that foreign trade, whether in imports or exports, by payment of the fixed transit dues of two and one-half per cent., could be certificated to any part of the interior, even though in Chinese hands.

On the other hand, the Chinese officers insist on the unceded right of the territorial sovereign to tax all goods, whether foreign or native produce not so certificated, when circulating in the interior, to such extent as the wants of the state may render necessary. But they have admitted that this should be done under imperial and responsible

authority, and with communication to the foreign representatives, if not by public decree, so that these could have the means of judging of the incidence of such taxes, and ascertain that it did not fall disproportionately on foreign trade.

To give effect to these views, they propose that all imports should pay the transit dues on landing, at the maritime customs, receiving a transit pass certificating such goods free of all charges whatever to any portion of the interior, while in transitu, and before passing into consumption, abolishing by imperial decree all li kin and other taxes of whatever denomination, at the ports on foreign goods.

As regards the staples of the export trade, these can also be certificated for the ports and relieved from all further duties, provided that, if not shipped to a foreign country but to another port in China, they are then subjected to the same taxation as native produce in native hands. The inclosed draught of a note which the Foreign Office propose to write, if this should be agreed upon, will give the details of these measures. It will be observed that the only possible objection to a payment of a transit due on all imports-that none ought rightly to be levied on goods sold at the ports-however true in theory, is of no weight when the right to levy that or five times as much, under another name, whether as an octroi or a li kin tax, the moment they pass into Chinese hands, is asserted and exercised. It is in the interest of the goods sold sur place even, to exempt them by a payment of two and one-half per cent. from uncertain and unlimited taxation, as they will be more salable and fetch a better price by reason of such exemption.

The inclosed memorandum concludes with a proposition to revise the whole tariff, with a view to equalize the rate on all articles to five per cent., excepting tea and silk, on which, in a former note, the Foreign Office had proposed that the duty should be doubled. This would not constitute a very heavy duty, judged by European rates of taxation, and it might well be compensated by the reduction of duty on many other articles which the proposed equalization would effect; although it is probable that such an increase would be very unpopular among the merchants, who, as a general rule, want everything reduced, and are never willing to listen to any reasons justifying an increase, though as a part of a general measure eminently calculated to benefit

them.

These are the points affecting the tariff and taxation of trade. In various other directions they have expressed their willingness to make unconditional concessions, with the view of facilitating trade both in the interior and on the coast. These may be summed up thus:

1. The framing of a code and rules of precedure for mixed courts.

2. The establishment of bonded warehouses.

3. The payment of drawbacks in specie, if within the current quarter, and their receipt in payment of duties for three years.

4. To regularize payment of duties by fixing the value of sycee at each port.

5. To provide for steam requirements, by allowing foreign machinery and assistance in working coal mines.

6. To free dock materials from duty, and to admit all household goods and personal effects, not for sale, also free.

7. To issue an edict declaring the right to trade and temporary residence throughout the interior.

8. To authorize inland navigation by foreign vessels (not steamers) for the transport of foreign goods.

9. To assist the expansion of steam traffic on the Yangtsze river, by the addition of certain landing stages for shipment and landing of goods and passengers at certain places other than the ports already opened, viz: at Ta-tung, Ngan-King, and Wu-hu. 10. To open the port of Wan-chan between Ningpo and Fuhchaw, and also possibly others if desired.

They refuse to admit foreign salt, to allow steam navigation of inland waters, and right of domicile in the interior, unless as regards the latter. Treaty powers are prepared to renounce, in regard to such residents, the exterritorial privileges. These are the only three propositions discussed to which a negative has been given.

From this brief summary of facilities offered and advantages or concessions obtainable, I think, with the aid of the inclosed note, you and my colleagues will be enabled to form a clear opinion as to the policy of acquiescing in the arrangements now proposed, and as I desire, very much in the common interest, to learn with as little delay as possible how far your views and those of my colleagues generally are in accordance with my own, I think it proper, frankly and plainly, to put you in possession of these. The British government is alone entitled, at the present time, to demand any revision, the date fixed for such demand on the part of other powers being more remote. I do not think, however, it is in the interest of any foreign power to press for any fundamental changes now; nor is her Majesty's government, even by treaty, entitled to demand any thing beyond a revision of the trade regulations and tariff. Within those limits the Foreign Office has, I think, offered with good will to grant nearly all that could for the present either be wisely asked by foreign powers or safely granted by the Emperor

of China. If more were even to be extorted by pressure, I do not think it would practically be in the power of the Chinese government to give it effect.

I believe that the arrangement contemplated for the abolition of the li kin taxes, and the protection of all produce, foreign and native, in transit, (inland or coastwise,) if carried out in good faith, (and such I believe to be the intention and wish of the officials here,) will be an immense gain to all foreign trade, and effectually remove the greatest drawbacks and grievances under which it has labored since the last treaties were signed.

I believe that the other measures enumerated, from 1 to 10, include all that are most essential and immediately practicable for the improvement of our relations and the development of trade. With these convictions I am prepared to recommend their acceptance by her Majesty's government, leaving it open for further consideration whether any revision of the tariff, subject to the condition of an increased tax on tea and silk, shall be declined or accepted. And so, in like manner, as to the opening of more ports on the coast, about the advantage of which there is great doubt among the merchants themselves, and some conflict of opinion.

Of course, to give such action on my part practical effect it is necessary that her Majesty's government should also be advised how far my colleagues, the representatives of the other treaty powers, are disposed to adopt the same views, and make a similar recommendation to their respective governments; and it is with this object that I now write to you as our Doyen, and beg you to be good enough to enter into communication on the subject with the other members of the corps diplomatique in Peking.

I avail myself, &c.,

His Excellency A. VLANGALY,

Envoy Extraordinary and Minister Plenipotentiary

RUTHERFORD ALCOCK.

of his Imperial Majesty the Emperor of Russia.

E.

[Translation.]

Mr. Lallemand to Sir Rutherford Alcock.

PEKING, August 9, 1868.

Mr. MINISTER AND DEAR COLLEAGUE: Your letter of the 5th instant arrived on the 7th. In replying, I have waited until our dean should communicate the documents of which you spoke, which you had sent him. I have received them this morning, and I now proceed to give my opinion respecting them upon first impressions.

To put foreign commerce and Chinese commerce upon the same footing as far as possible is a just and worthy project—an encouraging one-and such is the tendency of the various measures proposed by the yamun. But would the ameliorations upon the present state of affairs, which would certainly result from the sum total of these measures, if carried into execution, be, or appear to be, sufficiently compensated by the raising of the duties upon silks and tea to the double of the present tariff? I somewhat doubt it, for the following reason: we know by experience, or we think we know, that the yamun, or rather the government of Peking, has no great control over the administration of the provinces; and that in the treatment-good or bad-of the commercial problem, it would be always the provincial functionaries who would play the principal part. We are consequently tempted to say: those ameliorations are offered us in good faith and good will by the yamun, as we are very ready to believe; but from the will to the deed, to the actual execution, there is an interval, for we know that the yamun's authority is not preponderant in the provinces, and that what it here promises us cannot perchance be executed, except very imperfectly, at a distance from Peking. What will be fully carried out, if we agree to it, is the collection of the double duty on teas and silks. We are then exposed, in conceding without any precaution the doubling of the duty, to pay down and without drawbacks for the advantages which have been given us on paper at Peking, (though in good faith,) but whose execution is uncertain and subject to eventualities. I should then be of the opinion, if the doubling of the duties on teas and silks were to be conceded, that it should only be after two years probation of the promised ameliorations, and after being assured that they have become a fact. This would be the price and the recompense of the improved régime which the Chinese had commenced.

As to the concessions offered, they are small enough we must admit. The right of navigating by oar or sail on the interior waters is scarcely a concession. It is the steam navigation that we want, and that we begin to need. Even supposing that it cannot be permitted upon the canals, which we may easily admit, it ought at least to be permitted upon the great lakes, such as the Poyang and others, where the uncertainty of the winds

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