The long reign of Henry III saw a gradual erosion of Cologne's privileged position in the face of increasing competition from other German cities. The leaders in this development were the merchants from Baltic port cities, particularly Lübeck, who developed an east-west trading artery in contrast to the older north-south channel of the Rhine. The new Baltic trade of the “Easterlings,” as the merchants from this region became known, would overshadow Cologne by the end of the thirteenth century and serve as the basis for the future Hanseatic League. Although Cologne would still play a major role among the Hanseatic towns, it would no longer be the dominant power exercising virtually monopolistic control over Anglo-German commerce.

The Easterlings entered into German overseas trade during the early thirteenth century. Lübeck, established as a permanent town only in 1158-9, became the leader among the Baltic towns, which included Visby, Rostock, Stralsund, Elbing, Riga, and other inland towns in Saxony. Initially the merchants of these towns did not make the sea journey around Jutland, as it was considered too long and dangerous. Instead they traversed the isthmus from Lübeck to Hamburg and thence onward to Flanders and England. This proved to be a difficult and expensive means of transporting goods and so the volume of trade between the Baltic and England was relatively low.