· Industry is linked to trafficking and child labour · One in 10 products sold worldwide is counterfeit

A fancy hotel foyer, a glamorous model, and a vintage Ferrari to die for. The hotel off Brussels' main square is real, and the model, Yasmin Le Bon, is also genuine. But the cherry-red Ferrari?

A 1967 P4, it looks like it has just turbocharged off an Austin Powers film set. There were only three of these ever built. Each is worth several million. But this is not one of them.

Knocked up in a garage in the Thai countryside using Japanese parts, the Ferrari was about to be shipped to a European client when Thai police confiscated it.

Replicating the original in every visible detail, the car is a startling example of the genius for counterfeiting that is flourishing worldwide, eating into the aprofits of corporations and costing governments billions in lost tax revenue. It has been linked to child slave-labour in India and China, with the products being distributed from New York to Leicester.

Le Bon posed beside the "Ferrari" yesterday to launch an international drive against counterfeits. Campaigners say that the illicit global business has become a monster that is killing tens of thousands, funding terrorism and crime, and entrenching the victimisation of women and children in the developing world.

"This is something that really affects me because I'm in the fashion business," said Le Bon. "It's all very well buying that fake wallet in Dubai. But every time you do that, you're helping organised crime. Many people are losing their lives."

Fake designer labels remain a staple of the counterfeits industry. But advances in digital technology and electronics mean that there is now little that cannot be quickly and cheaply reproduced and marketed as the real thing. The result is a business worth an estimated $600bn a year, with one in 10 of all products sold in the world now believed to be counterfeit.

Buying a new car? Around 10% of the components are said to be counterfeit. Travelling by air? The US says 2% of the 26m parts used annually in aircraft are phony. Buying medicine online? There's a good chance it will make you sick.

The Authentics Foundation, a London-based NGO behind the first "global anti-counterfeit summit" staged yesterday in Brussels, said: "Today reverse engineering can take place literally at a key stroke, counterfeiters use 3D laser scanners and software to develop the perfect copy in record time. Digital technology has enabled counterfeiters to produce virtually any product known to mankind."

According to customs figures for the EU for 2006, the last year for which figures are available, more than 128m counterfeit and pirated goods were seized at European borders, a rise of 70% on the previous year and a tenfold increase in five years.

The EU commission president, Jose Manuel Barroso, said: "Counterfeiting now takes place on an industrial scale. It has become an extremely profitable business, generating income that can compete with narcotics and weapons trafficking, but at much lower risk ... The days when fake goods meant shifty men with a suitcase full of Rolexes are over."

The proceeds, say the campaigners, are funding terrorism and organised crime, and facilitating money laundering and drugs and people trafficking.

Of 126 million children exposed worldwide to armed conflict, trafficking and child pornography, said John Trew of Care International, many are abusively employed in the fakes manufacturing industries, and being denied education. "Any child being involved in the illegal production of goods is an unconditionally bad thing," he said.

In Europe the campaigners singled out Britain and Italy as main distribution points for counterfeit goods, specifically Nottingham and Leicester. In recent weeks customs officers have made several seizures of tens of thousands of counterfeit cigarettes from smugglers arriving at East Midlands airport, which serves the two cities.

The burgeoning trade in fake medicines such as Viagra is particularly alarming, according to researchers, because of the greater potential for damage to health. The World Health Organisation thinks 10% of all medicines are now faked.

False economy

· The fake medicines market is said to have an annual worth of €40bn, up 25% on three years ago and tipped to rise to €70bn by 2010

· The main entry point to Europe for counterfeit goods, overwhelmingly from China via the United Arab Emirates, is Greece

· Almost half of all spirits sold in Russia are counterfeit, killing 43,000 Russians every year

· Hi-tech products, electronics, pirated media products and pharmaceuticals are believed to be the leading sectors in the fakes industry

· In 2006, European border searches uncovered almost 74m in counterfeit cigarettes, 60% of all articles confiscated, although only 1% of the seizure cases. Clothing and textiles made up two thirds of cases