Counterfeiting and piracy could cost the global economy up to US$4.2 trillion by 2022, while putting 5.4 million legitimate jobs at risk, according to a report commissioned by the International Trademark Association (INTA) and the International Chamber of Commerce’s Business Action to Stop Counterfeiting and Piracy (ICC BASCAP).

The report, titled The Economic Impacts of Counterfeiting and Piracy, was launched in February in Hong Kong during INTA’s 2017 Anticounterfeiting Conference.

Research firm Frontier Economics, which conducted the research, found that counterfeiting and piracy “continue to grow at an astounding rate” and that “the problem is getting worse, not better” despite increased efforts by stakeholders.

It is estimated that the global value of counterfeit and pirated goods was between US$923 billion and US$1.13 trillion in 2013, roughly the size of Mexico’s economy. The size of this underground economy of fakes could hit US$2.81 trillion by 2022.

In addition, Frontier estimates that the wider economic and social costs from displaced legitimate economic activities, reduced foreign investment, fiscal losses and criminal enforcement falls between US$737 and US$898 billion, and is predicted to top US$1.9 trillion by 2022.

The report also indicates significant effects on the job market. Frontier estimates that around 2.3 million legitimate job opportunities were lost globally in 2013 due to counterfeiting and piracy, and the figure could double by 2022.

Estimating the impact of changes in the intensity of counterfeiting and piracy, the firm further suggests that a percentage point reduction would be worth US$30 to US$54 billion in economic growth for the 35 countries in the Organization for Economic Cooperation and Development (OECD).

“This new study shows that the magnitude of counterfeiting and piracy is huge, and growing,” said Amar Breckenridge, senior associate at Frontier Economics. “The results show once again that in an interconnected economy, consumers and governments suffer alongside legitimate businesses from the trade in counterfeit and pirated goods.”

Frontier’s study builds on a 2016 report by the OECD and the European Union Intellectual Property Office (EUIPO), which estimated that trade in counterfeit and pirated products accounted for as much as 2.5 percent of the value of international trade, or US$461 billion in 2013.

Frontier examined additional impacts beyond losses associated to international trade that are not quantified in the OECD/EUIPO report, including the value of domestically produced and consumed counterfeit goods, the value of digital piracy, and wider social and economic costs.

“By filling in the gaps left by the OECD, Frontier has been able to paint a more comprehensive picture of the negative economic and social impacts of counterfeiting and piracy,” said INTA CEO Eitenne Sanz de Acedo.

“The unchecked growth of counterfeiting and piracy already has created an enormous drain on the global economy,” he said. “This illegal business activity deprives governments of revenues for vital public services, forces higher burdens on taxpayers, dislocates hundreds of thousands of legitimate jobs and exposes consumers to dangerous and ineffective products.”

INTA and BASCAP, which commissioned the report, hope that the latest findings can help them lobby policymakers and raise global awareness of the issue.

“We all know counterfeiting is a huge issue, but it seems that governments and legislators are not really concerned about that. The reaction we often get is that counterfeiting is just an issue for the big corporations and it is not affecting an economy with mostly SMEs,” Sanz de Acedo said at the report launch.

“The rapid growth in counterfeit trade means it is vital for governments to step up the enforcement of intellectual property rights, and for the public and private sectors to increase their engagement on this issue, as well as their support of government efforts.”

“What this report shows that it is an aggregated problem and is a significant part of a company or a country’s economy that is being affected, not just a certain sector. It makes the appeal to the governments more effective.” added BASCAP director Jeffrey Hardy.

“Measures to fight counterfeiting have not been sufficient. If governments hope to stabilise the economy and stimulate economy growth and employment, they must do a better job to protect the central role that IP plays in driving innovation, development and jobs.”

 

Counterfeiting’s economic and social costs

Displacement of legitimate economic activity	$470-$597 billion	$980 billion - $1.244 trillion
Estimated reduction in FDI	$111 billion	$231 billion
Estimated fiscal losses	$96 - $130 billion	$199 - $270 billion
Estimated costs of crime	$60 billion	$125 billion
Total wider economic and social costs	$737 - $898 billion	$1.54 - $1.87 trillion
Estimated employment losses	2 - 2.6 million	4.2 - 5.4 million
Foregone economic growth in OECD 2017	$30 billion to $54 billion

 

Source: Frontier Economics. Dollar figures in US dollars.