Bad Trade Policy Still Bottling up Baby Formula

Scott Lincicome and Gabriella Beaumont-Smith brought us an update last week on the infant formula pipeline problems we’ve been seeing for the last several months. Writing in The Wall Street Journal, Scott and Gabriella point out that the real problem isn’t brittle domestic supply chains or competition from overseas suppliers, but a combination of protectionism and excessive domestic regulation – in other words, problems the U.S. government has created and that actual competition would quickly solve.

If you aren’t worrying about feeding an infant yourself, you can be forgiven for thinking the formula crisis has somehow resolved itself, since the dramatic print headlines and TV reports showcasing empty store shelves have mostly faded into the background since last summer’s peak of concern. Unfortunately, sparse shelves are still to be seen, albeit more intermittently, in grocery stores and drugstores across the country. And obviously, it only takes a lack of available formula in one area on one specific day to create a personal crisis for any given family. Babies are notoriously unwilling to substitute, for example, an Uber Eats order from Taco Bell for their usual formula.

The real problem with the formula supply chain isn’t that we don’t make enough in the United States – in normal times U.S. companies make plenty – it’s that if there’s a supply disruption, federal authorities don’t allow importers to pivot to international suppliers. When Abbott Nutrition’s infant-formula plant in Sturgis, Michigan was shut down because of a bacterial infection problem last year, existing trade policies keep orders from being filled with overseas supplies, even from countries that have similarly advanced economies and high standards for hygiene in manufacturing. When there was finally enough heat on the Biden administration and Congress, they moved to suspend the trade and regulatory policies that caused the most problems, but only temporarily. Rather than liberalizing the market for formula going forward, once the worst of the crisis was over they put everything that caused it back in place, ready to cause another supply crisis the next time we have another domestic supply interruption. Scott and Gabriella write:

Disruptions are both inevitable and necessary in a modern economy because growth often comes with growing pains. But eggs and children’s medicines, which are less regulated than infant formula, both bounced back quickly from recent supply shocks. A relatively free and open market not only lowers costs today but protects against long-term shortages tomorrow.

The Competitive Enterprise Institute’s Ryan Young has also been following the infant formula saga and called some of the major problems as far back as May 2022. In an op-ed for Inside Sources, Ryan wrote:

When new formulas enter the market, regulations forbid sellers from letting anyone know about them for 90 days, even as manufacturers may advertise existing formulas all they like. Those first months on the shelf are make-or-break for many new products, which is why existing producers like this otherwise pointless regulation. At times like this, parents might appreciate hearing about new options.

One of those options is toddler formula, which in many cases meets the Food and Drug Administration’s nutritional requirements for infant formula. However, FDA regulations prohibit many manufacturers from recommending this option.

For even more baby formula wisdom, see this op-ed from Dr. Joel Zinberg in the New York Post on how the FDA bungled the job on regulating formula and this op-ed at Issues & Insights by Iain Murray and Michele Minton on why President Biden invoking the Defense Production Act was an infantile response to the formula crisis. 

They’re all right, of course. And we should remember their recommendations the next time policymakers drop the rules that cause a crisis, only to immediately re-enact them as soon as everyone’s attention has turned to the next Current Thing. As it turns out, many such rules were never needed in the first place.  

This topic was also covered recently on the Free the Economy podcast. Listen to Episode 9 here (the infant formula segments starts at 6:05).