Economic expert calls for research into horn trade

THE consequences of legalising the rhino horn trade are unknown, but it could lock us into a “runaway expanding market” for the horn.

This is the view of Alejandro Nadal, an economics professor at the University of Mexico, who is critical of South Africa’s intention to ask Cites for permission to legalise the rhino horn trade without any research into the existing illegal market.

He said without this knowledge, claims of the beneficial effects of opening the trade were little more than fairy tales. “We’re not having a civilised, serious, sciencebased debate on these issues,” Nadal said.

Nadal was one of the speakers in a three-day lecture series on wildlife trafficking, organised by the University of Cape Town’s centre for criminology, the Global Initiative against Transnational Organised Crime and the Conservation Action Trust.

Nadal said the pro-trade lobby for ivory or rhino horn often put forward the view that legalising the trade would bring down the price, and the illegal trade would be outcompeted. But proponents did not put forward anything of substance to back up that claim. “They need to explain exactly why and how prices will drop as a stable supply of rhino horn flows into the market.”

What was needed was a rigorous and accurate evaluation of the rhino horn market, with information about the structure of the illegal market, its performance, price formation and dynamics.

“We know little about ownership, the type of firms, the size. Are they diversifying, how are they financed? All these conditions, the capacity of firms to launch or withstand price wars … What are the transaction costs – transportation, storage, smuggling, bribing, protection? Without this information it is very adventurous to say legalising the trade will bring prices down.”

The price structure depended on the market structure. What were the channels of competition, how would poachers compete with the legal traders, what were the barriers to entry into the trade?

“If you say prices will go down, I say: ‘What will that do to demand?’

“Economics text books on page 2 say if the price goes down the demand expands,” said Nadal.