Chapter 4: Drawbacks
Merchants and manufacturers are not content with the monopoly of the home market.
- They want the most extensive foreign sale for their goods.
- But their country:
- has no jurisdiction in foreign nations
- can seldom grant them any monopoly overseas.
- They generally petition for encouragements to exportation.
Drawbacks seem the most reasonable of these encouragements.
- Drawing back the imposed excise or inland duty upon exportation, can never cause more exportation than if there were no duty.
- Such encouragements do not turn towards any particular employment more capital than natural.
- They only hinder the duty from driving that capital away to other employments.
- They do not overturn that balance which naturally establishes itself among the various employments of society.
- They hinder that employment from being overturned by the duty.
- They preserve the natural division and distribution of labour in society.
The same thing may be said of the drawbacks on the re-exportation of imported goods.
- In Great Britain, it amounts to the largest part of the import duty.
- The old subsidy [duty] was imposed by the second of the rules annexed to the act of parliament.
- English and foreign merchants were allowed to draw back half that duty on exportation.
- English merchants were allowed provided the exportation happened within 12 months.
- Foreign merchants were allowed provided it happened within 9 months.
- Wines, currants, and processed silks were the only goods outside this rule.
- They have other, more advantageous allowances.
- The duties imposed by this act were the only ones at that time.
- The term which all drawbacks could be claimed was afterwards extended to three years by Chapter 21, sect. 10 of 1715.
Most of the duties imposed since the old subsidy, are all drawn back on exportation.
- This general rule is liable to many exceptions.
- The doctrine of drawbacks has become more complicated.
Imported foreign goods which greatly exceed home consumption are re-exported.
- On some re-exported foreign goods, the whole duties are drawn back without retaining even half the old subsidy.
- Before the American revolt, we had the monopoly of Maryland and Virginia tobacco.
- We imported 96,000 hogsheads.
- The home consumption did not exceed 14,000.
- They needed to be re-exported.
- The whole duties were drawn back provided the exportation happened within three years.
We still have the monopoly of the West Indian Islands sugars.
- If sugars are exported within:
- a year, all duties on importation are drawn back
- three years, all the duties are drawn back, except half of the old subsidy
- This half is retained on the re-exportation of most goods.
- Sugar importation very much exceeds what is necessary for home consumption.
- Though the excess is inconsiderable compared to the previous excess in tobacco.
Our own manufacturers are jealous of some goods.
- Those goods are banned from being imported for home consumption.
- They may be imported and warehoused for exportation upon paying certain duties.
- But on exportation, none of these duties can be drawn back.
- Our manufacturers are unwilling that even this restricted importation should be encouraged.
- They are afraid that those goods would be stolen out of the warehouse and compete with their own goods.
- Only under these regulations can we import processed silks, French cambrics, lawns, calicoes painted, printed, stained or dyed, etc.
We are unwilling even to be the carriers of French goods.
- We choose rather to forego a profit to ourselves than to allow our enemies to profit by our means.
- The following duties are retained on the exportation of all French goods:
- half the old subsidy
- the second 25%
The fourth of the rules annexed to the Old Subsidy allowed more than half the import duties of all wines to be drawn back on exportation.
- At that time, the legislature gave more than ordinary encouragement to the carrying trade in wine.
- Other duties imposed with or after the old subsidy were allowed to be wholly drawn back on exportation:
- the additional duty
- the new subsidy
- the 1/3 and 2/3 subsidies
- the impost 1692
- the coinage on wine
- All those duties, except the additional duty and the impost 1692, were paid down in ready money on importation.
- The interest of so large a sum created an expence.
- It made it unreasonable to expect any profit in the carrying trade in wine.
- Only a part of the impost on wine was allowed to be drawn back on exportation.
- None of the following were drawn back:
- The 25 pounds the ton on French wines
- The duties imposed in 1745, in 1763, and in 1778
- Two imposts of 5% were imposed in 1779 and 1781 on all the former duties of customs.
- These imposts were allowed to be wholly drawn back on exportation.
- The impost of 1780 is last duty imposed on wine.
- It is allowed to be wholly drawn back.
- When so many heavy duties are retained, it most probably could never lead to the exportation of a single ton of wine.
- These rules take place in all places of lawful exportation, except in the British colonies in America.
Chapter 7 of 1663 was called an act for the encouragement of trade.
- It gave Great Britain the monopoly of supplying the colonies with European goods and wines.
- This monopoly could never be much respected where:
- the coast of our North American and West Indian colonies are so extensive
- our authority was always so very slender
- The colonists were allowed to carry out their non-enumerated commodities in their own ships:
- first, to all of Europe
- afterwards, to all of Europe south of Cape Finisterre [Northern Spain]
- They probably found means of bringing back some cargo from other permitted countries.
- They found difficulty in importing European wines from Great Britain where they were loaded with many heavy duties not drawn back on exportation.
- Madeira wine is not a European commodity.
- It could be imported directly into America and the West Indies via free trade in their non-enumerated commodities to the island of Madeira.
- These circumstances probably introduced that taste for Madeira wine.
- Our officers found it established in all our colonies at the start of the French and Indian War in 1755.
- They brought back this wine with them to Great Britain.
- At the end of that war in 1763 (by Chapter 15, section 12 of 1764), all duties, except 840 pence, were allowed to be drawn back on the exportation of all wines to the colonies, except French wines.
- The time from 1763 to the American revolt was probably too short to create any considerable change in the customs of those countries.
That act favoured the colonies so much more than other countries, in terms of wine drawbacks.
- It favoured the colonies much less in the drawbacks of most other commodities.
- Half the old subsidy was drawn back on the exportation of most commodities.
- But this law enacted that none of that duty should be drawn back on exportation of any European or East Indies commodities to the colonies, except wines, white calicoes, and muslins.
Perhaps drawbacks were originally granted to encourage the carrying trade.
- The freight of the ships of that trade is frequently paid by foreigners in money.
- It was supposed to be fitted for bringing gold and silver into the country.
- This motive was perhaps abundantly foolish
- The carrying trade certainly deserves no encouragement.
- Its drawbacks seems reasonable.
- Such drawbacks cannot force into this trade more of the country's capital than what would go to it naturally had there been no import duties.
- They only cancel out bad effect of the duties.
- The carrying trade should be left free like all other trades.
- It is an avenue for those capitals which cannot find employment in agriculture or manufactures in its home trade or foreign trade of consumption.
The customs revenue profits from such drawbacks in the part of the duty retained.
- If the whole duties were retained, those foreign goods could seldom have been exported.
- Those goods would not be imported in excess of what was needed.
- Without imports, those duties would never have been paid.
These reasons justify drawbacks, even if all the taxes of excise and duties, were always drawn back on exportation.
- In this case, the revenue of excise would suffer a little.
- The revenue of the customs would suffer much more.
- The natural balance of industry and the natural division and distribution of labour is always disturbed by such taxes.
- They would be re-established by such a regulation.
These reasons will justify drawbacks only on exporting goods to independent countries.
- They do not justify drawbacks to countries where our merchants and manufacturers enjoy a monopoly.
- For example, a drawback on the exportation of European goods to our American colonies will not always create more exportation than without a drawback.
- Because of the monopoly of our merchants and manufacturers there, the same amount of exports would be sent even if the duties were retained.
- The drawback would frequently then be a pure loss to the revenue of excise and customs without:
- altering the trade or
- rendering the trade more extensive
- Chapter 7 will explain:
- How far such drawbacks:
- can be justified to encourage the industry of our colonies
- are advantageous to the mother-country
- Why our colonies should be exempt from taxes paid by the rest of their fellow subjects.
Drawbacks are useful only in cases where the goods they export are really exported overseas and not clandestinely re-imported.
- Some drawbacks, particularly those on tobacco, have been well known to be frequently abused this way.
Next: Chapter 5: Bounties and Subsidies