Valuable plant genetic resources are threatened with destruction by exploitation and the elimination of habitat. How can society protect and wisely manage these materials? One solution may be to assign them property rights and to treat them as marketable resources.
All too often, the resources that civilizations take most for granted are those that require diligent attention in order to be cared for well. Plant genetic material is one of them. Also called germplasm, it is a valuable economic resource that is often in limited supply and is sometimes threatened with destruction.
It is well recognized that wild and unimproved plant genetic resources have substantial social and economic value for plant breeding programs, for the development of natural products including drugs and pharmaceuticals, and for increasingly sophisticated applications of biotechnology. Despite these acknowledged values, widespread destruction of genetic resources is occurring. Although much of the destruction is caused by excessive consumption, a more serious threat comes from land-use changes such as tropical deforestation that destroy critical habitat.
Protection against destruction is difficult to achieve under current law and management systems. Naturally occurring plant genetic resources are treated as a common property resource, owned by no one. This absence of property rights opens up the possibility of excessive exploitation of the resource, a variation on the "tragedy of the commons." The absence of ownership denies individuals and countries the possibility of benefiting commercially from the presence of unique genetic resources within their jurisdictional boundaries. There is little incentive, other than altruism, to incur costs to safeguard the habitat of unique and endangered wild species.
Nor can this situation be easily changed by the introduction of national management and regulation. Public management usually cannot internalize to the country the benefits of genetic resources to which it has no internationally recognized property rights (although this is not the case for many common-pool resources that are under public management). Absence of property rights means, for example, that the recently discovered Mexican species of perennial maize is likely to provide Mexico with only negligible benefits, even if the desired genetic traits of the species prove to be of enormous economic value worldwide. Mexico therefore has little economic incentive to preserve undisturbed any vegetation in which this and similarly valuable (but as yet unknown) plant genetic material may be hidden.
Systemic limitations
The existing management system provides property rights for improved and genetically engineered plants, as well as government protection of selected habitat. Such an approach appears to do an excellent job of generating investments for the development of technology to improve seed strains and for the distribution of technically improved genetic material to users throughout the world. However, the system is doing a poor job of protecting the wild genetic resources and the habitat in which these valuable resources reside. Furthermore, there is little in the system that addresses the question of the sharing the financial gains with the Third World.
Since property rights are not now assignable to natural species, the Third World countries in which the majority of these species reside have no means to derive financial benefits from the utilization of "their" species in commercial applications. By contrast, since property rights in improved species are available, breeders can capture the commercial gains through improvements in resources without making payments to the countries from which the basic genetic materials derive.
Moreover, although many wild genetic resources are believed to be threatened with extinction, the existing system provides few incentives for their protection. Pharmaceutical firms and other users of genetic resources have little control over habitat maintenance in sovereign Third World countries. These countries, for their part, lack recognized property rights to genetic resources and cannot capture the rents—that is, the financial benefits—of these resources. Thus the current system relies almost exclusively upon governments for protection of habitat in a context where governments themselves have few direct incentives to undertake protection and where their actual performance in protection has been mixed at best.
There is little incentive, other than altruism, to incur costs to safeguard unique and endangered species.
An alternative system
Commercial pressures for land-use changes, combined with a lack of incentive for protection, create a social dilemma. If genetic resources continue to be available to all as part of our social heritage (a condition usually viewed as socially desirable), the economic incentives to protect these valuable and often fragile resources will be minimal. Yet if future government programs designed to preserve valuable habitat are no more successful than those of the past, we can expect uninterrupted destruction of habitat. Alternative systems could be devised that would supplement existing efforts to protect wild genetic resources. Such systems, however, might require some restrictions on availability, thus challenging the basic premise of global heritage.
One alternative system that may have merit is based on viewing genetic resources as the property of the state in which it resides. Under this system, property rights would be assigned in order to provide incentives for protection and wise management. Property rights for plant species could be expanded and extended to cover newly discovered natural species, whereas under current legal interpretations only special genetic stock, current breeder lines, and genetically engineered organisms are recognized as having ownership. Such an approach would allow the genetically rich Third World countries an opportunity to profit directly from the ownership of genetic resources. Property rights to species would also provide a direct financial incentive to protect and maintain the natural habitat in which rare and as yet unknown species may reside, since their discovery and development at some time could generate direct financial returns to the owner.
Under a system in which the concept of property rights was extended to include species not now known or utilized, newly discovered natural genetic resources would become the property of the political state in which those resources reside. In principle, the state would be free to declare all such resources as the property of the state, or it could grant private property rights to individuals or corporations that discover the genetic resources. Having ownership of the resources, the owners—public or private—could be expected to have an interest in their long-term preservation and development.
Alternatively, the state might decide that the rights be defined in terms of the ownership of land upon which the species resides, and that such rights be treated no differently than rights to other natural resources and property in that political entity. With the state controlling the rights, it could voluntarily sell or distribute those rights in any way it deemed appropriate. A domestic corporation or governmental department could be created to manage the system, or the rights could be transferred to private interests.
Markets for genetic material
The transfer of a wild genetic resource to private interests might be accomplished by having the private interest make an initial payment and subsequently pay royalties based upon the commercial earnings of products that utilize the resource. The country where the resource resides could negotiate an exclusive agreement with a firm, or allow a number of firms to utilize the resource under a set of mutually agreed-upon conditions. Agreement might be reached as part of bilateral negotiations or as the result of a competitive bidding process. Should a particular germplasm be discovered in several countries simultaneously, the potential users would be free to negotiate the best deal possible with the country of their choice. A necessary condition for such a system is the possibility of describing a plant with sufficient specificity so that the property right could be clearly and unambiguously assigned. Only under such a condition could those rights be enforced.
Markets for genetic material could function just as markets do for other resources. A country with sole ownership of certain germplasm, for example, might choose to behave like a monopolist in regard to a particular germplasm, demanding high prices in return for rights to utilize the resource. These conditions might be so onerous as to have no takers. Such market behavior is unlikely, however, because it runs at least two risks. First, the same natural germplasm might be discovered in another country. In this case a monopolist's bargaining power would be seriously compromised and the strategy of withholding the germplasm from development would backfire, resulting in loss of the monopoly position. Second, biotechnology may develop in such a fashion as to bypass the usefulness of the particular germplasm. Hence, by withholding the germplasm from development the monopoly would lose its opportunity for negotiating favorable conditions.
Genetic material markets could function just as markets do for other resources.
In both cases, the longer a monopolist withholds the germplasm from the market, the greater is the possibility that events will compromise the favorable initial bargaining situation. Where several countries have the same unique germplasm resource, the possibility for collusion and the formation of a cartel exists. However, cartels have been historically unstable, and the possibilities for finding alternative germplasm resources are likely to be substantial.
It might be deemed desirable to restrict the period of property rights for natural germplasm to some limited period—say seventeen years, as it is for patents. The period could begin when the property right is assigned, presumably sometime close to the discovery of a new germplasm. However, this restriction need not compromise the incentive effects of the proposed system. The very possibility of discovering a previously unknown genetic resource with commercial potential provides some incentive to preserve habitat.
In most respects the system proposed would be similar to that which currently exists for handling other resources. For example, if a country believes that it has a valuable petroleum deposit, it may choose to develop the resource itself, negotiate drilling rights with a major petroleum company, or sell some or all of the drilling rights (together with a royalty provision) to the highest bidder, who could then proceed with development. For a resource that is not commercially viable given current technology and markets, the country may choose a fourth option: set the resource aside for possible development at a more auspicious time. In principle, there is no reason why such a system of property rights could not be devised for unused genetic resources.
Advantages
The major socially desirable feature of the proposed system is that it would provide nonaltruistic incentives for the preservation of rare species and germplasm—no small matter, since the pressure on genetic resources is growing as the result of changing demands for land use. Such a system need not preclude existing governmental efforts to preserve habitat; nor should it be viewed as a substitute for existing efforts to preserve areas of wide or unique biodiversity. The two approaches are not mutually exclusive. Under the property rights system, national governments would also have economic incentives to protect regions of rich biological diversity. Thus the future value of currently unknown genetic resources could be captured. The destruction of a unique genetic resource would not only represent a global social loss, but this loss would be translated into a direct economic opportunity forgone for the country in which the resource resides.
A system that provides property rights for owners of natural plant germplasm also would provide a mechanism for the restoration of balance in the gene trade between the gene-rich Third World and the gene-poor industrial world. Just as plant-breeding countries would receive returns to their investments in breeding, gene-rich countries would receive returns associated with their protection of germplasm from extinction and their discovery of useful previously unknown species.
A system of property rights for wild or unimproved genetic resources would not be without significant implementation and enforcement problems. As with patents, a genetic resource must be defined in sufficient detail to distinguish it from similar but different resources. Conflicts are bound to occur. Nevertheless, the proposed system offers promise of providing an additional tool to induce social behavior to protect the earth's valuable genetic resources—resources that are currently under heavy pressure.
Roger A. Sedjo has been a senior fellow and the director of the Forest Economics and Policy Program at RFF since 1977.