No. 195.
Mr. Denby
to Mr. Bayard.
Peking, March 31, 1888. (Received May 31.)
Sir: If Chang Chi-tung, whom I shall shortly see in Canton, continues to act on the lines he has adopted as to kerosene, the considerations hereinafter stated may become important.
That the levying of enormous internal taxes on imported goods should be energetically resisted is the purport of your dispatch No. 209 of June 24, 1887.
The ground of this resistance is that such taxation is more or less prohibitory of an importation which the treaties permit.
The power of a State to tax imported articles has been, under certain limits, recognized in Brown v. the State of Maryland (12 Wheaton 419), and the License Cases (16 Curtis, 516). But these cases arose under the Constitution of the United States.
The familiar rules for the interpretation of treaties do away with strict construction and require that the interpretation shall be favorable rather than odious; that the whole context shall be considered, and that the reason of the treaty shall prevail.
[Page 287]Under the treaties, importations are permitted to be made by foreigners on the same terms that are accorded to Chinese subjects.
That the goods so imported escape lekin while in foreign hands is admitted. But, under the guise of internal taxation, they are subjected in Chinese hands to special duties which are not levied on native produce.
The test proposed by Chang Chi-tung is the nationality of the owner. He claims that China has the undoubted right to tax her own citizens as she pleases. This view is erroneous. The element to be considered is not the nationality of the owner, but the character of the goods. The harm done by levying an extraordinary tax on imported goods in the hands of a Chinese subject is just as great as if they were in the hands of a foreigner. Imports will certainly cease in either case whenever the tax becomes so great as to make importation unprofitable.
Under the treaties this internal taxation may be resisted long before it becomes prohibitory.
The true principle to be contended for is that there shall be no discrimination against the imported article. That China might tax all oils, native and foreign, a uniform sum, stopping short of a point which would imply prohibition, might be admitted. But, it can not be admitted that, for the purpose of benefiting a particular native article, China may, under the guise of internal taxation, discriminate against a foreign article of the same character.
If China may lawfully do this the treaties are valueless. It would be exceedingly easy to annihilate foreign trade without infringing the treaties.
I have, etc.,