Cyclopædia of Political Science, Political Economy, and the Political History of the United States
DRAWBACK, a term used in commerce to signify the remitting or paying back of the duties previously paid on a commodity on its being exported.
—A drawback is a device resorted to for enabling a commodity affected by taxes to be exported and sold in the foreign market, on the same terms as if it had not been taxed at all. It differs in this from a bounty—that the latter enables a commodity to be sold abroad for less than its natural cost, whereas a drawback enables it to be sold exactly at its natural cost. "Drawbacks," as Adam Smith has observed, "do not occasion the exportation of a greater quantity of goods than would have been exported had no duty been imposed. They do not tend to turn toward any particular employment a greater share of the capital of the country than 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 labor in the society."
—Were it not for the system of drawbacks, it would be impossible, unless when a country enjoyed some very peculiar facilities of production, to export any commodity that was more heavily taxed at home than abroad; but the drawback obviates this difficulty and enables merchants to export commodities loaded at home with heavy duties, and to sell them in the foreign market on the same terms as those fetched from countries where they are not taxed.
J. R. M'C. and H. G. R.
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