An examination of trade between the United States and China in the 18th century may hold lessons for today’s commercial relationship.

US President Richard Nixon’s historic trip to the People’s Republic of China in 1972 was an important moment in US-China foreign and commercial relations. But America’s trade with China started much earlier. Prior to the Revolutionary War, American colonists had already become enamored with Chinese products—especially tea and porcelain—and some merchants dreamed of traveling to China to trade before the United States was a country. Historian Eric Jay Dolin, author of the new book, When America First Met China, and China Business Review Editor Christina Nelson discuss the early China trade, the Americans who participated, and lessons for today’s commercial relationship. This interview has been edited for length and clarity.

We often point to the 1970s as the starting point for US-China trade, but your book takes us back to the 18th century after the American Revolution. Can you briefly describe the origins of the US-China trade relationship?

Dolin: The origins actually reach way back to the 1600s when the American colonies were part of England. It was from the mid-1600s up until the eve of the revolution that the Americans had grown accustomed to a great array of Chinese goods courtesy of the British East India Company, which had a monopoly over far eastern commerce. The way in which Americans got tea, silk, and porcelain in these early years was primarily through the British East India Company. There was also a lot of smuggling going on at the time. The Dutch were famous for bringing tea to the colonies from the Dutch East Indies, and the Americans would also travel to the Dutch East Indies and circumvent the British East India Company monopoly. Either way, it wasn’t the Americans going to China to get these goods.

By the time of the American Revolution, Americans knew not so much about China, but they knew a lot about a few key Chinese goods, and they greatly desired them. Foremost among those goods was tea. On the eve of the revolution, the Americans were consuming more than 1 billion cups of tea annually. The use of china or porcelain, another Chinese invention, was widespread in the colonies. Although originally in the late 1600s, early 1700s, it tended to be the wealthier Americans who could purchase these exotic Chinese goods, by the mid-1700s the demand had ramped up, the supply had ramped up, and prices had gone down far enough so even average American colonists were drinking tea and would have china plates and bowls in their cupboards.

The Americans were well positioned to get involved in the China trade after they beat the British in the revolution. In fact, during the American Revolution a number of merchants had already started thinking about a day when they could go to China. Discussions were already underway by 1782 and even 1781 with certain merchants seeing the war might go in America’s direction. After the war was over, the British East India Company’s monopoly on far eastern commerce was no longer, so the Americans could go to China and they did in droves.

America’s relationship with China and certainly the China trade goes far back in history, well beyond the opening of China by Nixon. In a sense, the opening of China by Nixon and what happened subsequently is a reopening of America’s China trade, a second iteration. WhenAmericaMetChina5 J1.indd

 

What goods did Americans first trade with the Chinese?

Dolin: By the time the Americans got there in 1784, the Chinese had already been trading with a range of western European nations for well over 100 years. China had been trading with many of the other countries, all the way from Africa to India to Japan. When the westerners arrived and wanted to trade with the Chinese, the Chinese were open to it. One of the problems for a lot of the westerners was China wasn’t all that interested in some of the things they could provide. What the Chinese wanted most of all was silver or, more specifically, Spanish dollars because that was an important element of the Chinese economy. They paid military and government officials with it, and people paid their taxes in silver.

By the end of the 1700s, Britain, which was the largest trading partner with China, was hemorrhaging silver. The Americans too faced the same problem in the early years. For the first three or so decades of America’s trade with China, 65-70 percent of all our purchases over there were made with silver, so we had a trade deficit from the very beginning. The Americans, like the British, were looking for substitutes.

The Americans found a lot of other things the Chinese were interested in, but they weren’t enough to eliminate the need for silver. Furs were one thing the Chinese, especially in the northern parts of China where it can get quite cold, loved. Not just sea otter furs but seal skins and beaver pelts and almost any kind of fur could be brought over there. But the number one fur, the one that earned the most money, was sea otter pelts. There are records of sea otter pelts—big ones that were in good shape—garnering more than $100 apiece. This is at a time when the average American laborer might have been earning $1-2 a day. Hundreds of thousands of sea otter pelts were brought over during a span of at least 20 to 30 years before the trade started to peter out in large part because we started wiping out the populations of sea otters in these areas. We also brought millions of seal skins, but they only sold for about 35 cents to $5 apiece.

The Americans also brought sandalwood because this fragrant wood was used to make furniture in China and turned into incense to burn in houses of worship. An American species of Ginseng plant was also brought over, and the Chinese loved it because they thought it could cure illnesses, be used as an aphrodisiac, and reenergize the body.

Anything America was producing they tried to sell to the Chinese, but the only other item that really took off and sold in huge quantities was cotton, which was increasingly coming from the south.

How did opium change the China trade?

Dolin: Opium stared being smoked in China in the late 1600s. It was thought to have been introduced, at least the smoking of it, by the Dutch. But opium was probably introduced in China well before that. It seems like by at least the 8th or 9th century opium was making its way to China on the Silk Road. It wasn’t being used in any widespread form until the late 1700s when foreigners started importing much larger quantities into the country.

Opium became the perfect commodity for the British—and to a lesser extent, the Americans—because the Chinese didn’t want people bringing opium into the country. The emperor, starting in the late 1700s, prohibited the importation of opium into the country. That doesn’t stop people very often; look at our drug trade today. What happened is the smuggling trade sprang up and the westerners, with the British in the lead, would bring in increasing quantities of opium. The Chinese smugglers would pay for the drug with silver, and thus the cash flow problem was solved. Instead of funneling huge quantities of silver into China, the Chinese smugglers were paying huge quantities of silver to get opium, and the British and the Americans used that to turn around and purchase Chinese goods.

It was a good system for the west; it turned out not to be a good system for the Chinese who were very upset about the illegal opium trade. They also had a hand in contributing to it. A lot of the Chinese officials who were charged with stopping opium importation smoked opium themselves and took bribes to look the other way. Like any other drug trade, there’s supply and demand, and here we had both in abundance. The trade expanded significantly up to the 1830s and then the first Opium War.

The Americans were relatively minor players in the opium trade, but in some years could bring in thousands of chests of opium into Canton. The Americans were earning millions of dollars, the British were earning tens of millions of dollars, and addiction was growing in China.

You say in the book that the China trade hastened the arrival of the American Revolution. How so?

Dolin: What was happening in America prior to 1776 and 1775 was an erosion of the ties between the colonies and the mother country, and I think a significant part of that erosion can be related to things that revolved around the China trade. The Boston tea party was a time when the American colonists dumped 342 chests of Chinese tea into Boston Harbor, which was brought there by the British East India Company. The anger surrounding the tea party was not because the colonists were saying, “This is Chinese tea, we are upset that they’re bringing Chinese tea.” There was a great level of unrest over the power of Great Britain as the mother country, but also the British East India Company riding roughshod over American interests.

Those American interests were divided. There were Americans who had long served as the middlemen between the British East India Company and American consumers. Right before the tea party, the British East India Company was having a tough time offloading its tea so the British government made the tea a lot cheaper and allowed the British East India Company to sell it directly to Americans, cutting out the middleman. American merchants complained that they were losing money because of this new deal.

Americans didn’t like the idea of taxation without representation and this little tea tax of three pence was an annoyance that became a focus for anger because tea was being consumed so widely. That all relates to the China trade because this product was ultimately coming from China.

The China trade played a small part in that because there were Americans before the revolution that talked about going to China but couldn’t because of the British East India Company monopoly and other Navigation Act restrictions. There were other currents that led to the ultimate break between American and Great Britain, but the internationalization of America’s palate for things from around the world, including Chinese things, expanded their horizons at the same time that they were being restricted. That didn’t sit well with the American populace, in particular the merchant class, which was growing increasingly confident in its ability to engage in trade.

Can you describe some of those early American traders who went to China?

Dolin: Probably the best character to talk about was the main backer of the ship, the Empress of China, which is Robert Morris. His story is somewhat typical of the merchants who got involved in the China trade very early on. These are people who had either been involved in trading activity prior to the American Revolution and had been rather successful. They were familiar with having ships and crews sent out to different parts of the world to gather all sorts of items, including human chattel slavery, and making a profit from maritime trade.

Another element that gave them the financial muscle to go out after the American Revolution was privateering. During the American Revolution a lot of merchants, with permission from the infant American government, went out and preyed on British shipping and won a lot of prizes. The American privateers were like our navy during the revolution, and they captured a lot of British ships and brought them back to American ports. They split the bounty—the American government got some of it but the people who went out and did the capturing got some of it as well, and some of these merchants got incredibly wealthy.

After the war, you had the combination of people who are savvy in the ways of business, savvy in the ways of maritime trade, who also have a fleet of ships at their disposal, skilled crewmen, and the money to fund these ventures. If they couldn’t do it on their own, they could join forces with other merchants and create little corporate syndicates to send these ships out.

Robert Morris was a merchant before the American Revolution. He was heavily involved in the West Indies trade, and during the war he not only became the financier of the revolution, helped the war effort, and sort of ran our infant navy, but he was also involved in privateering and he came out of the war very wealthy. He was very familiar with British trade with China and the opportunities that might be there if the Americans went over to Canton. So he hooked up with some other merchants who had money to spend, and they put together the Empress of China, which cost $120,000 to build the ship and load it up and then send it off. That was a lot of money back then.

What were American views of the Chinese before they started trading and after, when they had more direct experience? What were the Chinese views of foreigners at the time?

Dolin: Before the trade Americans had to rely on second hand information. Marco Polo, the Jesuit missionaries, and others who traveled from west to east wrote about their experiences. A lot of the greatest inventions in the world at the time can be traced back to China: gunpowder, the compass, the stirrup, the wheelbarrow, suspension bridges. The Chinese were an extremely advanced civilization—the most advanced in the world for thousands of years. When westerners got their first gaze upon China, they were very impressed.

America’s entry into the China trade during the late 1700s and early 1800s was just at the time when the Chinese empire was starting to crumble. China was being beset by a whole range of internal and external problems—famine, internal rebellion, problems with the military, and the rise in opium smoking. At the time that America was starting to really come to grips with China, China was on a downward spiral.

Also, the Americans that went over there by and large during the period I talk about were merchants, and up until the end of the Opium Wars most merchants only saw a sliver of China. They were in Canton, they were in a rough, walled off part of the city, and they were exposed to some of the meanest elements of Chinese society. They felt they were being cheated, they didn’t like what the Chinese ate, they made fun of how they walked, how they looked, how they dressed. There were any number of things that American merchants found less than commendable about the Chinese.

The Chinese believed that foreigners were foreign devils. They believed that all the other countries were beneath them at some level and had inferior cultures. When you have that kind of attitude going into the relationship, it’s not necessarily going to breed a sense of equality among the people with whom you’re trading.

In general, the Chinese held a condescending view of foreigners. But during the 1800s, China was being pounded by outside forces and humiliated in many cases. They were not being accorded the level of respect they thought their empire was due, and that created a lot of hostility that lasts to this day.

While there certainly were Americans who were writing glowingly of the Chinese, it’s not surprising that American merchants developed a somewhat negative view of the Chinese. Part of it had to do with the nature of the trade. The British and the Americans really didn’t like being constrained to Canton, the regulations they had to operate under, and the way in which the trade was set up. They wanted more open access to China. Westerners had this almost lottery perspective when they looked at China: They saw this huge, wealthy country just waiting for western goods. They thought, “If we can just crack it open somehow, the Chinese are going to buy so much of our products that we’re going to be rich.” Westerners were continually frustrated that the Chinese weren’t quite as interested in western goods as they had hoped. They slowly learned that the Chinese weren’t nearly as wealthy as they thought, and that’s still the case today.

Now China has a rising middle and upper class and they’re buying more and more, but even back then there were a lot of incredibly poor people who didn’t have the option to buy something from another country.

That’s a fascinating parallel to today. There’s a view that if only we can access this market, we can make a ton of money.

Dolin: Maybe someday the dream of China being this unlimited market for western products will be realized. I have no idea. The point I wanted to make and I think is true is that from the very beginning of our relationship with China, up until today, the dream of China becoming this enormous potential market has yet to be fully realized.

Do you see any other links between today’s commercial relationship and the past? What can we learn from the past?

Dolin: My intent with the book was to show the history and the past and let other people draw the lessons that are deeper than the ones that I drew. But I did draw some simple lessons that I think are still powerful: deficits then and deficits now and the whole notion of China being viewed through the lens of commercial opportunity.

Back then we didn’t know a lot about Chinese culture or the Chinese. We know a lot more about them now and they know a lot more about us, but I still think there are misconceptions and there are a lot of things that Americans don’t know, particularly about the history. Very few Americans have any concept of the Opium Wars or that we had this extensive China trade going back hundreds of years. The Chinese are certainly very aware of the Opium Wars, and that’s important for westerners to know that history because there are modern day sensitivities that relate to this period.

It’s also important to have a little more humility on both sides. We know more and our relationship is more important to each side than it ever was in the past. We are inextricably bound at the hip for the foreseeable future. I hope that looking at the past and realizing we have this long history can help us move into the future in a more positive way.

Posted by US-China

The China Business Review (CBR), published since 1974 by the US-China Business Council, and online since 1997, is the leading voice on commercial relations with China.