Corruption and weak IP legislation identified as main drivers for counterfeits

The main drivers that determine the likelihood of a country being involved in the trade of counterfeit goods have been identified by a new EUIPO report – with governance, free trade zones, production facilities, logistical capabilities and facilities, and trade facilitation policies all highlighted as key determinants.

The report – produced by the Organisation for Economic Cooperation and Development in collaboration with the EUIPO – builds on the findings from a series of prior reports on the global counterfeiting landscape and quantifies the socio-economic factors that determine what makes an economy more likely to engage in the export of fake goods.

The study stresses that an economy’s propensity to participate in the trade in counterfeits is most closely tied to poor governance. High levels of corruption and weak IP protection are together “the crucial factor for trade in fakes”, while other drivers have an increasing effect. Corruption is especially important as it undermines enforcement and leads to the misuse of facilities that would otherwise be extremely beneficial for trade in general.

Free trade zones (FTZs) also facilitate the problem by providing criminals with a safe environment, including good infrastructure and limited surveillance. The link is explicit; the larger the number of FTZs and the number of firms and employees within those FTZs, the greater the share of illicit goods in the total exports of that country. Economies that host many FTZs were found, on average, to have counterfeit export volumes double that of economies without FTZs.