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offices of the United States would become forceful intervention. Such intervention would, in turn, result in the exercise of the powers of a protectorate—a function which was farthest removed from the disposition or the intention of the United States in its relations with Asia. While Korea was, theoretically, not a party to the war between Russia and Japan, the United States, when such a service became acceptable, was glad to extend its good offices to both the combatants and thus to restore such a peace to Asia, as resulted from the Portsmouth Conference.

(2) But the United States was governed by a more fundamental consideration in its attitude towards the Far East. Peace and the independence of Korea were desirable, but even more important was the checking of the growing power of European nations on the western shores of the Pacific. Gresham's policy in 1894 had clearly included this consideration. It is quite evident that Mr. Roosevelt was moved by a similar motive, as was also Great Britain after 1900. The interest of Asia, it was believed, could best be served by the use of the good offices of the United States not only on behalf of an individual state, but also on behalf of eastern Asia as a whole, in the effort to check the advance of Europe. Thus, when it came to the application of this policy at the time of the annexation of Korea, the claims of Korea as an independent state appeared small when compared with the claims of Asia as a whole. The choice, unless an American protectorate were to be established over Korea—a chimerical and quixotic alternative—was between Korea as a source of strength to Japan, or as a part of Russia. With such a choice before it, there could be, if traditional policy were followed, but one answer from the United States.

There is, perhaps, room for speculation as to whether Mr. Gresham, in October, 1894, would not have achieved a greater ultimate good for Korea and for Asia as a whole if he had acceded to the proposition which came from Great Britain to join with the European powers in guaranteeing the independence of Korea. The intervention which the United States declined to support in 1894 is seen, in a somewhat different form, to be necessary in 1922, in the interests of peace in Asia. Yet, one has but to review the relation of the United States to the European powers in the years immediately following Gresham's decision, to realize that such intervention as Great Britain then proposed, could hardly have resulted in good for any party concerned. The United States was not prepared in a naval or military way, or in the condition of public sentiment, to assume such responsibilities as would have been involved. On the other hand, the part played by the United States at the time of the annexation of Korea is certainly not fairly open to the criticisms to which it has been subjected. While seeming to acquiesce in an injustice to a weak nation, the United States actually gave its tacit approval to a step in the direction of justice to Asia as a whole, for in the annexation of Korea to Japan the aggressions of Europe in Asia were curbed.

More recently it has seemed as though this traditional American policy of fostering a strong Asia had defeated its original purpose which was to safeguard American trade in an open field of competition. Japan, having profited as much by American support and assistance in the period before 1900 as she has since by the Anglo-Japanese Alliance, has shown a tendency to over-reach and to defeat the purpose which led the United States to support Asia against Europe. One may hope this is a temporary phase of purely contemporary history. Traditional American policy remains unchanged. The United States desires to see developed on the continent of Asia strong states which shall be able to meet the powers of the world on a footing of the most complete equality and sovereignty, and in the accomplishment of this purpose is as ready to use its good offices today, as it was at any time in the last century.

Indeed, is not the present conference in Washington, in so far as it is concerned with problems of the Pacific, a "good office" to Asia which is quite in accord with the Treaty of Tientsin, of 1858, as well as with traditional American policy?

AMERICAN DIPLOMACY AND THE FINANCING OF CHINA

By George A. Finch
Secretary of the Board of Editors

In his last annual message President Taft thus described the diplomacy of his administration: "The diplomacy of the present administration has sought to respond to modern ideas of commercial intercourse. This policy has been characterized as substituting dollars for bullets. . . It is an effort frankly directed to the increase of American trade upon the axiomatic principle that the Government of the United States shall extend all proper support to every legitimate and beneficial American enterprise abroad."1

His official experience in the Philippine Islands had naturally given Mr. Taft a wide knowledge of Oriental affairs and his strong feelings on the subject of American participation in them were indicated in his inaugural address of March 4,1909 where, as a reason for advising against the reduction of the expenses of the Army and Navy, he said: "In the international controversies that are likely to arise in the Orient growing out of the question of the open door and other issues the United States can maintain her interests intact and can secure respect for her just demands. She will not be able to do so, however, if it is understood that she never intends to back up her assertion of right and her defense of her interest by anything but mere verbal protest and diplomatic note."2

Thus holding the belief that the United States would be justified in resorting to force if necessary to keep open the door of equal commercial opportunity for its citizens in China, it was logical for Mr. Taft to justify at the close of his administration as a policy which had "substituted dollars for bullets" the activities of the State Department in behalf of American enterprise in China which had become so intensified as to become popularly characterized as "dollar diplomacy." That diplomacy, it is believed, represents the maximum point to which diplomatic assistance to private investments abroad has been extended by the American Government. It will therefore be taken as a starting point for this outline, which will briefly cover also the diplomacy before that time and of the present time.

The opportunity for the application of Mr. Taft's views occurred soon after he assumed office. In May 1909 the press reported an understanding between English, French and German financial groups for a loan

1 Congressional Record, Vol. 49, Part I, p. 9.

2 Congressional Record, Vol. 44, Part I, p. 3.

to China for the proposed Hankow-Szechuen Railway, which later became known as the Hukuang Railway Loan. Secretary of State Knox immediately applied by cable to the Chinese Government for the admission of American capital to participation in the loan,3 and the State Department requested certain American bankers to take a share in the loan.4 The diplomatic efforts of the State Department at Peking proved unsuccessful,5 whereupon President Taft sent a direct communication to Prince Chun, Regent of the Chinese Empire, in which the President stated that he had "an intense personal interest in making the use of American capital in the development of China an instrument for the promotion of the welfare of China, and an increase in her material prosperity without entanglements or creating embarrassments affecting the growth of her independent political power and the preservation of her territorial integrity."8 The personal interposition of President Taft in the negotiations resulted in the admission of America's equal participation in the loan. To Congress President Taft justified this unique and vigorous exercise of diplomatic pressure upon China in his annual message of December 7, 1909, on the ground that "this railroad loan represented a practical and real application of the open door policy" as well as because of its relation to the currency reform which China undertook in certain treaties of 1903.

In pursuance of the same policy the State Department in 1910 and 1911 assisted in the negotiation of a loan to China with which to inaugurate the new currency system, which, because of the inclusion of Russia and Belgium, became known as the Six Power Loan or Sextuple Consortium. This loan, the President explained, was originally to be solely an American enterprise, but upon the urging of the American Government, the Chinese Government admitted to participation in it the associates of the American group in the Hukuang loan.

At the end of his administration, President Taft thus defended and appraised the foregoing policy in China:

In China the policy of encouraging financial investment to enable that country to help itself has had the result of giving new life and prac

a Foreign Relations of the United States, 1909, p. 144.

«"The American group, consisting of J. P. Morgan and Company, Kuhn, Loeb and Company, the First National Bank, and the National City Bank, was formed in the spring of 1909 upon the expressed desire of the Department of State that a financial group be organized to take up the participation to which American capital was entitled in the Hukuang Railway loan agreement then under negotiation by the British, French and German banking groups." (Statement by the American group, March 19, 1913, this Journal, Vol. 7, p. 340.)

5 The loan had been in course of negotiation for several years and was on the point of being finally concluded when the State Department applied for admission of American capital. The foreign bankers and the Chinese director-general of the railway objected to the delay which would be involved in reopening the negotiations to admit American participation. (Foreign Relations, 1909, pp. 144-178.)

•Foreign Relations, 1909, p. 178.

tical application to the open-door policy. The consistent purpose of the present administration has been to encourage the use of American capital in the development of China by the promotion of those essential reforms to which China is pledged by treaties with the United States and other powers. The hypothecation to foreign bankers in connection with certain industrial enterprises, such as the Hukuang railways, of the national revenues upon which these reforms depended, led the Department of State early in the administration to demand for American citizens participation in such enterprises, in order that the United States might have equal rights and an equal voice in all questions pertaining to the disposition of the public revenues concerned. The same policy of promoting international accord among the powers having similar treaty rights as ourselves in the matters of reform, which could not be put into practical effect without the common consent of all, was likewise adopted in the case of the loan desired by China for the reform of its currency. The principle of international cooperation in matters of common interest upon which our policy had already been based in all of the above instances has admittedly been a great factor in that concert of the powers which has been so happily conspicuous during the perilous period of transition through which the great Chinese nation has been passing.7

It will be well at this point to go back and consider what had been the attitude of the American Government towards assisting and protecting American investors in China previous to the so-called '' dollar diplomacy.'' In an instruction to Mr. Denby on December 19, 1896, Secretary of State Olney stated, "You should not assume directly or impliedly in the name of this government any responsibility for, or guaranty of, any American commercial or industrial enterprise trying to establish itself in China," but that Mr. Denby should use his "personal and official influence and lend all proper countenance to secure to reputable representatives of such concerns the same facilities for submitting proposals, tendering bids, or obtaining contracts as are enjoyed by any other foreign commercial enterprise in the country. . . . Broadly speaking, you should employ all proper methods for the extension of American commercial interests in China, while refraining from advocating the projects of any one firm to the exclusion of others."8

A case in point was presented to the Department of State in August 1898. On the 19th of that month a copy of a contract between the Chinese Minister at Washington, acting on behalf of his Government, and the American-China Development Company was sent to the Department with the request that the Department give notice to the United States legation and consulates in China that the representatives of the company charged with carrying out the provisions of the contract "shall have recognition and protection in the performance of their duties" and that the charge of the revenues and property assigned to the loan under contract "will be

r Annual message, Dec. 3, 1912, Congressional Record, Vol. 49, Part I, p. 9. •Foreign Relations, 1897, p. 56.

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