OECD and EUIPO analyze root causes of counterfeiting

© Ralf Gosch / Fotolia.
In a new study, EUIPO and OECD have now identified five key factors that make economies particularly prone to trade in counterfeit products. Next to the political environment, measures that aim to promote economic growth can also harm legitimate trade.

According to EU estimates, counterfeiting occurs in almost all economies. A new report by the OECD and EUIPO (the Organisation for Economic Cooperation and Development and the European Union Intellectual Property Office) now explains why some nations are more affected than others. In their analysis, the two organizations identify five major factors that cause some economies to play a key role in the trade with counterfeits, either as producers or as shipping hubs.

The most important factor for this seems to be the state of a country’s governmental institutions and its legislation on IP protection. If a country is marked by corruption or if it lacks consistent regulations for protecting intellectual property, this can immensely promote the trade in counterfeits.

Additionally, free trade zones can have a significant negative impact, as the OECD and EUIPO already reported back in March. While legitimate companies benefit from greater freedom in these areas, counterfeiters can also cash in on the often less stringent regulations. This also applies to trade facilitation outside of free trade zones, which often promotes not only local industries but also illegal trade. To counter this, the OECD and EUIPO consider transparency and traceability to be indispensable in the fight against counterfeiting.

Finally, according to the report, low labor costs and poor labor market regulations are important catalysts for trade in counterfeit products too, as well as a country’s logistic capabilities and infrastructure. “The ability to trace and track consignments is the key factor for reducing the share of counterfeit and pirated products in exports,” the OECD and EUIPO say in their analysis. “However, other factors increase this trade, including low shipping charges; fast, simple and predictable customs formalities; and good quality trade and transport-related infrastructure.”

Ultimately, none of these aspects are solely responsible for making a country attractive to counterfeiters: “It is the combination of numerous factors that allows important nodes in counterfeit trade to emerge,” the report says. “Gaps in governance, especially high levels of corruption and gaps in [IPR] enforcement, are the crucial factor for trade in fakes, multiplying the effects of FTZs, logistic facilities or trade facilitation policies.”

Sources: EUIPO, OECD

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