Barriers from lack of plant variety protection

Like agricultural subsidies, lack of PVP also imposes barriers to trade in agriculture. The trade distortions from lack of PBRs occur when farmers infringe upon protected varieties, replant protected seeds or practise brown-bagging for future commercial replantation. Lack of PVP results in an economic cost to the breeder and to the developed world where such rights are prevalent. Since developed nations protect plant varieties, issues arising from the lack of PBRs typically do not affect developing nations. Monsanto's experience in Argentina with Roundup Ready soybean exemplifies developed nations' concerns in this area. Roundup Ready soybean comprises more than 95% of the Argentine soybean crop (Innovest Group, 2005, p. 9). Monsanto, however, closed operations in Argentina in 2004 due to lack of revenue generated as a result of inadequate plant varieties protections (Innovest Group, 2005, p. 9). Few studies focus on distortions from lack of PVP per se, although the Monsanto experience causes alarm in developed countries.

While the impact of trade barriers from such flagrancies may seem catastrophic, the overall impact is minuscule when compared with the impact from subsidies. In 1997, for example, the Economic Research Service (ERS) of the US Department of Agriculture (USDA) and Foreign Agricultural Service (FAS) estimated the cost of foreign trade barriers to US agricultural exports at US$5.8 billion annually (Becker, 199 7). The projected sum included the impact on US agricultural exports from both agricultural subsidies in other nations and from lack of PVP (Becker, 1997). Generally, the cost from developing nations misusing protected varieties owing to the lack of PBRs has been minimal due to two reasons: (i) subsidies determine whether exports will occur; hence, unauthorized protected varieties do not enter the international market; and (ii) private market players do not operate in countries without PVP. Even in the few developing nations where such companies are established, their presence tends to be limited. The preceding argument, however, discounts the international market for lost exports to such non-PBRs national markets. The non-PBRs nations artificially prevent the demand in their markets from being reflected in the international market. The extent of trade distortion from lack of PBRs in developing countries cannot be predicted unless there are more studies on demand for hybrids in such nations. Rectifying the distortion can potentially translate into benefits from increased competition, driving down the prices of essential commodities.

Even assuming that introduction of PVP is beneficial, as long as export markets remain closed due to subsidies, the farmers in developing nations will be unable to exploit the fullest potential of the local or international market. Hence, the benefits to developing nations from introducing PBRs will be minimal as long as the subsidies foreclose the market for their products. Thus, in reality, rectifying the distortions has limited global benefit. The opening of the market, however, will significantly benefit developed nations. First, most benefits of establishing PBRs regimes will accrue to the developed rather than the developing nations. Second, lack of PBRs has minimal effect on international trade (especially when compared with the effect of subsidies discussed later).

Subsidies of developed nations, on the other hand, create far greater barriers in agricultural trade for developing nations. Developed nations including the USA spend an estimated US$300 billion/year in subsidies (The Developmental Impact, 2002). Developed nations subsidies affect US$40 billion worth of net agricultural exports per year from developing countries (The Developmental Impact, 2002; Martinez, 2003). In 199 7, the loss to developing countries from agricultural subsidies of the developed nations accounted to US$24 billion (IFPRI, 2003). Annually, Latin America and the Caribbean alone lose US$8.3 billion from the loss of agricultural trade (Wealthy Countries' Trade Policies, 2003). This loss is estimated at US$6.6 billion/year for Asia and US$2 billion/year for sub-Saharan Africa (Wealthy Countries' Trade Policies, 2003).

The effect of subsidies on the agricultural trade of developing countries affects international trade in agricultural commodities. The total amount of agricultural subsidies in developed countries, at US$300 billion/year, represents approximately twice the global wealth of all developing countries or six times the current annual level of total overseas development assistance that developed nations provide to poor countries (The Developmental Impact, 2002). Elimination of the subsidies of developed nations would triple net agricultural trade in developing countries. The estimated gains to all countries (both developing and developed) from the elimination of subsidies and tariffs in developed countries are approximately US$100 billion (Rich Nations Need, 2003). Thus, developed nations subsidies create the maximum barriers to international trade in agriculture. Subsidy barriers of richer nations far exceed those that the lack of PBRs (and prevalence of subsidies) in developing nations generate. The decrease of global trade barriers by reducing or eliminating developed nations' subsidies will indirectly improve the economies of developing nations.

Was this article helpful?

0 0

Post a comment