NCPA - National Center for Policy Analysis


June 29, 2005

By stealing intellectual property and producing counterfeit DVDs, software and knockoffs, China is costing the United States countless jobs, billions of dollars and hindering our ability to compete, says author Ted Fishman.

It has long been in China's interest to take, but not pay for the world's most valuable technology, adds Fishman. When the damage is counted, the price of pirated software, DVDs, knockoff machines and designer goods equals $80 billion in lost sales to non-Chinese companies; overall, the United States and Japan suffer the most.

  • China produces 100 billion counterfeit brand-name cigarettes a year.
  • Ranking third, behind Vietnam and Ukraine, China has one of the highest piracy rates using nine bootleg software packages for every legitimate one.
  • The counterfeit trade in China is worth from $19 billion to $80 billion a year.
  • Based on 2002 figures, 91 percent of DVDs and video discs in Chinese homes are pirated; overall, piracy cost the U.S. home-entertainment industry $168 million in 2002.

Additionally, nearly every product produced for export in a Chinese factory benefits from the country's loose intellectual property regime; that includes the goods that make up the $160 billion-plus trade deficit between the United States and China. The trade deficit numbers are a good measure of how well American companies profit by taking advantage of China's low cost manufacturing.

But to curb intellectual property theft, solutions need to be considered, says Fishman. Two approaches are:

  • Levying a kind of technology tax on a wide variety of Chinese goods that are coming into the United States.
  • Insisting that corporate buyers of Chinese-made goods certify that their goods were not made in factories where pirated technology is used.

Source: Ted C. Fishman, "How to stop a thief - China," USA Today, June 15, 2005.

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