- Low Wages for High-Quality Work
- The Final Piece of the Low-Wage Puzzle: Nonunion Labor
- Lax Health, Safety, and Environmental Regulations
- The Catalytic Role of Foreign Direct Investment
- Network Industrial Clustering in Chinas Ultimate Pin Factories
- Rampant Piracy and Counterfeiting
- Beggaring Thy Neighbors with a Chronically Undervalued Currency
- Massive Subsidies and the Great Protectionist Walls of China
- Summing It All Up
Rampant Piracy and Counterfeiting
China is the epicenter of the counterfeits boom . . . Just a few years ago, counterfeiting was all Gucci bags and fake perfume. Now it’s everything. It has just exploded. It is many times larger a problem than it was only a few years ago. The counterfeit inventory ranges from cigarette lighters to automobiles to pharmaceutical fakes that can endanger a life. I would bet that there are companies in this country [the U.S.] that don’t even know they’re getting screwed around the world.
—Frank Vargo, VP of International Economic Affairs National Association of Manufacturers18
Chapter 6, “The 21st Century Opium Wars—The World’s Emperor of ‘Precursor Chemicals,’” describes in detail the breathtaking scope of China’s government-sanctioned counterfeiting and piracy. However, two brief points related to the China Price are worth noting here.
The first is obvious: To the extent that China’s entrepreneurs use counterfeit or pirated factors of production—such as pirated software on their computers—they are able to cut significantly their costs relative to countries where intellectual property rights are respected.
The second point is equally important. The piracy and counterfeiting that exists in China is largely the result of a tacit government policy to allow such practices to flourish. China has a relatively comprehensive set of antipiracy statutes on its books. However, little or no enforcement exists, and what fines and punishments do exist serve as only weak deterrents.
The reason for China’s tacit sanctioning of widespread counterfeiting and piracy is that the Chinese government is well aware of two things. Counterfeit and pirated goods sold domestically help keep inflation low, and selling these goods internationally creates jobs and export revenues.