The conservation rationale claimed for tiger farming is that the introduction of a legal supply source will result in lower product prices and consequently reduce poaching pressure. However, the tiger farming concept is fiercely opposed by western NGOs (and even the World Bank), who argue that it will actually intensify the threat to wild tigers. The opponents of tiger farming have further called for the closure of existing commercial captive breeding centres, and an effective reduction in captive tiger stocks.

In an attempt to move the polarized debate on tiger farming forward, we undertook a comprehensive review of the relevant literature on the subject and analyzed the arguments made to date. Numerous organizations have an interest in tiger conservation, and we examined publications with perspectives on in situ conservation strategies and captive breeding, trade studies, policy recommendations, and economic analyses of the trade and farming debate. Our review shows that tiger conservation and trade is a highly complex issue, given that there are six surviving subspecies, thirteen range states, and diverse forms of demand (and markets) for live tigers and tiger products.

In analyzing literature on the trade and farming debate, we also find obvious gaps in understanding between specialists in natural science, law enforcement and economics. Consequently, the exact nature of the forces driving poaching and illegal trade, and the best ways to address them, are not well understood. Trade studies by organizations such as TRAFFIC and the Environmental Investigation Agency reveal much detail about the illegal trade, but we find that some of their conclusions and recommendations do not flow logically from the evidence presented. Their positions show unstinting support of the CITES trade ban approach, despite strong evidence that this is not working.

To date, the farming debate has typically focused on a simple theoretical proposition branded as the “supply-side” approach. This simple supply-side model relies on certain assumptions that are easily challenged in the case of the tiger market. However, the mere fact that these assumptions do not hold does not automatically invalidate the case for farming.

One assumption is that of a hypothetical environment of “perfect competition”. In reality, no market is ever “perfectly competitive”, and we therefore need to consider more complex models that reflect the competitive environment more accurately. Until recently, this has only been partially attempted in a general theoretical framework without taking the specifics of the tiger market into account, and to date there is no consensus on an appropriate model for this market.

Another assumption is that wild and farmed tiger products are perfect substitutes for each other. However, evidence suggests that the market is likely to differentiate between them, especially in the case of tiger bones. Tiger bones, which are used in traditional Chinese medicines to treat rheumatism and other ailments, are often difficult to differentiate from bones of other species, and there is a high incidence of fakes in the marketplace. At least some consumers are likely to prefer bones from known certified sources (such as farms) over those from unknown sources. Conversely, other consumers may believe that products from wild tigers are more desirable and may be willing to pay a premium for them. To date, no study has properly assessed the relative preferences (measured by a willingness to pay) between farmed bones of verified source and wild bones of unknown origin. Without knowing these relative preferences, all predictions of the market impact of introducing a farmed supply of tiger products amount to sheer conjecture.

A common argument against the supply-side approach holds that the cost of raising a farmed tiger (variously quoted at between US$2,000 and $24,000) way exceeds the cost of poaching a wild one (quotes range from $1 to $200), and it will therefore always be cheaper to poach wild tigers than to farm them. However, this argument is flawed and the comparison misleading. The costs of tiger farming are offset by income from other sources such as tourism viewing (this accounts partially for the large number of existing captive animals), and the quoted costs of poaching do not reflect the full costs of illegal supply. The true costs of illegal supply include various transactions and risk costs associated with processing, smuggling, storing and delivering the product to end consumers, including bribery and protection costs. These cumulative costs are likely to be significant: this explains why recorded end-user prices (as much as $70,000 for one tiger) exceed even the alleged costs of raising a farmed tiger, typically by high margins.

In reality, the cost of poaching a tiger and supplying its body parts to end users will vary greatly with geography and circumstance, and it is likely that tiger farms have the potential to undercut the costs of illegal supply in many instances. The extent to which this may be possible is affected by the potential of laundering (the introduction of illegally-sourced product into legal channels), as this can reduce transactions and risk costs of illegal supply. Opponents of tiger farming cite laundering as a major concern, but they ignore market incentives that are likely to discourage it. The problem of fakes suggests that legal producers of farmed products would use authenticity as a competitive advantage, and therefore maintain a visibly separate supply channel. As a premium product, wild tiger bone should also command a higher market price, and there is no apparent benefit to either producers or consumers to routinely launder and market it as farmed bone.

Even if farmed and wild tiger products can be kept separate in the marketplace, opponents of tiger farming allege that allowing trade in farmed products would lead to an increase in demand for both farmed and wild tiger products, by removing an existing stigma associated with their consumption. However, this argument implies that existing law-abiding citizens will switch to becoming illegal consumers of wild products if farmed products are legitimized. Provided that stiff penalties for wild product consumption remain in place, from an economic perspective it seems more likely that existing illegal consumers would prefer to obtain products from legal suppliers, who would also have strong incentives to act against illegal competition.

Closer examination of anti-farming arguments also reveals common misconceptions about the nature of markets, which lead to flawed conclusions. One misconception is that the demand for tiger products is “too high” or “exceeds supply”. This argument assumes that the amount of product desired is a fixed number, and ignores the critical role of prices in regulating both the quantities supplied and consumed.

A second misconception is that an increase in supply causes an increase in demand, and hence an enhanced threat to wild tigers. In fact, demand is not determined by supply but by consumer preferences, and if these do not change, an increase in supply will simply result in an increase in quantity consumed with a concurrent drop in price. If the increased quantity consumed is supplied from farming, this does not impact on wild tigers, but the reduction in price may be beneficial for them, as it reduces the economic incentives for poaching and illegal trade.

These misconceptions reinforce an entrenched perception that trade is somehow detrimental to conservation and, conversely, that restricting or even eliminating trade will benefit conservation (the default assumption of a CITES Appendix I listing). Following this line of reasoning for tigers, reports by groups such as TRAFFIC and the EIA focus on levels of recorded trading activity and implicitly evaluate success by reductions in quantities traded. However, this approach is flawed, as trading profitability (not quantity) is the relevant driver of poaching pressure, and price data are thus essential in assessing relevant trends. Even if quantities traded are reduced, rising prices can more than offset the conservation benefit of those reductions.

Trade bans are also often mistakenly assumed to reduce or eliminate demand when in fact they might only constrict supply. If consumer preferences are relatively unaffected by trade restrictions, and if consumers are also relatively insensitive to increases in price, trade bans may be practically unenforceable and even aggravate the situation. This is because further restrictions in supply actually increase the profitability of the persisting illegal trade, thereby attracting sophisticated international organized crime syndicates. Such syndicates are adept at exploiting global institutional weaknesses and employing the assistance of corrupt enforcement agents, thereby remaining beyond the reach of the law. This phenomenon is prevalent in the trade of illegal drugs such as heroin, marijuana and cocaine, and is increasingly apparent in the wildlife trade. To date, these syndicates have on average successfully resisted attempts to thwart their activities, only experiencing relatively minor and temporary setbacks from law enforcement efforts.

In the case of seriously endangered species, trade bans and supply restrictions may also encourage excess levels of illegal harvesting driven by speculative demand for stockpiling purposes. Such speculation is caused by uncertainty over prices and future expectations of product scarcity (or even extinction of the species).

Examining evidence from the tiger trade and assessing the impact of the trade ban, we observe continued poaching, declines in wild tiger populations, illegal trade, consumption of tiger products, persistent demand for tiger bone medicines and reports of stockpiling. Increased regulation, bans and enforcement have not succeeded in eliminating any of this to date. We cannot ascertain whether illegal supply has become more or less profitable, and it is unclear to what extent the trade ban approach has helped wild tigers, if at all.

We are also skeptical of assertions that the use of tiger bone medicine is a dying practice, as these are based on flimsy evidence. Rising disposable incomes in China and neighbouring consumer countries, combined with an ageing population (and therefore more rheumatism sufferers) may actually result in future increases in consumer demand for tiger products. Although we acknowledge the possibility of influencing consumer preferences with information campaigns, the cost of achieving this to a point at which poaching is effectively reduced to sustainable levels is unclear, as is the potential source of funding.

We dispute claims that the trade ban is consistent with a precautionary approach. In particular, we believe that calls to further restrict supplies of tiger products from captive populations and to reduce stocks of captive tigers constitute a high risk approach. Taking this action forecloses an option of competing with illegal suppliers and effectively places the future of wild tigers in the hands of organized crime syndicates with consolidated monopolistic power. We strongly advise against this.

We recommend that conservation enforcement efforts focus on pre-emptive poaching measures in the vicinity of wild tiger populations, and intelligence-led enforcement sourced from wild tiger poaching incidents. Illegal trade in products sourced from captive tigers does not constitute a direct and immediate threat to wild tigers, and may even alleviate short-term poaching pressure, and we therefore advise against measures to restrict such activity. In particular, we advise against expending valuable conservation funding resources in attempts to restrict captive breeding and trading activity in non-range states such as the USA.

We recommend that range states secure all existing stockpiles of tiger products, and continue to accumulate and retain them. Similarly, captive tiger populations should be retained as an insurance policy.

We do not recommend re-instating regulated legal trade of tiger products supplied from tiger farming at this time, but suggest that this option be thoroughly investigated, employing the tools of relevant disciplines such as economics. We recommend undertaking a carefully designed consumer survey that assesses relative consumer preferences (measured by willingness to pay) between legal certified farmed products and illegal wild products of unverified origin. We also advise that any feasibility study of legal trade should address the issues of keeping farmed and wild products separate, preventing laundering, channeling a proportion of any profits into wild tiger conservation, and assessing appropriate ways to test the market (e.g. by means of a carefully designed one-off sale).

We urge all concerned tiger conservationists to consider our arguments carefully, and if unclear, to read the main text of this document, where they are laid out in more detail.

International commercial trade in tiger parts is illegal in accordance with CITES (the Convention on International Trade in Endangered Species) and domestic trade is also illegal in key range states and consumer countries, such as China.  Notwithstanding domestic trade bans, large numbers of tigers have been maintained and bred in captivity, and today more tigers survive in captivity than in the wild.

In recent years, there have been calls to legalize domestic trade of tiger products within China, to meet the continuing demand for body parts with a supply generated from existing captive breeding facilities (i.e. “tiger farming”). These calls have stimulated fierce reaction, and a polarized debate has emerged over the effect such action may have on the remaining wild tiger populations.

The two opposing arguments are based on the following propositions:

• Tiger farming will help to conserve wild tigers.  A legal trade in farmed tiger products would go some way to satisfying the demand for tiger bone medicine (and other products), which would in turn have the effect of reducing incentives to poach wild tigers.
• Tiger farming will doom wild tigers to extinction.  A legal trade in farmed tiger products would stimulate demand further and provide an increased threat to wild tiger populations.

As an extension of the second argument, the World Bank and numerous environmental groups have called for the closure of China’s large captive breeding centres.  They view the continued presence of these apparent tiger farms as a threat to wild tiger conservation efforts, for two reasons.  First, there is some evidence of “leakage” of tiger products from stockpiles of deceased animals – i.e. product appears to be entering the domestic market illegally in contravention of the existing trade ban.  Second, the mere existence of these facilities is regarded as sending an ambiguous message to the market if the intention is to “shut down” trade once and for all.

At the time of writing, China is resisting appeals to close its captive breeding centres.  Significant captive tiger populations also continue to exist (and are being further developed) in other countries.

The current situation is therefore one of policy deadlock.  Neither of the opposing arguments is proven, wild tiger numbers continue to decline, and there is continuing evidence of poaching and illegal trade.  Is the status quo failing because of the trade ban, because of the continued existence of large captive breeding centres or for entirely other reasons?  Is there any way in which the status quo can be changed to improve the outlook for wild tiger populations?

In an attempt to answer these questions, this paper considers the opposing arguments in some depth, reviewing and analysing their underlying logic and assumptions.  Our objective is to move the whole tiger farming debate forward, improve overall understanding of the issues, identify fallacious claims and suggest critical areas for future research.

Tiger conservation status and policy

Useful overviews of the tiger’s changing conservation status are provided by Tilson and Seal (1987), Nowell and Jackson (1996), Seidensticker, Christie and Jackson (1999), Sunquist and Sunquist (2002) and Tilson and Nyhus (2010).  These texts track the changing status of wild tigers in their range states as well as the global captive tiger population.  At the time of writing, the generally accepted WWF estimate of the global wild population stands at 3,200 (Moore 2010), following a detailed assessment for 2008 by Seidensticker, Gratwicke and Shrestha (2010), which placed the figure at between 3,800 and 5,200 adults.  Nyhus, Tilson and Hutchins (2010) estimate the global captive population to be in excess of 13,000, and assert that only 1,118 of those form part of managed zoo populations of known genetic lineages.

Nine tiger subspecies are recognized, three of which are extinct (see Luo et al 2010).  A fourth subspecies, the “South China Tiger” Panthera tigris amoyensis is generally considered to be functionally extinct in the wild, and there are initiatives aimed at restoring a wild population in China by “rewilding” captive bred stock (see Morell 2007; Traylor-Holzer, Xie and Yin 2010).

Determining and prioritizing tiger conservation objectives is no easy task.  With 13 range states, 6 subspecies, numerous distinct in situ and ex situ tiger populations and a plethora of agencies with varying interests in the governmental, private and non-profit sectors, overall co-ordination of interests and funding priorities presents a challenge to all those involved.  Attempts to establish a global tiger conservation plan can be tracked from the “taxonomy-based” approach of Seal, Jackson and Tilson (1987) to an ecology-based “Tiger Conservation Unit” approach (see Wikramanyake et al (1999), subsequently developed further as a “Tiger Conservation Landscape” approach (Sanderson et al 2010).  The recent Global Tiger Recovery Program, spearheaded by the Global Tiger Initiative (2010a), goes beyond ecological management strategies to address broader issues such as human conflict and the threat from poaching and illegal trade in tiger parts.

As Meacham (1997) points out, simply “saving the tiger” as a species can quite easily be achieved, as tigers breed easily in captivity and there is ample market demand for both live tigers and tiger body parts.  However, conservation and related groups pursue more specific and complex objectives, notably:

• Wildness – the maintenance of tigers as integral parts of larger ecosystems; i.e. in their natural habitat with their natural prey
• Genetic integrity – separate genetically viable populations of remaining subspecies
• Welfare – avoidance of harm and the provision of acceptable living conditions for both wild and captive tigers

Concerns regarding tiger farming typically relate to perceptions that it may compromise these objectives.
A recent article by Walston et al (2010) acknowledges the continuing unabated decline of wild tigers numbers, and argues for an approach based on the protection of 42 key source sites (“site-based protection”).  They estimate the cost of such an approach to be US$82 million per annum.  The Global Tiger Recovery Project (Global Tiger Initiative 2010a) calls for external financing of some US$280 million over the next 2-5 years.

Tiger conservation institutions

Among the many organizations with an interest in tiger conservation, several are noteworthy for playing a significant role in both tiger conservation and the farming debate.  The oldest international conservation body is the IUCN (International Union for the Conservation of Nature), in existence since 1948.  The IUCN spawned the WWF in 1961 as its fund-raising arm (before the latter became independent), and was instrumental in the creation of CITES, which came into effect in 1975.  The IUCN also initially established TRAFFIC, with financial support from WWF.  TRAFFIC monitors international trade in wildlife products and provides technical assistance to CITES.   WWF, TRAFFIC and CITES all play significant roles in shaping the tiger trade and farming debates.

In addition to TRAFFIC, certain other organizations have an interest in monitoring illegal trade and influencing policy, including the Environmental Investigation Agency (EIA), Wildlife Protection Society of India (WPSI) and the International Fund for Animal Welfare (IFAW).  These organizations, along with some 36 others, make up the International Tiger Coalition (ITC), which spearheads the “End Tiger Trade” campaign.

Three other recent international initiatives are noteworthy: the Global Tiger Forum (GTF), Save the Tiger Fund (STF) and Global Tiger Initiative (GTI).  The GTF was initially convened in 1994 as a political forum for tiger range states to exchange information, but membership since then has been somewhat limited.  The STF is a joint venture between the ExxonMobil Foundation and the US National Fish and Wildlife Foundation, and has allocated close to US$ 16 million to various initiatives in tiger range states.  The Campaign Against Tiger Trafficking (CATT) was also formed under the auspices of the STF (and is now superseded by the ITC).

The GTI is spearheaded by the World Bank, and has convened several international meetings since its inception in 2008.  These are all intended to inform the Global Tiger Summit, the high-level ministerial meeting planned to take place in St. Petersburg in November 2010.  The GTI lists 34 participant organizations (similar to the ITC) and has also assumed an explicit stance on ending illegal trade and closing down tiger farms, although the latter is not expressed in the draft St. Petersburg declaration that was drawn up at the most recent meeting in Bali (Global Tiger Initiative 2010c).

The trade in tiger parts

Asian consumers have a long-standing tradition of using and consuming tiger parts.  According to Mills and Jackson (1996), tiger bone medicines have been in use for more than 1,500 years, but it was not until the 1980s that this use was first perceived as a threat to wild tiger populations.  Apart from tiger bones and tiger skins, most other tiger body parts are also used and consumed for a range of purposes, and there is continuing evidence of such use.

In the last two decades, TRAFFIC has conducted numerous studies on the use and trade of tiger products.  Nowell (2000) provides a worldwide survey of the trade, while other authors discuss specific markets such as Australia / New Zealand (Callister and Blythewood 1995), Sumatra (Shepherd and Magnus 2004; Ng and Nemora 2007), China (Nowell and Xu 2007), South Korea (Kang and Phipps 2003), Myanmar (Shepherd and Nijman 2008) and the USA (e.g Williamson and Henry 2008).  Additional studies have been conducted by the EIA, and various reports appear on their website.  Broad and Damania (2009) and Duffy (2010)  provide  recent overviews of the trade.

Further information and perspectives on tiger trade and poaching are provided by Hemley and Mills (1999), Galster and Eliot (1999) on Russia, Kumar and Wright (1999) and Wright (2010) on India, and Tilson, Nyhus, Sriyanto and Rubianto (2010) on Sumatra.  Some research has also been done on consumer demand and attitudes, notably by Mills et al (1997), Lee et al (1998), Nowell and Xu (2007), Gratwicke et al (2008), Wasser and Jiao (2010) and the China Science and Technology Institute (see ‘t Sas-Rolfes 2010).

Tiger trade policy

Much of the literature on trade also discusses trade policy, with reports from TRAFFIC and the EIA typically recommending increased measures to restrict trade, reduce consumer demand and intensify enforcement efforts, all under the auspices of CITES.

At the inception of CITES in 1975, three tiger range states were among the 21 initial signatories, and most tiger subspecies were listed on Appendix, which bans commercial trade in the listed species.  In 1987, the remaining tiger subspecies (Panthera tigris altaica) was added to Appendix, and in 1993 China agreed to impose a domestic ban on all tiger trade.  By 2004 all 13 tiger range states had acceded to CITES, so all international trade has been officially illegal since then.

In addition to listing all tigers on Appendix and enlisting all tiger range states as signatories, CITES has acted as a vehicle for further measures to encourage trade restrictions and controls.  The US government played a leading role by invoking a piece of legislation known as the Pelly Amendment in 1993 as a means to pressure certain countries (including China) to comply with CITES (see Meacham 1997).  CITES itself has played a more active role in encouraging states to implement various policies and controls, via a series of official resolutions.  The most recent resolution, from the 15th CITES Conference of Parties (COP-15, held in March 2010) is the revision of Res. Conf. 12.5, which calls for a range of intensified enforcement and related measures aimed at reducing trade.

Opinions are divided over the effectiveness of CITES in protecting wild tiger populations.  While even the CITES secretary-general recently acknowledged a failure (Black 2010), some argue that without CITES the situation would be far worse (Nowell and Xu 2007).  Conversely, others assert that the CITES Appendix  approach is inherently flawed (Swanson 1994, Norton-Griffiths 1995, Hutton and Dixon 2000), and particularly in relation to certain species such as tigers (‘t Sas-Rolfes 2000, 2010; Lapointe et al 2007).

The most recent draft document of the proposed Global Tiger Recovery Program (Global Tiger Initiative 2010a) proposes expenditure of US$23.7 million for “controlling illegal trade and reducing demand” over the next five years .  Of this, $19.3 million is earmarked for six specific range states, $4 million for “combatting wildlife crime” generally, and $500,000 for the launch of a campaign to target consumers of tiger products in an attempt to eliminate demand.

Captive Breeding

Throughout the world, captive breeding of wild animal species is undertaken for both conservation and commercial purposes.

In terms of conservation, the purpose of some captive breeding programs is to maintain a “genetic lifeboat”, with the ultimate intention of reintroduction or restoration to native habitat, or to replenish a genetically impoverished relict population (see Tilson and Seal 1987, Meacham 1997).  Other programs breed wildlife in captivity for education, fundraising, and research purposes (Christie 2010).  These conservation-oriented captive breeding programs are managed regionally by associations such as the American Zoological Association and counterparts in Europe, Japan and Australia, and coordinate with the IUCN Conservation Breeding Specialist and Re-introduction Specialist Groups.

A second type of captive breeding is purely commercial.  Fur farms (for other species), mostly found in the EU but also in China, are a good example.

A third category of captive breeding is that practiced by private individuals.  Rationales for this practice include joy of possession, display and reproduction.  This type of captive breeding occurs in the USA and also in Southeast Asia, where, among other things, a tiger cub makes a fine gift for a retiring military official.  In the USA, there is a heated debate on the conservation value of such captive tigers, since they tend to be mixed at the sub-species level, and most scientists do not consider them as suitable candidates for reintroduction (see Nyhus, Tilson and Hutchins 2010).

A fourth kind of captive breeding, articulated by Harris (2008), also mingles conservation and commercial purposes.  Practiced in Asia, especially China, the idea behind these programs is that the wild populations are helped because some—if not all—of the demand for the species is met by a sustainable source.  The Chinese have a long history, dating back thousands of years, of domesticating and breeding wildlife in captivity.  In China, this rationale is used for musk deer and Asiatic black bears.

The cases for and against farming

Consistent with its approach to captive breeding as a conservation measure, and following the precedent of bear farming, China started investigating the possibility of commercial tiger farming in the 1980s (see ‘t Sas-Rolfes 1998).  In 1992, the Chinese government submitted a proposal to allow trade from captive-bred tigers at CITES COP-8 in Japan, but this was hastily withdrawn after meeting significant opposition (Meacham 1997).   China then agreed to conform to the approach of further domestic trade restrictions, but simultaneously allowed the continued growth of its captive domestic population through breeding programmes.

In 2006, with China having built up a substantially increased captive population, the State Forestry Administration revisited the possibility of opening a controlled domestic trade, by inviting input from knowledgeable parties, including representatives from the TCM community and several economists.  This effort culminated in a workshop held in Harbin in 2007, at which various interest groups expressed their views on reopening domestic legal trade in China (see Jiang et al 2007).

At a subsequent workshop in Singapore in 2008, six delegates with expertise in resource economics, conservation and business met to discuss both the Chinese proposals and objections against them.  By consensus, they:

• concluded that there was insufficient information to make confident predictions about the likely impact of re-introducing legal trade,
• agreed that some of the anti-trade arguments were based on false assumptions, and
• recommended and specified a comprehensive research agenda to improve understanding of the issues.

Mitra (2006) presents the basic economic argument for tiger farming, asserting that “tiger-breeding facilities will ensure a supply of wildlife at an affordable price, and so eliminate the incentive for poachers”.  This so-called “supply-side” argument is challenged in the academic economic literature by Damania and Bulte (2007), who demonstrate theoretically that there are certain conditions under which the argument does not hold.  Bulte and Barbier (2005) provide an overview of the economic literature relating specifically to trade in renewable resources, and other detailed economic analyses of the arguments are provided by Fischer (2003, 2004, 2010).  Abbot and Van Kooten (2009) present a sophisticated economic argument in favour of tiger farming, advocating a monopoly supply model (citing the example of the 19th century Canadian fur trade as a successful precedent).  Oster (2010) contrasts the opinions of two of the economists on either side of the farming debate.

Outside of the academic economic literature, Lapointe et al (2007) argue that farming should at least be considered as an option, but there are numerous challenges to this view (e.g. Hemley and Mills 1999, Dinerstein et al 2007, Gratwicke et al 2007, Cameron, Banks and Gosling 2009, Wright 2010, Nowell 2010 and Mishra 2010).  Proponents of farming proposals point to examples of farming success stories with other species – e.g. crocodiles and vicunas – whereas opponents cite examples of failures, such as turtle farming in China (see Haitao et al 2007) and the disappearance of wild crocodiles in Thailand (also due to farming).  Kirkpatrick and Emerton (2009) provide the most recent  summary of arguments against farming, and invoke the use of the precautionary principle.

Many valid concerns are raised about the risks of farming, but the existing trade ban policy is not without risk either (see ‘t Sas-Rolfes 2010).  Norton-Griffiths (1995) argues that bans on products such as rhino horn and tiger bone may prove to be self-defeating and unenforceable, and Moyle (2009) points out that even high deterrents such as the death penalty have failed to end illegal trade and poaching.  In response, Gosling (2009) argues that the ban has not failed, but rather that it has not been appropriately enforced.

The arguments for and against farming are linked to arguments over the potential effectiveness of CITES measures, the role and desirability of captive breeding, the nature of market demand for tiger products and operational issues (such as the potential for laundering).  In the following section we extend the analyses done to date and consider the arguments in greater detail.

These gaps in understanding are most noticeable in the analytical treatment of illegal markets.  Organizations such as TRAFFIC and the EIA have gained significant knowledge and understanding of certain aspects of these markets (see, for example, TRAFFIC 2008), but their publications continue to reflect some unfamiliarity with the full nature of the likely incentive structures and operational dynamics of the black market.  Perhaps partly out of an allegiance to the CITES Appendix I approach (seeing no practical alternative), but also partly due to some methodological research errors, some of their conclusions and policy recommendations appear misguided or biased, and do not always flow logically from their research findings.  In this section we deconstruct arguments made to date, reveal some logical flaws and suggest a way forward.

The simple “supply-side” argument

We start with the basic economic “supply-side” argument for farming, which asserts that increasing the availability of tiger products from legal farmed sources would lead to a drop in market prices and therefore reduce incentives to poach wild tigers.  This theoretical argument assumes a so-called “perfectly competitive” market (with no monopoly power), and assumes that legally-produced farmed products and illegally-obtained wild products are perfect substitutes (i.e. equally acceptable to consumers).  It says nothing about how they may be distinguished or kept separate in the marketplace.  If such separation is impossible, this approach would only succeed to the extent that production costs for farmed tiger products are lower than the costs of supplying products from poached tigers (thereby eliminating the incentive to poach).

The complex nature of markets for products such as rhino horn and tiger bone is clearly indicated in the literature (in TRAFFIC reports, for example), as are more sophisticated, practical arguments for considering regulated legal trading regimes (see, for example, ‘t Sas-Rolfes 1995, 1997, Meacham 1997, Abbot and Van Kooten 2009 and Fischer 2010), but this literature is frequently ignored in favour of attacking the simple supply-side argument on theoretical grounds (e.g. Damania and Bulte 2007, Kirkpatrick and Emerton 2009).

Three assumptions of the simple supply-side argument are easily challenged in the tiger’s case:  First, a perfectly competitive framework does not appear to exist; second, wild and farmed products are not perfect substitutes and third, it seems unlikely that farming production costs will be lower than poaching costs in all cases.  However, the fact that these assumptions do not hold for the simple supply-side argument does not invalidate the case for farming as part of a conservation strategy.  We return to these arguments shortly.

The simple anti-trade argument

An equally erroneous argument implicit in much of the literature, yet seldom challenged, is that all commercial trade in wild species products is bad for conservation.  This is the default position of a CITES Appendix I listing, and has the unfortunate effect of encouraging enforcement measures that are actually detrimental to conserving certain species, tigers included.

A simple example probably best illustrates this point.  Let us imagine that I want to buy a tiger skin, I am willing to pay up to $5,000 to get one, and I do not care whether the skin I buy is of legal or illegal origin (i.e. I am not law-abiding).  You have an old skin (of legal origin) in your possession, which you are willing to sell for $2,000.  Under a legal trading regime, I have two options: I can negotiate to buy one from you for anything between $2,000 and $5,000 or I can try and solicit a freshly poached skin on the black market for anything up to $5,000.   If an illegal trader is able to provide a poached skin at a minimum price of $4,000, then I am better off buying from you for, say, $3,500.  In this instance, both you and I effectively gain ($1,500 each), as does a wild tiger, which is spared from being poached.

What happens if legal trade is not allowed?  If you are a law-abiding citizen, you may not wish to sell your skin to me at any price – you may even destroy it.  In this case, I have no choice but to buy the poached skin on the black market for between $4,000 and $5,000, and I indirectly cause the death of another wild tiger.  This is a clear instance where allowing a legal transaction would not only be more beneficial to society (in terms of what economists call “welfare gains”), but also for wild tiger conservation.

Still using the same example, we can also imagine a different situation in which illegal traders are willing and able to source freshly poached skins and sell them directly to me for as little as $1,000.  In that case, offering the legal trade option would not make a difference – I would be tempted by the cheaper option of buying a poached tiger skin.

This example illustrates two important points.  The first is that trade is not always a bad thing – there are instances in which trade from sources other than fresh wild stocks can actually be beneficial to conservation (see Bergstrom 1990).  Examples of such sources are old stocks, farmed stocks, sustainably-obtained stocks (from, for example, a naturally deceased animal) and fakes.   If demand for a product remains constant, preventing trade from such sources effectively reduces the market supply, thereby driving up prices and raising incentives for poaching and illegal trade.

The second point is that legal trade will only be beneficial as long as legal product prices are lower than illegal product prices.  The simple anti-trade argument assumes that illegal supply costs (from poaching) are always lower than legal supply costs (from farming and other legal sources).  However, this is not necessarily so; in fact it is most unlikely (see below).

Fallacies of the low poaching cost argument

Many recent articles discussing the tiger trade claim that illegally-obtained tiger products will always be significantly cheaper than farmed products.  Figures quoted for “poaching a tiger” vary from $1 (Wright 2010) through $15-20 (Damania et al 2003) and up to $200 (Oster 2010).  By contrast, the cost of raising a farmed tiger is quoted variously as a minimum of $2,000 (Oster), between $4,000 and $7,500 (Wright 2010), $4,000 per year (LaPointe et al 2007) and up to $6,000 per year (Mishra 2010).  Even at the maximum suggested “poaching” cost of $200 and the minimum cost of $2,000  for producing a farmed tiger, the significant difference suggests that  the potential cost of farming is ten times higher than poaching wild tigers (Gratwicke et al 2007). However, this argument is both flawed and misleading.

To assess the relative merits of illegal and legal trading regimes, the figure quoted for poaching a wild tiger cannot validly be compared against the cost of producing a farmed tiger, for three reasons.  First, as already mentioned, wild tiger products and farmed products are not perfect substitutes, a point we discuss in more detail below.  Second, the quoted “poaching” figure is not a complete reflection of the illegal supply cost and the direct comparison is therefore invalid.  Third, the illegal supply cost is not a fixed figure, and will vary greatly depending on the effective distance (in terms of geography and regulatory hurdles) between the poached wild tiger and the end consumer.

Two intuitive observations suggest that the quoted comparisons between the cost of poaching and the allegedly prohibitive cost of farming are misleading, if not completely wrong.  The first is the continued presence of commercial captive breeding centres in countries such as China, Vietnam and Thailand, despite the CITES ban – if farming is “too costly”, then why do farms continue to exist, even when they can’t legally sell any product?  The second observation relates to empirical evidence that a single tiger’s parts can fetch between $30,000 and $70,000 on the Chinese black market (Mishra 2010, Nowell and Xu 2007, Oster 2010).  If the quoted poaching figure of no more than $200 is the correct cost of illegal supply and these current retail prices are also correct, then with such a potentially massive profit opportunity, why are there any wild tigers left at all?

The answer must be that the true economic cost of illegal supply is often far higher than the typically quoted poaching figure (see Abbot and Van Kooten 2009).  A valid supply cost comparison must consider all the costs of delivering illegally sourced tiger products to the end user.  This would not only include additional transactions costs (see Cheung 1987), but also an assessment of the risks of being apprehended by the law, which can also be expressed as an economic cost (Becker 1968).

Gosling (2009) discusses the structure of the black market and concludes that it operates by way of loose criminal networks (as opposed to structured organizations), in which a number of different agents play specialized roles.  Such roles may include poaching, processing, smuggling, storage, bribery and protection.  Implicit among these roles are various  activities and transactions, all of which involve risks and costs.   In the classic economics literature, Dahlman (1979) identifies three types of transactions costs: 1) search and information costs, 2) bargaining costs and 3) policing and enforcement costs.  In the context of illegal supply of tiger products, Moyle (2009) identifies what he terms co-ordination costs, motivation costs and evasion costs.

A careful consideration of all the likely costs and risks involved suggests that while it may be true that it costs relatively little to supply a poached tiger to local people in the tiger’s vicinity, the full economic costs of supplying tiger bones or skins from a poached tiger in India or Southeast Asia to a consumer in mainland China are far greater.  An important question is whether these costs would be reduced under a legal trading regime, and to what extent.  This will depend largely on the potential of separating illegal product from legal product and the ability to thwart the threat of laundering (see below).

Not only are the costs of illegal supply probably much higher than generally acknowledged, but as Abbot and Van Kooten (2009) also point out, the quoted costs of farming are not necessarily fixed, may be reduced over time with economies of scale, and are frequently offset by other activities such as tourism viewing (which must at least partly account for the continued existence of the farms under the ban).

The substitution issue

The tiger trade and farming debate is complicated by confusion over the extent to which products from (legally) farmed tigers can act as substitutes for products from (illegally poached) wild tigers.  This is an issue that is not well understood, and yet is pivotal as to whether farming could be beneficial for conservation or not.

Of the two most significant products, tiger skins and tiger bone, skins from wild and farmed tigers are likely to be fairly close substitutes, given that their value derives from aesthetics and they therefore essentially amount to the same product (although skins from carefully raised captive animals may be considered preferable  if  lacking scratches, etc).  However, bone is a different matter.  Tiger bones are difficult to distinguish from the bones of other animals (and practically impossible to distinguish from other large felids such as lions without DNA testing), so there is high potential for counterfeiting.  Since tiger bone is used as a vital medicine, one might assume that many TCM practitioners and consumers would be concerned about the authenticity of the product.  A bone from a  recognized legal source can be certified as such; one from an illegal source cannot (except fraudulently).  This fact makes tiger bone from a certified legal source a potentially preferred product over a bone of uncertain origin.

Conversely, as several authors have argued, wild tiger bone may be regarded as being superior in quality and effect over bone from farmed animals.  This is consistent with experience of other Traditional Chinese Medicine ingredients such as bear bile and gall bladders (see Meacham 1997) and appears to be supported by a survey conducted in China (Gratwicke et al 2008), but is disputed by some official TCM representatives (‘t Sas-Rolfes 2010).

It seems reasonable to assume that most consumers and TCM practitioners would prefer tiger bone from a source that is both wild and certified.  However, if this option is not available to them, and they must decide between farmed and certified versus allegedly wild but of uncertain origin, which would they choose?  More importantly, how much would they be willing to pay for each of those options?  If, for example, consumers are only willing to pay an extra 10% for a claimed wild product, the scope for substitution and effective competition is much greater than if they are willing to pay 200% more to obtain it!

Unfortunately there is no valid consumer research that compares the two options (certified farmed versus uncertified wild), nor any that measures the relative willingness to pay for them.  Without this critical information, all arguments about consumer preferences amount to mere speculation.

The supply side argument revisited

We have addressed two of the assumptions underlying the simplistic supply side argument, namely the extent of substitution between farmed and wild products and the differences in supply costs.  Farmed and wild-poached products are likely substitutes in the case of tiger skins, but the extent of substitution in the case of tiger bone is unclear: proper measurement of consumer preferences has not been empirically determined.  Also, the alleged end-user black market prices for tiger products way exceed the claimed costs of either farming or illegal poaching, and it is unclear to what extent illegal supply might be cheaper than a legal supply from farmed tigers.

The third assumption of the simplistic supply-side argument is that of a “perfectly competitive” market.  In reality, no market is perfectly competitive, and markets for tiger products show evidence of many imperfections.  The illegal supply regime may be highly competitive among poachers, but is likely to be far more concentrated among specialist illegal traders (Bulte and Damania 2005).  Similarly, if tiger farming were to be legally introduced, it seems likely it would be dominated by a small number of large producers, following the existing pattern of concentration in China’s captive breeding centres and backwards integration of TCM pharmaceuticals.

If farmed products and wild-poached products are perfect substitutes, then imperfect competition can theoretically lead to one of two outcomes: “quantity (aka Cournot) competition” or “price (aka Bertrand) competition” (see Damania and Bulte 2007 for a detailed explanation of this).  According to this analysis, quantity competition would lead to a reduction in poaching, whereas aggressive price competition may result in an increase in poaching, depending on the scope for cutting illegal supply costs.

The above argument assumes that legal traders do not invest profits into protecting wild stocks (thereby raising illegal supply costs), and is also affected by the issue of substitution.  If farmed product is differentiated from wild-poached product, then competition also takes place along qualitative lines (as discussed above), which affects the predicted outcome.

Bulte and Damania (2005) also note that the unfavourable price-competitive outcome can be avoided by strategically controlling farmed output, and they recall issues raised by Fischer (2004) relating to other possible effects of changing a trading regime from illegal to legal.  These effects would also change the predicted outcome, by affecting supply and demand.  We now examine these in more detail.

Factors affected by a change in trading regime

Fischer (2003, 2004) identifies four factors that can affect the outcome of introducing legal sales of a previously illegal product.  The first two relate to effects on consumer demand (law-abidance and stigma), and the other two to effects on illegal supply costs (laundering and direct cost reduction).

To illustrate the first two effects, consider what happens when a product such as tiger bone is banned.  Those who were consumers prior to the ban may react in different ways.  Some may stop purchasing bone simply because they are law-abiding citizens for reasons of risk aversion, i.e. motivated by a desire to avoid being punished.  Others may be motivated to stop purchasing bone because the ban signals to them that it is now somehow undesirable (perhaps due to a loss of faith in its curative effects or out of a new-found compassion for tigers) – this is the so-called “stigma effect”.  And others still may be unconcerned about breaking the law and not perceive any stigma, and will continue to buy bone on the black market.  Note that there could also be a “reverse stigma effect” where the newly illegal status of the product renders it “rare and precious” and more desirable in certain circles where it may be regarded as a status symbol.

What is likely to happen if legal trade is re-introduced from a source that is kept separate from illegal sources?  Law-abiding citizens may resume purchases, but are likely to restrict those to legal sources, so this should not impact wild tiger populations directly.  A theoretical increase in demand for illegal sources would take place if there are non-law abiding citizens who were influenced by the stigma effect during the ban and view the resumption of legal sales as a cue to resume illegal purchases of wild products.  However, as Abbot and Van Kooten (2009) point out, the existence of such consumers has yet to be empirically demonstrated.

A short-term surge in demand thus seems unlikely (this is not the same as a short-term surge in quantity sold, as we discuss below).  However, the presence of legal farmed sources could lead to changes in perceptions over the longer term and, coupled with future increases in spending power, could eventually lead to some consumers wanting to “trade up” from farmed bone to wild bone.

A more obvious immediate concern relates to how resuming illegal trade might result in laundering and the reduction of supply costs.  The potential for laundering – the introduction of illegally sourced product into the legal market – receives much attention.  If illegal product can be sourced at a lower cost than legal product, there would be strong incentives to channel it into the legal market.  This is an issue of serious concern in the ivory trade.  How does it relate to tigers?

With tiger skins there is certainly potential for laundering, which could only be mitigated by a recognized certification system.  However with tiger bone, the differences between bone from certified legal farmed sources and wild sources that are both unverified and illegal provide a natural deterrent to laundering.  Neither the legal nor illegal suppliers would seem to have much incentive to engage in laundering transactions: illegal suppliers would surely seek premium prices for their superior wild product and legal suppliers would be reluctant to contaminate their supplies with stocks from an uncertain origin, which may be wild but may also be fakes.  A logical rationale for laundering tiger bone is not obvious.

Apart from the potential effect of laundering, the re-introduction of a legal trade could also result in lower enforcement effort against illegal trade, thereby effectively lowering the cost of illegal supply.  For example, police and other law enforcement agents may find it easier to operate in a world where all tiger products are illegal, whereas if some (certified) products are legal and others not, they may find this confusing and be less inclined to pursue potential offenders.  Nowell (2010) raises this as a concern, but does not acknowledge the possibility that enforcement costs may also be lowered by a degree of self-enforcement in a legal trade scenario (legal suppliers would have strong incentives to prevent and act against illegal competition).

Supply, demand and the price mechanism

Much of the literature concerning wildlife trade policy displays a degree of confusion over the relationship between supply and demand.  This confusion typically arises in two instances:

1)      When authors treat supply and demand as fixed discrete numbers rather than a range of possibilities regulated by the pricing mechanism.

2)      When authors confuse short-term (price) effects with typically longer-term changes in supply and demand functions.  In technical economic terms, they confuse movements along the supply and demand curves with shifts of the actual curves themselves.

The first misconception is reinforced by misleading statements such as “demand for tigers exceeds supply” (Kirkpatrick and Emerton 2009), which implies that demand and supply are fixed numbers, rather than two parts of a dynamic relationship regulated by the price level (for a more detailed discussion of this fallacy see ‘t Sas-Rolfes 2010).  Demand only “exceeds” supply in actual trade when prices are set artificially low.  The same misconception is evident in the concern expressed by Nowell (2010) that “demand, if trade were legalized, would quadruple from the early 1990s level”.  It is, in fact, meaningless to talk about demand quadrupling without mention of contextual prices.  To illustrate this point, consider the statement: “the demand for tiger bones is 5,000 kg a month”.  While it may initially sound plausible, consider whether that statement would be true for both cases of two vastly different prices – e.g. $1 per kg and $ 10,000 per kg.  Economic logic tells us that fewer consumers would either want or could afford the same amount of bone at the higher price!

We see evidence of the second misconception in the concern expressed by Cameron, Banks and Gosling (2009) that an increase in supply of  tiger parts would lead to an even greater demand that would completely overwhelm supply capacity.  In addition to confusing short-term and long-term effects, this argument also implies a common fallacy that a mere increase in supply actually drives up demand.  However, the market mechanism is somewhat more complicated and deserves some discussion.

Well-established economic theory (and much empirical evidence) tells us that a simple increase in supply will typically have one immediate effect: a reduction in market price.  Demand, which is determined by other factors such as the preferences and spending power of consumers, is not directly affected.  However, even with constant demand, a lower price will typically result in an increase in the quantity of product traded.  It is important not to confuse this short-term increase in quantity traded with an actual increase in demand (i.e. it does not represent a change in consumer preferences).  We illustrate this distinction graphically in an Appendix to this document

In a hypothetical case of an increased supply of tiger products from a non-wild source, the increase in quantity traded would not pose a threat to wild tigers; in fact the lower price would reduce the future incentives for poaching and illegal trade.  This relates back to the simple supply-side argument discussed above.

The supply-side price reduction is only offset if there is a counteracting increase in actual demand (shifting out the demand curve), i.e. if consumer preferences change, leading to an increase in price.  Typically, this only occurs over the longer term, with changes in tastes and rising spending ability.  However, it may happen in the short-term in the event of a sudden policy change that leads to an immediate change in consumer behaviour.  Cameron, Banks and Gosling (2009) note the possibilities of both such a short-term change (if the lifting of a ban reverses a previous stigma effect) and longer-term effects such as the potential of marketing to stimulate increased consumer demand.

These demand factors do constitute a legitimate area of concern, as they may lead to increases in price, which in turn can raise incentives for poaching and illegal trade.  However, the demand factors are not caused directly by increases in supply.  Increases in supply and quantity traded do not directly constitute threats – in fact, if they lead to price reductions for wild-harvested products they are quite the opposite.

Price and “volume” issues

Related to the confusion discussed above, and to the earlier point about the misconceived simple anti-trade argument, past trade analysis has often focused on the assumed threat of high trade “volume” simply as a high quantity of product being traded.  Unfortunately this approach is flawed and can lead to false conclusions.  We can illustrate this with a simple example.

Consider the case of 100,000 consumers paying an average price of $10 per unit of bone over a given period.  The total market size (as measured by gross revenue) is 100,000 x $10, i.e. $1 million.  Now consider a case of only 10,000 consumers paying an average price of $200 per unit of bone over the same period.  The total market size is $2 million.  A superficial analysis of the market based on “trade volume” expressed as the quantity of product suggests that the first case would be far more threatening than the second.  However, since the second market is far more lucrative, it in fact may constitute the greater threat.

What matters in this example – indeed, what matters in every instance – is how much of the market revenue (quantity traded multiplied by price) is going to legal suppliers versus how much is allocated to the illegal supply sector (traders, smugglers and poachers).  It is the profitability of the illegal supply sector that drives poaching, and to determine the profitability we need to know not only quantities traded but also their market price.

Even without knowing quantities traded, price is a more accurate indicator of market conditions than quantities alone would be.  This is because market prices reflect scarcity – price increases indicate increases in relative scarcity and, in the case of illegal markets for wild species, also an increased threat of poaching.

The effects of trade bans

What effect do trade bans have on the profitability of illegal supply?  In theory, trade bans aim to eliminate demand, but in practice they may simply limit supply (Moyle 2003).  Trade bans may have the effect of reducing demand (as discussed above), by providing legal disincentives to purchase products or if they create a stigma effect.  However, there are instances where such demand reduction is relatively trivial, or only takes place in certain sectors of the market.  There also may be cases where, as noted above, there is a reverse stigma effect and products become more desirable as a status symbol in other market sectors, typically at the “high end” of the market. A recent survey of wild meat preferences in Vietnam by Drury (2009) suggests that this phenomenon exists.

There are also instances of products for which demand is relatively insensitive to changes in prices.  In technical economic terms, such demand is said to be price-inelastic.  Examples of goods for which prices may be inelastic include essential products (fuel, basic foodstuffs and essential medicines), addictive products (drugs, tobacco and alcohol) and prestige products (luxury goods).  Price-inelastic demand is of particular concern, because it can render a ban unenforceable (‘t Sas-Rolfes 1995).  The most classic example of this is the failed alcohol prohibition in the USA in the early twentieth century.  A current example is the well-documented failure internationally to end the trade and use of drugs such as marijuana, heroin and cocaine.

If demand is price-inelastic, restrictions in supply have the perverse effect of making illegal supply more profitable than before (see ‘t Sas-Rolfes 2010 for a full explanation).  This increased profitability tends to attract ever more sophisticated and powerful criminals and explains why trade in high value illegal goods is typically handled by specialized organized crime syndicates.  Every gain in enforcement effectiveness increases the profitability of the illegal enterprise.  For prohibited goods that are manufactured, this results in long term increases in production.  When the prohibited good is extracted from nature, the long-term result may be disastrous.

Another unfortunate consequence of trade bans is that market prices become difficult to monitor, resulting in a large degree of confusion and speculation, both among market players and those trying to monitor them.  Because market players are unable to legally advertise prices, it is hard to compare transactions, and prices tend to vary more than in legal markets.  This leads to inefficiency (wastage) and to various forms of speculative behaviour and market manipulation.  Such speculative behaviour can include stockpiling, which presents an additional threat in the case of endangered species.

Speculative stockpiling constitutes an additional source of demand (buying extra amounts in the present to allow for future use or resale), leading to price increases and thus driving poaching to higher levels.  A classic example of this is the plight of the African black rhinoceros, which was subject to  a CITES Appendix I listing in the mid-1970s.  The period following the ban was characterized by dramatic price increases and intense poaching pressure (‘t Sas-Rolfes 1995) and culminated in a well-publicized case in 1993 in which an EIA undercover operation exposed significant illegal stockpiling activities by a large crime syndicate (see EIA 2007).

Is the current trade ban on tiger products helping or hindering wild tiger conservation?  Let us consider some of the recent empirical evidence.

Some evidence from the tiger trade

The extent of the continuing illegal trade is difficult to determine, and there appears to be consensus that the current rate of detection is very low (Cameron, Banks and Gosling 2009).  Notwithstanding the alleged low detection rate, there are continuing reports of illegal trading incidents and smuggling interceptions.  Similarly, there are continuing reports of poaching incidents and population declines in areas where suitable tiger habitat persists (such as in Cambodia – see Wells 2010).  This implies that wild tigers continue to be poached to supply the market, at rates that undermine the sustainability of certain populations.

There is also evidence that some tiger products are being sourced – and are illegally entering the market – from captive populations (Cameron, Banks and Gosling 2009).  In addition, there is evidence that bones from other wild felids such as leopards and lions are also entering the market, probably as tiger bone substitutes, and are being sourced from as far afield as Africa.  All of this is suggestive of persistent consumer demand for tiger bones, despite the ban.

Much of the current opinion on levels of demand in China is based on the results of a retail market survey conducted by Nowell and Xu (2007), who conclude that China has virtually eliminated the domestic demand for tiger bone medicines.  However, their data do not support that conclusion.   What they do demonstrate, is a high level of awareness of the ban, and that conventional TCM wholesale and retail outlets are no longer selling tiger bone medicines (which were also removed from the formal pharmacopeia in 1993).

The absence of product in traditional retail channels and high awareness of the ban does not translate into a lack of demand.  It merely demonstrates a high level of legal compliance with the domestic ban among public TCM outlets, which is hardly surprising given the severe penalties for non-compliance.

It is worth noting the results of recent research monitoring the effect of banning the display of cigarettes in retail outlets in four diverse countries (Iceland, Ireland, Canada and Thailand).  These studies show that cigarette sales and consumption actually increased after being removed from retail outlets, having moved to other informal distribution channels, presumably involving more effective direct selling techniques (Basham 2010).

Nowell and Xu also report continuing incidences of seizures of illegal tiger products, which indicates both the continued presence of black market demand and an illegal supply network in China.  Other research confirms that demand is still present (see below), but because illegal trade now takes place covertly, it is difficult if not impossible to monitor or measure.  Reported illegal selling prices are highly variable (Nowell and Xu 2007, Cameron, Banks and Gosling 2009), which is consistent with what we would expect of a black market with fragmented and imperfect information.

The existence of high prices in some quarters is suggestive of threatening levels of demand in at least certain sectors of the market.  However, given the paucity of accurate data and the fact that availability of tiger bone through conventional outlets is an invalid indicator of illegal market size, it is impossible to determine with certainty whether the trade ban is currently having a positive or negative effect on wild tiger populations.

Trend evidence from consumer surveys

Even if we can’t determine the current impact of the trade ban, can we predict future trends and their likely impact on wild tiger populations?  Gratwicke et al (2007) assert that the use of tiger bone in medicine is a “dying practice”.   Even if this is true as a generalized statement, it is hardly a scientifically valid assessment of the threat posed by the residual demand.  As we have discussed above, it is not the absolute quantity of product desired that matters, but the value of the residual market.  If the residual demand for tiger bone is highly price-inelastic, even a small number of consumers may pose a significant threat.

Recent research results are indeed indicative of residual demand with high price inelasticity.  Mills et al (1997) note a presence of residual demand in China in the mid-1990s, despite awareness of the ban, and Lee et al (1998) report similar results for the US and Hong Kong markets.  A decade later, Nowell and Xu (2007) and Gratwicke et al (2008) still observe a presence of demand and actual use of tiger bone, despite awareness of the ban and apparent widespread support for it.

Results of a consumer survey conducted by the China Science and Technology Institute (CSTI) between 2004 and 2006 show continued widespread belief in the efficacy of tiger bone medicines (28.7% of respondents), especially among rheumatism sufferers (69.3%).  A significant number of respondents indicate a desire to acquire bone despite the ban (5.6% of the general public and 61.3% of rheumatism sufferers).  The survey also finds that respondents are stockpiling bone for themselves and their relatives (‘t Sas-Rolfes 2010).

The evidence from recent consumer research all suggests a continuing problem, because the persistent presence of price-inelastic demand, even among a relatively small group of consumers, will most likely continue to exert upward pressure on prices (and therefore incentives to poach) if supplies of tiger products continue to decline.

The results of the CSTI study indicate the greatest presence of persistent demand among elderly sufferers of rheumatism, which is consistent with the observations from some of the other studies relating to the age demographic of tiger bone demand.  How is this demographic likely to change in time?  One could argue that younger generations of Chinese are moving away from the use of tiger bone, however it is hard to predict whether their attitudes will change once they age and become rheumatism sufferers themselves.  It is also hard to predict the effects of probable increases in disposable income and possible increasing pride in (and assertion of) cultural traditions that will most likely accompany China’s continuing ascendancy as a global superpower in the 21^st Century.  Even the “dying practice” claim is merely a hypothesis that has yet to be empirically demonstrated.

Facts and fallacies – a revision

We pause to reconsider what we do and don’t know about markets for tiger products.

We know that there is continued evidence of poaching, declines in wild tiger populations, illegal trade, consumption of tiger products and enduring demand for tiger bone medicine.  Increased trade regulation, bans and enforcement efforts to date have not succeeded in eliminating any of this.

We do not know the extent to which the regulatory approach has actually helped wild tigers, if at all.  Although availability of tiger products through conventional channels has been virtually eliminated, we do not know the extent of illegal trade in terms of both quantity and price, and therefore do not know whether illegal supply has become more or less profitable.

We know that some consumers of tiger bone medicines would be willing to use products from farmed animals as substitutes for wild products.  We also believe that some consumers would prefer to use wild products, as they consider them more desirable.  We do not know the extent to which consumers would be willing to substitute farmed for wild products, considering that bones from farmed animals could be legally certified as genuine whereas illegally obtained wild bones cannot.

We know that, based on recorded prices of illegal retail sales of tiger bone and skins in China, the value of a dead tiger carcass ($30,000 – $70,000) is greater than the highest estimated cost of farming one to adulthood ($24,000).

We do not know the cost of illegally supplying tiger products to end consumers, but we do know that it must vary greatly with geography and circumstance, and that in most cases is considerably higher than the mere cost of poaching, due to the high transactions costs involved.

We know that increased restrictions in supply drive up prices if demand stays constant.

We know that an increase in supply from farmed products would drive down prices if demand remained constant.  We do not know whether demand would remain constant if such a supply were introduced.

Given what we know and what we don’t know, what is the most sensible policy approach?

Decision-making under uncertainty: the precautionary principle

Kirkpatrick and Emerton (2010) argue that “(B)ecause the level of endangerment is so high for tigers, a precautionary approach is called for” and conclude that an approach based on “supply-side conservation” is too risky.  Aside from their flawed analysis of potential farming options, the authors also implicitly assume that the existing approach is a least-risk option.  This is questionable (see Moyle 2010).

Abbot and Van Kooten (2009) argue that (in the absence of a legal supply) anti-poaching and trade ban enforcement must be increased to a level that is seemingly unattainable to prevent extinction of the wild tiger.  Cameron, Banks and Gosling (2009) counter that the ban approach has not worked because it has never been properly implemented, and they argue a case for “intelligence-led enforcement” against key individuals in the trade.  Their call for improved enforcement is both sensible and laudable, but it may be of little benefit to the plight of the wild tiger.

As noted above, there is significant evidence that residual demand for tiger bone medicines is price-inelastic, and there is also much experience to suggest that trade bans on price-inelastic goods are unenforceable.  Intelligence-led enforcement against key individuals may result in occasional high-profile arrests and convictions, but experience in these types of markets shows that this typically only results in temporary disruptions in supply.  The significant financial incentives of illegal trade simply attract new entrants (often by way of “promotions” within existing syndicates).

A survey of recent literature on organized crime and illegal trade provides much discouraging comparative evidence (see, for example, UNDOC 2010).  Despite intensive, long-standing enforcement efforts in markets for illegal drugs, selling prices and levels of both production and consumption have dropped marginally, if at all.  Glenny (2008) documents the spread of organized crime in the last two decades and shows how it has been built up and strengthened through the imposition of unpopular market regulations (i.e. bans that do not enjoy full public support).  He argues that organized crime networks provide an alternative institutional framework for dealing in all those commercial activities that governments refuse to recognize, a view that is developed in the academic literature by Gambetta (1993, 2009).

Fisman and Miguel (2008) also present insightful economic analyses of the incentives for (and prevalence of) corruption, as well as statistics relating to the massive volume of trade across China’s borders and the limited rate of monitoring that is practically possible by customs officials.  The widespread existence of corruption, also acknowledged by Gosling (2009), is especially challenging to enforcement.  In the case of high-value price-inelastic goods, enforcement tends to bypass corrupt senior officials, who effectively employ it to entrench the positions of leading cartels by only targeting their competitors (‘t Sas-Rolfes 1995).

Fisman and Miguel’s discussion of incentive problems is consistent with the insights of the new institutional economics, which contrasts the longevity and persistence of customs, traditions and social norms with the far shorter time horizons of governance structures and policy measures (see Williamson 2000).  One such insight is that a custom with a history of hundreds, if not thousands, of years, is most unlikely to change within a period of a mere decade, and that conflicts will arise when short-term policy changes ignore established social norms.

Given what we know about the failure of the tiger product ban to date and the experience of other similarly failed policies in other markets, all of which is clearly detailed by increasingly robust academic analyses in the economic and sociological literature, we challenge the assumption that the existing approach is the least risky.

It is quite possible that the scope for further demand reduction for tiger products is limited, having now reached a highly price-inelastic level of major resistance (from, for example, rheumatism sufferers with strong traditional beliefs) and that the threat of residual demand will increase with rising consumer affluence.  It is also quite possible that current aggregate illegal supply costs are much higher than typically assumed, and that if criminal cartels tighten their grip on the market, they could reduce transactions costs over time by forming more effective networks, higher-level protection from corrupt senior officials and improved smuggling methods.  This would allow them to expend greater resources on actual poaching, which could result in organized targeted poaching of the remaining larger wild populations as seen in India.  Such concerted efforts are virtually impossible to stop, even with drastic enforcement measures such as shoot-to-kill policies.  This phenomenon has been observed with rhino poaching in the 1980s, which is recurring in southern Africa at present (see ‘t Sas-Rolfes 2010 for further discussion).

In this instance, simply assuming that the status quo (i.e. the trade ban) is the least-risk approach may in fact amount to a perversion of the precautionary principle.  To deal with the issue of uncertainty, we recommend measures to reduce that uncertainty (such as further appropriate and credible consumer research) as well as a more flexible adaptive management strategy – one that does not preclude other options if the ban approach continues to fail.

Re-assessing the risks of tiger farming

Given what we know and don’t know about the tiger product markets, how do we assess the risk associated with the existing captive breeding centres in China?  Without legal trade, does their mere presence threaten wild tiger populations?

Our analysis suggests that any “leakage” and illegal trade of products from existing captive tigers adds to the supply of tiger products, but does not constitute an additional source of demand.  If anything, this trade is probably reducing pressure on wild tiger populations.  Restricting the supply of tiger products from non-wild sources appears to be a counterproductive strategy, with no obvious benefits to wild tiger populations.  Since a ban is already in place with widespread awareness, there is little if any further scope for stigmatizing demand or creating legal disincentives.  Supply reductions alone will simply drive up the black market prices for tiger products, thereby increasing the incentives for illegal supply from wild tigers through increased levels of poaching.

Our analysis also suggests that a genuine precautionary approach is one that leaves options open.  Proposals to shut down China’s captive breeding centres run counter to this approach (Moyle 2010), as this would eliminate the last possibility of competing with illegal suppliers should the ban (or its implementation) continue to fail.  The large populations of tigers in captive breeding centres may act as an effective competitive buffer and insurance policy.  Removing this would simply consolidate the monopoly power of existing illegal crime syndicates, and we fail to see the logic in doing this.

We do not necessarily recommend re-instating regulated legal trade of products supplied from tiger farming, but do believe that this option should be carefully investigated, because in theory it could benefit wild tiger conservation efforts if:

1.       The supply of certified farmed products displaces some of the existing consumption of wild products, and

2.       The profitability of illegal supply is reduced through competition.

The first point all depends on the possibility of substitution between legal and illegal markets.  If farmed skins can act as an acceptable substitute for wild-poached skins, then adding to the supply should exert downward pressure on poached skin prices.  At the same time, if certified legal bone could compete qualitatively with wild bones of uncertain origin, then a partial displacement effect (and drop in consumption of wild bones) is possible.

Regarding the second point, the scope for reducing illegal supply profitability would depend in part on the ability to keep the legal and illegal markets separate, to avoid laundering and to retain the legal disincentives and stigma associated with using products from wild tigers.  Another helpful measure would be for tiger farms to invest some of their profits into anti-poaching efforts to protect vulnerable wild populations.

We emphasize that as long as tiger body parts have any commercial value whatsoever, incentives to poach will persist, irrespective of whether legal supply alternatives exist or not.  Wild species with any commercial value will always need to be protected in situ against illegal harvesting, by using various direct and indirect anti-poaching measures.  In the case of tigers, even without commercial value, they will continue to be threatened by retaliatory killings if they attack local people and their livestock.

The example of bear farming in China is often cited as a precedent of conservation failure, as it has not ended the practice of poaching wild bears.  However, this argument misses the point.  Animal welfare considerations aside, has bear farming alleviated at least some of the pressure of residual persistent demand?  What would happen to levels of wild bear poaching if the supply of all farmed bear products was removed from the market?  Unfortunately, accurate data and analyses of bear product markets are also lacking, and this issue continues to be a subject of debate (see Williamson 2007), but it is worth contrasting the current situation of rhinoceros species with that of bears.  The former have been subject to a long-standing trade ban and continue to be severely threatened by poaching throughout their range, whereas the latter are certainly threatened in specific areas, but the overall intensity of this threat appears to be far lower.  Unlike rhinos and tigers, bears do not feature as a specified serious issue in the recent United Nations Report on transnational crime (UNDOC 2010).

We end our analysis by reiterating the opening point made by Fisher (2010).  Wildlife trade issues are complex, and each species is subject to specific ecological and market parameters that must be carefully identified and analysed before determining an appropriate policy.  Nonetheless, if we apply certain principles, based on sound application of relevant insights from both the natural and social sciences, we can compare and contrast experiences with various different species (and even other products with similar demand characteristics) and learn from these.  Many conservation scientists and practitioners have failed to take full account of all the issues relating specifically to the tiger farming debate, and more generally to questions about commercial captive breeding, CITES bans and conservation impacts.  We urge further and better research on these topics

Our analysis suggests that the potential of eliminating illegal trade in tiger products is very low, due to persisting price-inelastic demand.  Furthermore, attempting to eliminate all trade would appear to be a futile objective anyway, as illegal trade from captive sources may actually reduce pressure on wild populations.   Instead of aiming to eliminate trade, conservationists should focus more directly on reducing tiger poaching to sustainable levels.

The apparent residual demand profile for tiger bone (and other products) suggests that poaching pressure will continue to threaten wild tigers.  The most effective way to address this threat is through appropriate local, in situ measures that aim to prevent poaching before it actually takes place.  Such measures may range from direct anti-poaching (e.g. patrols), through indirect anti-poaching (e.g. informant systems) to other indirect measures that address the livelihoods of local people and provide them with postive economic incentives to conserve.

After-the-fact measures such as enforcement of trade bans suffer from two shortcomings.  First, the tiger is already dead when the smuggler or trader is caught.  Second, the further away from wild tiger populations and the potential source of poaching, the greater the possibility of intercepting trade from captive sources.

We note that the recent papers by Damania et al (2008) and Walton et al (2010) also prioritize in situ measures (“site-based protection”), while highlighting the continuing shortfall of funding required ($35 million) for such measures to be effective (to protect 42 source sites with 70% of the remaining wild tiger population).  In addition, they call for demand reduction measures, an approach reinforced by Broad and Damania (2009) and Wasser and Jiao (2010) and the Global Tiger Recovery Program (Global Tiger Initiative 2010a),  but there is no indication of how much such campaigns would cost to effectively and sustainably reduce the threat from poaching, nor where the additional funding for this would come from.

In our opinion, there is limited scope for improving the trade ban approach.  Whether this approach ultimately works for wild tiger conservation depends largely on a change in Chinese cultural attitudes and traditions.  Experience with persistent demand and trade in other markets suggests that no realistically achievable improvement in enforcement can work without cultural acceptance driving changes in consumer preferences.  It is unclear to what extent this can be achieved with “demand reduction” approaches.

As long as the ban continues to fail, a precautionary approach implies leaving other options open, including that of legally supplying tiger products from captive populations.  This implies retaining a sufficiently robust captive population in reserve.  Contrary to some claims, we find no evidence that the current existence of China’s tiger farms actually threatens wild tiger populations; in fact, a certain amount of product “leakage” may even be helping them.

Our analysis also suggests that the option of carefully-regulated commercial tiger farming, while unlikely to be a panacea, deserves further investigation.  Previous critiques of the farming option have overstated the potential risks, by addressing simplified theoretical propositions rather than a more carefully considered practical plan, which has never been promulgated.  To be credible, such a plan would need to address issues such as the effective separation of legal and illegal markets (through the use of certification and other methods) and ideally demonstrate direct benefits to conservation (by, for example, incorporating side-payments to fund anti-poaching measures).

Moving toward a legal trading regime is not without  risk, especially if the transition is handled inappropriately.  Immediate full relaxation of the existing trade ban is inadvisable and would be politically unacceptable to certain range states and other constituencies.  Incremental measures such as clinical trials and carefully monitored one-off sales provide alternative ways of testing the market and potentially relieving excess demand pressure (see Bulte, Damania and Van Kooten 2005).  However, even one-off sales would need to be planned and undertaken cautiously, with due consideration to possible strategic behavioural responses from existing illegal operators and market participants.

We conclude with the following specific recommendations for policy and research.

2. Focus on intercepting illegal trade of products sourced only from poached wild tigers.  This implies intelligence-led enforcement of illegal wildlife traders from the bottom up (following leads from poaching incidents) rather than from the top down (following distant trade and consumption leads) to avoid possible interception of trade from captive and other non-poached sources.  Avoid pursuing illegal trade supplied from captive populations in non-range states such as the USA – this wastes resources and is probably counterproductive.

3. To reduce consumer demand for illegal tiger products, employ approaches that directly address cultural attitudes and consumer preferences (e.g. moral suasion) rather than pursue implementation of laws that do not enjoy full public support (and therefore lead to black market activity that can neither be controlled nor monitored).

4. As long as any evidence of demand persists, avoid all actions that constrict supply and potentially strengthen the monopoly power of organized crime syndicates.  Secure stockpiles of tiger products but do not destroy them.  Retain a captive population of tigers as an insurance policy and do not shut down tiger farms.

5. Undertake credible market research to assess both the extent of consumer preferences and willingness to substitute between products that are: a) legal, certified and farmed, and b) allegedly wild, but of illegal and unverified origin.  Use “willingness to pay” to measure comparative preferences more accurately.  Employ accepted professional consumer research techniques to ascertain the existence of a stigma effect. Analyze the demographic profile of consumer demand and how it is likely to change.

6. Incorporate the results of such market research plus other specifically relevant data into any future economic modelling exercises that assess the conservation potential of tiger farming.

7. Investigate the practical feasibility of re-introducing legal trade from captive sources, and assess the potential to: a) keep legal and illegal product markets separate, b) prevent laundering, and c) channel profits into effective conservation activities such as anti-poaching measures.

8. Consider the use of one-off sales as a means to test the market and relieve demand pressure.  If implemented, ensure that such sales are carefully planned and monitored.

The left panel shows a simplistic supply / demand interaction, which we can use to illustrate the “no farming” option.  We use a standard downward-sloping demand curve and upward-sloping supply curve, which intersect at a point where the average market price is P and the quantity traded is A.

The right panel shows the effect of an additional source of supply from farmed animals.  The supply curve shifts out (from S0 to S1) and, as a result, the total quantity sold increases from (A to B), but the price falls and the quantity supplied from wild-poached animals falls (from A to C).  The remaining quantity (C-B) is supplied from farmed stock.

Note that this positive effect (gains for consumers, farmers, and tiger lovers) could potentially be offset if the demand curve shifts outwards (in the direction of the thick arrow).  In this case, depending on the extent of the shift, the price would again creep up, and poaching pressure would intensify.  For a sufficiently large shift, the new price could be even higher than the old one, and farming would be bad for conservation.  However, this is an exceptional outcome.

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