# Report of the Commission of Enquiry/Chapter 10

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Chapter X.
CONSIDERATIONS AND SUGGESTIONS TO THE COUNCIL.
Suggestions to facilitate a final solution.It is not the function of the Commission to submit directly to the Governments of China and Japan recommendations for the solution of the present dispute. But, in order "to facilitate the final solution of existing causes of dispute between the two countries", to quote the words used by M. Briand when explaining to the Council the text of the resolution which originated the Commission, we now offer to the League of Nations, as the result of our studies, suggestions designed to help the appropriate organ of the League to draw up definite proposals for submission to the parties to the dispute. It should be understood that these suggestions are intended as an illustration of one way in which the conditions we have laid down in the preceding chapter might be met. They are mainly concerned with broad principles; they leave many details to be filled in and are susceptible of considerable modification by the parties to the dispute if they are willing to accept some solution on these lines.
Even if the formal recognition of "Manchukuo" by Japan should take place before our Report is considered in Geneva—an eventuality which we cannot ignore—we do not think that our work will have been rendered valueless. We believe that, in any case, the Council would find that our Report contains suggestions which would be helpful for its decisions or for its recommendations to the two great Powers concerned, with the object of satisfying their vital interests in Manchuria.
It is with this object that, whilst bearing in mind the principles of the League of Nations, the spirit and letter of the Treaties concerning China and the general interests of peace, we have not overlooked existing realities, and have taken account of the administrative machinery existing and in process of evolution in the Three Eastern Provinces. It would be the function of the Council, in the paramount interest of world peace, whatever may be the eventuality, to decide how the suggestions made in our Report may be extended and applied to events which are still developing from day to day, always with the object of securing a durable understanding between China and Japan by utilising all the sound forces, whether in ideals or persons, whether in thought or action, which are at present fermenting in Manchuria.
Invitation to the parties to discuss settlement. An Advisory Conference.We suggest, in the first place, that the Council of the League should invite the Governments of China and Japan to discuss a solution of their dispute on the lines indicated in the last chapter.
If the invitation is accepted, the next step would be the summoning as soon as possible of an Advisory Conference, to discuss and to recommend detailed proposals for the constitution of a special regime for the administration of the Three Eastern Provinces.
Such conference, it is suggested, might be composed of representatives of the Chinese and Japanese Governments and of two delegations representing the local population, one selected in a manner to be prescribed by the Chinese Government and one selected in a manner to be prescribed by the Japanese Government. If agreed by the parties, the assistance of neutral observers might be secured.
If the conference were unable to reach agreement on any particular point, it would submit to the Council the point of difference, and the Council would then attempt to secure an agreed settlement on these points.
Simultaneously with the sitting of the Advisory Conference, the matters at issue between Japan and China relating to respective rights and interests ​should be discussed separately, in this case also, if so agreed, with the help of neutral observers.
Finally, we suggest that the results of these discussions and negotiations should be embodied in four separate instruments:
* A Declaration by the Government of China constituting a special administration for the Three Eastern Provinces, in the terms recommended by the Advisory Conference;
* A Sino-Japanese Treaty dealing with Japanese interests;
* A Sino-Japanese Treaty of Conciliation and Arbitration, Non-Aggression and Mutual Assistance.
* A Sino-Japanese Commercial Treaty.
It is suggested that, before the meeting of the Advisory Conference, the broad outlines of the form of administration to be considered by that body should be agreed upon between the parties, with the assistance of the Council. Among the matters to be considered at that stage are the following:
    The place of meeting of the Advisory Conference, the nature of the representation, and whether or not neutral observers are desired;
    The principle of the maintenance of the territorial and administrative integrity of China and the grant of a large measure of autonomy to Manchuria;
    The policy of creating a special gendarmerie as the sole method of maintaining internal order;
    The principle of settling the various matters in dispute by means of the separate treaties suggested;
    The grant of an amnesty to all those who have taken part in the recent political developments in Manchuria.
When once these broad principles have been agreed upon heforehand the fullest possible discretion as regards the details would be left to the representatives of the parties at the Advisory Conference or when negotiating the treaties. Further reference to the Council of the League of Nations would only take place in the event of failure to agree.
Advantages claimed for the procedure.Among the advantages of this procedure, it is claimed that, while it is consistent with the sovereignty of China, it will enable effective and practical measures to be taken to meet the situation in Manchuria as it exists to-day and, at the same time, allow for such modifications hereafter as the changes in the internal situation in China may warrant. Notice, for instance, has been taken in this Report of certain administrative and fiscal changes which have either been proposed or actually carried out in Manchuria recently, such as the re-organisation of provincial governments, the creation of a central bank, the employment of foreign advisers. These features might be retained with advantage by the Advisory Conference. The presence at the conference of representatives of the inhabitants of Manchuria, selected in some such way as we have suggested, should also facilitate the passage from the present to the new regime.
The autonomous regime contemplated for Manchuria is intended to apply to the three provinces of Liaoning (Fengtien), Kirin and Heilungkiang only. The rights at present enjoyed by Japan in the province of Jehol (Eastern Inner Mongolia) would be dealt with in the treaty on the subject of Japanese interests.
The four Instruments can now be considered seriatim:
1. The Declaration.
The final proposals of the Advisory Conference would be submitted to the Chinese Government, and the Chinese Government would embody them in a Declaration, which would be transmitted to the League of Nations and ​to the signatory Powers of the Nine-Power Treaty. The Members of the League and the signatory Powers of the Nine-Power Treaty would take note of this Declaration, which would be stated to have for the Chinese Government the binding character of an international engagement.
The conditions under which subsequent revision of the Declaration, if required, might take place would be laid down in the Declaration itself, as agreed to in accordance with the procedure suggested hereabove.
The Declaration would distinguish between the powers of the Central Government of China in the Three Eastern Provinces and those of the autonomous local Government.
It is suggested that the powers to be reserved to the Central Government should be the following:
* The control of general treaty and foreign relations not otherwise provided for; it being understood that the Central Government would not enter into any international engagements inconsistent with the terms of the Declaration.
* The control of the Customs, the post office, and the salt Gabelle, and possibly of the administration of the stamp duty and the tobacco and wine taxes. The equitable division, between the Central Government and the Three Eastern Provinces, of the net income from these revenues would be determined by the Advisory Conference.
* The power of appointment, at least in the first instance, of the Chief Executive of the Government of the Three Eastern Provinces in accordance with the procedure to be laid down in the Declaration. Vacancies would be filled in the same way, or by some system of selection in the Three Eastern Provinces, to be agreed upon by the Advisory Conference and inserted in the Declaration.
* The power of issuing to the Chief Executive the carrying out of the international engagements entered into by the Central Government of China in matters under the administration of the autonomous Government of the Three Eastern Provinces.
    All other powers would be vested in the autonomous Government of the Three Eastern Provinces.
Expression of local opinion.Some practical system might be devised to secure an expression of the opinion of the people on the policy of the Government, possibly through the traditional agency of the Chambers of Commerce, Guilds and other civil organisations.
Minorities.Some provision should also be made to safeguard the interests of White Russians and other minorities.
Gendarmerie.It is suggested that a special gendarmerie should be organised, with the collaboration of foreign instructors, which would be the only armed force within the Three Eastern Provinces. The organisation of the gendarmerie should either be completed within a period to be specified in advance, or the time of its completion should be determined in accordance with a procedure to be laid down in the Declaration. As this special corps would be the only armed force in the territory of the Three Eastern Pro-Vinces, its organisation, When completed, should be followed by the retirement from this territory of all other armed forces, including any special bodies of police or railway guards, whether Chinese or Japanese.
Foreign advisers.An adequate number of foreign advisers would be appointed by the Chief Executive of the autonomous Government, of whom a substantial proportion should be Japanese. The details would be worked out by the procedure described above and would be stated in the Declaration. Nationals of small States, as well as of the Great Powers, would be eligible.
The appointment of two foreigners of different nationalities to have supervision of (1) the constabulary and (2) the fiscal administration would ​be made by the Chief Executive from a panel submitted by the Council of the League. These two officials would have extensive powers during the period of organization and trial of the new regime. The powers of the advisers would be defined in the Declaration.
The appointment of one foreigner as a general adviser to the Central Bank of the Three Eastern Provinces would be made by the Chief Executive from a panel submitted by the Board of Directors of the Bank for International Settlements.
The employment of foreign advisers and officials is in conformity with the policy of the founder of the Chinese Nationalist Party and with that of the present National Government. It will not, we hope, be difficult for Chinese opinion to recognize that the actual situation and the complexity of the foreign interests, rights and influences in those provinces require special measures in the interests of peace and good government. But it cannot be too strongly emphasised that the presence of the foreign advisers and officials here suggested, including those who, during the period of the organisation of the new regime, must exercise exceptionally wide powers, merely represents a form of international co-operation. They must be selected in a manner acceptable to the Chinese Government and one which is consistent with the sovereignty of China. When appointed, they must regard themselves as the servants of the Government employing them, as has always been the case in the past with the foreigners employed in the Customs and Postal administration or with the technical organisations of the League that have collaborated with China. In this connection, the following passage in the speech of Count Uchida in the Japanese Diet on August 25th, 1932, is of interest:
   "Our own Government, since the Meiji Restoration, has employed many foreigners as advisers or as regular officials; their number, for instance, in the year 1875 or thereabout exceeded 500."
The point must also be stressed that the appointment of a relatively large number of Japanese advisers, in an atmosphere of Sino-Japanese co-operation, would enable such officials to contribute the training and knowledge specially suited to local conditions. The goal to be kept in view throughout the period of transition is the creation of a civil service composed of Chinese, who will ultimately make the employment of foreigners unnecessary.
2. The Sino-Japanese Treaty dealing with Japanese Interests.
Full discretion would of course be left to those who will negotiate the three suggested treaties between China and Japan, but it may be useful to indicate the matters with which it is suggested they should deal.
The treaty dealing with Japanese interests in the Three Eastern Provinces and with some Japanese interests in the Province of Jehol would have to deal principally with certain economic rights of Japanese nationals and with railway questions. Aims of the Treaty.The aims of this treaty should be:
    (1) The free participation of Japan in the economic development of Manchuria, which would not carry with it a right to control the country either economically or politically;
    (2) The continuance in the Province of Jehol of such rights as Japan now enjoys there;
    (3) An extension to the whole of Manchuria of the right to settle and lease land, coupled with some modification of the principle of extra-territoriality;
    (4) An agreement regarding the operation of the railways.
​Japanese rights of settlement.Hitherto, the rights of settlement of Japanese nationals have been confined to South Manchuria, though no definite boundary line between North and South Manchuria has ever been fixed, and to Jehol. These rights have been exercised under conditions which China found unacceptable and this caused continued friction and conflicts. Extra-territorial status as regards taxation and justice was claimed both for the Japanese and the Koreans, and in the case of the latter there were special stipulations which were ill-defined and the subject of disputes. From evidence given before the Commission, we have reason to believe that China would be willing to extend to the whole of Manchuria the present limited right of settlement, provided it was not accompanied by extra-territorial status, the effect of which, it was claimed, would be to create a Japanese State in the heart of a Chinese territory.
It is obvious that the right of settlement and extra-territoriality are closely associated. It is, however, equally clear that the Japanese would not consent to abandon their extra-territorial status until the administration of justice and finance had reached a very much higher standard than has hitherto prevailed in Manchuria.
Two methods of compromise have suggested themselves. One is that the existing rights of settlement, accompanied by extra-territorial status, should be maintained, and that such rights should be extended both to Japanese and Koreans in North Manchuria and Jehol without extra-territorial status. The other is that the Japanese should be granted the right to settle anywhere in Manchuria and Jehol with extra-territorial status, and that the Koreans should have the same rights without extra-territorial status. Both proposals have some advantages to recommend them and both have rather serious objections. It is obvious that the most satisfactory solution of the problem is to make the administration of these Provinces so efficient that extra-territorial status will no longer be desired. It is with this object that we recommend that at least two foreign advisers, one of whom should be of Japanese nationality, should be attached to the Supreme Court, and other advisers might with advantage be attached to other Courts. The opinions of these advisers might be made public in all cases in which the Courts were called upon to adjudicate on matters in which foreign nationals were involved. We also think that, in the period of re-organisation, some foreign supervision of the administration of finance is desirable and, in dealing with the Declaration, we have presented some suggestions to that effect.
A further safeguard would be provided by the establishment, under the treaty of conciliation, of an arbitration tribunal to deal with any complaints which the Chinese or Japanese Governments might bring in their own names or in those of their nationals.
The decision of this complicated and difficult question must rest with the parties negotiating the treaty, but the present system of foreign protection, when applied to a minority group as numerous as the Koreans, who are, moreover, increasing in number and who live in such close touch with the Chinese population, is bound to produce many occasions of irritation, leading to local incidents and foreign intervention. In the interests of peace, it is desirable that this fruitful source of friction should be removed.
Any extension of the rights of settlement in the case of Japanese would apply on the same conditions to the nationals of all other Powers which enjoy the benefits of a "most-favoured-nation" clause, provided that those Powers whose nationals enjoy extra-territorial rights enter into a similar treaty with China.
Railways.As regards railways, it has been pointed out in Chapter III that there has been little or no co-operation in the past between the Chinese and Japanese railway builders and authorities directed to achieving a ​comprehensive and mutually beneficial railway plan. It is obvious that, if future friction is to be avoided, provisions must be made in the treaty at present under discussion for bringing to an end the competitive system of the past, and substituting a common understanding as regards freights and tariffs on the various systems. The subject is discussed in the special study No.1 annexed to this Report. In the opinion of the Commission, there are two possible solutions, which could be considered either as alternatives or as stages to one final solution. The first, which is the more limited in scope, is a working agreement between the Chinese and Japanese railway administrations, which would facilitate their co-operation. China and Japan might agree to manage their respective railway systems in Manchuria on the principle of co-operation, and a joint Sino-Japanese Railway Commission, with at least one foreign adviser, might exercise functions analogous to those of boards which exist in some other countries. A more thorough remedy would be provided by an amalgamation of the Chinese and Japanese railway interests. Such an amalgamation, if it could be agreed upon, would be the true mark of that Sino-Japanese economic collaboration to secure which is one of the objects of this Report. While safeguarding the interests of China, it would place at the disposal of all the railways in Manchuria the benefit of the great technical experience of the South Manchuria Railway and could be evolved without difficulty from the system which has been applied to the railways of Manchuria in the last few months. It might even pave the way in the future to some wider international agreement which might include the Chinese Eastern Railway. Though a fairly detailed description of such an amalgamation is to be found in the annex as an example of the sort of thing that might be done, only direct negotiations between the parties could evolve a detailed scheme. Such a solution of the railway question would make the South Manchuria Railway a purely commercial enterprise, and the security provided by the special corps of gendarmerie, when once this body was fully organised, would enable the Railway Guards to be withdrawn, thus saving a considerable item of expense. If this is done, it would be well that special land regulations and a special municipal administration should previously be instituted in the railway area in order to safeguard the vested interests of the South Manchuria Railway and of Japanese nationals.
If a treaty on these lines could be agreed upon, a legal basis for Japanese rights in the Three Eastern Provinces and in Jehol would have been found which would be at least as beneficial to Japan as the present treaties and agreements, and one which would be more acceptable to China. China might then find no difficulty in recognising all the definite grants made to Japan by such treaties and agreements as those of 1915, unless abrogated or modified by the new treaty. All minor rights claimed by Japan, the validity of which may be open to dispute, should be the subject of agreement. In case of disagreement, resort should be made to the procedure outlined in the treaty of conciliation.
3. The Sino-Japanese Treaty of Conciliation and Arbitration, Non-Aggression and Mutual Assistance.
It is not necessary to describe in any detail the subject-matter of this treaty, of which there are many precedents and existing examples.
Such a treaty would provide for a board of conciliation, whose functions would be to assist in the solution of any difficulties as they arise between the Governments of China and Japan. It would also establish an arbitration tribunal composed of persons with judicial experience and the necessary knowledge of the Far East. This tribunal would deal with any disputes ​between the Chinese and Japanese Governments regarding the interpretation of the declaration or of the new treaties, and with such other categories of disputes as might be specified in the treaty of conciliation.
Finally, in conformity with the provisions for non-aggression and mutual assistance inserted in the treaty, the contracting parties should agree that Manchuria should gradually become a demilitarized area. With this object, it would be provided that, after the organisation of the gendarmerie had been effected, any violation of the demilitarized territory by either of the parties or by a third party would constitute an act of aggression entitling the other party, or both parties in the case of a third-party attack, to take whatever measures might be deemed advisable to defend the demilitarised territory, without prejudice to the right of the Council of the League to take action under the Covenant.
If the Government of the U.S.S.R. desired to participate in the non-aggression and mutual assistance section of such a treaty, the appropriate clauses could be embodied in a separate tripartite agreement.
4. The Sino-Japanese Commercial Treaty.
The commercial treaty would naturally have as its object the establishment of conditions which would encourage as much as possible the exchange of goods between China and Japan, while safeguarding the existing treaty rights of other countries. This treaty should also contain an undertaking by the Chinese Government to take all measures within its power to forbid and repress organised boycott movements against Japanese trade, without prejudice to the individual rights of Chinese consumers.
The above suggestions and considerations regarding the objects of the proposed Declaration and treaties are submitted for the consideration of the Council of the League. Whatever may be the details of future agreements, the essential point is that negotiations should be begun as soon as possible and should be conducted in a spirit of mutual confidence.
Our work is finished.
Manchuria for a year past has been given over to strife and turmoil.
The population of a large, fertile and rich country has been subjected to conditions of distress such as it has probably never experienced before.
The relations between China and Japan are those of war in disguise, and the future is full of anxiety.
We have reported the circumstances which have created these conditions.
Everyone is fully aware of the gravity of the problem which confronts the League of Nations and of the difficulties of the solution.
At the moment of concluding our Report, we read in the Press two statements by the Foreign Ministers of China and Japan, from each of which we would extract one point of the utmost importance.
On August 28th, Mr. Lo Wen Kan declared at Nanking:
   "China is confident that any reasonable proposal for the settlement of the present situation will necessarily be compatible with the letter and spirit of the Covenant of the League of Nations and the anti-war Pact, and the Nine-Power Treaty, as well as with China's sovereign power, and will also effectively secure a durable peace in the Far East."
On August 30th, Count Uchida is reported to have declared at Tokyo:
   "The Government considers the question of Sino-Japanese relations as more important than the question of Manchuria and Mongolia."
​We cannot close our Report more appropriately than by reproducing here the thought underlying these two statements: as exactly does it correspond with the evidence we have collected, with our own study of the problem, and consequently with our own convictions, so confident are we that the policy indicated by these declarations, if promptly and effectively applied, could not fail to lead to a satisfactory solution of the Manchurian question in the best interests of the two great countries of the Far East and of humanity in general.
Signed at Peiping, September 4th, 1932.
LYTTON. ALDROVANDI. H. CLAUDEL. Frank McCOY. SCHNEE.