Search the archive.

Overcoming local protectionism cannot be done simply through the drafting of new laws on intellectual property protection or the periodic “strike hard” campaigns initiated by central authorities against counterfeiting and piracy. While most of China’s top leaders acknowledge that counterfeiting is a serious problem, China has a long list of problems of varying degrees of urgency. Any decision by central authorities to suppress local protectionism will involve significant political and social costs at a time when the PRC faces many difficult problems competing for the limited resources of the central government. Where local authorities are unwilling to shut down an economic activity that is perceived to be beneficial to their local economies, PRC central authorities will need to expend significant political resources to overcome the resistance of local authorities. Cracking down on counterfeiting may also result in serious social turmoil caused by the loss of employment, the shutting down of legitimate businesses, and other painful consequences. Faced with the significant costs involved in any serious nationwide campaign against counterfeiting, China’s central authorities will naturally avoid incurring such costs, if possible. To date, it appears that China’s central authorities lack the political resolve or commitment to launch a serious nationwide crackdown on counterfeiting.

China leads the world in counterfeit and pirated products, the office of U.S. Trade Representative (USTR) Katherine Tai said in a report, opens new tabon Tuesday which identified WeChat, China's most popular chat app, as "one of the largest platforms for counterfeit goods."

"Counterfeit and pirated goods from China, together with transshipped goods from China to Hong Kong, accounted for 75% of the value of counterfeit and pirated goods seized by U.S. Customs and Border Protection in 2021," the U.S. government's latest report on "notorious markets" added.

The CSCG and the trade in counterfeit goods has become essential to the local economy. In the 1990s, the CSCG accounted for nearly 26% of the entire tax revenues of the city and was the single largest taxpayer in the municipality. The payment of tax is essential because it integrates the CSCG and the trade in counterfeit goods into the local economy. In addition to paying taxes, the CGSC and its illegal trade in counterfeit goods has given rise to a whole host of other legitimate businesses that support the trade. Hotels, restaurants, night clubs, transportation companies, and warehouse and storage facilities all depend on the trade in counterfeit goods.

Shutting down the trade in counterfeit goods in Yiwu would result in shutting down the local economy and would lead to the closing of many businesses and high levels of unemployment. A shutdown may also lead to social chaos and unrest, which the PRC government fears more than anything else. A small town by China’s standards, Yiwu has a population of about 650,000, the bulk of which depend upon the trade in counterfeit goods. There are hundreds of other towns like Yiwu in China that depend upon the trade in counterfeit goods to sustain the local economy. All told there are likely millions, if not tens of millions, of people in China who depend directly or indirectly on the trade in counterfeit goods for their economic livelihood and survival. A nationwide crackdown would impose significant costs on the PRC government, as it would need to expend significant resources and political capital to deal with the massive economic and social problems that would likely arise as a result.

From the perspective of U.S. firms, China’s entrance into the WTO has been a double-edged sword. Since China’s accession, its economy has grown anywhere between 6-13% annually, as measured by percent change in gross domestic product, thereby making it very attractive for foreign firms to conduct their business there. However, China is also home to a thriving black market. A significant portion of its economy is based on counterfeiting and the violation of most intellectual property laws found in the western hemisphere.

It will not be easy to eradicate counterfeiting in China without hurting the domestic economy. Piracy employs both directly and indirectly 3 to 5 million people in China. Recent estimates place the market value of counterfeit goods upwards of $25 billion annually. It is so pervasive that companies established by local governments operate as some of the 40,000 outlets nationwide for these fake goods. Many of the most flagrant brand violators are state enterprises and run by the same governments that should be policing them.

China’s role in counterfeit trade cannot be overstated. Counterfeit goods from China are estimated to make up approximately 12.5 % of China’s total exports and over 1.5 % of its GDP. Several comparative analyses rank the country as the primary source of global counterfeit goods (around 75% of all counterfeits worldwide).  Data now puts the value of the trade of counterfeit goods from China into SE Asia as approximately USD35 billion. The volume poses significant harm to developing economies within  SE Asia where local businesses and investors suffer heavy losses from these activities.

The discussion in this paper indicates that in approaching the counterfeiting problem, the PRC government is faced with a balance of two competing sets of interests. On the one hand, counterfeiting now supports many local economies and millions of people in China. Any serious crackdown on counterfeiting will result in serious economic losses and social costs that will require the expenditure of a great deal of political capital, as well as economic resources. Of course, China has many pressing problems that demand the attention of its leaders and would prefer not to have to incur the significant costs of a crackdown if they can be avoided. On the other hand, China’s leaders are well aware that MNEs, the worst victims of counterfeiting, are afraid of doing anything to offend the Chinese government. The PRC government knows that MNEs fear retaliation to their businesses in China and will avoid any actions that might cause any offense. Faced with the significant costs and social consequences of a nationwide crackdown on counterfeiting and a group of MNEs that appear to be intent on avoiding any offense to the Chinese government at all costs, China has no real incentive to incur the significant costs associated with a crackdown on counterfeiting. Rather, China has engaged in a strategy of appeasing MNEs through largely cosmetic changes that do not address some of the fundamental underlying issues, i.e. the importance of counterfeiting to local economies, local protectionism and corruption, and the need to find alternative lawful economic activity that can replace counterfeiting. Unless China finds the political will to engage in a meaningful crackdown on counterfeiting, there is unlikely to be any significant improvement in the foreseeable future. 

When a local government in Shenyang, China announced a crackdown on counterfeit goods, nintey percent of store owners responded by shutting down, .

This event has grave implications for the future of copyright/counterfeit/patent reform in China.

The Office of the United States Trade Representative criticized China, Russia and other countries on Wednesday for continuing to fall short of promises to protect intellectual property in  that cataloged various infringements by America’s trading partners.

The annual report placed 27 trading partners on so-called watch lists for intellectual property infringement, and labeled Argentina, Chile, China, India, Indonesia, Russia and Venezuela as being on a “priority watch list” of countries that had the most egregious practices or the biggest effect on U.S. businesses.

A Chinese invasion of Taiwan would prompt a major crisis between China and the United States, with significant repercussions for the Indo-Pacific region and the rest of the world. Such a crisis almost certainly would include implicit or explicit Chinese nuclear threats, despite Beijing’s longstanding no-first-use (NFU) policy. The United States can diminish the potential for China to leverage nuclear threats during a Taiwan crisis, but only if it moves with alacrity to strengthen conventional and nuclear deterrence. The Navy has a key role to play in achieving this goal.

Renewed interest in China’s nuclear program spiked after the 2021 discovery of three new missile fields in north central China. In January 2023, U.S. Strategic Command officially notified Congress that China has more intercontinental ballistic missile launchers than the United States.1 Yet, when it comes to assessing specific Taiwan invasion scenarios, Western analysts often downplay the nuclear dimension. In January 2023, for example, a major Center for Strategic and International Studies Taiwan wargame focused exclusively on conventional warfare, altogether sidestepping the potential for nuclear escalation.2 The Pentagon’s 2023 annual assessment of China’s military power makes a passing reference to the possibility of “nuclear activities” in a Taiwan scenario, but only in the context of a “protracted conflict.”3

China's domestic economic woes are prompting fears that Beijing could compensate by escalating the risk of a war with the U.S. over Taiwan, according to experts who closely follow the U.S.-China rivalry.

And China's economic slowdown, already evident in slowing growth, plunging exports and the increasing municipal debt, unemployment and deflation, is likely to worsen if other nations follow the U.S. lead in restricting investments in China.

Due to its illicit and illegal nature, it is inherently challenging to understand the exact numbers behind counterfeit trade. Statistics based on product seizures, however, indicate that around 90% of all counterfeit products originate from China.[103] These estimates place the value of counterfeit goods coming from China at over $400 billion dollars.[104] This has not always been a major issue, however, as the illicit industry has grown by over 10,000% since 2000.[105] Though no metric is entirely reliable on its own, together, these statistics highlight how China’s counterfeiting enterprise has grown into an unparalleled giant in the past two decades.

[FIGURE 2 OMMITTED]

Time and money have been identified as obstacles in implementing HACCP. Giampaoli, Sneed, Cluskey, and Koenig (2002) found that foodservice directors positively agreed on the benefits of certification and continuing education related to food safety. In our study, time and money were identified as the greatest barriers to improve food safety. Similar problems have been reported by other authors (Mortlock et al., 1999; Panisello & Quantick, 2001; Panisello, Quantick, & Knowles, 1999; Ward, 2001). Managers seemed to find it difficult to make their employees understand the importance of hazard analysis and why particular operations had to be monitored and controlled.

Several studies have examined barriers to HACCP implementation in food businesses. Hwang, Almanza, and Nelson (2001) found that Indiana school foodservice managers identified time to establish a HACCP program, time to run the program, and labor costs as being the three biggest obstacles. In addition, “lack of training funds, time to get used to running the HACCP program, and union problems” were other identified obstacles. Giampaoli et al. (2002) conducted a national study and found three types of barriers: resource management, employee motivation, and employee confidence. Employees are nervous about taking food safety certification examinations and often are not comfortable with the change needed for implementation of a program like HACCP. Youn and Sneed (2002) identified employee and resource barriers in a national study of school foodservice directors. Lack of employee training was the biggest employee barrier and lack of financial resources to devote to food safety was the biggest resource barrier.

In 2011, the U.S. Congress passed, and the president signed into law, the Food Safety Modernization Act (FSMA). A key regulation issued under the law is "Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Human Food". Among the requirements of the regulation is for food manufacturers to develop Hazard Analysis Risk-Based Preventive Control (HARPC) food safety plans. The underlying approach behind HARPC is close to that taken from globally accepted Hazard Analysis Critical Control Point (HACCP) principles. Both rely on experience and scientific data to proactively identify and evaluate process-specific food safety hazards and to develop appropriate, effective, and verifiable control measures. In this article, the evolution of the original HACCP principles towards HARPC is discussed and requirements within the FSMA regulation are summarized.

Background

The anti-money laundering efforts of European banks is being hamstrung by failures to manage key customer data and perform proper due diligence, regulators say

Banks’ failure to collect know-your-customer (KYC) data and their tendency to manage high-risk customer due diligence manually are hampering their anti-money laundering (AML) efforts, according to regulators in the United Kingdom. Further, many banks’ assessment of financial crime risk has also been found to be inadequate.

Real-life numbers tell a different story. Several independent studies have found that AML and KYC policies enable the authorities to recover less than 0.1% of criminal funds. AML efforts cost a hundred times these amounts, but more importantly, they start to threaten our basic right to privacy.

The instances of absurd demands, like the of a French man asked to justify the origin of €0.66 he wanted to deposit, are hardly raising any eyebrows anymore. Regulators face this ridicule without blinking, all while journalists and whistleblowers continue to expose billions of dollars laundered at the highest levels of the same institutions that put their regular clients through a bureaucratic nightmare.

The law must adapt to address the harms of cryptocounterfeiting. This is both ironic and inevitable. It is ironic because the prevention of crypto-counterfeiting is the entire point of a blockchain. Blockchain has been used for many ends for which it is not suited; the prevention of duplication of currency is the one thing that the system seemed to do well. Yet as bad acts by blockchain project organizers, hacks on blockchain projects like The DAO, or the use of exploits in infinite mint attacks proliferate, these supposedly invulnerable blockchain systems fall prey to inevitable bugs, intentional exploits, or unintended back doors in the code that permit the wrongful creation of extra tokens or the double spending of tokens. The reliance on purely technological solutions has also caused actors in the blockchain space to forgo developing legal instruments and theories that would provide governance should the worst happen. Crypto developers and communities must rediscover and develop legal constraints against bad behavior—standard in other virtual economy contexts like virtual worlds—such as EULAs and Terms of Use. They must then add the development of legal arguments around personal property and unjust enrichment to explain clearly to courts how crypto exploits steal value from individual token holders and from the entire community for whose benefit tokens are issued.

This will become increasingly important as crypto projects pass through the so-called recent crypto winter, an ongoing industry-wide downturn in value precisely caused by the lack of governance described in this Article.248 Wild-West-style arguments, such as the argument that all transactions executed by the software, even those obviously resulting from a hack, bug, or exploit, are valid, must be soundly rejected in the courts. If such arguments hold sway, crypto projects as a whole will simply fail. Given human greed and ingenuity, the failure of technological safeguards against crypto-counterfeiting is inevitable, and the law must adapt to enable project participants and other affected entities to move quickly to prevent and fix the damage exploits cause.

From examining the above three potential applications of blockchain technology, four main obstacles to wider adoption are identified.

a. Redundancy: Having every transaction recorded with every member of the network is a very costly redundancy whose only purpose it to remove intermediation. For any intermediary, whether financial or legal, there is no sense in adding this redundancy while remaining an intermediary. There is no good reason for a bank to share a record of all its transactions with all banks. There is also no legitimate reason for any bank to want to have complete records of other banks’ dealings with one another. This redundancy offers increased costs for no conceivable benefit.

Blockchain technology is supposed to prevent counterfeiting.15 In fact, what blockchain does is prevent counterfeiting by individual users through a very specific method. The much-vaunted combination of game theory and cryptography that lies at the center of the blockchain prevents a user from giving cryptocurrency to person B and person C at roughly the same time, and receiving goods or services from each, before reconciliation of the accounts with the network reveals the fraud.16 That is, blockchain has a pretty strong set of technological safeguards against the equivalent of writing bad checks.17

But all the discussion around double spending and how to stop it has stunted consideration of another inevitable set of problems.18 Blockchain software remains software. It is written by someone, it has bugs, and it can be exploited or hacked.19 The author of blockchain software can write it in such a way as to award themselves a large number of tokens. The entities that maintain control over the network can order it to generate tokens to permit them to dump tokens on the market before pulling the rug on the project. A hacker can find, create, or exploit a bug in the code to generate for themselves a large number of tokens. In these circumstances, the promised protection of blockchain networks against crypto-counterfeiting does not help at all.20 And, as the next section demonstrates, the social and legal protections of cryptocurrency projects are often less robust than they should be because of blockchain communities’ organizational precommitments.21

Food companies, including those specializing in food-grade ingredients, food contact materials and packaging as well as service providers, must develop HACCP programs using a “clean-sheet” approach rather than follow the established HACCP templates used for other specific food processor types. This approach should be based on the fit of their operations (e.g., high-risk protein, low-risk protein, liquid or dry ingredient, chemical, packaging or logistics) to existing HACCP models and templates and/or the unique aspects of the operational models and food risks.

Effective and workable approaches to mitigating the above issues should consider designing and customizing HACCP training to include product and unique process flow. To best accomplish this, several issues must be addressed, including the following:

Blog / The Importance of Blockchain Against Money Laundering

In the digital age, the fight against  has entered a new frontier, with blockchain technology emerging as a formidable ally. This decentralized ledger offers unparalleled transparency, security, and efficiency, making it an essential tool in the global effort to curb financial crimes. As illicit financial flows continue to challenge regulatory frameworks worldwide, understanding the role of blockchain in preventing money laundering is more crucial than ever.