The boom in e-commerce sales is driving a surge in fake merchandise and pirated goods that’s now estimated to be valued at more than half a trillion dollars or an estimated 3.3.% of global trade volumes, according to a report published last week by the Organization for Economic Cooperation and Development (OECD).
The report, Trends in Trade in Counterfeit and Pirated Goods, puts the value of imported fake goods worldwide based on 2016 customs seizure data at $509 billion, up from $461 billion in 2013. For the European Union, counterfeit trade represented 6.8% of imports from non-EU countries, up from 5% in 2013.
Trade in counterfeit goods, which infringe on trademarks and copyright, can potentially create profits for organized crime at the expense of private companies and governments alike. Fake copies of items such as medical supplies, automotive parts, toys, food and cosmetics brands and electrical goods also carry a range of potential health and safety risks.
What is Being Produced and Why the Increase in Fakes?
Working together with the European Union Intellectual Property Office’s (EUIPO) Observatory, the OECD found that footwear, clothing and leather goods again topped the list of products most often targeted by counterfeiters, with knock-off footwear alone accounting for nearly a quarter of all customs seizures. Other items seized included fake guitars, jewellery, pharmaceuticals, chemicals, spare parts, luxury watches, food and drink, and medical equipment.
This boom in fakes and “dramatic increase in the number of parcels crossing borders” comes as technology makes it easier to buy and sell goods online, according to the OECD, with “digital platforms which help connect supply and demand globally” as having a pivotal impact in this regard. Researchers found that from 2014 to 2016, small parcels are the most popular way to ship counterfeit goods, accounting for 69% of customs seizures, up from 63% from 2011 to 2013. “Small parcels sent by post or express courier are a prime and growing conduit for counterfeit goods,” the report said.
The report noted that while fake merchandise is often shipped “via complex routes” and can originate from a web of countries including India, Malaysia, Pakistan, Thailand, Turkey and Vietnam, the biggest sources continue to be China and Hong Kong. China was the top producer of fake goods in nine out of 10 categories, including the most popular category, footwear, where as much as 27% of all goods seized could be traced back to the country, according to the report.
Who is Affected?
The alleged theft of intellectual property is among Washington’s biggest gripes in its trade dispute with China and underscores the need to crack down on Beijing’s notoriously poor governance in this area.
The report concludes that the companies and businesses most affected by counterfeiting and piracy continue to be primarily based in OECD countries such as the United States, France, Italy, Switzerland, Germany, Japan, Korea and the UK. Almost 24% of the total value of seized products concerns the IP rights of owners registered in the U.S. This was followed by France (16.6%), Italy (15.1%), Switzerland (11.2%) and Germany (9.3%).
“Counterfeiting and piracy pose a major threat to innovation and economic growth, at both EU and global level,” Christian Archambeau, executive director of the EUIPO, adding that the upward trend in fakes is “deeply concerning, and clearly calls for coordinated action, at all levels, to be fully tackled.”