Justifying protection in the book market

Books in Australia are expensive. Really expensive. It has been well known that buying books from Amazon or 'The Book Depository' and having it shipped from the UK or USA has been cheaper than walking down to Dymocks. The reason is protectionist measures imposed by the government.

It is illegal to import for resale any book that an Australian publisher has the rights to. Therefore if an Australian publisher sells a book at $50 and a UK or US publisher sells the book for $15 then buying it in Australia leaves the consumer $35 worse off and until the internet there was nothing you could do about it.

The rules that cause this are called the 'parallel import rules' and have applied in several sectors. Recently the government accepted the recommendations of a report that all such rules should be abolished.

The argument for the rules on books has been that it protects Australian authors. By protecting Australian publishers from competition this raises all book prices.  Therefore the Australian authors can be published because the returns from Australian publishing are high enough to justify the investment.

Of course the big loser is the Australian book buyer. They pay more for all books, regardless of who wrote them. The big gainers are Australian publishers who can charge more because they are protected from competition from international publishers. For example a Harry Potter novel could be published overseas and in Australia but the overseas copy cannot be sold in Australian bookshops despite being a third of the price.

Would fewer Australian authors be published if the rules were dropped? Probably, but only because their product was uncompetitive - that is consumers preferred overseas alternatives. That is improving allocative efficiency.

Would fewer people be employed in the publishing industry if the rules were dropped? Certainly, because printing overseas is very much cheaper than printing in Australia. This means improved productive efficiency. (Many point out that overseas printing is also of much higher quality as their equipment and technology is superior. Improved allocative efficiency too.)

Would fewer people be employed in book selling in Australia? Probably not. Lower prices will increase book sales if the law of demand is right. Of course they may be employed differently to at present, but there is no reason why bookselling should see less activity at all.

Therefore the parallel import rules are an example of old fashioned protectionism with little to recommend it. The losers are the Australian public who will see their consumer surplus transferred to publishers or lost completely.

The Guardian covers the story here

This story is relevant to both IB and VCE students. IB students will study protectionism in international economics and VCE students will also look at the goal of external stability and policies to achieve it.