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THE MOST FAVORED TREATMENT 365

cal and other privileges. For example, the first article
of the Treaty of July 10, 1898, with the Congo Free State,
specifically mentions that the most favored nation treat-
ment is to include privileges of jurisdiction which cannot
mean any other than political privileges:

"All privileges of person, property, and jurisdiction en-
joyed by foreign nations under the Treaties concluded by
China shall from henceforth be granted to the Congo
Free State." 53

As a further illustration, in demanding the right to propa-
gate Buddhism in China, in 1915, Japan based her demand
on the most favored nation clause, arguing that inas-
much as the other Treaty Powers were given the right
to propagate Christianity by the operation of the most
favored nation clause, she should have a similar right
to propagate Buddhism in China ; to which China replied
that the scope of the most favored nation clause was
limited to mere matters of commerce and navigation and
did not extend to religious propagation except by specific
treaty stipulations. 54

Second, it is unilateral and not reciprocal, unqualified
and unconditional. As we have seen, in the treaties with
Belgium, Denmark, France, the Netherlands. Russia,
Norway, and Spain, the unilateral and unqualified form
of the most favored nation treatment is stipulated. Thus,
no matter whether China concedes favors or advanl
for consideration or on condition, these rowers may
claim the favors or advantages in question rind yel refuse
to offer the same consideration or concession or fulfill
the same condition. In consequence, these states enjoy-
ing the unilateral and unqualified form of the mosl fa-

d nation treatment can enjoy more privileges than

the other states obligated to give i >n or to fulfill

conditions, thus resulting in inequality of treatment, inter-
national friction and want of reciprocity, and so defeat-



366 IMPAIRMENTS OF SOVEREIGNTY

ing the very purposes for which the clause was originally
invoked.

Third, because of existing practices in connection with
this clause, China practically cannot carry out many
reforms or undertake several vital measures without the
unanimous consent of the Powers enjoying the most fa-
vored nation treatment. Having conceded to one Power
the right to be consulted on certain matters, by the un-
justifiable application of the clause, all the other Powers
claim the same right. Thus, China cannot regulate or
change her tariff without the unanimous consent of the
Powers enjoying the most favored nation treatment; and
this experience has proved to be quite impossible, or at
least extremely difficult, to obtain.

In view of these serious disadvantages resulting from
the present operation of the most favored nation clause
in China, the Chinese Government, through its Delega-
tion, applied to the Paris Peace Conference for the
insertion, in the preliminaries of Peace with Germany
and Austria-Hungary, of a provision for the adoption
of the principles of equality and reciprocity as the basis
of a new treaty of commerce and for the relinquishment
of the most favored nation treatment. The desired inser-
tion reads :

"Germany engages to adopt the principles of equality
and reciprocity as the basis of a new treaty of commerce
and general relations to be concluded with China and
relinquish therein on her part the principle of the so-
called most favored nation treatment ; and the said new
treaty, when concluded, shall guide all intercourse be-
tween the two countries in future." 65

It must, however, be observed that this policy of relin-
quishing the most favored nation clause from the future
treaties of commerce of China, as evidently adopted at
the Paris Peace Conference, is difficult to carry out and
probably unwise to pursue. In the first place, the Pow-
ers enjoying the most favored nation treatment will not



THE MOST FAVORED TREATMENT 367

be willing to relinquish the clause which is considered
as the cornerstone of their commercial rights in China.
In their eyes this little provision is priceless. It contains
all the essentials of their commercial privileges in China.
In the second place, judging solely from the point of view
of China, it would not be wise to relinquish the clause
totally, however obnoxious is its operation at present.
For if China demands that this clause should be elimi-
nated from all future treaties of commerce, to be con-
sistent, she will have to relinquish the same clause or
rather the same treatment which she now enjoys, or will
enjoy, in other states. Hence, in following the principle
of reciprocity, inasmuch as she would not give other
states the most favored nation treatment, she would not
receive the same treatment from other states. If she does
not desire to enjoy this treatment, she may consistently
ask for the relinquishment of the clause by the other
states; but if she does desire to retain the same privi-
lege, then such a policy of relinquishment will merely
injure herself.

Relinquishment being practically impossible and un-
wise, the solution of this problem seems to lie in a
compromise, that is, in retaining the clause and yet at
the same time limiting its operation within legitimate
bounds. The clause should still be retained in all China's
commercial treaties that have been, or may be, concluded,
thus satisfying the foreign states and at the same time
preserving the most favored nation treatment for her-
self. It should, however, be hedged about on all sides.
It should be limited exclusively to commerce and navi-
gation, and should not be permitted to extend to political
and other matters. It should be bilateral and reciprocal,
and not unilateral and non-compensating. It should be
qualified and conditional, and not unlimited and uncon-
ditional. A sample form of such a most favored nation
clause, — qualified, Conditional, and reciprocal, and lim-
ited to commerce and navigation, — is as follows :



368 IMPAIRMENTS OF SOVEREIGNTY

"The high contracting parties agree that in all that con-
cerns navigation and commerce, Favors which either has
already granted or may hereafter grant to any other
state shall become common to the other party who shall
enjoy the same freely if the concession is freely made;
or upon allowing the same compensation if the conces-
sion is conditional." 60

Thus can China retain for herself the advantages of
the reciprocal most favored nation treatment, and satisfy
the commercial Powers that are determined to build their
trade relations upon the cornerstone of the clause. Thus,
above all, can she liberate herself from the bondage of
the present unlimited and excessive application of the
clause.



NOTES TO CHAPTER XXII

1. State Papers, Vol. 31, p. 133.

2. State Papers, Vol. 32, p. 791.

3. Hertslet's China Treaties, Vol. 1, No. 39, p. 258 et seq.

4. Hertslet, Vol 1, Xo. 6, p. 34, Treaty of Tientsin, June 26,
1858.

5. Hertslet, Vol. 1, No. 64, p. 381, Art 25.

6. Hertslet, Vol. 1, No. 40, p. 284, Art. 40.

7. Hertslet, Vol. 1, No. 71, p. 419, Art. 16, Treaty with Peru,
June 26, 1874.

8. MacMurray, 1918/8, Declaration attached to the Treaty of
Amity, July 13, 1918, between China and Switzerland.

9. Hertslet, Vol. 1, No. 73, p. 426, Art. 10, Treaty with Por-
tugal, Dec. 1, 1887.

10. Hertslet, Vol. 1, No. 48, p. 313, Art. 12, Additional Con-
vention with France, June 26, 1887.

11. Hertslet, Vol. 1, No. 20, pp. 108-109, Art. 18, Convention
with Great Britain respecting Burma and China, Mar. 1, 1894.

12. Hertslet, Vol. 1, No. 67, p. 397, Art. 11, Treaty with
Japan of Dec. 22, 1905.

13. Hertslet, Vol. 1, No. 34, p. 233, Art. 45, Treaty of Nov. 2,
1865.

14. Hertslet, Vol. 1, No. 38, pp. 253, 257, Treaty of July 13,
1863, Arts. 23 and 54.

15. Hertslet, Vol. 1, No. 93, pp. 527-528, Art. 2, Treaty of
March 20, 1847.

16. Hertslet, Vol 1, No. 39, p. 268, Treaty of Whampoa, Oct
24, 1844, Art. 35; also Art. 40, Treaty of Tientsin, June 27, 1858,



THE MOST FAVORED TREATMENT 369

Hertslet, Vol. 1, Xo. 40, p. 284; also Art. 3, Treaty of April 25,
1886, Hertslet, Vol. 1, No. 47, p. 302; also Art. 7, Treaty of
June 26, 1887, Hertslet, Vol. 1, No. 48, p. 313.

17. Hertslet, Vol. 1, Xo. 70, p. 414, Art. 15, Treaty of Oct. 6,
1863.

18. Hertslet, Vol. 1, Xo. 82, pp. 460-461, Art. 12, Treaty of
June 13, 1858.

19A. Hertslet, Vol. 1, No. 91, p. 520, Treaty of Oct. 10, 1864,
Arts. 47 and 50. It will be noticed that the reciprocity in this
case was limited only to the trade with the Philippine Islands,
and that as the Philippine Islands are now in the possession of
the United States, this reciprocal treatment is therefore nullified.

19B. Hertslet, Vol. 1, Xo. 33, pp. 222-223, Art. 43. Treatv of
Sept. 2, 1869.

20. Hertslet, Vol. 1, No. 35, pp. 236-237, Arts. 5 and 8, Treaty
of Oct. 3, 1881. It will he noticed that, in the case of Brazil, the
most favored nation treatment is not only reciprocal but also
conditional. Art. 5.

21. Hertslet. Vol. 1, No. 36, pp. 240-241, Arts. 1 and 2, Treaty
of Julv 10, 1898.

22. Hertslet, Vol. 1, No. 69, p. 402, Treaty of Dec. 14, 1899,
Art. 8.

23. Hertslet, Vol. 1, Xo. 71, p. 419, Art. 16, Treaty of June 26,
1874.

24. MacMurray, 1908/11, Arts. 3 and 4.

25. MacMurray, 1918/8, Declaration attached to Treaty of
June 13, 1918. It is to be noticed that the grant of most favored
nation treatment is limited to the time until a treaty of establish-
ment and commerce is made.

25 A. Hertslet, Vol. 1, Xo. 73, p. 426, Art. 10, Treaty of Dec. 1,
1887.

26. Hertslet, Vol. 1, No. 20, pp. 108-109, Arts. 9 and 18, Treaty
of March 1, 1894, relative to Burma and China.

27. Arts. 6 and 7, Treaty of April 25, 1886, Hertslet, Vol. 1,
Xo. 47, p. 303 et seq. ; Art. 7, Treaty of June 26, 1887, Hertslet,
Vol. 1, Xo. 48, p. 313; modified bv Art. 4, Treaty of June 20,
1895, Hertslet, Vol. 1, Xo. 53, p. 325.

28. Hertslet, Vol. 1, No. 85, p. 492 et seq., Russian land trade
regulations annexed to Treatv of Feb. 24, 1881.

29. Hertslet, Vol. 1, No. 67, p. 396, Art. 11, Treaty of D»
1905.

30. Hertslet, Vol. 1, Xo. 60, pp. 357, 360, Arts. 24 and 54.

31. Hertslet, Vol. 1, X... n, p. 34.

32. Hertslet, Vol. 1, Xo. 11, p. 62

33. Hertslet, Vol 1. No. 20, i>. 108, Art. 22.

34. State Papers, VoL 32, i». 7"1 ; also see Hertslet Vol. 1,
No. ''4, pp. 545. 551 552.

'■it 6, i lerl l( i. Vol. 1. No. 96, p i \it. :■>. Treaty

of Nov. 17, 1880, Hertslet, Vol. 1. No 98, pp. 561 ^"2\ also Art 5
s. 1903, Hertslet, VoL 1. X... 100, p. 571
36. Vol. 1, No. 62, i.. 365.



370 [MPAIRMENTS OF SOVEREIGNTY

37. Hertslet Vol 1. No. 64, pp. 376, 381.

38. Hertslet, Vol. 1. No. 66, pp. 386-387. Art. 9.

o. 56, p. 339, Art 40, Treaty of Sept 2,
1861; also Art. IS, i>. 335.

40. Hertslet Vol I, No. 57, p. 343, Art. 1.

41. I. U. Moore, International La* Digest Vol 5, pp. 270-271,
Earl Granville, Sec of State for For. AtTairs, to Mr. West,
British Minister, Feb. 12, 1885. Blue Book Commercial No. 4,
1885, pp. 21-22.

42. Ibid., Vol. 5, p. 273. Mr. Bavard, Sec. of State, to Mr.
Hubbard, lulv 17. 1886. MS. Inst [apan 111. p. 425; cf. Whitney
vs. Robertson, 1888, 124 U. S. 190.

43. Ibid., Vol. 5, p. 27*. Mr. Sherman, Sec. of State, to Mr.
Buchanan, Minister to Argentine Republic, Jan. 11, 1898.

44. 122 U. S. 116.

45. 8 American Journal of International Law, editorial com-
ment, 1914, p. 578; Tyau, Treaty Obligations between China and
Other States, p. 198.

46. Moore, op. cit., Vol. 5, p. 272, Mr. Bavard, Sec. of State,
to Mr. Miller. June 15, 18S6, 160 MS. Dom. Let. 481.

47. U. S. For. Rel., 1896, p. 429 et seq., Mr. Olney, Sec. of
State, to Mr. Dun, Minister to Japan, Nov. 12. 1896; Moore, op.
cit, VoL 5, p. 316.

48. Ibid., Vol. 5, p. 290, the note of German Minister to the
United States State Department, dated Feb. 16, 1886, quoted in
Mr. Bayard's report, Sec. of State to the President January 14,
1889, H. Ex. Doc. 74, 50th Congress, Second Session.

49. Moore, op. cit.. Vol. 5, p. 289, the opinion of Attorney
General, Sept. 19, 1885, quoted in report of Mr. Bavard, Sec. of
State, to the President. Jan. 14. 1889, H. Ex. Doc. 74, 50th
Congress, Second Session.

50. U. S. bur. Rel., 1894, App. I. pp. 472. 473, Mr. Blaine,
Sec. of State, to Mr. Hertado, Columbian Minister, May 31,
1892; Moore, op. cit., Vol. 5, p. 304.

51. Moore, op. cit.. Vol. 5, p. 307.

52. Ibid.. Vol. 5. pp. 308-309.

53. Hertslet, Vol. 1, No. 36, p. 240.

54. Tyau, op. cit., p. 198.

55. Millard's Review. Supplement, July 17. 1920, pp. 4-5, Mil-
lard, China's Case at the Peace Conference.

56. S. K. Hornbeck, the mosl favored nation clause, \merican
Journal of Internationa] Law. VoL 3, 1909, p. 405; also sec his
three articles, pp. 396, 619, 79



XXIII
TARIFF AUTONOMY

We now come to another form of the impairment of
China's sovereignty, and that is, servitude with respect
to tariff autonomy. It is a principle in international law
that every state with full sovereignty has the right to
regulate its own tariff by legislation or otherwise, but
in China, this prerogative of sovereignty is denied by
the foreign Powers. In fact, tariff autonomy has become
so much impaired that, either by virtue of express state
treaty provisions or through the operation of the most
favored nation clause, China can not regulate or change
her tariff, made in convention with the foreign Powers,
without first securing the unanimous consent of the Pow-
ers concerned. And experience has demonstrated that
the securing of such a unanimous vote is extremely diffi-
cult, if not well-nigh impossible.

The origin of Chinese servitude in tariff autonomy
dates back to the Treaty of Nanking, August 29, 1842.
Article X of the treaty stipulated:

"lli> Majesty the Emperor of China to estab-

lish at all the ports which are, by Article 11 of this treaty.
to be thrown open for the resort of British merchants,
a fair and regular tariff of exporl and import customs
and other dues, which tariff shall be publicly notified
and promulgated for general information. And the Em-
peror further engages, that when British merchandise

shall have once paid at any of the Said ports the I

lated customs and dues, agreeable to the tariff to be
iter fixed, such merchandise may be conveyed by
Chinese merchant province or city in the inte-

rior of the Empire of c hma, on paying a further amount

371



372 IMPAIRMENTS OF SOVEREIGNTY

as transit duties, which shall not exceed per cent

on the taritT value of such goods." 1

In accord with this, in the supplementary Treaty of Oc-
tober 8, 1843, the tariff of import and export duties
was agreed upon, averaging five per cent ad valorem
except in some instances when the rate went up as high
as ten per cent. 2

In the subsequent American Treaty of July 3, 1844, 8
and the French Treaty of October 24, 1844, 4 there was
attached in each case a tariff of duties. In the American
Treaty, it was specifically stated that the consent of the
United States was required for any modification in the
tariff list:

"Citizens of the United States resorting to China for
the purposes of commerce will pay the duties of import
and export prescribed in the tariff, which is fixed by
and made a part of this treaty. ... If the Chinese Gov-
ernment desires to modify in any respect the said tariff,
such modifications shall be made only in consultation
with consuls or other functionaries thereto duly author-
ized in behalf of the United States, and witli the consent
thereof . . ." (Art. 2). 6

In 1858, when Great Britain and France had defeated
China in the so-called Arrow War (the Second War with
Great Britain), the British Treaty of Tientsin, June 26,
1858, provided for a revision of the tariff 6 which was
to endure for a period of ten years, subject to a demand
for revision by either party at the end of the term, 7 and
for the fixation of the transit duties at the rate of two
and a half per cent ad valorem. 8 In pursuance of the
above provision for tariff revision, a subsequent agree-
ment was made on November 8, 1858,° containing rules
of trade and a tariff list. 10 In general, a 1'ixq per cent
ad valorem duty both on imports as well as on exports
v. a- provided "Articles not enumerated in either list
(export and import), nor in the list of duty-free goods,



TARIFF AUTONOMY 373

will pay an ad valorem duty of five per cent, calculated
on the market value" (Rule 1). The transit duties were
again fixed at one-half of the tariff duties (Rule 7). A
uniform system of taxation was provided: "It is agreed
that one uniform system shall be enforced at every port"
(Rule 10). A duty-free list was stipulated consisting
of gold and silver bullion, foreign coins, flour, and the
daily necessities of foreign residents in China (Rule 2).
Contraband goods comprised gunpowder, ammunition
and other implements of war and salt (Rule 3). 11 Simi-
larly with the French Treaty of June 27, 1858, 12 a new
tariff list and commercial regulations were attached. 13
The United States drew up a separate convention at
Shanghai, November 8, 1858, M with a new tariff and
regulations of trade and transit. Russia simply stipu-
lated that her merchants should pay the same duties as
were levied on other foreign merchants. 1 '

Since 1858, despite the provision for periodic revision
of tariff at the end of ten years, for one reason or an-
other the privilege has not been availed of but on two
occasions, — in 1902 and 1918. In the final protocol for
the settlement of the Boxer Trouble, September 7, 1901, 19
the Maritime Customs, the Native Customs, and the Salt
Gabelle, were made the securities of the Boxer indem-
nity amounting to 450,000,000 Ilaikuan taels to be paid
off in annual installments until 1940 (Art. 6), and the
import tariff was to be raised to an effective five per
cent ad valorem, and the ad valorem duties, as far as
feasible, were to be converted into specific duties, cal-
culated on the average value of merchandise at the time
of landing during the three years, 1897-1899 (Art. 6).
In pursuance of these provisions, the Agreement of
Shanghai, August 29, 1902, was made, signed by the
special commissioners of Austria Hungary, Belgium,
Germany, Great Britain, Japan, Netherlands, Spain, and
later by those of the I Inited States, France, and Sweden
and Norway, and providing for a new tariff list. 17 The



374 IMPAIRMENTS OF SOVEREIGNTY

values of the goods were revised, bill the uniform rate
of five per cent ad valorem remained unmodified.
Meanwhile, in the Mackay Treaty of September 5,

1902, the abolition of likin was provided, and as a com-
pensation, import duties were to be raised to not more
than twelve and one-half per cent and export duties to
not more than seven and one-half per cent. The Pream-
ble of Article VIII of that treaty reads: 18

"The Chinese Government recognizing that a system
of levying Likin (Inland Transit Tax) and other duties
on goods at the place of production, in transit, and at
destination, impedes the free circulation of commodities
and injures the interests of trade, hereby undertake to
discard completely these means of raising revenue with
the limitation mentioned in Section 8.

"The British Government, in return, consent to allow
a surtax in excess of the tariff rates for the time being
in force to be imposed on foreign goods imported by
British subjects and a surtax in addition to the export
duty on Chinese produce destined for export abroad or
coastwise.

"It is clearly understood that, after Likin barriers
and other stations for taxing goods in transit have been
removed, no attempt shall be made to revive them in
any form or under any pretext whatever ; that in no
case shall the surtax on foreign imports exceed the
equivalent of one and a half times the import duties
leviable in terms of the Final Protocol signed by China
and the Powers on the 7th day of September, 1901 ; that
payment of the import duty and surtax shall secure for
foreign imports, whether in the hands of Chinese or
non-Chinese subjects, in original packages or otherwise,
complete immunity from all Other taxation, examination
or delay; that the total amount of taxation leviable on
native produce by export abroad shall, under no circum-
stances, exceed seven and one-half per cent ad valorem."

This consent, however, for an increase of the import
tariff to twelve and one-half per cent and of export duty



TARIFF AUTONOMY 375

to seven and one-half per cent in recompense for the abo-
lition of likin was made under the following conditions:

"1. That all Powers who are now or who may here-
after become entitled to most favored nation treatment in
China enter into the same engagements.

"2. And that their assent is neither directly or indi-
rectly made dependent on the granting by China of any
political concession or of any exclusive commercial con-
cession.

"3. Should the Powers entitled to most favored na-
treatment have failed to agree to enter into the
jements undertaken by Great Britain under this
Article by the 1st January, 1904, then the provisions of
the Articles shall only come into force when all the
Powers have signed their acceptance of these engage-
ments." 19

Similar consent was also granted in the American Treaty
of October 8, 1903,-° and in the Japanese treaty of the
same date. 21 Inasmuch, however, as the unanimous con-
sent is required of the Powers that are enjoying or
may enjoy the most favored nation treatment, as stipu-
lated in the British conditions, the provisions have so far
been non-effective.

The last revision of the tariff took place in 1018. It
was in connection with China's entrance into the World
War in I'M 7 that the Allied Powers again consented to
a revision, but this only to bring the tariff to an effective
the per cent. - They assented to "the principle of in-
crease of the Maritime Customs duties to an effective
rate of five per cent ad valorem, a commission including
Chinese delegates to be intrusted with the modifications
to be adopted in the system of customs tariffs in the
interests of all the contracting parties, and the Allied
Governments lending the Chinese Government their good
offices in order to obtain tin- acceptance by the neutral



376 IMPAIRMENTS OF SOVEREIGNTY

is of this increase in the Maritime Customs duties,"
at the same time demanding the promulgation by the
Chinese Government of a general tariff for all countries
without treaties. In pursuance of this consent, a tariff
revision commission met in Shanghai in January, 1918.
The hasis of revision was to be "the average of the values
of imports as they appeared upon invoices during the
years 1912-1916." - 3 The rates thus fixed, which became
effective in August, 1919, are to last for at least two years
after the end of the war, at which time another revision
may be made. Estimated in accordance with the pre-
vailing price of 1918, the new tariff now in force amounts
only to about four per cent effective. 24

Adverting to the foreign administration of the Chinese
Maritime Customs, the beginning of such supervision
dated back to the time of the Taiping Rebellion, when,
in September, 1853, the Chinese city of Shanghai was
captured by the Taiping rebels. In consequence, the
Chinese customs was closed and foreign merchants had no
officials to receive customs duties. In order to meet the
emergency the foreign consuls collected the duties for
a while, but this soon proved to be quite irksome. On
June 29, 1854, therefore, the following agreement was
entered into by the Shanghai Taotai and the British,
American and French consuls for the establishment of
a foreign board of inspectors :

"Rule 1. The chief difficulty experienced by the super-
intendent of customs having consisted in the impossi-
bility of obtaining Customs House officials with the
necessary qualifications as to probity, vigilance, and
knowledge of foreign languages, required for the en-
forcement of a close observance of treaty and customs
house regulations, the only adequate remedy appears to
be in the introduction of a foreign element into the
customs house establishment, in the persons of foreigners
carefully selected and appointed by the tautai, who shall



TARIFF AUTONOMY 377

apply the deficiency complained of, and give him efficient
and trustworthy instruments wherewith to work."- lA

Under this agreement a board of three foreign in-
spectors was appointed, of which Captain Sir Thomas F.
Wade was the chief executive officer. On his resigna-
tion a year later, Mr. Horatio Nelson Lay was appointed.
This continued until 1858, when the tarilT commission



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