Prepared Statement of The Honorable Joe Barton

Product Counterfeiting: How Fakes Are Undermining U.S. Jobs, Innovation, and Consumer Safety

Subcommittee on Commerce, Trade, and Consumer Protection
June 15, 2005

Thank You, Chairman Stearns, for holding this important hearing today. This subcommittee had a hearing last week on U.S.-China trade issues, and particularly intellectual property issues. This hearing on how counterfeiting hurts the American economy and American consumers is a natural extension of that discussion.

Intellectual property (IP) is one of our country's biggest exports. From movies and music to pharmaceuticals and manufactured goods, our innovation, creativity, and entrepreneurship are some of our most important cultural and economic strengths. Given our growing trade deficit-not to mention other concerns such as currency manipulation-it is increasingly important that we protect the economic rights of our inventors, engineers, and designers. In that spirit, I would like to commend the Administration for its interagency "STOP! Initiative," and specifically, the United States Trade Representative for recently placing China on the Special 301 Priority Watch List because of the rampant rate of counterfeiting and piracy in that country. Last year, more than 66% of counterfeit goods seized by U.S. Customs were traced to China. I trust that the administration will continue to keep a vigilant eye on this issue in China and elsewhere.

The growth of the global market for illegal goods has grown exponentially in the last 20 years, estimated now to be more than $600 billion dollars a year. More than one third of that amount is in fake American goods, which is estimated to cost the U.S. economy over ¾ of a million jobs. We all enjoy cheaper goods, but nobody wants to lose U.S. jobs. We expect our trade partners to enforce international law with regard to copyrights, patents and trademarks in order to prevent these losses. Importantly, the members of the World Trade Organization and signatories to the Trade-Related Aspects of Intellectual Property Agreement ("TRIPs Agreement")-including the U.S., China, and India-agree to abide by minimum standards for IP protection, including requiring enforcement procedures for any IP infringement. These agreements need to be adhered to and enforced.

Regardless of whether counterfeit products come from China, Russia, Ukraine, Brazil, India, or elsewhere, there is significant economic impact to American companies. However, there is sometimes less discussion of an equally important concern regarding the safety of some of these products for consumers. When fake automobile brake pads or counterfeited airline parts are thought to be genuine, they are installed and presumed safe. When this happens, all of us are at risk. Furthermore, counterfeit pharmaceuticals-which may account for as much as 60% of the market in some countries-frequently do not have the proper ingredients or the proper amounts of those ingredients, rendering them at the very least ineffective, and at worst potentially lethal. Our country has an economic, regulatory, and legal system that ensures a high degree of safety and accountability. When products come into this country that do not abide by the same rules, the entire system is undermined. This must not be allowed to continue as it does.

Simply put, Mr. Chairman, this is a serious concern for our country. Our economy relies heavily on our ability to innovate and improve American products for sale here and around the world. If the economic incentives to "build a better mousetrap" are eroded, it could have devastating effects on our economy. Additionally, the American people expect their government to protect them against unsafe products whatever they may be. We have a responsibility to keep dangerous counterfeits out of the market.

I want to thank the Chairman for putting this panel together to help us understand the extent of these problems and the implications for American industries and consumers. I look forward to their testimony.

I yield back the balance of my time.

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