Introduction
The tag dangerous good from China is a term used to refer to the inferior and counterfeit goods that have become dominant in world trade. The issue of counterfeit good has become a global crisis in the recent years. Based on the Counterfeiting Intelligence Bureau (CIB) study, it is realized that, counterfeit products account for up to 7% of World trade. Even though, the percentages cannot be substantiated due to the secretive nature of this market, the figures are expected to rise by 2015 worldwide. Despite the war against counterfeiting, the pirated products could rise to USD 200 billion in the international trade (Qian & National Bureau of Economic Research, 2011).
It is trending that the counterfeiting business is gaining momentum in world business. However, this is an illicit trade that not only affect companies but also disastrous to the world economy. According to reports of OECD) (2007), almost $ 600 billion is lost to the counterfeited products in world trade. However, the rise in this illicit business is inevitable but it has been associated with most companies in an effort to maximize profit. According to Marcelo (2011), the companies are moving to cheap labor third world countries with weaker environmental and labor laws and regulation. The new corporation managers want to achieve the maximum profits through shortcuts including little brand advertisement, low operation cost and mass production levels. These ideas have been found to be the driving force behind the illicit or counterfeit business. Counterfeit products are associated with China. Most of the illicit or fake products are produced in China. In fact, it has been tagged the world counterfeit capital, followed by Korea and Taiwan. These counterfeit products are produced in China either in the same factory that produces authentic good or in the product using the same material. As such, this paper objectively analyzes the harms of this dangerous product from China as well as the negative impacts on the world’s economy.
The markets for Counterfeit Products across the World
Even though, the counterfeit business has been fought across the globe, the business seems to gain momentum in terms of a strong based primary market as well as a secondary market. The counterfeiters and pirates infiltrate the primary market through the distribution channels with which they provide substandard goods or products. In this aspect, the consumers do not know that the products are pirates; hence, they unwillingly purchase the products thinking that they are the real ones, only to know later that the product is a counterfeit. On the other hand, the counterfeiters target the consumer in the secondary market. In this market, they target consumers who already know that the products are pirates, but they are willing to buy. The consumers under certain conditions purchase these products and indirectly support the parties supplying and producing such product (Organisation for Economic Co-operation and Development, 2007). The most important element considered in the secondary market is the low prices charged for counterfeit products. Since there will no need for counterfeit product suppose they were offered at the same price level, the counterfeiters virtually create the secondary market by offering extremely low prices for these pirated products. By doing this, they create an expanded market demand for the products. In fact, they offer a substantial discount for the products. Moreover, they manipulate the market by considering the characteristics of the product. For instance, they intense relatively low prices in products that have low customer trust like phones but not pharmaceutical products.
Impacts of counterfeit products
Impacts on Consumers
Meta- analysis of studies revealed that, counterfeiting and piracy has been globalized in almost all the economies. Data provided by the study indicates piracy and counterfeiting taking place in all world products. However, it is much intense in the technological industry. Before exhausting the impacts of this illicit practice, it is important to analyze its effects on consumers. According to Chaudhry and Zimmerman (2008), counterfeit products are usually unsafe and can be harmful to the consumers’ health. For instance, counterfeit drugs can negatively harm a person’s health since they contain incorrect amount of ingredients. Legally, it is unacceptable for a business to kill the consumers. Nevertheless, the risk of using counterfeit products are spread ranging from dissatisfaction experienced after purchasing the product to health hazards.
Impacts on the Brand
On the other side, counterfeiting affects the original brand adversely. Brand imitation poses worldwide defy. According to Staake and Fleisch (2008), customers always tend to disassociate themselves from products that have counterfeits since they are unable to distinguish the genuine product. In fact, it becomes difficult for customers to differentiate the counterfeits from the real brands. In this essence, the brand becomes weaker in the perception of consumers. With the genuine products retaining high prices, a cheap counterfeit moves in to dominate the market thereby forcing the brand to lose value. Chaudhry and Zimmerman (2008) argued that, since counterfeits are linked to low and poor quality they act to destroy the image of the genuine brand. Besides, counterfeit products in reality damage personal satisfaction in the perception of the brand towards the consumer.
Economic Impacts of the Dangerous product from China
Even though, counterfeiting and piracy have impacts on the consumers as well as the brand, the illicit activities have severe impacts on the economy of countries and businesses. By 2007, the amount of counterfeit products was worth $ 250, as an economist one can just estimate how this could be detrimental to the world economy. Staake and Fleisch (2008) pointed out that, from such an illicit trade world countries suffers both directly and indirectly. Suffice to quote that, they suffer both tangible and intangible losses in the economy. To start with, the foreign manufacturers or multi-national corporations of reputable brands become indisposed and vulnerable in manufacturing of their products. They cannot rely on their intellectual property since the counterfeiters forge and spread their products across the world market. Ideally, the move by counterfeiter results in maximum economic loss to the corporations as well as countries’ economies (Staake & Fleisch, 2008).
According to Shenkar (2006), most developing or third world countries depend on foreign investment to grow economically. However, when the foreign manufacturers are discouraged by counterfeit and piracy businesses to invest in such countries their economies continues to lag behind. In addition, counterfeiting businesses cause trade losses to manufacturers and countries. Staake and Fleisch (2008) argued that, the illicit business leads to loss of available employment opportunities and foreign exchange. Though some studies revealed that, the counterfeit industry also avails some jobs to the people, but they are poorly remunerated since they implicate substandard working environment. This is an industry characterized or focused on profits rather than anything else. Just to reveal that, the illicit businesses are never worried about the image of the brand or business but on the enormous profits that should result in the business involvement.
Second, the counterfeiting business affects the entrepreneurial nature of the people. Normally, the entrepreneurial development of the country or nation depends on legal systems that defend domestic businesses to encourage reasonable and fair competition. Counterfeiters in the market reverse this tradition and put everything in a mess. Ideally, they create an abnormal situation in the domestic market of a product. Shenkar (2006) revealed that, counterfeiters promotes ingenuity and discourage innovation and development to the new investors who may want to make entry into the market.
Moreover, the counterfeit business severely affects companies or international corporations. With the trending counterfeit business, most corporations that do not want their products or goods to be imitated incur extra costs in making the consumers aware of the genuine brand. This translates in high prices to these products that make consumers prefer the cheap counterfeits. Unfortunately, the buyer or consumer pays this price of unfair competition in the market. In fact, analysis of reports by Counterfeiting Intelligence Bureau reveals that, a greater percentage of consumers prefer the counterfeits since they are cheap as compared to the genuine brands (Qian & National Bureau of Economic Research, 2011). Although the consumers or buyers embrace the idea of low offers by purchasing counterfeits, the authentic value associated to purchase of imitations is typically inferior. In fact, the consumers end up incurring high costs for the inferior products.
Nonetheless, counterfeit business is a direct loss to the world countries’ governments. According to Chaudhry and Zimmerman (2008), the counterfeiters engage in unlawful trade thereby avoiding payment of taxes, which adversely affect the economies of countries. The counterfeits are usually traded via clandestine channels that enable them to evade taxes. Ideally, growth and development of countries barely depends on revenue raised through taxes. As such, counterfeit businesses lead to revenue loss to the countries and this spontaneously results in slow economic growth and development (Organisation for Economic Co-operation and Development, 2007).
Finally, counterfeit products affect the environment negatively. In his report Marcelo (2011) revealed that, the counterfeiter’s main focus is on the profit and as such never considers any legality in producing such products. Most of the counterfeit products are not environmentally friendly, and their disposal affects the environment. The disappointed consumers immediately dispose of these counterfeit products that pollute the environment. The counterfeit businesses do not use the green technology in manufacturing of such products.
Conclusion and Recommendations
Counterfeit business is a growing and booming business across the world. The illicit products majorly originate from Asia, China being the primary source. Even though, the counterfeit business may have some few benefits to the people, it is an overall disastrous trade. The businesses have various impacts on the consumers as well as the brand itself. The consumers become dissatisfied with the product immediately after purchase and, as a result, do not realize the benefits of their money. Moreover, illicit trade adversely affects the image of the original brand thereby resulting in low consumption of the real product. More importantly, the counterfeit business affects the economies of countries and corporations (Organisation for Economic Co-operation and Development, 2007). This prompts for the need or strategies to curb this giant detrimental business. The multi-nationals should produce quality brands at low costs such that the counterfeiters are left out of business. Furthermore, companies should manufacture more difficult to imitate the product that will send the counterfeiters parking.
References
Chaudhry, P., & Zimmerman, A. S. (2008). The economics of counterfeit trade: Governments, consumers, pirates, and intellectual property rights. Berlin: Springer.
Marcelo, C. (2011). The Crimes of Fashion: The Effects of Trademark and Copyright Infringement in the Fashion Industry. DigitalCommons@Liberty University.
Organisation for Economic Co-operation and Development. (2007). The economic impact of counterfeiting and piracy: Part IV. S.l.: OECD Pub.
Qian, Y., & National Bureau of Economic Research. (2011). Counterfeiters: Foes or friends?. Cambridge, MA: National Bureau of Economic Research.
Shenkar, O. (2006). The Chinese Century: The Rising Chinese Economy and Its Impact on the Global Economy, the Balance of Power, and Your Job. Pearson Education Inc.
Staake, T., & Fleisch, E. (2008). Countering counterfeit trade: Illicit market insights, best-practice strategies, and management toolbox. Berlin: Springer.
