4.4 Drawbacks
The natural inclination of producers of goods is to produce as much as they are capable of selling, first to the domestic market then abroad, which is entirely beneficial to the society in ways that have previously been discussed (lower cost of domestic goods to the market, trade for goods that can be most efficiently produced elsewhere). Where tariffs are imposed abroad, they reduce foreign demand for domestic goods, and the most direct way to counteract this is to remunerate domestic producers for foreign tariffs.
It is in the condition that they are compensation for excises and duties that differentiate a drawback from a subsidy, as subsidization is payment for production of goods, even those consumed in a domestic market.
Drawbacks strike Smith as a "most reasonable" encouragement for exportation: they are not an unnatural encouragement to produce, but the removal of an unnatural discouragement to do so, a countermeasure to the effects of intervention in trade that enables them to produce at a natural level, as they would if no tariffs were imposed.
However, this general rule is liable to exceptions, as the practice of drawbacks has become much less straightforward than they were when they were originally instituted.
(EN: The content that follows adds little to the information communicated above, but much historical evidence of the incidence of drawbacks and their effect on trade and manufacture.)
In certain instances, a drawback is used to favor certain nations much in the way a tariff is used to disfavor others. England has, on occasion, placed a tariff on the importation of a given good and offered a drawback of the tariff (it is collected, then refunded) to certain nations. The example is given of the drawback offered on the import of linen from any country other than France. It is the functional equivalent of placing a tariff only on French linen.
It's also noted that offering drawbacks does not entirely eliminate the income of the customs house, as a drawback is very seldom offered in full compensation of tariff collected, but most often a lesser amount, such that they are the equivalent of lowering the tariff, not of entirely eliminating it, though there are (rare) instances in which drawbacks were made in full.
Drawbacks are also used by the state as a matter of operational efficiency: it requires greater effort to monitor the inflow of goods so to impose a tariff only on those that come from certain locations. It is much easier to collect a tax on all goods coming into a port of trade and offer drawbacks to some, requiring the importer to present proof of origin - it is in the importer's financial interest to do so, and easier for the importer to provide evidence than for the state to investigate the origins of the goods of all importers.
And finally, there is mention of some incidence of the abuse of drawbacks, in which some ill-gotten profit was had by exporters who claimed to be sending goods abroad, but would clandestinely "re-import" them after collecting the drawback for export. This tends to occur more frequently with goods that are of high value to volume, such as tobacco, as they are easier to smuggle back into the country, as well as those where there is a high mark-up on cost, as there is greater margin to be had. Naturally, this practice is harmful to competition and fair trade within a nation, as it makes drawbacks the equivalent of subsidies.