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E-DRUG: New Zealand lifts parallel import ban

E-drug: New Zealand lifts ban on parallel imports -- US Objects

As the world rushes toward globalization of markets, some business
interests are trying to use trade negotiations to restrict cross
boarder trade in goods.   So called "parallel imports" occur when
goods are purchased in one country are imported into another.  (Not to
be confused with illegal counterfeit goods, or goods which infringe on
patents or copyrights).  

Under international law, countries can decide if "exhaustion" of
rights" (sometimes called the "first sale doctrine") permit such
"parallel imports."   A hot area of dispute concerns goods protected
under copyright, trademark or patent laws.  High courts in Japan
(http://okuyama.com/c3v01ok.htm), the United States
(http://laws.findlaw.com/US/000/96-1470.html) and the European Union
have said that international law permits the parallel imports of goods
protected by intellectual property rights. However, the United States
Trade Representative (USTR) is on a crusade to ban parallel imports,
and has placed several countries on the USTR's "watch list" or
threatened trade sanctions over the issue of parallel imports of music
CDs, software or pharmaceutical drugs.

The dispute is largely about the ability of a manufacturer or
publisher to set different prices in different countries.  A study of
music CD's in Australia by the Australian Consumers' Association
(http://www.cptech.org/ip/pi/acasubcd.html) indicated Australian
consumers were paying $ 6.33 more than consumers in other countries
for popular music CDs.  CPT looked at prices for HIV drugs and found
significant differences in prices for the same drugs sold by the same
companies in different countries
(http://www.cptech.org/pharm/sa/sa-10-97.html).  Other researchers,
such as K Balasubramaniam, have found similar results for other
pharmaceutical drugs.  In Japan, the Fair Trade Commission has
intervened to ensure that consumers benefit from parallel imports of
goods such as Steinway pianos, which were priced higher in Japan than
elsewhere.  This is considered a very sensitive issue with software,
which is often sold at very different prices in different countries,
and for the emerging trade in copyrighted goods over the Internet.

Firms that are seeking to make parallel imports illegal often assert
that parallel imports are related to piracy or counterfeit goods, or
undermine a firms ability to protect the image of a brand.  Consumer
groups from several countries say that piracy or counterfeit products
are illegal in any case, and can be addressed without bans on parallel
imports.  Rules from country to country are quite different.  The UK
reportedly relies upon parallel imports for about 10 percent of its
pharmaceutical products, for example.

The following is a news report about New Zealand's recent decision to
liberalize rules concerning parallel imports. 

  James Love

>From FT.com (the Financial Times), Wednesday, May 20, 1996.
(distributed as a non-commercial fair use)

PARALLEL IMPORTS: US warns as New Zealand lifts ban
By Gwen Robinson in Wellington
The US has threatened action against New Zealand for its abrupt move
to remove restrictions on parallel imports - allowing importers to
bring in brand-name goods without a franchise.

New Zealand has become the first country in the Organisation for
Economic Co-operation and Development to open its market to parallel
imports, after parliament voted at the weekend immediately to lift the
ban. The vote followed the government's announcement of the measure in
the national budget late last week.

Charlene Barshefsky, US trade representative, had convened an
immediate special review of Wellington's decision, said Josiah Beeman,
US ambassador to New Zealand. Mr Beeman this week publicly condemned
New Zealand's action and warned "severe consequences" of the move that
would go "far beyond the New Zealand market".

New Zealand's decision is particularly sensitive for US car,
pharmaceutical and CD manufacturers, which claim large market shares
through exclusive marketing deals in the country.

However, Mr Beeman said the issue was not a bilateral matter. "Rather,
it is a precedent-setting action by an OECD nation that could have an
adverse impact on overall world trade," he said.

In a sharp response to US protests, Jenny Shipley, New Zealand prime
minister, warned the US to stop interfering in New Zealand affairs:
"We will not be told how to run our country."

Some domestic business groups have warned the move could trigger a
flood of cheap imports and undermine investment and intellectual
property rights in the country. But the government insisted that
removing the ban would benefit consumers through lower prices and
wider availability of goods, which are currently limited through
exclusive franchise networks. At the same time, the government would
increase protection of copyright holders rights through stiffer
penalties for imports of pirated goods, said John Luxton, commerce

Consumer groups, importers and retailers welcomed the move and the
Manufacturer's Federation said the "advantages would outweigh the
drawbacks" as manufacturers would be able to buy cheaper machinery and

The Australian government, which has been fighting a similar battle in
parliament to remove parallel import restrictions on CDs, hailed New
Zealands decision. "The NZ decision was taken in support of a more
open and competitive economy and in the interests of consumers and
local businesses," Daryl Williams, Australian attorney-general, and
Richard Alston, communications minister, said in a joint statement.

The Australian governments proposed legislation has been blocked in
parliament's upper house by opposition parties. The deadlock revolves
around claims by the recording industry and artists that the removal
of restrictions would flood Australia with counterfeit CDs.  

The Australian government said New Zealand's move showed such claims
were spurious, and provided "a ringing endorsement" of the
government's determination to ensure "all Australians benefit from
cheaper CDs."

Political analysts said the parallel importing decision was motivated
by a push to deregulate the motor vehicle industry, and was hastily
introduced to accompany a decision to abolish vehicle tariffs of 22.5
per cent.

A five-year scheme to phase out vehicle tariffs, which initially stood
at 35 per cent, was introduced by the coalition when it gained power
two years ago. At the same time, the government facilitated
tariff-exempt imports of used cars, which grew rapidly last year to
make NZ the world's largest market for Japanese used-vehicle exports.
Also in 1997, the government decided to accelerate the schedule for
phasing out new vehicle tariffs to 2000.

But New Zealands vehicle importers and assemblers, including Toyota,
Nissan and Chrysler, were still able to use provisions of the countrys
copyright legislation to block imports of nearly-new cars. The end of
parallel-import restrictions has ended that right. Motor industry
executives warned this week the move would undermine confidence among
foreign investors. "By legislating the substance out of import
restrictions, the government has opened the market to every man and
his dog to dump anything they want in New Zealand," said David
Cumming, Chrysler Jeeps New Zealand general manager. "In a wider
context, the decision will lead people to question their investments
in the country if people can sell anything they like off the back of a

New Zealand-based car makers and importers have launched a campaign to
protest against the government's decision, claiming the legislation
would undermine intellectual property rights and remove manufacturers
rights to control the image of their brands in the marketplace.

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Send mail for the `E-Drug' conference to `e-drug@usa.healthnet.org'.
Mail administrative requests to `majordomo@usa.healthnet.org'.
For additional assistance, send mail to:  `owner-e-drug@usa.healthnet.org'.

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