The treaty, signed at Versailles on 26th September 1786, may be thus summarized: It granted complete freedom of navigation and trading rights between the two nations for their European dominions. The subjects of either kingdom were thenceforth free to enter the lands of the other without licence or passport, and free of any capitation tax—a privilege most unusual in those days—and to enjoy perfect religious liberty. In regard to the most important of French exports, namely, wine, Great Britain agreed to place her neighbour on the footing of the most favoured nation by lowering the duties to the level of those imposed on Portuguese wines. The duties on French vinegar and oil were also greatly reduced. The following articles nominally concerned both nations, but in practice applied almost entirely to British imports into France. Hardware, cutlery, and similar goods were not to pay more than 10 per cent.; cottons, woollens, muslins, lawns, cambrics, and most kinds of gauzes, not more than 12 per cent.; but silks, or articles partly silken, were prohibited as formerly. Linens were reciprocally to be charged at no higher rates than those levied on Dutch linens imported into Ireland, that is, at “the most favoured nation” rates. Sadlery, porcelain, pottery, and glass of all kinds, were to pay no more than 12 per cent. The highest impost retained was 30 per cent., levied on beer, perhaps because the interchange of that product was certain to be small. Countervailing duties might, however, be placed on certain articles. In the concluding forty articles of the treaty (one of the longest and most complex ever signed), the contracting Powers sought to lay down principles or regulations for the avoidance of disputes with respect to contraband and prohibited goods, smuggling, privateering, the suppression of piracy, and other subjects. They also left themselves free to revise the treaty at the end of twelve years. It is noteworthy that each of the contracting Powers affirmed the principle of seizing and confiscating the goods of the other Power when found on an enemy’s merchantman, provided that they were embarked after the declaration of war.494

The treaty disappointed the hopes of some enthusiasts, who hoped that it might include some proviso for arbitration. Among these was William Pulteney, who, on 14th September, wrote to Pitt in terms that deserve to be remembered. After pointing out the futility of prohibitive edicts, he continued:

Pitt, we may note, had sought to take a first step towards the limitation of armaments, by suggesting that the two Powers should lessen their squadrons in the East Indies; but to this Vergennes, on 1st April 1786, refused his assent.496 Seeing, too, that France was pressing on the works at Cherbourg, and forming an East India Company on a great scale, Pitt naturally restricted his aims to the establishment of friendly commercial relations. The progress made in this respect was immense. Powers recently at war had never before signed a treaty containing provisions of so wide a scope, and so intimate a character; and lovers of peace hailed it as inaugurating a new era of goodwill. “People in general,” wrote the Duke of Dorset, from London, to Mr. Eden, “are very much pleased with your treaty: the principal merchants in the City don’t choose to give an opinion about it; anything, if novel, is apt to stupify merchants.... I never saw the King in such spirits: they rise in proportion to the stocks, which are beyond the sanguine expectations of everybody.”497 The rise in Consols gave the verdict of the City in unmistakable terms, and it was generally endorsed. On 20th November the Marquis of Buckingham wrote: “My accounts are that all manufacturers are run wild in speculation. Our wool has felt it already.”498 A few cranks like Lord George Gordon declaimed against Pitt for selling his country to the French, but the majority of thinking men, even in the Chamber of Manufacturers, thankfully accepted the treaty. A Glasgow manufacturer wrote to Eden that Great Britain, having the best wool, the best iron, the best clays for pottery, the best coal, and by far the best machinery in the world, would soon beat the French in their own market.499 This was the general opinion. Those who held it said nothing, but set to work to regain in France herself the market of which she had deprived us in America. The state of Great Britain and of France in the year 1789 showed which were the more durable, the triumphs of war or of peace.

Nevertheless, there was some opposition in the House of Commons. Early in the session of 1787, Fox brought forward the question of the treaty and pressed for delay, so that the feeling of the country might be ascertained. To this Pitt demurred, on the ground that members had had ample time to consider the questions at issue, and that trade would suffer from the continuance of the present uncertainty. The arts which had undermined Pitt’s compact with Ireland were now once more practised. Burke twitted the Prime Minister with looking on the affairs of two great nations in a counting-house spirit; and the Chamber of Manufacturers, in which opinions were divided, sought to frighten members by a petition setting forth “the serious and awful importance of the treaty ... comprehending a prodigious change in the commercial system of this country.”500 This stage thunder was speedily divested of its terrors by Pitt pointing out that four months had elapsed since the signing of the treaty, and yet the Chamber of Manufacturers had remained silent until that day (12th February). After showing that neither our old ally, Portugal, nor our manufacturers had cause for alarm, Pitt raised the question to a high level in a passage which furnished a dignified retort both to the gibe of Burke, and to those who denounced trade with our traditional enemy: “To suppose,” he said, “that any nation can be unalterably the enemy of another is weak and childish. It has its foundation neither in the experience of nations nor in the history of man. It is a libel on the constitution of political societies, and supposes the existence of diabolical malice in the original frame of man.” Then, coming once more to practical considerations, he affirmed that, though the treaty was advantageous to France, it would be more so to us.501

In reply, Fox made one of the worst speeches of his career. He asserted twice over that France was the natural enemy of this land, owing to her overweening pride and boundless ambition; and that by means of the present treaty she sought to tie our hands and prevent us engaging in any alliances with foreign powers. Portugal, he said, was now made a sacrifice and peace-offering to France. The House refused to follow the vagaries of the Whig leader by 258 votes to 118; and the provisions of the treaty were passed in Committee by substantial majorities within a fortnight. The treaty passed the Lords on 6th March by 74 votes to 24.502 In due course the treaty was ratified, and the ports on both sides of the Channel were opened to free commercial intercourse on 10th May 1787.

Pitt undoubtedly erred in proclaiming his conviction that the treaty was more advantageous to Great Britain than to France. He clinched his triumph in Parliament, but he imperilled the treaty; and it is noteworthy that he made that statement after Eden had warned him not to do so.503 It was a weakness of which he was rarely guilty. The French negotiators had often pointed out that they were running a great risk of inflicting much harm on their industries. This was sober truth. Indeed, their general acquiescence in Pitt’s requests has always been a puzzle; for the belief of Vergennes in Free Trade was not shared by the other Ministers, except perhaps by Calonne; and it was certain that the manufacturers of Rouen, Amiens, and Lille would cry out against the sudden change from prohibition to a 12 per cent. duty on textiles.

Daniel Hailes set himself to solve the riddle for the satisfaction of the ever distrustful Carmarthen, who, on 29th September 1786, wrote to him privately: “our suspicions of the good faith and friendly professions of France in political matters ought to be in exact proportion to the facility she may have evinced upon matters purely commercial.” He further suggested that her aim was perhaps to sever our good relations with States with which we had political and commercial ties.504 Hailes, doubtless taking his cue from his chief, thereupon sought to find out the motives which had influenced the French Ministry, and summed up his conclusions in a long report. It gives an interesting but somewhat jaundiced account of affairs in that very critical year 1786—the year of the Diamond Necklace scandal and of the decision to convoke the Chamber of Notables for the rectification of abuses too deep-seated for Louis XVI to uproot. The report is too long to quote here except in its most important passage; but we may glance at its salient features. Hailes pointed out that France suffered nearly as much as England from the late war, which left her with a National Debt almost exactly equal to that of her rival; also that the hopes of Frenchmen to gain the trade of the United States had been blighted. The Court of Versailles had, moreover, not exercised “the wise management of venality and the œconomy of corruption and favor” which would have satisfied most of the privileged classes. Its partiality was as notorious as its extravagance; and the failure of the old commercial prohibitive system, as also of the recent prohibitive arrêts, was probably due to the corruption prevalent in Court and official circles; for, to quote Hailes’s words:

We need not lay much stress on the personal arguments here adduced; for Hailes may have been unduly influenced by the partisans of Necker or Breteuil, who were always at feud with Calonne. It is probable that Vergennes and Calonne were swayed by a deeper motive, namely, the desire to keep England quiet and friendly while they laid their schemes with a view to the ascendency of France in the Dutch affairs soon to be described, and thereafter to the combination of their efforts for the overthrow of British power in the East. Such an aim is consonant with the philosophic thoroughness of the character of Vergennes and the ambition of his showy colleague. Whether Pitt suspected some such design is uncertain; that Carmarthen did so can admit of no doubt.

Much, however, may be said for Hailes’s views. It is generally admitted that the prodigal Calonne sacrificed very much in order to stand well with the Queen’s party, and that his ardent desire was to put a good face on things at the time of the Assembly of the Notables early in 1787. There was every reason for his concern. The future of France depended on the docility of the Notables. If they were so far satisfied with the state of affairs as to pass the reforms desired by the King and Vergennes, the crisis which led up to the Revolution might have ended peacefully. Unjust taxation, constant deficits, and national bankruptcy were among the chief causes of the Revolution. Of course, Vergennes and Calonne could not foresee events; but they knew that the future was gloomy in the extreme unless the Notables induced the privileged classes to take up their fair share of the financial burdens. If Ministers were able to point to increased customs returns, the decline of smuggling, and the cementing of friendly relations with England, the Notables and the nobles at large might prove amenable to reason (for Anglomania was still the fashion); and all might yet go well. In these considerations probably lies the key to the conduct of the French Ministry in the later stages of the negotiation of 1786. With Vergennes the treaty was probably a matter of principle; to Calonne it was a device adopted in the course of that daring game of “neck or nothing,” on which he staked the destinies of France. Though he was the chief sinner, Government and people alike behaved with incredible levity. Alvensleben, reporting on the situation at Versailles in November 1787, said: “Everything here is a matter of ceremony, clothes, varnish, phrases, national boasting, tinsel, intrigues; and everything is finally decided by forms.”506

This scathing report was written after France had lost her one able statesman. Vergennes died shortly before the Notables assembled; and they, having to deal with an irresolute King and a political gamester, turned a deaf ear to counsels of Reform. Probably, too, they were influenced by the outcry against the commercial treaty, for it was general in all manufacturing centres, and did not pass away, as was the case in Great Britain. The Rouen Chamber of Commerce instituted an inquiry, the outcome of which was a report affirming the marked superiority of British textile goods to those of France, and the impossibility of competing with them on the basis of the 12 per cent. duty. An able writer, Dupont de Nemours, gave an effective answer to the report; but, as generally happens in such cases, the defence attracted less attention than the attack.507 We must further remember that merchants who lived under an oppressive system of taxation had every possible reason for “crying poor.” Complaints against the commercial treaty were hurled at Arthur Young in every French manufacturing town which he visited in his tours of 1787 and 1788. Abbeville, Amiens, Lille, and Lyons declared against it in varying tones of anger or despair; the wine districts alone were loud in its praise.508 Undoubtedly the French textile industries suffered severely for a time. The taste for English goods continued to depress home products, and that, too, despite the efforts of Marie Antoinette to set the fashion for the latter. In 1788 as many as 5,442 looms were idle in Lyons; but it is to be observed that this crisis was due either to the continued smuggling of English silk goods, to the preference for our fine cottons, or to the failure of the silk harvest in that year. The last cause was probably the most important.509 The woollen and cotton trades alone could have been directly affected by the treaty. In them the conditions were undoubtedly bad in the years 1787, 1788. At Troyes 443 looms were not worked out of 2,600, and that proportion was usual throughout the east and north of France.

M. Levasseur, however, who has carefully investigated the causes of this crisis, attributes it largely to the utter prostration of public credit in France, and the issue of a coinage of doubtful value. The bad harvest of 1788, followed by a terribly cold winter, also intensified the distress. He concludes that, even so, the commercial treaty might ultimately have been advantageous to certain parts of the industrial economy of France; but it was applied suddenly in a time of political unsettlement and general distress.510

We must also remember that Calonne had for many months been squandering the resources of France. In accordance with his motto: “In order to establish public credit one must cultivate luxury,” he had raised loan upon loan in time of peace, and it has been estimated that in the forty-one months of his term of office (1783–87) he borrowed 650,000,000 francs (£26,000,000).511 No fiscal experiment can have a fair chance under such conditions; and it is therefore a violation of the laws of evidence to assert that the Commercial Treaty of 1786 was the chief cause of the French Revolution.

Summing up the facts concerning this most interesting treaty, we may conclude that the honour of originating it undoubtedly belongs firstly to Vergennes, secondly to Shelburne, and only in the third place to Pitt. It is clear that the French statesman worked steadily for it during the negotiations of 1783, and used all available means to bring it about even while Pitt showed no responsive desire. As has been shown above, the young Prime Minister had good reasons for not taking the matter up seriously until the autumn of 1785. Indeed it would have been a tactical mistake to press on the commercial compact with France until he had put forth every effort to unite Ireland with Great Britain by intimate trade relations. When those endeavours were frustrated by ignorance and faction, he turned towards France, but slowly and suspiciously. Not until the negotiation was far advanced did he show much eagerness on the subject. But it is the mark of a great Minister to keep a firm grasp upon colleagues and subordinates at all important points; and Pitt saw the futility of Carmarthen’s prejudices no less than the possible danger of Eden’s Gallophile enthusiasm.

The hostile actions of the French agents in Holland, to which we must soon recur, made him cautious on matters purely political; and, while pushing on the commercial treaty, which Carmarthen looked on as a trap, he took care to subject the ardent fancies of Eden to cold douches like the following: “Though in the commercial business I think there are reasons for believing the French may be sincere, I cannot listen without suspicion to their professions of political friendship.”512 As we shall see in the next chapters, Pitt generally treated with wholesome scepticism the alarmist news sent by Harris from The Hague. But the tidings from that quarter enabled Pitt to assess at their due value the philanthropic professions of the salons of Paris. Not that he was indifferent to the golden hopes of that age. After the treaty was signed he gave expression to his hopes in words pulsating with a noble enthusiasm; but, while it was under discussion, he showed the balance of mind and keenness in bargaining which characterize a great statesman. We may also remark here that Pitt sought earnestly to bring about a favourable commercial treaty with Spain and Russia, but failed. The Czarina showed her hostility by granting to France a treaty on the basis of the most favoured nation.513

Finally, we may hazard the conjecture that, if the finances of France had received from the Court of Versailles and Calonne a tithe of the fostering care which Pitt bestowed on those of Great Britain, both countries would have profited equally from the free commercial and social intercourse inaugurated by this memorable compact. As it was, France slid fast down the slope that led to the chasm of Revolution; and in the midst of that catastrophe Robespierre and his followers, who represented the prejudices of the northern manufacturing towns, spread abroad the spiteful falsehood that Pitt’s commercial policy had ever been aimed at the financial ruin of the French nation.