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a Economics Department, Yale University, 27 Hillhouse Avenue, New Haven, CT 06520 USA
robert.evenson{at}yale.edu
| ABSTRACT |
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Abbreviations: IARCs, international agricultural research centers IFPRI, International Food Policy Research Institute IMPACT International Model for Policy Analysis of Agricultural Commodities IPRs, intellectual property rights NARs, national agricultural research systems PBRs, plant breeders rights TFP, total factor productivity
| INTRODUCTION |
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intellectual property rights were of limited relevance to plant breeding activities. In fact, because IPRs were not applied to plants and animals, private-sector firms had little incentive to engage in plant breeding activities (except in crops where hybridization requires new seed production for each crop). Public-sector plant breeding programs in both national agricultural research systems (NARs) and international agricultural research centers (IARCs) were (and remain) the chief producers of improved crop varieties. The public-sector research "culture" has a long tradition of open sharing of genetic resources, germplasm, and research findings between research centers. Extensive collections of landraces, mutants, wild species, weedy relatives, and advanced breeding lines exist for most important crops. For an economic evaluation of these resources, see Evenson et al. (1998).
This tradition of open sharing and exchange of genetic materials is under challenge from recent developments in IPR coverage and implementation. In the 1960s and 1970s, PBRs were implemented in many developed economies and this encouraged an expansion of private-sector plant breeding programs. In the 1980s, two developments led to an expansion of patent rights to plants and animals. One was the rapid development of biotechnology research methods. The second was the court-led expansion of patent rights to cover multicellular living plants and animals. These two developments are related. New biotechnology methods enable the invention of plants and plant components to meet the traditional standards of invention. Court rulings expanding protection have responded to this by allowing the application of these standards. In the 1990s, these stronger patent rights (and other IPRs) have been incorporated into world trade agreements, requiring many developing countries to address IPR issues for the first time.
| The Application of Intellectual Property Rights to Plants |
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Of wider usage are PBRs. The Plant Variety Protection Act of 1970 established PBRs in the United States. Plant breeders' rights have been strengthened in recent years in many countries. An international convention, the Union Pour la Protection des Obtentions Vegetales (UPOV) covers these rights and facilitates recognition of PBRs in other member countries. These rights allow the holder to exclude (without permission) others from reproducing and selling the protected "variety" (standards of uniformity and distinctiveness must be met). These rights do not allow the holder to exclude others from using protected material for research (the research exemption). They also allow farmers purchasing a protected variety to save seed for their own use (farmers' exemption). Recent changes have tightened up both the farmers' exemption and the research exemption.
Court case decisions in the United States have expanded the scope of traditional patent rights to cover plants, plant parts, and some genetic resources. Patent protection requires that the protected material be novel, useful, and meet an inventive step (the unobviousness requirement). The holder has the right to exclude others from using, making, or selling the protected material for a limited period of 17 to 20 yr. There is no research exemption, so protected material cannot be used (without permission) in a breeding program.
There are two major implications of expanded IPRs for public-sector plant breeding programs. The first is that they provide incentives for an expansion in private-sector plant breeding activities. This provides competition for public programs and requires a public program response. The second is that there will now be two sources of supply of genetic resources to public programs. One will be the traditional public-sector gene banknursery system. The second will be the genetic resources that are for sale or license from private firms holding IPRs on them.
Neither of these implications should result in reduced plant breeding activity in the aggregate or a reduced supply of plant variety options to farmers if public-sector response is optimal. Farmers will pay premiums to private firms selling IPR-protected varieties only if they conclude that the product is worth the price. If the public-sector supply of varieties is not reduced, this will result in expanded options for farmers. The real danger from this competition factor is that the public sector will withdraw from plant breeding. The optimal public-sector response to expanded private-sector plant breeding is probably to reduce breeding activities and increase prebreeding research services to the private sector. But a net increase in farmer options as regards plant varieties should be the result of this public-sector response.
The implications of "breeding lines or genes for sale" by the private sector are also not serious provided that the private IPR holder can protect only those genetic materials that they have produced. Proper IPR laws and their administration should prevent a private individual or firm from claiming IPR protection for natural genetic materials such as the landraces (or farmers' varieties) of crop species or of varieties developed by public-sector breeders. As with farmers, expanded IPRs should result in expanded options for public-sector breeders. They may choose to pay a premium (or engage in some other kind of exchange) for a protected breeding line or gene source if it is worth the premium. At present, payments by public-sector research programs to private companies are rare. Public-sector agricultural research programs have been reluctant to receive payment for their discoveries (inventions) or to make payment for genetic resources. However, in recent years, public-sector programs have begun to obtain IPR protection and to grant exclusive licenses (with fees) to private firms in order to provide incentives for postinvention commercialization activities.
There is also a concern that patent protection may be given to the "use discovery" of genetic resources. That is, a person may claim to have discovered a specific use (e.g., as a source of resistance to a particular plant disease) of a "landrace" in a public collection. This would give the patent holder the right to exclude others from using the landrace for that particular use. This could curtail the free exchange of genetic resources because public-sector gene banks might be held responsible for respecting use values.
It is highly likely that private plant breeding firms will continue to maintain most of their "advanced lines" and related breeding materials as proprietary or trade secrets. Some may be sold or exchanged. Gene constructs (or traits), on the other hand, may be available for "rent" or licensing to seed suppliers. If a private firm offers a gene product (a trait) that is a valuable enhancement of a public-sector plant variety, it may be economically feasible to have a combination of the private-sector gene product for which a license fee is paid and a public-sector variety for which no fee is paid. International Agricultural Research Centers may be called upon to develop such arrangements to deliver gene products to farmers who would otherwise not have access to them.
Optimal public response to stronger IPRs and to expanded private breeding activity will include an aggressive policy toward IPRs for public inventions. It is important that public research programs obtain IPRs to protect the integrity of their inventions. In some cases, IPRs are necessary to provide the incentives for postinvention market development investment.
It is also important that public research programs maintain the provision of competitive "backstop" plant varieties to farmers. This is in addition to providing supportive research in genetic evaluation and other prebreeding activities to private firms. Because of the importance of prebreeding and genetic resource evaluation research, private-sector breeding programs benefit from public-sector research programs. In general, these benefits are passed through to farmers and ultimately to consumers.
Finally, most conventional IPRs should not impinge on the exchange of genetic resources except for use patenting where public-sector programs may be held liable for providing protected material to infringers.
| Implications of Farmers' Rights |
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One form that this might take is that after a certain date producers of a crop (e.g., rice in California) must pay farmers' rights fees to varietal landrace origin countries. An analysis of rice genealogies could thus be used to compute payments owed by California rice producers to India, China, and others (for an analysis of rice cultivars, see Gollin, 1998).
A second form is that the varietal landrace origins, as of a certain date, will be given a "grandfather" exemption and that the farmers' rights fees will apply to new varieties developed after the year 2000. A more probable form is that a formula for dividing up an international pool of money to landrace suppliers will be agreed upon (see Esquinas-Alcázar, 1998).
In an uncertain farmers' rights environment, the traditional exchange of genetic materials could be curtailed. A country may insist that an IARC not provide its landraces or breeding lines containing its landraces to another country until a payment has been negotiated. As we will note in the section below, this could have serious consequences.
| Developing Simulations of Potential Effects of Restricted Exchange of Genetic Resources |
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The combined effects of 1 and 2 will also be evaluated.
Policy scenarios 1 and 2 are incorporated into the IFPRI-IMPACT model through the nonprice productivity change terms. Policy scenario 1 is based on recent scientists surveys regarding the potential for rice biotechnology techniques to reduce crop losses from insect pests, diseases, and abiotic stresses and from yield improvements (Evenson et al., 1997). Policy scenario 2 is based on genetic resource evaluation studies in rice (Evenson and Gollin, 1997; Evenson et al., 1998).
| The ifpriimpact model |
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Each country or region submodel has a set of equations for supply, demand, and prices for each commodity and for intersectoral linkages with the nonagricultural sector. Crop production is determined by area and yield response functions. Area functions include price responses (own and cross-price terms) and a nonprice trend. Yield is a function of the prices of commodities and prices of inputs and a nonprice total factor productivity (TFP) change term. (This term is discussed further below.) Livestock commodities are similarly modeled.
Domestic demand is the sum of food, feed, and industrial use demand. Food demand is a function of prices (of all commodities) per capita income and population. Country-specific population growth rates are based on UN projections. Income growth is partially endogenous to the model and agriculturenonagriculture links are specified. Feed and industrial use demands are derived from final demands.
Prices are endogenously determined. Domestic prices are linked to global equilibrium prices via exchange rates and producerconsumer subsidies and trade restrictions are allowed. Other policy instruments (acreage restrictions) are considered. Trade is determined by net supplydemand equilibrium conditions. Malnourished children projections for children (06) are based on weight-for-age standards set by the U.S. National Center for Health Statistics. Data for 61 developing countries for 1980, 1985 and 1990 were used to link malnourished children proportions to per capita calorie consumption (determined in the model).
The nonprice terms in the area and yield functions were developed for each commodity and country or region as follows. First, an accounting structure based on a study of Indian crop productivity was developed from Indian experience (Evenson et al., 1999). Second, the public-sector research component for rice production was developed based on estimates of crop losses in different regions due to various "problem areas" and on subjective probability estimates of problem reduction by a panel of rice scientists. This produced regional nonprice components for different periods. Third, the public-sector research component for crops other than rice were scaled to the rice component in proportion to evidence from a large number of returns to research studies. Fourth, the private-sector research components were based on technology infrastructure levels and projected changes in those levels. Coefficients were estimated in the Indian study. Fifth, extension contributions were linked to research components. Markets and infrastructure contributions were linked to technology infrastructure on the basis of the Indian study. Finally, the TFP components were compared with historical postGreen Revolution experience, checked for consistency and phase-in rules were applied to move from historical rates to projected rates for 5-yr periods from 1995 to 2020.
The accounting component structure included the following components:
The yield growth contribution of modern inputs such as fertilizers is accounted for in price effects in the yield response function, and as a complementary input with irrigation and with the modern varieties generated by research.
The public (IARC-NARs) research components for rice was based on and studied in both ex post and ex ante or priority setting studies. Rice Research in Asia: Progress and Priorities (Evenson et al., 1997), augmented by a recent IRRI study (Evenson, 1998), provided the basis for subcomponent projections for four rice-producing zones (South Asia, Southeast Asia, East Asia, and the rest of the world).
Estimates of crop losses from insect pests, plant diseases, and abiotic stresses were obtained for Eastern and Southern India, Indonesia, Bangladesh, Thailand, and China. These crop-loss estimates were treated as estimates of potential gains for specific types of research.
A rating exercise was carried out with sixty senior rice scientists participating in the 1997 Rice Biotechnology Conference in Malacca, Malaysia. For each of the research problem areas (RPAs) for which respondents had scientific qualifications, four ratings were elicited for alternative research techniques (managerial research, conventional breeding, wide crossing and hybridization, and biotechnology or transgenic rice and marker-aided selection). These ratings were: (i) a rating of achievement to data (RA), (ii) a rating of potential achievement (RP), (ii) an estimate of the number of years required to achieve 25% of the difference between achievement to date and potential (Y25), and (4) an estimate of the number of years required to achieve 75% of the difference between achievement to date and potential (Y75).
Scientists were asked to presume that both IARC and NARs programs would continue to be supported at the levels of the past decade in future periods in developing these estimates.
The specification of two ratings, one for achievement to date and one for potential achievement, forced respondents to focus on "remaining potential".
These ratings and timing estimates were then converted into annual research contributions in 5-yr periods and then multiplied by the crop-loss estimates to produce the nonprice (TFP) components for public (IARC-NARs) research.
Other components of the base case were based on other studies. The management research contribution is based on extension programs and facilitated by farmers' schooling. The growth accounting study for India (Evenson et al., 1999) showed that the growth associated with extension and schooling was roughly two-thirds that of growth associated with public-sector research. To approximate this, the combined growth contribution of management research, extension, and schooling was calculated to be 0.7 times the breeding contribution.
For the rice base case the India calculations were assigned to South Asian countries, the Indonesian calculations to Southeast Asian countries, and the China calculations to China. Other developing countries in Africa and Latin America were assigned 80% of the China calculations because they have considerable upland rice areas. Developed countries were also assigned 80% of the China case to reflect the temperate zone nature of developed countries and the fact that they have considerable private-sector research and development spill-in. However, because these countries are better positioned to benefit from biotechnology, the transgenic contribution are expected to be realized 5 yr earlier than in developed countries.
The contribution of private-sector research and development and of improved markets and infrastructure depends on investments in these activities. We use the technological infrastructure classification of Evenson and Westphal (1994) to relate contributions to investments.
Evenson (1999) reviewed studies of economic effects of research and extension programs. More than 200 studies reporting several hundred estimates of research program effectiveness are covered in the review. Median estimates for major commodities and regions were calculated. Rice research programs in Asia showed the highest median rates of return estimates. The ratio of median rates of return for other commodities and regions were used to scale the base-case nonprice terms to the rice estimates.
| Policy Scenario 1: Stronger Intellectual Property Rights in Developed Countries but Not in Developing Countries |
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| Policy Scenario 2: Fifteen-Year Period of Farmers' Rights Dispute Resolution |
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The EvensonGollin (1996) study also reports a statistical analysis of determinants of the production of new varieties. They concluded that the international nursery system significantly increased the production of varieties by making advanced lines more readily available to national program breeders. Estimates show that eliminating the nursery system would reduce varietal production by roughly one third. The nonprice TFP rate of change was reduced by one-third in the developing countries for this period. It was not reduced for developed countries because they have institutional mechanisms (IPRs) to facilitate exchange.
| Policy Simulations |
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44%). This is a favorable outcome, even though many countries will still have serious malnutrition (and related) problems in 2020.
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| Conclusions |
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The second scenario explored was a policy of temporarily blocking international exchange of genetic resources. This scenario has more serious welfare implications than the first because many of the poorest developing countries are dependent on international exchange of plant genetic resources. It too showed that prices will be higher, developing country imports will be higher, and developing country welfare lower because of impeded exchange of genetic resources.
The shift from a regime with limited IPR protection for crop varieties with a tradition of free exchange of genetic resources to a regime with strong IPR protection could have serious implications for developing countries. Developed countries have experience and institutions to enable this transition to take place efficiently. Developing countries, on the other hand, lack experience and institutions and if this delays the timing of their access to emerging biotechnology products they will experience losses.
The problem of farmers' rights may well turn out to be even more damaging to the interests of developing countries (and to developed countries as well) (FAO, 1998). The prospect of substantial payments from developed to developing countries may hinder genetic resource exchange and lead to losses that are in excess of any potential payments.
Neither scenario need obtain if policy makers understand the importance of maintaining systems of genetic resource exchange.Evenson Herdt Hossain 1996; Food and Agriculture Organization of the United Nations. 1998; Gollin Evenson 1997; Huffman Evenson 1993
Received for publication December 28, 1998.
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