Congress is letting its suspension of infant-formula tariffs expire today, to the detriment of parents and the benefit of the dairy lobby.
Congress is letting its suspension of infant-formula tariffs expire today, to the detriment of parents and the benefit of the dairy lobby.
T he idea of a military cargo plane delivering 78,000 pounds of infant formula from Europe to Indiana sounds like part of a dystopian sci-fi plot. Yet, it happened earlier this year.
It wasn’t due to nuclear fallout or an asteroid strike. It was a slight hiccup in the whole-of-government approach to carefully coddling the domestic formula industry.
One Abbott Nutrition plant, which supplied 20 percent of the whole U.S. formula market, shut down after issuing voluntary recalls of the infant formulas produced there. The recalls came after four babies who had consumed formula made at the plant contracted deadly bacteria, Cronobacter sakazakii. If the FDA had acted on a whistleblower complaint five months earlier or had not stopped plant inspections two years earlier, due to Covid, it could have known about the bad conditions in the Abbott plant sooner.
However, leniency for the industry is built into the government rules that concentrate all that production in one place. Ordinarily, 98 percent of infant formula consumed in the U.S. is produced by a handful of domestic suppliers.
With all the talk from the Biden administration about resilient supply chains, one would think it would take seriously the opportunity to strengthen this incredibly weak one. Instead, it pursued nonresponsive “fixes” while abusing the Defense Production Act to give the appearance to the press that it was acting to solve the problem. It was only months after the shortage began that Congress passed and Biden signed the FORMULA Act, which waived some trade barriers for a limited time and allowed foreign producers to help make up the shortfall.
In other markets, competitors at home and abroad would step in and fill the gap created by the failures of one company. But in the absence of competition, American parents resorted to hours-long searches driving from store to store. Some felt forced to make their own formula or dilute the formula they had, options that deny their children the full nutrition they need to grow. All the while they were preyed upon by scammers taking advantage of the government-assisted crisis.
On the other hand, those fortunate to get their hands on foreign formula learned that not only was it safe, it comes in varieties not available in the U.S. and often made to higher standards than the FDA required. For instance, European formulas use lactose as a source of carbohydrates, which is easier to digest than the corn syrup common in the U.S. (also due to government protectionism). Even Abbott Nutrition was thankful for the lower trade barriers as it was empowered to import formula from its plant in Spain.
Unfortunately, just after Christmas, like a belated and heartless grinch, Congress, with the encouragement of Big Dairy, will allow the suspensions in the FORMULA Act to expire. This will restore the average effective tariff of 25 percent on infant formula, which is 15 times greater than the weighted average of all other imports.
Tariffs are only one of the hands grabbing formula from American babies. According to the International Trade Barrier Index the United States is just behind China as one of the most prolific users of non-tariff barriers. For infant formula, these include a 90-day waiting period before marketing, onerous labeling requirements, and years of preclinical data for ingredients. All of this for formula that is already approved for sale in friendly countries with high health standards and consumed by millions of babies in those countries without issue.
Congress should not cave to the industry’s tantrum. It should make the suspension of infant-formula tariffs and non-tariff “flexibilities” permanent. Ideally this can be done by simply accepting the safety standards and approval processes of key foreign suppliers and allies such as Australia, the European Union, Canada, and Mexico. A permanent suspension would allow companies to make long-term investments in the U.S. market and restore competition to lower prices and increase options for parents.
Congress’s difficulty in prioritizing the welfare of babies over corporate carve-outs is a shameful display of America’s declining leadership in trade policy. American parents now know that competitive imports help prevent the kind of supply-chain vulnerabilities that allowed the Abbott shutdown to snowball into a crisis. Babies all over the world rely on infant formula, but only parents in the U.S. experienced a shortage due to one plant closure and their own government’s protectionism. By allowing the status quo ante to return, Congress and the president are only setting up the infant-formula market for a similar disaster when another plant closure or inspection problem inevitably happens in the future.