China's economic impact on Bolivia - Essay Example

Module China’s Economic Impact on Bolivia China’s rapid economic development has allowed it to be able to increasingly reach foreign markets with its products. China has managed to procure trade agreements with numerous nations, the majority of which are developing nations in Asia, Africa, and Latin America. In many cases, trading agreements with nations such as Bolivia, in Latin America, are not as productive for the country as they are for China. China’s business foray into Bolivia, for example, has resulted in the mass flooding of the nation with counterfeit products. Bolivia is Latin America’s poorest nation, while China is considered by many to be the second richest nation in the world. It is not considered unusual for China to exert its economical might in ensuring that it gets more profit from its trade relations with a poorer nation; moreover, the level of counterfeit China-made products flooding Bolivia’s market have made the trade arrangement a weight that is hurting the Bolivian markets. Policies in China that do not Curb Counterfeiting The competition brought by counterfeit Chinese products has served to impoverish the Bolivian economy whose products are hardly able to compete in the local economy, let alone the international market. The production of counterfeit products is nothing new. Every nation on earth has companies or firms that produce counterfeit products. Moreover, most nations do not product them at the rate and quantity that China does. This is made worse by the fact that the export rules used by the Chinese government actually support the export of counterfeit products. China has always had huge local, individual, and state streams of revenue that come from knock-off products. In order to comply with the newly instituted rules of the World Trade Organization, China made alterations to its foreign trade rules in 2003 so as to do away with the control that government-owned trading corporations had on all exports. Prior to this, all of the country’s exports had to go through state-owned firms. This means that counterfeit product firms had to pass through state-approved brokers and distributors to allow their fake goods into the international market. The rules that China signed to in 2003 effectively meant that every counterfeiter had the opportunity to be the first-rate exporter of its own fake products. There are other factors that contributed to the explosion of counterfeiting practice in China. These include the ease of technology transfer, and relaxed foreign trade regulations. There are also local factors such as the lack of enforcement of the law when Chinese companies produce counterfeits, an economic explosion experienced in small communities, and the existence of organized crime syndicates that deal in the counterfeits (Zhonghua Press 29). Organized crime syndicates play a major role in ensuring that counterfeit products reach international markets. The presence of the internet has also served to further develop the production of counterfeit products. Many people today, particularly those who have extra money to spend on secondary needs, often shop on the internet. Counterfeit products usually sell for much less than authentic products. This means that consumers from different parts of the globe can elect to purchase cheap products from China through the internet. This fact alone has been one of the main reasons for the explosion of the counterfeiting industry in China. In a sense, China’s advantage lies in the fact that its production sector is quite colossal and is also highly mechanized. China’s currency is also undervalued in relation to the dollar and it has readily available access to cheap labor. This makes China much stronger than a nation such as Bolivia whose manufacturing sector is much smaller in size. Bolivia also experiences political unrest on a much more common basis than China and its trade deficit with China keeps growing. This makes it easy for Chinese counterfeit products to flood the Bolivian market. However, it must also be admitted that the bias of the local population against the locally made products also serves to weaken the local market. In Bolivia, there are many counterfeit products from China such as televisions, DVD players, and other technical gadgets. Moreover, luxury products such as hair gels and hair shampoos from developed nations, as well as sodas and energy drinks that are popular in places such as America are the products that generate the most profit for Chinese counterfeiters. Products that are viewed as being luxury products from developed nations are quickly gaining markets in developing nations such as Bolivia. This could partly be blamed on the media which depicts the lifestyles of people living in developed nations as being the best way to live. This trend has not just affected Bolivia alone, but also other developing nations across Africa, Latin America, and Asia. Many people, particularly the poor in developing nations, are eager to own something that is perceived to be the province of the rich in today’s consumerist society. For individuals who are able to afford high cost shampoos and hair gels, the rapidly changing trends mean that the hair care products that are popular today may not be popular tomorrow. Cheap counterfeit products therefore provide an acceptable option for them since they pay as little as possible to get products that are being touted as being the best at present. In Bolivia, most citizens cannot afford to buy the best and most effective shampoos or hair gels that the media is constantly repeating is the most effective for women, or claims turns women into models. Neither can people afford to buy expensive energy drinks and sodas on a daily basis. With the media insisting that these are ‘must have’ products, the thriving of the counterfeiting industry is the natural outcome. There is a different perspective to the story of counterfeits. Many luxury brands do not openly seek to eliminate counterfeit products (Han, Suk, and Chung). Moreover, they consider counterfeit copies of their products as a type of viral marketing. In the past, luxury firms have stated that going after counterfeiters would negatively affect their profits because it would result in ‘brand confusion’ (Han, Suk, and Chung). Some counterfeiters are quite adept at creating near similar products. Today’s sophisticated technologies allow counterfeiters of products such as hair gels and shampoos to create convincing products and packages. In such cases, only a chemical test- something that is not common in Bolivia- would allow for government employed anti-counterfeiting agents to ensure if a product is a counterfeit or an original. The acceptance of counterfeit shampoos and hair gels is evident in places such as La Paz in Bolivia. Numerous shoppers fill the city’s up-market stall to purchase hair products that are said to be the daily regimen of the world’s most celebrated supermodels and actresses (Priy 57). From the odd packaging, it is obvious that these products are illegal versions of the real products, but the consumers do not appear to be fazed by this fact. Bolivians who ridicule the stratospheric price-tags on authentic luxury products have the opportunity to dispel their disappointment by purchasing replicas for a tiny proportion of the price. This counterfeit culture could be said to be one of the more popular pastimes of Bolivia’s young adults. How Chinese Counterfeit Products are affecting the Bolivian Market In many developing nations, counterfeiting is considered to be the result of the ignorance of unschooled people who want to make money by using products whose production they do not understand. There are Bolivian counterfeiters who actually add substances or water to counterfeit energy drinks and sodas so that they may make more profit. For the most part, these individuals are illiterate and ignorant. However, the larger percentage of counterfeiters who operate in the international market actually add harmful substances or dilute products such as energy drinks and sodas in order to make profits. The addition of elements into food stuff such as an energy drink can have serious health implications for consumers. For example, many Chinese counterfeiters add unclean water to sodas and energy drinks before marketing them. Also, Chinese counterfeit shampoos and hair gels are usually not made properly. They do not contain the right amounts of filters and other products which are used in moderation by genuine hair care product manufacturers. This means that the end consumers will be negatively affected by the product when they use it and possibly condemn the hair care line when it was the counterfeiter that was responsible for the faulty product in the first place. In the long-term, counterfeit goods bring financial damage to traders and manufacturers while undermining the confidence of consumers. In Bolivia, the customers who buy counterfeit products such as fake hair gels, shampoos, and energy drinks are attracted to them due to their cheap prices and the prospect of seeming to be trendy by gaining luxury items at cheap prices. However, they run the risk of ruining their health by using sub-standard or untested products. Every year, many consumers suffer injuries as a result of using products that have harsh chemicals or endanger their health by consuming drinks from questionable sources. The use of foreign made counterfeit products also deeply affects the productivity and inventiveness of local Bolivian producers of hair care products or food stuffs. Many entrepreneurs in developing nations such as Bolivia feel deeply discouraged by the fact that their local populations presume that only products made in foreign nations which are more developed are good enough to buy. This can even discourage local entrepreneurs from trying to create products for the Brazilian population because they may feel that they cannot do anything to turn the tide. The main victims of Chinese counterfeiters are genuine Bolivian business concerns that create and distribute products meant for the Bolivian population. Chinese counterfeit products also negatively affect the Bolivian economy. This is because the easy accessibility of counterfeit goods in any given country will send the message to vigilant consumers in other nations that the products manufactured in the said country cannot be trusted. In a poor nation like Bolivia, this will be quite damaging because its trade partners will also group the originally made Bolivian products as being counterfeit. This would slowly begin to affect the nation’s trading environment. China already appears to have been affected by this factor. Many developed as well as developing countries now have tight regulations on all Chinese imports. Moreover, China’s booming economy has not been unduly affected by this occurrence. Bolivia’s economy would be much more affected if it suffered the same fate because it does not share China’s economic might. Counterfeiting has also had serious effects on employment. Many people in the hair care product and soft drink industries have lost jobs as a result of counterfeiting practices in Bolivia. Counterfeit products also affect the Bolivian government which accords supplementary costs to fight counterfeiting practices. There is a lot of cost incurred in customs and possible judicial proceedings launched against the counterfeiters. Impact on businesses and how the Bolivian Government is Trying to Curb Counterfeit Goods Bolivian manufacturers usually spend money in creating and advertising their products. All these expenses are wasted when the local market is flooded by sub-standard goods. Counterfeiting does not just destroy local business initiatives, but also threatens, tax collection, stifles research, and channels considerable financial resources to criminal networks. The trade liberalization that is a result of globalization as made it easier for counterfeit products from nations as far away as China to reach Bolivia (Chieh-Yi 44). Even though trading in counterfeit products is something that happens in nations all over the world, counterfeiters particularly favor low-income or developing nations because they usually do not have strong regulations to counter counterfeiting practices on a large scale. For nations such as Bolivia, which is Latin America’s poorest nation, donor funds are necessary to provide for the basic needs of its citizens such as food and education. This means that there are hardly any funds to deal with other issues such as the existence of counterfeit hair gels and shampoos or soft drinks. In Bolivia, corruption, low purchasing power, and consumer ignorance or apathy also contributes to the spread of fake products in the region. The existence of a large population in Bolivia and the high cost of original products create a demand for cheap sub-standard products (Bojanic 34). With many trade unions being formed on many continents, it is likely that Bolivia will become part of some. This could increase the incidence of trading in counterfeit products if any trade is conducted with nations that do not have strong rules against counterfeit products. In such a case, the nation without stringent anti-counterfeit rules could end up becoming the illicit point of entry through which additional counterfeit products into Bolivia. One way through which Bolivia could discourage the formation of counterfeit hair gel and shampoo, or soft drinks, is by making this a crime that is prosecuted with as much seriousness as murder or manslaughter. Reasons for Counterfeiting in Bolivia The main reason for the increase of counterfeiting in Bolivia is the lack of enforcement. In many Bolivian cities, counterfeit products are sold freely on the street with little fear of administrative reactions. Bolivian government authorities do not implement the few existing laws against counterfeiting as a result of the following reasons: Corruption: Many times, Bolivia’s government authorities are involved in the distribution of counterfeit products. In addition, local firms can bribe officials or use their influence to stop the police from enforcing the law. Lack of internal laws against trade in Counterfeit Products: Bolivia’s administrative authorities do not have clear regulations on how to carry out enforcement actions, and there are hardly enough resources to carry out such actions. In most cases, counterfeiters are even appointed to be depositories of ‘confiscated’ products by administrative authorities. The non-existence of stringent sentences for counterfeiters has also served to encourage foreign based counterfeiters from nations such as China to operate in Bolivia. There have been government efforts to impose import taxes to stop counterfeiting; but this is unlikely to have much effect. CONCLUSION The only way in which the Bolivian government can curb counterfeit products while also encouraging its citizens to buy locally made products is by imposing larger import tariffs on foreign products, particularly from China, and investing substantially in local businesses. Bolivian authorities should also be more active in enforcing laws against counterfeiting in general. The government could even cooperate with international anti-counterfeiting organizations in order to curb the practice within its own boundaries. The Bolivian government could also subsidize local soft drink makers as well as hair product manufacturers. This would make the local products cheaper than Chinese counterfeit imports. It also would effectively result in increased output and decreased consumer prices. The Bolivian authorities could also implement import quotas which would allow only a given number of imported products into the nation. Bolivians will thus be forced to purchase fewer imported products, thus providing domestic goods with a larger market. If counterfeit products threaten to derail the Bolivian economy, a trade embargo for a specific period might be used as a last resort so that Bolivian citizens are given a chance to establish trust in domestic products and prefer them to foreign offerings. Works Cited Bojanic, Antonio. Evolution of the Bolivian Economy: A Time-Series Approach. New York: Kendall Hunt Publishing, 2012. Print. Chieh-Yi, Jessica. Fake Stuff: China and the Rise of Counterfeit Goods (Routledge Series for Creative Teaching and Learning in Anthropology). London: Routledge, 2011. Print. Han, Jung-Min, Hyeon-Jeong Suk, and Kyung-Won Chung. “The Influence of Logo Exposure in Purchasing Counterfeit Luxury Goods Focusing on Consumer Values.” Department of Industrial Design, Korea Advanced Institute of Science and Technology. N. d. Print. Priy, Bodhi. Role of Word-of-Mouth in Counterfeiting: Mystery of Word-of-Mouth towards counterfeit products. California: LAP LAMBERT Academic Publishing, 2011. Print. Zhonghua Press. Counterfeit Secret (Chinese Edition). Peking: Zhonghua Press, 2007. Print. Read More