The Intellectual Lineage of the Smuggling Epidemic

This week, we released China’s War on Smuggling: Law, Economic Life, and the Making of the Modern State, 1842–1965, by Philip Thai. Today, we are happy to present an excerpt from the chapter two of the book.

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THE UNEQUAL TREATIES that shaped the contours of the coastal Chinese economy—in both its legal and illegal variants—were defined by two key features: the introduction of extraterritoriality and the deprivation of tariff autonomy. The former, officially abolished in 1943, embodied China’s “century of humiliation” and untrammeled foreign privilege on Chinese soil. The latter, partially recovered beginning in 1928, receded in historical memory and has attracted comparatively less attention since. Yet in the decades after 1842, many Chinese viewed the recovery of tariff autonomy as having equal importance to the abolition of extraterritoriality, if not more. Initially limited to discussions among senior officials in the late Qing, the problem of tariff autonomy later spilled over into the public arena and suffused popular discourse in the early Republic. The topic attracted passionate attention because of the increasing realization that it implicated many aspects of modern China’s economy and sense of nationhood. Tariffs, in particular, bore a fundamental relationship with the modern Chinese experience, standing at the nexus of statecraft, sovereignty, and nationalism. In the official (and later public) imagination, the loss of tariff autonomy had widespread repercussions for China. It limited its revenues, confirmed its status as a semicolony (ban zhimindi), and left its domestic industries defenseless. Tariffs, moreover, bore a direct, inverse relationship with smuggling. Higher duties invariably raised the incentives for more trafficking while lower duties invariably lowered them. The absence of tariff autonomy after 1842 left many imports lightly taxed and made smuggling profitable for only a handful of commodities; its recovery after 1928 would transform this financial calculus as the Nationalist government slapped protective duties across the board and thereby incentivized smuggling along the coast. The tariff, Felix Boecking correctly notes, became “an important instrument of Chinese economic nationalism,” a tool that would not only fortify government finances but also realize greater official control over the economy.1 Thus, discussions of the tariff always encompassed more than just the tariff itself.

The explosion of coastal smuggling after 1928 was inextricably tied to growing enthusiasm for economic control among policy makers who assumed that an assertive developmental state could and should employ levers of policy to promote industrialization. The growing enthusiasm for economic control, in turn, was tied to the discursive transformation of tariff autonomy. Previous histories of China’s quest to recover tariff autonomy have focused on diplomatic and political negotiations at the highest levels.2 This chapter goes beyond such accounts by looking more broadly at changing opinions on the tariff among statesmen, intellectuals, and merchants from the late Qing through the early Republic. Discussions of “the tariff problem” (guanshui wenti) did not unfold exclusively at international conferences but also within the wider public. Growing interest in the subject reflected an intellectual shift that wove together abstract economic principles with the concept of national well-being. The legacies of these discussions endured well after 1928, and even 1949. Debates over the significance of the tariff consistently emphasized themes that dominated economic thinking throughout twentieth-century China to today: industry over commerce; production over consumption; and state intervention over free markets. Such discursive changes further reified the notion of more state control over the economy and thus animated official imperatives to fight smuggling. While its embryonic traces could be detected during the final years of the Qing dynasty, the ideal of state control over the economy became widely and indisputably accepted during the 1930s, at the nadir of the Great Depression.

How did the once-seemingly technical issue of tariff autonomy transition from a concern of fiscal statecraft among a narrow circle of literati to a symbol of national sovereignty for a wider public? How did a diverse group of policy makers, intellectuals, and industrialists come to subscribe to the ideals of greater economic control by the state? To answer these questions and uncover the intellectual roots of the smuggling epidemic, this chapter offers an overview on the evolution in the thinking and discussions about the tariff as well as attitudes toward the role of the state in the economy from the late Qing through the early Republic. It then explores how Nationalist China made tariff autonomy the cornerstone of its ambitious state-building agenda during the Nanjing Decade and how the ideal of economic control informed the new regime’s introduction of higher duties and stricter regulations that together laid the foundations for a developmental state. The tariff thus underwent successive changes in both the official and popular imagination, from a tool of statecraft in the late Qing, to a symbol of national sovereignty in the early Republic, to a prerequisite of economic control under Nationalist rule. Understanding this shift is critical to understanding China’s avid pursuit of restrictive economic policies throughout the twentieth century. It ultimately sheds light on why the Nationalists (and later the Communists) opted for an interventionist foreign trade regime, prohibitive tariffs, and harsh enforcement—even as such policies strictly disciplined private consumption and greatly incentivized smuggling as never before. The war on smuggling, in other words, was motivated by a long-standing, overriding desire to exercise official control over foreign trade to satisfy multiple—and competing—imperatives.

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