Chapter 3: The First Contraband Agreements

Negotiations for a contraband agreement with Holland. – Negotiations for a contraband agreement with Denmark. – Negotiations for a contraband agreement with Sweden. – Negotiations for a contraband agreement with Norway. – Negotiations for a contraband agreement with Italy. – Negotiations for a contraband agreement with Switzerland. – General conclusions upon the first contraband agreements.

The order in council of 29th October, 1914, was accompanied by an intimation that the British authorities intended to negotiate agreements with neutral governments, and, thereby, to regulate all outstanding and debatable questions, by the rules of expediency and mutual convenience. The neutral governments to whom this note was addressed were still free to refuse negotiation, by asserting, that, as the Hague convention granted them the right to allow exports and re-exports of contraband to flow unimpeded and unregulated, so, there was nothing to negotiate about. This appeal to a bare legal right was, however, unlikely, as the order in council made it evident, that the neutrals claim to a free trade in contraband would be answered by a declaration, that the neutral country, whose authorities claimed this freedom, was virtually a base of enemy supplies, and would be so treated. Some neutral statesmen (more particularly the Norwegian among whom a knowledge of the sea is common) may have grasped that this course of conduct would involve Great Britain in such difficulties that she would be forced to abandon it; but even if this was understood, it must have been understood, also, that the dangers of a general stoppage would be, to Great Britain secondary only, and to neutrals, immediate and formidable.

Moreover, although neutral authorities may have been conscious, that the British administration would be reluctant to be responsible for a universal stoppage, they must also have been aware, that we could exercise our rights far more rigorously than we had done hitherto; for our legal right to stop contraband from going to Germany was absolute, and was not, in itself, weakened by the difficulty of collecting evidence against particular consignments. Obviously, therefore, we could abandon our practice of demanding mere guarantees against re-export, and could demand, instead, that neutral authorities should furnish satisfactory proof, that detained cargoes would not be exported to the enemy. This request for positive proofs, accompanied by detentions of all cargoes for which proof of innocent destination was demanded, would, in itself, have caused severe stoppages and dislocations; and, as the neutral countries of Europe were only just recovering from an economic convulsion, their governments were but little inclined to endanger their countries commerce, by forcing the British government to adopt this more rigorous procedure.

A satisfactory settlement was thus possible, but it was not likely to be reached easily or quickly. The purpose of the negotiations was to transfer, from legal to political territory, all the issues we had raised by asserting the doctrine of continuous voyage in our first order in council. During the process of transfer, therefore, those issues would necessarily be exposed to all the influences that radiate from great centres of finance and industry; and no proposals from the British authorities were likely to be agreed to, unless they were adjusted to the policies of the neutral powers.

Apart from this, many questions of detail remained to be examined by technical experts before agreements could be concluded. The British authorities had intimated, in their circular letter to the neutral governments, that contraband cargoes consigned to neutrals would not be stopped, if neutral governments would prohibit the export of all commodities on the contraband proclamations. This proposal contained the [62] material for a reasonable bargain; but how should contraband goods be treated, if it were found, upon examination, that they stimulated an exporting industry in a neutral country, without being essential to it? What should be done with commodities which, although consumed in a neutral country, released other, similar, commodities for export to Germany? What transactions, in fact, would be treated as the transactions of a legitimate export trade between neutrals and the enemy? Every proposal under these heads was certain to be agitated among bankers, manufacturers, traders, landowners and peasants; and allowance would have to be made for a vast complex of interests, before any settlement could be reached.

To the Foreign Office authorities it was evident, that a special department would have to be formed, if negotiations of such compass were to be properly conducted; and the contraband department was founded, before the instructions were sent to our representatives abroad. The order for founding this department was, moreover, accompanied by another, equally important: Sir Eyre Crowe was removed from his post at the head of the war department, and was placed in charge of all contraband negotiations. This appointment placed a man who was, probably, the most far-sighted and able official in the British administration in control of what proved to be, later, an engine of such strength, that it shattered the fabric of two great empires. For the rest, the new department was placed under the immediate supervision of Mr. Parker, and was organized in geographical divisions: the first scrutiny of all negotiations with Italy and Switzerland, was entrusted to Mr. Craigie: Mr. Sargent supervised those with the Scandinavian powers and Holland: Mr. Vansittart was made the Foreign Office representative upon the licensing committee, which enforced the trading with the enemy legislation.

Simultaneously, or nearly so, the contraband committee was founded. From the first days of the war, Foreign Office and Admiralty representatives had scrutinised all the reports of detentions by the fleet, and had recommended appropriate action. It was not, however, until the beginning of November, that these meetings became the meetings of a regularly constituted committee with a permanent secretariat, and a set of minute books. Henceforward, an officer of the contraband department, and a representative of the procurator-general attended every meeting. The Admiralty representatives were officers of the trade division.

By thus drawing the political and military branches of the administration more closely together, these additions to the existing machinery served a good purpose. The union was, however, far from perfect, as it was only between branches of the service that were still subordinated to one authority. Notwithstanding that the war department of the Foreign Office had been founded to facilitate collaboration between the Foreign Office and the Admiralty, the high naval authorities acted quite independently, when they took a step that made neutrals extremely suspicious of our intentions. How this came about can only be explained by a retrospective survey of the campaign at sea.

The German naval staff were still executing their minelaying campaign, but their difficulties were great. Being ignorant how the British fleet was distributed, or where the main striking force was based, the Germans were, in consequence, uncertain what waters ought to be mined. Submarines were, therefore, repeatedly sent on cruises of observation, and, on 15th October, U-boats numbers 9 and 17 penetrated the patrol line of the tenth cruiser squadron, and sank the Hawke. Admiral Jellicoe now withdrew the grand fleet from the North sea, and the naval dispositions for intercepting commerce were modified. The old cruisers, which had hitherto done the service, were ordered to be paid off, and were replaced by armed merchant cruisers. The nucleus of the tenth cruiser squadron, reinforced by the third cruiser squadron, was ordered to patrol north of the Shetlands, and the cruiser forces of the grand fleet were directed to sweep out areas on the old patrol line, between Peterhead and [63] Norway. Thanks to these measures, the traffic to northern Europe was kept under observation, but our watch upon it was considerably relaxed, and was only carried out with its former regularity, when Admiral Jellicoe returned to Scapa.

As this evacuation of the North sea made the British fleet more difficult to locate than ever, the German naval staff determined to mine the approaches to a great commercial harbour, and ordered the Berlin to lay a minefield in the firth of Clyde. Her captain failed to do this, and mined the approaches to Tory island. The battleship Audacious sank on this new minefield on 27th October.

Soon afterwards, Admiral Jellicoe visited the Admiralty, to discuss the conduct of the naval war with the board. A general conference, of which the minutes of proceedings have been lost, was held on 2nd November, and a manifesto was published in the papers on the following day. It ran thus:

      During the last week the Germans have scattered mines indiscriminately in the open sea on the main trade route from America to Liverpool, via the north of Ireland. Peaceful merchant ships have already been blown up, with loss of life, by this agency, the White Star liner Olympic escaped disaster by pure good luck. But for the warnings given by British cruisers, other British and neutral merchant and passenger vessels would have been destroyed. These mines cannot have been laid by any German ship of war. They have been laid by some merchant vessel flying a neutral flag, which has come along the trade route, as if for the purposes of peaceful commerce, and, while profiting to the full by the immunity enjoyed by neutral merchant ships, has wantonly and recklessly endangered the lives of all who travel on the sea, regardless of whether they are friend or foe, civilian or military in character.
      Minelaying under a neutral flag and reconnaissance conducted by trawlers, hospital ships, and neutral vessels are the ordinary features of German naval warfare.
      In these circumstances, having regard to the great interests entrusted to the British navy, to the safety of peaceful commerce of the high seas, and to the maintenance within the limits of international law of trade between neutral countries, the Admiralty feel it necessary to adopt exceptional measures appropriate to the novel conditions under which this war is being waged. They therefore give notice that the whole of the North sea must be considered a military area. Within this area merchant shipping of all kinds, traders of all countries, fishing craft, and all other vessels, will be exposed to the gravest dangers from mines, which it has been necessary to lay, and from warships searching vigilantly by night and day for suspicious craft. All merchant and fishing vessels of every description are hereby warned of the dangers they encounter by entering this area, except in strict accordance with Admiralty directions. Every effort will be made to convey this warning to neutral countries and to vessels on the sea, but from 5th November onwards the Admiralty announce that all ships passing a line drawn from the northern point of the Hebrides, through the Faroe islands to Iceland, do so at their own peril.
      Ships of all countries wishing to trade to and from Norway, the Baltic, Denmark, and Holland, are advised to come, if inward bound, by the English channel and the straits of Dover. There they will be given sailing directions, which will pass them safely, so far as Great Britain is concerned, up the east coast of England to Farn island, whence a safe route, if possible, will be given to Lindesnaes lighthouse. From this point they should turn north or south, according to their destination, keeping as near the coast as possible. The converse applies to vessels outward bound. By strict adherence to these routes the commerce of all countries will be able to reach its destination in safety, so far as Great Britain is concerned, but any straying, even for a few miles from the course thus indicated, may be followed by fatal consequences.

It is a great pity that the documentary records of this conference have been lost; for it would be interesting to know how Admiral Jellicoe, and the other high officers present, reached these conclusions. First, the naval mining experts never swerved from their conviction, that the minefields in the North sea had been laid by regularly equipped minelayers of the German navy; secondly, how was this operation of laying mines from neutral vessels conducted? To whom did the neutral vessels belong? When and where had they received the mechanical equipment necessary for laying mines? Why had the owners consented that their vessels should be put to such a use? Why had neutral skippers agreed to conduct operations for which they had no training or experience, and why had the Germans entrusted them with such duties? Where had these neutral minelayers obtained their clearance papers? What arrangements had been made for corrupting the custom house and port officials who had granted false clearance papers; and how had the insurance companies been duped into insuring vessels engaged in this un-neutral service?

[64] Every neutral statesman and shipmaster and shipowner knew, from the beginning that the accusations in this document were quite untrue; but some weeks elapsed before they could collect proofs that refuted the whole paper.¹ As can be imagined, there was universal indignation, that these accusations should have been scattered about, without investigation or enquiry. Scandinavian shipmasters were particularly resentful of the charge that minelaying under a neutral flag and reconnaissance conducted by trawlers, hospital ships and neutral vessels were the ordinary features of German naval warfare; for they read this as an unfounded slur upon their honour and good name. Neutral governments read the announcement, as an intimation that the Admiralty intended to close the North sea by mines, and to sever Norway and Sweden's communications with America. From Stockholm and Christiania, Mr. Howard and Mr. Findlay reported angry meetings of shipowners and shipmasters; and it was with governments thus excited and indignant that they had to conduct a difficult negotiation.

i) Negotiations for a Contraband Agreement with Holland

The Scandinavian powers handed in a note of protest some days later. The Netherlands government had been pressed to join in the protest, but they declined to do so, for it seemed to them, that the Admiralty's proclamation only threatened restraints upon the traffic that entered the North sea at its northern end. Shipping for Dutch ports passed through the Channel, and was generally examined at the Downs. Dutch shipowners, therefore, considered that they were complying with the traffic regulations of the Admiralty's manifesto, and their government preferred to wait upon events, and to discover whether any unusual restrictions would be imposed, before they engaged in a controversy.

The Dutch authorities thus received the Admiralty proclamation more calmly than the governments of Denmark, Sweden and Norway; but they were apprehensive of our intentions, and, just before negotiations began, they protested against the last order in council. The protest was, however, very mildly worded, and was directed against the clause that threatened drastic restrictions, if a neutral country were considered to be a base of supply. Sir Edward Grey answered, that the British government intended to make proposals for regulating contraband commerce, and that, when examined, the proposals would be found to be reasonable. It will be necessary to make a brief survey of the Netherlands commerce, before describing the proposals made by Sir Alan Johnstone, our minister at the Hague, and the reception given to them.

The sources of Dutch wealth are substantially the same as they were three centuries ago, when the Dutch East Indies fleet arrived in Europe twice a year, laden with goods which were subsequently sold in central Europe; for now, as then, the Netherlanders are warehousemen, transit agents, and jobbers, for middle Germany. The commodities bartered have changed, but not the nature of the transactions from which the Hollanders draw their profits. In the seventeenth century, the Netherlanders sold spices, silks, furs, precious woods and rare animals to the wealthy Germans of the Rhineland: in 1914, they were buying food, fuel and metals in every country that produced them, and reselling, at a profit, when the markets to the southeast were good. Moreover, as the communications between north-western Germany and the Netherlands are better than the communications between eastern and western Germany, the Netherlanders were acting as distributers of large quantities of German materials.

[65] In 1913, for instance, they bought 11,700,000 tons of coal from Germany and re-sold 1,100,000 tons in the same country. Germany was, indeed, their best customer; for 46 per cent. of their imports came from Germany, and 50 per cent. of their exports were sold in that country. The Netherlanders were, moreover, much concerned in the re-export of the materials that we desired to control; for they were importers and retailers of foodstuffs and forage, fuel, copper, lead and hides; in each case, their best purchaser was Germany. The exact state of their normal trade in articles that had then been declared contraband is best described by statistics (see Table I).

From these particulars, it will be understood that no Netherlands government could easily pledge themselves to prohibit the export of contraband to Germany. They might, without danger, stop petroleum from leaving the country, for the Hollanders were not great dealers in oil; also, they might stop the export of such ores as haematite and ferro chrome, for their imports of these commodities were small. If, however, they promised to stop their export trade in foodstuffs, forage, copper and fuel, it was obvious that they would be tampering with the sources of national income. And even though they could persuade their electorate of great and petty traders, that they were imposing restrictions in the national interest, it was doubtful whether they could restrain contraband trade by government decree, without involving themselves in a dangerous controversy with the central empires. When treaties of trade and commerce contained lists of contraband, signatories were under a vague, ill-defined obligation not to export contraband to belligerents; but such attempts as had been made to enforce the custom had never been successful, and in 1914 it was no part of international usage.² Indeed, according to the Hague convention, neutrals were free to get what commercial profit they could out of the difficulties of belligerents. If, however, a neutral government did restrain trade in contraband, they were strictly obliged to restrict that trade equally with both sets of belligerents;³ and, as far as our authorities could foretell, it was at least possible that the Netherlands government would stand firmly on this convention, and declare themselves unable to discuss our proposals; for, just before Sir Alan Johnstone started negotiations, the Netherlands minister at Berne handed Mr. E. Grant Duff a carefully drafted paper headed, Quelques données au sujet de la situation actuelle des Pays Bas et de l'attitude du gouvernement néerlandais. The paper was an elaborate explanation, that the export prohibitions hitherto promulgated by the Netherlands government had been imposed for domestic reasons. Les défenses d'exportation émanant du gouvernement n'ont aucune tendence de politique internationale et ont exclusivement pour but de maintenir au juste niveau les provisions se trouvant aux Pays Bas...... Il ne s'agit donc pas d'interdiction comme en fait mention l'article 9 de la convention concernant les droits et les devoirs des puissances et des personnes neutres en cas de guerre sur terre; au contraire, le gouvernement néerlandais a toujours soutenu vis a vis des alliés le droit que l'article 7 du traité susdit reserve aux neutres de permettre l'exportation et le transit pour le compte de l'un ou de l'autre des belligérents. If this paper had recorded the considered policy of the Netherlands government no negotiation would have been possible.

[66-67]

[68] Finally, there were technical difficulties. The re-export trade was not entered in the commercial registers of the government as a transit trade, which in reality it was, but the greater part of the commodities brought into the country for sale abroad were registered for use (tot verbruik). The Netherlands government did, it is true, keep statistics of the transit trade, but the figures gave no measure of the quantities of goods which were brought into Holland, held there for a few weeks, and then sold in Germany. In the circumstances, therefore, the commercial magnates of Holland were better able than the Netherlands government to judge what goods were consumed in Holland, and what exports could be prohibited, without ruining the country.

The need for some agreement was, however, very pressing. During the first two months of the war, neutral governments had, certainly, much restricted German supplies, by prohibiting the export of food and raw materials. They had, however, imposed those restrictions solely for their own salvation, and out of no regard for British contraband proclamations. Confronted with an alarming decline in the supplies usually obtained from Russia, Germany, and the United States, neutral governments had forbidden food and raw materials to leave their countries, until they were satisfied that the people had enough food, and the industries enough material, to continue working. The upheaval of August and September was now subsiding, and supplies were being delivered with greater regularity. Our authorities could, therefore, expect that the neutral export prohibitions, which had fortuitously assisted us during the first weeks of the war, would be progressively relaxed, and that, unless some bargain could be concluded with the Netherlands and Scandinavian governments, the enemy would make good their shortages of food, metals and textiles during the first months of the coming year.

Our negotiators had thus good reasons for realising, that it was a matter of pressing importance to make a bargain, but it cannot be said that they opened the game with a good bargaining hand. British export trade with neutrals was still practically uncontrolled, and, in any case, the licensing committee was independent of the Foreign Office. The British negotiators had, therefore, no authority to threaten a stoppage of British supplies to neutrals, if their governments proved stiff and obstinate. Their best bargaining card was the unquestioned right of the British government to issue severer orders to the fleet; but to threaten an exercise of this right was to play a dangerous game. If a more rigorous procedure against neutral cargoes were exercised, our harbours would, in a few weeks, be blocked with ships and cargoes, which no prize court would condemn; and the American authorities might renew their protests, and make common cause with European neutrals.

Certain political influences, which we could not assess at the time were, however, operating in our favour; and the Netherlands authorities, though possibly conscious of the weakness of our position, did not intend to provoke us by bald opposition. They had certainly decided to disengage themselves from all controversy; but the memorandum presented to Mr. Grant Duff did not divulge all their intentions. Those intentions were subsequently made so clear, by the acts and decisions of the Netherlands authorities, that they can now be described without fear of misrepresentation. In the autumn of 1914, the Netherlands government anticipated a long and bitter struggle between the central empires and the entente powers, and were, therefore, determined to separate policy from commerce as far as they could be separated; to assume and discharge the duty of keeping the country neutral, by avoiding controversy with either set of belligerents; and to leave the great trading and shipping magnates free to maintain the national income as best they could, by adjusting their commerce to prevailing circumstances. The first step was already taken; for, just before Sir Alan Johnstone presented the British government's [69] proposals, the Foreign Office learned, that a great trading company had been formed at the instance of the Netherlands government, and that this association would relieve the authorities of many of the duties that they had performed during the first months of the war.

It was not easy to decide whether the British Foreign Office could treat this company as a substitute for a regular government; and Sir Francis Oppenheimer, the commercial attaché at the Hague, at once visited London, to report how the association was constituted, and to communicate all he knew about the directors. Sir Francis informed the Foreign Office, that the chairman of the executive board was M. Juist van Vollenhoven, a great shipping director, and that his colleagues had been carefully selected from the principal houses in the country. Personally, Sir Francis Oppenheimer did not doubt, that this trading association would be a more effective organ of control than any department of government, and, after hearing all that he had to say, Sir Eyre Crowe was persuaded. A supplementary memorandum was, therefore, added to the papers that Sir Alan Johnstone was about to present, and on 18th November, the British minister and his French colleague communicated the proposals of the allied governments.

In the first, or general, memorandum, the allied authorities asserted their right to prevent contraband from passing to Germany through neutral countries. The last order in council explained how the right would be exercised; but, as the allies were anxious, that this stoppage of contraband upon the high seas should not paralyse the commerce and industries of neutrals, so, they desired to regulate the procedure. They therefore proposed: first, that neutral governments should forbid the export of all commodities on our contraband lists, and, secondly, that the governments themselves, or some firms of good repute, should, henceforward, be the consignees of all contraband cargoes. If these conditions were complied with, the allies would undertake that neutral ships carrying contraband should only be detained for so long as might be necessary to inspect their papers. In their explanatory memorandum the allied governments suggested, that the Netherlands government should be the consignee of all foodstuffs and forage, petroleum and copper, and that the new trading committee, now called the overseas trust, should be the consignee of all other contraband cargoes. The guarantee of the trust would be accepted, on condition that it was included in the bills of lading, and strengthened by a collateral guarantee from the shipping companies that carried the cargoes. Finally, those foodstuffs and fodders which would be considered contraband were described in detail.⁴

Sir Alan Johnstone communicated the substance of these papers to the foreign minister, M. Loudon, before he presented them officially, and had made a few alterations to meet the ministers' wishes. He was satisfied that some agreement would be concluded, but doubted whether the Netherlands authorities would accept all the responsibilities which we desired to impose upon them. Nor was he mistaken; for the Netherlands government answered these proposals in a note which was little but a refusal to give any formal undertaking (4th December). After thanking the allied ministers for the friendly character of the proposals, M. Loudon answered:

That an agreement of the kind proposed between a neutral government and one set of belligerents would not be reconcilable with a strictly neutral conduct; and then explained, that, although the Netherlands government had purchased foodstuffs on its own account, and had forbidden their exportation, these exceptional measures could not be turned into a general [70] rule. If the government consented to any such arrangement, they would be party to a system of disguised guarantees, which would bar the entry of conditional contraband into the country...... In the government's opinion this commerce should be free. M. Loudon continued, however, that the interested parties had themselves discovered the most simple and effective method of overcoming the difficulties of the position, and then explained that the Netherlands overseas trust was a society formed in the first place to serve as an intermediary for importing the contraband articles which were necessary to the country, without government intervention.

If this official reply had been the only communication made to Sir Alan Johnstone, he could only have concluded, that the Netherlands government refused to give an undertaking of any kind; and that the negotiation must either be continued with the Netherlands overseas trust, or abandoned. He had, however, interviewed M. Loudon several times, whilst the proposals were being considered; and, when the official reply was handed in, there was another long interview between the Netherlands minister and the allied representatives. Sir Alan Johnstone thus penetrated the intentions of the Netherlands government, and was satisfied that their performance would be better than their promises. When the interview was over, he was able to report, that, although their official reply was by no means satisfactory, the Netherlands government could be relied upon to stop the re-export of grain, rice, copper and petroleum, and that they would agree to be the consignees of all cargoes of those commodities. They were quite determined, however, that they would accept no other responsibilities, and that the Netherlands overseas trust must be the recipient, distributor and guarantor of every other contraband cargo. Both the Foreign Office and Sir Alan Johnstone were now satisfied, that the trust was what M. Loudon described it to be: A society, which, by its composition and the mutual responsibility of its members, gave the highest guarantees of integrity and good faith. The task before them, after receiving the reply, was, therefore, to consider how a satisfactory agreement with the trust should be concluded.

After some consideration, the Foreign Office decided that the conditions to be insisted upon with this private company were: That Sir Francis Oppenheimer should be made a member of the trust; that British shipping companies should be allowed to consign cargoes to it; and that the legation should be furnished with exact statistics of the Rhine transit trade. As M. van Vollenhoven, the chairman of the trust, was as anxious to reach an agreement as the British government, these points were substantially agreed to in conversation. The trust only insisted on one modification: they could not agree that there should be a British member of the trust, for they would then be compelled to admit a German representative also. They were willing, however, that Sir Francis Oppenheimer should act as the British secretary to the trust; if they were subsequently requested to appoint a German secretary they would answer, that, as soon as the volume of German correspondence was equal to that of the British, a German secretary would be appointed. M. van Vollenhoven was also willing that Sir Francis Oppenheimer should inspect all the transactions of the company, and all the statistics of the transit trade along the Rhine.

As soon as these questions were settled, Sir Alan Johnstone temporarily left the Hague; Mr. Chilton therefore presented the notes in which the agreement was registered (26th December). The Netherlands government were to act as consignee for such quantities of wheat, flour, copper and petroleum as would be consumed in the country; in the case of cereals, meat, fish, lard, fodder, leather and hides, home consumption was to mean consumption in the Netherlands and the Dutch colonies only; other contraband cargoes might, however, be exported to neighbouring neutrals. An additional letter, signed by Sir Francis Oppenheimer, was sent to the trust; in it Sir Francis elaborated the undertakings that the company was to give, and sent drafts of the contracts that were to register the obligations of the trust, and of its customers, the shipping companies.

[71] These documents constituted the first of those trade agreements, which, later on, became the operating machinery of the blockade. The Netherlands authorities accepted them practically as they stood; the one slight modification insisted upon is however, worth describing, not because it was a modification of any importance, but because the reasons why it was inserted are illustrative of the political influences that affected the negotiations, and which, at any moment, might have made all negotiation impossible.

The sixth paragraph in the letter to the Netherlands government ran thus:

      With a view to a complete settlement of the questions relating to the trade of contraband, the British and French legations at the Hague reserve the right to appoint Sir Francis Oppcnheimcr to make the necessary arrangements with the Netherlands overseas trust......

To the wary M. Loudon it seemed as though this reference to a complete settlement of contraband questions might be construed as an undertaking given by a neutral, to a belligerent, government, and that, if he agreed to it, he might compromise the neutrality which he had been instructed to guard so jealously. At ten o'clock at night, at all events, Mr. Chilton, his French colleague, and Sir Francis Oppenheimer, were informed, over the telephone, that M. Loudon objected to the paragraph, and that, rather than accept it, he would allow the negotiation to fall through. The French minister feared that M. Loudon had determined to cause a breakdown. M. van Vollenhoven and the trust directors were, however, impatient of these niceties. Being charged with the duty of supplying the Netherlands industries, and of readjusting their country's commerce to the extraordinary circumstances of the time, they understood the dangers of delay and uncertainty, as clearly as M. Loudon understood the political dangers of a compromising phrase. M. van Vollenhoven, therefore, agreed to interview M. Loudon, before the allied ministers called upon him officially. What passed between the two Netherlanders has never been divulged; but, when the allied representatives reached M. Loudon's house, shortly after M. van Vollenhoven's visit, the Dutch foreign minister received them with profound apologies. The sixth paragraph of the official letter was slightly altered, and the negotiation was successfully concluded.

The incident is illustrative of the difficulties that our negotiators had to overcome. At the time, the harassed diplomats were exasperated at M. London's scruples: reviewed in perspective, the Dutch foreign minister's caution appears just and reasonable. Whilst he was negotiating, German diplomats were scrutinising his proceedings with intense and suspicious curiosity; German armies were moving past the southern boundary of Holland, in an unbroken succession of troop trains, transport vehicles and marching men. Being determined that no word, written or agreed to by him, should compromise his government, or deflect that sinister procession of armed men towards the undefended frontiers of his native country, M. Loudon felt that no vigilance on his part could be excessive, and that if vigilance demanded that he should cavil at words and phrases, he must do so without flinching.

This first agreement with the Netherlands government, and the overseas trust, must be included amongst those small beginnings to a great operation which were subsequently forgotten. As an instrument of control the agreement was found faulty and elaborated later on; nevertheless it would be difficult to exaggerate the importance of the settlement provisionally concluded. Without provoking political controversy, the agreement transmuted the rule of continuous voyage from a disputed legal doctrine into a workable contract between business men; more than this, the agreement stopped up an avenue of commerce, which led straight into Germany, without asserting a single contested doctrine of international law. Nor was this all. Henceforward, no food or forage was to be carried to the enemy through Holland. The agreement, therefore, swept away those artificial distinctions [72] between civil and military consumers of food - distinctions which made it incumbent upon belligerent governments to discover, whether a barrel of flour would be baked at a field canteen, or in a burgher's kitchen, and whether a load of forage would be eaten by a cavalryman's charger, or a tradesman's drag horse. It is true that the dividing line between conditional and absolute contraband was, henceforward, blurred rather than rubbed out; but, inasmuch as this first agreement was a business man's arrangement for stopping all enemies' supplies, without ruining neutral commerce by wholesale detentions and appeals to law, it may be regarded as the first practical plan of economic war.

ii) Negotiations for a Contraband Agreement with Denmark

While Sir Alan Johnstone and Sir Francis Oppenheimer were negotiating this agreement with the Dutch authorities, the allied ministers at Copenhagen, Christiania, Stockholm, Berne and Rome were conducting similar negotiations, with the governments to which they were accredited. Of these negotiations, those with the Danish authorities were, perhaps, the most important; for, during the autumn of the year 1914, Denmark was becoming a great conduit pipe for German overseas supplies. Germany's indirect trade with all northern neutrals was then steadily increasing, but with no country was the growth so rapid as it was with Denmark.

Our negotiators, however, only learned about the alarming growth of this contraband trade, after their proposals had been presented, and indeed examined. The normal commerce of Denmark, which the Foreign Office had considered when the first proposals were drafted, moved approximately in the following channels, and consisted mainly of the following commodities.

The Danish national revenues are largely maintained by the sale of meat and dairy produce; for no Danish export can compare in value with the export of live stock, meat, bacon, butter and eggs. In the year 1913, these commodities were sold in foreign countries at a total price of 525 million kroners; the subsidiary produce of the Danish farms: hides, animal fats and so on, were sold for an additional 75 million. As the Danes are great farmers of live stock, it follows that they are also great importers of grain and forage (see Table II); but, at the date which now concerns us, sources of their grain supplies were somewhat difficult to discover. The Danes bought considerable quantities of wheat in Hamburg, but the greater part of the wheat so purchased was known to be American and Canadian grain, which the Danes found convenient to purchase on the Hamburg corn exchange, or even to buy whilst it was afloat. Large quantities of other grains were bought in the same manner. In consequence of this, our negotiators and their expert advisers had always to remember, that American supplies were more important to Denmark than the official statistics would have led them to imagine. Also, Germany and Great Britain were Denmark's two most important customers, for with no other countries did the Danes do anything like such a volume of business.

As the Danes bought thirty-eight per cent. of their total imports from Germany, and sold a quarter of their domestic exports, and an equal proportion of their re-exports, in Germany, the German market was extremely important to the country; and it was not to be expected, that the Danes would ever sign a contraband agreement, which damaged their commercial interests in Germany. On the other hand, our negotiators started these discussions with advantages that were denied to Sir Alan Johnstone, at the Hague. The principal Danish imports from Germany were rye, hay, maize and barley; and all these supplies were very much reduced, as the German mobilisation, and the German shortage in grains and forage lowered the exports of all farm produce. As imports and exports run in the same channels, it followed that circumstances were deflecting Danish trade from the German markets.

[73] In contrast to this Great Britain's economic ties with Denmark were strong. Sixty-two per cent. of the domestic exports were sold in Great Britain; and it was to be presumed, that, if the Danish farmers increased the national production of eggs, bacon and butter, the British market would absorb the increase. Finally, the Danes bought the bulk of their coal from Great Britain, which further strengthened the economic links between the two countries. In all probability, therefore, prohibitions imposed upon the export of foodstuffs to Germany would not have damaged the Danish revenues, for the Danes could have compensated themselves for losses in the German market by rising sales in the British.

With regard to the ores, fuels and liquid propellants, which were then upon the contraband lists, the position was roughly this: the Danes re-exported considerable quantities of petroleum and of the ores now declared contraband, but their re-exports to Germany were not great, as their jobbing trade in these commodities was done mainly with Norway and Sweden.

These were briefly the economic influences which may be said to have supported the proposals presented by Sir H. C. Lowther on 19th November; those which ran counter to it were these. Hides, which our military authorities considered to be an important article of contraband, were exported in large quantities from Denmark to Germany. As the skins were of cattle raised and slaughtered in Denmark, the Danish authorities could claim, that this was a legitimate export trade in contraband, and that they could not be expected to curtail the national revenues by restricting it. Also, although the British market would, at the time, have absorbed almost any additional produce of the Danish farms and slaughter houses, Danish exporters were nervous about the North sea passage, and hesitated to increase the volume of goods shipped from Esbjerg, the great export harbour for Great Britain, for Esbjerg lies at the north-eastern entrance to the bight, and was, therefore, within a zone of water where the German navy predominated. The Danes were, thus, inclined to seek new markets in Germany rather than in England; and the tendency was stimulated by the rising prices of foodstuffs in Germany. These were admittedly adverse influences. On the whole, however, the British minister may be said to have held strong bargaining assets when the negotiations began; he had, moreover, the additional advantage that the Danish court was exceptionally friendly. A few weeks after war began, King Christian sent Sir Edward Grey a paper recording his own personal sympathies with the allied cause. Later, he gave M. Andersen a confidential commission to maintain cordial and intimate relations with Whitehall. Prince George of Denmark described this M. Andersen as an old and trusted friend of the royal family, to whom any secret could be confided.

There was, however, one adverse influence, which neither economics nor royal sympathies could hold in check: the Danish ministry's dread of Germany. King Christian warned Sir Edward Grey that his ministers were: So hypnotised by Germany that they dare not show their mind from fear; and our authorities discovered, later, that the words were no exaggeration. But although forewarned, and anxious to respect the fears of statesmen whose country lay at the mercy of a powerful neighbour, our negotiators can hardly have been prepared for the inconsequent suggestions and counter projects, which the Danes actually presented.

It should be added, however, as some justification of the Danes, that they, like ourselves, were embarrassed by difficulties that are inherent in the conduct of economic war. Exceptional movements of commercial traffic always precede such information as can be obtained of them; for these movements are started and controlled not by one, but by many, commercial houses, and are not recorded by a central authority, until long after. Again, commercial movements cannot be watched as military movements in the field are watched; for a paid observer, who merely took up his quarters at the London docks, or the Rotterdam quays, could watch the business

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[76] of the port from morning to night, and for months on end, without being able to ascertain whether it was normal or abnormal. The commercial movements in a foreign country can, in fact, only be ascertained by very expert observers, who have access to all those government departments which keep statistics of trade. These observers must, moreover, have friends and confidants in all the great trading houses, who transmit to them the daily gossip of the commercial centres. And even if they enjoy all these facilities, and possess the necessary qualifications, these agents of commercial intelligence have to spread their observations over a considerable period of time, before they can report exceptional movements of trade with any certainty; for it is only by this long and careful observation, that the seasonal fluctuations of trade can be distinguished from abnormal movements. As a result of all this, the commercial intelligence necessary for conducting economic war is often presented with the most disconcerting suddenness. Facts that, for months on end, have supported no particular inference, arrange themselves unexpectedly into a chain of evidence; and those responsible for conducting economic war have to adjust their measures to situations that have not been watched in the growth, and which, in consequence, have hardly been suspected.

When Sir H. Lowther was instructed to open negotiations with Denmark, the restriction of enemy supplies committee had already issued several warnings about the Danish trade in petroleum and other articles in contraband; but, as has already been shown, the Danish authorities had always given satisfactory explanations, and nothing certain could be concluded. Moreover even though the known facts still warranted a certain amount of suspicion, our authorities had been given assurances that the system of export prohibition was being rigorously enforced, and that it would not be relaxed; for, in reply to Sir H. Lowther's enquiries, M. Scavenius answered, on 22nd October, that no kind of cereal or of forage was allowed to leave the country, and that, although the export prohibitions had been imposed to prevent scarcity, there was little chance that they would be raised. In addition, M. Scavenius informed the British minister, that these prohibitions were being enforced against cargoes that entered the free port of Copenhagen, as the free port was inside Danish territorial waters.

The Danish list of prohibited exports was, moreover, fairly comprehensive, and less variable than the Dutch; and Danish authorities were prepared to advise their shipping companies to obey the British traffic regulations in the North sea. On the face of things, therefore, the negotiation should have been easy; a special arrangement was obviously necessary with regard to Danish exports of meat and dairy produce; some additions to the Danish list of prohibited exports were very much to be desired; and it was also advisable to secure a definite guarantee that the prohibitions would be permanent. None of these objects seemed particularly difficult of attainment.

On 19th November, Sir H. Lowther presented the proposals that had been prepared by the British and French authorities. M. Scavenius answered, that his government would firmly maintain all existing prohibitions, but that they could not agree to restrict the export of home grown meat and dairy produce, as these exports were the principal source of the nation's revenues. M. Scavenius was, moreover, unyielding on the general proposal, that all articles on the British lists of contraband should be placed upon the Danish list of prohibited exports. To do this, he said, would be to distinguish between belligerents; and he could not agree that the Danish government should become a kind of branch office for enforcing British orders in council. Similar answers had, however, been given by the Dutch minister at the Hague, and we had found that these disagreements on the point of principle had not obstructed negotiations.

[77] Almost simultaneously, however, the restriction of enemy supplies committee became aware that Copenhagen had become a base of German supply on a scale that had never been suspected. A new industry in tinned meats, called the gulash trade, had been started in Copenhagen; and, if the contracts by the firms concerned in it were in proportion to their orders for canning materials, the business in anticipation was enormous. In addition, large orders for canned goods had been placed in America, and 1,000 tierces of lard had been ordered from Chicago. In ordinary circumstances, the Danes exported lard. But these facts, though alarming, were trivial when compared to the information collected during the next fortnight. It was then ascertained, that 1,005,000 lbs. of lard had been imported into Denmark during October; that meat exports had trebled; and that the demands for American meat were so heavy, that the Swift Company of Chicago, and Armour and Company, another American concern, had both established branch offices in Copenhagen to deal with the enormous volume of business. There were similar increases in the orders for oil, rubber and copper; and large cargoes of copper were lying in the free port of Copenhagen. More disconcerting than all this, however, was the expanding mass of evidence, from the censor's office, that traders in contraband were establishing themselves in Copenhagen as regular business houses. Scores of intercepted letters were now before the Foreign Office: they contained instructions for sending goods to dummy consignees, so that they should not be stopped by British squadrons; further instructions for forwarding the goods to their ultimate destination; and a good deal of commercial intelligence about the goods most required in Germany. It would serve no purpose to examine this correspondence in detail; a few extracts from it may, however, be instructive. During the first half of November, the censor transmitted, amongst many other documents, a letter to Messrs. J. R. Smith of New York, which ran thus:

      With reference to the letter we have just written, about beef, bung, gut, skins, it strikes us there is a possibility, though ever so remote, that the port of Rotterdam may be closed to us...... To provide against this possibility, we give you the name of our agent in Copenhagen, a man who has represented us for a number of years...... In case we cannot avail of the Rotterdam route for our shipments we may ask you to forward goods for us to Copenhagen instead of to Rotterdam, in which case you will have to draw on our account on den Danske Landmandsbank, Copenhagen, but state, in your letter, that it is for account of Vith: Elwarth, and advise the latter by mail and telegram. Of course do not mention our name in any of these telegrams. M. Elwarth is fully instructed by us......

This letter alone showed that American and continental dealers in contraband were fast becoming members of an organised trade. In addition, our ambassador at Washington had obtained a copy of a petition that the American houses most interested in the Danish trade had presented to congress. The facts recited in the memorial confirmed everything reported by the restriction of enemy supplies committee. The petitioners first drew attention to the great opportunities to extend our foreign trade brought about by the great conflict between foreign nations; after which they estimated, that meat products to the value of 2,000,000 dollars were then on the high seas or detained at British ports; in order to make their paper even more impressive, the petitioners stated: The prospective export business in these products to neutral countries...... will aggregate upwards of 75,000,000 dollars annually, and it is in jeopardy because of the long detentions aforesaid and fear of seizures.

It was, indeed, at about this time that Sir Edward Grey sent a warning telegram to Washington:

      Since H.M. government have insisted that cargoes must be consigned to named persons, American shippers have begun to consign cargoes to themselves. We are face to face with a powerful German organisation, aided by American sympathisers, who are straining every nerve to introduce contraband into Germany. I trust Your Excellency will be able, by utilising the information contained in this telegram, to convince impartial Americans that the outcry raised of our alleged interference with German trade is due to the real facts being unknown, misrepresented or concealed.

[78] Sir Edward was in the right that a powerful organisation was at work; but it may be doubted whether the organisation had any political sympathies. What had happened was that a gang of commercial adventurers, known as the Chicago meat packers, had started their operations, and they were concerned with gain, not politics.

It will readily be understood that this unexpected cataract of evidence made negotiations with Denmark peculiarly difficult. Sir Edward Grey and his advisers were inclined to negotiation; for they realised that a contraband agreement between the two countries, concluded after all disputed points had been examined and settled in conference, would be a far more efficient organ of control than a drastic order to the fleet, or a proclamation that Denmark had become a base of enemy supply. Their view was not, however, shared by other branches of the administration, to whom negotiation seemed a mere waste of time.

The difficulties and uncertainties of the Foreign Office authorities were, moreover, augmented by the Danish authorities. It would seem as though the real facts about Germany's transit trade had been presented to the Danish ministers as suddenly as they had been to the British; for, while the restriction of enemy supplies committee were reiterating their recommendations, the Danish minister made an independent admission. On 2nd December, he called at Downing street, and presented a paper, in which he baldly admitted all the facts that so disturbed our authorities, and appealed for help. In this curious document, the British government were invited to pay attention to: The circumstances that were making Denmark a place of transit for American goods; agents were entering the country in hundreds, and a new line of steamers would shortly run between America and Denmark. It was obvious, therefore, that the country would soon be so choked with supplies, that the authorities would be obliged to raise the export prohibitions. In conclusion, the Danish minister asked that the British government should assist his country to check the flow.

This unexpected appeal for collaboration might have been a stimulant to negotiation, if the Danish authorities had supplemented it with any practicable proposal. Far from doing this, however, they seemed anxious to break off the discussions which Sir H. Lowther had just begun; for, two days after the Danish minister had presented his paper in London, Sir H. Lowther telegraphed from Copenhagen, that he had again been in conference with M. Scavenius, who had informed him that the Danish government could not agree to the proposals in the Anglo-French memorandum, as they were satisfied that the Danish export prohibitions were a sufficient guarantee. The British minister elaborated this report in a despatch, in which he informed the Foreign Office that the Danish government would never consent to become the consignee of cargoes on the British contraband list, nor would they add to their lists of prohibited exports, unless the economic condition of the country made it necessary. In the circumstances, it seemed as though the Foreign Office would be compelled to declare, that the second article of the last order in council would be applied against Denmark. Sir Edward Grey did, indeed, inform the British minister that, as the Danes seemed disinclined to follow the Dutch example, and to form a merchants guild; as their export prohibitions were not checking the flow of contraband into Germany; as their country had already become a base of enemy supplies; and as no distinction could be made between Danish and German cargoes, the government would shortly be compelled to hold up all contraband cargoes to Denmark, however consigned.

As the Danish authorities had appealed for assistance, and had said, in conversation, that they would be content if the British navy stopped all contraband, before it reached Denmark, there were grounds for supposing, that the Danish government would be somewhat relieved at this declaration. Instead of this, however, they at [79] once protested; the Danish minister presented a note to the Foreign Office, in which he begged the British government to reconsider their decision, as he could promise far reaching and fatal consequences if the order in council were applied against his country. When this paper was presented the matter, therefore, stood thus: The Danish authorities had formally, and officially, invited us to stop the flow of contraband into their country; and almost simultaneously, had protested against the measures that we proposed to take, at their own instance; in London the Danish authorities had admitted, in writing, that their country was being choked with German supplies, and that their export prohibitions were becoming inoperative: in Copenhagen they had maintained the very opposite. If the attitude of the Danish government is here correctly described, wrote Sir Eyre Crowe when the last Danish memorandum was presented, I can only say that it is difficult to imagine anything more illogical or inconclusive. In their latest note, the Danes had, however, assured Sir Edward Grey that they still wished to treat: a few days later, the Foreign Office was informed that a special Danish envoy was being sent to London. It was, therefore, decided to await his arrival, and to see what proposals he was empowered to make.

This special envoy was M. Clan, the head of the Danish commercial department. He arrived in London in the middle of December, and Sir Eyre Crowe, to whom the negotiations were entrusted, at once gave him a memorandum in which the British contentions were explained. The substance of this paper was that the Danes had, by their own admission, shown that their export prohibitions might, at any moment, become ineffective. These prohibitions had been imposed to prevent a scarcity; the scarcity was fast becoming a glut. Again, although the export prohibitions might possibly stop the re-export of foodstuffs and forage, of which the Danes required a great quantity, could they be relied upon to do the same for such commodities as copper or rubber? The Danish consumption of these materials was small, and a few large shiploads might well accumulate a big surplus in the country. The British government, therefore, proposed: first, that all meat imports should be consigned to a representative association of bona fide importers, which should give the necessary guarantees against re-export; and, secondly, that the firms importing other contraband articles should give guarantees in respect to every cargo consigned to them. This system of private and individual guarantees would not engage the responsibility of the Danish government, and, consequently, could not be objected to by the German government.

The Danish government had certainly given M. Clan very strict instructions; for, at the outset, it seemed as though he had been instructed only to act as the defender of Danish dairy produce, and the apologist of his government:

      As regards meat stuffs (wrote Sir Eyre Crowe) I could get nothing out of him beyond a declaration that a prohibition was impossible, but that it might be possible to prohibit the exportation of tinned meat, not prepared from Danish home produce. I pointed out to him how large a scope this left to contraband trade. He continued to urge that we should seize any contraband cargoes before they reached Denmark, and, in the same breath, to protest against our applying article 2 of the order in council of 29th October. I tried my best, in many hours of argumentation, to explain that the application of article 2 was the one and only way in which we could legally stop the contraband shipments. I am afraid I did not succeed in getting him to see the point......

M. Clan was, however, more impressed by Sir Eyre Crowe's contentions than he was prepared to admit in conference; for, after several long interviews, Sir Eyre Crowe was satisfied, that the Danish government would recognise themselves to be under an honourable engagement to maintain their prohibitions, if they were left free to export their home produce without restriction, and to re-export contraband to other Scandinavian countries. They could not, however, consent to the formation of an importer's guild on the Dutch model.

[80] It was evident that an agreement of this kind would be far more difficult to operate, than the agreement recently concluded at the Hague. The only alternative to it was, however, that the Danish proposals should be refused, and the second article of the October order in council put into operation. Was this the better of the two alternatives? At the time, many British officials thought it so, and the Foreign Office were being pressed, with the greatest insistence, to apply the order without delay; for it so happened, that, just when these negotiations seemed so unpromising, a Danish ship, the Kentucky, was brought into Kirkwall, and was found to be loaded with lard, wheat, lubricating oil, forage, iron and meat. Some of the cargo was consigned to order, the remainder to the Danske Fedt company, which had only started business a fortnight before, when the ship sailed. The contraband committee reminded the Foreign Office that they had no power to put the meat and lard into the prize court. Nevertheless they detained the vessel; the case was indeed so flagrant that they considered it required special treatment. Mr. Malkin, the legal adviser, showed that, although a case might be made against the cargoes consigned to the Danske Fedt company, the issue of the case would be very doubtful. The only method of securing the condemnation of these, and of similarly consigned, shipments would be to declare Denmark a base of enemy supplies, and to proceed against the entire cargo, when this had been done. Sir Eyre Crowe was persuaded that the declaration would have to be made, and recommended it to Sir Edward Grey.

The foreign minister refused to be persuaded, saying that the Danes would certainly retaliate, and would forbid the export of foodstuffs to England. This was the only reason specifically given; but there were others at least equally strong. At the time, the Foreign Office were in treaty with all the Scandinavian governments, with the Netherlands government, with the Netherlands overseas trust, and with the American meat-packers association. If any one of these negotiations failed, then the failure was certain to affect the remainder adversely, and it was particularly important that there should be no break-down with a Scandinavian power; for our diplomats were then watching what might have been the beginnings of a Scandinavian concert.

When the negotiations with M. Clan were most difficult, the three Scandinavian monarchs and their ministers met at Malmö. The avowed object of the meeting was that the Scandinavian authorities should conjointly discuss the extraordinary restraints imposed upon the commerce of each country; and, although we knew, from our ministers, that the policies and sympathies of the three governments were still very divergent, this friendly communion of the monarchs was, after all, in the nature of a Scandinavian congress. Any precipitate or arbitrary measure by the British government, any measure which a Danish, Norwegian or Swedish monarch could represent as an injury to his country, could hardly fail to give cohesion to this immature union. It was, moreover, significant, that almost as soon as the meeting at Malmö was over, the king of Denmark instructed his friend M. Andersen to inform our minister how important it was that there should be an early agreement. M. Andersen was even empowered to promise that the king would himself press his ministers to make the export prohibitions unbreakable.

The counsel pressed upon Sir Edward Grey was, therefore, hazardous, the more so, in that even the practical consequences of a general stoppage of Danish shipping were difficult to estimate. In contrast to this, a negotiated agreement secured certain very tangible advantages. So long as the negotiations undertaken were negotiations upon trade and commodities, then the attention of each neutral government would be more and more concentrated upon its own interests and its own concerns, and proportionately diverted from those principles of law, which, when invoked, have always provoked so much controversy. More than that, every agreement concluded established links between Great Britain and neutral countries, partly political and partly commercial; for they imposed obligations upon each, and these obligations were repeatedly examined and readjusted, a process which [81] kept the commercial systems of the two countries under a continual review. In addition, every contraband agreement could be revised if found faulty; Sir Eyre Crowe's extraordinary patience and forbearance during the negotiation with M. Clan proved, therefore, to be a far-sighted political investment. In contrast to this the alternative policy of announcing, ex cathedra, that Denmark was a base of enemy supplies, and of acting accordingly was a policy of declared coercion. If it failed, it could neither be readjusted to circumstances, nor abandoned outright.

The negotiation with M. Clan was, therefore, not interrupted and, by the beginning of January, Sir Eyre Crowe was able to report, that the Danish envoy had agreed to the general principles of an acceptable arrangement, and that it only remained to settle details. These details were not of particular importance, and on 12th January Sir H. Lowther was informed, that the agreement was concluded and that it was to be presented to the Dutch foreign minister for endorsement. By virtue of this agreement, the Danish government declared: That it was their firm intention not to raise their export prohibitions; and that the allied governments, could rely on the Danish prohibitions being maintained. This was the master guarantee that the Danish transit trade into Germany would be strangled; it was supplemented by stipulations, that the allied governments: Could seek special guarantees as to the bona fides of particular shipments going to individual importers, and that the prohibition to export raw materials should cover, not only such raw materials but their alloys and half finished products.... and also wholly manufactured goods, when the raw material, or its alloys, forms the essential part of the finished article. In return for these guarantees, the allied governments granted considerable liberty of trade in contraband; for they declared the Danes free to export meats and lard, if they had been raised or manufactured in the country. The Danish government certainly declared themselves willing to prohibit the export of imported lard, but this undertaking was weakened by article 10, which ran:

      So long as the importation into Denmark of commodities which she generally exports [of which lard was one] does not exceed the normal quantities, the allied governments will not raise the question of such imports releasing an equivalent amount of goods in the country for exportation.

In addition to this, Denmark was declared free to export contraband to neighbouring neutrals, provided that the articles so exported were on the other neutral's list of prohibited exports. Finally, the allied governments declared, that they would not apply the second article of the last order in council, for the moment, and would give the Danish government due notice, if circumstances compelled them to do so.

iii) Negotiations for a Contraband Agreement with Sweden

Sweden is a country partly industrial and partly agricultural. The most important articles of Swedish export are timber and timber products, such as wood pulp, pit props, papier mâché, and so on: Swedish sales of the first amount to twenty-six per cent. of their total export sales, and of the second to seventeen per cent. In addition, the Swedes draw considerable revenues from the sale of iron and steel, both raw and worked; of specialised engineering machinery; and of live stock and meat produce. Swedish steel and iron are mined in the central part of the country, and in Lapland, and are of great importance to the industrial countries of Europe, for the Swedish metal is of exceptionally high quality. The country's most important imports are cereals and forage, textiles, artificial fats, coal and other propellants, minerals and metals. In 1913, Germany and Great Britain were Sweden's principal customers; for they supplied fifty-eight per cent. of the country's imports, and bought exactly half of its exports.

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[84]

[85]

[86] Notwithstanding that the Swedes buy large quantities of foreign foodstuffs, their home production is considerable. Numbers of the territorial nobility are resident administrators of their properties, which are very scientifically farmed; while the yeoman farmers, who are exceedingly intelligent, and who exercise great political influence in the country, possess enough capital to work their farms on the best system. Thanks to this careful and methodical cultivation of the land, the country provides itself with hay and barley.

In the autumn of 1914, British coal exports to Sweden were the strength of her bargaining power. Coal was still the principal propellant for shipping and for industrial machinery, and practically all the coal imported into Sweden was British. America, Germany, Russia and Austria each supplied such quantities of domestic and lubricating oils, that the loss of any one source of supply would have been severely felt in the country. Swedish supplies of petroleum were obtained principally from America, but Great Britain controlled an important proportion.

The British authorities thus possessed a powerful bargaining lever, but they were by no means free to use it ruthlessly. The volume of Swedish trade with France and Russia was not large, but the Russo-Swedish trade, such as it was, was important to Russia; for the Russians were great buyers of those highly specialised engineering plants, which were then designed and manufactured in Sweden. A failure of this supply was bound to be severely felt in a country so ill-provided with industrial machinery. In addition to this, Russia's only line of railway communication with her western allies was in Swedish territory, and the Russian authorities were not in a position to bargain, that these supplies should be maintained, or that their line of railway communication should be left open; for they had no equivalents to offer or to refuse. In normal times, some of Sweden's forage supplies did, it is true, come from Russia; but those supplies were already failing, and the Swedes were replacing them by making purchases in the Argentine and America. If, therefore, the British authorities ever attempted to coerce Sweden, by some measure of economic duress, they could be certain that their hard pressed ally, Russia, would suffer severely from those measures of retaliation, which coercion inevitably provokes. Later, Russia's dependence upon Swedish supplies, and our own need for certain Swedish ores, very much influenced negotiations between the British and Swedish authorities. In the late autumn of 1914, however, British diplomacy was more affected by the uncertainties of Scandinavian policies, than by Sweden's economic strength.

In the first days of the war, indeed, before a war had actually been declared, the British Foreign Office were sharply reminded, that Sweden's long antagonism to Russia was still an influence powerful enough to affect Swedish policy. For when Russia, Germany and France were mobilising, the Swedish foreign minister informed Mr. Howard, that, if Great Britain declared war upon Germany, the Swedish government would almost certainly declare in favour of the central empires. At the time Sir Edward Grey thought the danger of Swedish intervention so serious, that he persuaded the other governments of the entente to declare jointly, that they would in no circumstances violate the neutrality of a Scandinavian power, and that, if the enemy did so, the country which suffered from their aggression could count upon British, French and Russian assistance.

The declaration was made to all Scandinavian governments; but our authorities had little reason to fear Norwegian intervention; for simultaneously or nearly so, they received reports of a very different kind from Christiania. On 3rd August, Mr. Findlay telegraphed, that the king of Norway had assembled a cabinet meeting; and that, after informing his ministers that he expected an ultimatum from Germany, he had urged them to make a declaration in favour of Great Britain. This, in the king's opinion, was the only way of securing the country's food supplies, and of guaranteeing it against Swedish aggression.

[87] At the very beginning of the war, therefore, the reports of daily occurrences sent in by our ministers at Stockholm and Christiania contained a succinct appreciation of the diverging interests and contrasted sympathies of the two northern powers. In Mr. Findlay's words, written when the crisis was passed: Norway depends absolutely upon the predominant naval power in the Atlantic; Sweden depends largely upon the predominant power in the Baltic.

The British Foreign Office were thus reminded, almost daily, that the two Scandinavian governments were animated by different sympathies and purposes; but it was, at this period of the war, impossible to separate our Swedish, from our Norwegian, policy. The two repeatedly impinged; for, while our authorities were receiving a large volume of testimony to the different interests of the two governments, they were, at the same time, receiving an equal amount of proof, that the racial affinities of the Norwegian and Swedish peoples had created a sort of common Scandinavian sentiment. This Scandinavian sentiment was, moreover, no mere emotion provoked by similarities in the national literatures, musics, sports and food. It was a force powerful enough to influence policy, and to engage the attention of our diplomatic representatives, who examined and reported upon it, as carefully as they did upon the opposing policies of intervention and neutrality; for it was most peculiar, that, whenever the differences between the two governments were acute, Norwegian and Swedish ministers had a disconcerting habit of meeting in conference, of concealing their antagonisms, and of acting in unison. The very same crisis that provoked these contrasting declarations of foreign sympathies was, indeed, ended in this way: the two governments discussed neutrality together, declared it almost simultaneously, and, a few days later, published an agreement, whereby they bound themselves to maintain neutrality at all costs, and undertook not to make war on one another. Five days after M. Wallenberg had made his alarming statement, and the king of Norway had urged a declaration in favour of Great Britain, the Norwegian minister at Stockholm informed Mr. Howard, that the two governments were working together.

When in treaty with either country, the Foreign Office, and our ministers abroad, were thus bound to pay great attention, and to make provision, for these sudden, manifestations of Scandinavian unity. It so happened, moreover, that our two ministers were not agreed whether this rough union of Scandinavian powers should be encouraged or not. Mr. Findlay believed it to be a danger, and thought, that if the two powers acquired the habit of acting in concert, the policy most natural to Norway, of forging strong political and commercial links with Great Britain, would be subordinated to Sweden's more continental and Germanic interests. Mr. Howard thought differently. In his opinion, Norwegian influence at Stockholm gave additional strength to those sections of the Swedish nation that disliked intervention; and he thought this an advantage, as he did not disguise, that the parties who favoured intervention were powerful. The negotiations that he conducted during the autumn of the year were, indeed, conducted to a nasty, jarring accompaniment of rumours, that the interventionist party was strongly represented in the army, the navy, and at the court; and that, although checked for the time being, the leaders of the party were still confident their policy would ultimately prevail.

Although divided upon this larger question, both ministers were, however, convinced, that the prevailing practice of detaining ships, and of asking for guarantees was extremely irritating. The press in each country rarely distinguished between the detention, and the arrest, of a vessel, and, when the vessel brought in to Kirkwall was a liner, the indignation was loud and general. It mattered little that most of the ships detained were subsequently released; for, by then, the exasperating news [88] of the first detentions had done its work.⁵ Mr. Howard had, therefore, discussed a more satisfactory procedure with M. Wallenberg, before the allied memorandum was sent to him, and had already been assured by the Swedish foreign minister, that, if the British government would trust the Swedish authorities to enforce and maintain their export prohibitions, which he promised they would do, then, the Swedish government would forbid the export of all raw materials not normally exported from Sweden. This was less than the undertaking we desired to obtain, but, at least, it was an approach to the proposals in the allied memorandum. This good beginning was, however, very much damaged by the Admiralty's announcement that the North sea would be treated as a military area, which roused all Sweden. Mr. Howard reported, at once, that it was universally represented in the press as a death blow to the Swedish merchant service, and as an announcement that Sweden was to be isolated from the rest of the world by indiscriminate minelaying. No less a person than the king of Sweden sent a reproachful message to the British legation. In fact, the French and Russian ministers thought the prevailing excitement so serious, that they met in conference at the British legation, and Mr. Howard telegraphed home a joint recommendation to placate public opinion as rapidly and as generously as possible.

It was with a government agitated by this excitement, that Mr. Howard had to discuss the proposals in the allied memorandum. His difficult task was, however, made easier by M. Wallenberg. Whenever our minister had reported upon the rumours of Swedish intervention, or upon the strength of the interventionist party, he had always expressed the greatest confidence in M. Wallenberg's judgement and honour. In these difficult times, M. Wallenberg showed that ou[r] minister's confidence in him was justified. Realising that a contraband agreement with Great Britain would give Swedish commerce and shipping the liberty that the Admiralty's announcement seemed to compromise, and would, on that account, reassure the nation, M. Wallenberg gave the allied proposals a better first reception than they had received from any other government. After examining the proposals carefully, the Swedish foreign minister answered, that his government would agree to the two main heads of proposals, that is, they would prohibit the exportation of articles on the allied contraband lists, and would prevent goods addressed to a named consignee from being declared in transit upon arrival, and then being re-exported. In return for these undertakings, M. Wallenberg demanded, that the allies should allow Sweden to import certain cereals and raw materials, and that they should not interfere with the export of goods if they were of genuinely Swedish origin. M. Wallenberg added, that the Swedish government would demand liberty to export contraband to Norway and Denmark, and to export minimum quantities of articles on the prohibited lists in special cases.

The first and last of the Swedish conditions were the subject of much discussion: for it seemed as though the Swedes, by their first reservation, were claiming the right to import unlimited quantities of such commodities as copper and ferro-manganese, and that they would refuse to place them on their list of prohibited exports, because they could prove a genuine Swedish export trade in the same materials. The right to export contraband to other Scandinavian countries was a right which the Foreign Office was willing to grant in the last resort; but, just when the Swedes were advancing their claim to it, our authorities were receiving reports of the prodigious growth of the Danish transit trade, and the Danish authorities were confessing their inability to control it. It was natural, therefore, that the Swedish claim to trade freely in contraband with Denmark should have been discussed at Whitehall with considerable misgiving.

[89] After further discussion, M. Wallenberg agreed to our principal contention, which was that the allies should seize all contraband goods that had not been placed upon the list of prohibited exports. Seeing that the allies appeared to be particularly anxious about copper and rubber, M. Wallenberg also agreed, that all half-finished products, and any finished product useful for military purposes, should be placed on the list. On the other hand, M. Wallenberg strongly upheld the claim to grant exemptions for small quantities, and showed, that certain perfectly legitimate commercial transactions between Sweden and Germany, and Sweden and Russia, would be impossible unless the right were exercised.

It was upon this question of exemption that the contraband department of the Foreign Office and the British minister at Stockholm were most sharply divided. Mr. Howard was aware that these exemptions were occasionally abused; indeed, while he was urging that the British authorities should agree to the Swedish claim, he sent in a long report about the subterfuges of a certain M. Eloff Hansson, who was then trans-shipping imported cereals from Gothenburg to Germany. Mr. Howard was, however, anxious that our knowledge of these occasional abuses should not be allowed to obstruct the agreement that he was then negotiating:

      The main thing, he wrote, is to prevent the Scandinavian neutral states becoming a regular channel of supply for Germany and Austria, and, at the same time, not to create a feeling of serious hostility or irritation towards ourselves, in these countries, by cutting off supplies which they really require. These objects will, I hope, be achieved by the arrangement which it is proposed to conclude with the Swedish government, but frankly, I do not expect that we shall be able, thereby, to exclude, absolutely, all supplies getting through to Germany. I do not doubt, however, that we shall hear, quickly enough, of any important exports of foodstuffs and other contraband into Germany and be able, with the help of Herr Wallenberg, to stop such abuses becoming the rule.

Mr. Howard had more reasons than those given in this despatch for urging that this question of exemptions should be subordinated to general policy. On the day that he telegraphed the draft of an acceptable agreement, he sent a careful review of the rumours of Swedish intervention to Sir Edward Grey, saying that he felt obliged to do so, because the war talk had begun again about a month previously. He now suspected, that the king had been saying that Sweden would be at war before long, and that the war minister had been saying there would be war by March. Furthermore, although M. Wallenberg would not admit that there was any substance in our minister's apprehensions, he did not disguise, that the early conclusion of an agreement was a matter of political importance. While the Foreign Office were still undecided whether the Swedish claims should be agreed to, the foreign minister showed Mr. Howard extracts from a note which the German government had recently presented at Stockholm. In language that Mr. Howard called little short of brutal, the German authorities were threatening severe reprisals, if the Swedes allowed Russian supplies to be carried by Swedish railways. M. Wallenberg was convinced, that the note had been written to deter the cabinet from making any economic agreement with the entente powers, and feared lest his colleagues might be influenced. There was, therefore, much to recommend his policy of concluding an agreement and of leaving the Germans to do the worrying (his own words); and it is small wonder that Mr. Howard endorsed it.

Nevertheless, the contraband department were not persuaded:

      The long and short of this is (wrote Mr. Sargent), that the Swedish government decline to meet our wishes as regards exemptions. In these circumstances, is it worth while concluding the agreement with Sweden, as it now stands? Mr. Howard seems to think that the proposed agreement is essential to us. It is nothing of the kind. What is essential to us is to stop, as far as possible, contraband reaching Germany, through neutral countries...... If it is German pressure, or party pressure in Sweden, which prevents the Swedish government from meeting our wishes, Mr. Howard must remember that H.M. government have ample means of bringing counter pressure to bear by enforcing, to their full extent, our powers of search and detention, by insisting on all Swedish ships passing through the Downs and so on......

[90]

[91]

[92] These differences of opinion are worth recording, because they are illustrative of two tendencies, which affected the administration of the blockade from its first inception, and which, by their intrinsic justice, were often difficult to reconcile. It was only natural that those public servants, whose duty it was to watch movements of trade, and to detect secret channels of contraband supply, should have recommended the stopping up of every possible avenue with scientific detachment: it was equally natural that public servants, who had spent their lives in ascertaining the motives of foreign courts, should dread the consequences of a policy that appeared to attach more importance to a few tons of copper wire, than it did to the political sympathies and affinities of a foreign government, and of a foreign nation. The difficulty of reconciling these opposing tendencies was the greater, in that the partisans on either side were not always servants of one authority. Differences between two Foreign Office officials could be settled by higher authority, accustomed by training and habit to review the two contending opinions impartially. When two different departments of state were similarly divided, it was not so easy to decide on the justice of the opposing views, and to adjust the general policy accordingly.

In the present instance, Sir Eyre Crowe decided in favour of the minister:

      I think, he wrote, we should, for the present, accept the Swedish offer. It has already been decided that we should give the proposed system a fair trial, and rely on the good will and good faith of the Swedish government to prevent serious abuses.

Mr. Howard, therefore, presented a draft agreement to the Swedish authorities on 8th December. First, the allied governments undertook not to interfere with ships carrying cargoes of contraband to Sweden (except in so far as was necessary for examining and verifying the ship's papers), if the ship's cargo was on the Swedish list of prohibited exports. If, however, the cargo had been declared contraband by the allies, and its export was not prohibited from Sweden, then, the allied governments would reserve their right to treat it as contraband. Secondly, the allied governments declared themselves free of their first undertaking, if the Swedish list of prohibited exports included only raw materials declared contraband. The half-finished products must also be included. Thirdly, the allies engaged themselves not to interfere with the export of genuinely Swedish goods. Fourthly, the entente powers promised not to prevent Sweden from importing raw materials from the entente countries, provided that those materials were to be consumed in Sweden. Finally, the allies acknowledged the Swedish right to export contraband to Norway and Denmark, if the commodities to be exported were on the Norwegian and Danish prohibited lists. The right to grant general exemptions for small quantities in special cases was also admitted. This agreement was signed by both parties on the day that it was presented.

iv) Negotiations for a Contraband Agreement with Norway

It has been explained that the Norwegian and Swedish governments declared their neutrality in concert, after expressing political sympathies that were diametrically opposed. The Norwegian authorities were, however, careful to show, that their agreement with Sweden was a Scandinavian agreement only, and that it had not subordinated their natural sympathy for Great Britain to any higher political interest; for, while the two Scandinavian governments were still in conference, M. Ihlen, the foreign minister, gave Mr. Findlay an account of all those measures of naval defence which had been ordered by his government, and informed our minister how the Norwegian naval forces had been distributed, and for what purposes, and where minefields might subsequently be laid. To explain a defence plan, in great detail, to a government with which Norway was united by no alliance, or military convention, was an exceptional mark of confidence.

[93] No circumstances of a nature to disturb these exceptionally friendly relations were reported in Whitehall during the first months of the war; for the restriction of enemy supplies committee had not observed any unusual fluctuations of Norwegian trade. During August and September, when the heavy shipments of American petrol and copper had engaged the committee's attention, there had been no evidence that the Norwegian ports were becoming centres of re-export trade. An occasional shipment excited suspicions; but the inference drawn from the available information was that the Norwegians had placed heavy orders for grain in north and south America, and that these exceptional orders had been made necessary by the failure of other sources of supply. Mr. Findlay was not, therefore, engaged in any important negotiation during the autumn of the year.

British relations with Norway were, however, exposed to a disturbing influence; for, in no neutral country did the daily detentions of neutral vessels by British patrols excite so much suspicion and irritation as they did in Norway. As has already been stated, the procedure was, that after any neutral vessel had been detained, the neutral minister concerned was asked whether his government could give a guarantee that the cargo, if contraband, would not be re-exported. When the guarantee was given, the ship was released. As the British government had proclaimed, in their first order in council, that the doctrine of continuous voyage would be applied against both classes of contraband, it is difficult to see that any other procedure could have been adopted. Nevertheless, these detentions, enquiries and releases, which in Whitehall were treated as matters of daily business, were not so regarded in Norway; and, after the procedure has been applied for three months, Mr. Findlay thought, that the authorities at Whitehall ought seriously to consider whether it should be persisted in. His appreciation ran thus:

      The question now to be decided is, whether the general assurance which the Norwegian government has been able to give is a sufficient safeguard against supplies reaching Germany, or whether it is necessary to ask for a particular assurance in the case of every cargo consisting of prohibited articles which sails for Norway. The disadvantages of the latter course are obvious, for, besides giving a great deal of work at the ministry for foreign affairs, it appears to call in question the good faith of the Norwegian government, which, as I have had the honour more than once to report, I have no reason whatever to doubt.
      There is another aspect of the question which should not be lost sight of. There is, undoubtedly, a growing feeling, which appears to be shared by the other small neutral states of western Europe, that their legitimate trade is being unreasonably hampered by Great Britain...... As regards Norway, I would venture to submit that every consideration should be shown to her interests, so long as she follows her present policy of discouraging in every way in her power, the supply of contraband of war to Germany. I am not in a position to guarantee that absolutely nothing finds its way from Norway to that country; but the leakage must be small, and so long as it remains small, its possible existence appears a lesser evil than the creation of a feeling of ill-will which would certainly lead to more leakage...... Norwegians feel rightly or wrongly, that their efforts to run straight have not been fully appreciated.

Almost as the minister was preparing his despatch, the Admiralty issued their declaration that the North sea would be treated as a military area; and, just as the Norwegians had been more suspicious about the detentions of their ships than any other neutral nation, so, they were the most indignant at this proclamation. They had, indeed, special reasons for resentment. No people in Europe are more intimately associated with the sea than the Norwegians: a large proportion of the peasantry are both farmers and fishermen; the Norwegian merchant service is a great national industry; and a fair proportion of the leisured classes draw their incomes from the profits of Norwegian shipping; every section of Norwegian society has thus some interest in the blue water. A proclamation that seemed to subject every seaman in northern Europe to British regulations, was, therefore, ill received by a nation of sailors, who have always been notorious for their independence, and the Norwegian skippers had additional grounds for resentment. Seamen of all nations are brave and unselfish, when they know that other seamen are in danger, and, [94] even among seafaring folk, the Norwegian captains have a high reputation for honour and courage, and for answering appeals for aid at sea, without any thought of the consequences to themselves. When, therefore, the Norwegian captains learned that they were accused, by implication, of assisting to lay mines, upon which they and their fellow countrymen might subsequently lose their lives, it is small wonder that they went hot with anger.

The Norwegian nation was roused, and Mr. Findlay reported, almost at once, that the prime minister and his foreign minister were attending a great meeting of captains, shipowners, marine insurance men and company directors. The meeting unanimously urged the government to protest; as far as our minister could judge, the government needed no urging.

      Having had no warning, he wrote, I was unable to prepare the ground. The German minister, assisted by the Swedish minister, has exploited the situation with unusual intelligence...... It will take time and careful diplomacy before we recover the position we held two weeks ago.

Mr. Findlay was not merely regretful, that a people so friendly to us as the Norwegians should have been infuriated by an insolent proclamation. Being anxious that Norwegian foreign policy should be entirely free of Swedish influence, it made him apprehensive, that M. Ihlen's manner to him changed, and that the Norwegian authorities at once conferred with the Swedish. This unfortunate proclamation seemed, in fact, to be strengthening that immature union of Scandinavian powers, which Mr. Findlay had always thought dangerous.

      My opinion, he wrote,...... is greatly strengthened by the pernicious influence which Swedish influence, obviously acting on German inspiration, has exerted in Christiania during the last three weeks...... The plant which has grown into the identic note of protest was grown in Swinemunde, watered in Stockholm, and tended, night and day by the Swedish minister...... The note itself is harmless enough, but the common action not so.⁶

This general indignation abated, when it appeared that the Admiralty intended only to make their practice of sending ships into harbour for examination more regular. The British government's orders were, however, being watched with the greatest suspicion, when Mr. Findlay and his French colleague presented the allied proposals to M. Ihlen, and the Norwegian authorities did not at once reply. In the interval we learned, from an incident of the naval campaign, that, although the Norwegian authorities had lost some of their first friendly feeling for the allies, they did not intend to make a bid for the enemy's favour.

At ten o'clock on the morning of 10th November, the inhabitants of Trondhjem were astounded to see a German auxiliary cruiser steaming up the fjord to the anchorage. She was the minelayer Berlin, whose operations had been the cause of the trouble, in that the Admiralty had credited neutral skippers with the work done by her captain and crew. After laying the Tory island minefield, Captain Pfundheller made north for the Arkhangel route, where he attempted to operate against trade. Here his ship was buffeted, for several weeks, by the autumn gales, which blow with tremendous force in those high latitudes, and Captain Pfundheller decided that he would never be able to pass the British patrols with a ship so damaged by the bad weather. He therefore made for Trondhjem, and passed the outer forts unobserved, in a blinding snowstorm. The Norwegian authorities acted with great energy: Captain Pfundheller was informed, that his ship must leave within twenty-four hours or be interned, and, during the course of the day, a Norwegian cruiser entered the harbour, and anchored off the Berlin. The German minelayer was, indeed, disarmed and interned in a very businesslike manner, and the incident did something to revive the old cordial feelings between the two governments. Sir Edward Grey thanked the Norwegian authorities for acting so promptly and so firmly, and [95] M. Ihlen seemed pleased at the message. Mr. Findlay again warned the authorities at Whitehall against irritating a government that had proved themselves so determined to perform their neutral duties.

The British authorities could not, however, allow that their proposals should be ignored, and the Norwegian government seemed disinclined to answer them. It was only after he had been pressed by Mr. Findlay, that M. Ihlen gave a guarded reply. Some weeks previously, indeed, before the allied memorandum had been issued, Sir Edward Grey had informed the Scandinavian ministers in London, that their export prohibitions were a satisfactory guarantee against the re-export of contraband. In his official reply M. Ihlen reminded the British government of this, and stated, that as the Norwegian prohibitions had thus been acknowledged to be an effective barrier, no further negotiations were necessary. He gave no answer at all to the general proposal, that all articles declared contraband by the allied governments should be placed on the Norwegian list of prohibited exports.

After receiving this reply, the French and British Ministers presented a second memorandum, in which they reminded the Norwegian government, that their prohibition lists did not correspond with the allied contraband declarations, and that the allied governments wished to be specially assured with regard to such metals as copper, aluminium, nickel, lead, iron ore, and to such commodities as rubber and petroleum. Of these articles, only rubber was on the list of Norwegian prohibitions when the allied memorandum was presented.

The Norwegian position in respect to these materials was roughly this. The Norwegians worked iron and copper mines of their own, and exported the ores mainly to Sweden, Denmark and Germany. They were, however, importers of that special copper which is used in electrical engineering; so that, as they were, at the time engaged in building great electric installations, the demand for imported copper was considerable, and the native, or Norwegian, copper was mainly exported. The Norwegian copper industry had another peculiarity, which was that large quantities of cupreous pyrites were raised from the Norwegian mines; and that this mineral, being used in the manufacture of sulphuric acid, was much needed in Germany. In addition, the Norwegians maintained several aluminium industries, and they imported and exported the metal; they were, however, dependent upon foreign countries for their lead and nickel, which they only export in small quantities.

After considering the second representation made to him, M. Ihlen answered, that his government would never circumscribe their freedom to sell metals raised in Norway where they wished, but that they might prohibit the re-export of imported metals, provided that the allies recognised their right to grant exemptions, and to trade in contraband with other Scandinavian countries. A few days after M. Ihlen gave this answer the Norwegian government did, in fact, prohibit the export of copper, and contraband department's enquiries about the scope and meaning of the prohibition were all answered satisfactorily. M. Ihlen intimated, also, that other prohibitions would shortly be imposed; and promised that when exemptions were granted, the allied governments would be given good notice, so that their expert advisers might investigate the destination of the exempted cargoes. The officers of the contraband department disliked this claim to grant exemptions, upon which all Scandinavian governments were then insisting; and, as the extraordinary growth of the Danish transit trade was causing much apprehension, it was natural that the authorities should have been mistrustful of the principle that Scandinavian countries should trade freely with each other in contraband goods. But although both were disliked, neither claim was seriously contested: the Norwegian government were going far to meet our wishes by notifying us of exemptions beforehand; and it was by then recognised, that the Scandinavian representatives at Malmö had agreed to [96] keep commercial traffic between the three countries free from all restraints. To have disputed this would at once have strengthened the Scandinavian concert, which Mr. Findlay so much mistrusted.

The negotiation with Norway thus became a negotiation for a more comprehensive list of prohibited exports; and, although the Norwegian foreign minister was obviously instructed not to give any general undertaking, or to exchange notes, which could be called an agreement, his government met our wishes promptly on these questions of practical detail. The export of copper, aluminium, nickel, lead and jute was forbidden by decree during December, and our minister was given to understand that further additions would be made, if the government had grounds for suspecting surreptitious re-exportations. By the end of the year, the Norwegian list of prohibited exports was so comprehensive, that the proposals in the allied memorandum was not further pressed.⁷ Also, the minister recommended that the Norwegian copper and nickel supplies should be bought by the British government, and this proposal was being examined by some copper traders selected by the restriction of enemy supplies committee. This discussion upon particular materials and commodities, into which the negotiation thus resolved itself, revealed facts that suggested, that a sort of piecemeal policy of negotiating with particular trades, and trading houses, might be the best.

As far as I have been able to discover, Sir Edward Grey never passed judgement upon the conflicting opinions of our ministers in Stockholm and in Christiania, that is, upon Mr. Findlay's opinion that closer union between the Norwegian and Swedish governments was dangerous; and upon Mr. Howard's opinion, that it would be a steadying influence upon Swedish politics, and ought, on that account, to be encouraged. The policy actually adopted by the British government was, however, substantially Mr. Findlay's; for the complicated business of concluding bargains with the leading industries in Norway of necessity brought the country, as a whole, within the general orbit of British commercial policy, and established a predominating British influence. It was thanks to the growth of this influence that the British government were able, later on, to establish a control, not merely of the Norwegian metal markets, but of the great national industries, and sources of income, of which a brief description should here be given, to serve as an introduction, or explanation, of later undertakings.

Fishing is the greatest of the Norwegian industries; but statistics give no indication of its importance in the national life, or of its influence upon the national customs. For some reason, which has never been fully explained, enormous migratory movements of herring, mackerel and cod pass along the coasts of Norway; so that, at certain seasons of the year, the indentations of the coast line, and the channels in the immense archipelago off the mainland, become catchment basins for the stream of fish. In addition to this, the fjords abound in rock bass and deep water fish, which are much sought after by the local fishermen. The northern coasts of the country are, therefore, studded with fishing settlements; and the Lofoten islands are a huge fishing base, from which the codding fleet moves in search of the swarm, and to which it returns, to dry the catch. Individual fishermen get small profits from the industry. A few owners of drying stations, and the directors of the great export houses, are men of fortune, but the skippers and their crews, for the most part, earn a few kroners a day, after suffering great hardships. For the cod swarm is intercepted at the coldest seasons of the year, and in high latitudes; the fishing boats are undecked, and are kept at sea for days at a time, when the normal temperature of the air is near freezing point, and the northern ocean is swept by tremendous gales, and by storms of sleet and snow. The yearly list of losses is heavy, but neither the hardships nor the dangers of the trade deter the Norwegian fisherman, who seem to follow the fish streams under the impulse of an instinct as powerful as the instinct [97] that holds the Chinese peasant to his ricefields. A fleet of strongly built, and well equipped, steam trawlers hunted the seal and the whale in the White sea and the Antarctic, and frequented south Georgia, south Shetland, and the south polar continent. Thanks to the prodigious industry of the fishermen, considerable Norwegian revenues were obtained from the sale of fish and fish oil: the refuse of the drying and salting stations was ground into fish meal and exported to agricultural countries. The Norwegian catch of cod was sold in all the catholic countries of America and Europe: Great Britain and Russia were heavy purchasers of every kind of fish.

The second great source of Norwegian revenue is timber and wood products. The market for Norwegian timber is more concentrated and Great Britain is the principal purchaser (see Tables). It is, however, sold in all mining countries, and, before the war, Belgium bought considerable quantities.

v) Negotiations for a Contraband Agreement with Italy

In the autumn of 1914, the Italians were drawing their principal revenues from the sale of silk tissues; of stamped and woven cottons; of textiles, machinery, fruits and wines. Their revenues on each of these heads were these:

The markets for these products were extremely dispersed, and the products themselves being, for the most part, highly specialised, were delivered in a great number of countries, in comparatively small consignments. Wealthy countries like the United States, Great Britain, Germany and Austria-Hungary were the most important purchasers; but Italian cottons and worked metals were sold in so many markets, that it would serve no purpose to reduce the Italian export trade in these commodities to a tabular form. The markets for their exports of cereals and fruits were more concentrated, and the Germans and Austro-Hungarians were the principal buyers (see Table VIII).

Normally, a fair proportion of the corn and meats imported into Italy came from within the Mediterranean (see Table IX); the Russian supplies had, however, failed, and Rumanian wheat was difficult to secure, as shipowners disliked sending their vessels into the Black sea, in times of such uncertainty. In the autumn of 1914, therefore, Italian supplies of grain and meat were coming entirely from the American continent. The metals most used in Italian industries were obtained in fairly equal quantities from Germany, France, Austria-Hungary, and Great Britain (see Table X).

Notwithstanding that the volume of Italian trade with the central empires was about equal to that of their trade with France, Great Britain and British India, the Italian commerce with the entente powers was of the greater importance. The Italians depended entirely upon Great Britain for coal (see Table X); and, if any Italian government had declared war upon France and Britain, there can be little doubt, that the country would have been prostrated by economic pressure, before any military success had been gained. The avenues through which an Italian army can advance into France are narrow and difficult; and although it might have been hard for the Franco-British armies to sustain a long campaign against the German armies in north-eastern France, and the Italian armies on the borders of Provence and the Dauphiné, they could, presumably, have held the Alpine passes, and the coastal roads from southern Piedmont, until the inevitable shortage of propellants [98] in Italy brought the Italian industries, and the Italian armies, to a standstill; for it was practically certain that the British coal supplies, if lost, would be irreplaceable. The ten millions of tons annually consumed in Italy might, conceivably, have been raised in the German mines, but they would not have been delivered; for they could not have been carried by sea, if Great Britain and France were enemies; and the German railways, whose carrying power had been very much reduced by the allocation of rolling stock to the armies, could not have hauled such a mass of additional supplies, from Silesia and the Ruhr to the frontiers of Switzerland.

[99]

[100]

[101] The entente powers had yet another advantage. The Italian and Austrian fleets, acting in conjunction, might have been powerful enough to supply the Italian garrison in Tripoli and Cyrenaica, or to have withdrawn it. But the combined fleets of Austria and Italy could not conceivably have shaken our hold on the straits of Gibraltar; and, for so long as the straits were under Franco-British domination, all the Italian grain supplies from the United States, and most of the Italian export trade to the American continent, would have been stopped from the moment when Italy declared war upon the entente powers.

On a first inspection, the economic consequences of an Italian declaration against the central empires seemed less serious; but, as that declaration would at once, have closed the markets for a quarter of the Italian import and export trade, it is small wonder that a strong party in Italy, headed by Signor Giolitti, were disinclined for anything but strict neutrality (see Table XII). Indeed, if Italian statesmen had been seeking for economic advantages, or if they had even been determined to protect the country against economic calamity, the entente statesmen could have counted upon Italian neutrality throughout the war.

But the Italian authorities were not free to regulate their policy by these calculations; for, of all the neutral governments in Europe, the Italian were, perhaps, the most obliged to subordinate economic to political advantages. Their natural desire to unite all Italian speaking people under Italian rule is too well known to deserve explanation or comment; it is, possibly, not so well understood, that this projected reunion excited other political ambitions, and that, during the autumn and winter of 1914, the Italian government were with difficulty controlling the passions of a dangerously excited nation; a nation which was, indeed, so disturbed and uneasy, that the ministers often feared for the safety of the dynasty, and that so shrewd an observer as the Austrian ambassador thought their anxieties justifiable.

First, there was no doubt, that the feeling dominant in Italy was vexation and anger that the crisis in August, 1914, had not been foreseen; and that the government had been so restricted by the obligations of an old alliance, that they had exerted no influence in the councils of Europe at the decisive moments.

      National and personal vanities have been deeply wounded...... wrote the Austrian ambassador some time later and it is here thought intolerable that Italy cannot take the part of a great power, and so receive proof that she is seriously thought to be one.⁸

The British ambassador did not attribute the political agitations of Italy to the same causes, but he, like Baron Macchio, was much impressed by the fermentation in the country.

      I find here, he wrote, in the first days of the war, a growing tendency to recognise that Italy must take a side or she will be left out of the final account. There is no doubt which way the general trend of public opinion is working...... It is inconceivable that Italy should take part against us, public opinion won't stand it......

Sir Rennell Rodd several times repeated his first appreciation during the first months of the war.

Nations thus agitated are but little inclined to be satisfied with a policy that seeks only for economic advantages. In the first days of the war, therefore, the Italian cabinet, or the Italian premier, instructed the Marquis di San Giuliano, the foreign minister, to prepare the way for intervention; and on 12th August, the Italian ambassador in London called at the Foreign Office to make a significant statement. After assuring Sir Edward Grey that his government wished to remain neutral, the ambassador added, that they might be forced into belligerency; first, because they feared a change of equilibrium, which would be very disadvantageous to them, and secondly, because they feared that the central empires would never forgive the Italian government for declaring neutrality. The anxieties that were disguised, rather than [102] explained, by this guarded language were presumably these. An Austrian army was then well established in the Serbian capital, and was preparing to move into the heart of the country and occupy it. Whatever the military position might be in other theatres, it therefore seemed certain, that the Austrians would shortly strengthen their hold upon the Dalmatian coastline; and would, at the final settlement, be less than ever inclined to cede territories to Italy in the north-eastern corner of the Adriatic. As these were their preoccupations, it is small wonder that the Italian authorities had no thoughts for the economic consequences of intervention on either side; their ambassador was, indeed, instructed to enquire, whether the British government would agree to nine conditions, if the Italian cabinet decided to intervene in favour of the entente. The first group of conditions provided for a rapid union of the British, French and Italian fleets; the second for territorial acquisitions in the Tyrol and the Adriatic, It was, of course, extremely significant, that such a statement should have been made at all, only a week after war had been declared; but the statement was qualified by many intricate reservations, and Sir Edward Grey answered cautiously, that, although the British government would probably agree to the most important of the Italian conditions, he could give no undertaking on any specific point, until the Italian government had decided to intervene.

The interview thus engaged neither party, but it determined the diplomacy of the two governments during the closing months of the year. Being convinced, from Sir Rennell Rodd's reports, that the Italian government might remain neutral, but that the nation would never tolerate intervention against the entente powers, Sir Edward Grey determined to make no move; to restrain the French and Russian authorities, if they exercised indiscreet pressure upon the Italian consulta; and to wait, until the pressure of public opinion forced the Italian government to make more definite proposals. On the Italian side, San Giuliano endeavoured to engage the British government more closely. During September and October he urged, on several occasions, that the British foreign minister should discuss the conditions presented in August; and, whilst urging this, made what our ambassador described as the nearest approach to a positive avowal of intentions to which he had committed himself. The interview took place on 27th September, when San Giuliano told our ambassador, quite definitely, that Italy must sooner or later join the allies, but that he was much exercised about a proper pretext. He anticipated, however, that an Austrian advance towards Ragusa, or to some other part of the southern Adriatic, would soon provide one.

This statement, though more explicit than any that had yet been made, was, however, carefully qualified, for the marquis left the date of Italy's intervention very doubtful; indeed he opened the interview by saying, that the Italians would not be completely ready in any measurable time. Sir Edward Grey, therefore, thought the statement insufficient, and refused to discuss details. Shortly before his death, the Marquis di San Giuliano again pressed the British foreign minister to give some kind of undertaking. At an interview with Sir Rennell Rodd on 11th October, the dying minister, for he was then failing fast, argued, that the moment for intervention would probably come unexpectedly; and that it would be a great misfortune, if the Italian authorities were unable to act rapidly, because the diplomatic agreements between Italy and the entente powers were still undigested. He therefore urged, that a draft treaty should be prepared, and that it should be signed, when the moment for intervention had arrived. This was, substantially, an offer of alliance, but the Italian minister still declined to state anything definite upon the matter which Sir Edward Grey thought all important: At what date would the Italian government intervene? When asked to be more precise on this point, San Giuliano replied, that the army was by no means ready, and that he must consult the minister for war. After this interview, the minister's fatal illness made rapid progress; he died on 30th October, and a new government [103] was formed soon after. As soon as the new cabinet had been formed, Sir Rennell Rodd reported, that it would probably be more inclined to intervention than the last. He also stated, that the new foreign minister, Baron Sonnino, was a very straightforward man; and that, if he decided to press on with the negotiation that San Giuliano had begun, he would be much more definite, and easy to understand, than his predecessor.

From these particulars it will be seen, that, at the end of October, 1914, when San Giuliano died, our diplomatic relations with Italy were very finely adjusted. Sir Edward Grey did not consider that any statement made to him, or to the British ambassador, had been definite enough to justify closer negotiations; and he was still determined not to examine details, until principles had been agreed to. If this attitude and conduct were to achieve their purpose, it was essential that no controversy should disturb the friendly relations between the two governments, or damage the position to which the Italians had raised us by making the British Foreign Office their sole confidant on such delicate questions. Also, these intimate confidences imposed special obligations. Inasmuch as the Italians had made these statements to the British government alone, and had particularly requested, that they should not be communicated to our allies, it was clear, that they looked to the British Foreign Office to reconcile the French and Russian governments to their pretensions and demands, when finally made; and to obtain their consent to certain preliminaries, such as the occupation of Valona, where they landed an expedition during the month of October. In addition, it was important, that the new Italian minister, like the old one, should find the Foreign Office receptive of special confidences, and that no friction, on any subject, should alienate the sympathies of the Italian people; for these sympathies - which Sir Rennell Rodd reported to be growing in strength - would nearly certainly be the decisive political force. So long as the Italian public and their government were unruffled, it was probable that the Italian foreign minister would sooner or later, make those definite proposals, which the British authorities were expecting.

Sir Edward Grey arranged that Valona should be occupied without opposition from the French; but during October, the flow of contraband into Italy promised to raise questions that would not be so easy to settle. During August, September and the first part of October, our agents had detected no abnormal movements of Italian trade; but, in the second half of the month, Sir Rennell Rodd reported, that he was much disturbed at the quantities of goods that were being landed in Italy, after which they were declared to be in transit, and forwarded to Switzerland. This was soon confirmed by the committee for the restriction of enemy supplies, who reported, that the shipments of copper on their way to Italy were abnormally heavy. Several vessels carrying copper cargoes to Genoa were therefore detained at Gibraltar, and the cargoes unloaded.

The allied memorandum on contraband was presented to the Italian authorities when the contraband stream was at full flood; and it was no easy matter to press our legitimate contentions, without disturbing those intimate and cordial relations, which it was so important to preserve. For, although some of the contraband then being carried into Italy was for German consumption, a considerable proportion was unquestionably for use in Italy, and it was by no means simple to distinguish between the two. Italian metal imports were, in fact, abnormal for several reasons. In the first place, German agents in Italy had bought such enormous quantities of metal during the first months of the war, that there was a shortage soon after; in the second, the Italian government were already spending heavy sums on additional equipment for the army, and were placing large contracts with the great armament firms. As we had such good reasons for anticipating Italian intervention on our side, it was of the last importance that their military preparations [104] should not be impeded by precipitate interceptions of contraband cargoes, however justifiable they might be on other grounds. As to consignments sent forward to Switzerland, some were again sent on to Germany, but a proportion was undoubtedly for the Swiss industries. Normally, the metals used in the Swiss factories are mainly re-exported from Germany: these sources were temporarily closed, however, for the Germans were, at this time, very short of copper, and the Swiss were naturally placing large orders for raw metal abroad, and receiving it by way of Genoa. Finally, it was most important that our authorities should not act precipitately and severely merely because the Italian metal imports were abnormally heavy; for the Italian industries were so organised as to be peculiarly sensitive to stoppages of supplies. A few large concerns, such as Pirelli-Ansaldo and the Moa smelting works, dominated the rest, and employed an enormous number of hands. If the supplies of any one of these great houses failed, or even if their flow of supplies became irregular and precarious, thousands of workmen's families would suffer, with the usual consequences to public opinion. The heads of these houses were, moreover, men with great political influence, who were connected by marriage and interest with large numbers of deputies and senators. By irritating them, or by damaging their concerns, we should presumably strengthen the neutrality party under Giolitti.

The need for caution was even greater than we realised: our ambassador certainly reported that the new cabinet were more inclined to intervention than the old, but it seems hardly doubtful, that they had just decided that San Giuliano's tentative offers should not be renewed. Soon after the allied memorandum upon the interception of contraband was presented, the Italians opened a long and arduous negotiation with the Austrian government; and, unless we regard the proposals and counter proposals of the Italian chancery as an elaborate artifice for gaining time, we must conclude, that in the late autumn of 1914, the Italian premier and foreign minister were endeavouring to keep the country neutral.

Seeing that the flow of contraband into Italy was principally a swollen import trade in copper, and that, at the time, we probably had more information about it than the Italian authorities themselves, the Foreign Office instructed Sir Rennell Rodd to hand in a special preliminary memorandum, before our general proposals were presented. In this paper, the Foreign Office gave particulars, which proved beyond doubt, that some of the consignments recently seized had been destined for Germany: the final paragraph, written by Sir Edward Grey ran thus:

      I do not suppose for a moment that the Italian authorities, if they realise this, will be anxious to facilitate an illicit traffic, which supplies Austria and Germany with ammunition.

When Sir Rennell Rodd presented the second or general memorandum on 8th November, he anticipated that the Italians would engage him in negotiations about the exports of certain foodstuffs, but, contrary to his expectations, the Italian government did not immediately reply. They may, or may not, have temporarily reversed the diplomatic course, which the Marquis di San Giuliano had attempted to steer, but, at least, they realised that a serious controversy upon contraband, with the entente powers, would have been as severe a set-back to their diplomacy as it would have been to ours. On 14th November, therefore, they issued a royal decree, which was no answer to the allied memorandum, but which, nevertheless, remedied a large part of what we complained of. By this decree, it was made illegal for any Italian importer to receive goods on the prohibited list, and to declare them in transit after receipt: it was also made illegal to tranship goods, if they were marked with an Italian destination when they arrived in an Italian port. These provisions were, moreover, supplemented by another, which had obviously been drafted to avoid all friction about the operation of the October order in council. It will be remembered that our proclamation made special reservations about conditional contraband, if it were consigned to order. The Italian government [105] therefore decreed, that all consignments marked thus would be appropriated to the internal use of the state. From this it was clear, that if the decree were rigorously executed, no cargo on the prohibited export list could reach Switzerland, unless its Swiss destination were clearly marked upon the bills of lading; for the Italian list of prohibited exports, though it did not include some articles on our contraband proclamations, was comprehensive with regard to petroleum, copper, nickel and aluminium - the commodities which had been declared specially important in the allied memorandum. After the Italian foreign minister had answered our enquiries about warehousing regulations and other matters of detail, the contraband department reported: The Italian measures for preventing goods passing in transit seem quite complete, and indicate a genuine desire to prevent fraudulent re-export. Our ambassador considered that the decree had superseded our proposals for an agreement, and that they might, in consequence, be dropped.

The contraband department could not, however, agree, without further enquiry, that the Italian proclamation could be treated as a substitute for an agreement. The question at issue was the same as the question that had been so difficult to resolve during the discussions with the Scandinavian powers: as the Italian government, in common with other neutral governments, intended to allow articles on the prohibited list to be exported under dispensation or licence, it was most important to discover on what scale these dispensations would be granted: would they be so frequent, and would they be granted to such large consignments, that they would open large breaches in the export barrier, or would only a few, insignificant transactions be allowed? The contraband department insisted, that very close enquiries must be made on these points, before the Italian legislation could be pronounced a satisfactory substitute for an agreement.

The Italian authorities assured us, that no exemptions would be granted in respect to manganese, aluminium, nickel, iron, rubber and petroleum; but they represented, with great force, that their great engineering houses would be incapable of completing their contracts, or of signing new ones, unless goods were allowed to be exported to neutral countries under licence. These assurances were, moreover, strengthened by a second order from the Italian government, who entrusted the execution and operation of the decree to a powerful committee of civil servants. The committee was ordered to examine every application for an export licence; to watch the movements of trade; and to report what new commodities ought to be placed on the list of prohibited exports. The inclinations of this committee were at least of as much importance as their constitution and powers; and such information as we were able to obtain about their procedure left but little doubt, that the committee were acting under a general instruction to reduce exports of all raw materials and metals; for, during their first sittings they ruled, that fencing foils were weapons; that felt hats were wool; and that no export licence could be granted in respect to either.

When these two successive orders were in operation, the Italian government answered what was proposed in the allied memorandum by informing our ambassador, that they did not wish to make a formal agreement with us, as it might expose them to an accusation of unneutral conduct. They claimed, however, that they had substantially agreed to our proposals, by making their list of prohibited exports nearly identical with our contraband proclamations, and by issuing their recent decrees for regulating the transit trade. And, though unwilling to sign a formal agreement, the Italian authorities nevertheless assured the ambassador, that there would be no dispensations in respect to copper, nickel, lead, aluminium, haematite, iron pyrites, ferro-silicate, rubber and petroleum - the commodities recently added to our lists of contraband:

      At the same time, ran their memorandum, in order to maintain the national industries, and prevent a suspension of work in Italian factories, she reserves to herself power to give, when national requirements have been met, facility to export these commodities and articles manufactured from them, so long as they are only sent to a neutral destination.

[106] The need for a satisfactory agreement was now pressing. The new Italian minister had not renewed San Guiliano's [Scriptorium: sic] tentative offers, and the German government had just sent Prince von Bülow to Italy to watch and assist the negotiations between Austria and Italy. Public opinion, which had throughout been so friendly to Great Britain, was then, more than at any other time, the reinforcement upon which our diplomacy was counting. Moreover, Sir Rennell Rodd now noticed, with great regret and anxiety, that some influential members of Italian society were openly expressing bitter disappointment, that the British government had ignored recent legislation; and that stoppages and seizures continued. During November and December the British patrols at Gibraltar, and the French patrols off Toulon held up several ships on their way to Italy, and the contraband committee approved the detentions.⁹ Their reasons were presumably excellent; but it was natural that our ambassador should dread the irritating effects of these detentions, however legitimate in themselves, as he knew that public irritation might at any moment sweep away the rather fragile diplomatic structure that he was endeavouring to strengthen. His anxieties were, moreover, shared by the king of Italy, who gave Sir Rennell Rodd two grave, but extremely friendly, warnings. From what the king said, our ambassador concluded, that the Italian government still intended to offer their alliance to the entente powers; for which reason they were most anxious, that, when the moment for intervening arrived, Italian sentiment should be strong, and untainted by disappointment. It is thus hardly surprising, that our ambassador strongly recommended that restraints should be imposed upon this conscientious search for contraband cargoes, ambiguous manifests, and defective bills of lading.

The Foreign Office authorities were not divided. It is true that the contraband department suggested, tentatively, that a special agreement for the control of copper, nickel, lead and aluminium should be insisted upon; and that, until it was concluded, cargoes of these commodities should be ruthlessly stopped, as the high prices paid for these metals in Germany would inevitably draw them into the country. This proposal was not approved, and when it was rejected, there were no reasons for delaying a settlement. On 23rd December, therefore, our ambassador at Rome was informed, that the Italian government's guarantees were satisfactory; and that, in future, no contraband cargo consigned to Italy would be stopped, unless our authorities had satisfactory proof that the shipper, or the recipient, was engaged in fraudulent dealing. A week later, the necessary orders were sent to the naval patrols.

vi) Negotiations for a Contraband Agreement With Switzerland

As the swollen imports of the port of Genoa, and the abnormal transit trade into Switzerland across the Lombard railways, were the matters most closely examined during the negotiations with the Italian authorities, it was natural, that our proposals for a contraband agreement with the Swiss republic should have been considered as a sort of complement to our negotiations with the Italian government. But although, at the time, the Swiss and Italian contraband trades were examined conjointly, the sources which nourished the trade of these two countries, and the directions in which Swiss and Italian commerce moved, were so different, that negotiations with Switzerland became negotiations for guarantees of a special kind. The differences between the economic systems of Italy and Switzerland will be understood from a brief survey of Swiss trade and commerce.

The principal sources of Swiss revenue are those preserved milks and cheeses, which are produced from the milk of the Alpine cattle; Swiss cotton and silk goods; and Swiss clocks and watches. The Swiss depend upon foreign markets for a large [107] portion of their cereals, and like all importers of corn, they make heavy purchases of American and Canadian wheat. Until the war began, they had depended upon European oats and barley (see Table XIII), after which the failure of German and Russian supplies forced them to place additional orders for grain in the American continent. The Swiss are, moreover, considerable meat importers, and the bulk of their purchases are made in France, Italy, Germany and the Netherlands. They buy lard from America, but unlike other buyers of foreign meats they only make small purchases of Argentine beef and American canned foods.

In November, 1914, the raw cotton, which the Swiss worked into embroideries and networks, was obtained from the United States and the Sudan, in fairly equal proportions. The silk, which the Swiss worked into an enormous number of fancy articles, was obtained raw and in a half woven state, from France, Italy and the far east. Great Britain and the United States were the best purchasers of the Swiss silk and cotton goods; but although a good customer, Great Britain was far less important to the Swiss than Germany; for German supplies of iron and other metals were so essential to Swiss industries, that Germany might almost be said to have had a strangle hold upon the economic life of the republic. The Swiss statistics distinguish between one hundred and thirteen different kinds of iron import and export, which it would serve no purpose to enumerate; they consist mainly of iron and steel in a half worked state, ready for the Swiss industries and railways: in 1914, Germany supplied nearly seventy per cent. of the whole, and bought back a large proportion, after it had been converted into machinery. The same held good with regard to copper. It is true that the French supplied some of the half prepared metal, and bought some of the finished products: Germany was, nevertheless, in potential control of any Swiss industries that needed copper. The Swiss watch trade yielded a total revenue of 169,410,000 francs, and, here again, Germany was in a commanding position; for the nickel and other metals used by watchmakers were, for the most part, bought in Germany.

The British authorities had no bargaining asset that was in any way comparable to these German advantages; for British coal, which was so important to half the countries in Europe, was not imported into Switzerland, where electric power was the chief propellant. Of the entente powers, France was, perhaps, the best qualified to drive an economic bargain with Switzerland; for the volume of French trade with the country was greater than ours, and French meat stuffs were an important item in the Swiss dietary. Also, which was perhaps more important, the recent Swiss purchases of American grain were being delivered in the western ports of France, so that the Swiss depended upon the French railways for its transport. The two governments had, indeed, recently signed an agreement, whereby the French undertook to place a fixed number of railway wagons in the Swiss service.

When the allied memorandum was presented, our authorities had before them no very certain facts about Swiss trade in contraband, but a great deal of agitated gossip. It was realised, that the Swiss imports through Italy would be heavy in the circumstances, but we had, at the time, no means of discriminating between those imports, which, though abnormal, would nevertheless be consumed in Switzerland, and those, which were part of a transit trade in contraband. The French newspapers were, however, conducting a fierce and unscrupulous agitation against the Swiss importers, in the hope that the French government would break their undertaking to supply railway wagons for the transport of Swiss corn.¹⁰ As far as we could judge, moreover, sections of the French administration were infected with this same rage for accusation and calumny. One of the most authoritative reports

[108]

[109]

[110-111]

[112] in the records of the restriction of enemy supplies committee had been prepared by Monsieur Rey, a French civil servant of high position; and this gentleman, after collecting and presenting a great deal of exceedingly useful information about the Swiss metal and chemical industries, urged the committee to regard all Swiss sales of metal goods and chemicals to Germany as downright breaches of neutrality. It has to be admitted, also, that some sections of the British administration were equally inclined to give a bad interpretation to every report of an unusual circumstance. Early in November, one of our naval agents discovered that Captain Messner, of the Swiss flying service, had gone to Berne, at government expense, and had there been in treaty with some German agents. As the Swiss government were then keeping large forces under arms, and as they had ordered large quantities of copper for their munitions, Captain Messner had presumably been instructed to negotiate with some German firms for the delivery of materials required by the air force. His visit to Berne was, however, officially represented as a most sinister transaction in which president Hoffman was implicated. It is not suggested for a moment that these wild accusations ever seriously affected the judgment of British negotiators; they have, however, been recorded as a reminder of the nasty accompaniment of slander and gossip to which the negotiations with Switzerland were conducted.

The allied memorandum was presented on 14th November. The immediate purpose of the negotiation was to secure guarantees against the re-export of raw materials; for, in the letter explanatory to the memorandum, the entente powers mentioned the heavy transit trade through Italy, and asked only that all articles on the British contraband list should be placed on the Swiss list of prohibited exports: no proposals were made with regard to the Swiss trade in worked articles of contraband materials. President Hoffman's reply was received about three weeks later: it was a long and ably drafted document, in which the Swiss authorities answered both the allied proposals, and the calumnies that were being directed against their administration. First, the Swiss government maintained, that a neutral state was not obliged, by any rule of international comity, to forbid the export of contraband to belligerents; in consequence of which the republic could not undertake to prohibit the export of any commodity, unless the prohibition was imposed in the country's interest, and to make good a shortage. Secondly, the Swiss government suggested that there was too much abstract reasoning in the allied memorandum: Toute la question doit être examinée uniquement a la lumière des faits: de la résoudre théoriquement, conduit, immédiatement a des conclusions fort erronées. The relevant facts were these: The Italian ports, Genoa in particular, were already choked with supplies that could not be distributed even in Italy; the consignments in transit for Switzerland were, in consequence, very much delayed, and the country was suffering. Import statistics were added to the note, and they proved, quite conclusively, that the deliveries of cereals during the previous quarter had been far below the normal average. The Swiss government therefore maintained, that Switzerland was not then, and could never become, a base of enemy supplies; and that the second article of the last British order in council could not be applied against consignments that were transitted to them through Italy. Such transit trade as existed ought not to be interfered with, so long as Switzerland was a neutral country. Nevertheless, the Swiss government stated, that they would accept the substance of the allied proposals, and would forbid the re-export of such imported goods as were on the allied contraband lists; it was, however, to be clearly understood, that they would grant exemptions and licences.

It might here be added, that although many reports about a large transit trade through Switzerland into Germany had been presented to the Foreign Office authorities, and although the reports had appeared consistent and conclusive enough to be digested into the allied memorandum, it seems probable that a great deal of what was then called German trade through Switzerland was, in fact, a legitimate [113] Swiss trade that had been diverted from its ordinary channels to the Italian railways. The diversion must, indeed, have been considerable. Our naval control of the North sea had turned Swiss imports from the Rotterdam route to the Mediterranean; and the committee for the restriction of enemy supplies had accentuated the diversion, by recommending that no goods marked for Switzerland should be allowed to go by way of the Rhine. Now the port and railway communications to which this great volume of goods had been turned were poor: Genoa was ill-equipped to deal with additional deliveries; and, although the railway system of the Lombard plains is excellent, the Alpine barrier between Italy and Switzerland is only crossed by two main lines. The first traverses the Alps between Domodossola and Brig, and connects with the main system at St. Maurice; the second - from Como to Lugano - joins the main system at Lucerne. There is a third line, across the pass of Poschiavo, but it is subsidiary to the other two, and its carrying capacity is low. As a great proportion of goods that were normally carried by the German railways, and were then delivered to the magnificent railway system of northern Switzerland had been diverted to these two lines of railway, there is no reason to doubt the president's assertion, that Switzerland was short of cereals and raw materials. Such observations and reports as we had collected proved that the traffic upon one particular system was much swollen, but this did not, in itself prove an increasing volume of imports. As to the transit trade through Switzerland, it could only have been a legitimate, certified, trade, or a dishonest traffic in contraband goods, received in Switzerland, and subsequently sent forward. Goods in legitimate transit would be so declared in the bills of lading and manifests that our patrols inspected at Gibraltar: with regard to the second kind of transit traffic, it was inconceivable that the Swiss government should not have been exerting themselves to stop it, when the nation was admittedly short of food, oil and other raw materials. The high prices offered for certain metals in Germany had presumably drawn goods across the frontier; but the contraband trade with Germany cannot have been on the scale that we imagined. The truth was that our authorities were compelled by circumstances to act upon rumours and reports, which would never have affected them, if they had been acting in a judicial capacity. One of the evidences of the Swiss transit trade was a letter from an English lady, whose villa overlooked a Swiss railway; from her drawing-room window she saw a succession of goods trains, manned with German conductors; the trucks were marked Münich [Scriptorium: sic] and Baden. This made her extremely anxious and she reported it. Officials whose duty it was to watch every movement of trade through the telescopes of a very imperfect organisation could not disregard even these reports; they were, in fact, often bound in duty to act upon them. But it must not be imagined that our diplomatic authorities were unconscious of the weakness of drawing inferences from statements that differed little from common gossip; indeed Sir Eyre Crowe's comment upon the president's memorandum was explicit: I am afraid that we shall never learn how much is really going into Germany through Switzerland, until an efficient system of observation on the frontier is established.

The immediate outcome of these negotiations was that steps were taken to organise a proper system of observation; and that the president's reply was treated as a sort of provisional agreement to our proposals. At the close of the year 1914, it was apparent that supplementary agreements of a peculiar kind would be necessary. The metals and raw materials for the Swiss industries were now passing through our patrols. The Swiss government could assure us, with absolute good faith, that these raw materials would not be re-exported, if they could help it. But when the iron, steel, nickel, aluminium, copper and silk imported into Switzerland had been converted into finished articles, the Swiss could claim, with equal justice, that by the accepted law of nations, these finished articles constituted a legitimate export trade. Could we, however, endorse the claim and allow these raw materials to pass freely through our patrols? Hardly, for legitimate as was the Swiss contention, our counter [114] contention was at least equally so. Although the exact quantities were not yet ascertained, it was admitted that a certain proportion of the materials required in Switzerland came from Great Britain; it was to be presumed, also, that the proportion was rising, owing to the German shortage. It was impossible to agree that wool, jute, textiles and metals, from the British empire, should be transmitted to Germany, after the Swiss factories had worked them into specialised articles of commerce. The guarantees necessary for preventing this could, however, only be secured after long preliminary investigations; for we were, at the time, not very well informed about the constitution of the Swiss industries, and our commercial attaché had only recently been appointed. Whilst these investigations were being undertaken, the campaign against contraband, which the Foreign Office was then conducting, was expanded into a plan of unlimited economic war.

vii) General Conclusions upon the First Contraband Agreements

These first contraband agreements have been very contemptuously referred to in the literature of the blockade: Mr. Arnold Forster describes them as an unsuccessful experiment; Mr. Bowles seems to think they were an unjustifiable encroachment upon the authority of the British prize courts, or of the naval authorities, or of both. It is not thus that they must be appreciated.

The powers of interception enjoyed by the fleet, when war began, have already been described at some length. Those powers must be compared with the powers exercised, four months later, if the importance of these agreements is to be even faintly apprehended; and, if this is done, the difference will be found to be this. In August, 1914, the fleet had a circumscribed, theoretical, right to arrest contraband consigned to neutrals in certain prescribed circumstances: in practice the right was useless, because the officers of the fleet had neither the power, nor the means, of applying discriminatory tests to the cargoes that they inspected. By the end of December, 1914, every cargo inspected was subjected to a succession of tests; and the neutral governments of Europe were virtually collaborating with our own, in applying them. As the history of contraband seizures, and of blockades, is little but a history of neutral recriminations, resistance and reprisals, it may be doubted whether a belligerent right has ever been so much strengthened in so short a time. To point out that the system thus established was imperfect is no criticism at all; those who organised it were, later, its severest critics, and almost every suggestion for expansion or improvement came from them.

But even if the instruments compounded had been as unworkable, and as useless, as Mr. Arnold Forster believes, it would still have been a great achievement to have concluded them at all. In November, 1914, neutral governments had forbidden the export of certain commodities for purely domestic reasons: by the end of December they had undertaken, with reservations dictated to them by the peculiarities of their country's trade, that these prohibitions should be permanent. It is only possible to understand how great a barrier was thus erected against the circulation of contraband, by reviewing these neutral prohibitions in a comparative table (see Appendix III). If the table be so much as glanced at, it will be seen that the agreements, taken as a whole, raised a great barrier against Germany's overseas supplies of grain, and against most of her foreign supplies of meat. In addition, the contraband articles particularly mentioned in the original memorandum - petroleum, copper, aluminium, nickel and rubber - were either upon the neutral prohibition lists, or were being stopped on their way to the enemy by the Netherlands overseas trust. It has to be granted that our representatives were assisted by adventitious circumstances when they negotiated for these undertakings: neutrals were anxious about their supplies, and were, in consequence inclined to meet our wishes; but adventitious circumstances alone could never have brought so comprehensive a negotiation to so successful a conclusion. Each [115] neutral minister opened the negotiation by reciting the rules of the Hague convention, which did, in fact, free neutrals from every obligation to stop the re-export of contraband to belligerents. These declarations of independence were, however, converted into workable agreements, freely negotiated; for in all the records it is impossible to discover a single threat of coercion. Those who persuaded neutral ministers to give undertakings so contrary to their first declarations must have been endowed with qualities that are only dimly perceived in the written records: great patience and judgement, great forbearance, great persuasive powers, and great knowledge of the politics and economic systems of northern Europe.

It is, therefore, no exaggeration to say that these agreements occupy an important place in the history of war at sea: they constituted an original system for discriminating between nocuous and innocuous contraband; and they set up an international machinery for applying the old doctrine of continuous voyage. Even if the system had been wholly inadequate, it would nevertheless have been very remarkable that it had been elaborated at all. But was the system as imperfect as some persons seem to have imagined? This can only be decided by recapitulating the objects of the economic campaign, as it was first planned, and by determining how far those objects had been achieved.

The objects of the campaign are precisely described in the war orders to the fleet: the navy was to intercept contraband, and to drive the enemy's merchant fleet from the sea; these two blows against the economic system of the central empires would it was hoped, cause so much injury to German interests and credits, that serious economic and social consequences would follow. These objects are further defined in a number of statements made by Sir Edward Grey during the first months of the war. They are worth recording, for they are proof of the small beginnings of the campaign, and an illustration of its subsequent expansion.

      His Majesty's government...... are not interfering with foodstuffs imported from neutral ships to Rotterdam so long as they are satisfied that such supplies are not destined for the German army. (Telegram to Sir F. Bertie, No. 791.)
      We have only two objects in our proclamations: to restrict supplies for the German army and to restrict the supply to Germany of materials essential for making munitions of war. (Telegram 78, Treaty to Washington, 29th September, 1914.)
      In our history we have always contended that foodstuffs and raw materials intended for the civil population are not contraband of war: that therefore they can only be made conditional contraband, and that, when on their way to a neutral country, they cannot be stopped unless we can show that they are destined, not for the neutral country, but for the armed forces of the enemy. (Private Correspondence - France. Letter to Sir F. Bertie, 27th October, 1914.)

These were the objects pursued; how far were they pursued successfully?

If the old definition of contraband is still good, then metals, fuels and propellants are the most intrinsically contraband goods in a modern state; for without them it is impossible to keep the smallest army in the field. In Germany the position with regard to these essential materials was this: In the early months of the year 1915, when the December agreements with neutrals were in full operation, the German supplies of each had been very seriously reduced. There was no lack of coal, for domestic fuel had not advanced in price. The iron mines in the country were moreover yielding enough ore to feed the most important industries. There was, however, an obvious shortage of all those metals, which had been designated as particularly contraband in the allied memorandum to neutrals, for by November, 1914, the current prices had risen thus:

[116] These prices were still rising when the German government issued decrees for fixing maximum prices of each metal, at figures roughly double the pre-war prices. This was followed by another list of fixed prices for commodities made of contraband metals, and by yet another, ordering that all stocks should be reported to the government to facilitate requisitioning. The requisitioning of domestic copper was then carried out with a rigour that is hardly believable: private houses were searched from cellar to garret; kitchens were emptied of their copper pans, and drawing rooms were ransacked for the smallest copper object. In Belgium, church bells were removed, and private houses were literally ransacked. The whole German nation was then invited to supplement these extraordinary efforts, by observing a metal week, during which persons of every age and condition were to search untiringly for scraps of metal, and for superfluous metal objects.

In Austria-Hungary there was a similar revival in the iron and coal trades, and a similar shortage in the others. During the first months of the year the iron industry recovered from the upheaval of the autumn months and the total output for February was nearly normal.¹¹ The same held good with regard to coal supplies. The shortage of other metals was, however, as serious as in Germany; and the rise in prices was, even sharper:

After fixing maximum prices, the Austrian and Hungarian governments took measures similar to the German. In February, they requisitioned all supplies of nickel, aluminium and copper; established metal companies for distributing those metals to factories that were executing army contracts; and, virtually, withdrew contraband metals from private industry.

In both countries there was a shortage of petroleum and domestic oils. In February and March the German government issued severe regulations for restricting all motor traffic that was not in military service. Similar regulations were issued in Austria-Hungary, at about the same time, where the price of domestic oil rose to 90 kronen per 100 kilos. It fell off in the following month when the days became longer, and consumption declined, but remained at a very high figure.

So much for contraband metals. Our endeavour to restrict the enemy's food supplies was equally successful; for by the beginning of December, 1914, the price of essential grains had risen to the following figures in Germany:

[117] In addition to this the price of potatoes had risen by seventy-five per cent. and of wheat and rye flours by about thirty per cent. In Vienna the rises were even sharper:

These rises, though formidable, were however small in comparison to the rises in the price of domestic vegetables:

The prices rose further during the following month, and on 1st February the German government assumed control of all essential grains; established a war corn company for distributing supplies; and placed the whole nation on rations. This, wrote the Foreign Office adviser, is the most significant economic measure since the outbreak of war. Soon afterwards, the Austrian and Hungarian governments intervened almost as drastically, and issued a number of intricate regulations for controlling the distribution, and the prices of foodstuffs.

These are the relevant facts and their inference is obvious: the limited economic war plan of the war orders was expanding itself into a more embracing project; originally directed solely against the armed forces of the enemy, it had been diverted from them, by pressure of circumstances, and redirected against the enemy population. Certainly the enemy's armies escaped from the economic restraints that we imposed; for the effect of the regulations that we have just reviewed was to reduce the supplies of the German and Austrian peoples, and to secure the armies their supplies of foodstuffs, metals, fuels and propellants. General Falkenhayn states definitely that the armies did not feel the shortage until much later. The enemy's resistance to our first measures of economic pressure was, however, more costly than they knew at the time; for their resistance was maintained by interposing the German people between the armies and the economic weapons that had been levelled against them, and by making the civil populace bear the suffering inflicted. This, in the language of the war orders, was a serious economic and social consequence. If the original purpose of the economic campaign had been to blockade the central empires, and to reduce them by famine, then, it might perhaps be said, that the opening manoeuvres of the campaign were unsuccessful; for our expert advisers were satisfied in the first months of the year 1915, that the enemy populations would be fed and nourished until the next harvest on their new diet of war bread and rationed meat. This, however, had not been the intention; we had entered the war intending to inflict as much economic damage upon the enemy as we could. The damage done was considerably in excess of what had been hoped for; and the December agreements with neutrals were, assuredly, the measures which intensified the original campaign. After they were concluded, neutral prohibition lists became a test that was applied indiscriminately against all classes of contraband; and as those neutral lists then included all essential grains and foodstuffs, foods were, in practice, being treated as rigorously as military contraband. This was the first really successful manoeuvre of the campaign, the manoeuvre which brought the enemy's populations into the theatre of economic war. Those who devised and executed it may, possibly, be accused of pressing on too fast and ruthlessly; they cannot be accused of moving too slowly. [Emphasis in this paragraph added by Scriptorium.]

²See Lord Stowell's remarks on Danish obligations in the Neutralitet. Sir William Duncombe's despatches from Stockholm during the League of Augsburg war contain certain vague references to an endeavour to make the Swedish government acknowledge an obligation. ...back...

³Convention respecting the rights and duties of neutral powers and persons in case of war on land. Article 7. A neutral power is not called upon to prevent the export or transport, on behalf of one or other of the belligerents, of arms, munitions of war, or, in general, of anything which can be of use to an army or a fleet. Article 8. A neutral power is not called upon to forbid or restrict the use on behalf of the belligerents of telegraph or telephone cables or of wireless telegraphy apparatus belonging to it or to companies or private individuals. Article 9. Every measure of restriction or prohibition taken by a neutral in regard to the matters referred to in articles 7 and 8 must be impartially applied by it to both belligerents...... ...back...

⁴Foodstuffs were described as: wheat, rye, barley, oats, maize, rice, rice meal and rice flour; Meat as: meat of all kinds, fresh, prepared and tinned, including tinned fish and lard; feeding stuffs as all articles used as fodder, as for instance, barley, oats, maize, rice, bran, green fodder, hay, potatoes, beans, vetches, lupines, peas, lentils, malt, distillers' waste, mangel-wurzels, beetroot, beetroot chips, rapeseed, linseed, cotton seed, earth nuts, soya beans, oil cakes. ...back...

⁵Compare Mr. Findlay's remarks upon the detention of the Bergensfjord with the documents on the subject. In Norway the detention of the ship was treated as an insult to the country; in Great Britain as an incident of daily business. (Mr. Findlay's private correspondence with Sir E. Grey, letter 14th November, 1914, and translation of leading article in Verdens Gang, 3rd November, enclosed in 68170/f 42134/14.) ...back...

⁶The note of protest was presented on 13th November. It was recitation of a few recognised legal principles; mare liberum, contraband, continuous voyage. ...back...

⁷See Appendix III. ...back...

⁸Documents diplomatiques concernant les rapports entre L'Autriche Hongrie et I'talie, p. 153. ...back...

⁹It is very difficult to discover the exact reasons, for, at this date, the contraband committee's minutes were very brief typescript notes, in which little was recorded but the names and voyages of the ships detained. ...back...

¹⁰See articles in the Gaulois, Matin, Temps, October-November: any fact relating to Swiss trade is converted into an accusation of some kind. The agitation was fairly successful. Lieutenant Guichard (Historie du Blocus) states that the French government fulfilled all their undertakings. This was not Mr. Hurst's or Admiral Slade's opinion. ...back...

11	Total output in meterzentners:
		February, 1914.	February, 1915.
	Bar iron	277,195	348,325
	Girders	64,616	43,360
	Iron plates	36,050	47,192
	Rails	114,810	30,167
	Total	492,671	469,044

...back...

A History of the Blockade of Germany
and of the countries associated with her in the Great War:
Austria-Hungary, Bulgaria and Turkey.
by A. C. Bell (Historical Section, Committee of Imperial Defence).