What makes a country a counterfeit exporter?

Counterfeits are produced in just about all global economies, but it takes high levels of corruption for countries to become major exporters of fake goods.

That’s the main conclusion of an EU Intellectual Property Office (EUIPO) report which suggests corruption in governance organizations – as well as poor IP protection – are a big influencer, along with other factors such as the presence of free trade zones (FTZs), low labour costs and poor labour market regulations.

Low shipping charges, simple and predictable customs processes and good transport infrastructure are also contributors to counterfeit exports, particularly where corruption is rife, says the report, which is the latest in a series produced by the EUIPO to try to build intelligence that can help in the fight against counterfeiting and other forms of illicit trade.

Among these factors, “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,” according to the report. “It is the combination of numerous factors that allows important nodes in counterfeit trade to emerge.”

On the other hand, greater transparency in shipping – and in particular the ability to track and trace consignments – are key factors for reducing the share of counterfeit and pirated products in exports, says EUIPO.

“Also important to note is that many of the factors presented above can actually be extremely beneficial for trade in general, such as good logistics facilities. It is the misuse of these facilities that can result in higher flows of trade in fake goods.”

Last month, the EUIPO published a study estimating that counterfeiting is leaching almost €60bn from the EU’s economy every year across 13 industrial sectors – including pharmaceuticals, smartphones, wine and spirits, and clothing and fashion accessories.

The total corresponded to 7.5 per cent of sales in these sectors, with accumulated losses equivalent to €116 per EU citizen per year, it said.

Combined data from EU and US customs put China as the top source for IP-infringing products – accounting for 68 per cent of all seizures in 2011 to 2013, equivalent to 10 per cent of its total exports – followed by Hong Kong which was the source of around 20 per cent of the total.

Turkey was in third place with around 3 per cent followed by India, United Arab Emirates (UAE), Greece, Canada, Morocco and Germany.