Remember the baby-formula shortage that grabbed every headline not that long ago? The headlines may be gone, but the shortage remains.
The Wall Street Journal yesterday:
U.S. stores are still struggling to stock baby formula despite monthslong efforts by manufacturers and the Biden administration to boost supplies.
Availability of powdered formula products in U.S. stores earlier this month dropped to the lowest level so far this year, with about 30% of products out of stock for the week ended July 3, according to the market-research firm IRI. While availability improved slightly last week, out-of-stock levels remain higher than in recent months, and shortages remain acute in states including Alaska, Utah and Wyoming, IRI data showed.
At the same time, consumers are finding fewer choices of brands, sizes or formats of formula on grocery-store shelves as the variety of available products shrinks. U.S. supermarkets over the four weeks ended June 26 sold an average of 11 different formula products per store weekly, according to IRI, compared with a weekly average of 24 from 2018 to 2021.
One reason the shortage has persisted is that the Michigan formula plant that was shut down in February and reopened in early June was hit by severe thunderstorms on June 15 and closed down again. It reopened July 1, which means another two weeks of production were lost. (It’s worth noting that neither the FDA nor the CDC have been able to link the infections that spurred the February closure to the plant.)
The United States of America should not be at the mercy of Michigan weather to have a sufficient supply of baby formula. The fact is we’re over-reliant on a small handful of factories because the U.S. baby-formula market has been made unattractive by federal policy.
A Congressional Research Service report from May documents how the U.S. is almost 100 percent reliant on domestic companies to meet demand for baby formula. The U.S. produced an average of 524 million kilograms of infant formula per year between 2012 and 2021 and imported an average of only 3 million kilograms per year, the report says. Domestic production regularly exceeded demand, which seemed to be working well.
But when there are domestic supply problems, there’s nowhere else to go. Tariffs and duties range from 14.9 percent to 25.1 percent depending on the contents, amount, and the country of origin, the report says. More importantly, though, the oligopolistic market structure, dominated by two huge firms that work in concert with state governments through the WIC program, makes the whole market unattractive for foreign manufacturers. The report says, “As such, Congress might consider encouraging mutual recognition agreements on regulatory testing and certification, or other policy instruments to reduce these trade barriers, in addition to potentially lowering tariffs.”
Senator Mike Lee (R., Utah) introduced a bill that would eliminate all duties and quantitative limitations on baby-formula imports for 90 days, which passed the Senate unanimously on June 23. It was received in the House the next day. Since then, no action has been taken on it.
The last White House statement on baby formula was on July 6, announcing the 15th “Operation Fly Formula mission,” this one delivering baby formula made in England. Instead of chartering special military flights and putting out press releases about them, the president should call for allowing these imports all the time through ordinary means of trade. That means the FDA should approve any formula manufactured in friendly countries with high health standards for sale in the U.S. and relax its labeling standards to allow imports. It should make these moves permanent to encourage long-term investment in the U.S. market, rather than one-time, stopgap efforts. We don’t need the military to make this happen. There are countless commercial planes that fly countless “missions” to deliver products to the U.S. every single day, and baby formula should be on them.
As I wrote twice in May, the Biden administration’s response to the baby-formula shortage was calibrated to look like Doing Something instead of actually addressing the causes of the shortage. Nearly two months later, the shortage persists. Maybe it’s time to give markets a chance.