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There is a shortage of baby formula caused allegedly by a mix of supply chain issues and a recall. Baby formula shelves are empty causing some stores to restrict sales of product as panicked parents and caregivers search for formula to feed their babies, reports Joseph Pisani in the WSJ.
In what the WSJ’s James Freeman calls “an important case,” Mr. Freeman wonders if President Joe Biden is serious about wanting to fight scarcity and reduce consumer prices.
Expecting the career Washington politician to suddenly consider economy-wide regulatory relief and broad tariff reductions to counter inflation may not be realistic. But why can’t the president just take a baby step toward open markets and plentiful supplies by removing trade barriers? His youngest constituents need help.
Covid-19 related supply chain issues have made baby formula harder to find. Exacerbating the shortage, a major formula manufacturer (Abbott Laboratories) voluntarily recalled some products and closed a plant in in Sturgis, Michigan, where the products were made.
At Cato Institute, Gabriella Beaumont‐Smith notes that freer trade could help alleviate the current shortage and prevent future ones:
Stores like Walgreens, CVS Health, and Target are limiting the number of formula products per purchase because of low inventory—just last month, national out-of-stock levels reached 40 percent!
We’re from the Government, and We’re Here to Help
One reason retailers are struggling to recover stock levels is the multifarious trade restrictions that limit infant formula imports.
The United States subjects infant formula to tariffs up to 17.5 percent and tariff‐rate quotas (TRQs); for TRQs some level imported are subject to a tariff with the excess subject to a tariff and additional duties.
A few trading partners receive “special” duty rates where some infant formula imports are duty-free or receive lower tariffs and TRQs. Mexico is one of the few U.S. trading partners that has some duty-free access for infant formula, and uncoincidentally, is the top trading partner for U.S. formula imports…
What Would We Do Without the FDA?
Making matters even worse, infant formula is subject to onerous U.S. regulatory (“non-tariff”) barriers. For example, the FDA requires specific ingredients, labeling requirements, and mandates retailers wait at least 90 days before marketing a new infant formula. Therefore, if U.S. retailers wanted to source more formula from established trading partners like Mexico or Canada, the needs of parents cannot be quickly met because of these wait times. Businesses also have little incentive to go through the onerous regulatory process to sell to American retailers, given the aforementioned tariffs and the relatively short duration of the current crisis.
The Biden White House defended the plant’s closure. Still to come, however, are any details on when the plant might reopen or what the administration plans are to help solve the problem.
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