Fake Auto Parts Have Real Consequences

posted by Pete on October 24th, 2006

from the offices of:
CARL LEVIN UNITED STATES SENATOR (MICHIGAN)
FOR IMMEDIATE RELEASE
October 6, 2006 Contact: Press Office
Phone: 202.228.3685

When it comes to intellectual property theft and piracy, most Americans think of movies and high-end handbags- but what if the brakes on your car were fake? The FBI estimates that counterfeiting costs U.S. businesses $200 to $250 billion annually, about $12 billion of which comes from losses in our domestic auto parts industry. Counterfeiting is a serious problem with serious consequences here in Michigan and across the country, and it’s time for real action to stop it.

China is far and away the largest source of intellectual property theft and counterfeiting. Counterfeits constitute an alarming 15 to 20 percent of all products made in China. This includes about three-quarters, or $9 billion, of what is lost each year in the U.S. auto parts industry. And these illegal knock-offs are not exclusively sold abroad- the Chinese were responsible for 70 percent of all counterfeit products seized by U.S. Customs and Border Protection in 2003.

Virtually every automotive part has turned up in the counterfeit trade, including windshield glass, brake fluid, brakes, headlights, taillights, emissions components, tires, belts, hoses, alternators, and structural, sheet metal and suspension parts. The auto parts industry has turned up such a variety of fake parts being sold in the United States that entire cars can be built. In fact, that was precisely what was discovered recently in China- an entire car was copied, manufactured and sold not as a Chevy but as a “Chery QQ,” with plans for export to the U.S.

Illegal trade in counterfeits is a substantial and growing threat to the competitiveness of the U.S. automotive industry. By Federal Trade Commission estimates, the auto industry could hire an additional 250,000 American workers if counterfeit parts were eliminated. Not only do knock-off parts mean fewer jobs and lost sales in the U.S., they also hurt American manufacturers’ efforts to gain a foothold in the rapidly expanding Chinese market.

There is another important—and potentially dangerous—part of this problem. With counterfeit auto parts, the concern goes beyond monetary losses. Fake parts are cheaper for a reason- they cut corners and use poor quality materials, and the consumer pays the price in the end. It is frightening to learn, for instance, that authorities have found counterfeit brakes made of nothing more than compressed wood and grass. While these products often look remarkably similar to the real thing, they undermine U.S. safety standards, hurt the reputations of our domestic manufacturers and put each of us at risk.

Counterfeiting is a problem that needs to be addressed quickly and decisively for the health of our domestic auto and auto parts industries and for the safety of consumers. The Department of Justice has long been unwilling to take action to fix this problem because it is somehow perceived as not serious enough. They have been unable to identify a single pending case against auto parts counterfeiters. To fill this costly gap, the U.S. auto industry has been working to educate suppliers, distributors and employees on how to detect counterfeit parts. Their efforts, however, are not enough. What we need is a serious effort by the Bush Administration to enforce anti-piracy laws.

The first step in an aggressive enforcement effort must be filing a case against China at the World Trade Organization (WTO) for their failure to protect intellectual property. In April of 2005, U.S. Trade Representative Susan Schwab placed China on a special watch list for their failure to protect U.S. intellectual property, yet nothing has changed. It is time to stop merely putting China on lists and start taking real action, such as placing restrictions on Chinese products. In addition, the Justice Department must aggressively prosecute those found with counterfeit auto parts here in the United States. We take the counterfeiting of money very seriously- why do we continue to ignore auto parts counterfeiting?

Recently, Trade Representative Schwab requested, along with the European Union and Canada, that a WTO panel be established to rule on a dispute over Chinese tax regulations that discriminate against imported auto parts. This long overdue step will hopefully bring us closer to a two-way street in trade with China, but a great deal still needs to be done. Until we stop the counterfeit parts that are flooding both the Chinese and American markets, U.S. parts will continue to struggle to gain a foothold in the Chinese auto market.

Counterfeiting has exploded in recent years across many industries to become a serious threat to the competitiveness of the U.S. economy. In an increasingly global economy it is essential that American manufacturers not have their products stolen out from under them, and nowhere is this more important than in our domestic auto parts industry. The Bush Administration needs to stand up for American industry and fight this growing economic crime.
Source:
http://www.senate.gov/~levin/newsroom/release.cfm?id=264528