Global Counterfeiting: Its Extent and Adverse Impact

On June 20, 2016, the Global IP Center (GIPC) released a new study entitled “Measuring the Magnitude of Global Counterfeiting.” The study analyzes the impact of counterfeiting of products on the 38 countries included in the 2016 GIPC International IP Index. See this February 2016 Free State Foundation blog explaining why the International Index is a useful tool for assessing the level of IP rights protections.

The study includes the following key findings:

• ·      China alone is estimated to be the source for more than 70% of global physical trade-related counterfeiting, amounting to more than $285 billion. Physical counterfeiting accounts for the equivalent of 12.5% of China’s exports of goods and over 1.5% of its GDP. China and Hong Kong together are estimated as the source for 86% of global physical counterfeiting, which translates into $396.5 billion worth of counterfeit goods each year.

• ·      Besides China and Hong Kong, the remaining countries in the sample account for 85% of world trade but account for 8.76% of global physical counterfeiting.

• ·      Although data published by customs authorities is lacking, the value of counterfeit goods seized and reported by customs authorities today from the sample of 38 countries ($5.2 billion) represents slightly less than 2.5% of the global measure of physical counterfeiting of $461 billion.

Counterfeiting of products poses direct health and safety threats to consumers and also decreases innovation and economic activity because entrepreneurs have little incentive to create and develop goods in countries with weak IP rights protections. In 2013, physical counterfeiting cost consumers and entrepreneurs $461 billion in economic activity.

It is important that countries with weak IP rights protections, such as China and India, quickly strengthen their IP rights protections to discourage this illegal activity. Together, GIPC’s counterfeiting study and International IP Index are useful tools in helping policymakers around the world understand how their nations’ IP systems can be improved.

Strong IP rights protections promote creativity, innovation, and investment by artists and entrepreneurs. Consumers, ultimately, are the beneficiaries such creativity, innovation, and investment. The GIPC's new study, "Measuring the Magnitude of Global Counterfeiting," is a valuable resource that reinforces the need to fight counterfeiting."