Chapter CXXXVI: Section II

EFFECT OF EXPORT DUTIES, etc., ON RAW MATERIAL.--EXPORT PREMIUMS.

B. Export duties on raw material, and prohibitions of the exportation of raw material, lower the price of such articles, by preventing the competition of foreign buyers.[A3-2-1] To this loss of the producers of raw material, there is, in the long run, no corresponding gain to the manufacturers. Rather will there be, when freedom of competition prevails at home, an increased flow of the forces of production to the favored branch, because of its rate of profit, which is greater than that usual in the country, and a corresponding flow from the injured branch, until such time as the level of profit usual in the country is restored.[A3-2-2] Hence here, also, the final result is only a change of the direction, not a direct increase of the productive forces.[A3-2-3]

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]

[Footnote 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.]

[Footnote 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.]

[Footnote 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.)]

[Footnote 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.]

[Footnote 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.)]

[Footnote 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).]

[Footnote 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.]