In their research paper, Alejandro Nadal and Franscisco Aguayo, examine the economic arguments surrounding the fate of ivory stockpiles.

     The paper, published in the current issue of Pachyderm journal, centres on the polarized debate between ivory stockpile destruction and various schemes of how to put them to economic use in the context of conservation policy.

     Swara reproduces the conclusion of of the paper: 

As poaching and ivory trafficking accelerate to become the primary source of elephant population reduction, the rigorous assessment of available policy options becomes ever more demanding. One of the critical aspects of policy-making in this context concerns stockpile management.

We have examined the arguments concerning three main courses of action vis-à-vis ivory stockpiles. The first course of action examined here concerns the destruction of ivory stockpiles. 

The traditional arguments in favour of taking this course of action have traditionally been framed in terms of maintenance costs and risks of leakage. But we have pointed out a new set of arguments that strengthen the policy option in favour of destroying ivory stockpiles. One of them is that keeping stockpiles in place supports expectations about future supply and the establishment of an international legal market.

This consolidates expectations about profits from future trade and acts as an incentive for legal and illegal traders and processors to remain in business. This can lead to new investments and new market-related institutions that lock-in society into a trajectory of more, not less, ivory trade.

The synergies between legal and illegal trade may very well be strengthened.Stockpile destruction may be the most effective way to deal with these expectations. Putting ivory stockpiles into economic use has been explored through two distinct avenues.

The first one relates to the use of stockpiles as a deterrent against speculators, while the second looks at selling them and therefore involves lifting the international trade ban. Both of these avenues have been examined through simplistic models that rely on obsolete theoretical notions, disregard market structures and ignore real-world price formation dynamics. Because of these shortcomings the economic use of ivory stockpiles as a conservation policy has not been shown to be a rational course of action.

Too much emphasis in the discussion about the deterrent capacity of stockpiles and of legalizing trade has been placed on the effects on prices. This is an important discussion, but the truly critical variables for the effectiveness of this policy option are profitability and competition.

Since information about market and cost structures has never been generated through research on the existing ivory market, profitability and the resilience of incumbent firms (i.e., illegal traders) remains a key unknown in the complex equation of the economic use of ivory stockpiles.

In the absence of serious analysis of market structures, putting ivory stockpiles to economic use (as a deterrent or through sales) remains a risky proposition at best. One final point on the control of ivory stockpiles needs to be highlighted.

Part of the literature on stockpile management recommends giving control of the stockpiles to agencies in the international community. This would have grave consequences, one of which is that it would effectively deprive African range states from the control of a critical component of their conservation policy. The definition of the strategic priorities of their conservation policies could pass to these agencies in the “international community.”

The justification for this recommendation is that ivory stockpiles could be a liability for conservation rather than an asset.But this is precisely why stockpile destruction may be the best policy option. Destruction of stockpiles in the context of China’s economic contraction and in the presence of pessimistic expectations may signal that ivory is a declining market.As China’s economy continues to slow down and macroeconomic policies fail to prop up growth rates, semi-stagnation may be the new normal for years to come. Against this background the recent destruction of 105 tonnes by Kenya’s authorities can be interpreted as a timely decision. 

Alejandro Nadal: Centre of Economic Studies, El Colegio de México

 Francisco Aguayo: UNU-MERIT, University of Maastricht, Netherlands