by Phytosophy.org

CITES is the acronym for the Convention on International Trade in Endangered Species of Wild Fauna and Flora. It is an agreement signed by various governments to regulate global trade of endangered species. The committee that recommends the rules and regulations, as well as decides which species are rare or not, is composed mainly of biologists, conservationists, ecologists, and taxonomists. However, many people question whether CITES is effective or if it accelerates the extinction of endangered species. This paper will discuss CITES and its relationship with orchids.

Every country that is a signatory to the CITES trade agreement implements it differently. Since America and Singapore have signed a Free Trade Agreement, one resolution of the agenda on that FTA was to follow the American interpretation of CITES. As the American interpretation of CITES is very stringent, does that spell doom for the fate of the orchids? For this essay, I’ll use America’s interpretation of CITES. CITES has three main classifications:

• Appendix I – plants are not allowed to be traded at all.
• Appendix II – plant have controlled trade even though they are not endangered because of the rate of utilization.
• Appendix III – particular plants that are protected in at least one country.

It is interesting to note that orchids are placed in Appendix I and II because they are one of the most heavily traded ornamental plants. An entire subfamily of orchids, the lady-slippers, are on the Appendix I listing. Typically, species are classified individually in CITES but the entire lady-slipper genera of Paphiopedilum, Cypripedium, Phragmipedium, Selenipedium and Mexipedium are placed into Appendix I despite the fact that many of the plants are very abundant or do not have the appeal to be traded.

Orchids can be harvested from the wild or artificially-propagated. The former is forbidden whereas the latter is slightly blurred in CITES rulings. The plants that are artificially-propagated are only considered legal if their parents are legal as well. Parent plants are legal only when they are licensed by the government to be owned or collected from the wild. This creates a big problem because these new ‘illegal’ plants will be destroyed in the name of conservation which will not only create a deadweight loss for not only the orchid seller and the orchid hobbyists as well (figure 1). The orchid hobbyists must then find alternative sources to satisfy their wants.

The price of an orchid species is highly dependent on its numbers in the wild, i.e. scarcity. Price is not affected by artificially-propagated stock as its pricing is benchmarked against wild-collected plants. Although artificial propagation can produce plants in plentiful quantity, it can also cost a lot in terms of laboratory work, setup, space, and time used in bringing up seedlings to maturity. One example of an orchid species is Phalaenopsis appendiculata, a diminutive plant with intricate blooms that was originally considered extinct. Phalaenopsis appendiculata was later rediscovered in small colonies and commanded prices of USD 1000 per plant (figure 2 next page, P₁). As more wild stocks were gathered, the price gradually fell to USD 350 (P₂). Currently, a new location far from its place of origin was discovered to be teeming with them (albeit of lower quality) and this caused a further price drop to USD 100 each (P₃).

If one is caught with wild-collected plants enumerated by the CITES agreement, the seller and occasionally the possessor will be heavily fined and face imprisonment. One way to satisfy the consumer’s hunger for rare and unique orchid species is to allow government-sanctioned nurseries to sell the orchids legally. These nurseries are called `rescue centres` which act as new homes for impounded plants.

When a big, red, voluptuous new lady-slipper orchid was discovered in Vietnam, many people in America wanted to get one. The problem with getting the orchid was that the Vietnamese authorities did not sanction any collection of the new plant species for cultivation. The plants that got into the USA were considered illegal, whether they were ripped from the ground or artificially-propagated, and were then confiscated and consolidated in a single rescue centre. That rescue centre was the only nursery allowed to propagate the plant artificially and sell the seedlings openly and legally. Effectively, monopoly rights to retail that plant openly in America were given explicitly to that nursery with an artificial barrier erected by the authorities. This barrier will be removed only if two things happen: Vietnam officially certifies that plants of that species can be collected for sale, in addition to USA’s recognition of Vietnam’s certification, or when the plants bought from that nursery begin to produce flowers. Once these legally-purchased seedlings mature and flower in three to four years time, the owner can then propagate the plants and enter the market to sell these new seed-grown plants openly.

When granted an indirect monopoly, the nursery can retail the plants at the highest possible price the market can bear. This is found in the above example as they are selling the seed-grown plants far above the price of an “illegally-acquired” mature plant. After all, it is the only nursery in the market allowed to sell these plants.

The market forces, even though they can be influenced by policies, are controlled by the consumer. Assuming that consumers are rational, they are selfish and act in their best interest. This may also reflect the typical consumer as they are often ignorant of the complex laws governing legal plant cultivation. These hobbyists also tend to be very secretive and private, so no one knows what they are hording for their own pleasure.

Given the opportunity, rational consumers will get the plants they like at the lowest possible economic cost while ignoring legal consequences. They will also keep the possession of the plant a secret as they want to enjoy the plant by themselves. Ultimately, consumers are the ones with purchasing power.

Orchids can be propagated artificially in great quantity because one seed pod can yield a few thousand seeds. In order to appease impatient hobbyists as well as to beat out competitors, nurseries will often release plants as seedlings. The main advantages to selling seedlings are that the hobbyist will have the pleasure of an early and direct ownership of the plant and the seller will also realize earlier monetary returns. This example assumes that the consumer wants the species without regard to the special forms and varieties which may be available from other competitors.

The dominant strategy is to sell the plants early as seedlings assuming that they sell only artificially-propagated plants.

Consumers have additional concerns as they act in self-interest: initial seedling releases tend to be expensive because they are exclusively available from few nurseries. As raising young plants involves more care and a lengthier time before seeing flowers (sometimes as many as ten years), producers have a large opportunity cost involved in raising plants from seedlings. Furthermore, seedlings die easily and the time and money invested can instantly be lost, turning fixed costs into sunk costs. Consumers aim to get plants with the greatest ease of culture at the lowest possible price. Because of this, consumers seek out sellers of wild-collected plants.

The graph above exhibits international trade in wild-collected and artificially-propagated plants, and the further effects of sporadic dumping. On the X-axis is the quantity of plants traded. On the Y-axis is the price of each individual plant. D represents demand, and S represents supply. S_A represents the limited supply of artificially-propagated plants available for sale. If there were no restrictions by CITES, trade in artificially-propagated and wild plants would occur at point α, setting the free-trade price on line P_FT and the free-trade quantity on line Q_FT. When trade restriction is introduced, the only legal plants available are those that are artificially-propagated. This shifts the trade from point α to point β, reducing the quantity traded and creating an artificially high price of P_A due to the limited supply. This artificially high price gives incentive to increase trade with suppliers of criminalized wild-collected plants, who in turn offer the wild-collected plants at the reduced price P_W, resulting in trade at point γ. This trade in wild-collected plants is represented by the medium grey box. It should be noted at this point that CITES restriction has actually amplified the trade quantity of wild-collected plants from Q_FT to Q_W, and total trade in wild plants can be observed as the distance Q_A to Q_W. Further, if we were measuring trade in a new endangered species, the line S_A would be dramatically shifted left because of the practical illegality of trade in new species, which greatly reduces the amount of artificially-propagated plants available for trade. The resultant lack of artificially-propagated plants ultimately amplifies trade in wild-collected plants by an order of magnitude, causing the complete stripping of discovered habitats of the desired plants, and the increased hunt for new habitats to loot.

Wild-collected plants have the lowest total economic cost in terms of plant culture, so the quantity demanded is higher. Legally-propagated plants, even though propagated in great quantity, cost much more than illegally-gathered plants because of laboratory costs, materials, labor, upkeep, marketing, and the certification and inspection by authorities. The sellers of wild-collected orchids may only need to walk into the jungle in their backyards to pull out plants for sale. Often, sellers of wild-collected plants try to quickly get rid of their perishable and illegal stocks by lowering prices, represented in the shift of P_W to P_D. This fall in price results in trade level γ shifting to δ, denoting the further increased trade of wild-collected plants. This quantity of dumped wild-collected plants can be observed as the dark grey area at the intersection of P_D and Q_D.

There are many artificially-propagated plants in the market which are produced from wild plants, but because the authorities do not recognize them as legal in the first place, they fall within the same class as the illegally-gathered matured plants. Typically, the one with the lower economic cost is preferred, that is, matured wild plants. This will also give incentives for the smuggling of such endangered plants since there is a demand for them.

Although placing restrictions on trade is considered to be a stabilization of the wild plant population, in reality and as shown in figure 4, these measures are not helpful. Not all offenders are caught even though those who are caught suffer dire consequences that are similar to those given to drug traffickers.

Furthermore, these endangered species that are being traded are found mainly in underdeveloped countries, such as Vietnam and Myanmar where rapid land developments are taking place. Because these countries do not have laws governing the domestic control of these plants, endangered plants are legally mauled over and cemented due to building projects, slash and burn farming, and coal production. Ironically, no salvage operations are allowed by the CITES trade agreement. The latter is also prevalent in developed countries, and it is saddening that killing plants is much easier than saving them. These plants would have been safer had they been removed and grown elsewhere. Most conservationists are concerned with maintaining plant populations within their natural habitat, and they failed to take into consideration the plants cultivated globally. One such example is the tropical lady-slipper orchid whose cultivated numbers far exceed those found in the wild.

In fact, these rigid restrictions deplete plant numbers by preventing them from being propagated in great quantity which in turn gives incentives to smuggling. A possible solution to ease the depletion of plants in the wild is to allow a relaxation of rules to allow all artificially-propagated plants for trade instead of just allocating a few nurseries with licenses to sell these plants openly. This will prevent monopoly trade where consumers will seek out an alternative (usually illegal) to quench their orchid fever. If such regulations are relaxed, global numbers of these plants available for sale will increase and this will result in fewer incentives for smuggling and indirectly prevent the depletion of wild plant populations.

From the pay-off matrix, by following the current trend of smuggling as the dominant strategy between sellers, the authorities are worse off as they have to tackle more cases of such illegal plant transactions. Judging from past cases of plant smuggling, the investigation into such cases can cost millions of taxpayer dollars, a very big external cost to those not involved. To make matters worse, these costs are not recovered from the offenders.

The authorities have to act first to encourage consumers to buy artificially-propagated plants. In order to do so, they would have to alter the market trend of getting cheaper smuggled plants. Strict restrictions would not be of much use if there was no reinforcement of such rules. By relaxing the rules on the sale of artificially-propagated plants, the authorities would be encouraging sellers to put out their artificially-propagated plants for sale regardless of whether it stems from a wild plant or not. These artificially-propagated plants will eventually capture a bigger share of the consumer’s dollar and will beat out the sellers of wild-collected plants.

CITES regulations are indirectly and globally depleting the endangered plant populations by imposing rigid trade restrictions. Orchid sellers are out to get the consumer’s dollar and these restrictions give further incentives in smuggling. There is a need to tone down the regulation in order to promote the sale of artificially-propagated plants. In this way, the majority of the consumer dollar will be captured by the artificially-propagated plants and it will reduce the incentive to smuggle. This in turn will stabilize the plant populations in the wild through the action of the invisible hand.