JULY 2019 GERMINATION.CA 37 Michelle Klieger President, Stratagerm Consulting Boston, MA Michelle comes from a trade association role. She is familiar with the key players in the U.S. and international seed industry. During her career she has worked on six continents, helping industry leaders move seed varieties globally and grow their businesses. Can you summarize for us the reason trade disruptions seem to be making headlines every day? We’ve transitioned from declining tariffs and increasing free trade agreements to a more protectionist time, highlighted by the Brexit vote and the election of Donald Trump as U.S. president. Trump’s steel and aluminum tariffs caused many allies to respond with tariffs of their own, includ- ing Canada. He also renegotiated major free trade agreements like NAFTA and KORUS. Canada, on the other hand, has not reversed its course. In 2018, Canada finalized two significant multilateral free trade agreements — the Comprehensive Economic and Trade Agreement with the EU and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership with 10 Pacific Rim trading partners. Why does any of this matter for the seed industry? Facilitating seed movement is critical for the industry. Seeds and their genetics can pass through six countries before they are planted by a farmer. Counter-seasonal pro- duction, pre-commercialization research and production and commercial sales are all affected. At each border they might face tariffs or non-tariff barriers to trade, which can be expensive for seed companies to comply with and cause significant delays. Research or production delays increase the amount of time it takes for new varieties to come to market. How can retailers cope? First you need to determine how tariffs could impact your business — then you can make changes to insulate yourself from any negative impacts (often higher costs or supply chain shortages are the result). Being prepared will help you act faster when tariffs change. Many tariffs are imposed with little notice, limiting options. The impact of tariffs varies from industry to industry. What are some seed-specific trade concerns? Higher seed prices are a major one. Labour-intensive vegetable seed multiplica- tion is done in China, to minimize produc- tion costs. Chinese vegetable seeds are brought to North America to be cleaned, processed, and sold to Canadian growers. At the U.S. border they face a 25% tariff that will be passed on to growers. Flower seed multiplication also occurs in China because Chinese farmers are willing to sign very small contracts (< 3,000 square feet). Row crop and grass seeds aren’t grown in China and aren’t affected by tariffs. Lower commodity trade and a result- ing reduced demand for seeds is another. Agricultural commodities are priced globally. The final major trade concern is a lower willingness to pay for seed. Lower grain prices also change seed buyers’ behaviour. When commodity prices are low, farmers want to minimize variable costs (including seeds). The current trade environment and low commodity prices will impact seed companies as well as non-seed companies. Which alternative markets are stepping up to absorb reduced imports from China, and do you see higher costs associated with moving to those markets? There are companies looking at other markets within southeast Asia trying to keep labour costs down and not move their supply chains as much. I’ve worked with the Asia and Pacific Seed Association and I do think you’re seeing a transition to production and multiplication in countries like Vietnam and Thailand. They have reasonable labour costs and are transition- ing to UPOV 91, so seed companies still get the protection they need. South Korea is looking at being a seed hub. There is some movement, but you still have to file paperwork to move your seeds. When a country boycotts a commodity from another country, do prices in other markets go up, or does the market self-adjust? It depends on the commodity. It makes sense that supply chains move around, but in practice it doesn’t work that smoothly. For example, the U.S. and Brazil produce in opposite seasons. You never know about the weather, so with Canadian canola into China, China stopped buying Canadian canola and Australia was going to fill in the demand, and then Australia had a bad year, which causes global canola prices to go up.