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Discuss the legal risks associated with international business activity in China as described in the video. How might you mitigate those risks?

Counterfeiting in China
Most people in the world do not live in the U.S. Thus, whether we like it or not, most businesses involve an international aspect. But when these countries fail to police their markets, how can we avoid paying the price in real terms? Counterfeit goods involve just such an issue.

We're going to take a closer look tonight at the business of counterfeiting. It is a multi-billion dollar industry, including everything from software to soap. And China, which joined the World Trade Organization in December, is one of the worst offenders. Fake good produced in China cost foreign firms about 20 billion dollars a year in lost profits. Although the government in Beijing has taken some steps to crack down, the United States says the problem is as bad as ever. This is all about money. And here's ABC's Mark Litkie.

China today seems not only to make everything, it fakes just about everything as well. And Charles Schultz is a genuine fake buster, hired by international corporations to root out and help shut down the counterfeiters.
The tag is real, the product isn't.
If you buy this, you get wet.
If you buy this, you're going to get soaked.
Soaked, indeed.
Well, in the case of one particular consumer goods manufacturer, as much as 70 percent of the goods on the market are counterfeit.
7 out of 10 are fake.
7 out of 10 are phony.

Just across the border from Hong Kong, the town of Shenzhen has become a Mecca for cheap knock-offs. Small cameras under wraps, we found an amazing quantity and variety. Not only the latest DVDs, one dollar each, and the latest software at one-tenth the cost...
The newest Photoshop, the newest Windows.

But just about every consumer product available. The list is mind boggling. Most of the Yamaha motorbikes here, not made by Yamaha. A fourth of the Duracell and Energizer batteries are bogus. American Standard toilets, Head & Shoulders shampoo, Gillette razors, even old reliable Skippy peanut butter, and yes, fake Viagra. Almost all of dubious quality.

Anything from shampoo that might burn your head, batteries that only work for two days before they cut out, light bulbs that go out after two days...
Shoddy goods that sometimes make their way around the globe.
A five-hour drive out of Shanghai is the bustling city of Yiwu, which calls itself the "Capital of Small Commodities." In the merchandise trade it's better known by another name, "Counterfeit Central."

This is where international buyers come to purchase knock-offs in bulk. 40,000 wholesale shops, 100,000 productsâ?"up to 90 percent fake. And every day, tons of phony goods are shipped out, right under the noses of Chinese police. China does crack down occasionally. You may recall the scenes of pirated videos being crushed for the news cameras. But counterfeiting is now so big, China is reluctant to shut is down completely, since it provides millions of badly needed jobs.

Actually trying to put a stop to it, it's going to take some fundamental changes in society and the economy here.

In the meantime, the counterfeiters remain so brazen, one of the most popular markets for fakes still sits in the center of the Chinese capital, right across from the U.S. embassy. Mark Litkie, ABC News, Beijing.

So, do we buy the goods or not? We will probably still buy, but we must be more careful. Maybe our government can help. Here are some video follow-up questions to discuss in class.

What is a counterfeit good? What should we do for countries that don't handle the counterfeit goods problem? What does "counterfeit central" mean?

Why do we do business with China?

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Solution Preview

What is a counterfeit good?
Counterfeit goods are imitation products offered for sale. These are called knockouts. These goods are illegal. Currently it is estimated that $200 billion trade is counterfeit.
What should we do for countries that don't handle the counterfeit goods problem?
There can be some action taken on the diplomatic level. However, it is possible to reduce the impact of Counterfeit goods by taking legal steps and being vigilant.
What does "counterfeit central" mean?
Counterfeit central is the city of Yiwu which is five hour drive from Shanghai. This place is famous for an astonishing variety of Counterfeit goods. This is the place where international buyers come to buy Counterfeit products in bulk.
Why do we do business with China?
We do business with China because China offers a large market for our products. In addition, China offers opportunities for business locations where low cost manufacturing facilities can be set up. It is the lure of low cost production centers and a large consumer market that induces us ...

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