This house would allow retailers to import for resale "grey" goods from abroad.

Consumers benefit from grey imports. The economics of grey importation drives sourcing to low-cost economies. Even if retailers take some of this benefit as improved profit margins, typically at least some of it will be passed on to consumers in the form of reduced prices. Grey imports also allow consumers to buy products that may not yet be available in their own market, because they have not yet been released, or because in their market the manufacturer feels there is insufficient demand. Thus, grey imports expand consumer choice.

Many films, DVD's and video games are released in one region months before others, and grey imports allow enthusiasts to access their favoured products earlier than they otherwise would¹.

¹ Bun, Mara and Horrocks, Steve, 'In Support of Parallel Imports of CDs', Australian Consumers' Association, February 1998

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Consumers do not really benefit overall from grey imports. Although manufacturers may reduce prices in some (typically, richer) countries, they are at least as likely to raise prices in less developed economies, depriving consumers there of access to international brands and luxury goods, and so depriving them of a real choice and in some cases the full product.¹ In addition, they will still have to pay all the taxes and the losses from lack of regulation which have been avoided in some way or lose the services those taxes provide. The loss of revenue from grey imports can mean that production is limited or even halted going forward, even though there is market demand for more products from the manufacturer. The film industry shows this clearly. Manufacturer protections of their products (for example region specific DVD's and PCs) actually increase costs for all consumers.

¹ Etherington-Smith, James, '"Grey" imports: The black and white of it', mybroadband.co.za, 14 December 2010

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Allowing grey imports means that manufacturers do not concentrate economic power in a monopolistic way which can be damaging to free trade (even Adam Smith¹believed certain monopolies were antithetical to free trade). Banning them is tantamount to granting a licensed monopoly or cartel on a country-by-country basis, which inevitably means higher prices for consumers. As manufacturing has increasingly been relocated into a smaller number of offshore countries, rather than in the country of purchase, it makes sense that other parts of the supply chain should make a similar move so that they too can realise the efficiency benefits of a globalised economy.

¹ Smith, Adam, "An Inquiry into the Nature and Causes of the Wealth of Nations" 1776

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Grey imports limit a company's control over its own products. Many manufacturers/distributors wish to control their distribution outlets for sound commercial reasons, for example, to protect the image of their brand. This becomes very difficult, possibly impossible, to do if grey imports are allowed, as this circumvents their planned distribution network. It becomes much harder for a manufacturer/ distributor to track their products where they have been used in a grey importation. This can lessen their effectiveness when they need this information, such as for a safety recall. "It is unclear whether adequate mechanisms are in place to adequately recall parallel trade medicines. Batch number recording is not consistently applied throughout the supply chain and in practice may make comprehensive product recall difficult, creating a risk to patient safety". ¹

¹ Trade and Industry Committee, Eighth Report, 29 June 1999

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Governments might as well accept that allowing retailers to sell grey goods has benefits because government will never be able to completely prevent such imports. Government regulation may prevent most retailers from selling grey goods but it won't stop all. For example Tesco in the UK sold cut price Levi jeans for years, and fought Levi Strauss in the courts for four years to try and keep selling them.¹ If even the biggest retailers are willing to sell grey goods unless stopped by the courts many smaller ones will be getting through the net. Moreover consumers will simply buy the goods elsewhere, particularly online. The government should instead legalise the import of grey goods so that it can make sure that these imports are of a high standard and do not break any other standards

¹BBC News, 'Tesco defeated in cheap jeans battle', 31 July 2002,

It may be impossible to completely stop such imports however the vast majority of shops will not import these items while they are not allowed to. Opening the market up will simply lead to a flood of imports with a resulting effect on native manufacturing.

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Allowing grey imports is consistent with the basic principles of free trade. (Free trade principles – WTO¹) If a manufacturer/distributor is selling the same item at different prices in two countries, free market economics suggests that the rational purchaser will purchase in the cheaper of the two, presuming, for example, that the difference will not be wholly swallowed up by transaction and transportation costs or taxes. If this logic holds for a consumer choosing between two jeans shops in his town, it must also hold for a retailer choosing between a jeans manufacturer’s price lists in two countries. Until recently, there was an information asymmetry (rational markets requiring information symmetry), as the manufacturer knew about their differential pricing, but the purchaser did not; information technology has now changed the equation and allowed the market to operate more efficiently. Not only this, but consumers can already buy products from pretty much anywhere in the world, as long as they can pay the postage.

¹World Trade Organisation "UNDERSTANDING THE WTO: BASICS", WTO 2011

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Free trade involves a principle of free will. The buyer should be able to decide to whom he wishes to sell and on what terms, and if the seller does not accept those terms then the buyer should be able to refuse to deal with him. Manufacturers can have many good reasons for choosing to price goods at different levels in different countries, such as their wish to build a long-term brand preference by cheaper initial marketing in a developing economy, or their desire to maintain an aura of exclusivity in mature markets through high pricing and confining sales to specialist retailers. Grey imports result in the manufacturer/ distributor effectively losing some, and often most, control of their pricing and retailing strategy in the importing country. This reduces their capacity to position the brand as they see appropriate. In extremis, a company can be put out of business in one nation by its own operations overseas!

improve this

Consumers benefit from grey imports. The economics of grey importation drives sourcing to low-cost economies. Even if retailers take some of this benefit as improved profit margins, typically at least some of it will be passed on to consumers in the form of reduced prices. Grey imports also allow consumers to buy products that may not yet be available in their own market, because they have not yet been released, or because in their market the manufacturer feels there is insufficient demand. Thus, grey imports expand consumer choice.

Many films, DVD's and video games are released in one region months before others, and grey imports allow enthusiasts to access their favoured products earlier than they otherwise would¹.

¹ Bun, Mara and Horrocks, Steve, 'In Support of Parallel Imports of CDs', Australian Consumers' Association, February 1998

improve this

Consumers do not really benefit overall from grey imports. Although manufacturers may reduce prices in some (typically, richer) countries, they are at least as likely to raise prices in less developed economies, depriving consumers there of access to international brands and luxury goods, and so depriving them of a real choice and in some cases the full product.¹ In addition, they will still have to pay all the taxes and the losses from lack of regulation which have been avoided in some way or lose the services those taxes provide. The loss of revenue from grey imports can mean that production is limited or even halted going forward, even though there is market demand for more products from the manufacturer. The film industry shows this clearly. Manufacturer protections of their products (for example region specific DVD's and PCs) actually increase costs for all consumers.

¹ Etherington-Smith, James, '"Grey" imports: The black and white of it', mybroadband.co.za, 14 December 2010

improve this

Allowing grey imports means that manufacturers do not concentrate economic power in a monopolistic way which can be damaging to free trade (even Adam Smith¹believed certain monopolies were antithetical to free trade). Banning them is tantamount to granting a licensed monopoly or cartel on a country-by-country basis, which inevitably means higher prices for consumers. As manufacturing has increasingly been relocated into a smaller number of offshore countries, rather than in the country of purchase, it makes sense that other parts of the supply chain should make a similar move so that they too can realise the efficiency benefits of a globalised economy.

¹ Smith, Adam, "An Inquiry into the Nature and Causes of the Wealth of Nations" 1776

improve this

Grey imports limit a company's control over its own products. Many manufacturers/distributors wish to control their distribution outlets for sound commercial reasons, for example, to protect the image of their brand. This becomes very difficult, possibly impossible, to do if grey imports are allowed, as this circumvents their planned distribution network. It becomes much harder for a manufacturer/ distributor to track their products where they have been used in a grey importation. This can lessen their effectiveness when they need this information, such as for a safety recall. "It is unclear whether adequate mechanisms are in place to adequately recall parallel trade medicines. Batch number recording is not consistently applied throughout the supply chain and in practice may make comprehensive product recall difficult, creating a risk to patient safety". ¹

¹ Trade and Industry Committee, Eighth Report, 29 June 1999

improve this

Governments might as well accept that allowing retailers to sell grey goods has benefits because government will never be able to completely prevent such imports. Government regulation may prevent most retailers from selling grey goods but it won't stop all. For example Tesco in the UK sold cut price Levi jeans for years, and fought Levi Strauss in the courts for four years to try and keep selling them.¹ If even the biggest retailers are willing to sell grey goods unless stopped by the courts many smaller ones will be getting through the net. Moreover consumers will simply buy the goods elsewhere, particularly online. The government should instead legalise the import of grey goods so that it can make sure that these imports are of a high standard and do not break any other standards

¹BBC News, 'Tesco defeated in cheap jeans battle', 31 July 2002,

It may be impossible to completely stop such imports however the vast majority of shops will not import these items while they are not allowed to. Opening the market up will simply lead to a flood of imports with a resulting effect on native manufacturing.

improve this

Allowing grey imports is consistent with the basic principles of free trade. (Free trade principles – WTO¹) If a manufacturer/distributor is selling the same item at different prices in two countries, free market economics suggests that the rational purchaser will purchase in the cheaper of the two, presuming, for example, that the difference will not be wholly swallowed up by transaction and transportation costs or taxes. If this logic holds for a consumer choosing between two jeans shops in his town, it must also hold for a retailer choosing between a jeans manufacturer’s price lists in two countries. Until recently, there was an information asymmetry (rational markets requiring information symmetry), as the manufacturer knew about their differential pricing, but the purchaser did not; information technology has now changed the equation and allowed the market to operate more efficiently. Not only this, but consumers can already buy products from pretty much anywhere in the world, as long as they can pay the postage.

¹World Trade Organisation "UNDERSTANDING THE WTO: BASICS", WTO 2011

improve this

Free trade involves a principle of free will. The buyer should be able to decide to whom he wishes to sell and on what terms, and if the seller does not accept those terms then the buyer should be able to refuse to deal with him. Manufacturers can have many good reasons for choosing to price goods at different levels in different countries, such as their wish to build a long-term brand preference by cheaper initial marketing in a developing economy, or their desire to maintain an aura of exclusivity in mature markets through high pricing and confining sales to specialist retailers. Grey imports result in the manufacturer/ distributor effectively losing some, and often most, control of their pricing and retailing strategy in the importing country. This reduces their capacity to position the brand as they see appropriate. In extremis, a company can be put out of business in one nation by its own operations overseas!

improve this

Grey imports damage the importing economy. By reducing the profitability of the manufacturer/distributor in the importing country, grey imports accordingly often lessen the amount of money that the company can invest in its operations in that country. This is a vicious circle which may reduce demand and so lead to greater inefficiencies in official importation. An acceptance of imports – especially of unclear provenance – hastens the demise of the manufacturing base of the importing country.¹ The manufacturer will have less reason to support the brand locally through, for example, advertising, as the benefit does not show up in their local results and, in any case, grey imports tends to start focusing consumers’ minds on price rather than the brand identity. This can be detrimental to the advertising and media spend in the importing country, which for a premium consumer goods brand (e.g. perfume, clothing) could represent quite a significant economic benefit.

What is a loss for the economy is also of course a loss for the government. The United States Internal Revenue Service estimated 15% of workers did not pay taxes, a $345billion shortfall from what should have been paid in large part as a result of workers in the grey economy of which there are more than 140,000 in San Diego alone.²

¹Peacock, Louisa, 2010, ‘Go East, if you want that top job’, The Telegraph, 19 November 2010, 

²Calbreath, Dean, ‘Hidden economy a hidden danger’, Signs On San Diego, 30 May 2010 

Grey imports benefit the importing economy. As some grey imports will be products originally targeted at a foreign market but which turn out to achieve some popularity in the host market, they increase foreign trade. In this way, grey imports act to internationalise consumer tastes and cross-cultural understanding. Through the downward pressure on retail prices, grey imports will also encourage industry to more efficiency, as ultimately factory gate prices will be expected to fall too. This leads to rising living standards in the cheaper economy as prices balance out, as we can see in for example China, with it's recent massive rises in living standards.¹

¹ Mortishead, Carl, ‘China’s rising living standard cranks up resource competition’ The Australian, 18 October 2007

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In general we do not accept as moral or socially permissible the idea that the makers of a good can tell their customers where and when they may use that good, who they may give it to, where and when. Car manufacturers do not sell cars on the basis you will only drive to the shops and back, clothes makers do not sell clothes on the basis you will only wear them on Sundays or every full moon. Limiting customer ability to resell items they have paid for in full is irrational and immoral.

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While we do not see limitations on reselling by customers in general, there are, in fact, a good few occasions where such limitations on reselling and use occur. Books and other media are limited through copyright laws in their ability to be legitimately re-sold, motor insurance is indeed sold at least partly on the basis of what you are going to do with your vehicle.

A free flow of goods is not always an automatic good. The extra transport and pollution involved in grey imports alone is a serious argument against it. Grey importers often do not make clear that products sold under the same brand name in different markets are in fact sometimes tailored to suit the local market environment. So, for example, one of the reasons for lower pricing in some products in particular countries is that they do not include all of the same ingredients as a product sold under the same brand name in another country. This can be, for example, because the performance needs (e.g. the climate), regulatory framework, or consumers' willingness to pay in the two countries vary. Accordingly, in the importing country, consumers may end up paying for a familiar brand that is not actually as well designed for their needs as the domestically marketed version. ¹ There are many practical problems with grey importation. For example, consumers may not understand usage instructions.

¹ Santos, Botchi, 'Why locally sold cars are still better than grey-market options, 26 January 2010

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A free flow in goods is a desirable end in itself. The rational, efficient supply chain of grey imports reflects the ideal of the free market. Moving it from the shadows to a position of legitimacy would make it even more efficient, by reducing the effort currently employed to keep the imports' trail hidden, etc. There is also job creation involved in the distribution network. For example, the logistics and transportation activities involved in grey imports will create new work as the trade grows.

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