Debunking Counterfeit Myths: It Ain’t About China

In the Hutong
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A thoughtful piece in BusinessWeek, “Debunking Common Myths About Counterfeits” suggests that our peceptions about counterfeits and China may be a little skewed:

Another myth worth busting is the notion that China is responsible for all of the world’s counterfeit problems. Counterfeiting is truly a global problem. According to Research And Markets, China is the top source of counterfeit electronic components; approximately 10% to 40% of electronics goods in China today are believed to be fake. Yet the estimated figure across the Middle East is 20% to 40% and across Eastern Europe, 10% to 40%. Other Asian countries—including Korea, Vietnam, and India—and some South American countries significantly contribute to the overall intellectual-property-infringement problem.

As most of us learned by the time we were seven, the worst possible defense for any offense is “yeah, but they’re doing it, too.” But that is not the intention of the author of the piece. The point is simply that the matter of counterfeits does not begin or end with China, and that a focus on China as the intellectual property rights-violation poster-child can lead to policies that don’t solve the problem.

The counterfeit problem is a trans-national, cross-jurisdictional matter that is confounding law enforcement authorities worldwide because the networks that drive such trade operate beyond traditional jurisdictional boundaries. The persistent belief among both brand owners, many of their attorneys, and the general public is that IPR violations in China would go away if the cops would just do their job. There is some truth in that, but at best it is an oversimplification. Counterfeiting is a global problem, and China is merely a convenient nexus.

An excellent overview of how large the problem of counterfeit goods (and all illicit trade) comes from Moises Naim, longtime editor-in-chief of Foreign Policy magazine, in his readable Illicit: How Smugglers, Traffickers, and Copycats are Hijacking the Global Economy. Naim is nobody’s definition of a “panda hugger.” His editorial in the Decemer 2007 issue of Foreign Policy predicting a dire “Battle of Beijing” during the 2008 Olympics is indicative of his views.

If I expected an anti-Chinese screed when I read Illicit, I was soon disabused. Naim is reasoned, expansive, and decidedly balanced in his coverage of the problem. While not exonerating any government (he notes that often the governments, or select officials, are active participants in these networks), he notes that counterfeiting is a bigger problem today than ever because its practitioners have exploited the openness brought by globalization.

The problem of all illicit trade, he notes, is multinational. The solution must be so as well. The answer is not to chuck globalization or rake the Chinese government and police over the coals when fake Louis Vuitton bags show up in San Francisco, but to globalize the effort against the problem. In fact, by the end of the book, the only question I had left was “how many other China-related issues are we seeing through the veil of a commonly held mythology?”

Our experience with a rising China is teaching us an important lesson: not every China-related business issue need be raised to a bilateral fight with China in the middle. Some demand a new approach that turns the government into a willing ally rather than an enemy. Today, the matter of intellectual property rights is at the head of this list.

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