Piracy of Clothes and Goods in China and the Consequences on the Global Market

Introduction and Background

The Chinese accession to WTO in 2001 was expected to be a boon to world trade with the opening out of the Chinese markets and the easy access to Chinese goods for countries across the world, particularly the developed world. These hopes were not believed as can be seen from the trade figures between China and the United States of America. Exports from the United States of America to China grew by almost eight percent in comparison to the growth of a mere eleven percent to all the other countries in the world. However such a surge in trade with China was not without a price tag for the developed world. The heavy price tag that is being paid by the developed world stems from the totally dissatisfactory enforcement of intellectual property rights and the flooding of their markets with cheap and imitation clothing and products from China. The issue of piracy and counterfeiting in China that is causing serious concern to the developed world is best summed up in the words of Christopher R. Hill, the American Assistant Secretary for East Asian and Pacific Affairs, who claims, “Piracy and counterfeiting in China are rampant. If we can make it, they can fake it” (Hill, 2005).

Research Question

This study aims to answer the research question how severely does cheap pirated clothing from China impact on the manufacturers of branded clothing products in the United Kingdom? The study hypothesis is that the cheap pirated clothing from China has a negative impact on the manufacturers of branded clothing products and the purpose of the study is to verify this hypothesis and in addition evaluate the extent of the negative impact.

Relevance

Piracy and cheap imitations of clothes and other goods by China provide it with an unfair advantage in world trade, as it can supply goods at prices much lower than the original manufacturers of the goods, for they are cheap imitations. This works out to the economic detriment of the original manufacturers and the economy of the countries in which these manufactures have their production facilities.

Literature Review

Globalization has led to a significant increase in international trade and commerce and with that has come the potential for making huge profits through piracy and counterfeiting (UNICRI, 2008). The Internet is proving to be a conduit through which the movement of pirated and counterfeit is facilitated, which is not easy to verify and check (Decker, 2004).

China has earned the reputation of being the leading source in the world for pirated music and movies, soft wares, designer other goods (Waller, 2006). The rampant nature of piracy of clothes and other goods in China can be seen from the result of the European Commission survey, which has laid the blame of almost two-thirds of the goods found in the European Union on China, with the other nations like Russia, Ukraine, Chile, and Turkey trailing far behind (Zaracostas & Carvajal, 2007). This has led the European Union to issue a warning to the Chinese authorities to act and reduce the level of counterfeiting and piracy activities in the country (BBC News, 2006).

In China, piracy and counterfeiting are rampant because millions of its working population are dependent on these activities for their livelihood. Piracy and counterfeiting make for earning a lot of money. These two factors in combination lead to resistance against any reform on piracy and counterfeiting and the authorities turn a blind eye to it (Sheban, 2007). This has resulted in no sign of abatement of piracy and counterfeit activity in China, despite all the promises that come from the Chinese authorities (Schearf, 2006). The money involved can be seen from the estimates of the Economic Cooperation and Development (OECD) that as much as $200 billion in international trade in 2005 came from counterfeit or pirated products (UNICRI, 2008).

A major portion of this piracy and counterfeit activity is in branded clothes and other branded products that make for increased profitability in the activity, resulting in losses to these companies and revenue to the developed world. Estimates suggest that the actual loss to genuine companies through piracy and counterfeiting could be as high as $600 billion (Sheban, 2007). An example of how this loss occurs can be seen from the example of the Kingsoft Corporation’s dictionary program that is found in the majority of the 60 million personal computers in China. Kingsoft Corporation has not benefited much for as much as ninety percent of these personal computers use the pirated software (Waller, 2006). Loss to the economies of the developed countries can be evaluated from the estimated loss in revenue to the economy of the United States of America through lost sales, lost jobs, and lost tax revenue is as high as $250 billion (Sheban, 2007).

Methodology

The methodology planned for this dissertation is to undertake a literature review to understand what is known about the piracy of clothes in China and its impact on the legitimate international trade in branded clothing products. The literature review will involve the use of scholarly primary sources and the international trade statistics from the Department of Trade and Commerce in the United Kingdom. Through this exercise, it is also expected that quantitative data will become available from the evaluation of international trade statistics on branded clothing products and pirated clothing from China. Additional quantitative data will be generated through the examination of sales and trade figures from manufacturers of branded clothing willing to participate in the study. The number of such will be kept at ten. Data collection sheets pertinent to the study will be created for this purpose.

Data collected from the literature review and the data sheets will be collated for statistical analysis. Correlation between the data will be ascertained using statistical analysis of t-tests and ANOVA. A similar statistical analysis of the quantitative data alone will be done. The results of these statistical analyses are expected to provide the findings of the study, which will assist in arriving at the answers to the research question.

Conclusion

The basic assumption of the study is that cheap pirated clothing from China has a negative impact on the manufacturers of branded clothing products. The findings of the study are expected that this holds for branded clothing product manufacturers in the United Kingdom and in addition provide direction as to the extent of this negative impact on the branded clothing manufacturers in the United Kingdom.

Literary References

1. BBC News. 2006. ‘EU warns China on piracy problem’. Web.
2. Decker, M. A. 2004, ‘”Knockoffs of Knockoffs:” The Global Implication of Fashion Piracy’.
3. Hill, C. R. 2005, ‘Emergence of China in the Asia-Pacific: Economic and Security Consequences for the U.S.’ Testimony before the Senate Foreign Relations Committee, Subcommittee on East Asian and Pacific Affairs. Washington DC, U. S. Department of State. Web.
4. Schearf, D. 2006, ‘Fakes Flourish in China Despite Government Promises to Halt Piracy’, newsVOA. Web.
5. Sheban, J. 2007, ‘Organized crime runs the Asian fakes trade’, The Columbus Dispatch. Web.
6. UNICRI. 2008, ‘Counterfeiting: a global spread, a global threat’, United Nations International Crime And Justice Research Institute. Web.
7. Waller, S. 2006, ‘Piracy Hurting China’s Own Industries’, Economic and Finance Information. Web.
8. Zaracostas, J. & Carvajal, D. 2007, ‘Chief executives single out China and Russia as worst offenders in global piracy’, International Herald Tribune. Web.