President-elect Trump will not step into the White House until January, and it is difficult to discern what his policies might be from all the bluster of a particularly vicious and contradictory election campaign.
However, compliance professionals can take an “informed guess” that a cornerstone promise of his administration—regulatory reform—is likely to proceed, and will probably include a temporary moratorium on all new regulation. A thorough review to identify and eliminate unnecessary rules that are already in place is also a good bet.
Experts attending Compliance Week’s European conference in Brussels last week had mixed feelings about the impact that a Trump presidency could have on their work.
“Lowering regulation may also lead to a lowering in enforcement,” said one delegate. “This can present risks for consumers, but also for other companies if their competitors are flouting the law and the regulator is doing nothing about it,” he added.
Several compliance officers working in European companies also raised concerns about the impact that a move towards US protectionism might have on their companies, and what would happen if Trump kills the proposed Transatlantic Trade and Investment Partnership (TTIP) between the US and EU, essentially a free trade agreement between the two blocs that would abolish tariffs and delays at U.S. Customs. “If Trump pursues an anti-free trade policy and pushes to set up different trade agreements with different blocs and countries, it could result in companies having to relocate goods, services and staff to take advantage of trade terms. This could create some headaches,” said one expert.
Others took a more pragmatic view. “New administrations bring in new policies—it’s part and parcel of politics,” said one head of compliance.
Some industry sectors in particular are set to benefit from any expected change in the rules—namely oil and gas, and energy. Trump has previously stated that rolling back regulations implemented by the Obama Administration on these industries would be one of his top priorities. According to Continental Resources, an independent US oil producer, Obama has hit the sector hard with at least 72 significant new regulations at federal, state and local levels in the past seven years—30 of them in 2016 alone.
“A lighter regulatory burden should make financial activities, especially trading, easier and compliance less tick-box. However, I think we will see softening on most of Trump’s positions if he truly wants to implement some change.”
Michael Hinton, Chief Customer Officer, Allegro Development
Under Trump, curbs on oil and gas production are expected to be scrapped or curtailed, new areas for drilling opened up, and Obama’s clean energy plan unceremoniously dumped. Furthermore, the president-elect has set out his stall for increased investment in energy infrastructure. Consequently, Trump’s presidency could be a shot in the arm for the likes of National Grid, the operator of Britain’s electricity network of cables and pylons that also owns gas pipelines and electricity cables in the US.
“The position in terms of Trump is that it’s early days,” said the chief executive, John Pettigrew when giving the company’s half-year results the day after the election result. “What we did see from the Trump administration is positive statements on the need for investing in infrastructure. If that flows through into policy, that could be good for the energy sector.”
Meanwhile, Anglo-Dutch oil major Shell congratulated Trump on his election victory and has said that it will continue “to advocate the role that energy plays in the overall US economy and stress the importance of a stable, predictable regulatory environment—one that allows for ongoing investment, new jobs and the delivery of safe, affordable energy.”
Pharmaceutical firms may also prove to be winners from a Trump presidency. Democratic nominee Hillary Clinton had made bold announcements about putting drug companies in line over extortionate price hikes following Retrophin’s unapologetic decision to raise the cost of an anti-parasitic drug from US$13.50 to US$750 per pill, and Mylan Pharmaceuticals’ 471% price increase of its life-saving allergy medication and device EpiPens over a nine-year period. Ian Read, chief executive of Pfizer, had warned that Clinton’s plans for “draconian” pricing rules would amount to the kind of drug “rationing” seen in some European countries, such as the UK. However, under a Trump presidency the likelihood of new legislation controlling the pricing of drugs and healthcare services is significantly decreased.
Some other industry sectors could also see an expected cut in regulation as part of Trump’s plans to stimulate the US economy, particularly with Republicans controlling both houses of Congress. Car manufacturers could be subject to easier emission standards for US models, for example, while financial services companies could be subject to less stringent regulations that would potentially lower their compliance costs.
U.K., EU BUSINESS VIEWS
Trump’s election victory has been as big a surprise as the U.K.’s referendum result to leave the European Union (EU). Consequently, business groups are keen to get some kind of reassurance that free trade will continue and that there will not be any kind of onerous compliance burden or severe regulatory overhaul.
In a statement, Ben Digby, international director of the U.K.’s largest pro-business lobby group the Confederation of British Industry (CBI), said that “firms are keen to understand more about the President-elect’s trade policies. Following the U.K.’s decision to leave the European Union, we need to do everything we can to make it easier to trade, invest and drive prosperity on both sides of the Atlantic.”
Simon Walker, the director general of the U.K.’s Institute of Directors (IoD), said that “the key question is what policies will Trump pursue when he enters the White House.”
“During the U.S. election the benefits of free trade came under attack from both candidates, a development which has worried the business community. The IoD firmly believes that trade raises living standards across the world. In today's globalised world, pulling up the drawbridge and turning inwards will only hurt citizens. We strongly hope that, as President, Trump will embrace the U.S.’ role as a leader in international economic co-operation.”
European business leaders have also urged Trump to focus on boosting trade. “The 45th president of the U.S. is an entrepreneur,” said Emma Marcegaglia, head of BusinessEurope, the lobby group. “We hope that his decisions will be driven by political and economic reason.”
Some experts are unsure whether Trump will actually pursue some of his more strident policy announcements once in office. “It would be hard for a brand new president to come in and say, ‘I'm ripping up this treaty,” David Melcher, CEO of the Aerospace Industries Association, a U.S. lobby group that represents more than 300 aerospace and defense companies, has said.
Trump has said that the Dodd-Frank Act—created in the wake of the financial crisis—could be dismantled, at least in part (though which parts will go is unclear). Such a move “would change things massively for the financial services industry,” says Michael Hinton, chief customer officer and senior vice president products and solutions at Allegro Development, a provider of commodity management software for energy companies. “A lighter regulatory burden should make financial activities, especially trading, easier and compliance less tick-box. However, I think we will see softening on most of Trump’s positions if he truly wants to implement some change,” says Hinton.
But not everyone is shouting about such changes from the rooftops. In fact, some would prefer the regulations to be untouched. Stephen Baseby, associate policy and technical director at the Association of Corporate Treasurers (ACT) in London, says that its members would prefer not to see any further regulatory divergence between the United States, European Union, and United Kingdom. “The combined effects of Dodd-Frank and its EU counterparts are burdensome but are similar and are now managed,” he says. “The problem would be that the U.S. election, Brexit, and further EU regulatory evolution lead to divergence so that businesses find themselves managing several regimes simultaneously.”
Jonathan Friedman, assistant director in the due diligence and strategic research practice of forensics and cybersecurity consultancy Stroz Friedberg, says that Trump’s election is likely to end a period of expanding compliance regulation and aggressive enforcement. “Any efforts to undo the Dodd-Frank Act or the post-2008 financial regulatory framework will face challenges in Congress. However, officials serving a Trump administration can reduce the impact of these laws by limiting their implementation. Moreover, we expect Trump’s administration to shift focus away from integrity compliance to penalising companies viewed as outsourcing jobs.”
Friedman also believes that Trump’s foreign policy preferences suggest a reduction in US sanctions against Russia, but increased risks to trade with Iran, China, and Mexico. “Trump has repeatedly stated his interest in repairing ties with Russia’s President Vladimir Putin, so he is unlikely to support continued sanctions against the country. However, Trump has repeatedly denounced Obama’s nuclear deal with Iran, and threatened tariffs against China and Mexico, generating new compliance risks for companies involving U.S. counterparties in transactions with those countries.”
Perhaps the real indicator of what Trump’s policies will actually be will lie in the choices he makes for his key government positions. “Trump’s inexperience in government suggests he will be especially reliant on others to help implement his policies,” says Friedman. “This includes former House Speaker Newt Gingrich, tipped as a potential secretary of state, who is on record advocating to abrogate the nuclear deal with Iran. Steven Mnuchin, a banker and ?lmmaker, is considered a likely candidate to become treasury secretary, and he has been equivocal about his views on compliance regulation. Whatever the makeup of Trump’s cabinet, compliance professionals can expect changes ahead,” he says.
While some of the predicted regulatory changes are set to affect particular industry sectors, there is one area where change will impact all companies – Trump’s tough immigration stance. The president-elect’s anti-immigration rhetoric could translate into cuts to the country’s foreign skilled-worker visa program, known as H1B—already regarded as particularly important to Silicon Valley, as tech companies rely on foreign engineers to plug a domestic skills shortage.
Christi Jackson, attorney and head of the U.S. practice at immigration specialist law firm Laura Devine Solicitors in London, says that while Trump’s focus is on undocumented workers rather than on skilled labour moving to the US, she says that “it is clear that the task facing firms needing to relocate staff to the United States is not going to get any easier.”
However, she adds that on the other hand, U.K. and other international firms may need to consider requests from workers based in the US to be relocated to other international sites to escape the uncertainties and potential fallout from a Trump victory.
“The campaign has created a lot of division, and Muslims particularly have been targeted. Firms may need to be prepared for a surge of requests to return home or to other locations,” she says.