Chapter 1 Neutral Rights and Trade with the Enemy

identifying trade with the enemy

Commercial interactions between enemy belligerents can be direct or indirect. Direct trade is an exchange of merchandise where a merchant in state A transfers the ownership of the product directly to a merchant in state B. States have good strategic reasons to restrict direct trade with the enemy during war. It is difficult for an enemy state to tell if a ship approaching its shores seeks to unload merchandise or to shell the port. Given wartime conditions, shooting at ships flying enemy colors and asking questions later is safer. Likewise, it is difficult to tell if an incoming railroad car is full of products or soldiers. Ships, railroad cars, trucks, and airplanes coming from an enemy state are assumed to be hostile in war; thus, the transport of merchandise via such direct means is restricted to limit unnecessary destruction.

Trade can still be considered direct if neutral intermediaries facilitate its transport—for example, if a merchant in state A hires a neutral ship to transport some products to a merchant in state B. So long as the ownership of the products does not transfer to the neutral, the trade is still considered direct between state A and state B. Because of transportation provided by neutral states, it is possible for official trade statistics to reflect some direct bilateral trade with the enemy. Unfortunately, states are inconsistent in recording such interactions as direct trade.

When the ownership of a product switches to an intermediary before being delivered to its final destination, trade is considered to be indirect. In the simplest form of indirect trade, a merchant in state A sells a product to a merchant in a neutral state, who then sells the same product to a merchant in state B. Indirect trade typically increases both the cost of the merchandise and the amount of time it takes to reach its final destination. The neutral state would not engage in wartime trade if it were not profitable; thus, the final consumer price reflects the profits of the intermediary as well as the initial cost of the product. Transporting the products via an indirect route to enemy borders increases the transportation time. However, even if the neutral state uses a direct transportation route, locating a willing merchant in the neutral state and negotiating the sale take time. Nevertheless, indirect trade reduces the risk that the receiving state will conflate trade with military action. Trade with the enemy is likely to be indirect trade.

Indirect trade also includes more creative methods of transferring products from one state to another, such as domestic substitution. A merchant in a neutral state imports a product from state A, then sells an identical product that was manufactured in the neutral state to a merchant in state B. While technically this exchange constitutes two different transactions using two different products, it is still indirect trade because the neutral can only export domestically manufactured goods to state B if domestic demand is satisfied by imports from state A. Without the trade between the neutral and state A, the trade between the neutral and state B would not be possible. Domestic substitution allows the neutral to legally claim that it is not exporting any goods of enemy origin to state B.

Another form of indirect trade is minimal manufacturing in a neutral country. A merchant in a neutral country imports a product from state A, processes it in some minimal manner, then exports the result to state B. For example, a neutral state can import tulips from one belligerent, wrap each dozen in plastic, and sell the resulting bouquets to a different belligerent. Again, this could allow neutral states to legally claim that only goods of neutral origin—bouquets—are entering state B. Determining the economic nationality of a product is a technically complicated process, made more difficult by disagreements between different states on the rules of origin. The World Trade Organization (WTO) has been working since the Uruguay Round to harmonize these standards across the member states.⁴

States are well aware of all the different types of commercial transactions that can occur between the merchants of their state and those of the enemy. When formulating a wartime commercial policy, states are not content with setting limits only on direct trade with the enemy; they also seek to control as much of the indirect trade as seems prudent in a given war. Therefore, wartime commercial policies can range from allowing all direct and indirect trade to placing various restrictions on direct or indirect trade to forbidding both direct and indirect trade with the enemy.

enforcing a prohibition on trade

With so many different channels for trade with the enemy, how can a state enforce its preferred wartime commercial policy, especially when most of the indirect channels of trade pass through neutral states, over which the enacting state has little to no control? In fact, states prove quite adept at creating the tools for controlling even the least accessible of indirect trade.

The simplest way to limit all direct and indirect trade with the enemy is to establish a blockade of enemy territory.⁵ The more complete the blockade—sea, land, air—the more trade can be prevented from reaching the enemy. Along with severing all trade between the enacting state and the enemy, a well-established blockade can sever all neutral trade with the enemy in contraband goods. Contraband goods are a class of products meant for the use of enemy forces and are allowed to be captured if found destined for an enemy’s territory.⁶

Alternatively, enforcing a prohibition on direct trade with the enemy can start with a legal prohibition. Self-regulation among the law-abiding citizens severs a portion of trade with the enemy. For the rest, the state’s Customs and Excise department monitors the products leaving and entering the country, stopping trade that violates the government’s mandate.

Enforcing a prohibition on indirect trade with the enemy requires more effort. To prevent the import of enemy goods, a country can levy prohibitive tariffs on products of enemy origin or require a certificate of origin to screen out goods produced by the enemy. The use of these measures is somewhat tempered by the reigning international economic order.⁷ For example, the WTO prevents states from imposing discriminatory policies based on country of origin; however, these rules are subject to a national security exemption. While these measures provide some enforcement to limit indirect trade, they can be circumvented by domestic substitution or minimal manufacture in the neutral state. A stricter enforcement mechanism can place limits on the percentage of enemy goods and/or labor allowed in imported products, as verified through a certification scheme.

To prevent indirect exports of domestic goods to the enemy, a state can prohibit the export of all or specific products to neighbors of the enemy state. Any citizen wishing to export such prohibited products to the enemy (skirting legality) would be required to send them along a lengthier route through several neutral states to reach the enemy. The additional cost and time of transport might prove prohibitive for such trade with the enemy to continue. A stricter enforcement measure can place a quota on exports to a neutral state based on the level of prewar exports to said state. Any additional exports to the neutral country are likely to be passed on to the enemy, as they are not required for domestic consumption.

Finally, if the war lasts long enough for the necessary information to be collected, a state can curate blacklists of merchants known or suspected of trading with the enemy. Domestic merchants can be prohibited from interacting with anyone on the list. Neutral merchants can be threatened with being placed on the blacklist themselves to discourage indirect trade. Whitelists are even more restrictive, naming approved merchants with whom trade can be conducted; trade with all other merchants in the state is illegal.

development of neutral rights

In the modern conception, neutrality refers to a state’s legal status of nonparticipation in relation to belligerents engaged in warfare. Neutral rights ensure that the neutral state remains impartial toward all belligerents and assures the neutral state of freedom from hindrance by the belligerents in its own territory and in its commerce.⁸ The development and evolution of neutral rights, to arrive at even this general definition, was a long and contentious process. As with most aspects of customary international law, for any step forward, there were several steps back. However, at a certain point in the evolution of neutral rights, states were forced to reevaluate their approach to wartime trade; severing all trade with the enemy ceased to be the best approach to all wars.

Maritime neutral rights hold the greatest relevance to this change: (1) the principle that the flag covers the merchandise, (2) the abolition of privateers, (3) the fact that a blockade has to be effective to stop trade, and (4) a specifically defined contraband list and free goods list. The first of these rights assures the safety of neutral ships transporting products of enemy origin, with the exception of contraband, making it practical for neutrals to insert themselves as intermediaries into belligerent trade and creating an indirect channel for trade where direct ties between belligerents are severed. The following two rights limit the extent to which belligerents can restrict their enemy’s trade to the level of enforcement the belligerents can provide using their own navy. The last neutral right clarifies the extent to which belligerents can interfere in neutral trade with the enemy belligerent.

Before and during the Napoleonic Wars, Britain and France spent most of their time at war with each other. This made the development of neutral rights highly unprofitable for both great powers.⁹ Allowing neutrals to resupply their enemy would have been counterproductive to their war efforts. Individual states signed bilateral treaties to protect each other’s commerce, but these agreements mostly collapsed as soon as war began.¹⁰ Indeed, there was little consensus between nations on the proper treatment of impartial states’ commerce with the belligerents during a conflict. France and Spain rejected all neutral rights at sea; neutral goods on enemy ships as well as neutral ships carrying enemy goods were liable to capture.¹¹ England, likewise, supported the capture of enemy goods on neutral ships but restored captured neutral goods on enemy ships to their neutral owners. However, England enforced the capture of neutral ships attempting, during a war, to engage in trade that was new for that neutral, a policy known as “the rule of 1756.”¹² Since most European states reserved exclusive rights for their own ships for coastal trade and trade with their colonies, the rule of 1756 prevented neutral ships from helping enemy belligerents transfer supplies where the belligerent’s own vessels were unable to do so. It also protected belligerent shipping from competition and belligerent markets from being conquered by neutral states while the belligerent was unable to service them because of the war.

Moreover, the practice of granting letters of marque was widespread. These letters essentially commissioned private individuals, or privateers, to capture enemy shipping during war.¹³ Privateering supplemented the naval strength of the belligerents and ensured that the enemy could not resupply with the help of neutral states.

Efforts to defend neutral rights stemmed from innovative cooperation schemes, like the First League of Armed Neutrality.¹⁴ A Russian-led effort during the American Revolutionary War, it combined the naval efforts of Russia, Denmark, Sweden, Netherlands, Prussia, Austria, Portugal, and the Two Sicilies to enforce the principle that enemy products on neutral ships should be safe from seizure and that neutral ships should be permitted to sail between belligerent ports.¹⁵ France, Spain, and the United States agreed to the principles without formally joining.¹⁶ The combined pressure from the members of the league threatening to protect their trade militarily against British seizure led to some wartime concessions by the British Empire.

League members had their own private reasons to support the development of neutral rights. Russia’s goal was to protect its exports, the majority of which were carried in British ships, which made them vulnerable to capture whenever Britain fought a war.¹⁷ At the same time, Russia wanted to pacify a recently defeated and potentially dangerous Sweden in the case of a Russian war with a European power.¹⁸ As a consequence of the Great Northern War (1700–1721), Sweden and Denmark had to come to terms with the rise of Russia and Prussia and their own relegation from great power ranks. Their prosperity could no longer be supported by conquest on the European continent as much as it could by commerce, especially while the great powers fought each other.¹⁹ As states’ reasons were highly contingent on their geopolitical aspirations, support for neutral rights existed mostly in principle. In practice, great powers tended to disregard neutral rights when their roles switched from neutral to belligerent. The First League collapsed at the end of the American Revolutionary War. During the Napoleonic Wars, impartial states again joined forces in the Second League of Armed Neutrality, but this effort was much less successful as war swept the whole continent and few countries remained neutral.

The next breakthrough on neutral rights did not come until the Crimean War (1853–56) when France and Britain issued the Declaration on the Rights of Neutrals.²⁰ Both states agreed to follow the principle that the flag covers the merchandise, making enemy goods, with the exception of contraband, on neutral ships free from seizure.²¹ Additionally, the practice of granting letters of marque was abolished. Despite being the belligerents in the conflict, France and Britain, as well as Russia, followed these principles during the war. At the conclusion of warfare, these principles—the flag covers the goods, neutral commerce is safe under the enemy’s flag, blockades must be effective to be binding,²² and privateering is abolished—were codified in the Declaration of Paris of 1856, which all great powers ultimately signed.²³ Two features of this declaration made it a significant achievement for neutral rights. First, the agreement represented an innovation in international law, as it invited nations who were not party to the negotiations to agree to its tenets and sign on to the agreement after the fact.²⁴ Second, all signatories explicitly agreed that none would ever sign a convention that did not contain the four main points of the Declaration of Paris, allowing the agreement to serve as a coordinating equilibrium for maritime rights.²⁵

The requirement for an effective blockade, combined with the abolition of privateering, substantially increased the naval size necessary for a state to degrade enemy commerce and prevent the resupply of the fighting forces. Although the United States was represented at the conference and was a strong champion of neutral rights, it did not sign the convention because it had too small a navy to enforce belligerent rights as they were defined by the Declaration of Paris.²⁶ Mexico and Spain initially did not sign the agreement because they expected to need privateers in a potential war against the United States.²⁷ Conversely, the major reason Britain gave up its traditional opposition to the principle that the flag covers the merchandise was to secure the abolition of privateering.²⁸ This simultaneously decreased the likelihood of Britain being blockaded, by increasing the naval requirements necessary for an effective blockade to a level many states could not match, and protected British commerce on the open seas from smaller navies.

After the Declaration of Paris, most wars started with the belligerents pronouncing their intent to respect neutral rights during the conflict. France declared that it would observe neutral rights in the Franco-Prussian War, with Prussia following suit; the blockade of Formosa (1884) was consistent with the declaration; Britain started the Boer War with an assurance that it would respect neutral rights; Russia and Japan initially agreed to follow the principles of the declaration at the start of the Russo-Japanese War.²⁹ However, this did not mean that the issue of neutrality was settled. During each war, belligerents played out the tension between belligerent rights and neutral rights; every concession provided for neutral rights lessened the effect of belligerent rights. While involved in war, states attempted to balance their agreement with the Declaration of Paris with their incentives to expand belligerent rights, creating considerable contestation over questions that remained unanswered in 1856.

One point of contention was who was responsible for enforcing neutrality—the neutral or the belligerent. During the US Civil War, the North lacked the naval strength to enforce belligerent rights and therefore argued that neutrals were responsible for policing their own commerce, that is, ensuring that no contraband was sold to the belligerents and that neutral ships did not overstep their rights.³⁰ The North was trying to increase the scope of belligerent rights, at the expense of neutral rights. Britain, on the other hand, having the naval strength to enforce belligerent rights when it chose to fight, countered that it was the belligerent’s responsibility to enforce neutrality by boarding neutral ships and ensuring that there was no contraband on them. Britain’s goal, as it was neutral in the US Civil War, was to expand neutral rights at the expense of other states’ belligerent rights. Arbitration after the US Civil War—the Treaty of Washington of 1871—established the neutral state’s responsibility to exercise due diligence in policing its commerce.³¹ Because of belligerent pressure in war, neutral rights now also coexisted with neutral obligations.

Similar contestation between belligerent rights and neutral rights played out over the issue of contraband. As a category of products, absolute contraband refers to goods unquestionably meant for the use of enemy forces and is legally allowed to be captured if destined for enemy territory.³² Conditional contraband refers to products that can be used by the armed forces and civilian populations; it is allowed to be captured only when destined for delivery to the enemy government or armed forces.³³ All other products are not liable to seizure regardless of destination. Since only contraband can be legally captured on neutral ships, the broader the definition of contraband, the greater the belligerent interference with neutral trade in war. Indeed, declaring all products as contraband of war effectively circumvents the previously gained neutral rights.

Neutrals demanded as short a contraband list as possible; belligerents drew up extensive contraband lists. Yet long contraband lists were double edged swords. Placing a product on the contraband list, legally speaking, prevented neutrals from providing this product to all belligerents. Thus, limiting the enemy’s ability to resupply from neutral states also limited the belligerent’s own ability to resupply. The question was not settled until the Declaration of London of 1909, which set the list of products considered absolute and conditional contraband.³⁴ Simultaneously, it established a list of free goods, which codified products that neutrals could always trade with belligerents.

None of the signatories of this declaration ever ratified it; however, states grappled with its implications for their economic warfare strategies.³⁵ World War I started with the belligerents adhering to most of the principles laid out in the Declaration of London, with few alterations to the contraband list. The restraint did not last long. By the middle of World War I, belligerent respect for neutral rights was mostly thrown out the window.

The experience of World War I emphasized how essential neutral trade is for the resupply of a war economy, allowing states to sustain their war efforts far longer than an economically isolated nation could. As a result, the League of Nations sought to address neutral rights by outlawing neutrality.³⁶ The Covenant of the League of Nations required all member states to become belligerents in any war between two member states.³⁷ The purpose of removing neutrality was to regain the military benefits of economically isolating an aggressive state.³⁸ If all states in the world were belligerents in a war against the aggressor and all states sanctioned the aggressive state, the aggressive state would have no hope of resupply. The costs of sanction would be spread across the whole world, while the military benefits concentrated on weakening the aggressor, destroying its ability to fight. The biggest problem for this effort was the requirement for universal participation, a benchmark the League of Nations never hit, allowing one of the most powerful states in the world, the United States, to claim neutrality.³⁹ Given the league’s failure to effectively outlaw neutrality, the rights of neutrals to free commerce remained dominant in the interwar years.⁴⁰ For example, when Japan blockaded China as part of its invasion, it informed the British government that it would respect neutral shipping.⁴¹

After World War II, the United Nations Charter mirrored the League of Nations in seeking to prevent neutrality among its membership. In principle, the United Nations Charter prohibits the use of force without authorization, and the collective security mechanism mandates universal enforcement, preventing any state from remaining neutral.⁴² The split between the United States and the Soviet Union throughout the Cold War, however, left the Security Council in deadlock, preventing it from designating aggressors and mandating universal enforcement.⁴³ This left plenty of room for states to remain neutral in conflicts.⁴⁴ Consequently, during the Cold War, states were careful to respect neutral rights; laws of neutrality were invoked and respected in the close blockade of North Korea, in the Suez Crisis, during the Cuban Missile Crisis, in the Vietnam War, in the India-Pakistan War of 1965, and through all of the Arab-Israeli conflicts.⁴⁵ It was not until the start of unipolarity that the UN’s purpose of outlawing neutrality was achieved. In the First Gulf War, after Resolution 665, no UN member could remain neutral in the conflict.⁴⁶ But this change lasted barely a decade; by the Kosovo War, the UN was back in deadlock, and neutrality was once again an option for states.

From this brief overview of the development of neutral rights, it should be evident that neutral rights are not an immutable feature of international politics. While they are respected by most states most of the time, when wars get particularly difficult for belligerents, they try to disabuse themselves of the constraints of neutral rights. On top of that, global institutions are structured to outlaw neutrality for the benefit of all, and for about a decade of unipolarity, a world without neutrality was achieved. Although respect for neutral rights, or even the availability of neutrality as a status, is not constantly obtainable in international politics, in the eighteenth century there was a clear shift toward the development of maritime neutral rights. Support for this shift sprang from great powers seeking to ensure their commerce was protected while other states engaged in warfare.⁴⁷ Remaining neutral in a conflict, likewise, allowed states to make considerable profits from supplying the warring states. As states found themselves spending more time in the role of neutral as opposed to belligerent power, they became more willing to codify the rights of neutrals to preserve their own commerce.⁴⁸

The consequences of these decisions for wartime trade became apparent only after neutral rights were guaranteed. Where neutrality was respected and enforced, states’ approaches to their wartime commercial policies had to be more nuanced than in a world without neutral rights. The following two sections compare what decision-making on wartime trade looked like before and after neutral rights to show how the adoption of this institution changed the trade-off states make between their military and economic power.

wartime commercial policy in a world without neutral rights

In a world without neutral rights, the wartime commercial policy of severing all bilateral trade with the enemy likewise severed the enemy’s trade with the world. A restrictive wartime commercial policy, therefore, had extensive military advantages. At the same time, the costs of such a policy could be shared with the rest of the trading states and partially offset with wealth gained from seizing enemy shipping.⁴⁹

A blockade of enemy ports prevented enemy or third-party ships from carrying enemy products to the rest of the world and prevented the rest of the world from resupplying the enemy. Those ships that made it through the blockade could be chased down by privateers and seized as war prize. Combined, these two practices could eliminate a large portion of the enemy’s seaborne trade. The military benefits of such a policy in wartime were substantial.⁵⁰ It was possible to starve the opponent of all products necessary for their war effort and for their domestic economy, regardless of where those products came from. By capturing and condemning enemy exports, a state could starve the enemy of the foreign reserves necessary to purchase products on the world market, if the enemy still had a way of reaching the world market.

Moreover, there was little reason to worry about enemy diversification toward alternative sources. With all the difficulties blockades and privateers posed for seaborne trade, the only alternative method of resupply was land transport, which was prohibitively expensive for most products. Bulky and heavy products were considerably harder to transport by land before the invention of railroads. Perishable products could not survive the increased length of a land journey. Lack of good infrastructure often meant an increase in damage to the merchandise being transported, making land transfer less than ideal for luxury products.

While losing out on beneficial economic exchange is always costly for a state, in a world without neutral rights, substantial portions of that cost could be avoided. On the one hand, prohibiting trade with the enemy required a state to forgo its own gains from bilateral trade with the enemy. The lack of neutral rights meant that the state’s own products transported in third-party ships were subject to capture by privateers licensed by the enemy. Just like the enemy belligerent, the state lost options to diversify its own trade, though the extent of the loss varied by the enforcement capabilities and each belligerent’s willingness to pay privateers. On the other hand, the economic warfare in the open seas stopped not only the belligerent’s trade with the enemy but also a large portion of third-party trade with the enemy. This removed a substantial cost of severing bilateral trade—losing in relation to third parties resupplying the enemy in the state’s stead. If third parties could trade with the enemy where the state could not, third parties would grow at the expense of the state, while the state fell further behind. Lack of neutral rights not only denied the belligerents the economic gains from trade but, likewise, denied those gains to third-party states, forcing those states to also accept the costs of severing trade with the belligerents. This spread the economic cost of the wartime commercial policy, measured in loss of trade with the enemy belligerent, among all states. No one—neither the states engaged in the war nor the nonparticipants—could continue to trade unhindered with the enemy.⁵¹

Without neutral rights, belligerents also did not have to worry about postwar relative losses vis-à-vis third parties. The rule of 1756—stating that third-party states could not engage in trade that was prohibited to them in peacetime—ensured that protected routes the enemy belligerents gave up during the war could not be taken over by third parties. The markets and trade routes that belonged to a belligerent state would be waiting for that belligerent once the war was over. The war did not provide third parties with an opportunity to benefit at the expense of the fighting states.

Overall, before neutral rights were developed and codified, the military advantages of severing trade with the enemy were substantial. The economic costs, to some degree, would be paid by all trading states. Therefore, discussions about the formation of a wartime commercial policy prioritized military considerations of imposing economic pressure on the enemy over the economic dislocation such a policy might cause domestically.⁵² Severing all trade with the enemy indiscriminately was, predominantly, the most beneficial choice. If trade with the enemy was discussed at all, it was in the context of acquiring products absolutely necessary to the war effort that could not be obtained elsewhere.⁵³

wartime commercial policy in a world with neutral rights

The development of maritime neutral rights changed these calculations. A restrictive wartime commercial policy severing all bilateral trade with the enemy no longer affected the rest of the world’s trade with the enemy belligerent. Indeed, it provided neutrals with a profitable occasion to establish unwanted indirect trade between the belligerents. At the same time, the costs of severing wartime trade rose, as neutrals had the opportunity to permanently take over the belligerents’ abandoned trade and market share.

In a world where a neutral flag ensures the safe passage of enemy goods, where blockades have to be effectively enforced, where only the belligerent navy can capture and search ships at sea, a belligerent’s ability to impose substantial economic damage on the enemy is considerably weakened. By prohibiting wartime trade, the enacting state can prevent its own products from reaching the enemy; however, neutrals can openly and safely engage in commerce with the enemy, resupplying the enemy’s war effort.⁵⁴ Similarly, the enacting state can no longer prevent the enemy from acquiring foreign reserves in war, as enemy exports are free to leave enemy ports in neutral ships. The military benefits of severing trade with the enemy are considerably lower in a world where the belligerents respect neutral rights.⁵⁵

Prohibiting trade with the enemy in a world with neutral rights also carries higher economic costs. The enacting state still has to forfeit its own gains from trade with the enemy; this is constant between the two worlds. But compared to a world without neutral rights, the costs of blockade are localized to the enacting state. States have to consider the additional cost of relative losses vis-à-vis neutral states when formulating a wartime commercial policy since neutrals continue to gain from trade with the enemy belligerent while the enacting state does not.⁵⁶ Further raising the costs, the loss of trade with the enemy for the duration of the war can come with permanent consequences. Since the enemy can diversify its trade to neutrals and there is no mechanism requiring neutrals to give up their wartime gains in market share, such losses can restructure international trading patterns after the war.

Granting neutrals the right to safely conduct economic relations with the enemy allows neutrals to act as intermediaries between the belligerents, creating indirect channels of trade. The severed direct trade between two belligerents is restored through neutral states, but only at a premium as neutrals take their cut. When this consequence of agreeing to the Declaration of the Rights of Neutrals was fully understood in England at the start of the Crimean War, the Privy Council summarized the situation by stating that preventing British trade with the enemy was tantamount to “preventing British subjects from supplying what is allowed to be supplied without restriction by neutrals.”⁵⁷ The changing nature of the military benefits and economic costs of severing trade with the enemy forced states to reconsider the formation of their wartime commercial policies.

However, unlike neutrals, belligerents could not simply switch preferences to free trade with the enemy during war. Trade still provides the enemy with gains that can be translated into military capabilities to use in the war effort. To adjust to the new environment of neutral rights, states had to minimize the loss of trade to neutrals while preventing the enemy, to the extent possible, from benefiting militarily. By adopting neutral rights, states created the fundamental problem of trade with the enemy. On the one hand, the war provides the security imperative to sever all trade with the enemy. On the other hand, neutral rights provide an economic imperative to keep all trade with the enemy. To solve this problem, states started to search for “innocent goods”—products that would not benefit the opponent during the war and thus could be traded with the enemy.⁵⁸ Unfortunately, states could not agree on a set of products that would be innocent for trade with all enemies in all wars. The following chapter makes the reasons for this clear.

The development of maritime neutral rights inadvertently forced states to reconsider the design of their wartime commercial policies to make room for wartime trade with the enemy. In a world without neutral rights, prohibiting trade with the enemy meant likewise prohibiting most enemy trade with the rest of the world. Trade with the enemy, if considered at all, was reserved for situations of exceptional need. In a world with neutral rights, prohibiting trade with the enemy meant allowing the enemy to resupply from neutral sources. States had to make more nuanced decisions, keeping as much wartime trade with the enemy as was militarily sensible.

In a purely rational calculation, a state could have decided to trade with the enemy in “innocent products” even before the development of neutral rights. If a state can perfectly predict the conditions of the war and ascertain which trade should be considered innocent, there is little reason to give up the gains from trade. However, making these predictions accurately is difficult. There is an aspect of risk in the decision to trade with the enemy—the risk that a miscalculation will provide the enemy with materials needed to increase their military capabilities. In a world where high economic pressure can be exerted on the enemy and the costs of this policy dispersed among all states, the risk is not worth taking. The military advantage of severing the enemy from world trade is too great to pass up, which makes the practicalities of continued wartime trade with the enemy nearly impossible to set up: Whose ships will transport the products? However, in a world where the military benefits gained from severing trade are diminished and the costs are localized and high, the risk seems considerably more reasonable.

Sometimes it is still possible to exert substantial economic pressure on an enemy even in a world where neutral rights are respected. However, this requires an almost total blockade of the enemy, which makes neutral rights less relevant. For example, during the Second Boer War (1899–1902), Britain was able to cut off the enemy from trading with the world because it controlled most of the territory surrounding the South African Republic and the Orange Free State.⁵⁹ Where a state can isolate the enemy from neutrals, either by itself or by an alliance with all the relevant neutral states, it can exert considerable economic pressure on the enemy.⁶⁰ Under these conditions—high military benefits and dispersed economic costs—the fundamental problem of trade with the enemy has the same simple solution used by states before neutral rights were developed. However, these situations are exceedingly rare in a world of neutral rights.

the persistence of neutral rights

Given the complications neutral rights create for warring states’ ability to impose military pressure on their enemies, why have most wars after the Declaration of Paris begun with the belligerents proclaiming their respect for neutral rights? Why do states adopt this institution when it is least beneficial for them to adhere to it? The first part of the answer is based in institutional logic. Neutrality is a useful and highly profitable political position, especially for states that do not spend the majority of their time at war. When states do take the role of belligerent, they seek to preserve the institution so that they have access to it when they are once again neutral.⁶¹ However, the institutional logic is insufficient to explain the persistence of neutral rights when wartime conditions become unfavorable and belligerents prefer the short-term benefits of winning the war over the long-term consequences of breaking an institution.⁶² The second part of the answer is that the threat of neutral states entering the war to protect their commerce alters the short-term calculus of the belligerents seeking to abandon neutral rights. The development of neutral rights changed the preferences of states, but not to the extent where enforcement from other great powers ceased to be necessary.

Once maritime neutral rights were codified in the Declaration of Paris, belligerents started wars by announcing their intention to safeguard the rights of neutrals.⁶³ In the long term, states expected to spend more time protecting their own commerce from belligerents than chasing down enemy commerce to prevent wartime resupply. While tension between belligerent rights and neutral rights made respect for neutrality an inconvenience in wartime, states made an effort to avoid setting precedents that could be used against them when they were neutral.⁶⁴ Indeed, during the US Civil War, which was the first test of neutral rights after the signing of the Declaration of Paris, the US secretary of state opined, “Any belligerent claim which we make during the existing war, will be urged against us as an unanswerable precedent when [we] may ourselves be at peace.”⁶⁵ Likewise, the British navy was instructed to avoid actions that might set precedents for a future war.⁶⁶ While respecting neutral rights made wars more complicated, it was worth the benefits gained in peacetime.

Additionally, allowing neutral rights did come with some wartime benefits. Although neutrals were free to resupply the enemy, they were also obligated toward impartiality. Neutrals could also be relied upon to assist with the state’s own military efforts. In this way, permitting the neutral flag to protect merchandise provided belligerents with a new solution to logistical problems in war.

Nevertheless, the benefits of neutrality were not sufficient to overcome states’ short-term interest in making difficult wars simpler to win. The same states that declared their support for neutral rights at the start of conflict found themselves tempted to infringe on those rights when wartime conditions turned against them. At this point, the balance of power reinforced the institutional benefits of maintaining neutral rights. Strong neutrals enforced neutrality by threatening military action to protect their commerce. This altered the short-term calculus of belligerents from the idea that breaking neutral rights would make the war easier to win to the idea that breaking neutral rights would escalate the war to a stronger counterbalancing coalition. For example, while Britain started the Boer War fully respecting maritime neutral rights, after military setbacks, its policy changed toward seizing neutral goods as contraband. When both Germany and the United States threatened retaliation, however, Britain returned to its initial position of respecting neutral commerce and even compensated German commercial interests.⁶⁷ Likewise, after beginning the Russo-Japanese War adhering to neutral rights, Russia started attacking neutral commerce as the war turned sour. Yet after threats from Britain and the United States, it backed away from this aggressive policy.⁶⁸ This same story played out at the start of World War I, when US pressure was sufficient to influence both Britain and Germany to make special provisions to ensure the safety of neutral traffic, at least for a limited time.⁶⁹

The fact that neutrals have to enforce their rights themselves to ensure the survival of the institution could raise the question of why neutrals did not simply enforce neutrality even before the Declaration of Paris. They tried; the Declaration of Paris simplified their efforts considerably. Both of the Leagues of Armed Neutrality were efforts by neutral states to enforce neutral rights in other states’ wars.⁷⁰ But each neutral had its own preferred version of maritime rights—what should and should not be allowed.⁷¹ This made it easier for the belligerents to exploit the differences of opinion, making neutral cooperation all the more difficult. The Declaration of Paris allowed all states to converge on the same basic definition of maritime neutral rights, which meant that, at least on the four points of the declaration, the obligations of the belligerents were as clear as the rights of neutral commerce.⁷²

After the Declaration of Paris solidified the first four maritime neutral rights and powerful states enforced them, it became much more difficult for the world to revert to a condition without neutrality. This would require all neutrals to simultaneously abandon neutral rights. One condition that would allow for such a reversion is a global war. When all states are already belligerents in a conflict, no one is left to defend neutral rights. World War I started with mutual respect for neutral rights. When the war stalled into trench warfare, it was the US defense of its commerce that placed restraints on British and German attacks on neutral commerce. However, when the United States entered the war as a belligerent, neutral rights were abandoned until the end of the conflict.⁷³ Second, international organizations like the League of Nations or the United Nations could draw on a collective security mechanism to mandate that all states have belligerent status in a conflict. The League of Nations never managed to remove neutrality as the United States never joined, and the rest of the members mostly followed their individual interests over the collective decisions. The United Nations was stalemated during the Cold War, preventing the activation of collective security mechanisms.⁷⁴ It managed to remove neutrality for about a decade of unipolarity before once again falling into stalemate.⁷⁵ Overall, a return to a world without neutral rights would require either a global war or global adherence to an international organization. Otherwise, even when individual states are tempted to ignore neutral rights, others counterbalance by enforcing neutrality. The institution persists.