One of the more important stories of 2022 — noteworthy because it illustrated how a protectionist government policy caused a boatload of trouble — may be about to repeat itself.
It was the baby formula shortage, caused in part by the shutdown of a Michigan manufacturing site, over contamination concerns, that produced 20% of the formula made in the country. But the rest of the problem was government tariffs and other barriers that keep foreign competitors out of the U.S. market.
Catherine Rampell, a columnist on The Washington Post website, wrote that four U.S. companies have 90% of the baby formula market, and have “have successfully bricked themselves off from domestic and especially foreign competition.” Which is fine and dandy — until there is an unexpected shock to the supply chain, like the shutdown of 20% of formula production.
When the Michigan plant got shut down, many parents hoarded formula, making the shortage worse. President Biden wound up commissioning military planes to fly in foreign formula — the stuff American producers claimed wasn’t safe enough to sell in this market.
Congress also suspended tariffs on formula, which were about 25%. The Food and Drug Administration temporarily allowed some foreign brands into the country, and other domestic manufacturers were able to produce more. Ultimately, the shortage eased and the story faded from the headlines.
Well, guess what? As Rampell noted, lobbying from the U.S. dairy industry convinced Congress to restore the tariffs on Jan. 1. The FDA has extended the sale of foreign formula to 2025, but what’s the point if the price is not competitive with the homemade stuff?
You can hear the objection to imports: Why don’t we make more formula at home? Yes, exactly! Why don’t we? Could it be that the companies that have 90% of the market are lobbying lawmakers to prevent new competition?
If the events of this year proved anything, it’s that there’s a market for infant formula. If American companies aren’t going to build enough safeguards into their system to prevent shortages, then we need more producers.
Jack Ryan, Enterprise-Journal
