The International Consortium on Agricultural Biotechnology Research (ICABR)
Impact of Terminator Technologies in Developing Countries. A Framework for Economic Analysis
C.S. Srinivasan, University of Reading
Colin Thirtle, Imperial College, University of London and Department of Agricultural Economics, Extension and Rural Development, University of Pretoria, RSA
The appropriability of the returns to investment in plant breeding presents peculiar problems because of the self-reproducing nature of seeds. Problems in appropriation are likely to lead to market failure, which traditionally has been overcome by large-scale public investment in plant breeding. The terminator technology is not merely the outcome of scientific advancement; it is also an innovation induced in response to the problems of appropriability and weaknesses in existing intellectual property rights (IPR) institutions. There have been several attempts to tackle the weaknesses of IPR institutions and improve appropriability: the evolution and development of PVP and plant patent laws bear testimony to these efforts. Terminator technology may provide a technological solution to the problem of appropriability, but it must be seen as a culmination of these efforts.
The simple model used in the paper shows how appropriability of returns from investment in plant breeding is extremely sensitive to farmer seed replacement behaviour. Terminator technology, which is equivalent to the case in which farmers invariably replace seed each year, can bring about a dramatic improvement in the appropriation of returns. There is evidence from the US that research effort is related to the level of appropriability. Research investment in hybrid corn is four times that in wheat - this ratio is very close to ratio of appropriability between hybrids and self-pollinated crops. Terminator technology has the potential to significantly raise the level of research effort in self-pollinated crops - with attendant consequences for productivity. We support these observations with a review of the differential in growth rates between hybrids and open pollinating varieties over the last 50 years for a wide range of countries, which shows that the differences are significant.
By adhering to the TRIPs Agreement, developing countries have already committed themselves to provide IPRs for plant varieties to provide better returns for breeders. Terminator technology is only a better technique of enforcing IPRs; it does not involve a change in the principle of what is legitimately appropriable. But, developing countries face many difficult choices in responding to this technology. If a large part of varietal improvement in the future is going to be bundled together with terminator technology, then it may not be possible for them to ignore the technology altogether. Productivity is of even greater concern to them than it is to developed countries. Potential productivity gains will have to be weighed against the social costs arising from the coercive element of the technology. What they need at this stage is the capacity to evaluate its ecological, economic and social impacts, selectively apply it where appropriate and upgrade their regulatory system to deal with the technology. They will need to seriously think about appropriability and intellectual property rights.
Determinants of GMO use: a survey of Iowa corn-soybean farmers acreage allocation
Corinne Alexander, UC Davis
Agricultural biotechnology allows the radical alteration of crop characteristics and has expanded the farmers set of seed choices. Corn and soybean farmers have perceived benefits to traits such as herbicide and insect resistance and have rapidly increased their use of genetically altered seeds. In 1998, genetically modified seeds accounted for at least 20% of U.S. commercial corn acreage and 40% of U.S. soybean acreage (Fernandez-Cornejo et al., 1999). Producer adoption was not matched by public acceptance. In spring, 1999, European consumers and governments expressed serious concerns about the use of genetically modified organisms (GMOs). American agricultures reaction was limited; some farmers decreased their use of GM seed and some seed companies exchanged explicitly forbidden stacked traits for approved varieties. Overall, GM seeds still accounted for 37% of commercial corn acreage and 47% of commercial soybean acreage in 1999 (Carey et al., Business Week, December 20, 1999).
GMO use in the food chain has become even more contentious over the past year. Our paper examines the impact of agricultural biotechnology on U.S. producers production decisions by assessing the factors influencing their GM adoption decision. We assess the effect of incomplete public acceptance of GM foods on farmers planting decisions. We obtained information regarding planting intentions and the adoption decision from a sample of Iowa corn farmers in two ways: interviews and focus groups, and a survey mailed to one thousand producers.
In December 1999 and January 2000 we conducted interviews and focus groups with corn and soybean farmers in Iowa and found that farmers are aware of the potential marketing difficulties that may emerge as a result of the uncertainty about public acceptance in Europe, Japan, and potentially the U.S. Overall, our focus group findings did not establish a distinct trend regarding the use of GM seed. For corn, most intend to continue using GMOs unless a premium emerges for non-GMOs. For soybeans, very few plan to reduce their use of GMOs. Even so, some plan to delay their final seed decision, in order to see the effects of the GMO controversy. Unless there is a significant development before planting season, the net effect on hybrid choices and acreage allocation is likely to be relatively small.
In this paper we compare these preliminary focus group findings to those of a pre-planting survey of Iowa grain farmers conducted in late February and early March. The survey has two components. The first component focuses on actual acres planted in both conventional and genetically altered corn and soybeans for 1999 and planting intentions for 2000. The second component focuses on farmers adoption decision process. The survey gathers information about sources of information about corn seed, farmers corn production practices, marketing opportunities for corn, and attitudes towards biotechnology, risk, and family farms. Drawing on our focus group and survey data, we will discuss the impact of agricultural biotechnology on producers and discuss the impact of uncertainty regarding public acceptance of GM crops on producers planting decisions.