To understand the difficulties with which the Chinese Government is faced, it is necessary to realize the loss of fiscal independence which, China has suffered as the result of the various wars and treaties which have been forced upon her.  In the early days, the Chinese had no experience of European diplomacy, and did not know what to avoid; in later days, they have not been allowed to treat old treaties as scraps of paper, since that is the prerogative of the Great Powers—­a prerogative which every single one of them exercises.

The best example of this state of affairs is the Customs tariff.[27] At the end of our first war with China, in 1842, we concluded a treaty which provided for a duty at treaty ports of 5 per cent. on all imports and not more than 5 per cent on exports.  This treaty is the basis of the whole Customs system.  At the end of our next war, in 1858, we drew up a schedule of conventional prices on which the 5 per cent. was to be calculated.  This was to be revised every ten years, but has in fact only been revised twice, once in 1902 and once in 1918.[28] Revision of the schedule is merely a change in the conventional prices, not a change in the tariff, which remains fixed at 5 per cent.  Change in the tariff is practically impossible, since China has concluded commercial treaties involving a most-favoured-nation clause, and the same tariff, with twelve States besides Great Britain, and therefore any change in the tariff requires the unanimous consent of thirteen Powers.

When foreign Powers speak of the Open Door as a panacea for China, it must be remembered that the Open Door does nothing to give the Chinese the usual autonomy as regards Customs that is enjoyed by other sovereign States.[29] The treaty of 1842 on which the system rests, has no time-limit of provision for denunciation by either party, such as other commercial treaties contain.  A low tariff suits the Powers that wish to find a market for their goods in China, and they have therefore no motive for consenting to any alteration.  In the past, when we practised free trade, we could defend ourselves by saying that the policy we forced upon China was the same as that which we adopted ourselves.  But no other nation could make this excuse, nor can we now that we have abandoned free trade by the Safeguarding of Industries Act.

The import tariff being so low, the Chinese Government is compelled, for the sake of revenue, to charge the maximum of 5 per cent, on all exports.  This, of course, hinders the development of Chinese commerce, and is probably a mistake.  But the need of sources of revenue is desperate, and it is not surprising that the Chinese authorities should consider the tax indispensable.