Impacts of counterfeiting and piracy to reach US$1.7 trillion by 2015

A new report released recently by the International Chamber of Commerce (ICC) indicates that the global economic and social impacts of counterfeiting and piracy will reach US$1.7 trillion by 2015 and put 2.5 million legitimate jobs at risk each year.

The report was launched at the sixth Global Congress on Combating Counterfeiting and Piracy, during a panel session on economic impacts.

The report updates a ground breaking 2008 report by the Organisation for Economic Cooperation and Development (OECD) that showed more than US$250 billion in counterfeit and pirated goods move through international trade alone. The revealing ICC study not only brings the estimates up to date but also examines additional impacts not quantified in the OECD report. These include the value of domestically produced and consumed counterfeit products, the value of digital piracy, and the negative impacts on society, governments and consumers.

 “By filling in the gaps left by the OECD, we have been able to paint a more comprehensive picture of the negative economic and social impacts of counterfeiting and piracy,” said Jeffrey Hardy, Coordinator of the ICC Business Action to Stop Counterfeiting and Piracy (BASCAP) initiative. “This additional data is important because it provides policymakers with better information on how counterfeiting and piracy undermine innovation, economic growth and employment. It better equips them to make the fight against IP theft a higher public policy priority and take the actions needed to stop counterfeiting and piracy.”

The report reveals that based on 2008 data, the total global economic and social impacts of counterfeit and pirated products are as much as US$775 billion every year. This includes impacts of lost tax revenue and higher government spending on law enforcement and health care. The figure is estimated to more than double to US$1.7 trillion by 2015, due in part to rapid increases in physical counterfeiting and piracy as measured by reported customs seizuresand greater worldwide access to high speed Internet and mobile technologies.

The report shows that international trade in fakes currently accounts for more than half of counterfeiting and piracy, and could grow to as much as US$960 billion by 2015. Domestic production and consumption will account for between US$370 billion and US$570 billion, and digitally pirated music, movies and software for as much as US$240 billion in 2015.

 “The report shows that in an interconnected economy, consumers and governments suffer alongside legitimate businesses from the trade in counterfeits,” said Damien O’Flaherty, Senior Associate at Frontier Economics, the internationally recognised consulting firm that produced the report. “Our objective is to as accurately as possible characterise the magnitude and growth of this illegal underground economy and its impacts on governments and consumers.”

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

The report notes that counterfeiters and pirates operate outside the law, which makes estimating the extent of counterfeiting and piracy and the harm these activities cause extremely challenging. Illegal businesses do not report information on their activities to any government agency so measuring their size must be done using indirect methods.

 “No one report or approach will yield a complete picture or provide all the answers but we’ve attempted to examine the measurement of this illegal activity in a more comprehensive way than has been done to date, and to develop methodologies that others can now use for more completely and accurately estimating the economic and social impacts of counterfeiting and piracy,” O’Flaherty said.

Hardy added: “BASCAP is committed to learning from as many sources of expertise as possible because we believe that reliable information on the scope and impacts of counterfeiting and piracy is critical for helping policymakers better understand that the trade in fake goods is damaging their economies, threatening the health and safety of their citizens and stifling innovation and creativity.”