Close connection between forgery and labor exploitation

Product piracy is a problem that has always plagued the fashion industry. It has a serious impact on business and is linked to labor exploitation. A new joint study by the Organization for Economic Cooperation and Development (OECD) and the European Union Intellectual Property Office (EUIPO) shows that the illegal trade in counterfeit goods is closely linked to labor exploitation. These include forced labor, child labor and unsafe working conditions.

The study, titled ‘From Imitations to Forced Labor: Evidence on the Link Between the Illicit Counterfeit Trade and Labor Exploitation’, shows that the countries most commonly identified as sources of counterfeit products tend to have weaker labor market conditions. These include inadequate protection, longer working hours and a higher number of fatal workplace accidents.

The findings show that weak governance, limited regulatory enforcement and social vulnerability create an environment in which both counterfeiting and labor abuses thrive, the EUIPO said in a statement.

Using global data on customs seizures and labor statistics, the report shows that exploitation reduces production costs and risks for criminal actors. This makes illegal activities more profitable. In this context, forced labor and the shadow economy emerge as structural factors in the production and distribution of counterfeits rather than as isolated by-products.

In detail, the study used several analytical approaches to establish the connection between counterfeiting and labor exploitation. The investigation began with a review of relevant literature documenting links between organized crime and labor abuse. The quantitative analysis combines counterfeit trade indicators with labor market data. The data on counterfeit products is based on customs seizures from the World Customs Organization, the European Commission and the US authorities. The labor market data comes from the databases of the International Labor Organization (ILO) and the World Bank.

Forced labor and child labor are more widespread in countries where counterfeits originate

The analysis first examined the correlations between various indicators of labor exploitation and anti-counterfeiting measures. Indicators of labor exploitation include forced labor; child labor; Occupational accidents and informal employment. Anti-counterfeiting measures include frequency of seizures; the estimated value of the counterfeit goods and the propensity to export counterfeits. Econometric regression models were then used to test whether these relationships remained statistically significant. Variables such as GDP per capita; the export volume; the minimum wage; the rule of law; social security and the level of poverty are taken into account.

Countries identified as sources of counterfeit goods have higher levels of forced labor, child labor, informal employment and fatal workplace accidents. This also includes dangerous forms of child labor. Countries with weaker labor protections show greater vulnerability to illegal trafficking networks. These include lower union membership and limited collective bargaining coverage.

Evidence from authorities confirms that counterfeiting is often supported by abusive labor practices to cut costs and maximize illegal profits. Criminal groups exploit vulnerable workers in various stages of illegal supply chains. Examples include illegal factories without contracts; Warehouses where migrant workers are locked up overnight and small workshops where children assemble counterfeit products.

The study calls for more integrated policy measures. These include greater regulation of the labor market combined with improved trade and customs controls; better data collection and closer cooperation between labor authorities, customs and law enforcement authorities. According to the report, combating labor exploitation is essential. It not only protects the rights of workers, but also dismantles the criminal networks behind the global trade in counterfeit goods.

Solutions to improve the situation

Piracy has often been described as an intellectual property and trade enforcement issue. However, the results of this report show that this is also a labor market problem. Economies where forced labor is most prevalent are also consistently those with the most intensive counterfeit trafficking. This relationship holds even after controlling for income levels, trade liberalization and institutional quality. In other words, the data suggests that labor exploitation and the production of counterfeit goods tend to occur in the same favorable contexts. These are characterized by low levels of occupational safety and limited rule of law.

The connection found is not a coincidence. Counterfeit manufacturing thrives where human labor is cheap, unprotected and easily replaceable. In such contexts, coercion or extreme forms of vulnerability replace productivity or innovation as competitive factors. Econometric models show that forced labor is one of the strongest predictors of counterfeit export intensity.

The same patterns emerge with high shadow economies, which together form a structural ecosystem in which illicit manufacturing can flourish. Although informal employment is not included in the final model presented here, examination of several alternative specifications suggests a significant association. This lies between the number of counterfeit goods confiscated per country of origin and the degree of the shadow economy. In particular, the results suggest that informal employment plays an important role in promoting wider illegal economic activity, which is associated with various dimensions of low labor standards.

Beyond the numbers, these results reflect the evidence collected by control authorities. These include the existence of illegal factories without contracts; Warehouses where migrant workers are locked up overnight, or small workshops where children assemble counterfeit products. The quantitative analysis confirms that these are not isolated cases. Rather, they are symptoms of broader economic links between criminal trafficking and labor abuse.

Measures must start with the profitability of counterfeits

Recognizing this connection changes the way policymakers assess risk. Measures to combat illicit trade must also address the underlying labor and social dynamics that make counterfeiting profitable. This is in addition to strengthening border controls and other intellectual property protection measures. Likewise, initiatives to eliminate forced labor must take into account trade and supply chain dimensions. These maintain the demand for cheap and unregulated production.

This convergence has three important implications. First, labor rights and trade integrity strengthen each other: strengthening one promotes the other. Protecting workers from modern slavery helps eliminate one of the key cost advantages that supports illegal production. Conversely, dismantling criminal trafficking networks helps create a level playing field for employers and employees who abide by laws and labor standards.

Data and law enforcement must evolve together

Data and law enforcement must evolve together. Customs and labor authorities often work in parallel, although their information complements each other. Integrating labor risk indicators into customs risk profiling systems could help identify shipments or production centers at higher risk of illegality. These indicators include the prevalence of forced labor or the shadow economy. Likewise, labor inspection strategies could benefit from commercial intelligence about suspicious actors or supply chains.

The strategic importance of social protection: Econometric data shows that the counterfeit trade arises where the rule of law, including labor law, is undermined. This suggests that social policy does not only have a redistributive effect. It is a preventive tool against illegal trade and the associated exploitation.

Based on these findings, several general policy directions emerge, such as strengthening labor market governance and inspections. Effective inspection systems are the first line of defense. They must be able to uncover both forced labor and links to illegal production.

Labor law parameters as criteria for risky shipments

The risk of labor rights violations should be integrated into the enforcement of trade regulations. Customs authorities could include labor law parameters in the criteria for targeted inspection of high-risk shipments. This is particularly true in sectors known for producing counterfeits, such as textiles, footwear and electronics.

Responsible entrepreneurial behavior should be promoted. The OECD Due Diligence Guidelines provide a framework to identify, assess and mitigate risks of forced labor in supply chains.

Certification of ‘clean’ trading zones should be expanded. The OECD’s certification system for free trade zones shows how a trade integrity framework can simultaneously strengthen controls against illicit trade and promote compliance with labor standards.

Investing in data and transparency

Collaborating on data is critical to monitoring progress and refining risk assessment.

The proposed paths also include promoting specific training for investigators. Targeted courses will be developed to recognize and report signs of labor exploitation in anti-counterfeiting operations.

This report shows that the link between counterfeiting and labor exploitation is real, measurable and relevant to public policy. It requires a more integrated approach that treats trade integrity, decent work and fair competition as parts of a single policy agenda. Ending forced labor is not just a moral imperative. It is also an economic imperative to protect legitimate trade and ensure that global markets reward compliance rather than crime.