Building trust in Asia’s digital trade revolution

Author: Seth Hays, International Trademark Association

Trade in counterfeit goods is approximately 2.5 per cent of global trade (US$461 billion) — and over 80 per cent of these counterfeits are manufactured or traded in the Asia Pacific. Digital trade in Southeast Asia alone will grow to US$1 trillion by 2030. But as trade moves online and e-commerce grows, so too does trade in counterfeit goods.

What is unclear is the scope of this problem and the extent to which e-commerce counterfeits will negatively impact consumers and business innovation. To better manage digital trade, Asia Pacific countries should adopt smart measures to prevent the trade in counterfeit goods, fostering trust in e-commerce.

The Asia Pacific is the focus of the world’s most innovative and expansive trade agreements. The high-standard Comprehensive Progressive Trans-Pacific Partnership (CPTPP) includes seven countries in the Asia Pacific, while the broad reach of the Regional Comprehensive Partnership (RCEP) captures 30 per cent of global GDP and 15 Asia Pacific economies. Innovative agreements, such as the Digital Economy Partnership Agreement and the Singapore–Australia Digital Economy Agreement signed by Singapore, Australia and New Zealand, among others, are serving as models for a new form of trade agreement.

Asia Pacific countries are even joining ‘softer’ projects that are not considered ‘hard’ trade agreements, such as China’s Digital Silk Road or Washington’s Indo-Pacific Economic Framework (IPEF). What all these agreements have in common are provisions on digital trade. This makes sense — the future of trade in the region and the world will necessarily have a digital footprint.

The sale of ‘fake’ products and services online is the fastest growing form of intellectual property infringement. They are driven by the increase in e-commerce globally. The United Nations Office of Drugs and Crime reported in 2019 that in Southeast Asia, ‘the distribution of counterfeit goods through the internet and e-commerce is rendering what was once a low-risk, high-profit cross-border crime into an even lower-risk and higher-profit borderless one, providing counterfeiters (as well as digital pirates) with a powerful global platform to market and distribute their goods to greater numbers of potential consumers at minimal expense’.

The pandemic took this trend up a notch, especially in the Asia Pacific. The South Korean Intellectual Property Office recorded a near doubling of reported online counterfeit sales in 2021, while the Singapore Consumer Association cited a near tripling of reported fake online sales in 2020. Tackling this problem involves awareness-raising and actions by all stakeholders — consumers, trade associations, brands, platforms and governments.

The digital divide — the gap between those with and without access to the Internet and telecommunications — in the Asia Pacific is well documented. But the question remains as to whether increased access to smart phones and the reliance on e-commerce will create a new digital divide in which price-sensitive and vulnerable consumers are targeted by counterfeit traders online.

Clean online marketplaces should not only be accessible to those wealthy consumers willing to pay a premium, but also to those without the funds to protect themselves against counterfeit goods. Governments around the Asia Pacific should enact smart policies, such as conducting public awareness campaigns or employing trademark recordal systems at customs to better identify and stop fakes at the border, to build reliable and trustworthy digital trade that is free from counterfeit goods and lead the world in eliminating fakes online.

The digital economy agreements that are emerging around the region include important chapters on online consumer protection. They usually include specific mention of fraud prevention, refunds for faulty products and avenues through which consumers can resolve disputes with online platforms and sellers. These provisions should go further by citing the purchase and sale of counterfeit goods that infringe trademark rights and allow brand owners to take legal action against sellers of fakes online.

Other stakeholders need to do their part. Asia’s tech companies are some of the world’s largest and fastest growing. Industry standards will play an important role in building the best-in-class products and services of the future. The International Organization for Standardization (ISO) — the globally recognised international standards setting organisation — includes the secretariat for the technical committee ISO/TC 321 on e-commerce standards based in China. Future ISO standards for e-commerce must set a high bar for preventing the sale of fake products and services online.

Private businesses — including sellers, platforms and brands — need to adopt best practices to combat the sale of fake goods online. The International Trademark Association published a set of recommendations for companies and intermediaries to fight counterfeits online. These include knowing your customer, proactively taking down fake listings by utilising AI and technology, and preventing repeated listings from the same sellers operating in bad faith.

The pieces are in place for the continued acceleration of digital commerce in the Asia Pacific, but its success is not guaranteed. As innovators bring new products and services to consumers, they will need to rely on established brands and reliable e-commerce platforms to help build trust in these new and unfamiliar digital ecosystems.

If consumers cannot make their purchasing decisions free from doubt about the quality and safety of these products and services, trade in the region will be stuck in the last century.

Seth Hays is the Chief Representative of the International Trademark Association in the Asia Pacific. He was a visiting scholar at the East–West Center and the Korea Foundation researching US–South Korea cooperation on intellectual property in Southeast Asia.

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