Melanie Gosling
Environment Writer
THE consequences of legalising the rhino horn trade are unknown, but it could lock us into a path of a “runaway expanding market”.
This is the view of Alejandro Nadal, economics professor at the University of Mexico, who is critical of South Africa’s bid to ask Cites for permission to legalise the horn trade without research into, or understanding of, the existing illegal market.
He said without this knowledge, claims of the beneficial effects of opening the trade were little more than fair tales.
“We’re not having a civilised, serious, science-based debate on these issues,” Nadal said.
He was one of the speakers in a three-day lecture series on wildlife trafficking, organised by UCT’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. However, 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. A literature review showed that this information did not exist.
“We know very little about ownership, the type of firms, the size. Are they diversifying, how are they financed? All of this 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 it (legalising the trade) will bring the price 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? None of this was known, nor was the size of the rhino horn demand, or the evolution of demand.
“Cultural habits are not synonymous with an eternal stable demand. Can we say for sure this will bring the price down? How? If you say prices will go down, I say: ‘What will that do to demand?’ Economics textbooks on page 2 say if the price goes down, the demand expands.”
Although the trade was illegal, this was not a barrier to studying the trade, in the same way that the illegal drug trade had been studied in the US. Nor was there a need for economics researchers to go undercover to do so. Illegal markets were closely related to legal markets and much information could be gathered through a variety of channels.
The reality was that no one had “even an approximation of an idea of how this market works”.
“We were all behind a veil of ignorance,” Nadal said.
Without a rigorous and accurate assessment of the illegal rhino horn trade, those who claimed that opening the trade would result in the criminal cartels being outcompeted, was simply deluding themselves.
“One possible outcome is that it will lock us in on a path to a runaway expanding market.”