Identifying the potential monetary and
non-monetary benefits arising from the utilization of plant genetic
resources under the Multilateral System
Modelling payments to the Benefit-sharing Fund
http
://ww
w.p
lan
ttreaty
.org
The questions
Is it possible to predict:
•How much money could become available to the Benefit-sharing Fund, as a result of the use of materials under an SMTA?
•And when and at what rate this money would become available?
We have made a model to do this, but:
•A model is only a theoretical construct that produces hypothetical estimates
•The currently available data is very weak
•Plant breeding will change rapidly and in unpredictable ways in the medium and long term
Caveats
•The model cannot propose changes to the Treaty or the SMTA, or alternative benefit-sharing systems
•This the prerogative of Contracting Parties
•And there are no indications from the Governing Body on which such speculation could be based
•The model therefore strictly reflects the actual provisions of the Treaty and the SMTA
The concept is simple
•The current annual commercial value of the world’s seed market can be estimated
•So the model first estimates what part of the world seed market will contain SMTA-materials at any time
•And applies this ratio to empirical market values
Basic assumptions
So, we model five crops/crop groups separately:•Wheat
•Rice
•Maize
•Other Annex 1 crops, taken together
•Non-Annex 1 food and agriculture crops, taken together
The Treaty’s scope is all plant genetic resources for food and agriculture
Basic assumptions•We start from the world ex situ holdings (accessions), as at December 2009, listed in The Second State of the World’s PGRFA. This covers all countries, and all International Institutions
•For each country and institution, we set a performance factor, i.e., the part of their holdings that they are currently making available under SMTAs
•Some countries are already making non-Annex 1 materials available under SMTAs
•Materials held by natural and legal persons are not included, because of a lack of data
PGRFA holders
H3: States, not CPs
HI: Contracting Parties
H2: Article 15 Institutions
H4: Institutions. not Article 15
SMTA use
Obligatory
World crop holdings and holders,
and SMTA useCrops
C1: Wheat
C2: Rice
C3: Maize
C4: Other Annex 1 crops
C5: Non-Annex 1 crops
Material reallyavailable
Annex 1
πPerformanc
e
VoluntaryNon-Annex 1
Annex 1πPerformanc
e
All crops
All crops
Non-Annex 1
Basic assumptions•A certain amount of material enters the Breeding Pool annually, both SMTA and non-SMTA material
•Over time, the ratio of SMTA to non-SMTA materials in the Breeding Pool will build up to the ratio of these materials in genebanks
•And the crossing of SMTA and non-SMTA materials (“diffusion”) will increase the ratio of materials in the Breeding Pool that are subject to SMTA conditions
•A factor allows for the possible avoidance of SMTA materials
Growth of SMTA materials in the Breeding pool
time
Factors influencing use of SMTA
material
Access
Breeding Pool
World Holdings
WithoutSMTAs
WithSMTAs
Annual increment
Materialsubject to SMTAs
Factors influencing
the growth of A/Bυ : Avoidance of SMTAsλ : Diffusion
Basic assumptions•The ratio of products subject to SMTAs to products not subject to SMTAs in the Product Pool will parallel the ratio of SMTA to non-SMTA materials in the Breeding Pool, after the average development time of a variety
•Factors that influence the build-up of products are research intensity and the ratio of improved to unimproved materials
•From the Product Pool, we can estimate the build-up of moneys due to the Benefit-sharing Fund
Growth of SMTA materials in the Breeding Pool
time
Factors influencing use of SMTA
material
Access
Breeding Pool
World Holdings
WithoutSMTAs
WithSMTAs
Annual increment
Materialsubject to SMTAs
Product Pool
Factors influencing
product development
Product development
Development time
Productssubject to SMTAs
Factors influencing product development
β : Research intensityγ : Ratio of improved/unimproved materials Consequences of γδ1 : Speed of uptake of materialδ2 : Proportion of material leading to products
time
Factors influencing use of SMTA
material
Access
Breeding Pool
World Holdings
WithoutSMTAs
WithSMTAs
Annual increment
Materialsubject to SMTAs
Product Pool
Factors influencing
product development
Product development
Development time
Productssubject to SMTAs
Benefit-sharing
FundPayments
Factors influencing
payments due
Payment obligations
Payments due to the Benefit-sharing Fund
•The ratio of products subject to SMTAs to products not subject to SMTAs is applied to the empirical current market values
•The use of IP decides whether payment is mandatory or voluntary
•The mandatory payment rate (SMTA Art. 6.7) is 1.1% - 30% = 0.77% of annual sales
•The voluntary payment rate (SMTA Art. 6.8) is assumed to be the same, and a performance factor is applied to simulate real payment
Basic assumptions
Q1Voluntary
Q2 Mandatory
: Available without restrictionQ1
Q2: Not available without restriction
ttime
ιIP status
Levels of payment
Maximum
Minimum
ρEffective payment
Mandatory and voluntary payments
Mar
ket v
alue
Subjec
t to
SMTA
s
Wheat
Rice
Maize
Other Annex 1 crops
Non-Annex 1 crops
V1 T
V2 T
V3 T
V4 T
V5T
V1
V2
V3
V4
V5
Commercialized products
Benefit-sharing
Fund
Annual payment
obligations
Q2: Article 6.8
ρEffectiv
e payme
nt
Voluntary
Q1: Article 6.7
Mandatory
μPaymen
trate
ιIP
status
The effect of IP: voluntary and mandatory
payment
US$ billion
V1: Wheat 3.07
V2: Rice 1.87
Genetically modified maize 5.06 Conventional maize 3.80V3: Total Maize 8.86
Other Annex I (genetically modified) 0.26 Other Annex I (conventional) 5.34V4: Total Other Annex I 5.60
Non-Annex I (GM) 5.25 Non-Annex I (no GM) 12.15V5: Total Non-Annex 17.4
V1>V5: TOTAL 36.8
Values of the international seed market
World crop holdings, and material available under SMTAs
SourceHoldings: Second State of the World’s PGRFA = WIEWSAvailability: Reports to Treaty Secretariat
The model can investigate•The effects of Parties effectively making or not making available their holdings
•The effects of the number of Parties increasing
•The relative values of Annex 1 and non-Annex 1 materials in world holdings
•The value of non-Annex 1 materials that some Parties are already making available under SMTAs
•The relative values of mandatory and voluntary payments
•The effects of avoidance of SMTA-materials
Holdings made available and income
Current membership, current availability, 50% voluntary payments, Non-Annex 1 currently available
Annual income at 2081
US$ millionsWith current holdings 28At 33% availability 38At 66% availability 49At 100% availability 60
Current membership, current availability, 50% voluntary payments, Non-Annex 1 currently available
Annual income at 2081 US$
millionWheat 5.7Rice 2.6Maize 10.2Other Annex 1 8.9Non-Annex 1 0.7
Holdings currently available and income, by crop
Expanding membership and income
100% availability, 50% voluntary payments
Annual income at 2081
US$ millionsWith current membership 60With three largest non-members 73With all possible members 93
Countries and International Institutions
100% availability, 50% voluntary payments
Annual income at 2081
US$ millionsInternational Institutions,
100% availability 21.4
Countries, current availability 8.2Countries, 100% availability 100.0
This under-represents the IARCs, as only their ex situ holdings are covered, while most of their distributions are of improved materials from their breeding programmes. 2011: For Annex 1: 71% of distributions For Non-Annex: 31% of distributions
Mandatory and voluntary payments
Current membership, 100% availability, Non-Annex 1 currently available
Annual income at 2081
US$ million0% 23.033% 47.466% 69.4100% 97.0
Mandatory and voluntary payments
Company 1cooperates
Company 2 defects
Company 2 cooperates
Company 1defects
0,0 -,+
0,0+,-
A GAMES THEORY ANALYSIS
If Company 1 pays a voluntary payment (cooperates), and Company 2 does not (defects), Company 2 has a strategic advantage over Company 1, which can:
•be taken as increased profit,
•provide an R&D advantage, or
•be used to lower the sales price of a competitor product
The advantage is always to the company that defects, and represents a substantial part of profits.
•Profit in plant breeding is low. If we assume a profit range of 4% to 6%, 0.77% of sales equals 19.25% to 12.83% of profits.
No Company can therefore make the first move and cooperate, because of the risk that other companies defect.
Current membership, 100% availability, Non-Annex 1 currently available
2081, 0% voluntary paymentUS$
millionsMaize 21.0Other Annex 1 1.5Other Non-Annex 1 0.3
Mandatory payments only (0% voluntary payment), and income
by crop
Current membership, 100% availability, 50% voluntary payment, Non-Annex 1 currently available
Avoidance of SMTA-materials
In other scenarios, avoidance is: Wheat, Rice, Other Annex 1 5%Non-Annex 1 0%Maize 13%i.e., half the market share of GM maize
In this scenarios, avoidance is: Wheat, Rice, Other Annex 1 10%Non-Annex 1 0%Maize 26%i.e., all the market share of GM maize
Annual income at 2081 US$ millions
At higher avoidance 56At lower avoidance 60
It is important to consider avoidance in combination with the effective voluntary payment
In this graph, ALL the area under the green line derives from voluntary payments
Annex 1 & Non-Annex 1 values
100% availability, 100% voluntary payments
This scenario shows the theoretical maximal annual income values for the Treaty, because it assumes 100% availability and 100% effective voluntary payment
Annual income at 2081, by increased membership and possible expansion
of Annex 1
US$ millions
Summary
All at 50% voluntary payments
Members Availability Annex 1 Non-Annex 1 US$ millions
Current Current Yes No 28
Current 100% Yes No 60
All 100% Yes No 93
Current 100% Yes Yes 100 All 100% Yes Yes 176
Voluntary payment : 50%
Annual income at 2081, by increased membership and possible expansion of Annex
1
Income at 2081 , under various scenarios
2030 2050 2081
US$ millions
An alternative set of
projections, which
do not include
include expansion of
the list
Members Availability Voluntary Avoidance payment
Current Current 50% Lower
Current 100% 50% Lower
Current 100% 50% Higher
Current 100% 100% Lower All 100% 50% Lower
How long would it take under these assumptions?
The Time Factor: Years to current annual target
Years to 50% of theoretical maximum
Conclusions
Box, George E. P.; Norman R. Draper (1987)
Empirical Model-Building and Response Surfaces
“Essentially, all models are wrong,
but some are useful.”
ConclusionsWith the strong caveat that this is only a model!!!
•Possible annual income is large, if all factors are favourable, but after many years
•If current Parties’ Annex 1 materials were available today, US$ 24 million could be reached by 2030
•With current availability, only US$ 10 million would be reached by 2030
•If all possible countries joined and made their materials available today, US$ 39 million could be reached by 2030
So a priority must be for all
Parties to make their m
aterials
available immediately
Conclusions
The model has shown:
•The key importance of the ex situ collections of International Institutions in the current situation
•The substantial value of the non-Annex 1 materials that some members are already making available under SMTAs
•That a decision by the Governing Body to expand Annex 1 could greatly expand the flow of income to the Benefit-sharing Fund.
Conclusions
These projections are crucially dependent on two factors:
•Substantial voluntary payments actually being made, and this seems very unlikely, for valid games theory reasons
•Avoidance of SMTA materials crops that use IPRs (almost entirely maize), which seems to be happening
So the are the other questions
that the Governing Body need
to address, in order to
put
monetary benefit-sharing on a
predictable and sustainable
basis
Conclusions
So:
•Build-up of income will be slow
•The potential income is high
•But current projections are low, unless the Governing Body can address the main bottle-necks: avoidance and low voluntary payment
THANK YOU