…but more has to be done.
The EU is China’s biggest trading partner and the EU’s biggest source of imports.
So it’s not very surprising to learn from the latest EU customs enforcement of intellectual property report that China is the main source country of imported goods suspected of infringing trademarks, copyrights and patents.
Nearly 73 per cent of the detained 115 million articles – amounting to a total value of €1.3 billion – had originated from China.
This is yet more bad press for the ‘Made in China’ label, already stigmatised (often unfairly – the Chinese can produce good stuff) for cheap, shoddily-made and hazardous products. It is surely in China’s own interests in terms of the nation’s brand image to do more in its own backyard at cracking down on counterfeiters, attacking the problem at source rather than relying on the EU with its public budgets under pressure and its disparate 27 borders agencies.
After all, China has infinitely bigger financial resources and manpower than Europe. China’s annual internal security budget spent on police, militias and security services amounts to a staggering USD $ 111 billion and exceeds its defence budget. But it’s an open question as to whether China’s authorities have the political and economic will – especially at the regional and provincial level – to do so. Local business and political interests are too often intertwined encouraging crony capitalism.
A bigger worry for the EU is the personal health of the European consumer, as counterfeit and fake medicines represent almost a quarter of the total number of articles detained by EU customs authorities. It was not so long ago that Chinese-produced heparin (a blood thinning drug) was found to be contaminated, causing 19 deaths in the USA. Chinese pharmaceuticals and cosmetics imports masquerading as well-known branded products often contain toxic and harmful substances. Fake cosmetics brands are usually laced with high concentrations of lead that cause severe skin allergies, burns and reputedly, even brain damage.
These products find their way onto a plethora of niche ecommerce websites and even the big players such as EBay and Alibaba. Unscrupulous importers sell them to gullible buyers who should know better yet seem easily cozened. After all, if you’re offered cosmetics brands like Max Factor, Bobbi Brown, Benefit or Lancome at one-tenth the price they sell for in high street shops, one would expect that most consumers would be telling themselves “it’s too good to be true”. But they don’t. Conditioned by market norms, humans make decisions without rationalizing the outcomes of their choices, as Dan Ariely illustrated in ‘Predictably Irrational’.
If fake trademarked medicines and lead-laced cosmetics weren’t enough of a health hazard, counterfeit brands of cigarettes are the third biggest EU customs-detained product by quantity (after pharma and packaging materials). Apart from containing occasional fecal matter and insect eggs, China’s fake cigarette brands have much higher concentrations of nicotine and 130 per cent more carbon monoxide than the real thing.
The total number of EU counterfeit goods cases has risen by 15 per cent since 2010 with many more fake products now being intercepted in the postal and express courier systems. The EU report ascribes this increase to the phenomenal growth of online ecommerce fuelled by easier household access to the internet and presence of reputable internet shopping malls such as Amazon.
This suggests that the problem of trading in counterfeit goods – whether from China or elsewhere – is likely to get worse as it becomes easier for small e-traders to set-up their own e-commerce websites and capture the growing numbers of EU consumers migrating to online shopping. With the parlous state of the Eurozone putting tremendous pressures on the average EU consumer’s disposable income and savings, buying cheap counterfeits as substitutes for authentic brands, or under the impression that they really are discounted brands, becomes more tempting. In hard times, most people are highly susceptible to a low-priced bargain if it saves them money.
As European internet shopping expands at an annual rate of 12%, EU customs officials are going to have their work cut-out over the coming years. They are already liaising closely with their Chinese counterparts through the Joint Customs Cooperation Committee (JCCC) that was set-up a few years ago to combat fraud, enforce intellectual property rights and enhance supply chain security through the so-called SSTL project.
But is this enough?
Probably not. The EU needs to get their Chinese colleagues to step-up enforcement and closure of counterfeiters’ production chains at source, as well as interdict consignments before fake products leave China’s mainland.
With China’s reputation for weak IPR enforcement, that scenario is still a long way off and Chinese counterfeiters will continue to profit at the expense of European brands and European consumers – both the vulnerable and the greedy – as well as the personal health of the buyer.