§ Mrs. EwingTo ask the Secretary of State for Trade and Industry if he will make a statement on Her Majesty's Government's policy regarding the legality of parallel trading of goods from outside the European economic area markets; and what estimate he has made of the impact on United Kingdom manufacturing if such trading is rendered lawful. [116589]
§ Dr. HowellsThe judgment of the Court of Justice of the European Communities in the Silhouette case [C-355/96] of July 1998 highlighted the extent of powers afforded by European law to trade mark owners. In particular, the Court decided that they can prevent the import into the Community of goods which they themselves have already sold in other parts of the world. This confirmed as a matter of law that the European Trade Marks Directive does allow trade mark owners to use their rights to prevent import of their goods into the Community after they have been marketed elsewhere.
Since this judgment, the European Commission has produced a study [Trade Mark exhaustion—Study on the economic consequences of alternative regimes by National Economic Research Associates for the European Commission] on the economic affects of such rights, and the results which can be expected if trade mark owners were to be denied them. The conclusions of this study are that a move to so-called international exhaustion would create beneficial impacts on the European economy. In particular, prices in some key consumer sectors would fall 194W significantly, and competition in these sectors would increase as brand owners and retailers respond to increasingly competitive markets.
Our own studies agree with the conclusions reached by the Commission. In particular there is likely to be a beneficial, if small, impact on the United Kingdom economy. We expect a maximum of about £400 million of additional imports would be generated by moving to international exhaustion. Total United Kingdom imports are around £220 billion, of which £180 billion are imports of goods. Additional levels of parallel imports would, therefore, be equivalent to approximately 0.2 per cent, of United Kingdom imports. Such imports are likely to arise in a limited number of sectors, principally clothing, footwear, sports and luxury goods for which there is already a strong import market. It seems likely that parallel imports would take market share from existing imports rather than domestic manufacturers.
In the light of these studies, we are discussing trade mark rights with our European partners with a view to changing current legislation. However, in some sectors where the Single Market is not yet complete or which are subject to other special conditions, for example Pharmaceuticals, the benefits of international exhaustion are not clear, and care will be needed to ensure that unwanted results do not arise.