1. Your telegram of November 27, 1943, No. 287, Chinese Extraterritoriality.  Please reply to Dr. Evatt along the following lines.
2. When we communicated with Australia on this subject in February 1943  we were not aware that the Chinese interpretation of the simple act of abolishing extraterritorial rights would lead to the placing of missionary and other Canadian property rights in China in jeopardy. There is evidence now that this is the case and as our property holdings are very extensive it is essential that they be protected. You will remember that Dominions Office took this view in Circular D489 of November 30, 1942. 
3. At that time also we were under the impression that the inclusion of a 'travel, reside and carry on commerce' clause would involve rights of entry which we were not prepared to accord. We have since been informed, and the text of our present draft assures, that this clause refers only to such rights as have been 'long accorded' to Chinese nationals by Canada.
4. Finally, public opinion in Canada has been modified by considerations similar to those which in the United States have resulted in Congress according an immigration quota to China.
5. Under these circumstances we are disposed to conclude an agreement with China which will preserve our essential property rights in that country and yet, without conceding any vital principle, meet some parts of the Chinese case.
6. In the Treaty which we now propose to conclude the only changes from our original intention are the inclusion of articles which:
(a) provide protection for Canadian property rights in China;
(b) provide for consular notification in the case of the arrest of Canadian nationals in China or Chinese nationals in Canada;
(c) recognize, on a reciprocal basis, the right of Chinese to travel, reside and carry on commerce' in Canada insofar as those rights have already been 'long accorded';
(d) commit both countries to enter into negotiations, after the conclusion of the war, for the conclusion of a 'comprehensive modern treaty or treaties of friendship, commerce, navigation and consular rights'.
Of these (a) and (b) are obviously in our favour; (c) is a gesture as it merely confirms present practice, and (d) refers to a plan which in any case we would be disposed to favour. (In connection with (d) it will be noted that a reciprocal clause granting most favoured nation treatment in regard to immigration is not a necessary element in such a treaty and no such clause will be included in any agreement we may make with China.) In other words, it is our view that in agreeing to the conclusion of a treaty of this kind we will be strengthening our own position in a very material way, without conceding any rights which could be invoked to our disadvantage. There are no 'vague general propositions' in our text and while we may not be wholly cognizant of the Australian point of view, we can see nothing in the principles involved in the proposed Treaty that would in any way affect the maintenance of, for example, the 'White Australia' policy.
7. It is hoped that these fuller explanations will remove Dr.
Evatt's fear that the early conclusion of a treaty along the lines proposed between Canada and China would embarrass the Australian Government.
8. In connection with this whole matter you should inform Dr.
Evatt that we propose shortly to discuss with the Chinese Minister  the conclusion of an Immigration Agreement which, if accepted by the Chinese, would enable us to rescind the Chinese Immigration Act against which considerable hostility has been aroused in Canada as well as in China. Our proposed agreement would prohibit immigration entirely but would permit the reciprocal admission of restricted numbers of persons of specified categories for limited periods and defined purposes. A more detailed description of our proposals will be given to the Australian High Commissioner in Ottawa shortly for transmission to Canberra.