than 10 percent, figured on present-day values, while raisins, which are imported in large quantities from America, are subjected to a duty which, calculated on present-day prices, is probably about 30 percent.

With a sad dearth of railway mileage in China the motor bus has come in many sections of the country to take the place for passenger purposes of the railway. Naturally the cheaper the bus the cheaper may be the passenger rates. Furthermore it is not yet possible to build roads in the interior of China which can stand heavy traffic. This means that the most economic type of bus is that assembled in China from the chassis of such cars as Ford, Dodge and Chevrolet. The new tariff imposes a duty of [222] percent on all motors and accessories except bus [ses] with a minimum seating capacity for 12 persons and completed trucks of over one ton capacity, for which new tariff is only 122 percent. By this method American companies are discouraged in promoting assembly plants in China, and Chinese are discouraged in the buying of chassis and accessories and assembling in China.

During the years 1927 and 28 there sat in China a commission for the revision of the valuations in China's import tariff of 1922. It concluded its labors in July 1928. The chairman of this commission was a Chinese. Thirteen [nations] were represented. In compiling the new tariff the Chinese totally ignored the findings of this commission and elected to use values as fixed by a similar previous commission which sat in 1922 and used 1921 market values as the basis for the revision made at that time. Hence values as they appear in the new tariff are those of the 1922 values based upon Shanghai wholesale market values of 1921, whereas 1927-28 commission based its revision upon the 1925 Shanghai wholesale values.

The new tariff schedules are divided into seven classes, namely: 712 percent, 10 percent, 122 percent, 15 percent, 172 percent, 2212 percent, and 272 percent. It was presumably to be a 1212 percent tariff with certain necessities on lower schedules and certain commodities of patently luxury character in the upper classes. However, the new tariff departs radically from this theory in a number of important particulars among which were those as enumerated above. It is patent that it places the heavier burden of the increased duties upon American trade not because the economic situation in China warrants, but because generous good-hearted America would probably stand for that which would occasion an outburst of protest from certain other nations had they been placed in a similar situation. To what extent American trade will be adversely affected by this new tariff is difficult to prophesy but it has within it certain elements of unfairness to American trade which are bound to result unfavorably as contrasted with that which effects [affects] the trade of other countries.

It is a significant fact that nothing has appeared in any official documents or in press in connection with this new tariff which may lead any one to infer that, when it becomes effective, internal taxes on trade, for instance as likin, transit dues, destination taxes, consumption taxes, and other similar excises, will be abolished or materially reduced. It was presumed when the foreign powers signatory

to the Washington Conference treaties and agreements met in Peking during the year 1926 that when China's assumption of tariff autonomy on January 1, 1929, went into effect it would be accompanied with some definite arrangement for the abolition of those internal taxes in the event the import schedules were materially increased. Unless there is a substantial reduction in the internal taxes on trade, it would seem that the additional import duties, will with certain commodities increase the costs to such an extent as appreciably to lower the quantities imported."

MACMURRAY

PROPOSALS FOR REVISION OF CHINESE TREATIES REGARDING TARIFF CONTROL AND EXTRATERRITORIALITY *

793.00/194: Telegram

The Minister in China (MacMurray) to the Secretary of State

[Paraphrase]

PEKING, December 31, 1927-1 p. m.

[Received December 31-11:30 a. m.] 1137. 1. As a result of the recent action of the Peking regime in denouncing the Spanish treaty as there has been much discussion among the diplomatic representatives in regard to the practicability of the powers manifesting a concerted attitude towards the increasing propensity of the Chinese to repudiate international obligations. With the object of formulating a course of action which might be presented by the Senior Minister (the Dutch Minister) for the consideration of the diplomatic body as a whole, there was an informal meeting yesterday of the Senior Minister with the British, French, Italian, and Japanese Ministers, and myself. It is our suggestion that, having obtained the approval of their several Governments, the various Ministers arrive at an understanding that each of them, when faced with the denunciation of his Government's treaty, will reply along the line of the following formula A to the Chinese notification, though presumably such reply would be in the third person in his Government's name:

"Even if it be assumed that you are to be regarded as the other government party to my treaty, I entirely contest any right on your part to denounce the treaty in the way you have done.

I have no intention, however, of discussing with you the question as to whether you are legally entitled to denounce the treaty. Noth

* Continued from Foreign Relations, 1927, vol. п, pp. 341-370. See also section on treaty regulating tariff relations between the United States and China, signed July 25, 1928, post, pp. 449 ff.

93 This apparently refers to the action of C. C. Wu (then Nationalist Minister of Foreign Affairs) in notifying the Spanish Minister, Nov. 24, 1927, that the Sino-Spanish treaty of friendship, commerce and navigation of Oct. 10, 1864 (China, Imperial Maritime Customs, Treaties, Conventions, etc., Between China and Foreign States, Shanghai, 1908, vol. II, pp. 1085, 1104), had expired and become inoperative.

ing in the treaty gives to you the right to take any such action. You have, moreover, estopped yourself by refusing to have the point determined in the Belgian case by the Permanent Court of International Justice at The Hague, despite the fact that the optional clause of the Court's protocol 5 which is applicable to the case had been accepted by you a short time before.

94

There is entire willingness on my part that the matter of your right to denounce the treaty should be decided by the Permanent Court. Unless, however, the matter is submitted to arbitration, and, pending a decision in your favor, I shall continue to consider that my treaty is in force.

There is no implication in this that my Government is not willing to negotiate a revision of the treaty, but it must continue to be understood that if, in the meantime, you take any action inconsistent with the treaty, I reserve the right to take such steps as I may deem appropriate for the protection of my interests and those of my countrymen."

2. In view of the fact that the United States is not a party to the Permanent Court, I stated that in submitting the formula for your consideration it would be recommended that in our case all of the third paragraph might be omitted except the words "I shall continue to consider that my treaty is in force" and that the reference to the Court in the preceding sentence might also be omitted. It may be that you would think it appropriate to substitute something analogous, such as a reference to The Hague Court of Arbitration or to a commission under our 1914 treaty for the advancement of peace with China.96

3. The suggestion of the diplomatic representatives contemplates further that in case the treaty of one country is denounced in the manner mentioned, a communication in the terms of the following formula B should be addressed to the Chinese by the representatives of the other countries, or by as many of them as feel themselves in a position to do so.

"The action taken by the Peking Government in regard to the (blank) treaty has been learned by my Government with concern, such action being in their opinion an additional exhibition of a spirit of disregard of international obligations. The communication of (date) by the (blank) Minister, is therefore, endorsed by my Government."

4. The next treaties which will be denounced are, it is anticipated, the Portuguese in March and the Danish and Italian in July." It is

"For correspondence regarding the abrogation by China of the Sino-Belgian treaty of Nov. 2, 1865, see Foreign Relations, 1926, vol. 1, pp. 984 ff.

96

League of Nations Treaty Series, VI, pp. 380, 384.

For text of treaty signed Sept. 15, 1914, see Foreign Relations, 1915, p. 41. "For texts of treaties signed on Dec. 1, 1887, July 13, 1863, and Oct. 26, 1866, respectively, see China, Imperial Maritime Customs, Treaties, etc., vol. I, pp. 1010, 1043, and 1129 (1166), respectively.

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felt by all the Ministers here that if the treaty rights of one country after another continue to be set aside by the Chinese without any demonstration of concern on the part of the others, the Chinese soon will be emboldened to force the issue of voluntary repudiation and, therefore, that it is for the self-protection of all of us that we should manifest a concerted attitude toward the Chinese program of treaty denunciation when the terms of the treaties provide for revision by negotiation. I am in entire agreement with the view that the course of action by which the Chinese not only are contravening foreign rights but also are creating very serious perils for the future international relations of China would be very soon halted by the manifestation of disapproval on the part of the powers.

5. It is recommended, therefore, that you authorize me to act favorably upon the above-mentioned suggestions.

MACMURRAY

793.00/194: Telegram

The Secretary of State to the Minister in China (MacMurray)

[Paraphrase]

WASHINGTON, January 3, 1928–5 p. m.

2. Your telegram No. 1137, December 31, 1 p. m.

1. Referring to the first paragraph. It is not considered advisable by the Department that any commitment be entered into which purports to bind the Government of the United States in advance in regard to the action which will be taken by it or the phraseology it will use in the event that it is confronted with the action of any Chinese regime in denouncing a treaty between the United States and China.

2. Referring to your third paragraph. As to the effectiveness of identic protests by all the powers in the case of treaty denunciation by the Peking or any other Chinese regime it does not seem that optimism is justified, considering the experience gained during the so-called "gold-franc controversy" between the Chinese and French Governments.98 Although the Department is not disposed to object to your exerting your influence, informally and unofficially, in an appropriate case in opposition to an improper denunciation, any such action on your part must reserve, in each instance, the liberty of action of this Government.

KELLOGG

98 See Foreign Relations, 1924, vol. 1, pp. 559 ff.

711.93/164

Memorandum by the Assistant Secretary of State (Johnson)

[WASHINGTON,] January 5, 1928.

Mr. Frank W. Lee, of the Nationalist Government at Nanking, called on Mr. Johnson, Assistant Secretary of State, at 3 P. M.99 Mr. Lee said that he supposed Mr. Johnson had been wondering what had taken place in Nanking. Mr. Johnson said that he had heard that something violent had taken place there and that there had been a number of resignations. Mr. Lee replied that he had recently received two telegrams from Nanking. The first one had informed him of the resignation of Dr. C. C. Wu, from the portfolio of Foreign Affairs, and the second, relayed to him over the long distance telephone from New York, had said that Dr. Wu had been requested to remain as Minister for Foreign Affairs and that a mandate had been issued appointing him, additionally, as a delegate of the Nationalist Government to come to America to conduct negotiations for treaty revision. Mr. Lee said that Mr. T. V. Soong would take the place of Mr. Sun Fo as Minister of Finance, and the latter would be Minister of Reconstruction.

1

Mr. Lee described the political situation at Nanking somewhat as follows: He said that it still remained for the plenary session of the Kuomintang to confirm the appointment of General Chiang Kai-shek as commander in chief. He said that the "Western Hills" faction seemed to be opposing Chiang and it would be necessary for the latter to win the support of the Kwangsi group of generals. He thought that Chiang could do this as he would consent to act with a Military Council. Mr. Lee expressed the opinion that the Nationalist Government controlled the South solidly, including Canton and Hankow.

Mr. Lee said that he wished to come to the principal subject in interest, namely the formation of the Chinese delegation to negotiate with representatives of the American Government regarding treaty revision. He inquired how the appointment of Dr. Wu as a delegate, or as the chief delegate of the Southern delegation, would be regarded by the American Government. Mr. Johnson replied that the proposed Chinese delegation must be the spontaneous creation of the Chinese themselves and he did not wish to express any opinion about the eligibility or desirability of any particular person. Mr. Lee asked whether Mr. Johnson would not express a personal opinion, pointing out that if the Nationalist Government sent its Minister

Mr. J. K. Caldwell and Mr. W. R. Peck, of the Division of Far Eastern Affairs, were also present.

1 Former commander in chief of the Chinese Nationalist armies.