It is a pleasure to be here with Chairman Goodlatte and Undersecretary Dudas to develop a strategy on one of the most pressing business issues facing the consumer products industry. We look forward to being an active partner with the Chamber in this new and necessary initiative.

Much has already been said this morning about the magnitude of the counterfeiting problem and the urgent need to find appropriate solutions to address it.

So, in my short time here, I would like to amplify upon Jim’s introductory remarks and address the particular challenges that face the branded consumer products industry when dealing with counterfeiting. I’ll also offer some thoughts as to how to tailor our message in a manner that raises awareness about the need to address product counterfeiting without endangering consumer confidence in branded products.

The Grocery Manufacturers of America is the world’s larges association of food, beverage and consumer product manufacturers. Many of our companies have worked for centuries to build brands and consumer loyalty for their products.

This consumer trust is immediately jeopardized by fake products, since the purchased products are inferior and often dangerous. First time buyers may never purchase the products again. Other customers may turn to different manufacturers. This violation of consumer trust is a real threat to operations within our companies.

The bottom line impact of counterfeiting is also very real. In some countries, nearly 15-20 percent of sales are lost to counterfeit products. Moreover, our companies are increasingly worried about the legal liability associated with counterfeiting. Customers will sue manufacturers whom they believe have not adequately secured their supply chain.

More important though, is the direct impact on the health and safety of our customers. Although there is insufficient quantitative data on the perilous impact of counterfeits, as you have heard earlier, children and adults world wide have suffered rashes, illness, blindness and even death from counterfeit products. As counterfeiters continue to attack more and more famous brands, the threat to consumers has increased. Safeguarding consumer health and safety must be our number one concern when we consider anti-counterfeiting strategies.

For all these reasons, we absolutely agree with the Chambers’ assessment that we need to re-brand counterfeiting as a significant threat to the US economy, businesses and consumers. However, we must be careful that our efforts to raise awareness about the growing threat of counterfeiting do not unduly frighten our customers about a hazard that they can not control. We are concerned that unfettered information about the abundance of fakes could lead to diminished brand loyalty and consumer trust—the very assets we are trying to safeguard.

We believe that we need a carefully targeted strategy to educate stakeholders on the counterfeiting issue. Our message to the decision makers—the lawmakers and government officials—should be plain. We need better enforcement of existing intellectual property rules and we need help in convincing countries around the world that it is in their interest to address the counterfeiting issue. We should not be afraid to educate governments about the harm that fake products do to their own citizens.

Our message to consumers, however, must be more nuanced and should be targeted toward those consumers that knowingly purchase the fake luxury items. We need to find messages that reduce consumer complicity in counterfeiting by demonstrating the larger impact of their seemingly small purchases. In countries where counterfeiting is rampant, we also need to help educate our customers about methods to find the genuine article rather than simply alerting them to the possibility of fakes. For example, many of our companies have instituted Certified Retailer Programs that provide a clear signal to consumers that they are buying the real thing.

I’d also like to address broader strategy for combating counterfeiting globally, since for many of our companies the bigger problem lies outside our borders. We all know that enforcement of intellectual property laws is key, but how do we promote enforcement? As associations, we are naturally inclined to turn directly to our governments for help in addressing the counterfeiting problem. And, we have been very pleased that USTR and the US Commerce Department have recently responded so well to our requests for direct intervention around the world, and particularly in China. We believe that the increased pressure on China over the last few months has yielded tangible benefits in terms of strengthened penalties for counterfeiters and a renewed commitment at the highest levels of the Chinese government to address the counterfeiting issue.

As important as this direct government to government intervention is though, it is not, and can not be, the only approach we take. This top down approach has some limits, especially for companies that manufacture abroad. Because these companies must attempt to maintain good relations with regulators, heightened pressure from the United States can backfire with retribution against US companies. In addition, in many countries around the world, counterfeiting is an entrenched, local problem. Local law enforcement officials often turn a blind eye to counterfeiting, and in some cases, profit directly from the sale of fakes. So, while the top officials may be committed to addressing the counterfeit problem, they are limited in their ability to influence local activities.

What is needed, therefore, is a long term solution that creates incentives for countries to want to address the counterfeiting problem on their own. This is why GMA supports the collection and dissemination of the economic impact of counterfeiting within countries that are the worst offenders. Producing meaningful data on lost tax revenues, as well as on the magnitude of counterfeiting activities involving public health and safety risks, would help to drive home the fact that counterfeiting is everyone’s problem, not just the trademark holders’.

To collect this data on a global scale, we believe that the Organization of Economic and Cooperation and Development should update their 1998 study on the impact of counterfeiting with new emphasis on the negative economic impact on countries that harbor counterfeiting activities. The OECD has also effectively confronted other trans-border criminal activities such as money laundering, bribery and corruption and should be considered a resource in the development of new model law to combat counterfeiting. GMA is working closely with the US Council for International Business and the Trans Atlantic Business Dialogue to advance further work by the OECD and hope that the Chamber will also endorse this approach as part of the broader international strategy.

We believe our approach towards counterfeit prevention fit well with this new Chamber initiative and we are very pleased to lend our support to the campaign. I look forward to our discussions today as we develop new tools to combat this growing threat to the US economy, businesses and consumers.

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