Continental System

The System had mixed effects on British trade. The embargo encouraged British merchants to seek out new markets aggressively and to engage in smuggling with continental Europe. Napoleon's exclusively land-based customs enforcers could not stop British smugglers, especially as these operated with the connivance of Napoleon's chosen rulers of Spain, Westphalia and other German states.[10][11] British exports to the Continent fell between 25% to 55% compared to pre-1806 levels. However, trade sharply increased with the rest of the world, covering much of the decline.[12][13]

Britain, by Orders in Council, prohibited other countries (that is, its trade partners) from trading with France. The British countered the Continental system by threatening to sink any ship that did not come to a British port or chose to comply with France. This double threat created a difficult time for neutral nations like the United States. In response to this prohibition, the U.S. government adopted the Embargo Act of 1807 and eventually Macon's Bill No. 2. This embargo was designed as an economic counterattack to hurt Britain, but it proved even more damaging to American merchants. Together with the issues of the impressment of foreign seamen, and British support for Indian raids in the American west, tensions led to a declaration of war by the U.S. in the War of 1812. This war, not Napoleon's blockade, sharply reduced British trade with the United States.[14]

The British economy suffered greatly in 1810 to 1812, especially in terms of high unemployment and inflation. This led to widespread protest and violence, but the middle classes and upper classes strongly supported the government, which used the army to suppress the working class unrest, especially the Luddite movement.[15][16]

The episode seriously hurt France itself. Shipbuilding, and its trades such as rope-making, declined, as did many other industries that relied on overseas markets, such as the linen industries. With few exports and lost profits, many industries were closed down. Southern France, especially the port cities of Marseille and Bordeaux, as well as the city of La Rochelle, suffered from the reduction in trade. Moreover, the prices of staple foods rose in most of continental Europe.[17]

Napoleon's St. Cloud Decree in July 1810 opened the southwest of France and the Spanish frontier to limited British trade, and reopened French trade to the United States. It was an admission that his blockade had hurt his own economy more than the British. It had also failed to reduce British financial support for its allies.[18] The industrialized north and east of France, and Wallonia (the south of today's Belgium) saw significantly increased profits due to the lack of competition from British goods (particularly textiles, which were produced much more cheaply in Britain).

In Italy, the agricultural sector flourished;[19] but the Dutch economy, predicated on trade, suffered greatly as a result of the embargo. Napoleon's economic warfare was much to the chagrin of his own brother, King Louis I of Holland.

Vice-Admiral James Saumarez was the commander of the Royal Navy in the Baltic campaign of 1808–1814 that secured British trade to the region.

Britain's first response to the Continental system was to launch a major naval attack on the weakest link in Napoleon's coalition, Denmark. Although ostensibly neutral, Denmark was under heavy French and Russian pressure to pledge its fleet to Napoleon. London could not take the chance of ignoring the Danish threat. In the Second Battle of Copenhagen in August–September 1807, the Royal Navy bombarded Copenhagen, seized the Danish fleet, and assured control of the sea lanes in the North Sea and Baltic Sea for the British merchant fleet.[20][21] The island of Heligoland off the west coast of Denmark was occupied in September 1807. This base made it easier for Britain to control trade to North Sea ports and to facilitate smuggling. The attacks against Copenhagen and Heligoland started the Gunboat War against Denmark, which lasted until 1814.

Sweden, Britain's ally in the Third Coalition, refused to comply with French demands and was attacked by Russia in February and by Denmark/Norway in March 1808. At the same time, a French force threatened to invade southern Sweden, but the plan was stopped as the Royal Navy controlled the Danish straits. The Royal Navy set up a base outside the port of Gothenburg in 1808 to simplify operations into the Baltic Sea. The Baltic campaign was under the command of admiral James Saumarez. In November 1810 France demanded that Sweden should declare war upon Great Britain and stop all trade. The result was a phoney war between Sweden and Britain. A second navy base was set up on the island of Hanö in the south of Sweden in 1810. These two bases were used to support convoys from Britain to Gothenburg, then through the Danish straits to Hanö. From Hanö the goods were smuggled to the many ports around the Baltic Sea. To further support the convoys, the small Danish island of Anholt was occupied in May 1809. A lighthouse on the island simplified navigation through the Danish straits.

Russia also chafed under the embargo, and in 1810 reopened trade with Britain. Russia's withdrawal from the system was a motivating factor behind Napoleon's decision to invade Russia in 1812, which proved the turning point of the war.

Portugal openly refused to join the Continental System. In 1793, Portugal signed a treaty of mutual assistance with Britain.[22] After the Treaty of Tilsit of July 1807, Napoleon attempted to capture the Portuguese Fleet and the House of Braganza, and to occupy the Portuguese ports. He failed, as Queen Maria I of Portugal took her fleet and transferred the Portuguese court to Brazil with a Royal Navy escort. The Portuguese population rose in revolt against the French invaders, with the help of the British Army under Arthur Wellesley, later the Duke of Wellington. Napoleon intervened, and the Peninsular War began in 1808. Napoleon also forced the Spanish royal family to resign their throne in favor of Napoleon's brother, Joseph.