Trump - Reading about the Trump Trade Doctrine, US biofuel risk, 100 days plan video, Malaysia ringgit more exposed, Europe food industry reactions

5 Jan 2017: Reading about the Trump Trade Doctrine in Talking Trade blog by Dr Deborah Elms

How Much Change Is Coming From Washington On Trade? January 5, 2017 -- While we don’t want to spend too much time at Talking Trade watching unfolding events in Washington DC, the changes happening now are likely to significantly affect trade across Asia.  This is not a typical American administration. President-elect Donald Trump has now named enough of his staff to show that his comments on the campaign trail and his various tweets and actions since his election were not simply pandering to the electorate.  He intends to handle trade policy quite differently....

Reprint: Trump's Trade Policy Revisited December 2, 2016 -- The Trump Trade Doctrine requires renegotiating all bad trade deals to ensure that all agreements increase the GDP growth rate, decrease the trade deficit, and strengthen the US manufacturing base. ...The “obvious Trump negotiating strength” will rebalance trade with the six countries that hold half the US deficit: Canada, China, Germany, Japan, Mexico and South Korea....The Koreans will just recognize that the current KORUS arrangement is not working and will “simply seek a far more equitable deal.” Germany and Japan will negotiate mostly for US energy (with the added bonus of creating additional US jobs).... China, Navarro and Ross admit, is a tougher nut to crack.  But soybeans, petroleum, motorcycles and raisins, plus a few other goodies should surely be sufficient as carrots when matched with “the strength and resoluteness of Trump.” ...And thus, in less than two dozen pages, the Trump economic plan shows exactly how America’s real GDP growth rate will be increased with millions of new jobs created and generate trillions of new dollars in additional income and tax revenues.... Getting from here to there may, as it happens, fundamentally overturn decades of US trade policy as practiced by Republican and Democratic administrations.  But the results—Trump would surely say—will be SOOO worth it.... ***This Talking Trade blog post was written by Dr. Deborah Elms, Executive Director, Asian Trade Centre, Singapore***

12 November 2016: US biofuel risk, Donald Trump 100 days plan video, Malaysia ringgit more exposed, Europe food industry reactions

Editor's note: US support for imported biofuels is obviously in some doubt - for blenders credit to shift to producer credit. RIN's immediately dropped.

Donald Trump outlines policy plan for first 100 days By Tom LoBianco, CNN November 22, 2016

Donald Trump's first 100 days: A breakdown of his plan By James Masters, CNN November 22, 2016

Malaysia caught in currency ripples - Bloomberg, By: Christopher Langner (Nov 21) -- A drop in hedging and refinancing activities would be bad news for banks. Ironically, Malaysian financial institutions could be the worst affected. They're the biggest issuers of short-term dollar debt, with more than US$3.5 billion ($5 billion) of bonds due in less than a year outstanding.... Malaysian banks are the most dependent on short-term markets for dollar funding in Southeast Asia.

Your thoughts on Trump's triumph: From 'authoritarian tactics' to 'a thriving business environment'
By Niamh Michail+, 15-Nov-2016
Brash, billionaire businessman Donald Trump is America's president elect. While some FoodNavigator readers foresee "authoritarian tactics" from "an unpredictable man" others are looking forward to "a thriving business environment" for the US and Europe.

17 November: Foreign banks shaken by Malaysia's move to halt currency slide, Malaysia's Running Out of Trump Cards

Foreign banks shaken by Malaysia's move to halt currency slide By Saikat Chatterjee and Praveen Menon | HONG KONG/KUALA LUMPUR -- "There's a massive back and forth going on between banks and Bank Negara Malaysia (BNM) now," said a banker at a foreign bank in Malaysia that deals in foreign currency transactions. "This is a type of indirect capital control ... I see a flood of people exiting Malaysia." ... "We have been told that we cannot repatriate our money and our investments stay in Malaysia if we don't sign," he said. The bankers asked for anonymity, due to the sensitivity of the subject. Foreign holdings account for 40% of the total outstanding bond market in Malaysia, one of the largest foreign ownerships in Asia.... Foreign investors pulled 8.4 billion ringgit out of government bonds in September, the largest outflow since August last year, when Malaysia's markets tumbled on a political crisis swirling around Prime Minister Najib Razak and corruption allegations involving indebted state fund 1Malaysia Development Berhad (1MDB).... In October, however, there were inflows of 2.39 billion ringgit into government bonds, and foreign reserves rose to US$97.8 billion by the end of the month, up from US$97.7 billion at the end of September. The reserves were enough to finance 8.4 months of retained imports....

Malaysia's Running Out of Trump Cards By Andy Mukherjee -- Amid a deepening emerging-market rout, three of Donald Trump's seven promises to American workers are making Asia particularly nervous.... Although no Asian nation would relish the prospect of an all-out trade war, Malaysian investors are perhaps most at risk...And while it's a TPP member, the accord's demise is the least of Kuala Lumpur's worries. It might even be a short-term boon. After all, the Southeast Asian country is an energy and palm-oil exporter. It's not terribly competitive at much else.... But TPP being dead doesn't help either. For one, dollars are in short supply in the banking system, and therefore a flight to safety among investors jittery about a Trump presidency makes Malaysia a particularly vulnerable emerging market....If fears about a Trump presidency keep exchange rates volatile, and the $5.5 billion of foreign inflows into Malaysian bond markets turn into outflows, hopes consumers will provide a floor to the economy may quickly disappear....

15 November: Global growth to suffer? Ringgit issues, end of TPPA, Trump's first interview

Goldman Just Killed The "Reflation Euphoria" - Concludes Global Growth Will Suffer Under Trump No Matter What by Tyler Durden Nov 14, 2016 
What it confirms to us is that the scenario we predicted on November 9, moments after Trump was declared winner, is starting to play out namely that the true state of the global economy - which had been propped up for years with trillions in liquidity - is about to be revealed, and a major global recession, if not depression is in store.

 Malaysia's business news front page today

CIMB Research: Ringgit could touch 4.80 against greenback within next six months  November 14, 2016

On Malaysia Ringgit onshore-offshore disparity problem last week, please see excerpt in The Edge Malaysia here. The background from bank treasury experts is this: the non-deliverable forward (NDF) market for Ringgit has always been around since 1998 when Bank Negara Malaysia outlawed offshore Ringgit trading.
I got item below via social media, and it is here  (please read BNM website version). PRESS RELEASES by BNM - Prohibiting Facilitation of NDF Related Transactions Ref No : 11/16/09 13 Nov 2016: Bank Negara Malaysia would like to state that there is no change in the Foreign Exchange Administration (FEA) rules and there is no introduction of any new measures. Ringgit remains as a non-internationalised currency, thus any offshore trading of ringgit such as ringgit non-deliverable forward (NDF) is not recognized..... 

A friend wrote: NDFs are traded in Ringgit and Monetary Authority of Singapore have instructed banks to review their processes because of NDF spot rates manipulation by AAAA and BBBB, including Ringgit and Rupiah.

Another friend checked with AAAA: This is a Jan 2013 case whereby 14 banks were involved, AAAA being one of them. We paid the fine, sacked the traders involved and so did some other banks.

US 2016 results reflect trends seen 2014 and before?
A political analyst I was in touch with pointed out that the media has not been reporting properly. The USA 2014 mid-term election already showing Republican gains. Look at this (image on left and link below)? Plus the "deep state" signs like FBI on the Hillary's email issues.

Trump's first interview as president-elect
As CBS' Lesley Stahl summarized the interview, "what we discovered in Mr. Trump’s first television interview as president-elect, was that some of his signature issues at the heart of his campaign were not meant to be taken literally, but as opening bids for negotiation.
Lesley Stahl: You don’t like it, but your own transition team, it’s filled with lobbyists.
Donald Trump: That’s the only people you have down there.
Lesley Stahl: You have lobbyists from Verizon, you have lobbyists from the oil gas industry, you have food lobby....
Donald Trump: I’m saying that they know the system right now, but we’re going to phase that out. You have to phase it out.

Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan said they would not take up the TPP before Mr Trump's inauguration. The President-elect made his opposition to the TPP a centrepiece of his campaign, saying it would send more jobs overseas.

Surprised to read Japan push through TPPA earlier. The advise from trade experts has been to wait for USA legislators to move first. See news from 4 Nov 2016, Japan Lawmakers Vote to Ratify TPP - Bill was pushed through a special committee after scuffles and shoving on the committee floor 

On Michael Moore's analysis and Trumpland
It is amazing how quickly Moore's rational assessment of the election on October 24th has completely devolved into madness as he is blatantly and overtly calling for mass violence. Moore, like other democrats, would be well served to take a step back and consider the fact that the outcome of this election is the direct result of a corrupt DNC rigging the system to nominate a flawed candidate with numerous outstanding criminal investigations....the blame game should end there.
Michael Moore: Trump presidency a 'dangerous' risk - UpFront, Al Jazeera English
Michael Moore: Trump Voters Aren't Racists, Many Voted for Barack Hussein Obama
Michael Moore Explains Why TRUMP Will Win 24 Oct 2016

11 November - reflecting on market uncertainty

Emerging market forex drops, USD and US equities gain. Big tax incentives shift money back to US. Fisca lrather than monetary boost to come? Sounds good for USA..Feels like TPPA and vast recent volume of China SOE driven MOUs in the region marks some sort of apex! Social media in KL full of chatter BNM forex intervention. CPO denominated in MYR is heading up as USD strengthens. Offshore USDMYR said be 4.50. I inadvertently used that figure in my spreadsheet last week in forecast view. No inkling of such volatility. 

Latest:11/11 BNM governor says Malaysia will not peg ringgit despite recent volatility currency has been facing due to external environment/STARBIZ (please verify)

9 November - Trump victory impact on palm oil

First of all to acknowledge that my husband was correct. He has held the opinion that Trump would win since early this year; his take on Malaysia perspective: Even US political analysts and the Economist (Donald Trump triggers political earthquake by EIU, had great hope for Hillary until the end. I feel media is no longer reflecting public opinion but trying to create or manage it.

From reader feedback out here: A general agreement on international (Brexit-type) de-globalisation movement?
Read a comment from Henri Bardon: What market pullback? Businessman that has never held political office and wants to reduce tax and regulations.... And from a hard-nosed KL-based investor: Trump is pro-business, noting that TA Enterprise of Malaysia is a Trump business partner.

For palm oil, notable that Trump may be pro-business (lower tax and regulations) but domestic (and Americas region?) trade, business and US jobs oriented:

  • Producer-country: Boost existing domestic sentiments that may further agitate for better deals / protection for smallholders. On sustainability, suggesting more rapid reform at elite-oriented programmes needed i.e. further RSPO resourcing reform. Comes in wake of pressured disbandment of IPOP in late 2015 despite record haze on cartel fear. Smallholder outcomes worth tracking and remain to be seen. But TPPA-demanded Malaysia sustainability upgrades including on ILO labour standards on the back burner?
  • Destination market issues: Less support for imports of biofuels and other products, sustainable or not. Increased domestic buy and domestic oils focus (already also seen for China). Foodnavigator (below) writes: Dr Marion Nestle to suggest that nutrition, food safety and sustainability may not be high up the policy agenda.
To repeat my early reaction while sitting at RSPO RT14: What are implications of Brexit-Trump victories for sustainability? Review your political-economic structure and mitigate negative economics for small suppliers.   

Some articles and links:

Plantation Sector: Impact of a Trump presidency by Ambank 10 Nov 2016 -- These are the potential effects that we can think of:-
1. No TPPA - President Trump does not support TPPA. USA tax on refined palm oil from Malaysia at about 9.6%... no import duty on crude palm oil.
2. Drop in demand for biodiesel imports? renewable energy may not be a priority for his administration (see OGJ below)
3. Indirect impact from weaker RM vs. USD
4. Disruptions in global trade to affect commodities demand? China and currency manipulators.
....It remains to be seen if Trump will carry out his proposals when he starts his job as the new President of USA.

US election results improve prospects for federal policy reforms - Oil & Gas Journal -- The US oil and gas industry’s prospects for reforming federal policies, from arbitrary quotas under the Renewable Fuel Standard to reduced leasing opportunities on the US Outer Continental Shelf, brightened as Donald J. Trump beat Hillary Clinton for the presidency and Republicans kept control of both houses of Congress in the 2016 elections....

What will a Trump presidency mean for the US food & beverage industry?.. Thus far Trump has not talked much about food policy or agriculture beyond discussing taking SNAP away from USDA and the farm bill, describing the FDA as the ‘food police’ (in a fact sheet later removed from his website), calling for an immediate halt to new federal regulations, and talking of significantly curtailing the powers of the EPA - prompting food policy expert Dr Marion Nestle to suggest that nutrition, food safety and sustainability may not be high up the policy agenda under the Trump administration.....

OFIC global trade policy and politics panel - initial notes

At MOSTA's OFIC Module 2, we just had a great line-up of speakers and a good panel session.

Photo: Mr Syahril at the rostrum by Khor Yu Leng

Ms Sanya Reid Smith of Third World Network drew our attention to domestic agriculture subsidies remaining in places like the US and EU within the trade agreement contexts, Malaysia's bounded export duty (up to 8.5% on CPO)exemption under TPPA (and RCEP leaked documents showing Japan and South Korea asking for zero), that IP extensions may reduce availability of non-patent agricultural chemicals (that often result in prices being 3x higher), and TPPA's potential impact on procurement by federal government entities and large SOEs, ILO labour standards becoming enforceable, and question whether palm oil milling is a service and therefore subject to liberalisation. The USA certification process for TPPA may add more requirements (beyond the text, with topics as yet unknown), and that many countries wait until the USA proceeds before making changes to domestic laws and regulations. She offered a thorough applied analysis of TPPA on palm oil that has not featured in previous public for a.

Dr Joe Feyertag of LMC International Ltd explained a profound shift in grain and vegetable oil production post 2002 with large production and acreage growth amidst the biofuels boom, rapid meat consumption transitions, oil palm expansion less than a quarter of maize and soy acreage expansion, the 2010s being the end of the biofuels decade and rise of the protein decade, future growth scenarios showing a hypothetical moratorium on palm oil volume resulting in even larger increase in soy acreage likely in the Amazon Basin, a look at US biodiesel market volume, potential volume return from Argentina and Indonesia and EU biofuels policy news of no more public support for food-based feedstocks from 2020. He concluded that environmental aspirations need to take a more nuanced consideration of how demand drives expansion across the vegetable oil complex (palm, soy, rape/canola and sun), and for GMO products.

Mr James Caffyn of Gira Strategy Consultants provided major insights into vegetable oils usage in the dairy sector - specifically analog cheese, fat-filled milk powders, growing-up milk and infant formula - with great data on dairy-veg oils price arbitrage of over 4.5x, market size and growth, vegetable oil inclusion ratios and palm oil tonnage indicators (over 1.5 million tonnes in FFMP and GUM-infant formula). What came strongly across for palm oil was the fast growth potential of this segment (especially in Asia), its technical proficiency, compelling price arbitrage, market perception, regulatory concerns and food safety.

Mr Syahril Syazli Ghazali of Ministry of International Trade and Industry (MITI) of Malaysia offered wonderful insights into TPPA, as Lead Negotiator for the Market Access Chapter. 20% of Malaysia palm products go to TPPA countries and a focus was on Canada and Mexico on duty removals, Malaysia's ability to carve out export duties (bounded basis), and the need to comply to international standards will be a cost to Malaysia industry and government but it is the way forward.

In our panel discussion, we fielded a question on EFSA's 3MCPDE issue - the greater volume concern would arise if it also affects China dairy sector demand. As for biodiesel prospects, these are quite limited to Southeast Asia. Moreover sludge oil has been removed from double-counting and is unlikely to come back soon. From the floor, we heard from MR Chandran on the problem of definitions of by-products versus waste products, and that freedom of association for labour will be an issue especially since 30-35% of production cost is labour (Sanya mentioned PWC's report finding that one week stoppage could impact 2% of revenue). On my question about a pathway for palm to USA biofuels (beyond a handful of grandfathered facilities), Joe said that GHG emissions reductions is an official problem and Syahril clarified that USA biofuels access negotiation was tried but remains on the table without a solution via TPPA. To MR Chandran's added question on USA (California) market potential (this being a growth market versus EU not being seen as having much potential), I highlighted the change in the US Customs Border and Protection (CBP) rule against forced-labour imports in force since March 2016 and that it has already disrupted cargoes of tea and sweeteners; and  it is notable that California leads in lawsuits on child labour allegedly in the cocoa supply-chain of large brand name companies. Sanya notes that the US CBP rule reinforces TPPA requirements and that complaints can be made against products and producers.

In conclusion, we covered the development and prospects for important fast-growing end-uses for vegetable oils and focussed on issues for Malaysia palm oil. Palm oil has a complex processing chain and a big range of applications. It has tremendous technical proficiency and price advantage in food uses, but if needs policy support in biofuel applications. Success in market share penetration is mediated by trade policy and new breed trade agreements (require upgrade to international standards in production and more). This affects relative price-cost and some non-price/non-tariff issues may also affect price-cost.

Trade deals: Via TPP, Malaysia ready for environmental step up for US market access, but the US-oriented geopolitical deal stumbles ("as important as another US aircraft carrier").

Talks for Pacific Trade Deal Stumble By JONATHAN WEISMAN JULY 31, 2015; LAHAINA, Hawaii — Trade negotiators from the United States and 11 other Pacific nations failed to reach final agreement on Friday, with difficult talks on the largest regional trade agreement ever deadlocking over protections for drug companies and access to agriculture markets on both sides of the Pacific....Vietnam, Malaysia and New Zealand were willing to make significant concessions to gain access to United States markets.... ...Canada would not budge on opening its poultry and dairy markets. Chile... saw no reason to compromise, especially on its demand for a short window of protection for United States pharmaceutical giants. Australia’s delegation insisted that pharmaceutical market protections beyond five years would never get through Parliament... Mexico’s secretary of economy, was defiant on the hard line he took against the export of Japanese cars with any less than 65 percent of their parts from T.P.P. countries....The bright spot might have been the environmental negotiations... cover illegal wildlife trafficking, forestry management, overfishing and marine protection, and it could prove to be a landmark, setting a new floor for all future multilateral accords....Environmentally destructive subsidies, such as cheap fuel to power illegal fishing vessels and governmental assistance for boat making in overfished waters, are banned....Failure to comply ... potentially culminating in trade sanctions. United States negotiators hope that just the threat of economic sanctions will bolster relatively weak environmental ministries in countries like Peru, Malaysia and Vietnam....The impact of the Pacific accord’s environmental chapter could be broad, both for the nations in the deal and those outside. The 12 participating countries account for more than a quarter of the global seafood trade and about a quarter of the world’s timber and pulp production. Five of the countries rank among the world’s most biologically diverse countries.... Some, like Vietnam and Malaysia, have long been on the watch list for illegal wildlife trafficking...

Other links:

MITI talks on Malaysia palm oil and FTAs

MITI explains that the ASEAN-Australia-New Zealand regional deal covers goods, investment, environment and labour. It is the more ambitious of the regional agreements, as most just cover goods. To explain on RCEP, she notes that its aims to pool (disparate) rules. This and the Transpacific Partner (TPP) Agreement are open agreements as membership can expand as more countries can opt in.
Malaysia is a small open economy and regards such networks as useful. Malaysia wants to be in room when new rules being made but it is another matter if Malaysia signs up. Two studies on TPP are done: I) one on national interest analysis and another ii) on impact on SMEs and Bumipura business. These two studies will be present to Parliament to make a decision. MITI reports that TPP will still take time to conclude its negotiations. MITI seeks a balance of benefits from the TPP Agreement. Once all 12 countries present their market impact commitments, then Malaysia can decide. MITI reiterates that it's important to shape outcome i.e. to be there when rules being formed.
A short update on others deals: The (stalled) Malaysia EU deal has similar issues as the TPP, and there is also the European Free Trade Area deal in the pipeline.
MITI talked about tariff rates facing palm oil, pointing India and Turkey rates as being rather higher potentially (the latter was hard to negotiate given the high rates scenario), and the relative impact on Malaysia and Indonesia if the import duties were to be raised.
Questions that the palm oil industry would have on TPP and other high level agreements:
  • What is the potential impact on cost production impact versus trade gains?
  • What is the impact on GLC plantations?
  • What impacts from the labour and environment (sustainability) chapters?