‘Manila remained all this time the meeting ground, halfway round the world, of the heirs of Columbus and Vasco da Gama: a triumph of maritime communication in defiance of probability.’^[64] The meeting was never without some tension, and this is a leitmotiv of the first forty years of the seventeenth century. For the first fifty, until the news came that by the Treaty of Munster (1648) the Spanish Crown had at last admitted reality and recognised the independence of- 224 -the northern Netherlands, there was a deeper burden: for throughout this period the Philippines were a beleaguered outpost, exposed to almost constant Dutch attacks. There was an offensive triumph at the beginning, Acuña's Moluccan expedition of 1605–6, and a defensive triumph at the end, ‘La Naval de Manila’ in 1646; but most of the actions between these dates, though generally successful, were in fact the reactions of a tough but hard-pressed static garrison. The Dutch pressure must be borne in mind as a persistent abrading factor, a tide constantly returning to beat upon the coast. The tone of the times can be caught from the Jesuit annual letter for 1618–19:

Paradoxically, the Dutch rush to the Indies, East and West, was expedited by Philip II himself. In a desperate attempt to cut off that trading with the enemy which was at once a running sore and a necessary nourishment of his own war effort, Philip in 1585 and again in 1595 closed Iberian ports to the shipping of England and the United Provinces, on the second occasion seizing some 400 Holland and Zeeland ships. It is highly likely that both countries, sooner rather than later, would have tried to tap the trade of the Indies at source—the English had already sought to find both a Northwest and a Northeast Passage to the Orient, the Dutch the latter only—and Philip's action by itself was neither a necessary nor a sufficient cause of the Dutch expansion. But it was a stimulus, a straight challenge, and with the confidence born of twenty or thirty years of privateering, good geographical intelligence, and a wealth of ships and shipping skills, the Netherlanders turned enthusiastically to direct long-distance trade. By mid-1596 the first fleet from the Texel had reached Bantam, and by the end of the century sixty-five Dutch ships had been sent out, all but eleven of them returning safely, and most of them profitably.^[66]

In March 1603 one of their commanders, Jacob van Heemskerck, was not doing too well in legitimate trade: there was already too much competition amongst the Hollanders, and indeed just twelve months earlier, in March 1602, the seal had been affixed to the charter of the association designed to limit it, the famous Vereenigde Oost-Indische Compagnie or VOC. But that was on the other side of the world, and hearing of two carracks on their routine voyage from Macao to Malacca, van Heemskerck fell upon them and took the 1500-ton Santa Catharina. This was indeed a prize: Japanese copper, American silver, Chinese porcelain and above all silks, to the value of over 1,200,000 pesos, making this one of the richest single captures of the age. The news did not reach Macao, brought by a Japanese junk, until July; and the same evening two Dutch ships entered the port and took a carrack already laden for Japan.^[67]

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Macao now faced probable disaster: ‘In a few years, the cunning and complex net which, from Lisbon to Macao and the Moluccas, held the Indian Ocean in the bonds of Portuguese trade, was torn to shreds … Macao was condemned to death, unless she could adapt herself; and she adapted.’ The Macaonese were risk-takers in a sense the Manileños were not, versatile and persistent traders, as the career of Francisco Vieira de Figueiredo shows. By 1604 their ships had entered directly into the Manila trade, hitherto carried entirely in Chinese bottoms, taking over much of the high-value low-bulk trafic de choix. From 1618, the Dutch blockades were countered, with a good deal of success, by using numbers of lighter and handier galliots instead of the annual carracks; the Straits of Formosa were more difficult for the Dutch to block than those of Malacca, and so long as relations with the Japanese Court remained good (and nobles from the Shogun down had investments in Portuguese cargoes) the Dutch were held in check by diplomatic pressures. The Great Ship from Amacon was no more, but the traffic went on. The Portuguese came to be regarded by the Spaniards as masters of the Philippines;^[68] but, just as with the intercolonial trade on the other side of the Pacific, the success of this trade—not between two Viceroyalties but between two Empires, albeit under one Crown—imperilled, or seemed to imperil, the whole system. It raised, even more acutely than before, the question of the ‘drain’.

In the earlier years of the Union of the Crowns it was the Portuguese who feared trespass from Manila across the invisible boundary, arguing that all the treasure would go from New Spain to China, none to Old Spain, and even a Spaniard—although a bishop, and hence an enemy of Francisco Tello—could say that the Governor's shipment to China could utterly ruin Macao and with it the Japanese mission and all Luso-Castilian interests in the Orient, ‘for all these affairs are moved but by one wheel, namely, Macan.’^[69] It was on Lusian insistence that the Manila-Macao trade was banned in 1593, since at this time the Portuguese could freely send Japanese silver not only to China but to their Indian Ocean trading zones. But from 1605 the Malacca Straits were always liable to Dutch blockade, and in 1612 and 1613 there were premonitions of religious troubles in Japan, where the VOC had recently (1611) established a factory at Hirado. Access to the Manila trade thus became vital to Macao just as that trade was coming under attack; as we have seen, the Cabildo of Mexico City was early on the scene with complaints. Its real concerns were probably the cutting-in of Peruvian merchants and the competition of Chinese with Mexican goods, but it was of course more tactical to express great anxiety over the silver drain; it alleged that in the peak year of 1596 this amounted to no less than 12,000,000 pesos; actually a quarter of that amount was probably exceptional, though of course even this reduced figure was six times the legal limit—when Anson took the Galleon in 1743, she was carrying about 1,300,000 pesos, plus 35,582 ounces of silver—some of it disguised as cheeses!^[70] Sevillean hostility could be taken for granted, but Lisbon interests also saw in the Manila-Macao link a squandering into China of silver needed for the Indian Ocean trade, and- 226 -condemned the Manileños for reckless competitive bidding and a general forcing up of prices. Nevertheless, the trade across the South China Sea was flourishing until the early 1620s, when, on any reckoning, New Spain's silver output began to drop. The position was clearly seen by Grau y Monfalcon in 1637: the fall in trade that then set in was due to monetary inflation succeeded by declining output of precious metals, decrease in the number of Indians considered both as consumers and as workforce, falling purchasing power offsetting the increase in the number of Spaniards, and the high imposts, increasing averia, and fear of sequestrations and forced loans.^[71] The Dutch establishment of Fort Zeelandia in Formosa (1624), inside the Manila-Macao-Nagasaki triangle, of course did not help.

Even before this decline, drastic action to stop the drain had been requested by the Consulado of Seville—nothing less than the prohibition of Mexican trade to the Philippines, replacing it by direct trade between Spain itself and the archipelago, via the Cape of Good Hope. This was countered, ably and at length, by the Marques de Monteclaros, who pointed out that there were many other leaks, and at least ‘the Chinese do us no other harm than to keep the silver’, unlike ‘the French and the rebels [who] are so skilful in getting this product away from us’; the Pacific route was more secure.^[72] Administrative measures were tried: in 1635 Pedro de Quiroga was sent to Acapulco to enforce the legal limits, which he tried to do inter alia by the outrageous procedure of insisting on opening boxes and bales to see that their contents conformed to the consignor's sworn statement. The row was tremendous: there was a shipping strike at Manila, and for two or three years no laden Galleon reached Acapulco. Quiroga was snubbed and died in disgrace, and reform died with him.^[73]

Proposed remedies were many, and conflicting. Grau y Monfalcon argued for lower imposts and fewer restrictions; he admitted that others stood for an opposite policy. In 1619 the Dominican Diego Auduarte put forward a drastic solution: forbid the Macaonese to trade with Japan, so that they would simply have to move to somewhere else in Portuguese India, where they would be more useful: there were only about 300 anyhow, an independent and irresponsible lot and ‘evil examples’; Manila could take over the Japan trade and the conversion of China. The proposal was referred to Governor Fajardo, who thought that the Dutch or English would seize the place, destroying the Galleon trade; perhaps better to move the Macaonese to northern Luzon or Formosa, to keep open the Japan trade, but then again any action would be most difficult, and, on the whole, the time was not ripe for a definite decision….^[74]

On an opposite tack, there were suggestions for exchanging the Philippines for Brazil, or even for abandoning them altogether, as a fiscal and strategic liability. This of course was all but unthinkable, and the Manileños’ spokesmen in Madrid, Rios Coronel and Grau y Monfalcon, loosed salvoes of counter-reasons, sacred and profane: first, the islands were as a firm column, a strong rock, whereby the Faith may be propagated and the heretics, Moors, and heathen broken; then- 227 -they were necessary as a base to defend the Spiceries; they forced the Dutch to divide their forces and so they protected the whole of India, and indirectly the Spanish Main as well; victories in the Filipinas added to the honour and profit of the Crown, and cemented the fraternal union of Castile and Portugal; ‘on the preservation of these islands depends that of the China trade’; and finally, if from Philippine expenditures were deducted those properly attributable to general imperial purposes (such as the defence of the Moluccas), then the Manila establishment was not so expensive after all.^[75] Between the suppression of Macao and that of the Galleon trade, which it was understood on all hands would destroy the raison d’être of the Philippines, a wide variety of compromises was canvassed, their particular biases depending on whether their promoters thought the Macaonese, the Manileños, or the Mexicans were the villains of the piece. Chinese goods might be taken to Japan, whence so much silver ‘is and may be obtained’ to stop the drain from America; or the Philippines should be confined to paying for Mexican imports with their own local gold. And so on, and so on … Little wonder that Philip III, anything but a strenuous or intellectual monarch, minuted wearily ‘All has been carefully considered, but the remedy is not easy.’^[76]

In the 1620s Macao and Manila seem to have had a momentum of their own, since all the time the trade between them was officially without the law, and yet officialdom itself was often drawn in, by the mere necessities of the case. The semi-autonomy of the Senate of Macao may have accounted for something in this, as also of course the distance-time from Lisbon and Madrid; but the essence of the situation was that the fortunes of the two cities were bound together: if ‘the ships from China do not come’, there would be nothing for the Galleons. Both contributed to the cost of defending the communications between them.^[77] Yet the tension remained, and became more acute with the depression in Mexican mining; it was exacerbated by mutual resentments stemming from the missionary rivalry in Japan, and doubtless by the reflex of events in the homeland, or rather the homelands. By 1624 Olivares had planned the ‘Union of Arms’—in itself a sensible, even statesmanlike, proposal to pool Iberian resources in face of common danger, but in peninsular circumstances one bound to strain the loyalties of the non-Castilian realms, traditionally jealous of their ancient privileges; it was to lead by 1640 to secessionist revolt in Catalonia, revolution in Portugal. It had its reflection in the Orient: in 1630 Governor Niño de Tavora wrote to the King on the advantages of a ‘union of posts and arms in the South Sea’, but he had to admit that auditors and citizens bitterly opposed the experienced and meritorious, but Portuguese, Diego Lopez Lobo as admiral: ‘I am not aware that it is a crime or a demerit to be a Portuguese.’ (This was in face of a feared joint attack by Dutch and Japanese; nor did Tavora receive much help from the Viceroy in Mexico, who sent ninety men, little money, and gratuitous advice to reduce the military establishment—‘he does not know what it means to have Dutch enemies about us …’.) Malacca and Macao should be joined with Manila; otherwise there was little hope for the Indies.^[78]

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As silver output continued to fall in the next decade, the 1630s, crisis deepened; with a smaller cake to share, the old links of interest began to snap. The complaints against the men of Macao, regarded as bigger profiteers than even the Sangleys, became more bitter, until in 1632 seventeen articles, leading up to a demand for the total prohibition of Portuguese trade at Manila, were adopted, unanimously, by the Manila town council. Two years later, on the insistence of Grau y Monfalcon, royal decrees were issued for the enforcement of the old law, though perhaps the expression was not so stringent as it might have been; and in 1636 the Governor reported that trade with Macao had in fact been banned. The natural result, of course, was that the Sangleys, who had always carried the bulkier portion of the trade, moved in on the rest; and not only that, but Spanish ships put into Macao, with or without the excuse of stress of weather, and drove a roaring trade. Even the Governor of Formosa tried to smuggle so blatantly from Macao harbour that he had to leave under fire from its defences, while in 1637 the Acapulco Galleon itself put in. After the expulsion from Japan in 1639–40 the Macao Senate tried to get their trade to Manila licensed, or even extended to the Americas:

Perhaps in the end the divorce was a relief to both parties.

The fall of Malacca to the Dutch in 1641 cut Macao off from Goa and the rest of the Estado da India; with remarkable resilience the Macaonese turned to Indochina, Makassar, and Timor, fitting themselves into the regional carrying trade and surviving as an almost indigenous element; as Anthonio van Diemen put it, as if ‘they knew no other fatherland.’ The Galleon, supported now by the American market, continued to carry silk to New Spain and indirectly to Peru; Mexican competition in silks was all but eliminated.^[80] But the mastery of the Indonesian and China Seas was falling to the Dutch and the Mar del Sur itself was no longer mare clausum: it was still a Spanish lake, but one increasingly traversed by English and Dutch keels.