The opium trade of the 18th and 19th centuries was Britain’s solution to its chronic trade deficit with China. The reason for the deficit was an extraordinarily high demand for Chinese commodities in Europe and little or no demand for European goods in China. The problem was compounded because the only commodity that China accepted in payment was silver, preferably Spanish Carolus coins.  Prior to 1810 the British had been able to obtain the coins primarily through trade, however beginning that year Spain’s supply of silver began to decline -and finally ended- when its American colonies gained their independence.

Faced with dwindling reserves, the British searched for a commodity with which to pay the Chinese. Their solution was to buy cheap opium from their Indian and Burmese possessions and sell it to Chinese addicts. By the late 1830s British and American vessels were landing 30,000 chests annually, and the number of addicts grew to 12 million.

In 1839, when the Chinese Emperor attempted to halt the trade, the first Sino-British Opium War began. Following its defeat, China granted Britain most-favored nation status for trade, ceded the island of Hong Kong,  accepted the principle of extraterritoriality -whereby British merchants would no longer be held accountable to Chinese laws- and opened Shanghai, Canton, Ningbo, Foochow and Amoy to western trade. In 1844 the United States and France extracted similar concessions.

In 1854 the British further demanded that China open all its ports to foreign trade, legalize the importation of opium from British India and Burma, and exempt British goods from all import duties. In 1857, when the Chinese demurred, British and American warships were sent to Canton, and France and Russia joined. Following its second defeat, China ceded the port of Kowloon to Britain, agreed to export indentured Chinese laborers to the United States and Canada, and legalized the importation of opium.