convergence

Picard
not particularly relevant as a cause of these social developments.” 24 In short, the effects of illicit
markets matter more than their size. In the section below, where our proposed methodology
to measure the impacts of illicit markets is presented, results of studies that measured the
economic cost of illegal drugs will be used instead of the market size estimates.
Counterfeiting
In the early part of the last decade, 5–7 percent of international trade was the commonly used
figure for counterfeiting. However, this estimate from the International Chamber of Commerce
turned out to be, at best, an educated guess. At worst, it was seen as a conveniently large number
created to draw attention to the problem. As this and other estimates came under severe criticism,
the Organisation for Economic Co-operation and Development (OECD) was mandated
to launch a study on counterfeiting in order to produce a more solid statistical estimate. Its
2008 report stated that “analysis carried out in this report indicates that international trade in
counterfeit and pirated products could have been up to USD 200 billion in 2005.” This figure
was later updated to $250 billion based on 2005–2007 world trade data. This estimate appears
lower than the previously cited figure, corresponding to a bit less than 2 percent of international
trade. Also, strictly speaking, the basis of measurement is not the international trade value but
the value of counterfeit goods reported by customs, which can be significantly higher than the
shipment declared value.
Also there are very significant problems with the employed methodology, of which even
the authors of the report seem to have been aware. They pessimistically noted, “The overall
degree to which products are being counterfeited and pirated is unknown and there do not
appear to be any methodologies that could be employed to develop an acceptable overall
estimate.” As the team of economists and statisticians discovered when they started their
study, little data were available and the lack of harmonization between data sets made it very
difficult to combine them. With limited funding and considerable time pressure, the quickest
way forward was to send questionnaires to custom agencies through the World Customs
Organization to collect data on the estimated retail value of seizures.
The definition of counterfeiting used was based on the Trade-Related Intellectual Property
Standard agreement, and it is the only definition compatible with custom seizure. However,
this definition is far from being universally accepted because it disproportionately represents
the interest of brand owners. The definition of counterfeiting is a subject of controversy that
has resulted in intense debates and the freezing of anticounterfeiting efforts of the World
Health Organization (WHO). It will suffice to say that from the standpoint of consumers,
there are many situations where intellectual property (IP) infringement does not necessarily
involve counterfeiting (for example, patent infringement). On the other hand, goods may be
deliberately and fraudulently mislabeled to deceive consumers without necessarily infringing
any intellectual property right.
There is also lack of clarity in the report on the basis for recording interceptions. Customs
authorities have indeed used the declared customs value, the reported market value, or the
legitimate item value. This is problematic because with counterfeit goods, there can be an order
of magnitude difference between these estimates.
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