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  May 3rd, 2016 | Written by

Global Trade in Fake Goods Worth Half a Trillion Dollars a Year

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  • Many of the proceeds of the illicit supply chain go to organized crime
  • New report contradicts image that counterfeiters only hurt big companies.
  • The U.S. topped the list of counterfeiting victims; U.S. brands or patents were affected by 20 percent of the knockoffs.

Imports of counterfeit and pirated goods are worth nearly half a trillion dollars a year, or around 2.5 percent of global imports, with U.S., Italian, and French brands the hardest hit, according to a new report by the OECD and the EU’s Intellectual Property Office.

Many of the proceeds of this illicit supply chain go to organized crime, according to the report.

“Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact” put the value of imported fake goods worldwide at $461 billion in 2013, compared with total imports in world trade of $17.9 trillion. Up to five percent of goods imported into the European Union are fakes. Most originate in middle income or emerging countries, with China the top producer.

The report analyzes nearly half a million customs seizures around the world over from 2011 to 2013 to produce an estimate of the scale of counterfeit trade. It points to a larger volume than a 2008 OECD study which estimated fake goods accounted for up to 1.9 percent of global imports.

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

Fake products crop up in everything from handbags and perfumes to machine parts and chemicals. Footwear is the most-copied item though trademarks are infringed even on strawberries and bananas. Counterfeiting also produces knockoffs that endanger lives—auto parts that fail, pharmaceuticals that make people sick, toys that harm children, baby formula that provides no nourishment and medical instruments that deliver false readings.

The report covers all physical counterfeit goods, which infringe trademarks, design rights or patents, and tangible pirated products, which breach copyright. It does not cover online piracy, which is a further drain on the formal economy.

The report notes that emerging economies tend to have the infrastructure for large-scale trade but often suffer from governance gaps and may lack the institutions and enforcement capacity to effectively tackle counterfeiting. While China is the top provenance of fake goods, its most innovative companies also fall victim to counterfeiters.

The top countries whose companies had their intellectual property rights infringed in the 2011-13 seizures were the United States, whose brands or patents were affected by 20 percent of the knockoffs, Italy with 15 percent, and France and Switzerland with 12 percent each. Japan and Germany stood at eight percent each followed by the UK and Luxembourg.

Postal parcels are the top method of shipping bogus goods, accounting for 62 percent of seizures between 2011 and 2013, reflecting the growing importance of online commerce in international trade. The traffic goes through complex routes via major trade hubs like Hong Kong and Singapore and free trade zones such as those in the United Arab Emirates. Other transit points include countries with weak governance and widespread organized crime such as Afghanistan and Syria. The report shows trade routes change greatly from year to year as counterfeit gangs spot new weak points.