The NYT should have included some discussion with an economist in its article about a crackdown on "counterfeiting" in China. The items in question appear to be unauthorized copies of items that have trademark or copyright protection. It does not appear that the items are counterfeits. The difference is that an item that is actually counterfeit deceives the borrower. For example, a counterfeit Rembrandt would be sold with the understanding that it is in fact a painting by Rembrandt. In such cases, the buyer is directly a victim since they were deceived about the true nature of the product. The circumstances described in the article suggest that the buyers understand that they are not buying products actually produced by the trademark or copyright holders. In this case, they are not victims. They are taking advantage of the opportunity to buy products at prices that are closer to their cost of production and therefore benefit from having access to the unauthorized copies. The crackdown on these sales will raise prices and hurt consumers in the same way as if China started imposing tariffs on imports. The difference is that the price increases from cracking down on unauthorized copies are likely to be much larger than price increases associated with any plausible increase in tariffs. The article cites industry sources as saying that the sale of unauthorized items in China cost U.S. corporations $2 billion a year in lost sales. It would have been helpful to include an estimate from an economist of the cost to China's economy from enforcing U.S. intellectual property claims. It would almost certainly be several times higher.
--Dean Baker
