The Continental System or Continental Blockade (known in French as Blocus continental) was the foreign policy of Napoleon I of France against the United Kingdom during the Napoleonic Wars. As a response to the naval blockade of the French coasts enacted by the British government on 16 May 1806, Napoleon issued the Berlin Decree on 21 November 1806, which brought into effect a large-scale embargo against British trade. The embargo was effective intermittently. It ended on 11 April 1814 after Napoleon's first abdication. In terms of economic damage to the UK, the blockade was largely ineffective; however, British exportations to the continent saw a loss from 25% to 55% of their total value in between the years 1802 and 1806. As Napoleon realized that extensive trade was going through Spain and Russia, he invaded those two countries. His forces were tied down in Spain — in which the Spanish War of Independence was occurring simultaneously — and suffered severely in, and ultimately retreated from, Russia in 1812.
The Berlin Decree forbade the import of British goods into European countries allied with or dependent upon France, and installed the Continental System in Europe. All connections were to be cut, even the mail. British merchants smuggled in many goods and the Continental System was not a powerful weapon of economic war. There was some damage to British trade, especially in 1808 and 1812, but British control of the oceans led to replacement trade with North and South America, as well as large scale smuggling in Europe. The loss of Britain as a trading partner also hit the economies of France and its allies. Angry governments gained an incentive to ignore the Continental System, which led to the weakening of Napoleon's coalition.
The United Kingdom was the central important force in encouraging and financing alliances against Napoleonic France. In addition, the British government enacted a naval blockade of the French and French-allied coasts, on 16 May 1806. As France lacked the naval strength to invade Britain or to decisively defeat the Royal Navy at sea, Napoleon resorted instead to economic warfare. Britain was Europe's manufacturing and business center as a result of the Industrial Revolution. Napoleon believed it would be easy to take advantage of an embargo on trade with the European nations under his control, causing inflation and great debt to undermine the British strength.
In November 1806, having recently conquered or allied with every major power on the European continent, Napoleon issued the Berlin Decree forbidding his allies and conquests from trading with the British. The UK responded with the Orders in Council of 1807 issued 11 November 1807. These forbade French trade with the UK, its allies or neutrals, and instructed the Royal Navy to blockade French and allied ports. Napoleon retaliated with the Milan Decree of 1807, which declared that all neutral shipping using British ports or paying British tariffs were to be regarded as British and seized.
Napoleon's plan to defeat Britain was to destroy its ability to trade. As an island nation, trade was its most vital lifeline. Napoleon believed that if he could isolate Britain economically, he would be able to invade the nation after its economic collapse. Napoleon decreed that all commerce ships wishing to do business in Europe must first stop at a French port in order to ensure that there could be no trade with Britain. He also ordered all European nations and French allies to stop trading with Britain, and he threatened Russia with an invasion if they did not comply as well. His orders backfired in the Iberian Peninsula, especially in Portugal (being allied to Britain), setting off the Peninsular War. He pushed Russia too hard, both in terms of the Continental System, and in his demands for control over part of Poland. His attempted punishment of Russia through a massive invasion 1812 was one of the famous military disasters in world history, and set the stage for Napoleon's final downfall.
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. The System had mixed effects on British trade, with British exports to the Continent falling between 25% to 55% compared to pre-1806 levels. However, trade sharply increased with the rest of the world, covering much of the decline.
Britain, by Orders in Council (1807), prohibited 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, compounded by the Chesapeake Incident, 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.
The embargo also had an effect on France itself. Ship building, 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 a loss of 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 for most of continental Europe. 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 also failed to reduce British financial support to its allies. The industrialized north and east of France, and 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. 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.
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. The island Heligoland outside the west coast of Denmark was occupied in September 1807. This base made it easier for Britain to control the trade to the ports of the North sea coast 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, first 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 the 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 the United Kingdom 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 island. 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 light house on the island simplified the 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. 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 king John VI of Portugal took his 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 1st 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.