Magazine article Risk Management

The Debate on Chinese Counterfeits Hits the WTO

Magazine article Risk Management

The Debate on Chinese Counterfeits Hits the WTO

Article excerpt

In February, U.S. Customs seized more than 100,000 counterfeit Gucci and Fendi handbags in Oakland, California off of a cargo ship arriving from China. Bound for New York, these knockoffs would have fetched more than $13 million in luxury boutiques had they been authentic.

For many major retailers, the only real news here is that the counterfeit goods were actually discovered this time. Increasingly, everything from New Balance sneakers and Abercrombie apparel to Titleist golf clubs and Microsoft software are being illegally produced in China and sold at discount rates across the globe.

And now, it seems Washington is beginning to take a hard line. In April, the United States filed a formal complaint against China at the World Trade Organization (WTO), claiming that Chinese policies to prosecute counterfeiters have "excessively high thresholds" and are rooted in a bureaucracy that may actually be exacerbating the problem. "Piracy and counterfeiting levels in China remain unacceptably high," said U.S. Trade Representative Susan Schwab. "Inadequate protection of intellectual property rights in China cost U.S. firms and workers billions of dollars each year."

All tolled, the Chamber of Commerce estimates that piracy costs the U.S. economy $250 billion per year, with officials confiscating record numbers of merchandise each year (over 14,000 total seizures in 2006, totalling $155 million). And the problem is by no means simply American, with more than 75 million counterfeit items also seized across the EU in 2005. …

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