Effects of Counterfeit Product on the Economy Finance Essay

The economy refers to the resources and wealth of country or state. The term is commonly used in the production and usage of goods and services. The country depends on the production and consumption of goods as well services to determine their economy strength (Chaudhry & Zimmerman, 2009). The higher the production and usage of products manufactured in the country, the higher the rate of economy growth. It is crucial to note the imports and exports are major boost of the economy when done in the right way. Imports are the goods and services, which coming into a country from another country (Avery, 2008). The exports are the goods and services, which are taken out of a country to another country. Basically, the government is directly engaged in importing and exporting of goods and services. This is done to balance the amount of imports and exports to balance on the country’s economy (Chaudhry & Zimmerman, 2009). The presence of unbalanced imports ad export significantly affects the economy.

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“Effects of Counterfeit Product on the Economy Finance Essay”

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Smuggling of goods and services refers to the uncontrolled import and export of goods and services in a country. People are privately involved in import and export. Some of the questions that this paper will answer include what are the common counterfeit goods? Why do people sell counterfeit goods? What is the government doing to curb smuggling and counterfeit good? What are the results of smuggling goods in various countries? This research will try to investigate the effects of counterfeit and smuggled products in the economy of a country. It will also investigate some counterfeit goods and compare them with the original products.

Literature Review:

Smuggling activities by individual people deny the government of its revenues, which it charges on products and services leaving and entering the country (Avery, 2008). Since there is no control of imports and exports, more goods are mugged into the country then sold at a cheaper price to promote private gains. The smuggled goods are counterfeit or take the likeness of the produced products in the country. Products usually are charged some fee for certification of sale; however, counterfeit goods are charged any fee, which depletes the government of its resources.

Smuggling of goods and services is a crime and punishable by the law. Usually, people try to take chances to benefit by maximizing on their profits. The presence of large amount of imports lowers the economy of a country due to the decreased consumption of local products (Avery, 2008). Therefore, the local products find no market locally and in the export market. The production of the country is decreased because the industries are producing, products, which can be found cheaply from imported goods. The rate at which goods are smuggled into the country lowers the price of the original products, which are produced by the local industries. The lowering of the price causes the industries to experience large losses (OECD, 2007). This can make unable to operate or even close down.

On the other hand, export of goods through smuggling also deprives the government of its revenues charges. This decreases the revenue of the country and thus, the country is unable to fund its projects and even carrying out its administrative rights (Avery, 2008). This causes the economy to decrease to very low levels. According to the bureau of counterfeit intelligence in the world, counterfeit goods have become very rampant in the current world. This is because they make up over five percent of the trade in the world (OECD, 2007). The Organization for Economic Co-operation and Development (OECD) asserts that about six hundred billion dollars is lost through counterfeit goods. It adds that some goods are counterfeited and peddled within the same state (OECD, 2007). This has significantly increased the rate of counterfeit goods. The counterfeit goods have a wide range; it includes small consumer goods and large consumer goods such as motorcycles and cars. Some of the small computer goods include purses, movies, software, watches, computer hardware parts and drugs.

According to OECD, counterfeit goods have grown substantially due to the transfer of manufacturing companies to the overseas and the high growth of internet market. The desire of customers to seek out items of lower cost is another cause of the growth of counterfeit goods (OECD, 2007). The United States of America is the worst hit despite being the largest consumer nation in the world. The criterion that counterfeit dealers use to trick their consumers is by using a quality trademark reputation from brand manufacturers. The trademarks used by the counterfeits are from brand manufacturers who have struggled to build for the purpose of their quality products (OECD, 2007). This trademark convinces the consumers that the goods are of best quality.

The major factor that has contributed to counterfeit goods is the shift of manufacturers to countries, which have weak protection of property (Avery, 2008). These countries provide the opportunity and technology to peddle counterfeit goods both internally and internationally. According to the recent counterfeit studies, China is the world biggest source of counterfeit goods. Most products being sold internally and in the internet market have been found to be pirated in China (OECD, 2007). Due to the advanced growth of technology and use of computers, there have been high software piracies. China is also ranked first in software piracy. Software piracy has worse repercussions not only on the national economy but also on the global economy.

The counterfeit goods market, which is also known as the black market, is bringing much stress to businesses that have their trademarks used in this illegal business. The business puts their resources and struggle in creating a quality trademark, but eventually the counterfeiters take it and use it to sell their pirated goods. The hurting bit is that the counterfeiters use the quality trademark and sell the pirated products at lower prices (Avery, 2008). This makes the quality products from the original manufacturers lack market because they have a high price than the pirated products. This is a major loss for the manufacturers of registered products because they lose market. Businesses are making great efforts to eliminate the counterfeit imposters. The high number of lawsuits from the companies against distributors and manufacturers of counterfeits shows these greats efforts (Yager, 2011).

The Chamber of Commerce of the USA states that counterfeit goods are produced in violation of human rights and child laws. This is because they benefit the drug cartels, people smugglers, street gangs and terrorist groups. This shows that market of counterfeit goods affects job, national and international securities negatively (OECD, 2007). This is observed from the groups that are involved in selling counterfeits; they are great threats to the nation and the world as a whole. In this connection, the companies and the government are working hard to design ways of curbing counterfeit activities. On the side of the government, it faces serious threats from its military, health and government corporations. The military using counterfeit equipment is at high security risk. For instance, the USA Senate Committee submitted a report that the military are using counterfeit electronics, which includes surveillance planes and operation helicopters. This puts the military troops at risk of attack (Avery, 2008).

On the other hand, health is also affected by counterfeit goods such as food, medicines and cigarettes. It has been observed that counterfeit cigarettes contain harmful substances such as asbestos, human excrement, dead files and mold (Avery, 2008). In addition, the foods sold through the black market have been found to contain dangerous chemicals such as melamine in milk. According to Food and Drug Administration (FDA) reported that the melamine makes milk seem of have high content of protein, however, it has caused more than one thousand children to be hospitalized and some have died (Yager, 2011). Counterfeit food products is very risky in health issues because not all foods being sold are tested by the regulatory bodies. This makes eating of these foods a health hazard because of the chemicals used in the manufacture and packaging. On the other hand, pharmaceutical medicines are also in the counterfeit medicine. The sale of counterfeit medicine has adverse health and economic effects to the individuals taking them and the corporations involved in medicine manufacture and distribution.

Research Question:

What are the measures and methods available in curbing counterfeit goods and market?

Significance of study:

The knowledge of measures and methods of preventing counterfeit is very significant to the economy, not only the state’s economy but also the global economy. This is because the counterfeit market is a multibillion problem that can affect what people watch, eat, wear and the medicine people take. This shows that counterfeit goods are everywhere and is responsible for fake goods and organized transnational crimes. The earlier this fake business is controlled the safer the world. This is because it is a global business, which affects most of the world’s industries such as, software, health, media and music, security and the manufacturing industries (Yager, 2011).

According to Avery (2008), some of the world governments have installed some measures to curb counterfeit business. These measures include threaten people who buy counterfeit goods with imprisonment and big fines. The governments are also making treaties aiming eradication of counterfeit and piracy (Avery, 2008). Other measures include creating bodies that will obtain better information and tips of detecting fake goods. On the other side, the companies are developing new ways of branding their products to prevent imposters. Some of these ways include use of special inks, watermarks and Radio- Frequency Identification (RFID) technology. RFID technology involves tagging the product crates with chips, which are used to send authentication signals. In addition, the newest and the most authentic method is the one involving integrating the original products with special genetic tags, which their DNA is read to ensure it is not fake (Avery, 2008).

This study aims at enlightening the people on the effects of counterfeit goods on their bodies. It also involves providing methods to identify fake goods, which can cause problems in the body. By understanding the methods used in detecting counterfeits, it promotes significantly the field of criminal justice. The parties involved in counterfeit market can be easily identified and prosecuted according to the law. The society will benefit in various ways such as knowledge of detecting fake goods, knowledge of the effects of the counterfeit goods and the economy will grow substantially. The decrease and eradication of counterfeit goods and piracy will improve sectors of economy such as employment, manufacturing and health.


In this section, it will involve the methods of data gathering to be used in this research study. As stated earlier, the research question is; what are the measures and methods available in curbing counterfeit goods and market? The methods to be used will collect the measures and methods that people and government regulatory body officials use in identifying fake products. The methods include use of questionnaire and interviews.

The questionnaires will used to collect data from the regulatory officials, while interviews will be used to common people who purchase the consumer products. Questionnaire will be used in this study because they are cost effective and easy data analysis. Questionnaires are cheap as compared to interviews especially face-to-face interviews. Entry of data and tabulation can be easily prepared even using packages of computer software. In addition, questionnaires are familiar to many people, reduce bias and less disturbing than telephone or interview. People fill in the questionnaires according to their understanding and not the researcher’s opinion hence reducing biasness. On the hand questionnaires can be completed at own time schedule and this reduces interruptions from one’s work.

Questionnaires, however, have limitations such as people unwilling to answer the questions, untruthfulness, rigidity where they give no room for explanation and open-ended questionnaire may contain large data amount, which takes long time to analyze. On the other hand, interview is preferred because several reasons such as asking detailed questions, high response rat and ambiguities can be clarified easily. The limitations of interviews include time consuming, costly and interviewers ask questions differently, which can affect the responses

The data collection will be done in fourteen days so that the people filling the questionnaires will have sufficient time to complete. This will enhance reliable responses from the clients. The people to be interviewed will be questioned for about thirty minutes on how they detect fake consumer goods and if they know any other methods, the government is using to prevent counterfeit goods.

Sampling method:

In this study, the middle aged people in supermarkets, employee of various manufacturing companies and government regulatory body officials especially the Food and Administration (FDA) officials. The sample group will consist of twenty regulatory body officials, who will receive the questionnaires through email. There will be about fifty people to be interviewed. This sample group is a probability sample. Probability sample involves use of random selection of participants in a certain study. This type of sampling is useful in this study because it enhances each participant in this study to have equal chances of participation. This type of sampling ensures that the population of study is well represented. This shows that the data collected from the sample group will represent the whole population of the study.

The probability sampling is the best method to use due to various reasons. One of the reasons includes representativeness and fairness. This is because each person has an equal chance of being selected and everyone feels represented. This method is also flexible in the process of setting inclusion probabilities for sampling frame elements. Using this sampling method is easy. Ina addition, analysis of data is made easier. It raises no doubts that there is some data, which is missing. The population being used in this study is hard to get, therefore, use of probability sampling ensures the people involved are available and data is taken efficiently. This is difficult to achieve in non-probability sampling, which can give biased data, improper representation of the population of study. The data collected in non-probability sampling is biased and in most cases it is less to what the researcher expected.

The probability method of sampling involves some tasks such as using a simple random selection table and use of computer software in random selection of sample group. Use of these simple criteria makes this method of sampling easy to use and time saving. In contrast, non- probability sampling is time consuming and tiring. This is because sampling is done by initial thorough analysis of the population of study, which takes some time to finish. In conclusion, the research study will use probability-sampling method because it satisfies the required in this kind of study.


After collecting data from the sample group, the people involved need their privacy to be protected. The participants will sign a consent form, which includes the terms of how the data provided will be handled. It is important to note, most of the people in this study are respected officials in the country, and therefore, their privacy should be taken handled with much care. To implement the protection of privacy, the report from this data will not include their names. This step will protect the participants from potential physical and psychological harm. The research report will contain code numbers for the respondents instead of using names. In addition, the results, which contain respondents names will locked in safe place. By doing this, the pricy of the respondents will be safe.

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Effects Of Counterfeit Product On The Economy Finance Essay. (2017, Jun 26). Retrieved November 30, 2022 , from

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