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Source: James (1998 and 2000).

Source: James (1998 and 2000).

technological epoch for developing country agriculture. The main differentiating features of agbiotechnology that have implications for poverty reduction are discussed in the following sections.

4.3.1 Technological features of agbiotechnology i) Research on traits separated from research on varieties. Compared to traditional breeding GRI and II), where research on trait identification was confounded with variety development, biotechnology dissociates research on traits (functional genomics) from product development (insertion or activation of genes corresponding to traits in selected varieties). Results of agbiotechnology research on traits may consequently be used over a wide range of local conditions. Hence, if the technology on relevant traits, derived through functional genomics, exists and can be accessed through markets (e.g., Chapter 18), contracts, or as public goods, and if the process technology to insert or activate these traits in local varieties is widely available, developing countries can produce improved varieties without the need to engage in fundamental research. This has powerful implications for the division of labor in research between developed and developing countries and the type of capacity building needed in the latter, in this case principally to screen and adapt these technologies to their own needs.

ii) Potential environmental externalities and consumer risks. New varieties under GR research were achieved by natural crossings. Biotechnology, and particularly genetic modification (the creation of GMOs), creates new varieties by artificial gene transfers, with yet poorly known risks for the environment and consumers. As a result, experi-mentation on and the diffusion of agbiotechnology innovations need to be accompanied by specific regulatory procedures to safeguard environmental and consumer safety that carefully weigh risks against benefits of innovations. Experimentation on biosafety is a public good in which private firms cannot be expected to invest sufficiently. This is an area where public research is an essential complement to private research since private biotech products cannot be released unless their biosafety implications are known and appropriate regulatory procedures designed. This offers a powerful rationale for private firms to make coalitions to fund public and CGIAR research. As the recent slowdown in the spread of GMO crops has demonstrated, investments in private research that get ahead of advances in complementary public research can create a huge waste of resources.

iii) Biodiversity as the source of research materials. New genes to be inserted in cultivated varieties are expected to be found in the stock of global crop germplasm biodiversity. The option value of preserving biodiversity in situ and ex situ will thus be enhanced (Koo and Wright, 2000). Incentives to establish property rights over biodiversity and to invest in biodiversity conservation are thus important side effects of progress in agbiotechnology. The large collections of native seeds (landraces) held in trust by the CGIAR are important international public goods (respecting farmers' rights). Their maintenance should be secured by permanent endowments instead of depending on the annual budgets of repository research centers, with the risks that this implies.

4.3.2 Role of IPRs i) IPRs and access to biotechnology materials for the LDCs. The current policies on the patenting of life forms in the United States allow for the private appropriation of knowledge that makes up the basic "raw materials" of biotech research (Wright, 1998). There is serious concern that such appropriation is creating hurdles for access to the relevant materials for agricultural research in developing countries, public sector institutions, and the CGIAR and for downstream product development. Some of the patents that have been granted are very broad and can be used to block others from accessing related discoveries. Evolution of patent law in the United States is, however, in full progress, as it is modified by case law without being submitted to open national debates. Governments, both in industrialized and developing countries, are pressed by public concerns with biosafety, and by their own interests in preserving the competitiveness of the industry. They are also constrained by World Trade Organization (WTO) requirements to introduce IPR legislation on life forms, potentially leading to changes in current national IPR systems.

ii) Market failures for IPRs and industry concentration. A large number of technological innovations are involved in the development of a final product, and ownership of these innovations is often scattered over many institutions. Rapid concentration of patent ownership in the corporate sector through acquisitions and mergers evidences these technological complementarities in product development and existence of serious market failures in the acquisition of patented materials needed for product development (Graff, Rausser, and Small, 2003). As the Bt example shows (Fig. 18-1), university and public institutions held 50% of the stock of patents in 1987, independent biotech companies and individuals held 77% of the stock in 1994, and the industry's "Big 6" firms (AstraZeneca, Aventis, Dow, DuPont, Monsanto, and Novartis) held 67% of the stock of patents in 1999. As can be seen from Fig. 18-2, 75% of the patents controlled by the six largest firms in the industry in 1999 had been obtained via acquisitions of subsidiary biotech and seed companies. Concentration fueled by market failures for IPRs shows that LDCs and the CGIAR will have considerable difficulties engaging in biotech-enabled research and development until an effective means of accessing the rights to utilize biotech knowledge, such as a IPR licensing clearinghouse (Chapter 18), becomes available.

in) IPRs and access to GMO seeds. Property rights over seeds can be established by (1) providing hybrid seeds, which because of their natural biological mechanism are undesirable for replanting after the first generation,

(2) introducing terminator genes in open-pollinated varieties, thus artificially creating a biological mechanism similar in effect to that of hybrid seeds, and

(3) enforcement of the legal prohibition created by IPRs to reproduce seeds of open-pollinated varieties. Failure to provide property rights over seeds via legal means can be expected to (1) limit research on biotechnology to hybrids and terminator-charged varieties, (2) limit insertion of new traits to a narrow range of local varieties, implying suboptimal seeds for the poor and loss of biodiversity through oversimplified farming systems, (3) increase reliance on contract farming by seed producers, with increased concentration of control over the industry, and (4) raise the price of seeds as producers attempt to recoup the cost of research and development in one single sale, increasing liquidity constraints for smallholders exposed to credit market failures. In any form, IPRs give

Fig.

100 n 90 80 ■ 70 ■ 60 ■ 50 ■ 40 ■ 30 20 10 ■ 0

18-1. Proportions of ownership of the stock of Bt patents in force in 1987,1994, and 1999

■ University & Public Institution

□ Independent biotech & Individual

□ Other corporate

Stock Stock Stock in 87 in 94 in 99

Fig. 18-2. Source of patents controlled by the Big 6 firms in 1987. 1994, and 1999

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