Effect Of British Blockade On Continental Neutrals

[YM]

I recently viewed the last episode of the excellent series "Fall of Eagles" which deals with the flight of Kaiser Wilhelm II to Holland at the end of the war. The final scene shows his host, Bentinck offering the Kaiser a "cup of good English Tea" which the Kaiser was grateful for. If this indeed true that Holland was able to obtain English goods, this leads to the question of how Holland was able to obtain this, because it would seem that the British would need to embargo all neutral continental countries that had land access to Germany because the Germans could set up straw companies that would import goods into these neutral countries and then bring them into Germany. Does anyone have any information on this?

[phylo_roadking]

If this indeed true that Holland was able to obtain English goods, this leads to the question of how Holland was able to obtain this, because it would seem that the British would need to embargo all neutral continental countries that had land access to Germany because the Germans could set up straw companies that would import goods into these neutral countries and then bring them into Germany. Does anyone have any information on this?

Hi, YM - yes indeed, what you want to do is find out more about the "Quota System"; the Allies...more on that below...encouraged the European and Scandanavian Neutrals to only import the amounts of various items and resources that they needed for themselves....the so-called "Quota" - and compensated them financially for the loss of finances and government revenues (export and sales duties etc.) that the Neutrals thus incurred.

It took some time for the Quota System...and particularly the financial recompense - to be arranged and put into place; because it was backed in the main by American money even when America was still neutral itself The first elements of the System weren't put into place until the second half of 1915 IIRC.

A country like Holland could therefore, for example, import English tea, enough for the Dutch' own use....and they received the equivalent money that they would have made in duties etc. IF they had imported far more at pre-war levels and sold it on to Germany Tea is just one small example; nitrates etc. both for fertiliser and munitions manufacture was another major import, as were supplies of metals and metal ores etc.. Fertiliser imports was a major issue for Germany....for not only did they therefore have to prioritise what they could get to munitions production, it had many knock-on effects; agricultural production was reduced, thus domestically-produced animal fodders, and ultimately meat animals raised were smaller and thinner - thus less meat in the ration AND less fats available for both human comsumption and again for muntions production...and even less leather for boots, military equipment, winter clothing...! AFAIK the Quota System didn't cover products such as agricultural output and animal fodder that were produced IN the European Neutrals and sold to Germany - both Holland and Denmark were hugely important sources of both for Germany during WWI...but it covered anything that could have been transshipped via the Neutrals through to Germay.

There was however a hidden cost for the European and Scandanavian Neutrals...one they had to pay once the war and the economic blockade ended in 1919...

Suddenly - no "Quota System" payments...AND with a lot of Germany's industries dismantled no demand returning for what they could transship to the Fatherland. Also - the demand for animal fodder and agricultural produce in Germany tailed off rapidly. Together with the end of Quota System payments, several of the major Neutrals suffered economic upheaval; Norway for instance suffered TWO economic depressions in the two and a half years following the end of the war!

[glenn239]

The reading I've done suggests that by 1918 the continental neutrals were basically in the same boat as Germany, that the system for trading through the neutrals collapsed in part because the neutral economies themselves were contracting in lockstep with Germany's.

[phylo_roadking]

The reading I've done suggests that by 1918 the continental neutrals were basically in the same boat as Germany, that the system for trading through the neutrals collapsed in part because the neutral economies themselves were contracting in lockstep with Germany's.

Glenn - I've emboldened the important word there...economies, yes...government revenues etc. were buoyed up by the Quota System payments. And they were contracting only in those areas of the economy where production and growth would vary - agriculture and agricultural output for example stayed the same and in places increased because the demand from Germany stayed the same I.E. everything they could get their hands on. Those sections of the economy that depended on Germany as a through-trading partner contracted earlier; there were for example large issues with Neutrals importing raw materials, manufacturing with them, and then selling the finished products/goods on to Germany; these fell squarely under the Quota System. And THOSE sections of the Neutrals' economies shrank because of course they could only get the necessary raw materials and manufature for domestic use only.

The Neutral governments were very much caught between the proverbial rock and a hard place; if they didn't take the Quota System on board - the Allies threatened to embargo THEM, both directly and by blocking trade with them in vital commodities. If, once they accepted the System and the System payments, they attempted to renege or trade secretly and were found out - they'd face the sudden halting of payments which many Neutral governments had come to depend on for the bulk of their revenues Yes, it was indeed economic blackmail...but one could argue that it worked... and yes, it DID also mean that as the war progressed the Allies were subsidising in effect many Neutral governments!

Obviously, yes there were attempts to "pad" the quotas, for a government to say a given country used X-amount of whatever when in fact they only used a half or a quarter of that, and THEN they'd trade on the "surplus"...it was a dynamic system, constantly being monitored and rejigged.

I suppose you could say that what the Quota System did was support governments...but economies could, in their manufacturing sectors, be in freefall...but it's worth remembering that this was an era of minimal government meddling in national economies as yet except to "cream off" revenues via taxes and duties...or to foster certain elements of the economy to enable them to cream off MORE taxes and revenues! Interestingly, the first major elements of "positive" government control of the modern economies in many Neutral states, particularly the Scandanavians, came about as a result of the Quota System, as they sought post-WWI to protect themselves against the effects of any such similar system in the future!!! OP, see under "the Oslo Group" of Neutral nations...

[Attrition]

https://archive.org/search.php?query=blockade%201914

There's a few things here and

http://www.naval-military-press.com/his ... -1918.html

[James A Pratt III]

On the Netherlands and WW I see the books:
"The Art of Staying Neutral"
The Netherlands in World War I"