Facebook Pinterest Search Icon SourcingJournal_horiz Tumbler Twitter Shape photo-camera graph-trend Shape latest-news icon / user
You will be redirected back to your article in seconds

Global Trade in Fake Goods Costs Half a Trillion Dollars Each Year

As we settle into the new year, our Sourcing Summit Companion Report looks ahead at ways to optimize processes and performance.

OECD report on counterfeits

Counterfeiters are ramping up their rip-off efforts and bringing in beaucoup cash as a result, and global trade in fake goods is getting increasingly worse.

Imports of counterfeits and pirated goods are worth nearly half a trillion dollars ($461 billion) a year, or 2.5% of global imports, according to a report released Monday, “Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact,” by the Organisation for Economic Co-operation and Development (OECD) and the EU’s Intellectual Property Office (EUIPO).

In OECD’s 2008 study of counterfeit impact, fakes accounted for 1.9% of world imports or $200 billion.

“Intangible assets are at risk, as the potential for infringement and the resulting damage to the economy have also expanded in recent years, due to new trends in international trade and governance gaps across countries,” according to the report.

To assess the state of fakes in the industry, OECD and EUIPO looked at a global set of half a million customs seizure data from 2011 to 2013.

American, Italian and French brands are taking the hardest hit where counterfeiting is concerned and most of the offenders mostly hail from China (63.2%) or other middle income or emerging countries, like Turkey (3.3%) and Singapore (1.9%). Organized criminal groups are starting to play an even more important role in the counterfeiting market.

countries hit hardest by fakes

“Middle income and emerging economies both tend to have sufficient infrastructure, productive and technological capabilities that enable large-scale trade. Yet, they may not have developed sound institutional frameworks, including IP-related legislation and enforcement practices,” the report noted.

where most fakes originate

High-end handbags are often faked but footwear is the most-copied item. In 2013, the most recent year for which data was available, customs seizures of fake footwear totaled nearly 30,000, followed by clothing and knitwear with just over 20,000, and leather articles—where handbags would fall—were the fourth most frequently seized items at almost 20,000.

“The post-crisis revival of trade, including growing market openings in many regions, the emergence and globalization of value chains, and booming e-commerce in global trade underpin global market dynamics for both legitimate and counterfeit goods,” the report noted.

The majority of counterfeit goods are getting to consumers via postal packages, which accounted for 62 percent of seizures in the 2011-2013 period, due in large part to the growing prevalence of e-commerce in international trade.

Fakes travel through major trade hubs like Hong Kong and Singapore and via free trade zones like those in the United Arab Emirates. Some are routed through countries with weak governance and rampant organized crime like Afghanistan and Syria, the report noted.

“The findings of this new report contradict the image that counterfeiters only hurt big companies and luxury goods manufacturers,” OECD deputy secretary-general Doug Frantz, said. “They take advantage of our trust in trademarks and brand names to undermine economies and endanger lives.”

If there’s any hope of curbing counterfeits, its going to take a village.

More than just relying on customs seizure observations, which don’t factor in domestically produced and consumed counterfeit and pirated products from physical stores or over the Internet, it’s going to take complementary analysis. Countries will have to individually and cooperatively design policy and enforcement solutions, the report noted.

Further in-depth quantitative exercises like mapping the trade routes of counterfeit products and the potential impacts of free trade zones, and analysis of customs seizure patterns could help provide deeper insight.

“Given the magnitude of the issue, policy makers in OECD member countries and other governments, as well as the private sector, should be concerned about the scope of the phenomenon and its implications for the future, including the world’s highest added value activities and innovation potential, both of which are sources of long-term economic growth,” according to the report.

Related Articles

More from our brands

Access exclusive content Become a Member Today!