Parallel Importation: Economic and social welfare dimensions

This briefing paper examines the legal, economic, and social dimensions of parallel importation, focusing on the 'exhaustion of rights' doctrine in intellectual property (IP) law. It analyzes how different exhaustion policies—national, regional, and international—affect market segmentation, consumer welfare, and the accessibility of pharmaceutical products.

• Parallel importation is based on the 'exhaustion of rights' doctrine, which stipulates that an intellectual property holder's control over a specific good or service ends once it has been first sold. There are three geographic scopes for this policy: 'national' (no parallel imports permitted), 'regional' (permitted within a defined region like the European Union), and 'international' (permitted from anywhere in the world).
• Restricting parallel imports allows producers to engage in geographic price discrimination by segmenting international markets. This enables them to charge different prices for the same product in different markets without fearing that low-priced goods will be imported into higher-priced markets.
• Open parallel importation generally increases consumer welfare by providing products at the lowest prices available on the world market. For developing countries, it can stimulate production by allowing wholesalers to export lower-priced locally produced goods to developed markets, leveraging their comparative advantage in low-cost labor.
• Producers of consumer goods, such as electronics and clothing, argue that restricting parallel imports is necessary to protect investments in advertising and customer support in specific markets, preventing 'free-riding' by importers from markets where such investments were not made.
• In the pharmaceutical sector, parallel importation can increase public welfare by lowering prices for patented medicines, improving access for low-income individuals, and reducing the burden on public health budgets. The document notes that parallel imports are genuine products, not counterfeit ones.
• Pharmaceutical companies argue against parallel importation by claiming it reduces revenues for research and development (R&D), threatens public safety, and undermines profitability in markets with price controls. However, the author notes that these companies often spend more on advertising and 'lifestyle' drugs than on essential R&D, and that there is little evidence of quality issues with parallel imports in developed countries.

APA

Abbott, F. M., & Ball, E. (2007). Parallel Importation: Economic and social welfare dimensions. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/parallel_importation.pdf

Chicago

Abbott, Frederick M., and Edward Ball. Parallel Importation: Economic and social welfare dimensions. International Institute for Sustainable Development, 2007. https://www.iisd.org/system/files/publications/parallel_importation.pdf.

Wikipedia

{{cite report |last1=Abbott |first1=Frederick M. |last2=Ball |first2=Edward |title=Parallel Importation: Economic and social welfare dimensions |publisher=International Institute for Sustainable Development |date=June 2007 |url=https://www.iisd.org/system/files/publications/parallel_importation.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{abbott2007parallel, author = {Abbott, Frederick M. and Ball, Edward}, title = {{Parallel Importation: Economic and social welfare dimensions}}, institution = {International Institute for Sustainable Development}, year = {2007}, month = jun, url = {https://www.iisd.org/system/files/publications/parallel_importation.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }