The Australian book industry is in a state of considerable agitation as it waits to see if the federal government will scrap the parallel import restrictions of the Copyright Act.
Lifting the restrictions has been recommended by the Harper Committee and the Productivity Commission, and a decision could come next week, next month, or never.
These regulations restrict the importation of commercial quantities of books without the permission of the copyright holder. There is a strong sense of déjà vu in the current situation. Every few years since the 1980s a recommendation for repeal of these import restrictions has been put to the government of the day and every time the government, whether Coalition or Labor, has rejected it.
The arguments for doing away with them are based on simple economics. The restrictions provide some protection for authors and publishers in the face of international competition. The overall effect is to raise, at least temporarily, the price of books to Australian consumers, though the directly attributable cost increase is uncertain.
Keep reading: Parallel importation and Australian book publishing: here we go again
Nevertheless, any form of protection is anathema to economists as it distorts markets, creates inefficiencies in the allocation of our national resources, and restricts the access of consumers to cheaper supplies of products from abroad.
The cultural exception
So should books be treated differently from anything else? Books are a cultural product, and can be defined as such for the purposes of international trade. Ever since the structure of the world trading system was set up in the 1940s with the establishment of the General Agreement on Tariffs and Trade, the forerunner of the present-day World Trade Organisation, a special case for cultural goods and services has been recognised: the so-called “cultural exception”.
The principle behind this concept is the proposition that cultural products are not just commercial merchandise, but embody cultural values that are separate from and additional to their economic value. These cultural values, it is argued, can be shown to be important to society, especially when they represent something about the national culture from which they are derived.
Keep reading: Friday essay: thriving societies produce great books – can Australia keep up?
So the argument concerning Australian books, written by Australian authors about Australian subjects and published by Australian publishers is that they convey such values. Hence, in the context of international trade they should be granted a cultural exception and should not be subject to the same free-trade ideology as other commodities in the global marketplace.
Some hardline economists – including in the Productivity Commission – acknowledge the significance of Australian books to our culture. They’re willing to accept a role for the public sector in ensuring that the cultural contribution of the book industry is maintained, provided that the community agrees that such a role is worth paying for.
The argument here is that if Australian books generate a sufficient level of public-good benefit through their contribution to our collective cultural life – a contribution that cannot be purchased overseas, by the way – this may constitute a case of market failure. Government intervention to correct for it may be justified if the benefits from intervention outweigh the costs.
So far so good, you might think. But it is one thing to agree that some level of support for an industry is justified – and quite another to determine how such support might be provided.
Economists are likely to argue that instead of the blunt instrument of parallel import restrictions, whose beneficiaries may well include many of the “wrong” people, direct fiscal support would be more appropriate because it can be targeted at those who generate the public benefit, such as Australian authors.
Protection through fiscal channels?
If we accept this line of argument, and if the existence of public-good benefits from the Australian book industry is assumed, it can be argued that the best policy action in the present circumstances would be to remove the import restrictions, and replace them with an equivalent level of protection provided through fiscal channels, for example by increasing the levels of financial support provided to writers and publishers of Australian books.
Such a recommendation may have merit in principle, but in the realpolitik of the Australian government today it simply doesn’t stand up. Federal funding for the arts and culture sector has been under considerable pressure in recent years. Even more pointedly, the government last year signalled its attitude to supporting the book industry by abolishing the newly-established Book Council before it had even held its first meeting.
Keep reading: Short shelf life: the Book Council of Australia is stuffed back on the rack
The possibility that the Government would approve a new budget allocation of any significance to compensate authors or publishers following removal of the import restrictions must be regarded as very remote indeed.
Some commentators have argued that import restrictions are a relatively minor issue, particularly when set against other more far-reaching copyright proposals such as the possible introduction of US-style fair dealing – a prospect that would have much more serious implications for the book industry. Nevertheless the recommendation is there, and needs a response.
What to do? To avoid a confrontation with an entire industry and to demonstrate a concern for the health of Australian cultural life, the government could either abolish parallel import restrictions and provide compensatory support for the production, distribution and consumption of Australian books, or it could leave things as they are.
As we have noted, successive Australian governments have in previous years accepted the latter as the appropriate practical and principled strategy. In its own interests, the present government would be well advised to do the same.
Authors: David Throsby, Distinguished Professor of Economics, Macquarie University