The Global Multilateral Benefit-Sharing Mechanism: Where Will Be The Bretton Woods Of The 21st Century?

By Joseph Henry Vogel, professor of economics at the University of Puerto Rico-Río Piedras

[Note: a Spanish translation of this article is available here.]

Bretton Woods is the name of a place and also of a system. Bretton Woods-the-place boasts the Mount Washington Hotel and majestic views of the White Mountains of New Hampshire. Bretton Woods-the-system is the set of financial rules drafted during an international conference held at the hotel from 1 to 22 July 1944 [1]. The system created monetary order and allowed postwar recovery. For economists, Bretton Woods signifies the system. Its success illustrates how economic thinking can penetrate the political sphere and make lasting change. John Maynard Keynes, the Darwin of economics, led the British delegation.

Mount Washington Hotel, a National Historic Landmark (Bretton Woods)

Similar thinking has not transpired at any of the Conferences of the Parties (COP) to the 1993 United Nations Convention on Biological Diversity (CBD), even though conservation is as economic as is finance. The problem lies in the language of the CBD. “Genetic resources” are defined as “material”, which is interpreted as matter [2].

Were genetic resources instead interpreted as information, [3] economics would imply that “bounded openness” be the policy for “access to genetic resources” and “the fair and equitable sharing of benefits” (ABS), which is the third objective of the CBD [4]. But to so persuade the delegations to the COP, a willingness to be persuaded must first exist [5]. Bretton Woods is again instructive. The merciless destruction of Europe and Asia by both Axis and Allies prepared the psyche of the 44 nations who met in Bretton Woods. To prevent WWIII, concessions by the victors would be a small price to pay–a prescient insight that Keynes wrought from the Paris Peace Conference of 1919 [6]. The threat today of ecosystem collapse on land, air and sea should likewise persuade Users to concede benefits to Providers. However, as argued in the previous essays in this trilogy, concessions are not even necessary. Bounded openness is a Win-Win situation that can pay for itself through the emergence of biotechnologies which would have otherwise been stymied by Prior Informed Consent, Mutually Agreed Terms and Material Transfer Agreements (MTAs).

Bretton Woods was a radical departure from the competitive devaluations and the restrictive trade policies that vexed the interwar years [7]. In a similar fashion, bounded openness departs from competitive MTAs and the restrictive measures of ABS Competent National Authorities. However, bounded openness is far less contingent on achieving first this and then that, than was Bretton Woods. One thinks of the establishment of the International Monetary Fund and the World Bank Group. The execution of bounded openness will draw from existing institutions, and the system itself would become a means of financial support. The legal vehicle is Article 10 of the Nagoya Protocol (NP), titled “Global Multilateral Benefit-Sharing Mechanism” (GMBSM).

Stepwise, bounded openness can be summarized:

Unencumbered access: Parties reconfigure ABS Competent National Authorities concomitant with the ratification of an amendment to the NP that enables the GMBSM [8];

Disclosure: Intellectual property institutions adapt application procedures to include a Yes/No query or other method, [9] regarding the utilization of natural information;

Royalties upon commercialization: On net sales disclosed annually, the GMBSM charges a percentage, the negotiation of which is foreseen in the aforementioned amendment to the NP, with income held in escrow [10];

First-round cost estimates: From the royalties in escrow, GMBSM engages (a) molecular biologists to estimate the costs of determining homologous diffusion of natural information as well as diffusion in distinct lineages, should convergent evolution be evidenced, and (b) ecologists to model the habitat of species so identified;

Financial threshold of estimates never met: Royalties in escrow revert to GMBSM upon expiry of intellectual property associated with the utilization;

Financial threshold met: From the royalties in escrow, GMBSM engages biologists and ecologists to conduct aforementioned studies;

Second-round estimates: From the royalties in escrow, GMBSM engages field biologists to estimate the costs of “ground truthing”, i.e. verification of the presence of species in the habitat(s);

Financial threshold never met: Royalties in escrow revert to the GMBSM upon expiry of the intellectual property associated with the utilization;

Financial threshold met: GMBSM authorizes studies and distributes royalties annually according to share of habitat positively ground-truthed and opens a temporal window to evaluate new claims for, or challenges to, Provider status;

Expiry of associated intellectual property: The claims of Providers also expire and natural information enters public domain [11].

Each step invites elaboration. Some will require the design of rules to break foreseeable impasses [12]. Although the system as a whole may seem daunting, each step is tractable. Patience is required. Nevertheless, impatience is understandable given twenty-five years of failed ABS measures. Satirizing a famous verse from Bob Dylan, the economist will ask: How many measures must be proposed, Before comes a Bretton Woods? [13] Eight years prior to the historic conference in New Hampshire and at the depths of the Great Depression, Keynes wrote that the power of vested interests was “vastly exaggerated” and that economic thinking would prevail [14].

Optimism enables action. Whichever Conference of the Parties ushers in bounded openness will someday find, as with Bretton Woods, that the location of the conference has become synonymous with the system. When that day comes, the place will be a landmark in the natural history of the 21st Century.

[Note: This is the third in a trilogy of essays on “bounded openness” as the solution to “access to genetic resources” and the “fair and equitable sharing of benefits”. Presentation of the arguments will be made at the Fourteenth Conference of the Parties to the Convention on Biological Diversity, in a Side Event sponsored by the Peruvian Society of Environmental Law and the International Centre for Trade and Sustainable Development. The first two essays are available here (first) and here (second).]

References:

[1] The international conference was officially titled “United Nations Monetary and Financial Conference”, where “United Nations” did not mean the affiliation now associated with the intergovernmental organization established in 1945.

[2] JH Vogel. 2018. Not just a matter of matter: ‘The way forward’ in the CBD and NP. IP-Watch. Available at http://www.ip-watch.org/2018/09/07/not-just-matter-matter-way-forward-uncbd-np-half-earth/

[3] For the purposes of ABS, information must be further classified as either artificial or natural, where the latter means any non-intentional distinction, non-uniformity or difference produced by something alive or once alive.

[4] JH Vogel, K Angerer, M. Ruiz Muller, O. Oduardo-Sierra. 2018. Ending Unauthorised Access To Genetic Resources (aka Biopiracy): Bounded Openness. IP-Watch. Available at http://www.ip-watch.org/2018/04/06/ending-unauthorised-access-genetic-resources-aka-biopiracy-bounded-openness/

[5] JH Vogel. 2013 (December). The tragedy of unpersuasive power: The Convention on Biological Diversity as exemplary. International Journal of Biology, 5 (4): 44-54. http://www.ccsenet.org/journal/index.php/ijb/article/view/30097/18019

[6] JM Keynes. 1919. The economic consequences of the peace. MacMillan, London.

[7] S Kollen Ghizoni. 2013 (22 November). Creation of the Bretton Woods System July 1944. Federal Reserve History. Available at https://www.federalreservehistory.org/essays/bretton_woods_created

[8] Although Prior Informed Consent will be vacated, new tasks will arise as suggested in second to the tenth steps. Hence, the system as a whole will employ more bureaucrats, which is efficient to the extent that monetary benefits under the GMBSM will have increased, perhaps by as much as four or five orders of magnitude. Economists will recognize the broad outlines of Jevons’ Paradox: efficiency has hugely improved within the bureaucracy but more bureaucrats are required because the scale of the economy has expanded.

[9] For trademarks, the method may have to be an alteration of the (TM) and (R) symbols to (NTM) or (NR), where the N signifies the presence of natural information. Each method for an intellectual property right should be designed to minimize the transaction costs of disclosure.

[10] To avoid royalty burden from distinct ensembles of natural information utilized in a single product (“stacking”), Providers of each ensemble receive a percentage share weighted by the number of ensembles. Suppose the COP decides that the royalty for patents on a specific combination of characteristics is 15%. Imagine a case where five distinct ensembles of natural information were utilized. Each of the five ensembles would receive 3% which sums to 15% rather than a stacked royalty of 75%.

[11] Quid pro quo between artificial and natural information is a goal, but not a mandate. In distinction to artificial information, any new intellectual property right granted on value added to public-domain natural information will not incur a benefit-sharing obligation to that ensemble. For example, conceptualizing the 1950s antihypertensive vasodilator Minoxidil as an ensemble of artificial information, a new patent was granted on that same ensemble in 1971 for prevention of alopecia. The departure from quid pro quo, i.e., unequal treatment for natural information, enhances conservation inasmuch as incentives are not diluted by compensating Providers for ensembles which were long since characterized and in no risk of extirpation.

[12] Without measures to reach compromise on royalty percentages, negotiation will not proceed timely. One possible measure would be imposition of a randomly chosen percentage between upper and lower bounds, invoked after a clock runs out, which would be specified in the proposed amendment to the NP. To the extent that both Users and Providers are averse to risk, compromise will emerge.

[13] The verses are a satirical rendering by the author of the third and fourth lines to “Blowin’ In the Wind”: “Blowin’ In the [Brackets]: A tribute to the CBD on its Silver Jubilee and to Bob Dylan on the second anniversary of his 2016 Nobel Prize in Literature”. Available on YouTube here: https://www.youtube.com/watch?v=rYJx-J31Op8

[14] JM Keynes. 1936. The general theory of employment, interest and money. Macmillan, London at page 383. The title of the last chapter foreshadows the robustness of Keynes’ genius: Concluding notes on the social philosophy towards which the general theory might lead.

Image Credits: rickpilot_2000 from Hooksett, USA – Mt. Washington Hotel Uploaded by jbarta