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  Plant Breeders' Rights Create Winners and Losers
By
Jeroen van Wijk
 
Keywords:  Developing countries (general); Plant breeders' rights; Seed; Access to genetic resources; Argentina; Relation public-private sector.
Correct citation: Wijk, J. van (1995), "Plant Breeders' Rights Create Winners and Losers." Biotechnology and Development Monitor, No. 23, p. 15-19.

The plant breeders' rights (PBR) system is in use in most OECD countries as well as in some developing countries, but it is controversial. Private seed firms advocate PBR as it would stimulate innovation in plant breeding. Others argue that PBR may hamper the seed supply to farmers and may decrease genetic diversity. A notable problem in the controversy is that empirical evidence on the impact of PBR is lacking. A recent study has attempted to collect some experiences in Latin America, with an emphasis on Argentina.

In early 1995, 27 countries had PBR legislation enforced and were member of the International Union for the Protection of New Varieties of Plants (UPOV). Apart from these countries, Zimbabwe and Chile also have an operational PBR system, and, due to the new GATT agreement, many more countries will follow suit. Even though the PBR system is being considered by many countries, knowledge about its socio­economic effects is poor. Apart from one or two studies on the effects of PBR in the USA, no assessment studies have been carried out.
This situation was the reason for the Inter­American Institute for Cooperation on Agriculture (IICA, Costa Rica) and University of Amsterdam, the Netherlands, in collaboration with researchers in five Latin American countries, to collect information on the debate and impact of PBR in Latin America. The study, carried out in 1994, tried to find data on the effects of PBR on: (1) investments in plant breeding by private seed companies; (2) international transfer of plant material; (3) the access to public germplasm; and (4) the diffusion of seed among farmers.

PBR in Latin America
Argentina, Chile and Uruguay established PBR protection some 15 to 20 years ago. Colombia promulgated a PBR law in 1994, while Mexico is on the verge of introducing it. In all of these five countries a variety of interests groups have been advocating PBR: (1) domestic seed companies which want to protect their new plant varieties in order to obtain royalty income; (2) domestic cultivators of fruit and cut flowers for whom PBR protection is a condition to improve access to breeding lines and varieties from foreign breeders; (3) domestic public agricultural research institutes which face considerable budget reductions and are looking for additional income sources; (4) subsidiaries of foreign seed companies which want protection of their varieties and breeding lines in order to enter the Latin American seed markets; and (5) foreign governments which aim at an overall strengthening of intellectual property protection in Latin America. Foreign political pressure has been especially important in the case of Colombia and Mexico. Mexico, for example, is obliged to introduce PBR under NAFTA.
Opposition to PBR protection has come from the direction of public sector researchers and some NGOs which work with small­scale farmers, but is generally weak. The general public in most countries is little informed about the plans and potential effects of intellectual property protection in the seed industry.

Private investments
In three of the five countries, Argentina, Chile, and Uruguay, specific PBR authorities have been enforcing the law for some time. But Argentina is the sole country where the seed companies exercise their rights themselves. From 1990 onwards, the Argentinean breeders have actively controlled the seed market and have attempted to reduce unauthorized seed trade. Around 45 seed companies and institutes, both domestic and foreign, are presently members of a newly formed plant breeders association, named Asociación Argentina de Protección a las Obtenciones Vegetales (ARPOV). This organization represents more than 80 per cent of all plant breeding organizations in Argentina. ARPOV has designed licensing contracts and has its own auditors who check the books and shelves of seed dealers in order to trace trade in seed multiplied without authorization. The collective control by breeders and by the newly established PBR authority has been very effective in reducing unauthorized seed trade, at least in some commercial crops. The share of unauthorized bags of wheat seed decreased from around 80 per cent in 1990 to 20 per cent in 1994. With respect to soya bean seed these figures were 80 per cent in 1992 and 40 per cent in 1994.
The enforcement resulted in an increased royalty income on the part of the seed companies. According to economic theory, this remuneration should induce them to invest in further innovation. Did this happen in Argentina? Based on estimates of 11 of the 50 companies with plant breeding programmes in Argentina, both absolute R&D expenditure and the R&D to sales ratio in plant breeding were higher in 1992 than in 1986, before the enforcement of PBR commenced. The difference was highest with the subsidiaries of seed multinationals which specialize in hybrid crops, and was relatively low with the domestic seed companies which deal with self­pollinating varieties. Assuming that the figures indicate a trend, the question arises whether the increase in R&D can be attributed to the PBR enforcement. According to the Argentinean seed industry, it can. There was a broad consensus among the companies that, even though PBR enforcement had not led to more R&D expenditure, it has prevented the domestic wheat companies from reducing or even terminating their breeding activities. PBR protection has probably also triggered the reactivation of some soya bean breeding programmes.
The increase in R&D expenditure by seed multinational enterprises (MNEs) in Argentina seems not to be related to the PBR enforcement. MNEs increasingly protect parental lines of their hybrids under the PBR system, but the companies themselves indicated that a rise in their R&D budget was mainly due to changes in economic policies in Argentina and to the need to improve their competitiveness.

Structure of the seed market
The seed markets in the five Latin American countries consist of basically two segments: the hybrid seed market (for maize, sorghum, sunflower and some vegetables), and the seed market of self­pollinating varieties (wheat, soya bean, barley, etc). The former is almost exclusively supplied by seed MNEs, while the latter market is dominated by the domestic seed industry. Has PBR protection altered this division of labour? No, not in Argentina so far. High barriers to entering the sector of hybrid breeding have prevented domestic companies from becoming active in the hybrid market. Seed MNEs, on the other hand, have not entered the markets for self­pollinated crops. It seems that PBR may rather encourage the MNEs to take more risk in sending parental lines of a higher quality to Latin America for testing and propagation purposes. In this sense, it seems that PBR has sustained the existing division of labour between the foreign and domestic seed industry. In the long run the structure of the market may change when hybrids replace self­pollinating varieties in more crops. Enhanced involvement of MNEs in the seed market of the Latin American countries is more likely to occur as a result of an increased use of hybrids than of effective protection of PBR.

International transfer of plant material
One of the objectives of enacting PBR in the Latin American countries was the promotion of import of foreign germplasm. Germplasm includes modern cultivars, special genetic stocks, and genomic material. It is widely believed that an operational PBR system enables and stimulates the transfer of foreign advanced plant materials. This assumption, however, seems partly false.
PBR plays a role in two stages of technology transfer: (1) the physical access to plant material, and (2) the exploitation of this material. Whether PBR protection improves access to foreign genetic material depends on the intellectual property protection policy of the supplier. Offering PBR protection may improve access to germplasm that is concentrated with private seed companies in OECD countries. PBR seems to make it easier for Latin American companies to get access to breeding lines of grain hybrids, or high quality propagating material of ornamental or fruit varieties from North American or European seed companies. But major public suppliers of grain germplasm, such as the international agricultural research centres, are not directed to legal protection of their plant material. An operative PBR system will not improve access to the genetic material available at these centres.
The positive impact of PBR on access to foreign private germplasm may be limited, because most forms of exploitation of the obtained germplasm require the permission of the breeder. For obvious reasons it is unlikely that the foreign breeder will object to exploitation if it is additional to existing use of the variety. But when the exploitation interferes with, or substitutes, existing exploitation, the breeder may employ his right to limit or prevent exploitation. Export restrictions may be imposed upon receivers of the breeder's varieties to prevent parallel imports of material of these varieties into the main markets. This may happen, for example, with the emerging cut flower and fruit exports from developing countries, because this growing production competes with production that takes place within the USA or the EU, the main markets themselves. In 1994, Argentinean strawberry plant producers were denied permission to export strawberry plants to Europe by the American breeder and European licensees, because the Latin America plants competed directly with plants produced in Europe. PBR protection granted in Europe proved to be an effective non­tariff trade barrier.
PBR protection may also be used to prevent exploitation of the variety altogether. This is a likely scenario when the breeder is not an independent entity, but is also involved in the propagating and growing stages of the chain of production of a crop. The breeder's interest is then linked to that of the whole (national) industry such as is the case in many traditional tropical agricultural export sectors. Sugar cane breeders, for example, in some Latin American countries may protect their varieties in other countries in the region to prevent exploitation, in order to protect the export interest of the national producers. In this way, PBR may become a tool among developing countries who compete for the same export markets.

Public germplasm
In all five Latin American countries national public agricultural research centres are by far the main plant breeding organizations. These centres used to release their new varieties at a low price or free­of­charge among farmers, and they also licensed out their varieties to the private sector on a non­exclusive basis. Budget reductions, however, in combination with the knowledge that the private sector was benefitting from their work, made the institutes try to retain the commercial benefits of their work. The main centres in the five countries protect all their new varieties under PBR, or are intending to do so as soon as the law offers them such an opportunity. They consider PBR protection an important tool to defend their existence and to remain competitive vis­a­vis the private sector.
The increasing commercial perspective of the centres has a negative influence on the traditional free access to the centres' germplasm. Firstly, the more a centre depends on the commercial success of plant varieties it generates, the more it will assign strategic value to its germplasm. Consequently, a centre will increasingly deny third parties access to the traditionally public plant germplasm it administers. Secondly, collaboration with private companies also forces the centres to restrict access to their germplasm. Many centres enter into joint research projects with the private sector in order to carry out research that otherwise would be technologically or financially untenable. Private firms, however, demand protection for the material that comes out of the joint research. If the policy of unrestricted access were maintained, third parties would be able freely to use the results of research that has been carried out with capital of competitors. This would make private companies reluctant to enter into research collaboration with the institutes.
The seed industry, however, is far more optimistic about the effect of PBR on the availability of public germplasm. The industry stresses that access to public germplasm used not to be as free as is often assumed. In the absence of a formal procedure for germplasm transfer, it is the personal attitude of the institute's breeder that determines how open or restricted the access to germplasm actually is. These breeders have the capacity to assess the value of the material for the institute as well as for the receiver and, therefore, possess a key position in the germplasm exchange. Taking into account the fact that many public breeders were, for political reasons, reluctant to collaborate with the private sector, it may well be that companies found access to germplasm more restricted in the past.

Diffusion of seed
The impact of PBR on individual farmers depends on the way these farmers acquire their seeds. It is generally assumed that, overall in developing countries, most farmers save their own seed on­farm, or obtain seeds through unofficial seed trade. Around 80 per cent of the seed requirements in developing countries is met in this way. Seed saving is important for farmers, because it can considerably reduce seed costs and it makes farmers less dependent on external suppliers. Unofficial seed trade often takes the form of grain for seed exchanges with dealers or grain elevators. Grain/seed swaps involve a credit system in kind: the farmer receives a bag of seed from a dealer during planting time. This seed is actually conditioned grain that has been produced by other farmers. In return, the farmer hands over a double or triple quantity of grain to the dealer during harvest time. For the farmer, this transaction has advantages of lower seed prices and avoidance of cash payment. Payment in kind makes farmers less vulnerable to inflation and lessens the pressure to market their produce. The benefit for the dealer is that he/she can get three bags of grain for the price of one, and that it is an unofficial transaction. Both royalty and tax payment can be avoided this way.
Under the PBR laws of the five Latin American countries, seed saving of protected varieties remains unaffected. All countries have included the farmers' privilege into their legislations. This means that farmers are exempted from PBR. They are allowed to save seed in order to resow their land. Exchanging saved seeds with other farmers is not allowed, but in practice unverifiable.
The effect of PBR on grain/seed swaps is another story. This seed trade becomes illegal as soon as PBR law is promulgated. As was shown above, the Argentinean "black market" has been considerably reduced in the case of wheat and soya bean since the enforcement of PBR. The grain/seed swap may survive under PBR, but as a legalized practice it will be more expensive due to the royalties and taxes that the seed dealer, and finally the farmer will pay. The overall result for the diffusion of seed may be an increased number of farmers that will save their own seeds.

Winners and losers
The period that PBR has been enforced in the Latin American countries is too short to draw far­reaching conclusions about the impact of PBR in these countries. There are enough indications, however, that give a clue about where the winners and losers of PBR protection can be found.
Firstly, the seed industry will presumably be among the winners. PBR protection enables the companies to control the exploitation of their varieties and to obtain additional income. Whether this will stimulate them to invest more in plant breeding is difficult to answer. Many other macro­economic factors will play a crucial role here. An overall improved profitability of plant breeding may encourage more private actors to enter the seed sector. Those breeders who have access to germplasm available at public international research centres may reap most benefits, as their input remains relatively unaffected by PBR, while their output enjoys protection. Based on the Argentinean experience there is no indication that, as yet, foreign multinational seed companies have benefited more from PBR than domestic companies. However, issuing intellectual property titles opens the door for conflicts that have to be resolved in court. When it comes to law suits between local and the far larger foreign companies, it is obvious that the latter is in a better position. The strength of an intellectual property right title is generally a reflection of the financial capacity of the holder.
Secondly, cultivators of export crops, such as cut flowers and fruit, may initially benefit from PBR because of better access to foreign varieties. These benefits, however, may be counterbalanced by restrictions the breeder is enabled to impose on the Latin American licensees, especially because cut flower and fruit are grown for export, which may pose a threat for the local production in the export markets. Whether cultivators will win or lose from PBR depends on their opportunities to collaborate with licensees within the export markets.
Thirdly, public institutes may benefit from royalty income, which may provide new and badly needed additional capital to survive deregulation policies. The cost is that access to traditional public germplasm becomes restricted. The consequences of this development for other public and private breeders are as yet unclear.
Fourthly, it may well be that farmers will finally pay the bill for PBR protection, although not necessarily. PBR will make seed more expensive, because unofficial seed trade, which is an important channel for seed diffusion, is the main target of PBR. This may encourage farmers to save more seed on their own farm. This practice is still allowed under the legislations in the Latin American countries. By introducing PBR, however, this natural right of seed saving becomes a legal right, actually a ÒprivilegeÓ, which makes seed saving subject to political decision­making and consequently prone to restrictions. Farmers may also be affected by shifts in the research agenda of public institutes. Are these institutes following the commercial route only with some crops in order to keep breeding capacity in non­commercial crops? Or does reduction of their budgets result in a shift in breeding objectives away from commercially unattractive crops?
Jeroen van Wijk

University of Amsterdam, CEDLA, Keizersgracht 395­397, 1016 EK Amsterdam, the Netherlands. Phone (+31) 20 525 3251; Fax (+31) 20 625 5127; E-mail jvwijk@sara.nl

This article is mainly based on: Walter Jaffé and Jeroen van Wijk, The Impact of Plant Breeders' Rights in Developing Countries: Debate and experience in Argentina, Chile, Colombia, Mexico, and Uruguay. DGIS/IDRC. DGIS publication, forthcoming.



Contributions to the Biotechnology and Development Monitor are not covered by any copyright. Exerpts may be translated or reproduced without prior permission (with exception of parts reproduced from third sources), with acknowledgement of source.

 


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