[Reading Science] 70% of Global 'Counterfeits' Are Made in China... Korea Only 'Pretends to Crack Down'

[Asia Economy Reporter Kim Bong-su] In the era of the 4th Industrial Revolution, where technological advancement determines a nation's fortune, the importance of intellectual property rights (IPR) over the results of rapidly increasing research and development (R&D) expenditures is growing day by day. As technological competition intensifies and the technology life cycle (TCT) shortens, intellectual property trade is being revitalized through various methods such as license agreements, technology transfer, and technology commercialization. This is the background behind countries worldwide beginning to strengthen management of intellectual property rights as part of trade technical barriers (TBT). However, it has been pointed out that China commits more than 70% of intellectual property rights infringements, i.e., patent theft, and that compared to the proactive responses of Europe and the United States, South Korea's response remains passive.

According to the recent Science & ICT Policy Technology Trends Report published by the Ministry of Science and ICT on the 4th, international trade in intellectual property rights is dominated by a few top-ranking countries including the European Union (EU), the United States, Japan, and China, accounting for over 70%. In terms of exports, the EU (38.0%), the United States (30.0%), and Japan (11.3%) accounted for a total of 79.33% of the total export value in 2020. Imports also show an overwhelming share with the top three countries?the EU, the United States, and China?accounting for 72.9% of the total in 2020. Notably, the EU, with its many member states (52.9%), is the largest import market, incomparable in scale. South Korea ranks around 7th or 8th, with exports of $6.858 billion and imports of $9.959 billion in 2020, recording a deficit of $3.101 billion. The report explains, "South Korea's intellectual property trade balance is steadily improving," adding, "Since 2014, copyright has steadily increased, contributing to the overall improvement of the intellectual property trade balance."

The problem is that international disputes arising from intellectual property rights infringement are also increasing. While advanced countries use intellectual property rights to maintain technological hegemony, developing countries, due to low protection levels and institutional abuse, neglect the production and trade of counterfeit and illegal replicas, leading to conflicts.

In particular, according to an OECD report, more than 50% of counterfeit and illegal replicas are produced by China. Most of these are shoes and clothing, with the United States and Europe being the biggest victims. Including Hong Kong, which accounts for about 20%, over 70% of the world's counterfeit and illegal replicas in 2019 were of Chinese origin. Turkey has also become a haven for counterfeit and illegal replicas, increasing its share from 4% in 2016 to 12% in 2019, about threefold.

The United States is the largest victim country, accounting for 39% of the total. It is followed by France (18%), Germany (16%), and Italy (9.8%). By product category, shoes, clothing, leather goods, and electronic devices are frequently detected, with China producing 79% of shoes, 62% of clothing, and 59% of leather goods. Recently, the share of perfumes, cosmetics, toys, and games has more than doubled from 2016 to 2019, showing a significant increase.

Accordingly, international regulatory movements are becoming active. The 'WP6,' a shipbuilding expert committee directly under the OECD Council, addressed intellectual property rights issues in the shipbuilding industry as a major agenda item this year. At this meeting, the EU raised concerns about China's policy of absorbing foreign technology and sinicization related to intellectual property rights in the shipbuilding industry, strongly urging the introduction of protective policies. It demanded specific countermeasures, stating that Chinese counterfeit and illegal replicas used in ships account for 20% of the total market, amounting to 1 billion euros. However, South Korea and Japan, which attended this meeting, shared the awareness of the problem but did not show an active stance, as they could not estimate the scale of the damage.

The report pointed out, "Europe and the United States conduct regular country-specific monitoring of intellectual property rights infringements, cooperate with investigative agencies, and strengthen protective policies by promoting civic education," adding, "South Korea remains passive in dispute response and lacks active protective policies; proactive measures and strengthening intellectual property protection in trade agreements are necessary."