The Wealth of Nations

Book 4, Chapter 4

Drawbacks

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Chapter 4 Summary


Merchants and manufacturers are keen to sell their goods to the most extensive foreign market possible. Since their home country has no jurisdiction in foreign markets, they do not have any monopoly there. As a result, they petition their governments to create incentives for export. Drawbacks are one such incentive and perhaps the most reasonable (rebate of taxes or duties paid on imported goods that have been re-exported).


Enabling a merchant to recuperate the excise or inland duty imposed upon his domestic industry does not direct a greater quantity of goods to be exported than would have been had no duty been imposed. Such incentives tend to preserve the natural division and distribution of labor in a society.


Before the revolt of our North American colonies, we had the monopoly of the tobacco production in Maryland and Virginia. In order to facilitate export of surplus tobacco, drawbacks were introduced, provided the export took place within three years.


We still have the monopoly over sugar production in the West Indian islands. If sugar is exported within a year, therefore, all import duties importing are drawn back.


Some goods are prohibited from importation; they may be imported and stored for export, upon payment of duties, but there will be no drawbacks for exportation once they are exported.


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