Measuring the Magnitude of Global Counterfeiting: Creation of a Contemporary Global Measure of Physical Counterfeiting

Monday, June 20, 2016 - 9:45am

Counterfeiting today represents a tremendous and ever-increasing global threat. Counterfeit products from goods and merchandise, tobacco products, and industrial parts to banknotes and medicines circulate across the globe. These products cause real damage to consumers, industries, and economies.

For example, counterfeit automotive parts are often of very poor quality and lead to failure, fake batteries and chargers may explode or catch fire, counterfeit clothes and alcohol contain excessive levels of dangerous chemicals, and fake toys may contain hazardous and prohibited chemicals. In addition, counterfeit medicines may be composed of dangerous or contaminated substances and sometimes do not even contain an active ingredient. The significant potential for dangerous ingredients or parts in counterfeit products, and resulting adverse events, constitute a serious health and safety risk.

Counterfeiting also has detrimental effects on industries as well as on economies. The direct impact of counterfeiting is the loss of revenue, which is estimated at billions of dollars for any given industry. 

However, the indirect effects enhance the negative impact beyond the scope of industries to economies. The U.S. Government Accountability Office (GAO) has found that in the United States counterfeiting has resulted in decreased innovation, loss of trade revenues, higher rates of unemployment, and overall slower economic growth. Globally, it is estimated that counterfeiting has resulted in the loss of 2.5 million jobs and more than 60 billion euros in tax revenue losses among the G20 economies.

The continuous growth of the global counterfeiting industry is a major cause for concern. Fueled by the proliferation of Internet use and social media platforms, the magnitude of global physical counterfeiting is estimated to have increased significantly since the beginning of this century.

In this context, the purpose of this study is twofold: 1) to provides a deep-dive analysis of trade-related physical counterfeiting on a comparative level, and; 2) to provides a breakdown of the share of the global rate of physical counterfeiting (as both a percentage and with a USD figure) for the 38 economies included in the 2016 U.S. Chamber of Commerce’s GIPC International IP Index (4th Ed.) based on new modeling of an economy’s propensity for counterfeiting, including factors such as broader levels of IP enforcement and estimated rates of corruption. This is achieved by: 1) Establishing the division of the global physical counterfeiting percentage with respect to the anomaly of China and Hong Kong’s prominence; and 2) Evaluating the propensity/likelihood of physical trade-related counterfeiting in a sample of 38 economies by creating a proprietary metric of three equally weighted factors using several datasets, and assign each economy with a percentage and monetary value share of global physical counterfeiting.