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Part III: The Rationing System and the American Embargo   (cont'd.)

Chapter 25: Switzerland under the Rationing System

The disturbances consequent upon establishing the société de surveillance suisse. – The close connection between commerce and policy. – The French black lists, and the severities of the French administration. – The German exchange system and Swiss industries. – The first deliberations of the allied powers upon the Swiss note. – The conferences between the Swiss and allied representatives. – A settlement is suggested, and subsequently refused by the British authorities. – The position after the second conference broke down, and the German-Swiss agreement. – How the allied governments appreciated the German-Swiss agreement. – The French disagree with the British and new demands are presented at Berne; the Swiss reply. – The allies start a new negotiation with the Swiss.

It is said, that, when the president of the société de surveillance suisse first assembled his colleagues at the directors' board, he assured them that he and they would shortly be the most hated men in all Switzerland, and congratulated them on being so patriotic as to risk all their friendships in the service of their country. This was a trifle gloomy: the directors of the society quickly earned, and long kept, the reputation of honourable men; but in many respects the president did not exaggerate, for, a few weeks after the society was legally established, it was a target for every calumny; and, if the public clamour spared the directors, it was only that it might discharge more venom against the institution itself. Here is one extract from an abusive literature that would fill many folio volumes, if it were collected together; it is taken from a report passed unanimously by the French chamber of commerce at Geneva:

      Monsieur le Ministre des Finances I dedicate this report to you. French commerce, French industry, and French agriculture appeal to you and ask for your aid. We have helped ourselves, we have made every effort and every sacrifice. We have fallen crushed from above, and your consuls can do nothing. You have promised to answer our appeal. We beg you, therefore, that the société de surveillance suisse be abolished, as a diabolic invention, which spreads death among our traders, our industrialists and our peasants, and wealth among our enemies.

This was the style of an assembly of grave and respectable merchants: the professional leader writers would have exercised even less restraint, if that had been possible. If it should ever again be necessary to regulate Swiss trade, or the trade of a neutral state that is surrounded by powers at war, the reasons for this extraordinary fury may be worth considering, before the thing is attempted.

i) The disturbances consequent upon establishing the société de surveillance suisse

The governing reason for all this anger was that a commerce valued at many millions, and a peculiarly complicated commercial system, were being artificially restrained, controlled, and strictly regulated, after having run free for at least a century. It was not to be expected that the controlling mechanism should work smoothly. The new control was, moreover, more severely felt in some sections of the Swiss industries than in others, and the sections most injured were better able to complain, than to obtain redress. First, it will be remembered, that, as finally constituted, the société suisse was the directing board to a large number of trading associations called syndicates: these syndicates were already being formed, when the negotiations at Berne were being conducted, and the arrangement finally reached was that syndicates of the metal, textile, and other trades should answer to the governing society for the honourability and good behaviour of their members. Now, although in theory, it was open to the master of any concern, however small, to join a syndicate, in practice, only the owners of considerable establishments ever did so. The larger Swiss industries were, however, surrounded by numbers of master craftsmen, who [504] had learned their trade in the big factories, and had subsequently set up as masters of small concerns in their towns and villages. The operations of these cottage industries, which accepted work in all trades, were entirely outside the société suisse. Technically, a man who was a watchmaker and a bicycle mender, and who, besides this, repaired agricultural machinery, and kept the hot water system at the local hotel in order, was a metal worker, and could have enrolled himself on the metal syndicate: actually, it was absurd to expect that he would ever do so. There were many thousands of such men in Switzerland; and they had always been accustomed to obtain the goods they required in small consignments, often by the parcels post, or to buy small quantities, locally, from the nearest factory. By being constituted the sole consignee of all the metals, and textiles received from the entente powers, the société suisse virtually became a vast barrier between these small yeomen traders and their sources of supply. Every place in the country where small traders assemble, village councils, town councils, cafés, and estaminets thus became collecting and distributing centres for complaints that were repeated, or reinforced, by any municipal councillor or journalist who had an end to serve. Furthermore, every possible allowance should be made for the exasperation of those traders who were in a large enough way of business to enrol themselves in a syndicate, but whose concerns were not big enough to warrant the employment of a large secretarial staff; for the difficulties that beset them, when the system was first instituted, were so unusual in themselves, and so suddenly imposed, that many traders must have wondered whether their business could still be prosecuted. By singular good fortune, we have a reliable record of what was inflicted upon the ordinary business man: it was printed in a paper that was extremely friendly to the allied cause, and the contraband department admitted that the statement was neither exaggerated nor unfriendly. It ran thus:

      We have been asked, by our commercial men, to initiate the public into the mysteries of the société de surveillance suisse; and to show them what complications a trader is exposed to, when he wishes to import goods into Switzerland. We take a very simple example. Monsieur X needs certain goods, which he imports from London, or from Paris. He asks his supplier to send him some toilet soaps, straps and medical bandages. The supplying firm answers, that the goods are ready, but that an authorisation to import must be given by the société de surveillance suisse. The trader at once writes to the société de surveillance suisse at Berne, who send him a collection of pink forms, models Nos. 8, 11, 12 (five copies of each). Being very anxious to act correctly the trader answers the questions on the forms, that is he states: his raison sociale; the nature of his goods; the corresponding numbers of the customs tariff; the gross weight; the net weight, the quantity; the value in Swiss currency (including freight, port and customs charges); the name, profession and address of the supplier; where the goods then are; the railway station or harbour from which the goods will be shipped; the station at which the goods will pass the Swiss frontier; the Swiss station at which the goods will be delivered; the name and address of the transit agent; the weight and quantity of the goods imported by the applicant in (a) 1912 and (b) since the war; the weight and quantity of the goods which are in the applicant's possession, or are being sent to him.
      The trader can now date, sign and despatch all the forms, adding to them form No. 12, stating that he was on the commercial register before July, 1912, and adding further, form No. 8a - a letter of despatch.
      Having posted this, the trader confidently expects the authorisation asked for. Instead of receiving it, however, the société de surveillance suisse sends him back all his forms, and begs him to forward them through the syndicate concerned. The trader now sends his papers to the syndicate hoping that everything is in order. Far from it. The syndicate reply, with great affability, that they are inclined to forward his application to the société de surveillance suisse; but that he must first apply for membership of the syndicate. Having no option but to comply the trader applies for membership and the syndicate send him: an application form; a copy of the statutes; a circular explaining the obligations he undertakes and the formalities which he will have to perform; forms on which he will have to state what goods are in his possession, what goods he imported in 1911, 1912 and 1913, and what goods he wishes to import in 1916; forms for filling in the numbers of the customs tariff corresponding to his goods (for some syndicates there are more than 100 relevant numbers) and forms for stating the weight and value of the goods. The syndicate also asks for an entry fee of 1,000 francs, and for 10,000 francs surety money; (in some cases the surety is 15,000 francs).
[505]   The trader finds it difficult to be so good a statistician, and seeks for information from his syndicate and his chamber of commerce. He is told that it is quite easy: he has only to collect his customs receipts for 1911, 1912 and 1913, and add up the totals. He answers, that it is not so easy as he received a large quantity of goods by parcel post, and that his goods were not bought by weight, but by units.
      After spending a good fortnight in making inventories and digests of receipt books, he again fills in his forms, satisfied that he is at last about to receive the goods necessary to his business. A few days later he receives an envelope from the syndicate, and hopes that at last he has been given the blue form upon which an authorisation to import is printed. No; his papers have been returned to him because they do not comply with the orders of the société de surveillance suisse. The trader has mixed up rationed with unrationed articles. He has put customs tariff numbers 1145 (slings) and 1142 (toilet soaps) under the same heading; all his work has to be done again....... Nor must it be forgotten that traders must pay for their goods in advance (whereby they lose interest on their money), and that while they are spending all this time in completing forms, and doing paper work, they are paying for the storage of their goods. To give an example: a spinning factory has just paid 70,000 francs for the storage at Genoa of 70,000 francs worth of goods, which even now, cannot be imported. If prices rise, none should wonder at it.

Even the directors of larger concerns had grounds for complaint; for they represented that the sums demanded of them by way of guarantee and security were out of all proportion to the transactions they wished to undertake, and that, by paying them, they drained their concerns of the funds required for ordinary business. Finally, those who complained most bitterly, the French, were the most to blame; for their administration adapted itself even worse than the Swiss to the new state of affairs. On this point, let Monsieur Briand's memorandum to the subordinate officials of the French customs and railways serve as testimony.

      I think it necessary that we should facilitate the delicate work of the society as far as we can, and not allow ourselves to be deterred by criticism, which is made by our enemies, or by interested parties. And some of this criticism, which the British commercial attaché considers serious, can justly be directed against us, for our administrative services raise every obstacle and difficulty, and impose every delay, when goods are to be despatched to Switzerland....... For a long time my department has been combating the over strict application of administrative rules against Swiss commerce. The ill will shown by subordinate officials and minor departments, in respect to measures that the allies have decided upon in common council, has spread a belief that there is a deliberate campaign against Switzerland, and has shocked the British government....... Commercial correspondence with Switzerland has been exposed to real abuses; letters containing samples of embroidery have been stopped by the censor, and traders at St. Gall have thereby lost their Christmas sales, funds being sent to Switzerland as subscriptions to the French loan have been confiscated....... More than this, I have often been compelled to intervene in the matter of goods sent from Switzerland, which the customs have arrested as German goods, after which they have been sent to the legal experts (from whose ruling there is no appeal) on the slightest pretexts....... But, as Mr. Skipworth says, the movement of goods into Switzerland has caused the most serious complaints. The Swiss have complied with all the rules imposed by the military administration of the railways. This administration ordered that the port of Cette should be the only harbour at which goods passing into Switzerland could be received. The choice of this port has been bitterly complained of; for it is badly equipped, badly served, and shipmasters dislike ordering their vessels to enter it. After thus complying, the Swiss were obliged to send their own rolling stock into France to carry away their goods; they formed trains for Cette, Marseille and Bordeaux, and about a quarter of their rolling stock - 4,000 wagons  - are running in this service. But every time a difficulty was surmounted, the military authorities raised another, so effectively, indeed, that trains of Swiss rolling stock have left Swiss material on the quay at Bordeaux, because the permission to ship it could not be obtained. On many occasions authorisations given by the licencing committee have had to be renewed, because permission to transport was refused; and Swiss goods have been in our ports for months, sometimes for a whole year, because the ministry for war have withheld the necessary permits.

As can be imagined, the société suisse reeled and staggered under this tempest of ill will and calumny; indeed, many persons in authority doubted whether it could survive. It was with an institution whose bare existence was doubtful, and whose operations were made difficult by the French bureaucracy, and by the studied enmity of a number of disappointed and envious magnates in Switzerland itself, that the allies were compelled to treat upon a succession of delicate matters.

ii) The close connection between commerce and policy

Moreover, all negotiations were difficult, because every economic issue was entangled in policy. The population of French Switzerland was genuinely attached to France, and that of German Switzerland to Germany. Doubtless, the warmest friend to the French and allied cause was not less a Swiss patriot on account of his friendship for France; nor would it be just to suppose that the German-speaking regiments of the Swiss army would have failed in their duty, if the country had been invaded by Germany. The sympathies were, however, so strong, and the terms pro-ally and pro-German so recklessly used, and always as a bitter reproach, that Swiss society was really divided by racial hatreds, and matters that, in ordinary circumstances, would not have been influenced by racial affinities at all, were, in those times, quite infected by them. Our authorities were, indeed, sharply reminded of this from the outset (if any reminder were needed); for, just when we were confronted with our first difficulties, all Switzerland was convulsed by an occurrence that would have been thought trivial in a united country. This was called the affair of the two colonels; the facts appear to have been these.

Early in January, certain journalists discovered that two Swiss colonels on the intelligence section of the general staff had communicated several numbers of a confidential publication, called the bulletin de l'armée suisse, to the German military attaché. Now, if the facts subsequently ventilated are considered without prejudice or passion, it has to be admitted that these two officers probably made these communications for honourable motives. They maintained, at their subsequent trial, that they were bound by their duty to secure as much information as they could about the German forces stationed near the Swiss frontier, and that they could not secure the intelligence they required, unless they gave the German military attaché an equivalent return. They denied that the intelligence communicated in the bulletin de l'armée suisse was of any prejudice to their own country; but admitted that the bulletin had been accepted by the German military attaché as an equivalent for what he communicated, because it contained information about the French and Italian armies. This was a sound defence, and the Swiss chief of the staff was quite justified in saying: Le service des renseignements militaires ne connaît pas la neutralité. The only offence of which the two colonels were guilty, therefore, was an offence against military discipline; for they had certainly communicated this bulletin, without proper authority from their senior officers.

This trivial incident was so distorted by passion that the country was convulsed for weeks. Every editor and leader writer in French Switzerland regarded the occurrence as proof that military officers from German Switzerland were more in the service of Germany than of their own country. The bare issue whether these two colonels had, or had not, failed in their military duty was never examined. Even Colonel Feyler, one of the most sober and authoritative military writers in Europe, and who, by his training, well knew how military intelligence is collected, could not disengage himself from these wild prejudices. Indeed, the discovery of the affair served to illustrate how much the nation was divided. The first intelligence of it was made by a certain Doctor Langie, a French Swiss on the deciphering section of the general staff. This gentleman made accusations against his superiors, which he was quite unable to substantiate, and his only motive for making and lodging information against them appears to have been a dread lest the Swiss general staff was doing something prejudicial to the allies. The Swiss government contrived to bring the agitation to rest by drawing matters out; but, before the matter was laid, the federal parliament had to be convened for a special session; and although every speaker then freely admitted that the business had been much exaggerated, both ministers and deputies made no disguise that the country was terribly divided, and that the antagonism between Latin and German Switzerland was extremely dangerous. The incident had nothing to do with enemy trade or with contraband; but at least [507] it served to show, that everything agitated in Switzerland was there being inspected through the distorting lenses of racial prejudice. It must, therefore, never be forgotten, that all the questions treated by the allies, during the year 1916, were debated to a nasty accompaniment of clamour from outside the council chamber; and that such impersonal questions as the quantities of oil and cotton needed by a factory, or what could be demanded as an exchange for a hundred tons of aluminium, often became, upon a closer inspection, a political calculation: Whether by treating the matter as one of pure business we should not unwittingly foment divisions between French and German Switzerland; and whether it was expedient, or inexpedient, to assist some section of Swiss society.

iii) The French black lists, and the severities of the French administration

The first difficulty that arose had its sources in the French trading with the enemy legislation; for it seemed to us that this legislation, or rather its strictly logical application by the French courts and administrative services, would, of itself, soon wreck the société de surveillance. It will be remembered that the French, and the Italian, test of enemy character was political allegiance; and that the French law forbad any French citizen to have any dealings, direct or indirect, with any person who was either living in an enemy country, or who, living out of it, was a subject of an enemy government. A considerable number of firms that were established in Switzerland, but which were enemy firms by French law, were therefore posted in the French black lists, and this caused considerable disturbance for the following reasons.

The nationality of a company, or of a collegiate body, only becomes a pressing concern when a country is at war; so that, as Germany had been at peace for fifty years, and Switzerland for nearly a century, continental lawyers had more concerned themselves with the rules that must be complied with before a corporate body becomes a person in law, than with the rules that decide its nationality. With regard to this latter, German jurists have declared that the place of business (sedes materiae) shall decide the nationality of a corporate body; but they admit considerable exceptions to this general rule. The most important of these is the exception with regard to what German lawyers call daughter companies (Tochtergesellschaften), which is that if a corporate body, constituted as such by German law, and situated in Germany, forms a daughter company by virtue of the powers granted to it by German law, then, the daughter company shall be deemed German. When this rule was first established, the German courts were deciding on the nationality of such bodies as chambers of commerce, learned societies established abroad, and so on; but there was general agreement among German lawyers that the rule applied to some commercial companies outside Germany. As the German and the Swiss industries were so closely connected, it would seem, therefore, as though the French administration posted firms that were strictly speaking German, and which would have been admitted to be so by the German courts.1

The French black lists were, however, a great affront to the Swiss, because, by their law, companies are judged to be Swiss almost solely by the rule of sedes materiae. Swiss law admits of a few unimportant exceptions with regard to chambers of commerce, and philanthropic societies, which are regarded as foreign bodies, inasmuch as their corporate existence is derived solely from a foreign legal system; but with a legal existence that is so far recognised and acknowledged that they may plead in the Swiss courts. As for commercial companies with a foreign parentage, Swiss jurists maintain: that all companies must receive a legal charter before they can administer property, raise funds, or pay and withhold dividends, on Swiss soil; that, when they receive this charter, they are given a juridic personality; and that the [508] nationality of the legal person thus created can only be Swiss, as the Swiss state has no power to create a foreign juridic person. Swiss lawyers freely admit that some companies may have two nationalities at one and the same time; but maintain that this does not alter the nationality of societies that have been established by Swiss law, on Swiss soil. There can be little doubt, therefore, that firms which the Swiss authorities considered to be Swiss concerns were included in the French black lists. More than this, some firms attached to the société de surveillance suisse were proclaimed enemy firms in the journal officiel. Our minister at Berne, and Mr. Skipworth, the commercial attaché, both thought that these blacklisting practices, when added to other severities of the French administration, would bring the society to ruin.

It was fortunate, however, that the upper ranks of the French hierarchy grasped quite clearly that every matter relating to Swiss commerce was potentially a political one. An admirably worded reminder of this was added to Monsieur Briand's fierce indictment of the customs and railway officials, wherein he stated that it was of high political importance, that the Swiss people should receive daily assurances of French friendship, and that this could best be given by making the ordinary daily business between the two countries smooth and easy. It has to be admitted, therefore, that although the French authorities often disconcerted us by adhering rather obstinately to propositions that we thought too precise and geometric, they always showed a just appreciation of the political issues involved, when matters that were outwardly economic were discussed in conference.

On this first issue, however, the French entirely disagreed with us, and denied that their legislation was endangering the society. They assured us they desired as much as we did, that the society should be kept in operation; but suggested that they were better able than we to estimate what concessions ought to be made to the prevailing clamour, and how far it ought to be disregarded; for they claimed to be very familiar with the Swiss character. They answered, therefore, that they could not alter their trading with the enemy legislation in favour of enemy firms that were associated to the société de surveillance suisse; but that existing difficulties would diminish, when commercial transactions between France and Switzerland became easier. The French legal advisers did, however, issue an interpretation of the French law, which removed one obstacle; for they ruled, that French houses in Switzerland were not debarred from joining syndicates constituted by the société de surveillance suisse, as those syndicates, whatever their composition might be, were formed to promote allied trade with Switzerland, and to stop allied goods from passing to the enemy. Probably, therefore, the French alleviated the application of their law, as the need arose; for although they never altered their practice of blacklisting, and although we undertook that no firm on the société de surveillance suisse should be blacklisted in England (which perpetuated the contrast between the two legal systems) there were no ill consequences. After being hotly agitated, the question disappeared, possibly because it was overlaid by another of much greater importance.

iv) The German exchange system and Swiss industries

This new issue was the pressure that the Germans were able to exert against Switzerland. In all our dealings with the northern neutrals we may be said to have had the upper hand of the Germans; in that every one of the northern governments knew, without calculation or enquiry, that the loss of their sea communications, which we controlled, would be of far greater damage to their countries than any the Germans could inflict upon him, by operating their exchange system coercively. The case of Switzerland was different; for here it was doubtful whether the allies, or the central empires, were more influential: our command of the sea was, so to speak, [509] very equally matched with the German control of the Swiss industries; and we were soon made to feel that the Germans had power to resist and obstruct all arrangements made in that country.

It has to be admitted, moreover, that the Germans exerted their power very dexterously; for, although they imposed their exchange system upon Switzerland in a harsh and peremptory manner, they subsequently operated it with consummate ability. The end principally pursued by the Germans was to stimulate commerce with Switzerland, and, by so doing, to draw the produce of the Swiss food trades towards the German market. Their major exports, coal and iron, were therefore kept out of the system; but machinery, finished textiles, drugs, chemicals, and aniline dyes were rigidly exchanged. The Germans refused to accept goods that were produced by the major industries of Switzerland, in exchange for these essential commodities, and insisted that they would only accept raw materials in return for them. The same system was followed in the textile trades, and in no case would the Germans agree that Swiss cheeses, chocolates, condensed milks, clocks, watches, broderies and plumetis should be accepted as equivalents for what the Germans supplied them. The position resulting from all this was very advantageous to the Germans. Their coal was as irreplaceable to the Swiss industries as the land on which they were established, and, as this coal was paid for by exports from the major industries, without being formally exchanged, so, the Germans maintained their dominant position without much trouble. Also, by forcing the Swiss to exchange goods that they did not themselves produce, they drained the country of exchangeable goods, and so advanced the day when the Swiss, being unable to operate the exchange system any longer, would be at their discretion.

In April, the Swiss were fairly entangled in the difficulties that the Germans had prepared for them. Their stocks of exchangeable goods were then running out, and they required a quantity of raw metals, chemicals, whey (for cheese-making), wood, and cellulose, all which the German and Austrian governments refused to deliver, except in return for goods that were held in the country by the decrees prohibiting their export. As the Swiss government's undertaking that these prohibitions should be enforced without exception was the basis upon which the société de surveillance rested, the Swiss government were forced to open a negotiation with the allied powers, whom they invited:

      To indicate to them what goods could be imported for the exchange, or, alternatively, to consent that stocks of goods, which have been purchased by the central purchasing agencies of the German and Austro-Hungarian empires, and which have accumulated in Switzerland shall be used for exchange; in which case the quantities ought to be settled.

Some explanation must be given of the German stocks, which were thus introduced into the controversy, for the first time.

Although there was no rationing agreement with Switzerland the country had been regularly rationed in textiles, metals, oils, and foodstuffs since the beginning of the year, and the rations allowed had never been seriously complained of. The Swiss had, however, been left free to distribute the goods that were allowed to them as they thought fit. A certain number of large firms received their supplies direct from the society; but, either by design, or because it is always easier to sell to jobbers than to particular industries, the société de surveillance allowed the jobbers to receive a considerable proportion of the raw materials that had been consigned to the society. Large quantities of goods thus passed into the hands of men whose trade it is to sell to all bidders, and to increase the number of their customers as much as possible, in order to raise prices. This gave the German and Austrian buyers their chance: they bought raw materials and foodstuffs heavily from every jobber who was willing to sell, and prosecuted their operations in every town and hamlet to which their agents could penetrate. They never disdained to make the smallest purchase: a farmer who had a few spare cheeses to sell, or a country locksmith who [510] had a few bags of scrap metal to dispose of, always found a ready buyer, and received a good price, if a German agent visited his village. The outcome of all this was that, when the Swiss note was presented, it was estimated that these German and Austrian purchasing agencies held over forty million francs worth of foodstuffs, forages, metals, and cotton. These stocks were, however, unexportable, for so long as the Swiss prohibition decrees remained in force.

v) The first deliberations of the allied powers upon the Swiss note

If it had stood by itself, the Swiss note would have raised issues of the first order of importance; but, shortly after it was presented, the German government themselves presented a note at Berne, which aggravated the matter. In this document the Germans stated: that the société de surveillance was an organ for waging economic warfare against Germany; that its statutes and operations were alike objectionable; that the German government could not admit that goods lawfully acquired by Germans could be held indefinitely in Switzerland; that they demanded the release of all German and Austrian stocks, in order to liquidate a trade balance of some sixteen million francs; and that, if these demands were not complied with in fourteen days, they would withhold all German goods licensed for export into Switzerland, and would refuse all further licences. This meant that the Swiss supplies of coal and iron were in danger.

The contents of this German note were communicated to us, while we were still making preliminary enquiries into the Swiss note of 4th April, and it will easily be understood how much the enquiry was complicated. When we first considered the Swiss note, both our authorities and the French freely admitted that we were bound in honour to discuss the Swiss proposition; indeed the war trade advisory commission reported it would be a breach of faith to refuse negotiation, seeing that we had promised it in the tenth article of the agreement.2 But we had never intended that our promise should be anything but a promise to facilitate a few isolated bargains between Switzerland and Germany, if the Swiss showed them to be necessary. To have agreed to anything in excess of this would have been equivalent to agreeing that Switzerland was a privileged neutral. Our naval squadrons upon the traffic routes, our agreements with the Netherlands trust, with the Danish trade guilds, and with the Norwegian shipowners and manufacturers, were, each and severally, organs for stopping German commerce with the outer world. We were prepared therefore to sanction a few exchanges between Germany and Switzerland, even though the Swiss put imported goods into the exchange; but we were not prepared to allow a regular exchange traffic, for, to allow this, would be to admit that a country whose imports were carried by railway could be given privileges that were refused to a country whose imports were sea-borne. The only continuous exchange traffic that we could sanction was, therefore, a traffic in goods of neutral origin and manufacture, and in such goods as the German government was willing to give in return. The German note to the Swiss authorities was thus an open challenge; [511] for the Germans were asking that a regular re-export trade was to be established. Our authorities were less inclined to agree to anything after the German note had been presented than they were before, because they felt that concessions would, henceforward, be concessions on points of principle, and that, if the Germans gained anything at Berne, they would at once repeat their manoeuvre at the Hague and Copenhagen. On this point all the allies were agreed.

Also, it was not to be disguised that the Germans were threatening the Swiss with such severe pressure, that the Swiss authorities might be forced, in sheer desperation, to move into the German orbit. The allies could not supply the coal and iron that the Germans threatened to withhold; for, although these goods might have been put on the Swiss market at the price at which the Germans sold them (with the allied exchequers bearing the loss), the coal and tonnage committee reported, that the necessary quantities could never be delivered, as there were neither the ships, nor the railway trucks, to carry them. The allied authorities could not, therefore, disguise from themselves that the German note might be a manoeuvre to force the Swiss into some kind of commercial union, for of the two alternative dislocations with which they were threatened - that consequent upon a stoppage of cereals, textiles, and lubricants, which the allies controlled, and that consequent upon a stoppage of coal and iron, which the Germans controlled - the second was, possibly, the more dangerous.

Thus far the allies were agreed, but they were divided on another matter: general Joffre and the French staff were convinced that the Germans would never seek to force the Swiss into a military alliance; for, according to their calculations, the central powers had not the forces necessary for turning the French flank through Switzerland, and would, in consequence, prefer that the Swiss should remain neutral, and so protect the German flank against an Anglo-French turning movement. The Italian general staff disagreed, for they maintained that, if the Germans were assured of a passage through Switzerland, they could send large forces through the Swiss passes into northern Italy, and so turn the Italian armies in the Trentino and Julian Alps. The Italians were so impressed by this danger, that they were actually fortifying the Swiss passes. It was an important disagreement that the Italians thought the French staff far too hasty, when they reported that there was no military danger in pressing the Swiss. The Italians agreed to stand with us on the point of principle, and they kept their word, for their representatives supported us loyally in all the conferences that were held; but they let it be known, that they could not alter their estimate of the dangers ahead, and that they might be obliged to reconsider their conduct.

vi) The conferences between the Swiss and allied representatives

These arguments on the point of principle were exchanged at great length at two conferences between the allies and the Swiss. The allied representatives maintained that to allow an exchange traffic in such goods as cotton, lubricants, and cereals (which was what the Swiss proposed) was to allow a breach of blockade. Nor could they accede to the Swiss proposal for a restitution traffic, the Swiss supplying stipulated quantities of raw materials, and receiving, in return, manufactured goods with an equal quantity of those same raw materials in them. Our objection to this is best explained by an example: supposing that the Swiss sent into Germany a hundred tons of cotton thread, and that they received, in return, sheets and goods containing a hundred tons of cotton thread; the cotton then received from Switzerland could be sent straight to the explosive factories, while the manufactured goods sent into Switzerland would merely help to maintain the value of the mark in that country.

No agreement was reached at the first conference, which, however, relieved the allies of some of their original anxieties. The Swiss were reserved about the German note, but they let it be known that there was a six months' supply of coal and iron [512] in the country, which was an intimation that German pressure would not be immediately felt, and that they had time to negotiate with the authorities in Berlin. More than this, our experts were satisfied, that such economic control as we were exercising was not damaging the country: the imports and exports were now well above the figures for 1913; and the national trades in clocks, chocolates, condensed milks and cheeses seemed prosperous. Certainly the hotel trade and tourist traffic had dwindled to little or nothing; but in the words of the official appreciation:

      It would be an insult to Switzerland to suppose that she expects to continue, as in times of peace, catering for the pleasures of nations engaged in a life and death struggle. The conclusion seems inevitable that the causes of the decline in Swiss commerce, which occurred in 1914, is now being overcome by the resources and ingenuity of a nation which has never yet been beaten by misfortune.......

The admissions of the Swiss representatives, and the facts ventilated in this investigation thus proved that no immediate crisis was to be apprehended, if the allies did not alter the rations allowed, and, at the same time, firmly refused to countenance the proposals for releasing the German stocks, and for setting up a restitution traffic in metals and lubricants.

The second conference, like the first, was dissolved with nothing agreed to; but it was not only bare adherence to principle that obstructed a settlement. First, the British authorities were suspicious that the Swiss government were, in some sort, accomplices in the German note, and had arranged that it should be so presented as to influence the negotiations with the allies. Also, it was known that the Swiss licencing authorities had allowed some sulphur to be exported to Austria, notwithstanding that the statutes of the société de surveillance suisse forbad the export. This irregularity was thought to be evidence that the Swiss government desired to weaken the reputation and authority of the société de surveillance. The Swiss authorities, however, by no means admitted that our suspicions were reasonable, and it is only fair to state their case. As to the German note, and their complicity in it, they maintained they were not such ill governors of Switzerland as to collaborate in a note, which had excited all the racial divisions in the country, and had put it into such a ferment, that the press of the French cantons were accusing the German cantons of being party to a manoeuvre for turning the country into a vassal state of the central empires. More than this, they claimed that their innocence of all complicity was proved by their subsequent conduct: their long negotiations for reducing the German demands, and their successful resistance to them. As for the irregularities about which we complained, they argued that the Germans were only pressing them, because the German stocks in the country were unobtainable, which proved that the government's export prohibitions, and the control exercised by the society, were being honestly and rigorously administered. If there had been some minor irregularities, the Swiss authorities maintained that they were done by mistake, and not by design, at a time of great administrative confusion, when the trade of the whole country was being put under control; and that it would have been more compatible with our professions of goodwill to have drawn attention to these irregularities privately and friendly, and to have asked for an explanation, than to have put our own construction on them, and to have made them the subject matter of formal protests, seeing that every diplomatic protest from ourselves, or from Germany, inflamed the racial hatreds and divisions in the country.

vii) A settlement is suggested, and subsequently refused by the British authorities

A settlement would, however, have been reached but for a curious misapprehension, which is worth describing in detail, in that it is an illustration that those chances and hazards, which are often decisive in a military campaign, may operate with equal force in economic warfare. When these negotiations with the Swiss were opened, the allied representatives had a plan for settling the controversy without prejudice to [513] the economic campaign as a whole. The plan was that the Swiss should be urged to force the Germans to accept a larger proportion of their domestic exports in the exchange traffic, and that, if something was needed in addition, in order to strike an equivalent, then, that silks, fruits, and wines should be added. A brief explanation must here be given of the Swiss traffic in these goods.

During the first negotiations with the Swiss government, the Italian representatives had stated that they did not desire that silk should be consigned to the société de surveillance suisse, and had intimated, in a guarded way, that they would be obliged to maintain some commerce with the central empires. Their commercial policy, when finally settled, was to keep up their silk exports, and their exports of Sicilian fruits. They were willing to stop the export of the silks that are used for making military balloons, aeroplanes and so on; but they maintained, that only a few special varieties of silk can be used for military purposes, that the export of this light and expensive article was a great support to their exchange abroad, and that they could not forego the advantages of it. As to their fruit exports, they were satisfied, that, if they stopped them, the whole population of Sicily would be thrown into distress, which would cause great commotion, as there were a great number of brigands and faction leaders in the island, who would turn the people's distresses to good account. The Italians were, however, quite willing to arrange that a great part of the trade should be diverted to the allies, if arrangements could be made for purchasing and carrying it. Now the Italian trading with the enemy legislation forbad all exchanges of goods, and all dealing in securities and negotiable instruments, with persons resident in Austria-Hungary; with subjects of the Austro-Hungarian monarchy, wherever resident; with persons resident in countries allied to Austria-Hungary;3 and with all subjects of governments allied to the Austro-Hungarian monarchy. Direct commerce with the central powers being thus stopped, the export trade in silks and fruits moved towards Switzerland, as shipping was running short, and there was none available for capturing new markets. The Swiss were, thus, doing a very big jobbing trade in these goods during the summer of 1916; forty-one thousand tons of fruit were exported during the year 1915 (three thousand tons was the normal); while the value of the silk exports rose from 158 to 274 millions of francs. It was therefore hoped that these exceptional exports might be used for bartering, if the Germans insisted that there should be a regular exchange traffic with Switzerland. The allied representatives suggested this at the close of the first conference. They gave no undertaking, but a settlement of this kind was submitted by them for the consideration of the higher authorities.

This was during the last days of June. The project was therefore being considered, while the British press was choked with articles, reports, and gossip about the battle of Jutland. The nation still imagined that we had won a victory; the country was resounding with a boisterous clamour, and this legend of a naval victory became a motive force in high policy; for, when this project of sanctioning an exchange traffic in silk, fruits, and wines was considered at the foreign office, Sir Eyre Crowe, who was quite unaware of the real facts, thought the time ill-chosen for granting a neutral country a contractual right to provide Germany with a large supply of luxuries and comforts. For these reasons he drafted an instruction which ran thus:

      Owing to the changed situation brought about by the recent naval victory and cumulative evidence of the effects of economic pressure upon the central powers, great pressure is being brought upon His Majesty's government to tighten the blockade in every feasible way and to abandon wherever possible the system of special concessions to neutral countries adjacent to Germany as regards imports of value to the enemy. It is therefore not a good moment for giving an undertaking to Switzerland which amounts to authorising unlimited supplies of silk, wine and fruit into Germany and several of our administrative and other authorities will have to be [514] consulted before a definite and final decision can be given. Without being able to anticipate this decision, I think objections might more easily be disarmed if any concession were made strictly temporary, possibly for a fixed period, and also if in return there were...... a definite undertaking on the part of the Swiss government to abandon all idea of exchanges with Germany of any goods consignable to the société de surveillance suisse.

It is curious to speculate how these instructions would have been drafted, if the foreign office authorities had known the truth, which was: that there had been no naval victory for either side; that the Germans had won a success by inflicting far more loss than they suffered; and that, for the first time in British history, a crack British squadron had been out-fought by a weaker force. Possibly it would have made no difference, for, if the facts had been known, Sir Eyre Crowe and the contraband department would probably had judged it a bad moment for wavering and drawing back. It yet remains true that instructions of the first order of importance were influenced by a misapprehension.

When acted upon, these instructions brought the second conference to a standstill, because the Swiss, on hearing how closely we wished to circumscribe the concession about silk, fruits, and wines, said that so narrow an engagement would be of no use to them. The Swiss authorities were rather bitter about this second failure. Their whole case was: that the national trades, which we had promised not to hamper, were all re-export trades in the sense that we were then giving to the word; that it was unreasonable in us to make it so difficult for them to obtain German goods that were required in the very trades that we allowed to be free; that, at the second conference, they had promised to bring the exchange traffic to an end, if we granted them the means of doing it; and that the few concessions they asked for in the matter of wool, linen, cotton and rubber exports would not have relieved the economic distresses of the central powers.

viii) The position after the second conference broke down, and the German-Swiss agreement

Our authorities hoped that this second failure would settle the controversy as well as a formal settlement, but in this they were wrong. Even before the first conference assembled, there were indications that the Germans did not intend to stand on their first demands; for they did not insist that the Swiss should answer their note within a stipulated time, as had been originally demanded. Thereafter, the indications of a German manoeuvre increased; reassuring articles, written after consultation with the German authorities, appeared in the Neue Zürcher Zeitung, the Bund and the Welthandel, papers of good standing in Switzerland, and, as soon as sufficient time had passed for these articles to make an impression, the German commercial attaché assembled a number of Swiss magnates at the Schweizerhof in Berne, and announced to them that his government would never do anything to injure Swiss industry, and desired rather to stimulate and encourage it. The matters debated between the allies and the Swiss were, therefore, not settled when the second conference was dissolved; for the Germans had still to make their move, and, a few days after the second conference with the Swiss had failed, our minister reported that the Berne government were in treaty with the Germans.

When these negotiations began, trade between Switzerland and Germany was still running freely, but the outlook was very uncertain for the Swiss. The Germans had certainly not stopped their exports of coal and iron, but they had reduced them, and the Swiss were beginning to draw on their stocks, which were good for between three and six months. The German demand for the release of the goods that had been purchased by their agencies had not been withdrawn; and it was peculiarly threatening that the German authorities had recently issued black list regulations of unparalleled severity. By these rules, all German goods were to be withheld [515] from black listed firms, from firms transacting business with them, and from firms, which might, at any time, transact business with them. An office was established for administering these regulations, and Colonel Schmidt, the gentleman in charge of it, was the sole judge of what constituted an objectionable transaction, and of what justified him in withholding supplies, because an objectionable transaction was to be expected. No severe stoppage had been ordered by Colonel Schmidt; but these regulations, by their mere existence, were a formidable threat to Switzerland.

Very little is known about the course of the negotiations between the Swiss and the German representatives; but if the final settlement between them is juxtaposed to the position at the beginning, and if the German organs of pressure are remembered, it has to be conceded that the Swiss laboured valiantly in their country's interest. The Germans undertook to send 255,000 tons of coal into Switzerland every month, and to supply the country with as much iron and steel as was needed; the Austro-German stocks were to be held in Switzerland until the end of the war; and the German black list was to be cancelled. A special office, the Treuhandstelle was, however, to be established for distributing the German supplies of steel, and no munitions of war made by machines imported from Germany, or with materials imported therefrom, were to be exported to allied countries. In return for these concessions, the Swiss undertook to send a considerable supply of cattle into Germany, and to facilitate commerce between the two countries. The exchange traffic between Germany and Switzerland was, in fact, so revised that Swiss domestic produce was included in it, and anilin [sic] dyes, so very important to the Swiss textile trades, were removed from the exchange list.4

ix) How the allied governments appreciated the German-Swiss agreement

When this agreement is reviewed, from this distance of time, it would seem as though the Swiss were more to be congratulated than reproached for having concluded it. Notwithstanding that the Germans had such good means of pressing and intimidating them, the Swiss had stood firm on the two points upon which we had insisted: that Swiss re-exports should be on the same footing as those of any other border neutral; and that the goods purchased by Germans and Austrians should not be released. More than this, the Swiss had so regulated the exchange system, that it could not again be used to obstruct the arrangements made with the société de surveillance suisse. Nevertheless, the new agreement was received with great misgiving. The British authorities were apprehensive lest these new German conditions about coal and iron were the first moves in a plan for bringing all the Swiss munition firms within the German orbit. Labour was scarce in Germany, and a rising number of orders were being placed abroad; it was therefore thought possible, that the Germans intended so to administer their regulations about coal and iron, that no Swiss factory would be able to tender for the allies, and that all would be forced to seek German contracts. As the orders being executed for the entente powers were far larger than those being executed for the central powers, this was a formidable danger. The British authorities were also indignant that the Swiss had agreed to increase their exports of cattle to Germany. We had not a good case on this point; but inasmuch as we had tried, throughout the year, [516] to establish the principle that the domestic exports of a neutral bordering on a blockaded country should not be allowed to rise above normal, so, we were more or less bound, by the precedents that we had ourselves created, to protest against this new agreement; for it was not disguised that the Swiss had agreed to treble their exports of cattle to Germany. The French authorities were, possibly, less apprehensive than ours about the conditions now attached to the supply of coal and iron; but they were even stiffer than we were on the general principle that Switzerland should be on an exact footing with other border neutrals, for which reason they objected to the clauses with regard to cattle. The strongest French objection was, however, that the agreement was a political gain for the Germans, and that it increased their influence in Switzerland.

The allies were, therefore, united in their dislike of the agreement, but they were divided as to what was most proper to be done. Sir Horace Rumbold was now minister at Berne; and Mr. Craigie, who had been much concerned in the negotiations during July and August, was assisting him. Knowing that the new agreement was much disliked in Paris and Whitehall, and that projects for reducing Swiss rations by way of retaliation were being considered, both these gentlemen advised strongly against active retaliation, and gave the following reasons why it would be unwise.

      I am so convinced that we are on the wrong course that I can only feel that I have failed to explain to you properly what the real situation is and how much we stand to lose by following the German blood and iron method at a moment when we could, I honestly believe, gain almost anything we want by other methods. Popular opinion here is steadily swinging round to us and the attitude of the conseil fédéral is altogether different from the time when the German menace was still dark upon the land. I do not look upon Swiss friendship as an end in itself but as the best means to an end, and that end is the progressive increase of our blockade pressure through Switzerland. Do not think that the methods which do admirably for Greece are equally suitable to Switzerland. I agree that with the Swiss we must always have a threat somewhere in the background, but to make too free a use of it is to bring out in the Swiss his latent capacity for tortuous diplomacy, which he regards as his only shield against force majeure. Whereas at the present moment, when they have just suffered from the German lash, they (the government) wish to treat with us in the frankest manner and they are ready to give me the fullest facilities for any investigations I may wish to make. You will say I have already been nobbled! Don't believe it for a moment. I do not believe I can ever have been accused of a desire to be weak in these blockade measures and I am more determined than ever to make things watertight here. It is merely a question of method. You have not given us enough time and, if we now take up too severe a line in this question where our case is a bad one - in fact where our only case resides in our own paramount military necessity, is to lose any advantage which you may have hoped to gain, from a change of ministers here. If my plans fail, by all means let us try the other method and carry it through to the end. But give us some more time and remember that the German-Swiss arrangement was practically a fait accompli when we came.
      Let me just briefly put the Swiss case again: they say that at the last meeting at Paris they spoke of their intention to use cattle for export for exchange and no objection was raised; certainly no limit was fixed and certainly they have nothing which is more purely Swiss production than cattle - some foreign element enters into everything they produce. And yet Germany has them by the throat and will undoubtedly carry out her threat of cutting off her coal and iron unless she gets something. The present excess of breeding cattle is not due to excessive supplies of fodder, but to a long spell (four years) during which there has been little disease; the great majority of the cattle being exported are from four to five years old; the net gain in food to Germany is small since the food value of potatoes is almost equivalent to that of the cattle. (I believe with pressure and a promise of absolute secrecy we could still get the figures.)
      But whatever her fault, a mere policy of strafing is barren: we cannot expect to break the agreement with Germany and it would, in the long run be no advantage to us if we did. It is for this reason that I plead most earnestly before it is too late, that we should use what we shall call our right to cut down supplies (in view of the cattle export) to obtain (i) the assurances proposed in despatch to Paris, No. 2300,5 (ii) certain undertakings over and above what is agreed to in the société de surveillance suisse règlement such as absolute prohibition of export of rubber, statistics other than those covered by article 17, the confirmation in writing of the existing state [517] of things under which the société de surveillance suisse have a veto over all exports of société de surveillance suisse goods (this is undoubtedly so at present) and various other points, (iii) an agreement whereby any further abnormal exports of cattle after April will be avoided - or even a reduction below the normal to compensate for present increase. But always bear in mind that the Swiss are really obliged to send something to get their coal and iron for which they are more dependent on Germany than any other limitrophe state. (Mr. Craigie to Mr. Waterlow, 6th October, 1916.)
      Although I do not for a moment suggest that the arguments in your lordship's telegram should not be put forward if it is decided that a reduction of the Swiss imports of fodder and edible fats would in the end suit our purpose, yet I think it desirable to point out that the federal government would have a strong case in any contest of this kind. The whole question of the relation between the imports of foodstuffs and fats on the one hand and the exchange of cattle on the other is an extremely complicated and difficult one. While no doubt a considerable reduction in the fodder imports would ultimately result in a state of things whcih [sic] would render a further export of Swiss cattle impossible, this would only take place after a very considerable amount had passed to the enemy, and would produce a great reduction in the amount of Swiss milk and chocolate which we are at present obtaining from this country. Moreover, it would produce a state of acute ill-feeling against us at a moment when, if disagreeable incidents can be avoided we have a real chance of shaking German influence which has hitherto been supreme in government circles in this country. The future may, of course, show that mild measures are of no avail against Switzerland even at a time when the military strength of the allies is in the ascendant, and, in that case, the exigencies of the blockade should, no doubt, override all other considerations, and should render necessary the adoption of a severe policy of reprisals against Switzerland. So far, however, as I have been able to gauge the sentiments of the federal government since my arrival here, there appears to be a sincere desire to work with us and to insist that the obligations of Switzerland towards the allies be carried out in a more loyal and in a franker spirit than has previously been the case. Officials who have been too lenient in the distribution of export permits are finding their powers reduced; the influence of the société de surveillance suisse is undoubtedly on the increase and the relations of the société with the federal government are becoming more and more harmonious; finally, the present arrangement with Germany does not appear to have been brought to a conclusion without a certain amount of friction on the two sides, M. Hoffmann, M. Schultess and M. Frey having all referred, somewhat bitterly to the exacting methods of their northern neighbours. I feel convinced that the Swiss negotiators have only given the minimum which Germany would take, and, that after a considerable struggle. It must further, I think, be recognised, that the refusal of the allies to agree to the continued export of silk, fruit and wine has considerably narrowed the field in which the federal government could look for articles capable of being used for exchange purposes with Germany. (Sir H. Rumbold to the Foreign Office, 2nd October, 1916,)

In addition, our authorities had before them a number of appreciations from Mr. Sawyer, who was acting as agent for the ministry of munitions in Switzerland. After carefully reviewing the position, and interviewing the directors of every factory that was contracting for us, Mr. Sawyer was satisfied that our munition supplies would not, in practice, be endangered by the German agreement: coal and steel were still being supplied by middlemen to firms working on our account; and the Swiss authorities were most anxious that no industry in the country should be dislocated.

Our advisers were thus persuaded, that the difficulties and uncertainties of the moment would best be overcome by enlarging our influence in Swiss councils, and that this influence would be diminshed [sic], rather than increased, if our manoeuvres were guided only by the precise calculations and logical inferences of economic warfare. Mr. Craigie's opinion is interesting for a peculiar reason. While he was advising on Swiss affairs from headquarters, or attending conferences with the Swiss representatives, he consistently advised against concessions; one of his last minutes on the official papers was that, even if we did secure a little popularity by being easy about small exports of goods that, by agreement, were unexportable, we should gain nothing. On arriving in the country, he changed his opinion, and freely admitted it, which is proof that nobody could assess the political consequences of our economic war plan, until he had visited Switzerland, and seen how every restraint upon trade, and every new regulation either stimulated, or started, some political movement in the cantons. Mr. Craigie and Sir Horace Rumbold therefore urged that no new proposals should be pressed upon the Swiss government, but [518] that we should negotiate with them for positive, binding, assurances that the société de surveillance should be paramount in all matters relating to export licences, and that no government department should have the power to disregard the society's rulings.

x) The French disagree with the British and new demands are presented at Berne; the Swiss reply

Sir Eyre Crowe, and the contraband department agreed with Sir Horace Rumbold and Mr. Craigie; but they were not free to endorse their proposals, unless the French also agreed with them, and the French authorities could by no means be persuaded to do so. The French agreed with our advisers, in a general way, that it would be unwise to impose severe restraints upon Swiss commerce; more than this, they agreed it was more important to keep our influence in Switzerland unimpaired, than to stop small leakages in woollens or cottons. On the other hand, the French appreciated the German agreement as a political gain for Germany, and were convinced that our influence would decline, unless we secured conditions from Switzerland similar to the conditions recently imposed by the Germans. In support of their contentions, they quoted numerous written opinions from the French cantons, which certainly did seem to show that the French Swiss were looking to the French to counter the last German move. The French therefore considered that Sir Horace Rumbold's and Mr. Craigie's proposals were insufficient, and thought it incumbent upon the allies to demand assurances, that no raw materials supplied by the allies should be delivered to any firm that was executing German contracts. Supplies controlled by the allies would then be on an exact footing with German supplies of coal and iron. In the circumstances, it was inevitable that French opinion should prevail. The sympathies of the French cantons was for France rather than for the allies as a whole, and Monsieur Beau was by far the most influential of the allied ministers at Berne. In any case, as the whole calculation was political rather than economic, we were bound to treat the French as our expert advisers upon the temper of a people, whose literature, system of education, and social customs were all of a French model. For these reasons, the British and Italian governments agreed, that a note drafted by the French Foreign Office should be presented at Berne. Mr. Craigie and Sir Horace Rumbold agreed to the text against their better judgement, for they both thought the proposals dangerous.

The allies stated in the preamble, that, having carefully examined the agreement recently concluded between Switzerland and Germany, they considered it incumbent upon them to demand, that the federal government should re-establish equal treatment between the two groups of powers at war, as that equal treatment had now been departed from. The allied governments had been given grounds to believe, that the Swiss would be unconditionally supplied with German iron and coal during the war, just as they were being unconditionally supplied with cereals by the entente; believing this, the allied authorities had placed orders in Switzerland. By agreeing to these new conditions about the supply of coal and iron, and by agreeing that they should be retroactive, the Swiss had done grave injury to the industries working for the entente powers. In order that the balance should be restored, the allies therefore asked that the Swiss government should: (i) prevent all electrical installations and power stations that were sending current into Germany from receiving or using copper and electrodes supplied by the entente powers: (ii) prohibit all houses then executing munition contracts for Germany from receiving lubricants supplied by the entente powers: (iii) cancel those articles in the agreement with the société de surveillance whereby goods were allowed to be exported, if they contained a small, agreed percentage of raw materials supplied by the entente; (iv) prohibit the export of all machinery, hydro electric products, and cotton tissues pending an enquiry into the measures proper to be taken for giving effect to the allied demands.

[519] When this note was being prepared, the French maintained that we should lose nothing by presenting it. They argued, that French and Italian railways, and British shipping were as much allied property, as German coal and iron were German property; and that the French Swiss would never dispute our right to stipulate, that nothing carried by our railways and shipping should ever be allowed to assist or comfort our enemies. Indeed, they claimed that the French cantons would probably welcome these new demands, as tangible evidence that the allied governments would not allow the Germans to strengthen their influence in the country. In all this the French miscalculated. The note was very badly received by the Swiss government; and the Swiss foreign minister at once stated that the allied cause in Switzerland would suffer a sharp setback, if the government made the matter public, by presenting papers to the federal parliament. In order to test the country's temper, the Swiss ministers gave the leading newspapers an outline of the allied note, and although it is impossible to infer anything for certain from a press so excited by racial sympathies and hatreds as the Swiss, it yet seems well established, that the French cantons did not give the allied proposals the reception that the French had confidently anticipated. Editor after editor reproached the allies for being so harsh and peremptory to a friendly nation; and no editor, French, German, or Italian, ever suggested that the allies' proposals could be agreed to. When the Swiss cabinet prepared their resistance to the allied demands, they had thus good reason to know that the nation was supporting them.

The Swiss certainly lost no time in answering. They maintained, firmly, that we had no just cause of complaint. The société de surveillance had been established to prevent raw materials that were imported through the entente countries from passing to the enemy, either as raw materials, or as goods useful in war: the Germans were, therefore, only imposing conditions, which the allies themselves had imposed in the previous year. In any case, the Swiss maintained that the clauses in the German agreement, whereby German coal and iron were to be withheld from certain firms, were far easier than our conditions about machines that could be exported, or about alloys in the metal trades. The allies had only allowed export, if a very small percentage of the final product had been brought into Switzerland through the entente countries, whereas the Germans had merely stipulated, that German iron and coal were not to be used in factories that were making arms and explosives for the entente powers. As for our contention that the Germans had undertaken to supply Switzerland with coal unconditionally, the Swiss answered that it was not accurate, as the Germans had promised only to facilitate the export of coal. With regard to our actual proposals, the Swiss answered that they were inconsistent with the engagements that we had previously given: having undertaken that no restraints should be imposed upon goods imported by the société de surveillance, and consumed in Swiss territory, we were now endeavouring to impose new conditions about lubricants used in Swiss factories, and electrodes needed for Swiss industries.

      The principles established in the constitution of the société de surveillance suisse, which are incompatible with the demands presented, cannot be abrogated or suspended unilaterally. Nor is it to be understood why such enquiry as may be necessary can only be undertaken, if agreements between the federal council and the entente powers are suspended.

In conversation, the Swiss authorities elaborated these arguments, saying that our proposals were most wounding, and that they would as soon agree to surrender their glaciers and waterfalls, as to consent to our conditions about electric machinery and current. They added they took it very ill, that we should present them with proposals that their pride alone obliged them to reject, after they had given such good proofs of friendship, by receiving and interning great numbers of sick and wounded prisoners, and treating them with every possible kindness.

xi) The allies start a new negotiation with the Swiss

Our authorities were soon convinced that the Swiss were genuinely roused by what they had learned about our note, and that the presenting of it had been a bad manoeuvre. The best remedy was, therefore, to open negotiations for liquidating the matter, and these were begun in the middle of December. Some account should be given of matters not negotiated upon, but which nevertheless influenced the final settlement. It was a great misfortune to us, that our military reputation was declining whenever we undertook a big negotiation with the Swiss. The German armies had been advancing into Russia, when the allied representatives were conducting the negotiations for setting up the société de surveillance: in the winter of 1916, the outlook was almost as dark as it had been during the previous summer; for the meteoric successes of the year had by then quite disappeared from the military firmament. General Brusilov's advance against the Austrians was brought to a stand; the British attack upon the German positions on the Somme failed; the French defence of Verdun, which had raised the reputation of the French armies during the first months of the year, was then forgotten. And against such temporary successes as our armies had gained, the Germans could set off the immeasurably greater success of having defeated the Rumanian armies and over-run the country. It is true the press in the allied countries still reviewed the military position in a high strain of bragging; but of all neutrals in Europe, the Swiss were probably the least deceived by the extravagances of the allied newspapers. The Swiss general staff were a very intelligent body of men, and articles upon the military position, written by Swiss officers, and published in the Swiss papers, were, perhaps, the most level-headed, and critical, appreciations that were being circulated in Europe. The most casual glance at the revue militaire suisse will serve to show what the Swiss staff were reporting to their government. The Swiss generals realised - and presumably M. Hoffman and his ministers were content to be guided by their military advisers - that the German armies were not likely to be expelled from the countries they had conquered, from which it followed that Rumania, a great corn producing country, would be under German occupation until the end of the war. More than this, the Swiss authorities, whose preoccupations in the matter of overseas imports gave them a good measure of the growing shortage of tonnage, were shrewd observers of the German submarine campaign, and realised that the entente powers would be in great difficulties during the coming year. Just as the French representative had reported in 1915 La situation militaire pèse lourdement, so, in the winter of 1916, Sir Horace Rumbold and Mr. Craigie felt they were negotiating with persons who were persuaded that the allied armies would never turn the tide of misfortunes, which was then setting so strongly against them.

In the final settlement, therefore, we receded a good deal from our demands and agreed: that, in view of the German regulations about coal and iron, firms making munitions for the central powers were to obtain their lubricants from them; and that, if the allies did not get a satisfactory equivalent in munitions for the lubricants they supplied to firms that were working for the entente, then, the whole matter was to be reviewed again. The proposals about metals used in electric installations were entirely abandoned, in return for an undertaking by the Swiss, that fifteen thousand kilowatts should be transmitted into France by the power station at Olten Goesgen. In addition, the Swiss were allowed to export twenty thousand quintals of cotton, annually, to the central empires. A number of highly technical provisions about metals and machines followed; and the federal council agreed to certain proposals for strengthening the société de surveillance. These proposals had first been formulated by Mr. Craigie; the details were intricate, but their whole purpose was to make the society the paramount authority in all matters relating to the export of goods that were consigned to the society. Finally, it was agreed that [521] a joint commission should prepare a list of goods useful in war, and that this list should be authoritative, whenever any clause in the agreement relating to war material was put into operation.

Several matters were left unsettled by this agreement, notably the Swiss exports of cattle. The allied authorities had, however, concluded that it would be better to check the cattle exports by being liberal with forages, which would enable the Swiss farmers to keep their cows back for cheese-making, and, after that, to prepare a scheme of purchase. The plan approved was that half the surplus cattle, and four-fifths of the condensed milk, exports should be bought by the allies. It has been shown, in previous chapters, that of all the operations of economic war that of reducing and regulating the domestic exports of a neutral country was the most difficult to execute satisfactorily; for this reason it was probably a piece of good fortune that this plan for reducing Swiss exports by measures similar to those attempted in Holland and Denmark was never executed. The agreement with the Swiss was concluded in the last days of January, 1917: a few days later, the final German campaign against commerce began, and this put shipping and transport into such confusion, that all agreements with neutrals were temporarily suspended. The whole system of rationing, and of enforcing agreements about re-exports was brought to a stand, because there was no shipping to carry the rations allowed. When neutral shipping had recovered from this first dislocation, the United States had declared war, and this, as will be shown later, virtually terminated every agreement in operation.6

1See Nussbaum: Deutsches Internationales Privatrecht, Chapter I, Book 2, Personenrecht. Also, la nationalité en droit suisse by Georges Sauser Hall. ...back...

2The basis or starting point of the negotiation was rather complicated. It will be remembered that the negotiations for establishing the société de surveillance suisse has been long because it had proved difficult to come to an agreement upon the question of exchanges between Switzerland and Germany, and that, as it was deemed highly important that the société suisse should be established as soon as possible, a temporary expedient was agreed to in the following articles. By article 4, it was laid down that houses which benefited by the new facilities granted: Should not dispose of their old stocks in a manner contrary to the conditions imposed when the new facilities were granted. On the other hand, by article 11, section 2, the Swiss government were allowed to use certain stocks in the country for exchanges with the enemy. In order to restrict this right closely, it was further laid down that goods imported through the société de surveillance could not be exchanged for goods from another country; and, finally, it was agreed that the arrangements to be made on the head of exchanges were to be the subject of negotiation in each particular case. In a confidential letter, the allied representatives promised to interpret all rules established with "liberal goodwill" (large bienveillance). ...back...

3See Atti Legislativi relativi ai rapporti economici dell' Italia con i passi già nemici duranti e dopo la guerra - Tipografia Ludovico Cecchini. ...back...

4The lists of interchangeable goods were:
(a) Goods delivered by Germany. - Potash salts (in general); ground basic slag; potatoes; products of potato drying; raw sugar; calves stomach and rennet; straw; sugar beet-root seed and red beet-root seed; soda; clay and china clay; zinc, raw, in cakes or spelter; sheet zinc and zinc tubes; sulphate of copper.
(b) Goods delivered by Switzerland. - Cattle for breeding purposes and dairy cattle; Emmenthal cheese; herb cheese; condensed milk; preserved goods; goats; dried waste fruit and other dry feeding stuffs; chocolate; industrial casein and rennet casein; fresh fruit; fresh wine (cider and perry, etc.); dried fruit; honey and syrup; milk powder. ...back...

5A despatch in which we suggested that the Swiss government should be warned about certain irregularities reported to us, and asked to give assurances against a recurrence. ...back...

6For the subsequent history of this agreement see pp. 635 et seq.. ...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).