Ambassador Baucus’s Remarks on IACC Conference

Keynote Remarks

IACC Spring Conference

May 19, 2016

Good morning, everyone!

Thank you Danny for that wonderful introduction.  It is great to be here!

Tim Cook once said, “You can focus on things that are barriers, or you can focus on scaling the wall or redefining the problem.”

Developing better solutions.  That’s the only constructive way forward.

Too often we get stuck complaining about problems.   We do little more than talk about how big the walls have become.

You represent many of the world’s most well-known brands.

Sportswear from Nike, Under Armour, and Adidas.

Personal electronics from Apple, Microsoft, and Dolby.

Life-saving drugs from Pfizer, Gilead, and Celgene.

Brands like these are ones customers everywhere know and trust.

And as you know, protecting these brands is a tough job.

Setting the Scene

I am not here to question the Chinese government’s desire to fight counterfeits.

But I am here today to say that what the Chinese government is doing is not enough.

That’s why today we need to start finding better solutions to a challenge we all face: global counterfeiting.

That’s why we’re all here.

 

The evidence is undeniable.

China is the leading haven for counterfeiters — the thieves who profit off the creativity and good will of others.

These counterfeiters introduce unsafe products into the market, and into our homes.  They don’t care about the damage they cause.  And they are moving online.

Their actions hurt consumers in the United States, in China, and across the globe.

There is a lot at stake.  Experts estimate that fake products make up more than $104 billion of the $1.67 trillion in global online sales.

It’s not just about the money.

Fakes are dangerous.

Interpol estimates that fake medicines kill more than one million people a year.

And it isn’t just fake drugs.

Fake hair dryers cause fires.

Counterfeit perfume and cologne can contain poisonous chemicals like cyanide.

But you know what’s really scary?

One bad actor on the internet can wreak havoc worldwide.  Catching these guys is tough.

Yesterday’s solutions that worked in corner stores don’t work in cyberspace.

China is Key

But this isn’t about blaming — it is about facing the facts.

China is the world’s largest e-commerce market.

Last year, online retail sales to Chinese consumers reached an estimated $672 billion.  That’s forty percent of all global online retail sales!

By 2020, China’s e-commerce market is expected to hit $1.1 trillion.

Whether they’re on their phones, tablets, or computers, approximately 380 million Chinese consumers are shopping online.

Within ten years, more than 50% of shopping in China will be online.

And what is done — or not done — in China will have global ramifications.

Eighty-eight percent of the fakes seized at U.S. borders come from greater China — more than $1.1 billion in fake goods last year alone.

What is seized is just a small fraction of the fakes coming in.

An OECD study last month also found that nearly all of the fakes captured by customs offices around the world came from China.

Based on these customs numbers, China is the source of an estimated $390 billion dollars of fakes sold around the world.

We are talking about a big problem.

But great challenges like this can spur great solutions.  I know that the United States, China, and our companies can get this right.

Because we have to.

Fighting this problem is a top priority for me and for all of us who care about protecting consumers and protecting IPR.

China can and must be a strong partner in this fight.

Creating the right laws and business solutions won’t just reduce fakes within China’s borders.  It will reduce global counterfeiting.

Maintaining the status quo, on the other hand, means the problem will only get worse.

That’s why we need to get this right.  It is time to step up and lead.

Leading Businesses and Governments

How do we do that?  It begins with a strong foundation — laws, policies, enforcement.

China’s government needs to strengthen this foundation.  Because its reputation is on the line.

So are the reputations of many of China’s fastest-growing businesses.

I’ve discussed the importance of IPR with both Vice Premier Wang Yang and Premier Li Keqiang. And they agree: we owe it to our people and our companies to protect intellectual property.

No one is going to do this for us.

At last year’s U.S.-China Joint Commission on Commerce and Trade, our highest-level exchange to address the concerns of our businesses, we set the stage for progress.

We committed to working together to address the challenges caused by e-commerce.

It is time to find new and effective solutions.

But industry leaders must also continue to work together to develop business-oriented solutions.

 

If you don’t do it, the government will.

And you might not like the results.

Calling Brands to Action

You have practical experience fighting fakes.  You know what works, and what doesn’t.

You can develop recommendations that direct the future of our efforts.

What will these look like?

First, as much as possible, we need to stop fakes before they ever reach the customer.

This means better screening to prevent fake products from being listed for sale.

Online markets where goods are sold have the know-how.  They should propose ways to use “big data” to spot and stop fakes.

We also need stronger background checks of those who want to sell products online.

 

We need more effective ways to remove fakes that get through.

Getting Alibaba, JD.com, or Amazon-China the information they need to remove fakes quickly should be easy.

Brand owners, you know how your product is counterfeited better than anyone.  Share these trends with online markets.

Finally, we need to make it more difficult for the bad guys to make money.

Calling Platforms to Action

But the companies that connect sellers to customers must also be constructive partners.

Counterfeiters are taking advantage of the websites where those 380 million people shop online in China.

This needs to change.

No e-commerce market can be 100% free of fakes.

But each market needs the right solutions that work for it and that produce real results.

Scott Cook, the co-founder of Intuit, once said, “A brand is no longer what we tell the consumer it is — it is what consumers tell each other it is.”

E-commerce websites are brands too.

And consumers are telling each other where to get the real thing, and where to get fakes.

I know this is why many of you don’t trust Chinese           e-commerce markets.

I’ve talked with leaders from a number of these companies in China.

Many have told me repeatedly they want their brands to meet the highest standards of integrity.

My message to them and to everyone is simple:

The time for talk is over.

If you want to prove you are not part of the global trade in counterfeits, show the steps you are taking to get them off your sites.

Make real changes.

To rebuild trust and prove you’re part of the solution; show us you’ve shut the door — for good.

And that call to action goes for everyone.

In a few minutes, you are going to hear from Mike Evans of Alibaba.  Mike and Jack Ma have told me they don’t want Alibaba’s name to be synonymous with fakes.

So Alibaba and everyone in this room today have an important decision to make.

Will you work together to put in place new solutions?

Will you lead by example?

What you and the others in this room decide here today can shape the future not just of IACC, but of global efforts to fight counterfeiting.

Conclusion

The key is cooperation.

I spent more than 35 years in the U.S. Senate.  And I know cooperating isn’t always easy.

But without it, we couldn’t have led the passage of free trade agreements with eleven trading partners.

We couldn’t have led efforts that opened the way for China’s membership in the World Trade Organization.  Or expanded health care coverage to millions of Americans.

And without cooperation, we cannot win the fight against counterfeiting.

At the end of this year, I will bring together industry leaders from both sides of this equation to share their most effective solutions.

We can’t solve the global scourge of counterfeiting overnight.

But we can start working toward solutions and building trust – today.

Thank you.