On March 18, 2019, the Organization for Economic Cooperation and Development (OECD) and the European Union Intellectual Property Office (EUIPO) co-published a status report on the trade in counterfeit and pirated goods. The work builds on another study published in 2016 by the two organizations, and is based on updated research.
The new data is based on nearly half a million customs confiscations by international law enforcement agencies, including the World Customs Organization, the European Commission’s Directorate General for Taxation and Customs Union, and the US Department of Customs Secretary of the Interior.
An Explosion in the Value of Counterfeit Trade in Barely Three Years
The latest edition of the report records a sharp rise in the commercialization of counterfeit and pirated goods around the world, noting that the share of counterfeit products in world trade has increased from 2.5% in 2016 to an estimated 3.3% today. The value of trade in counterfeit goods has reached 460 billion euros, up from 338 billion euros three years ago. The acceleration is itself significant, but perhaps even more so when one takes into account the concurrent slowing in international trade. The two data points illustrate an intensification of the global counterfeit market.
“Counterfeiting and piracy pose a significant threat to innovation and economic growth, both within the EU and at a global level”, noted Christian Archambeau, Executive Director of EUIPO. The intellectual property sector is directly impacted by this threat and is a determining growth factor for economies carried by innovation and high added value production.
The products most commonly subjected to counterfeiting include shoes, ready-to-wear fashion, leather goods, watches, perfumes, and cosmetics, as well as electronics and pharmaceutical products.
Although the report states that counterfeit goods can originate in almost any economy in the world, China continues to dominate as country of origin for the majority of confiscated counterfeit products. The report also notes an increased use of the postal service in the transportation of counterfeit goods. This system allows “exporters” to avoid detection by authorities and adds additional costs to customs budgets for the control and storage of small cargo.
The European Union Remains a Target Destination for Counterfeit Goods
When it comes to the European Union, the documents paints a particularly grim picture. The region counts 121 billion euros worth of imports, and counterfeit products account for 6.8% of them. The proportion has risen sharply from 2016 estimates. The companies and businesses most affected by the illicit trade are located for a large part in Europe: the United States, France, Switzerland, Italy, Germany, Japan, Korea and the United Kingdom. However, a growing number of companies registered in emerging economies, particularly in China and Brazil, are also beginning to feel the undesirable effects of counterfeiting.
The industries most likely to fall victim to the importation of counterfeit products into the EU include perfumes and cosmetics, leather goods, watches, children’s toys, tobacco, and shoes. There are two sectors in which Europe is comparatively less affected than the rest of the world: electronics and jewelry.
On the other hand, illegal trade is more intense in Europe in sectors that have a direct impact on the health and safety of consumers, including tobacco, pharmaceuticals, agriculture, machinery equipment, and automobile parts.
The answer to the scourge currently facing Europe is far from obvious. The complex shipping routes used by the counterfeit market – usually through free zones – make it difficult to put effective controls in place. These zones are important hubs for international trade, as explained by Jack Radisch, a project manager at the OECD: “These products often pass through free zones lacking regulations. There is no access to customs services, and a great need for international cooperation to increase transparency in these areas.”