Chapter 1
U.S. Trade and Neutrality

     In the decades before World War I the United States had developed as a major industrial and trading power.  With abundant natural resources, capable American engineers were able to draw upon research conducted both in the United States and elsewhere to make great strides in industrial arts.  Standardization of mass production methods and advances in distribution also helped United States industry.  As production and distribution could easily be converted for the supply of armies in the field it is no accident that U.S. industrial assets were much sought after by the belligerent states in World War I.1
     World War I was of immense economic benefit to the United States.  For example, the export of gasoline and other refined fuels rose from 20 million gallons in September 1913 to 23 million gallons in September 1914.  The export of fuel oil rose dramatically from 36 million to 58 million gallons in that same time frame.2   The export of corn rose from 41,409,000 bushels in 1914 to 50,668,000 in 1915.  An even more impressive figure was the export of wheat and flour, which rose from 104,967,000 bushels in 1914 to 332,465,000 in 1915.3  The American shipbuilding industry also profited from the war.  Although tonnage dropped from 600,000 tons in 1914 to 300,000 in 1915, it rose steadily thereafter all the way to a staggering 3,500,000 tons in 1918.4  Closely related to shipbuilding was the rise in steel production in the United States.  Although total steel production fell from 28,329,700 tons in 1910 to 25,606,100 in 1914, it rose all the way to 49,010,100 tons in 1918, almost twice that of 1914.5  The yearly value of American exports rose from $294,664,000 in 1914 to $353,091,000 in 1915 and climbed to $799,098,000 in 1918.6  Figures such as these led Washington to favor increases in neutral non-contraband trade with the belligerent nations.  The main obstacle to this was that each side would accuse the United States of favoring the other.  This could lead to attacks on American merchant shipping or at least seizure of vessels pending prize court hearings.  For Washington to undertake such a course of action would require constant and delicate diplomatic correspondence with both sides.  It would also require modernized shipping to increase the chances of the merchantmen arriving safely at their ports of destination.
     The United States had constructed a modern fleet in the years leading up to 1914.  This seemed to work to Great Britain's advantage.  At the time Britain had an empire 140 times its own size, covering nearly a quarter of the earth's surface and embracing some 400 million people in Great Britain and abroad.  This empire was far too large for the Royal Navy to control and, beginning as early as the Monroe Doctrine a century earlier, London allowed the United States to take on more and more of the responsibility of protecting the Western Hemisphere.  The British felt comfortable with the situation because, aside from some U.S. difficulties with Japan, Washington's policies generally did not threaten bringing Great Britain into war with any major power.  By the same token, Washington favored this arrangement with the United States because friendship and commerce between the Atlantic powers seemed to involve no future military obligations outside of the Western Hemisphere.  On the surface it seemed a foundation for peace and economic cooperation.
     Unfortunately the British would sometimes take their friendship with the United States for granted, considering the Americans as their junior Anglo-Saxon cousins.  Tending to forget that the United States had grown from a population of 3 million at independence to nearly 100 million in 1914, London on occasion still thought of the United States as a branch of the British Empire.  Common language, economic ties, and a common culture and history fueled this prevailing belief.  Even American innovation, while held by the British as a threat to their own well-being, was accepted as a manifestation of Anglo-Saxon genius.7
     It was true that the United States was Great Britain's greatest trade partner.  Before the war, Great Britain and her colonies accounted for some forty percent of all American exports, making American trade orders essential to economic prosperity all over the world.8  The sad truth was that the United States could hardly be considered neutral with such a high degree of trade with the British.  The filling of American orders was absolutely essential to Allied success in the war.  But, Washington had stayed out of European conflicts for a century and wanted to continue along that path.  Therefore a policy of neutral trade seemed the best policy.
     When the war began President Wilson quickly made an official proclamation of neutrality.  This statement outlined acts forbidden by laws and treaties of the United States.  Most important was the statement that the U.S. Government would not be responsible for any arms and munitions sold internationally by private citizens or firms.  Traders in contraband had to assume all risks without any government protection.
     International law also dictated that neutral governments were forbidden from supplying belligerent nations with arms, munitions, or monetary aid.  This was unfortunate because enforcement of restrictions on neutral trade of military items would be left up to the belligerent powers.  It was a recipe for an escalation of the naval war in the Atlantic as both sides would likely attempt to restrict neutral trade.  Belligerents could, and in fact did, accuse the United States of favoring their enemy.9
 Trade with Europe was vital to the American economy.  Before the war in Europe began, the United States was experiencing an economic downturn.  Americans, fearful that they might be drawn into the conflict, seemed to lose some of their interest in conducting day-to-day business and, partly as a result, the economy continued to be depressed.  Also, American assets abroad became all but worthless as the belligerent states declared moratoria on private debts.  Worst of all was the paralysis of American merchant shipping caused by the fear that the North Atlantic would be too dangerous to traverse.  As the United States had traditionally relied on foreign carriers to transport much of its trade, there were insufficient numbers of American merchant ships in August 1914.  Goods piled up in ports and railroad stations, and prices fell to lower levels than before the war.
     These problems of distribution and finance began to correct themselves a few weeks into the war, although the United States failed to regain all of its pre-war markets.  The British soon were in control of the North Atlantic shipping lanes and, with the United States lacking a sufficient merchant marine to transport its goods, this virtually cut off American trade with Germany.  Firms in the United States could not use German ships to carry on commerce with German firms because too many German merchant vessels had sought refuge from the Royal Navy in American ports; if they ventured out, the British could easily stop them.  Ultimately more than a hundred German ships were interned in U.S. ports, including the 54,000-ton Vaterland.10
     The Wilson Administration refused to grant ship subsidies, but found other ways to support American trade.  A bill was introduced in Congress in August 1917 to allow foreign-built, American-owned merchant ships to fly the American flag.  Critics of the bill attacked it as inadequate to solve the shipping shortage and dangerous to neutrality.  They pointed out that the belligerent nations might conveniently decide to fly the American flag aboard all of their ships.  The United States would also be fully responsible for protecting these ships, making the task of staying neutral much harder.  Nevertheless, the bill passed on August 17, 1914.11
     This new law brought only a few Standard Oil tankers and other vessels under the American flag and hardly solved the shipping shortage.  Two subsequent and unsuccessful attempts to strengthen the merchant marine led Wilson to move in another direction.  His concern over the safety of American merchantmen caused him to support the arming of the available ships.  This was not a new idea.  Great Britain had resurrected the practice in 1913.  Under twentieth-century conditions, belligerent warships could only remain in neutral ports for twenty-four hours, where they could acquire ship's provisions and fuel.  On the other hand, strictly commercial shipping had free access to neutral territory.12
     The decision to arm American merchant vessels was dangerous to Washington's neutral status.  The belligerents would now have a difficult time distinguishing neutral from enemy and merchantmen from warships.  Indeed this became one of the main sources of accidental attacks and disagreement between Washington and Berlin.


1.    Thomas Frothingham, The American Reinforcement in the World War (New York:  Books for Libraries Press, 1971),
       p. 22.
2.    John Bach McMaster, The United States in the World War (New York:  D. Appleton and Company, 1918), p. 53.
3.    Benjamin J. Hibbard, Effects of the Great War Upon Agriculture in the United States and Great Britain
       (New York: University Press, 1919), p. 51.
4.    J. Russell Smith, The Influence of the Great War Upon Shipping (New York:  Oxford University Press, 1919), p. 265.
5.    Douglas Alan Fisher, The Epic of Steel (New York:  Harper and Row Publishers, 1963), p. 297.
6.    Smith, Influence Upon Shipping, p. 92.
7.    David R. Woodward, Trial By Friendship: Anglo-American Relations, 1917-1918 (Louisville, Kentucky:  University
       Press of Kentucky, 1993), pp. 5-6.
8.    Phillip C. Jessup, Neutrality: Its History, Economics, and Law, Volume 4 (New York:  Columbia University Press,
       1936), pp. 54-55.
9.    Frederick C. Luebke, Bonds of Loyalty: German-Americans and World War I (Dekalb, Illinois:  Northern Illinois
       University Press, 1974), pp. 118-19.
10.  Alice M. Morrissey, The American Defense of Neutral Rights, 1914-1917 (Cambridge, Massachusetts:  Harvard
       University Press, 1939), p. 6.
11.  Ibid., pp. 9-10.
12.  Ibid., pp. 11-12.

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