The Swedish economy is innovative and rich in intellectual property (IP), with nearly every industry either producing or using IP. Swedish innovative industries are also export-dependent and very deeply integrated in the global economy, through active participation in global value chains. At the same time, the threats of counterfeiting and piracy are growing – and Sweden is vulnerable. This report measures the direct economic effects of counterfeiting on Swedish industry, government and consumers. It examines both the impact of the imports of fake products to Sweden and – more importantly – the impact of the global trade in fake products that infringe on the IP rights of Swedish innovative companies.
Counterfeiting and Piracy and the Swedish Economy
Making Sure "Made in Sweden" Always Is
Illicit Trade
Abstract
Executive Summary
This report presents the findings of the Swedish case study of trade in counterfeit and pirated goods. It looks at the problem from two perspectives. First, it analyses the scale and product composition of counterfeit and pirated products smuggled into Sweden and the effect on consumers, industries and the Swedish government. Second, it studies the magnitude and effects of global trade in counterfeit goods that infringe on the rights of Swedish trademark holders.
This dual analysis is based primarily on a quantitative assessment of global trade in counterfeit products within and outside Sweden, using the tailored statistical methodologies developed by the OECD, together with a large dataset on customs seizures of IP-infringing goods.
The findings can help both public and private sector decision makers better understand the nature and scale of the problem for the Swedish economy, and develop appropriate, evidence-based policy responses.
Key findings
The total value of world trade in fake goods that infringed on Swedish IP amounted to as much as SEK 28.3 billion (USD 3.4 billion) in 2016, equivalent to 2% of total Swedish manufacturing sales (domestic plus exports).
Products where Swedish IP rights were particularly targeted, in terms both of the absolute value of trade and of percentage of total trade in a given product category, include automotive spare parts, machinery (bearings), clothing, toys and watches.
Counterfeit and pirated goods that infringe on the intellectual property rights (IPRs) of Swedish right holders come mainly from China; Hong Kong, China; Singapore and Turkey.
The results indicate that in 2016, over one-half of the goods traded worldwide that infringed Swedish IPRs were offered to consumers who knew they were buying fake goods.
Imports of counterfeit and pirated goods to Sweden accounted for as much as SEK 18.3 billion (USD 2.2 billion) in 2016 – the equivalent of 1.6% of Swedish imports.
Regarding the degree of counterfeiting in Sweden, ICT devices were the most counterfeited type of goods followed by watches, clothing, and toys and games.
The analysis shows that more than a half of imported counterfeit and pirated goods in Sweden in 2016 were sold to consumers who believed they were buying genuine products, with the remaining purchased wittingly. The share of fakes bought knowingly in Sweden varies significantly by product, ranging from 20% for automotive spare parts to 55% for perfumery and cosmetics.
Impact on Sweden
The estimates for consumer detriment – that is, the price premium unjustly paid by consumers in the belief they are buying a genuine product – in Sweden amounted to almost SEK 4.5 billion (USD 540 million) in 2016.
The total volume of Swedish companies’ forgone sales due to infringement of their IP rights in global trade amounted to SEK 17.1 billion (USD 2 billion), or 2.4 % of total sales by these Swedish companies in 2016.
Lower sales reduce the demand for jobs, either in the retail and wholesale sector or in Swedish industries due to the global infringement of their trademarks. Altogether, at least 7 100 jobs were lost in Sweden due to counterfeiting and piracy, which represents 0.7% of full-time equivalent employees in Sweden.
Lower sales due to counterfeiting in Sweden mean lower revenues for the Swedish government from value-added tax (VAT), corporate income tax (CIT), personal income tax and social security contributions. Altogether, trade in counterfeit and pirated goods resulted in a reduction in Swedish public revenues equal to almost SEK 7.54 billion (USD 905 million) or 0.2% of Swedish GDP.
