C. In the case of export-premiums, it is necessary to distinguish between the mere refunding back of the taxes which have been paid on the assumption of a home consumption which has not taken place (drawbacks), and the actual making of donations because of the exportation of goods (bounties). The former produces no result except to maintain the possibility of a production which would otherwise have been prevented by the tax. The latter, on the contrary, compels all those who are subject to taxation to make a donation to one particular class of persons engaged in industry.[A3-2-4] Moreover, all consumers are compelled to pay a higher price for the commodity to the extent that the market price, inclusive of the premium to be obtained abroad, is higher than the home market price hitherto usual. But, as the cost of production has not increased, this profit of the producers, which is greater than that usual in the country, must induce other productive forces to enter into the favored branch; so that here, also, the lasting result is not a higher rate of profit of the individuals engaged in the industry, but an extension of the industry itself. Foreign countries chiefly reap the greatest advantage from this course, since they obtain the commodities at gift-prices.[A3-2-5] The premiums paid, not for exportation, but for the production of a commodity, have a meaning akin to this.[A3-2-6] Either the industry could not maintain itself without premiums, in which case the state encourages a losing production,—and the more there is produced the greater is the loss to the national economy;—or the industry might exist without the payment of premiums, and then the newly increased profit would lead to an extension of the industry. Exportation would follow, and all the effects of export-premiums appear.[A3-2-7]
[A3-2-1] Rags in Silesia dearer than in Bohemia by the full amount of the Austrian export duties (Gutachten über die Erneuerung der Handelsverträge; 1876, p. 9). When the English export-prohibitions were extended to Scotland, the price of Scotch wool fell about 50 per cent. (A. Smith, W. of N., IV, ch. 8.) In the case of foreign raw material, the reëxportation of which is prevented, the object of such prohibitions may be largely frustrated. When England, to promote its dyeing industries, left the importation of colors entirely free, but allowed their exportation only under heavy duties (8 George I., c. 15), the importers provided the market always with somewhat less than the amount required, and thus raised the price.
[A3-2-2] Export hindrances have been continued longest in favor of manufacturing industries (Verarbeitungsindustrie), in the case of such commodities as are not intentionally produced, such as rags, ashes, etc., but which are collected only as the remains of some other kind of production or consumption. "Negative production," according to Stilling, Grundsätze der Staatswirthschaft, 803, because it is desirable to produce as little as possible of such raw material. But the dearer rags, for instance, are, the more carefully are they collected.
[A3-2-3] When the French prohibition of the exportation of hemp was extended to Alsace, its production decreased from 60,000 to 40,000 cwt. (Schwerz, Landwirthschaft des Nieder-Elsasses, 378 ff.) Frederick the Great soon carried his prohibition of the exportation of raw wool to such an extent as to prohibit the exportation even of unshorn sheep, and to punish the dropping of a sheepfold by a fine of 1,000 ducats. (Preuss. Gesch. Friedrichs III., 42.) Here, also, belong prohibitions relating to the exportation of corn, which force considerable capital, etc. into industry. The prohibition of the exportation of corn in England, and the permitting of the exportation of cattle, wool, etc., was one of the principal causes why there were so many complaints at the time of the turning of land used for tillage into pasturage-land. When, in 1666, the exportation of Irish cattle to England was prohibited, it produced, at the outset, great need in Ireland, but afterwards a flourishing condition of Irish industry. (Hume, History of England, ch. 64.)
[A3-2-4] The effect must be very much the same when the right of buying up all the raw material of a certain district is granted to one factory exclusively. The elector, Augustus of Saxony, did this frequently. Compare Falke, Gesch. des Kurf., A. v. S., 190-212, 345.
[A3-2-5] As to how, by means of German drawbacks (Rückzölle) it is possible for beet-sugar to be offered at a cheaper rate in Brazil than home cane-sugar, see Wappäus, Brazilien, 1830. The French export-premiums for sugar amounted, in 1856, to over 8,000,000 francs. Frenchmen subject to taxation were obliged to pay this amount, and thus add to the already increasing price which they had to pay for that article. (Journ. des Econom., Juill., 1857.) In England, in 1742, the export-premiums for linen were defrayed by enhanced entry-duties on cambrics. (15 and 16 George II., c. 29.)
[A3-2-6] As to how English export-premiums sometimes made English commodities cheaper in Germany than in England, see Büsch, Werke, XIII, 82. There are, indeed, gifts which may ruin the receiver of them, as, for instance, when one gets his rival intoxicated at his expense before the decisive solicitation. Timeo Danaos et dona ferentes (cited by Fox and Burke against the Eden treaty: Hansard, Parl. History, 1787, Jan. p. 402, 488).
[A3-2-7] It is said that Maria Theresa paid 1,500,000 florins a year for this purpose. (Sonnenfels, Grundsätze, II, p. 179.) England, between 1806 and 1813, altogether, £6,512,170. Colquhoun, Wohlstand, Macht, etc., Tieck's translation, I, 251.
SECTION III.
THE FREE-TRADE SCHOOL.