Apologies for this site being down for the past 24 hours or so. I blame aliens.

I have been fortunate enough to have enjoyed two of the most pleasant New York summer days one could wish for. Thanks to my heeding overblown warnings of long delays due to tight security at JFK, I now find myself with an hour to burn in yet another nondescript airport lounge. After catching up on the latest Robert Kissel developments I came across a great piece in The Standard on the hypocrisy of the EU over China's intellectual property pirates. The author sees pirate goods being freely sold in Florence and notes it seems a bit rich for the European Union to complain to China about failing to enforce intellectual property protection when EU countries seem unable to enforce their own laws only a couple of hundred meters from Gucci's, Louis Vuitton's and Fendi's own flagship shops.

He goes on to point out the huge difference between the average spending power of the Florence tourists compared to the average shopper in China. For many in China there is no choice because the "real" goods are completely out of their price range but in Florence it is a very deliberate choice.

America is not above blame, either. The article goes on to point out how history repeats itself:

...the United States did not protect international copyright until the 1890s, 100 years after this right was written into the US Constitution. It could be argued that America's media giants were built on piracy: In the 19th century, when the country was attempting to catch up with its more developed rivals overseas, US publishers reprinted English works often without paying royalties, arguing that the industry was under-capitalized. Putting it in modern terms, pirating English literature allowed the US industry to avoid product development costs while building economies of scale.

The same hypocrisy is common in the USA. My Monday afternoon stroll in New York took me through Soho and Chinatown, where numerous stalls were doing a brisk trade selling fake handbags, pirated CDs and DVDs, computing software, watches and more. In a delicious irony, a police car was parked directly in front of one of the busiest handbag shops. The tourist hordes were not disturbed by any other sign of law enforcement.

What this demonstrates is how difficult it is to eliminate the demand for these goods. Like the ridiculous and damaging "war on drugs", a supply will always meet demand just as supply creates demand. It is a cycle that is difficult to break, even in rich and advanced economies. If the original is really the best the market will pay that price. Most Hong Kongers wouldn't be caught dead buying fakes...because of the cachet and show-off value of buying the real thing. Those that do know they are getting an inferior product for a (much) lower price, and one that most of their friends will spot as fake in an instant. It is a trade-off between quality (and originality) and price that improves overall economic welfare. The only losers are the economic rent seekers who own the intellectual property. They are literally pricing themselves out of the market.

So let's view American and European attacks on China's intellectual property regime for what they really are: protectionism in sheep's clothing.