Of Drawbacks

Merchants and manufacturers are not contented with the monopoly of the

home market, but desire likewise the most extensive foreign sale for

their goods. Their country has no jurisdiction in foreign nations, and

therefore can seldom procure them any monopoly there. They are generally

obliged, therefore, to content themselves with petitioning for certain

encouragements to exportation.

Of these encouragement
, what are called drawbacks seem to be the most

reasonable. To allow the merchant to draw back upon exportation, either

the whole, or a part of whatever excise or inland duty is imposed upon

domestic industry, can never occasion the exportation of a greater

quantity of goods than what would have been exported had no duty been

imposed. Such encouragements do not tend to turn towards any particular

employment a greater share of the capital of the country, than what

would go to that employment of its own accord, but only to hinder the

duty from driving away any part of that share to other employments. They

tend not to overturn that balance which naturally establishes itself

among all the various employments of the society, but to hinder it from

being overturned by the duty. They tend not to destroy, but to preserve,

what it is in most cases advantageous to preserve, the natural division

and distribution of labour in the society.

The same thing may be said of the drawbacks upon the re-exportation of

foreign goods imported, which, in Great Britain, generally amount to by

much the largest part of the duty upon importation. By the second of

the rules, annexed to the act of parliament, which imposed what is now

called the old subsidy, every merchant, whether English or alien.

was allowed to draw back half that duty upon exportation; the English

merchant, provided the exportation took place within twelve months; the

alien, provided it took place within nine months. Wines, currants, and

wrought silks, were the only goods which did not fall within this rule,

having other and more advantageous allowances. The duties imposed by

this act of parliament were, at that time, the only duties upon the

importation of foreign goods. The term within which this, and all other

drawbacks could be claimed, was afterwards (by 7 Geo. I. chap. 21. sect.

10.) extended to three years.

The duties which have been imposed since the old subsidy, are, the

greater part of them, wholly drawn back upon exportation. This general

rule, however, is liable to a great number of exceptions; and the

doctrine of drawbacks has become a much less simple matter than it was

at their first institution.

Upon the exportation of some foreign goods, of which it was expected

that the importation would greatly exceed what was necessary for the

home consumption, the whole duties are drawn back, without retaining

even half the old subsidy. Before the revolt of our North American

colonies, we had the monopoly of the tobacco of Maryland and Virginia.

We imported about ninety-six thousand hogsheads, and the home

consumption was not supposed to exceed fourteen thousand. To facilitate

the great exportation which was necessary, in order to rid us of the

rest, the whole duties were drawn back, provided the exportation took

place within three years.

We still have, though not altogether, yet very nearly, the monopoly of

the sugars of our West Indian islands. If sugars are exported within a

year, therefore, all the duties upon importation are drawn back; and

if exported within three years, all the duties, except half the old

subsidy, which still continues to be retained upon the exportation of

the greater part of goods. Though the importation of sugar exceeds a

good deal what is necessary for the home consumption, the excess is

inconsiderable, in comparison of what it used to be in tobacco.

Some goods, the particular objects of the jealousy of our own

manufacturers, are prohibited to be imported for home consumption. They

may, however, upon paying certain duties, be imported and warehoused for

exportation. But upon such exportation no part of these duties is

drawn back. Our manufacturers are unwilling, it seems, that even this

restricted importation should be encouraged, and are afraid lest some

part of these goods should be stolen out of the warehouse, and thus come

into competition with their own. It is under these regulations only

that we can import wrought silks, French cambrics and lawns, calicoes,

painted, printed, stained, or dyed, etc.

We are unwilling even to be the carriers of French goods, and choose

rather to forego a profit to ourselves than to suffer those whom we

consider as our enemies to make any profit by our means. Not only half

the old subsidy, but the second twenty-five per cent. is retained upon

the exportation of all French goods.

By the fourth of the rules annexed to the old subsidy, the drawback

allowed upon the exportation of all wines amounted to a great deal

more than half the duties which were at that time paid upon their

importation; and it seems at that time to have been the object of the

legislature to give somewhat more than ordinary encouragement to the

carrying trade in wine. Several of the other duties, too which were

imposed either at the same time or subsequent to the old subsidy,

what is called the additional duty, the new subsidy, the one-third and

two-thirds subsidies, the impost 1692, the tonnage on wine, were allowed

to be wholly drawn back upon exportation. All those duties, however,

except the additional duty and impost 1692, being paid down in ready

money upon importation, the interest of so large a sum occasioned an

expense, which made it unreasonable to expect any profitable carrying

trade in this article. Only a part, therefore of the duty called the

impost on wine, and no part of the twenty-five pounds the ton upon

French wines, or of the duties imposed in 1745, in 1763, and in 1778,

were allowed to be drawn back upon exportation. The two imposts of

five per cent. imposed in 1779 and 1781, upon all the former duties of

customs, being allowed to be wholly drawn back upon the exportation of

all other goods, were likewise allowed to be drawn back upon that of

wine. The last duty that has been particularly imposed upon wine, that

of 1780, is allowed to be wholly drawn back; an indulgence which, when

so many heavy duties are retained, most probably could never occasion

the exportation of a single ton of wine. These rules took place with

regard to all places of lawful exportation, except the British colonies

in America.

The 15th Charles II, chap. 7, called an act for the encouragement of

trade, had given Great Britain the monopoly of supplying the colonies

with all the commodities of the growth or manufacture of Europe, and

consequently with wines. In a country of so extensive a coast as our

North American and West Indian colonies, where our authority was always

so very slender, and where the inhabitants were allowed to carry out in

their own ships their non-enumerated commodities, at first to all

parts of Europe, and afterwards to all parts of Europe south of Cape

Finisterre, it is not very probable that this monopoly could ever be

much respected; and they probably at all times found means of bringing

back some cargo from the countries to which they were allowed to carry

out one. They seem, however, to have found some difficulty in importing

European wines from the places of their growth; and they could not well

import them from Great Britain, where they were loaded with many

heavy duties, of which a considerable part was not drawn back upon

exportation. Madeira wine, not being an European commodity, could be

imported directly into America and the West Indies, countries which, in

all their non-enumerated commodities, enjoyed a free trade to the island

of Madeira. These circumstances had probably introduced that general

taste for Madeira wine, which our officers found established in all our

colonies at the commencement of the war which began in 1755, and which

they brought back with them to the mother country, where that wine had

not been much in fashion before. Upon the conclusion of that war, in

1763 (by the 4th Geo. III, chap. 15, sect. 12), all the duties except

£3, 10s. were allowed to be drawn back upon the exportation to the

colonies of all wines, except French wines, to the commerce and

consumption of which national prejudice would allow no sort of

encouragement. The period between the granting of this indulgence and

the revolt of our North American colonies, was probably too short to

admit of any considerable change in the customs of those countries.

The same act which, in the drawbacks upon all wines, except French

wines, thus favoured the colonies so much more than other countries,

in those upon the greater part of other commodities, favoured them much

less. Upon the exportation of the greater part of commodities to other

countries, half the old subsidy was drawn back. But this law enacted,

that no part of that duty should be drawn back upon the exportation to

the colonies of any commodities of the growth or manufacture either of

Europe or the East Indies, except wines, white calicoes, and muslins.

Drawbacks were, perhaps, originally granted for the encouragement of the

carrying trade, which, as the freight of the ship is frequently paid by

foreigners in money, was supposed to be peculiarly fitted for bringing

gold and silver into the country. But though the carrying trade

certainly deserves no peculiar encouragement, though the motive of the

institution was, perhaps, abundantly foolish, the institution itself

seems reasonable enough. Such drawbacks cannot force into this trade a

greater share of the capital of the country than what would have gone

to it of its own accord, had there been no duties upon importation; they

only prevent its being excluded altogether by those duties. The carrying

trade, though it deserves no preference, ought not to be precluded, but

to be left free, like all other trades. It is a necessary resource to

those capitals which cannot find employment, either in the agriculture

or in the manufactures of the country, either in its home trade, or in

its foreign trade of consumption.

The revenue of the customs, instead of suffering, profits from such

drawbacks, by that part of the duty which is retained. If the whole

duties had been retained, the foreign goods upon which they are paid

could seldom have been exported, nor consequently imported, for want

of a market. The duties, therefore, of which a part is retained, would

never have been paid.

These reasons seem sufficiently to justify drawbacks, and would justify

them, though the whole duties, whether upon the produce of domestic

industry or upon foreign goods, were always drawn back upon exportation.

The revenue of excise would, in this case indeed, suffer a little,

and that of the customs a good deal more; but the natural balance of

industry, the natural division and distribution of labour, which is

always more or less disturbed by such duties, would be more nearly

re-established by such a regulation.

These reasons, however, will justify drawbacks only upon exporting goods

to those countries which are altogether foreign and independent, not

to those in which our merchants and manufacturers enjoy a monopoly. A

drawback, for example, upon the exportation of European goods to our

American colonies, will not always occasion a greater exportation than

what would have taken place without it. By means of the monopoly which

our merchants and manufacturers enjoy there, the same quantity might

frequently, perhaps, be sent thither, though the whole duties were

retained. The drawback, therefore, may frequently be pure loss to the

revenue of excise and customs, without altering the state of the trade,

or rendering it in any respect more extensive. How far such drawbacks

can be justified as a proper encouragement to the industry of our

colonies, or how far it is advantageous to the mother country that they

should be exempted from taxes which are paid by all the rest of

their fellow-subjects, will appear hereafter, when I come to treat of


Drawbacks, however, it must always be understood, are useful only in

those cases in which the goods, for the exportation of which they

are given, are really exported to some foreign country, and not

clandestinely re-imported into our own. That some drawbacks,

particularly those upon tobacco, have frequently been abused in this

manner, and have given occasion to many frauds, equally hurtful both to

the revenue and to the fair trader, is well known.