5 Harmful Effects of Counterfeiting
In 2013, the counterfeit market was estimated to account for approximately 2.5% of global trade. Today, it’s estimated to account for 3.3% of global trade.
While the percent value may seem negligible—worth USD522 billion a year in trade alone—it is bigger than the drug trade and illegal gambling sectors combined. Therefore, there is no doubt that the effects have serious negative implications for businesses, governments, and everyday people across borders.
Here are five ways counterfeiting is especially detrimental:
1. Alarming death tolls
According to the World Health Organisation, 1 million people die every year from the intake of counterfeit drugs. From this figure, British think-tank International Policy Network estimates that 700,000 people die from fake malaria and anti-tuberculosis drugs alone, the greatest number of victims coming from the African continent. With counterfeit packaging and technology improving, it is becoming increasingly difficult for suppliers to weed out fake medication from genuine ones.
2. Funding criminal activities
While you may have achieved a record bargain off of that cheap counterfeit handbag or
Apple iPhone look-a-like, you may have been a party—whether you knew it or not—to criminal activity. A recent study conducted by the Intellectual Property Crime Group found that 40% of counterfeit cases worldwide were linked to drug crimes, meaning that criminal organisations make it a point to involve themselves in making and dealing fake goods. It brings in more revenue, diversifies their footprint in order to evade arrest and allows them to use counterfeit goods as capital for trade with other criminal groups.
When counterfeit brands gain from selling at lower prices, legitimate businesses producing those same products by adhering to high quality and safety standards lose out. Consequently, as those businesses lose out on potential profit, their employees suffer too. At the current growth rate of the counterfeit market, brands and corporations around the world will be forced to lay off a total of anywhere from a staggering 4.2 to 5.4 million employees by 2022.
4. Cutting off FDI
While China accounts for more than 60% of the world’s counterfeit goods, other countries such as Turkey, Thailand, Egypt and India are also up on the OECD’s list of the world’s top producers of fake products. Such a reputation could cause investors to funnel off their investments elsewhere, stemming the influx of foreign direct investment (FDI), which acts as an economic growth and development driver for countries. The International Chamber of Commerce has noted a global loss of USD111 billion worth of FDI due to the prevalence of counterfeit markets across several countries.
5. Loss of public funds
When companies are subjected to profit cuts, governments earn less tax. In 2016, countries around the world collectively lost sales taxes of up to USD89 billion due to counterfeit trade. Although the economic shocks were not isolated to a specific country, the implications are distressing: lower state revenue translates to reduced capacities to maintain and upgrade the infrastructure, develop public education and improve the healthcare sector within a nation.
While counterfeiting capabilities are becoming increasingly sophisticated in widening the impacts of the above problems, Identem’s track and trace solutions are a feasible way forward in addressing the way in which both brands and consumers can stymie their growth. With its comprehensive online database platform and serialization methods, businesses can resort to Identem to productively establish a more secure and streamlined supply chain, in order to help the global supply chain become more impenetrable to counterfeiting, saving and protecting lives and increasing fiscal productivity simultaneously.