These are now provided monthly by Edelman Shanghai as part of the news monitoring we do for issues and crisis management in Asia.

We are pleased to extend this information to our wider USDEC membership to serve as a quick and informative compilation of regional headlines and potential trends in Asia-Pacific, but more specifically over time to help build understanding of what's happening in these markets, as well as identify any formative issues.

REGION

"Major dysfunction" in French baby milk recall
Regional media continue to follow Lactalis salmonella scandal. 

After issuing a recall of infant formula products in December, Lactalis, one of the world's largest dairy producers, expanded the recall to cover all products made at its factory in France due to salmonella contamination. Regional media are closely following the on-going investigation as the recall affects products in the Asian market. At a press conference, the French Minister of Economy said there was major dysfunction in the withdrawal process after several French retailers admitted they had continued to sell the affected products even after the recall. Regional media also widely reported French food safety inspectors' failure to detect salmonella in routine inspections of the factory, as well as accusations Lactalis had tried to hide the salmonella outbreak. In response to the continued outcry, Lactalis Chief Executive Emmanuel Besnier gave his first interview in nearly 20 years, gaining widespread Asian media attention. While media highlighted the CEO's promise of compensation for all victims, many reports also questioned the company's delay in addressing public concern. Another focus of regional media coverage was the scope of the recall, which affected 83 countries.

In China, media reported the recall is still underway even after the company submitted batches of the infant formula for follow-up tests by the Shanghai Institute of Quality Inspection and Technical Research that came back clean. China's Food and Drug Administration also inspected one of the Chinese manufacturers of a Lactalis brand in question and discovered nine food safety management issues unrelated to the salmonella issue, which were ordered to be rectified. Chinese consumers responded with surprise at the recall, noting the scale and approving the company's decision. Some media said consumers should not blindly trust the quality of foreign brands. There have been no reports of illness in China.

The Takeaway: Media reporting of Lactalis' delayed public response, amplified media attention of the product withdrawal appeared to deepen negative public sentiment towards the company.

Sources: Netease, 12/27/17; Foodmate, 12/28/17; Sina News, 12/28/17; Jiemian, 12/25/17 South China Morning Post, 01/11/18; The Sun Daily, 01/11/18; Xinhua News, 01/12/18; Global Times, 01/13/18; The Malay Mail Online, 01/14/18; The Jakarta Post, 01/14/18; Xinhua News, 01/15/18; Shanghai Daily, 01/15/18; Japan Times, 01/15/18; The Daily Star, 01/16/18; New Straits Times, 01/14/18; Netral News, 01/16/18.

All eyes on Trump at Davos World Economic Forum
More confusion amid concern over ‘America First' agenda and potential trade war.

All eyes were on U.S. President Trump at the World Economic Forum (WEF) in Davos, with many expecting his "America First" protectionist agenda to clash with the spirit of the annual meeting championing free trade and global cooperation. Leading up to the WEF, Asian media extensively covered regional concern over the U.S. protectionist trade agenda and a potential U.S.-China trade war after the United States imposed high tariffs on imported solar panels. Chinese media reported measured responses from government spokespeople, including the minister of commerce and foreign affairs, both of whom stressed China would take necessary measures to defend its interests should the United States unilaterally pursue harsh trade barriers. A majority of reports noted other world leaders' warnings against the rise in nationalism and protectionism, with many regional media specifically referencing the U.S. withdrawal from the Trans-Pacific Partnership (TPP) and ongoing NAFTA negotiations. However, Trump's speech at Davos alleviated some concern as he reaffirmed his belief in free trade, emphasized "America First does not mean America alone," and demonstrated a pragmatic approach to a rules-based trading system. Comments Trump made hinting at the possibility of joining multilateral trade frameworks such as the TPP were also widely reported and met with cautious optimism by regional media, particularly in Japan.

The Takeaway: Media continue to point out it is unclear what the Trump administration will do, indicating overall sentiment towards the future of U.S.-Asia relations remains uncertain.

Sources: Asia Times, 01/23/18; The Korea Times, 01/24/18; The Star Online, 01/24/18; Malaysian Digest, 01/26/18; The Edge Markets, 01/25/18; Jakarta Globe, 01/26/18; The World on Arirang, 01/26/18; Jakarta Globe, 01/25/18; The Japan News, 01/27/18; The Mainichi, 01/26/18; Shanghai Daily, 01/26/18; Nikkei Asian review, 01/26/18; NHK World, 01/26/18; Asia Times, 01/28/18; New Straits Times, 01/29/18; The Japan News, 01/18/18; The Paper, 01/18/18; ifeng News, 01/17/18; Sina News, 01/18/18; People's Daily, 01/30/18; Netease Finance, 01/27/18.

CHINA

China's Dairy Industry Consolidates Further
Formula registration policy effective as of January 1, 2018.

The new infant formula registration policy, officially in effect as of January 1, 2018, limits the number of formulas each company can have in China, and requires each formula to be registered and approved by China's Food and Drug Administration (CFDA) before entering the market. At a press conference, CFDA announced the registration stage was completed smoothly, with a total of 100 domestic companies registering 813 formulas, and 39 overseas companies registering 227 formulas. New formulas can no longer be registered, but products already in the market can be sold until their expiration date. According to media reports, the policy encourages domestic companies to accelerate their expansion and increase competitiveness, while also weeding out minor brands to offer consumers better options. Media also reported OLIBABY, an Australia brand, confirmed its withdrawal from the market after its manufacturing company reached its quota for registered infant formulas in the market. Reports also note labeling and promotion of infant products has become stricter under the policy, which forbids the use of exaggerated language and functional benefits in marketing.

Sources: Beijing Youth Daily, 01/09/18; China Food News, 01/11/18; People's Daily, 01/12/18; China Economic Daily, 01/23/18; Netease Finance, 01/21/18; Sohu, 01/05/18; China Finance Online, 01/02/18.

First Annual China Dairy Industry Quality Meeting Held in Beijing
Officials highlight industry's progress and future development.

On January 18, the China Dairy Association held the first "China Dairy Industry Quality Annual Meeting" in Beijing. Reports highlight the progress China's dairy industry has made in the past decade, particularly in terms of implementing stricter laws and regulatory measures. Key advances include increasing capacity by focusing on improving the feed industry and mechanizing production to guarantee domestic milk source quality, as well as boosting consumption by improving confidence in domestic dairy. Reports also note China's dairy industry still needs to improve overall management, quality awareness and innovation capabilities.

Sources: China Economic News, 01/18/18; Xinhua News, 01/18/18; China Economic News, 01/18/18; China Economic News, 01/18/18.

JAPAN

Trans-Pacific Partnership Progresses Without United States
Japan leads negotiations, 11 remaining members agree to sign pact in March in Chile.

The 11 remaining members of the Trans-Pacific Partnership (TPP), now the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), met in Tokyo to forge ahead with the free trade deal. One of the last remaining obstacles was Canada, media reported. Now the second largest economy in the pact, Canada was holding out for stronger protection of cultural industries. Japanese media highlighted Prime Minister Abe's role in lobbying Mexico to convince Canada to stay in TPP-11, a key factor in keeping the negotiations on track. Media also note the timing of the deal is significant as Canada, Mexico and the United States entered the sixth round of NAFTA renegotiations at the end of January. At the end of the two-day meeting in Japan, the 11 remaining members agreed to sign the deal in Chile in March. Media report the TPP-11 will be Japan's first free trade deal with Canada and New Zealand.

The Takeaway: Reporting indicates Japanese officials remain cautiously optimistic America will return to the TPP, particularly after Trump hinted the United States would consider multilateral trade pacts at the WEF.

Sources: Japan Times, 01/22/18; The Asahi Shimbun, 02/22/18; Japan Times, 01/24/18; The Japan News, 01/24/18; The Mainichi, 01/24/18; Japan Times, 01/24/18; The Japan News, 01/24/18.

Japanese dairy farmers move to revive domestic industry
Agriculture ministry sets dairy import quota to cover domestic supply shortages.

Dairy farmers in Fukushima Prefecture plan to build large scale "reconstruction farms" by fiscal 2020 as part of efforts to boost the industry in the areas affected by the 2011 nuclear disaster. The envisaged farms would host a combined 1,600 cows for milk production as well as a research and development hub for cutting-edge biotechnology. According to the Fukushima Dairy Farmers' Cooperative, large-scale farming is seen as the key to the industry's future as the population grays, leaving farms with a lack of successors. It also hopes that running large-scale farms with cutting-edge R&D functions would give consumers peace of mind about product safety. Due to the shrinking number of Japanese dairy farmers and declining milk output, media report Japan's agriculture ministry has set an import quota for butter and skimmed milk powder to help prevent a shortage.

Sources: Japan Times, 01/14/18; NHK World, 01/29/18.

SOUTH KOREA

South Korea-U.S. Free Trade Deal Renegotiations
Second round of talks to begin amid mounting domestic concern and U.S. trade pressure.

The second round of talks to revise the five-year-old free trade deal will begin at the end of January, after Seoul and Washington failed to narrow differences in the first round at the beginning of the month. Media reports reveal declining trust in the South Korean administration, particularly among those seen as losing from the FTA renegotiations such as farmers and agriculture. Korean media also widely covered the U.S. import restriction "safeguard" measures imposed on South Korean washing machines and solar panels. Some media called it the first of the Trump administration's protectionist "America Frist" measures to be implemented. In response to increased U.S. trade pressure, the South Korean government is preparing to lodge a complaint with the World Trade Organization in early February, and has discussed a joint response to U.S. protectionism with the European Union, along with the implementation of the EU-South Korea Free Trade Agreement. Media coverage also noted U.S. trade pressure was detrimental to the security situation on the Korean peninsula and beneficial to North Korea's strategy to cede discord between Seoul and Washington.

Sources: Yonhap News Agency, 01/06/18; KBS World Radio, 01/06/18; The Hankyoreh, 01/22/18; KBS World Radio, 01/22/18; The Korea Times, 01/24/18; Yonhap News Agency, 01/26/18; Business Korea, 01/26/18; The Hankyoreh, 01/25/18; Yonhap News Agency, 01/25/18; Korea Times, 01/25/18; The Hankyoreh, 01/25/18; Korea Times, 01/28/18; The Korea Herald, 01/29/18; Yonhap News Agency, 01/26/18.

MALAYSIA

Malaysia Reviews Trade with European Union 
Retaliation for EU move to ban use of palm oil in biofuels.

Malaysian government officials responded strongly to the European Union (EU) Parliament's vote to ban the use of palm oil in biofuels by 2021. After a cabinet meeting with Prime Minister of Malaysia, the government announced it will review the purchase of products with any country that bans palm oil. Media also widely reported the harsh rhetoric of Malaysia's Plantation Industries and Commodities Minister, who said the EU move was discriminatory and protectionist, and in violation of World Trade Organization Rules. Furthermore, the minister challenged the EU's dairy industry, saying the EU should ban the production and export of butter due to the commodity's carbon footprint. Media also covered limited farmer protests in Malaysia, and noted the EU move could threaten EU trade and cooperation with Malaysia and the wider Southeast Asia region.

The Takeaway: Palm oil is a national commodity and key pillar of Malaysia's economy. Despite the strong response from Malaysian government officials, it remains to be seen if Malaysia will enact retaliatory trade measures, but is unlikely the palm oil ban will cause a boycott of EU products.

Sources: The Malaysian Insight, 01/09/18; New Straits Times, 01/09/18; The Sun Daily, 01/18/18; The Malaysian Reserve, 01/19/18; The Star, 01/19/18; Jakarta Globe, 01/18/18; The Edge Markets, 01/18/18; The Star, 01/19/18; New Straits Times, 01/28/18; New Straits Times, 01/28/18.

INDONESIA

Food Price Volatility Causes Concern
Indonesia continues to subsidize food while increasing imports of key commodities.

The Bank of Indonesia, the country's central bank, said the local economy remains in good health, but also warned against food price volatility index which may increase inflation, according to media reports. The cautionary note from the central bank governor comes as the government decided to allow the import of rice and is kicking off its non-cash food subsidy program, while Jakarta, the capital city, added milk to its food subsidy program, following an increase in the budget for food subsidies. While media report the aim is to reduce poverty, industry analysts caution the subsidies could exacerbate food price uncertainty and impede the country's ambition of achieving food security.

Sources: Jakarta Post, 12/18/17; The Jakarta Post, 01/11/18; Netral News, 01/17/18; Antara News, 01/25/18; Jakarta Globe, 01/04/18; The Jakarta Post, 01/28/18.

Margaret Speich is senior vice president of strategic and industry communications at the U.S. Dairy Export Council. 

###

The U.S. Dairy Export Council fosters collaborative industry partnerships with processors, trading companies and others to enhance global demand for U.S. dairy products and ingredients. USDEC is primarily supported by Dairy Management Inc. through the dairy farmer checkoff. The password-protected article above is intended for USDEC member organizations only and should not be shared with anyone outside your organization.