22: Bounties on Exportation
Another respect in which nations meddle in trade among their peoples is interfering with the price of goods, generally by offering bounties to export goods charging duties for importing goods. The notion that this action on the part of the state is at all necessary or beneficial is contrary to common sense, but as it is the matter of constant debate, further meditation is necessary.
The immediate effect of a bounty of exportation is to decreases the cost to foreign consumers. It is believed not to reduce the cost to domestic consumers because the bounty is paid only based on the amount exported
(EN: All of this is theoretical, and overlooks several possibilities that come into play - for example, a bounty that makes a good more profitable to export than sell domestically will increase the domestic price because local buyers must pay a price equal to the foreign price plus the bounty.)
Ricardo also reasons that such a bounty would also have a number of side effects that are beneficial to the domestic economy: it would encourage domestic production, increasing the wages of workers, increasing experience, increasing capital investment, etc. In general, exporting a crop "gives encouragement" to the development of industrial technology and infrastructure, even if the product is exported.
There is also some suggestion that there is a net profit to domestic economy, because of the wages paid to workers, profit of the manufacturer, and rent of the landlord are all increased while the quantity of goods remains the same - but this overlooks the fact that for every good exported, another is imported to replace it, and the amount of goods increases proportionally (EN: unless, of course, the foreign source pays with money rather than goods, and wealth then accumulates in the domestic economy with no increase to the amount of goods for which money can be traded, the net result of which would seem to be devaluation of currency and price inflation in the domestic market.)
It's also pointed out that subsidizing products for export (or any purpose) leads to an increased cost of production because there is greater demand of domestic labor to produce them and employers must bid for skilled workers. This is likely to affect the domestic price as well as the foreign one, and have some impact on the labor market in general, as demand of workers from one industry calls labor from another, who must also increase wages to retain their own workers. Ricardo then seems to disagree with this notion, though, based not on supply and demand of the good that a bounty encourages production of, but in terms of the workers' own need of wages: they still consume the same amount of necessities and luxuries, and need demand no higher compensation to do so. (EN: And ultimately, much depends on the situation in which stimulation is attempted. If there is a surplus of labor, likely there would be no need for producers to bid for the extra help to produce the exported quantity.)
Another point to consider is: whence the funds for paying the bounty? The state likely does not have considerable funds in reserve, and must raise taxes on individuals in other industries, or in general, to offer a bounty on export to the producers in any given industry.
(EN: Beyond this point, and at quite some length, Ricardo considers the various positions of Smith, Say, and Buchannan on the notion of taxes on trade among nations. If he has any original idea of his own to offer, it's lost among the bickering.)