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From my viewpoint, the grounds for allowing the trademarked goods’ parallel importation in China are on the basis of the following reasons.
Firstly, the aim of the WTO is to eliminate all international trade barriers. Restriction to parallel imports would be construed as an artificial trade hindrance. In the last three or four decades, globalization has intrinsically changed the structure of international trade and economic relations. With the advent of globalization, free trade policy has become a dominant trend in international trading world. The principal objective of multilateral trading system is to push forward free trade to the utmost on the condition that no negative influence arises. To eliminate barriers to the free movement of goods across national borders is the most extraordinary path to realize more liberalizing free trade system. As Professor Verma has forcefully argued: "The objectives of TRIPS include to reduce distortions and impediments to international trade and to ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to international trade. Territorial exhaustion, by creating artificial barriers against the free movement of goods, would be an impediment towards the stated purposes of these Agreements." [FN29]
It is said that countries that participate in international trade grow out of poverty faster than those that do not. The evidence for this proposition is clear. World bank research shows that per capita real income grew three times faster in the 1990s for developing countries that most increased their participation in globalization through trade than for the rest of the developing countries. The world bank also finds that trade barrier elimination in conjunction with related development policies would lift tens of millions of people from poverty by 2015. Developing countries that generate growth through trade will be less dependent on official aid over time. [FN30] In this regard, to permit parallel importation is possibly conducive to trading-encouraged developing countries. China should treat the parallel imports problem as a challenging test with willingness, to bring harmonization to the global legal and economic environment by establishing and enforcing national predictable, equitable laws and regulations. China is able to steer towards the goal of achieving a barrier–free international system of trade on its own initiative.
Secondly, from an economics perspective, with an analysis of vertical price control, a manufacturer selling its product through an independent agent sets the wholesale price sufficiently low to induce a desired retail price abroad. This permits the agent to sell the product profitably in the originating market. Parallel imports can increase retail-market competition, it can also affect a rights-owner’s incentive in setting the wholesale price it charges a distributor, thereby reducing vertical pricing efficiency. There exists a U-shaped welfare curve of parallel trade with respect to trade cost. Restricting parallel imports benefits the manufacturer, but could raise or reduce global surplus. However, it is said that parallel imports are more likely to increase welfare within a region. [FN31] Therefore, prohibition of parallel imports is not necessarily a good choice.
Thirdly, to compare trademarked goods with patented goods, it is understandable to provide for the former a more flexible legal environment. Because patents incorporate useful scientific discoveries or knowledge which are costly to acquire. It is clear that, given that the investment of time, energy and money into developing a patentable item is substantial, and the low probability of any given patented item being successful, it is important to provide innovators with an incentive to undertake research and development. [FN32]
By contrast to patent protection, trademark is a tool which reduces search costs and enable consumers to enjoy the benefit of previous satisfactory experiences with products. Trademark acts as a signal from producer to consumer that they can be assured of a given quality of product. Regarding to the trademarked parallel imports are genuine goods, in this manner it is reasonably persuasive to permit trademarked parallel imports.
Fourthly, from a social point of view, Chinese consumers may enjoy the same quality products at less expensive prices. The benefit is to increase the living standard of Chinese people. This is important for developing countries, and perhaps it could also explain why very few developing countries choose to restrict parallel imports completely. Moreover, if parallel importation is not allowed, high prices and lucrative profits in selling famous foreign brand-name products will only increase the likelihood of unscrupulous traders producing and selling counterfeits of such products. [FN33]
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