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Wednesday, 27 June 2001
Page: 28665

Mr McCLELLAND (11:57 AM) —The member for Cook, as sincere and diligent as he is, quoted some figures. I understand that they are intended to be sincere, but they are in fact inaccurate. I understand the information was probably based on information provided by the ACCC, which calculated its figures over a 10-year and 12-year period in comparing book and computer software prices. But, if you look at its own recent figures, the suggestion that there is a 30 per cent differential and the like just does not stand up. I say that at the outset to put that on the record, because when you are looking at legislation, when you are analysing it, you look at the rationale for it and then scrutinise the figures to see if that rationale stands up.

The rationale for this legislation, the Copyright Amendment (Parallel Importation) Bill 2001, from the government's point of view is a position of dogma that the free market should prevail. The argument is that, by allowing parallel importation restrictions, you give a copyright owner or a copyright licensee a monopoly over a particular market in a geographical location—usually a country. In theory, that second part of the statement may well be correct, but you do not have to go, to use the vernacular, the full Monty. We have a very successful book industry in Australia and, since 1991, there have been some restrictions on that market. There have been parallel importation restrictions but, at the same time, regulations to prevent a monopoly market being exploited. They are known in the vernacular as the `use it or lose it' principle. Essentially that means that a book released overseas must be released in Australia within 30 days of that occurring overseas. Related to that, if an Australian consumer wants to purchase a book, they must be able to do so at an internationally competitive price within 90 days.

This has led to some real successes in the development of the book industry. I will refer to those in one moment as the underpinning, if you like, of the example that the Australian Labor Party proposes in the regulation of the parallel importation of what we are talking about now. What we are talking about now is the government's proposal to remove restrictions on parallel importation in respect of computer software, computer games, books, periodicals and sheet music. In respect of the last three of those items, that applies whether they are in hard form or in digital or electronic form. The removal of the current restrictions on parallel importations will be significant.

Equally of significance is the fact that the government have not applied this religious adherence to market forces to the film industry. One wonders why the same logic does not apply. The member for Cook asserted that the Australian recording industry has been able to continue to prosper, despite removal of parallel importation restrictions. Why does that same argument not apply to the movie industry? The answer, regrettably, is because of political donations, by one substantial company in particular making very substantial donations to the Liberal Party. In so far as the Liberal Party is committed to a reverence to the free market, that commitment seems to be pretty cheap in so far as it has at least been bought off from it in one sector. I say that obviously to make a political point but also to ask, `Just how serious and sincere are you in what you are advocating as the rationale for this bill when you have not on the other hand objectively and dispassionately analysed the facts?'

Before conducting that analysis, I will outline, by way of a brief introduction, just what we are talking about in copyright. As previous speakers have explained, copyright is essentially the protection of the way ideas are expressed. That is something of value, and that thing of value is described as a work. Copyright gives the owner a monopoly of how that work is exploited, and that includes commercial exploitation, obviously, by way of reproduction, publishing, broadcast or performance. Indeed, different aspects of that work can be licensed, including the ability to import into and sell a work within Australia. This is where we are talking about removing restrictions to allow a product—albeit a product having been purchased legitimately from a copyright owner or overseas licence holder—and brought into Australia from overseas, competing with the rights of the Australian copyright owner or Australian licensee. That sounds all very well in practice, but it has been the creator of the work that has negotiated the price and is in the position to negotiate the price for the releasing of their rights to their intellectual property; they have obtained a price on the basis of these expectations of how markets will be utilised.

Copyright is a very important thing in this day and age. We hear the phrase `the new economy'. This concept of intellectual property, or the exploitation of ideas, is of vital importance because it applies to the development of computer technology, hardware and software, and to the development of scientific discoveries, whether it be in terms of more efficient production of crops through the use of gene technology, medical research or the development of Australian culture and arts. Increasingly, intellectual property is becoming the cornerstone of the new economy. It is vitally important that we get it right and we get it right on the basis of logic, not adherence to dogma. I come back to the example of the book industry that, since 1991, has operated under this `use it or lose it' policy.

We have seen, since then, that there are now 250 publishers in Australia and there are over 4,000 people employed in the industry. In 1997-98, the book industry sold 110 million books; 60 per cent of those were by Australian authors. In the period since 1991, we have seen 7,000 new Australian titles. The sale of Australian books now exceeds $1 billion—not million—a year, of which $100 million is exported. In other words, it has been a real success story. There is a significant question as to whether, without adequate copyright protection, those Australian authors who are at the basis of our book industry would have succeeded and been able to concentrate their time on developing their skills. Indeed, to our pride, many are achieving international fame as a result of having their books published.

In respect of Australian software, which is the other significant area that this legislation would impact upon, the Australian economy also has significant benefits from the development of Australian packaged software. There have been sales of more than $3.5 billion a year from the packaged software industry in Australia. It creates more than 25,000 jobs across all sectors, from creation to marketing and sale, and pays more than $850 million a year in taxes.

I state these figures to indicate the risk involved in getting our regulatory regime wrong. That is of great concern. The reason I say that the government's reasoning is wrong is that, quite frankly, it has been based on lazy or convenient work. Convenient work is having the policy based on this dogmatic position and trying to fit the facts in to comply with the policy rather than having the policy based on a legitimate factual analysis. Indeed, we note that concerns were quite openly and boldly expressed as to the government's approach by the committee chaired by Senator Marise Payne that looked at this bill. At paragraph 5.2, the majority report of the inquiry by the Senate Legal and Constitutional Legislation Committee says:

A number of outcomes appear to be promised by this legislation, but the extent to which such expectations may be realised is unclear. Essentially, the legislation is premised on the economic theory that the more open the marketplace, the cheaper the product, and the belief that the benefits of copyright must not dominate to the detriment of benefits to consumers of the copyright item.

Similarly, at paragraph 5.5, the report states:

Although economic theories underpin the direction of the changes, there is little information as to how these changes will occur.

At paragraph 5.6, the report states:

Additionally, there is no consideration of the direct and indirect costs to the community as well as to individuals and groups that may result from the proposed changes.

The government itself acknowledges in the explanatory memorandum that there will be disadvantages suffered by the sectors. In particular, in respect of the book industry, the explanatory memorandum acknowledges that `there may be some loss of confidence' and that `some individual publishers may fail'. That is a significant admission for the government to make in circumstances where they are enacting legislation with that acknowledged effect.

When they are doing that, we are entitled to ask, `Why are you doing it?' They say they are doing it to bring down prices to benefit consumers. We heard the member for Cook speak of this in respect of the music industry. Indeed, the Attorney-General, in his second reading speech, quoted an average figure of about $21.43 for the top 40 CDs. The industry have now done a survey of current prices of CDs. They found that in Target some items were as low as $22.95, but most items were anywhere between $28 and $31. In Woolworths, some were $23.95, but there were different prices in different stores. In Sanity Music, the price was $27.95 to $31.95. In HMV, CDs were from $27. Together, those four retailers constitute more than 50 per cent of the retail market. To suggest that there have been reductions of $9 and $10 is just fanciful. It is not occurring, and at the same time we are seeing these other consequences occurring.

From our point of view, the question is, `What are the detriments to be considered in this policy?' The detriment is the potential effect on these industries. Why is there a potential effect? Firstly, there is a potential effect from piracy. Secondly, there is a potential effect from dumping. Thirdly, there is the prospect of a loss of benefits or diminished returns for the creators of these works.

How will it be easier for piracy to occur? It will be easier for piracy to occur because, obviously, if there is one copyright licence holder, the Australian Customs Service can check with that licensee as to who the authorised distributors and importers of the product are. If it is at large and it can come from anywhere, from all over the world sent by anyone, obviously it is a much harder task for the Australian Customs Service to identify the source of that material and whether it is pirated. The Australian Record Industry Association estimate that, in just a year after the removal of their protections, piracy has gone up from about four per cent of music sold to about nine per cent. If we see a further increase in piracy across these other sectors—in the book industry, but more specifically in respect of the computer software industry, where it is more likely to occur— we will see a significant reduction in economic benefits in Australia.

For instance, let us look at the cost of piracy to the computer software industry. It must be said that some of this piracy is piracy that occurs at a domestic level; nonetheless, the figures are worth mentioning. From the point of view of a similar increase, if there were a five per cent increase in the level of piracy in this industry, what economic effect would that have? Piracy cost the software industry about $264 million a year in lost sales. It is estimated that between 1995 and 1999 it cost the industry about $1.4 billion. In Asia, we are particularly vulnerable. It costs about $4.9 billion—not million but billion dollars—a year. It costs distributors and retailers in Australia about $286 million a year in lost revenue.

Obviously, pirated goods are going to be sold by markets; they are not going to be sold through established retailers such as Harvey Norman or even smaller, independent retailers. It is going to be sold on the black market, as it were, costing about $286 million a year. Indeed, as a result of those lost sales through legitimate channels, where records are kept, it is estimated that there has been a significant reduction in revenue to government.

If you apply simply the goods and services tax lost to that $286 million, we are looking at, just on those figures in the retail sector, $28.6 million of lost government revenue. Indeed, the industry estimates that, if you could reduce the extent of our piracy to that which occurs in America by five per cent, from 32 per cent to 27 per cent, it would generate about an additional 7,300 jobs and would raise additional tax revenue of about $140 million. If you apply what has occurred in the record industry, that is, a five per cent increase in piracy, to the existing level and multiply those figures which I have just given you, you would see corresponding losses and in circumstances where the rationale just does not add up.

As I indicated at the outset, the rationale of the government is primarily based on information it has received from the ACCC, which, regrettably, has not done a fair dinkum or a sincere calculation. It has averaged book industry figures over 12½ years and has not recognised the significant difference that has been made to legislation since 1991. Indeed, on our figures, Australian books are as cheap, if not cheaper, than those in the United Kingdom and the USA. Similarly, the software industry have conducted an analysis over a decade not on current figures. On current figures, on the basis of information provided by the Business Software Association of Australia, our prices are actually lower than those in the United Kingdom, the United States and New Zealand. The government has based its legislation on dogma, not logic, and that simply is not the way to legislate. (Time expired)