Intellectual Property Rights, Biotechnology And Developing Nations

By the term “biotechnology” I am referring to the applications of modern microbiology to develop technologies. The term would include genomics, proteomics, recombinant DNA technologies, etc.

How can biotechnology help us to reduce the burden of disease? How can it increase food and agricultural production? There are other applications, including waste processing, environmental reclamation, mineral beneficiation, biomass conversion, and other industrial processes. However, let me focus on health, food and agriculture.

In a global perspective, the burden of disease falls most heavily on poor people, and those people are concentrated in developing nations. Similarly, the most pressing needs to increase food and agricultural productivity are found in meeting the food and economic needs of poor people in developing nations. Thus I believe the priority applications of biotechnology should be to meet critical needs of poor people in developing nations.

Key Technologies

In the health field, we look to biotechnology to contribute to the development of new diagnostics, vaccines and therapeutic pharmaceuticals. Other health applications exist, such as in the control of disease vectors. The biotechnology involved can be applied to animal as well as human health, and thus can benefit productivity of livestock.

In agriculture, we also look to biotechnology for development of improved crops (including the creation of genetically modified crop varieties). There are also applications in crop disease control, reducing post harvest losses, and biological nitrogen fixation. There is a significant field of application of biotechnology to food processing.

Scientific Research versus Technology Development

For convenience, one can distinguish between:

· Fundamental science, the results of which are generally published in scientific journals and become common property;
· Applied research, which involves the application of scientific methods to solve practical problems, and which may result in public goods or privately held intellectual property;
· Technology development, which includes the development of new products or processes.

A linear model of progression from fundamental science to applied research and then to technology development and commercialization was once widely used. However, most recognize that the processes involved are more complex than implied by the linear model, and that there is a complex interplay between fundamental and applied research and technology development.

Comparative Advantage

Economists have long known that countries should produce goods and services for which they have comparative advantage. They should trade the surplus production with other countries to obtain the additional goods and services that they need. If the system of international commerce works correctly, the patterns of production match the patterns of comparative advantage, and every country does better through specialization and trade than it would by closing its borders and producing solely for domestic markets.

Biotechnology, as described above, is a new field. As far as I know, the first study of research priorities in biotechnology for developing nations was done by the National Academy of Sciences in 1982. However, biotechnology capacity is developing rapidly in many countries. Thus the pattern of comparative advantage in biotechnology is evolving. However, I suggest that we can understand some aspects of that evolution, and make some useful suggestions as to where efforts in building biotechnology capacity are likely to be useful.

Of course, if international transactions are too expensive (due for example to the cost of transportation), then countries can’t exploit their comparative advantages through trade. The improvement of information infrastructure and the reduction of transportation costs have radically increased the variety of goods and services that can be traded profitably, and globalization has resulted. Thus not only is the capacity to do biotechnology evolving, but the costs of international transactions in biotechnology are also changing rapidly.

As an aside, let me remind you of the difference between “competitive advantage” and “comparative advantage”. Competitive advantage refers to the advantage that a country obtains by producing some product at a lower cost or with higher quality than others can produce that product. Comparative advantage in contrast depends on the ratios of production costs for products in different countries. When the ratios are different, two countries can both prosper by trading the products they produce with more comparative efficiency for those they produce with less comparative efficiency. Of course, countries tend to have a comparative advantage in producing those products for which they have the greatest competitive advantage.

A recent report by RAND illustrates the complexity of the factors that combine to create the competitive advantage. In general, the report finds that richer countries, with more advanced scientific and technological capacities, enjoy competitive advantages in high technologies, including biotechnology.

The experience of the various tigers suggests that building competitive advantage in high technology areas is a long process. Highly qualified human resources are needed, and it takes time to build a system to educate and train the scientists and technicians needed; those trained before they can be utilized in their fields leave. Clusters effects from the multitude of firms that are involved in producing high tech products and supporting the producing firms take a long time to evolve. Institutional development also takes time.

The Geography of Comparative Advantage

It was once assumed that comparative advantage came largely from natural resources, while today it is often assumed that it derives from knowledge resources. In the case of biotechnology, comparative advantage is also based on facilities and institutions.

New crop varieties must be developed under the conditions similar to those in which they will be grown, and thus there is a comparative advantage for at least part of the product development to be done in developing countries. So too must new vaccines and drugs be tested in the populations they are to serve, against the local varieties of the diseases. Here too, there is a comparative advantage for part of the research and development process to be completed in developing countries.

On the other hand, fundamental research is best done where there is strong funding for such efforts, as well as a strong cadre of researchers, well-established research teams, well-equipped laboratories and good scientific libraries. Thus there is a comparative advantage for parts of the biotechnology R&D enterprise to be conducted in scientifically-advanced, developed nations.

Specific pharmaceutical firms and specific agro-industries have technological expertise developed from decades of experience in biotechnology and related industrial processes, suites of relevant intellectual property rights, and linkages with firms providing complementary inputs (in biotechnology clusters). These factors together also create comparative advantages in parts of the biotechnology R&D process.

Still another part of the biotechnology R&D network are the research intensive universities, which not only carry out part of the R&D, but which train the people needed in the other R&D laboratories. These too are a geographically localized resource, mostly occurring in scientifically-advanced countries.

I would suggest a key problem is the articulation among the organizations carrying out these different biotechnology R&D functions. Most obviously, the critical capacities located in developed countries are not adequately brought to bear on the priority problems centered in less developed nations.

How to Improve the Situation

Clearly a mixed solution is required, combining many factors.

Some governments and foundations are subsidizing researchers doing upstream biotechnology research in ways that encourage them to focus on topics relevant to global priority concerns. The innovations by the Gates Foundation illustrate the power of this approach. Linkages between such researchers and corporations with downstream development capabilities have been improved by changes in policy and laws. Efforts have been made to assure market demand for commercial biotech products in developing countries. Such efforts appear important, and I think they should be continued.

Foreign direct investment in agro-biotech and pharmaceutical industries in developing countries seems to me a critical ingredient that should be stimulated and enhanced. Not only does FDI provide needed capital for the expansion of biotechnology capacity, but it enhances technology transfer to the developing world for those many techniques dominated by industrial firms.

Developing countries should create first the biotech R&D capacity to field test new medications and vaccines, to adapt new crop varieties to local conditions, and to produce products for local and regional markets. From this base, they may well expand into other areas of biotechnology capacity. Thus did the newly industrialized countries often start with simple technological functions in the information and communications technology field, and move upstream to more innovative research and development as they deepened technological capacity.

It would also seem important to develop a cadre of biotechnology experts for each developing nation, at least adequate to serve as gatekeepers. Nations with aspirations to move up in biotechnology capacity might also consider not only developing the basic industries, but also developing the capacity to train people in biotechnology. This may but need not involve research training to the PhD level.

Intellectual Property Rights

Various kinds of intellectual property rights (IPR) influence the field of biotechnology, including patent rights for products and processes, plant breeder rights, and trademarks.

Countries can be characterized by their balance of payments for intellectual property. Some countries receive more income from the licensing of intellectual property abroad than they pay for licensing intellectual property from abroad. Similarly, industry in some countries makes more money from selling protected products abroad than is spent on products from abroad in those countries. Not surprisingly, countries with the most to gain from IPR have been the most active in promoting globalization of IPR. Indeed, historically only as countries went through the industrialization process did they strengthen IPR protection.

In recent years, international trade agreements have resulted in increased pressures for and interest in strengthening IPR regimes in developing nations. In the newly industrializing nations, this factor has been added to the increasing self-interest in strong IPR regimes, while in the least developed nations it has been hoped that any added costs to the country due to increased respect for foreign IPR would be balanced by advantages due to improved exports of products for which those nations have comparative advantage.

There has been an interest in harmonization of IPR. This seems to make sense in a number of situations. In the case of the European Union, it may contribute to the overall economic integration of the countries of Europe. In Francophone Africa, which already has a considerable integration of IPR systems, harmonization may offer some efficiency to poor countries helping them avoid duplication of efforts.

I suspect that countries seeking to attract investment from multinational corporations will benefit by having IPR regimes that enable corporation executives to feel comfortable that their companies intellectual property will be safe. There might be a small additional benefit if such countries provide IPR regimes that are also familiar to those corporate executives and their lawyers.

Ultimately, however, harmonization of IPR will provide only limited advantages to countries seeking to build the capacity to bring biotechnology to bear on development priorities, and then only in the presence of other supporting factors. A strong IPR regime is not a panacea.