Economic technical and legal issues involved in a multilateral system to regulate the conservation and sustainable use of PGRFA

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During the negotiations for the ITPGRFA, a number of complex economic, technical, and legal issues needed to be examined and understood in order to develop, negotiate, and reach consensus on innovative concepts and provisions, based on an interdisciplinary approach. To facilitate this negotiation, the secretariat of the negotiating body, the Commission on Genetic Resources for Food and Agriculture commissioned a number of technical papers, as part of its series "Background Study Papers" (available on the internet at http://). Many of the concepts discussed in this section were presented and developed in such papers.

2.2.1. Economic issues

Wild and weedy crop-relatives and landraces provide the foundation-breeding materials for crop improvement and sustainable agriculture. They allow value to be added or provide a "value of use" in breeding and farming activities. This value is realized through the use of germplasm from in situ conditions, as well as material in ex situ collections.

Besides the current use-value of plant genetic resources, there are a variety of other values that can be derived from plant genetic resources. The

These collections were made before the entry into force of, and hence outside the CBD, as Resolution 3 of the Nairobi Conference for the Adoption of the Agreed Text of the CBD recognized.

More information on countries' dependence for its major crops on genetic resources that originated abroad is given on a country-by-country basis in Flores (1997).

portfolio value is the value of retaining a relatively wide range of assets within biological production systems, to smooth yield fluctuations. The option value is the value of retaining a wide range of known agro-biodiversity across time, as a source of currently unknown potential usefulness. The exploration value is the value retaining unexplored biodiversity, for the same reasons. Another way of grouping those values is to see them as insurance values (diversity acts as an insurance against crop yield fluctuations) and information values,4 (specific information coded in the germplasm may later prove to be of concrete value). (See chapters 4, 5, 6 and 19 for alternative discussions of the value of conserving plant genetic resources.)

It is clear that the conservation of PGRFA generates a use-value. A further question is how an exchange-value may arise, that is, how is it possible to set a price, or determine an appropriate level of economic remuneration, for the exchange of these resources? An understanding of this matter is necessary in attempting to identify effective incentives for the conservation and sustainable use of PGRFA.

Traditional farmers, their communities, and countries maintain agro-diversity in situ, and thereby conserve and further develop the diversity contained in their landraces and related materials. A problem arises, however, in that they often have an economic incentive to replace their heterogeneous landraces by homogeneous modern varieties, as these frequently offer higher yields and productivity, and thus, higher incomes. While this process of conversion (the replacement of landraces by modern varieties) may be a rational decision on the part of an individual farmer, increasing conversion means a continuous and irreversible loss of diversity, which is not in the global interest.5 (See chapters 5, 6, and 19 for other discussion on public and private values of in situ conservation.)

4 Swanson et al., 1994 (supplemented by personal communication with Swanson), consider that there are two parts to the information value of biodiversity: one part is unappropriable under all known mechanisms, while one part (exploration value) is appropriable under current conditions. They believe that the returns earned by plant breeders and seed companies, when they market a new variety over which they have any form of exclusive marketing right, include this value.

5 An example may be given of how fast the conversion process is. Tarwi (Lupinus mutabilis) is one of the Andean crops that have formed the staple diet of the area for thousands of years, as a protein source. These landraces were selected by farmers over many generations for the quantity (as much as 40%) and quality of their proteins. Although of lesser interest to the farmer, tarwi also has a high fat content (as much as 26%). There is, however, a negative correlation between productivity and the oil content of tarwi seeds. In 1977, in a foreign assistance project to industrialize the crop, an experimental factory for the extraction of tarwi oil, was established south of Lima. The commercial production of new varieties of this crop, which had been selected to offer better characteristics for oil extraction, was encouraged, and farmers replaced their very heterogeneous and protein-rich landraces with the new, uniform, oil-rich but protein-poor varieties. The experiment failed, and the factory was closed in 1979. Farmers found

The question of the realization of an exchange-value for PGFRA is complex, because the farmers and communities developing and cultivating landraces, and other related genetic resources in their farming systems are, in fact, creating a global economic value, much of which they are unable to appropriate. In other words, they have no mechanism for obtaining a price, or other form of compensation, for the valuable germplasm they generate and conserve. It is the germplasm, which they have developed within their farming systems, that is the world's main source of PGRFA (whether it is still maintained in the fields, or in ex situ collections). This germplasm is, however, mostly available at no cost.

Traditional farmers thereby generate externalities, as providers of a "public good" (that is, a good that cannot be appropriated by its producers, and which may be used by many without exhausting it, and without adding cost). To the extent that traditional farmers, and their communities and countries, are not able to appropriate the values that they generate, they lack economic incentives to continue developing and conserving the diverse PGRFA, on which agricultural development will continue to depend. That is, they lack economic incentives to maintain this biodiversity, rather than converting to improved varieties.

In more general terms, where public goods are created, the investments for producing or preserving them necessarily tend to be suboptimal, because their producers are unable to fully benefit from the rents such goods may generate. This is a typical market failure, and is also often found in areas such as the funding of basic science.

The public nature of the goods generated by traditional farming does not mean, however, that other agents do not appropriate and benefit from these values, at a later point of the development and production process. Plant breeders and seed companies do, for example, capture at least part of the rents generated by the farmers' germplasm which they have incorporated in their varieties, especially when these are protected by plant breeders' rights, or other forms of intellectual property right. But this value is not appropriated at the correct point in the production cycle to provide the necessary incentives to promote ex and in situ conservation.

If it is in the global interest to maintain landraces and other diverse PGRFA, it is necessary that farmers and communities, who develop and conserve diversity, and their countries, either appropriate the value of maintaining diversity directly, or are compensated for the costs of conserving diversity, including the potential benefits that they forego by not themselves without seeds of their old, more nutritious, landraces, the useful genes of which would have been lost forever, had not some samples previously been collected and kept viable through storage. In situations like this, a few years of the substitution of landraces by modern varieties are often enough to cause the permanent loss of germplasm that has been selected in traditional farming systems over thousands of years (Esquinas-Alcázar, 1983).

converting to modern varieties. A major difficulty arises with agro-biodiversity in the design of incentive mechanisms, as values are both difficult to estimate and to appropriate. In fact, an essential part of these values, specifically those of global nature, cannot be appropriated.

Economic analysis suggests that, for an agreement to be economically effective, it should be forward-looking and include structural incentives to favor and reward conservation in a clear, transparent manner. These incentives must be greater than the benefits foregone by renouncing conversion to specialized agriculture. If necessary, they could be linked to conservation for precise periods of time. The implementation of such incentives would require international arrangements, within the framework of an overarching multilateral agreement. Such a system might, in principle, be based on market mechanisms (for example using intellectual property rights or contracts), on nonmarket mechanisms (such as an international fund), or on a mixture or combination of mechanisms (such as a system of payments from countries on the basis of the commercial benefits derived from the use of foreign PGRFA to an international fund, and utilized to pay countries and farming communities maintaining diverse PGRFA, for making specific commitments).6 These three possible mechanisms— especially the latter two—provide ways in which Farmers' Rights and benefit-sharing could be implemented.

The design of such mechanisms, in turn, raises a number of technical and legal questions, which condition their feasibility and enforceability; and these are discussed in the following sections.

A further approach, which avoids the burden of many separate bilateral agreements and the need to trace material in use with all the technical difficulties involved, is the development of a multilateral system shaped to the needs of agriculture, and which would not compensate individual farmers but facilitate access generally and, as benefits, mobilize finance for projects, programs, and activities for internationally agreed priorities, which promote conservation and sustainable use of PGRFA and, in particular, support small farmers holding biological diversity in their farming systems.

2.2.2. Technical issues

For the design and implementation of mechanisms for the appropriation of, or compensation for, values generated by PGRFA, the identity and origin of material must be identifiable, at least when bilateral instruments are concerned. A major question is how far this is possible, that is, whether it is possible to identify and track the geographic origin and distribution of plant genetic resources in use, over time. A document commissioned by FAO

Editors note: Chapters 9 and 10 describe some of the issues in designing such a fund and suggests some approaches to its implementation.

reviews the capabilities and limitations of genetic fingerprinting, and related modern techniques, in identifying PGRFA, and establishing their geographical origin.7

In this analysis, a distinction is made between an original accession, the population from which that accession was sampled, a single genotype from that accession, and a particular gene from an accession. While any individual organism appears as a phenotype,8 genetic fingerprinting and related techniques help to analyze the genotype and the particular combination of genes and gene variants (that is, alleles) it contains, independently of the environment in which it may be expressed. Diverse populations can be described in terms of genotype and allele frequencies.

It must also be noted that there are important differences in the genetic structure, as well as the genetic variability contained in landraces, when compared with the modern varieties that are the subject of plant breeders' rights. Current plant breeders' rights legislation applies only to propagating materials that are distinct, uniform, and stable, and can thus easily be identified, that is, to modern varieties. These contain much less variation than is usually present in a landrace. A landrace is the product, at a particular moment of time, of continuous, changing evolutionary processes that result in great variability in the gene pool, but which also provide the capacity to adapt to changing human needs (expressed through selection by farmers) and environmental conditions (expressed through evolutionary pressure). It is these characteristics that give landraces their high value as sources of plant germplasm. However, these same dynamics mean that the identification of a landrace is much more difficult than the identification of a modern variety.

Genetically inherited traits, such as flower color, growth habits, and disease resistance, can be used to identify PGRFA. More precise identification can also be obtained at the level of biochemical and molecular composition, especially through proteins and DNA-sequences.

The examples given in the Hardon, Vosman, and Van Hintum (1994) review for FAO show that, in specific instances, a number of techniques have been used to distinguish varieties and accessions. However, it is unlikely that such techniques can be routinely used to prove the identity of specific genotypes, or gene sequences, and even less the origin of unknown genetic material. There are several reasons for this:

(i) The high costs of some of the techniques, particularly sequencing and restriction fragment length polymorphisms (RFLPs).

(ii) The same, or similar, genetic material may exist, and be detected, in more than one place, especially in neighboring countries.

(iii) Different methods of analysis may give different genetic estimates for the same accessions, which may lead to disputes.

8 The expression of a particular genotype in a particular environment.

(iv) The complex pedigrees of most improved varieties resulting from a plant-breeding program complicate attempts to trace specific genes, and to infer their possible relative values.

In addition, it must be borne in mind that, on the rare occasions when the ultimate geographical origin can be identified, it may not necessarily benefit the country or region of origin, since this might not be the provider of the accession, which, in line with the CBD, will usually be the subject of any rights.9

All these were strong arguments in favor of multilateralism as the preferred option to deal with PGRFA.

2.2.3. Legal issues

There is a need to establish a clear distinction between sovereign rights and property rights, as well as between physical and intangible property. The recognition of sovereign rights over PGRFA is not equivalent to the attribution, or existence, of property rights over such resources: sovereignty only means that the State may, within the limits imposed by the nature of such resources, determine what type and modalities of property rights, if any, are recognized.

The values of PGRFA are derived from the genetic information contained in their germplasm. It is from this point of view that intellectual property rights become relevant. Intellectual property rights cover the intangible content of processes or goods: In the case of living forms, for instance, they may govern knowledge of the information contained in genes, or other subcellular components, in cells propagating materials or plants. However, the existence of intellectual property rights over such information is not equivalent to property rights over the individual organism that carries such information, but is the right to exclude third parties from producing or selling such organisms without prior agreement.

Intellectual property rights (in particular, patents and breeders' rights) cannot currently apply to crop landraces and farmers' varieties. An important question is whether it is technically sound, and legally feasible, to extend such rights, possibly in a modified, sui generis, form to cover such heterogeneous populations, and whether this would create adequate incentives for the conservation of landraces. The issue raises a number of complex legal problems. These include the definition of the subject of such rights, requirements for protection, who may become titleholders, the territorial validity and administration of the system, and the actual enforceability of rights. A proposal to extend intellectual property rights to landraces, if feasible, would also have to consider the transaction costs involved in the establishment and operation of the system.

9 Article 2 of the CBD.

In certain cases, the value of plant genetic resources may also be appropriated by contractual arrangements, whereby the suppliers of germplasm are remunerated, or otherwise ensured an equitable sharing in the benefits of their exploitation. Most contracts concluded until now relate to genetic resources of specific pharmaceutical or industrial value under a bilateral arrangement, rather than PGRFA, where multilateral approaches are likely to be more efficient.

Under either a multilateral or a bilateral approach, "material transfer agreements" (a form of contract) may be useful in regulating the transfer of material. Material transfer agreements typically regulate the use of the materials by the receiver, issues relating to intellectual property rights, and economic compensation to the supplying source.

Figure 1 below shows the relationship between access to genetic resources and related biotechnologies for food and agriculture, and between plant breeder's rights and Farmers' Rights, as well as the possible role of sui generis systems in ensuring harmony, coordination, and synergy among the various related international agreements in all relevant sectors, especially agriculture, environment, and trade. Intellectual property rights allow individuals and plant breeders to appropriate the benefit of applying biotechnologies to make commercial products. These rights are individual and have already been established for many types of biotechnologies. In contrast, farmers' rights and other forms of communal rights are the means by which benefits from the genetic resource inputs to the development of commercialized products can be obtained. These rights are collective and yet to be operationalized. The institutions governing intellectual property rights include the World Intellectual Property Organization (WIPO), the World Trade Organization/Trade Related Intellectual Property Agreement: (WTO/TRIPS) and the Union for the Protection of New Varieties of Plants (UPOV). Institutions governing farmers' rights and other types of communal rights are the FAO ITPGRFA and the CBD Article 8j.

National legislation for countries that are members of these international binding agreements needs to comply with international legal provisions contained in the agreements noted on both sides of Figure 1. This can be done through the establishment of sui generis systems of rights as referred to in Article 27.3.b of the TRIPs agreement and the recognition of rights through national legislation as ways in which to balance the appropriation of values from genetic resources and the biotechnologies that use them. One example is recently enacted Indian legislation, "The Protection of Plant Varieties and Farmers' Rights Act".

2.2.4 Implications for the design of the ITPGR

Many of these economic, technical, and legal issues have been overcome during the negotiation process of the ITPGRFA by innovative provisions. A key outcome was the development of a multilateral system shaped to the needs of agriculture, and which would not compensate individual farmers but facilitate access generally and share benefits, by mobilizing finance for projects, programs, and activities for internationally agreed priorities, which promote conservation and sustainable use of PGRFA, and, in particular, support small farmers holding biological diversity in their farming systems. This approach was developed to overcome the difficulties that arise from the frequent lack of knowledge of the origin of specific germplasm contributions; the difficulty of attributing value; the fact that the same diversity may be found in in situ conditions in a number of countries; and the onerous transaction costs of bilateralism.

Under the ITPGRFA, Farmers' Rights are the responsibility of national governments, and separate from the concept of the sharing of the monetary and other benefits of commercialization. The latter are expected to contribute to the implementation of a rolling Global Plan of Action periodically agreed by the governing body of the ITPGRFA.

In order to identify needs and priorities, national and regional plans of actions were developed in a country-driven process that culminated with the negotiation and adoption by 150 countries of the Global Plan of Action for the Conservation and Sustainable Utilization of Plant Genetic Resources for Food and Agriculture, at the Fourth FAO International Technical Conference on Plant Genetic Resources for Food and Agriculture in Leipzig (Germany) in 1996.10 This first Global Plan of Action identified 20 priority activities on PGRFA and estimated the funds necessary for their implementation.

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