After Franklin's departure from Paris, Jefferson was left officially in charge of the diplomatic relations of the United States with the French Court. Adams was in London and Carmichael in Madrid, and with them he exchanged extensive communications. But the Paris legation was really the headquarters of American diplomacy, and the problems that came up taxed the ingenuity and all the intellectual resources Jefferson could command.

Summing up his activities in Paris, he declared with too much modesty in his "Autobiography":

As a matter of fact, Jefferson's duties extended to many other subjects, of which the most important and at any rate the most perplexing may have been the settlement of the debt question. This problem, as we shall presently see, haunted Jefferson's mind and was never separated by him from the purely commercial questions. In many respects the situation then existing between the United States and France was very similar to the present situation and certainly not easier to solve. An estimate of Jefferson's career that would leave out this particular side of his activities when in France, would necessarily be incomplete, if not misleading. A large part of the minister's time was devoted, not to philosophical conversations with HelvÉtius' friends but to obstinate, patient, and harassing endeavor to obtain for his country commercial rights and even privileges that would enable her to pay off her debt to Europe. In spite of his affected scorn for figures and statistics, the "philosopher" demonstrated an unusual business ability.

The tobacco trade in which the Southern States and particularly Virginia were vitally interested was at that time entirely in the hands of the Farmers-general, whose monopoly was not administered to the best interests of either the American growers or the French consumers. Being closely allied with some of the prominent economists and entirely in sympathy with their views, Lafayette was naturally against the farming of taxes on tobacco. But as he realized that there was very little hope of doing away entirely with the system, he contented himself at first with employing his best efforts to facilitate the direct importation of tobacco into France. As early as May, 1785, he managed to obtain a copy of a document indicating that some London dealers were offering to the Farmers-general large quantities of Virginia tobacco. He communicated the document at once to Jefferson, and suggested that it was important for both countries to eliminate the London middlemen. Direct commercial relations should be established between France and America, not only as a matter of patriotism, but also as a matter of interest.[121]

This proposed change in the traditional policy of the Farmers-general, who were accustomed to deal with British intermediaries, met with a strong opposition from the Farmers-general. For reasons which they did not state openly, they refused either to deal with independent American growers, or to buy from a new and strictly American company planned by Jefferson.[122]

Unable to overcome the resistance of the Farmers-general, Jefferson decided that the next step would be to fight the monopoly and to persuade the Court to do away with it. It was a logical more than a truly diplomatic procedure, since Jefferson took upon himself to meddle in the internal affairs of the government to which he was accredited. But Jefferson, without being the originator of the famous "shirt-sleeve" diplomacy, was not the man to let diplomatic proprieties stand in the way of the best interests of his country. Furthermore, he was quite sincere in his belief that he was acting to the greatest advantage of both France and America. He therefore wrote to Vergennes a long letter, in which he stated the advantages which would accrue to the royal treasury from the abolition of the tobacco monopoly.[123]

There is no indication that Vergennes resented in any way Jefferson's suggestion; but there is no evidence either that he paid any attention to it. Things remained in the same condition to the end of the year. Up to that date, Lafayette had fought as a free lance the commercial battle of the United States, using his personal influence and family connections to undermine the prestige of the Farmers-general. At the beginning of 1786, Calonne, yielding to his solicitations, formed the ComitÉ du Commerce composed of Farmers-general, inspectors of commerce, and members of the council, in order to study the future of the commercial relations between France and the United States. Lafayette was appointed to the committee on February 9, 1786. He had very little training in economics and had never displayed any particular aptitude for financial problems. But back of him was Jefferson, and on the committee Lafayette was nothing but the spokesman of the American Plenipotentiary. The account of his speeches before the committee, given by Brissot, and reprinted in a note to the "Memoirs of General Lafayette", is simply the rÉsumÉ of a letter sent by Jefferson to Vergennes six months earlier. Jefferson prompted him, furnished him with figures and statistics, and in a letter written at the eleventh hour urged him to expose the fundamental dishonesty of the Farmers-general. Since, according to their own figures, said Jefferson, they lose annually over four million livres by the farming of tobacco "the king, in favor to them, should discontinue the bail; and they cannot ask its continuance without acknowledging they have given in a false state of quantities and sums."[124]

Standing alone in the committee against a strong combination of skilled financiers, Lafayette was fighting for a lost cause without any profit to himself or any visible hope of success.[125]

Both Lafayette and Jefferson were outmaneuvered by the financiers. They professed that they were willing to denounce their contracts with the London merchants, and thus seemed to accomplish a grand patriotic gesture, but they granted to the American financier, Robert Morris, the exclusive privilege of buying tobacco for them and thus defeated the main purpose of Jefferson. The minister had to confess that he was beaten, although he had spared no pains to strike at the root of the monopoly. "The persons interested in it are too powerful to be opposed, even by the interest of the whole country."[126]

But it was not in his character ever to give up; he soon renewed the attack at another point. First he succeeded in postponing for six months the effect of the new lease to Morris, and thus permitted American importers who had accumulated stocks in Lorient to sell them directly to the Farmers-general. Some time later he partially nullified the concession to Morris by obtaining an order from the council "obliging the Farmers-general to purchase from such other merchants as shall offer fifteen thousand hogshead of tobacco", and to grant to the sellers in other respects the same terms as they had granted Robert Morris.

Thus, indirectly but very effectively, Jefferson finally achieved his purpose: to undermine an odious monopoly which caused a great loss to the planters of his country; to enable the American consumers to buy directly from France manufactured products, or at least those "commodities which it is more advantageous to us to buy here than in England, or elsewhere"; finally "to reinforce the motives for a friendship from this country towards ours.—This friendship we ought to cultivate closely, considering the present dispositions of England towards us."[127]

In addition, he flattered himself that he had taught the French some sound economic principles:

One might well wonder to what extent these "truths" were as new to the French as Jefferson seemed to believe, and to what extent he was operative in strengthening the opposition to the Farmers-general, already very strong in France. However that may be, the American minister learned from the French example as much as he taught the members of the committee. The tobacco monopoly was to him another object lesson on the danger of farming taxes, and he did not forget it.

Even greater obstacles were encountered by Jefferson and Lafayette in their effort to develop commercial transactions with New England. The negotiations extended over three years and would be worth relating in detail.[129] Jefferson, bent on breaking customs barriers and obtaining free entrance for the products of New England fisheries, brought forward every possible argument to fight the doctrine of commercialism and summed up his case in a letter sent to Lafayette, but evidently intended for the committee. There for the first time he pointed out the necessary connection existing between the tariff question and the repayment of the French debt. The problem of "transfers" is not a new one, and Jefferson's reasoning sounds strangely familiar to all those who have paid any attention to our present problems of debt settlement, reparations, and tariff. The following passage seems particularly worth quoting:

The conclusion was that it was imperative to obtain such abatement of duties and even such exemptions as the importance of the article might justify, in the hope that his country would be enabled to build up a commercial credit of about 275,000 louis, which would provide for the service and amortization of the American debt to France.

Thanks to the unrelenting efforts of Lafayette and also to the sympathetic attitude of the committee, a series of arrÊts du conseil listed in a letter to Monroe was finally obtained.[131] There was little hope at first that they would be countersigned, but in October of the same year Jefferson, with evident satisfaction, was able to inform Jay of the new regulations granting free ports to America, abolishing export taxes on brandies, and for a year the tax on whale oil and spermaceti, on potash, furs, leather, timber, trees, and shrubbery, brought either in American or French bottoms. Every effort had been made not only to place the United States on the footing of the most favored nation, but to encourage her infant industries and manufactures. The new regulations approved by Calonne did much to free America from her commercial subservience to Great Britain and also reinforce, according to Jefferson's wishes, the motives for a "friendship from France towards America."

This was by no means the end of all difficulties; the abatement on whale oil was only temporary and Jefferson was never able to obtain entire satisfaction in respect to the tobacco trade, but there is no doubt that the situation had greatly improved.

Even during the last months of his stay in France he never overlooked an opportunity to further the commercial interests of the United States. His fear to see his fellow countrymen "over-trade themselves and embark into the ocean of speculation" had not abated. He still believed that "we have no occasion for more commerce than to take off our superfluous produce", and tobacco was clearly in that class.[132] But at that time there arose an opportunity both to develop commercial relations and to be of distinct service to France. The years that immediately precede the French Revolution were marked by a very distressing food shortage in France and particularly in the capital. This was one of the most disquieting problems confronting the Committee of Commerce and the city syndics. Jefferson, because of his connections with Lafayette, Du Pont de Nemours, and Mr. Ethis de Corny, was particularly well informed on the situation and he turned his best efforts to induce the government to remedy it through the importation of American products. He thought that besides the salt fish from New England, salt meat and corn beef would constitute a desirable addition to the French diet and he undertook a campaign to convert the French to the idea. One of his last letters to Necker, on September 26, 1789, was to recommend the importation of salted provisions from the United States, appraising the quality of American salt meat, for "the experience of a great part of America, which is fed almost entirely on it, proves it to be as wholesome as fresh meat."[133]

In spite of all the obstacles to the development of the Gallo-American commerce because of the deep-rooted French horror of innovations and changes, the efforts of Jefferson and his friends were not wholly unavailing. According to Mr. Woolery, in 1789 importations from the United States amounted to 140,959 barrels of flour, 3,664,576 bushels of wheat and 12,340,000 pounds of rice. Vessels coming from the United States to French ports in this year included thirteen French, forty-three English and one hundred and sixty-three American; the tonnage of American vessels was 19,173 in 1788 and 24,173 in 1789. Exports to France in 1788 were valued at $1,384,246; to French possessions in America $3,284,656; and from them, $155,136 and $1,913,212 respectively. In this trade the American tonnage engaged was approximately ten times that of the French. The philosopher had proved himself a first-class commercial agent. He had built up trade relations which would have consolidated the friendship between the two countries if the Revolution had not intervened. But no real friendship can exist between creditor and debtor; the debt problem was no less important than the commercial problem, and Jefferson displayed on this occasion an ingenuity and a diplomatic skill no less worthy of commendation.

When he took charge of the legation at Paris the finances of the United States were in a deplorable condition. Loans made by the Farmers-general, by Beaumarchais, by the King of France, and loans contracted in Holland and in Spain, constituted the most important outstanding liabilities of the American Government. In 1783 the situation as reported to Congress was as follows:

To this total was to be added a loan from Holland for $671,200, and $150,000 borrowed from Spain by Jay. Interest was coming in at the rate of four per cent. on the French loan, making it a total of approximately $7,885,000. The domestic situation was far worse; the States had plunged into issues of paper money: $241,552,780 had been issued in bills of credit by Congress, and $209,524,776 by the States.

If it is remembered that private investors had bought American paper rather recklessly, that important sums were due to England, and that the United States could not even meet the interest on the debts without further borrowing, it is small wonder that European creditors began to wonder whether they would ever be repaid. The first task confronting the new Minister Plenipotentiary was to convince them that the United States as then organized had a sufficient stability to allay all fears. Jefferson undertook at once to clarify the situation. In a letter to the Dutch bankers, N. and J. Van Staphorst, he asserted that no man in America had ever entertained any doubt that "our foreign debt is to be paid fully." He significantly added: "Were I the holder of any of them, I should not have the least fear of their full payment." But he had to call the attention of the bankers to the fact that some international notes were issued for paper money debts, and those of course would be subject to a certain depreciation, to be settled by Congress according to carefully worked out tables. The safer thing, therefore, for European investors was to beware of and to avoid any speculation on American bills and "foreigners should be sure that they are well advised, before they meddle with them, or they may suffer."[134] He repeated the same advice on October 25: "It is a science which bids defiance to the powers of reason."

With the particulars of the different loans obtained by Jefferson while he was in France, and with the transactions that took place in Holland, we cannot deal here. It would be a study well worth undertaking separately, and one for which there is abundant material not yet utilized in the Jefferson papers, particularly in his correspondence with Dumas, the agent at the Hague. We shall restrict ourselves, however, to the political aspect of the debt settlement during Jefferson's mission.

The French were at first very polite about it; without insisting in any way on the question of payment, Vergennes simply asked Jefferson whether "the condition of American finances was improving." The French minister did not even mention the possibilities of the United States paying the arrears of the interest; but Jefferson suffered and irked, thinking that he was probably expected to mention it first, while he could not do so without instructions and there were "no visible means to pay anything for the present."[135]

Curiously enough, the matter came to a head with England during the trip made by Jefferson in the spring of 1786. He held several conferences with the British merchants and tried to obtain with them a sort of compromise by which American merchants would repay in full the capital of debts contracted before and after the war, but withdrawing payment of the interest for the period of the war. It was then that Jefferson put forth the principle he was to maintain persistently with the French,—namely that the matter of commerce and the question of the debts could not be separated, "were it only as a means of enabling our country to pay its debts."[136]

The chief fault of Jefferson's solution, however, was that there was very little America could sell to England, while the Americans themselves were eagerly buying goods manufactured in England. There was great danger of seeing that economic vassalage perpetuated, for "instead of a proper equilibrium, everything at present lies all in the British scale."[137] Importations being permitted, fashion and folly requiring English products, the country was sinking deeper and deeper into poverty, and all the news on the matter received by Jefferson "filled him with despair."

However, something had to be done at once in the case of the French debt, as Jefferson knew that the French Minister of Finance was "at his wit's end to raise supplies for the ensuing year."[138] It does not appear that the French Court had made any representation on the debt to the American Plenipotentiary, but Jefferson fully realized that he was placed in a position of inferiority as long as the vexing question remained unsettled and payments on the interest were overdue. This was the more deplorable, as France was the only European nation with which the United States could hope to develop really satisfactory relations. It was at this juncture that a very interesting proposition was made through Dumas by the Dutch bankers. The French debt's most objectionable feature was that it placed the American Government under direct obligation to the French; in other words, as we would say now, it was a political debt, but means might be found to change it into a purely commercial debt. If a company of bankers were formed to pay off France at once, the American Government would be able to treat with them on a business basis, the greatest advantage being that in case of delayed payments, no political pressure could be exerted or political advantage claimed.

The only objection to such a combination was that it could not be made without the consent of both the French and American governments, and negotiations to that effect would necessarily take a long time. To provide for the most pressing needs, Jefferson proposed to raise directly in Holland the four and twenty millions due to France as accrued interest. This would make a beginning and create a precedent. In the meantime Adams was urged to go to Holland to acquaint himself with the situation, so as to be able to present a definite solution to Congress on his return to America.[139] The French court remained very considerate and did not make any formal representations; but very harsh criticism of the failure of America to meet her obligations were heard during the AssemblÉe des Notables. The funds were so low that the American Government could not even pay its debts to the French officers who, because of their influence with the Court, should have received special consideration. Yet Congress did not seem to realize how pressing the matter was, and Jefferson could only repeat with real despair and disgust: "Would to heaven they would authorize you to take measures for transferring the debt of this country to Holland before you leave Europe."[140]

On their side, the French Court did their best to reassure the French creditors, and when the written report of the AssemblÉes des Notables appeared it had been considerably toned down, simply stating that:

... the interest of the claims of His Majesty on the United States of America, cannot be drawn out for the present, except as a document. The recovery of these claims, as well as principal as perhaps even interest, although they appear to rest on the most solid security, may, nevertheless, be long delayed, and should not consequently, be taken into account in estimating the annual revenue.