Presentation from the launch of the report "Why do Countries Export Fakes?". For more information see oe.cd/exporting-fakes-report

1. WHY DO COUNTRIES
EXPORT FAKES?
The role of governance frameworks and enforcement

2. • Trade in counterfeit goods: growing, global threat
• OECD / EUIPO studies: Objective information
• Data: key inputs from customs (seizures of fake goods)
Background

3. Findings so far:
• Counterfeit and pirated products originate from virtually all
economies on all continents.
• Some economies tend to be important producers or transit
points in trade in fake goods, whereas their neighbours play
only marginal roles.
Question
• How can we explain the propensity of economies to export
fake products?
• What is the impact of variables that are related to public
policies, institutions and enforcement?
Motivation

4. Approach
The method:
• Employs large datasets to provide more detailed and
precise information about the quantifiable socio-
economic conditions that influence economies’
propensities to trade actively fake goods.
• Sets of measures:
– governance indicators
– production facilities
– Free Trade Zones
– trade facilitation policies
– logistic capacities and facilities

5. • The set of explanatory variables includes:
1. Governance indicators (control of corruption, irregular
payments and bribes, quality of IP protection)
2. Production facilities (manufacturing VA, minimum wage,
annual paid leave per worker)
3. Number of special zones (number of FTZ)
4. Logistic facilities (e.g. ability to track and trace
consignments , ease of arranging competitively priced
shipments , efficiency of customs clearance process)
5. Trade-related measures (e.g. involvement of trade
community, trade information availability, discipline on fees
and charges)
Fractional response model

6. • The level of corruption, as measured by
control of corruption, and irregular
payments and bribes
• Low quality of intellectual property
protection
 significantly increase the share of
fake exports
Results: governance indicators

7. Results: governance indicators
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0
Share of exports of counterfeit
and pirated goods
Intellectual properity protection (1 - very weak; 7 - very strong)
Predicted share of fake exports depending on
the quality of intellectual property protection

8. • FTZs are key drivers of trade in counterfeit and pirated
goods, especially for economies with weak governance
Results: FTZs
0.00%
0.02%
0.04%
0.06%
0.08%
0.10%
0.12%
0.14%
0.16%
1 2 3 4 5 6 7
Effects of an additional FTZs
on the share of fake exports
(in percentage points)
Irregular payments and bribes (1 - very common; 7 - never occurs)
Average marginal effects of the number of export processing zones
on the share of fake exports, depending on the index of irregular
payments and bribes

9. • Economies with:
 the lowest labour costs (minimum wage) and
 the poorest working conditions (annual paid leave per worker) have the
largest share of counterfeit and pirated exports.
Results: production facilities
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8
Share of fake
export
Minimum wage (in log)
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30
Share of fake
export
Paid leave (annual per worker))
Predicted share of fake exports depending on
the minimum wage and annual paid leaves per worker

10. • The ability of trace and track consignments is a key
factor allowing to reduce the share of counterfeit and pirated
products exported by an economy.
• On the contrary:
 the ease of arranging competitively priced
shipments,
 the speed, simplicity and predictability of customs
formalities (“efficiency” of customs clearance processes)
 the quality of trade and transport related
infrastructure (e.g. ports, railroads, roads, information
technology)
can significantly increase the share of counterfeit and pirated
exports.
Results: Logistics facilities

11. The impact of trade facilitation measures and policies on the
share of fake exports largely depends on the level of
corruption.
 An improvement of
– information availability,
– disciplines on fees and charges,
– internal border agency cooperation, and
– a greater involvement in the trade community
would particularly reduce the share of counterfeit and pirated
products exported by economies that are characterized by a high
level of corruption.
Results: Trade facilities

12. No silver bullet
None of the factors outlined above can alone
explain the phenomenon of exports of fakes.
It is the combination of these factors that results in
emergence of important nodes in trade in
counterfeit and pirated goods.
Important!!!

13. Misuse of good instruments
Many of these factors (e.g. good logistical facilities)
can be very beneficial for licit trade flows.
In some cases it is the misuse of these facilities that
in some economies might result in higher flows of
trade in fake goods.
It greatly depends on a number of governance-
related indicators.
Important!!!

14. Good governance is the key
Governance indicators (corruption, IPR enforcement)
in addition to their direct effect, also multiply the
effects of other elements (FTZs, quality of logistic
facilities or trade facilitation policies)
Good governance is a catalyst that greatly enhances (or
deters) the effects that other elements have on illicit
trade in counterfeits.
Important!!!

15. Michal.KAZIMIERCZAK@euipo.europa.eu
Florence.MOURADIAN@oecd.org
Piotr.STRYSZOWSKI@oecd.org
Nathan.WAJSMAN@euipo.europa.eu