Forgery trade losses ‘under $200bn’

International trade losses due to product counterfeiting and piracy are much lower than estimated by business lobby groups, according to the most detailed global study to date.

Trade losses in 2005 were “up to $200bn”, according to the executive summary of a report by the Organisation for Economic Co-operation and Development, obtained by the Financial Times.

This compares with the business estimates for international trade losses, ranging upwards from $600bn.

The report, due for endorsement by the OECD board later this month, could prove embarrassing for international business lobbies, which have used the higher estimates to lift intellectual property rights up the global political agenda and to demand crackdowns in China and elsewhere.

The German chancellor Angela Merkel and trade union representatives from the G8 industrial nations discussed these issues on Monday in Berlin. Germany has put the battle against counterfeiting on the agenda for next month’s G8 summit on the Baltic coast.

The OECD report, based in part on reported customs seizures in various countries, stresses the $200bn figure did not cover all aspects of counterfeiting, which it says is growing at an “alarming” rate. It notes that “counterfeit and pirated products are being produced and consumed in virtually all economies, with Asia emerging as the single largest producing region”.

Business groups such as the Paris-based International Chamber of Commerce fear the report’s publication could undermine momentum on tackling IPR abuses. Guy Sebban, ICC secretary general, said “up to $1,000bn in international trade was lost annually” to piracy and counterfeiting. The OECD figure was “an under­estimate”, he added.

Jeff Hardy, co-ordinator of Business Action to Stop Counterfeiting and Piracy, an alliance of multinational companies including Microsoft and Nike, said: “Business is definitely not exaggerating the scale of the problem.” The OECD report did not cover domestic or internet-based losses.

OECD officials have acknowledged the report is “politically sensitive”, according to people familiar with the draft. Mr Hardy said his group had called for changes, which were subsequently made.

John Evans, head of the OECD’s trade union advis­ory committee, said IPR abuses were a serious problem but companies should not put all their “political capital” into stronger legal penalties and campaigns against China and other countries. Im­proved labour conditions and corporate governance standards in developing countries would help, he said.

The unions’ position paper prepared for the G8 summit, obtained by the FT, states: “both the absence of decent work and a lack of corporate accountability facilitate the manufacture of counterfeits”.

The OECD study says law enforcement needs to be improved, but closer co-operation between industry, governments and other stakeholders is also needed.

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