The presently severe shortage of baby formula in the United States is a lesson in the perils of protectionism.
When things go awry domestically with the production of an essential item, there are not enough foreign sources to pick up the slack.
The result: shortages, rationing and steep price increases.
The Atlantic’s Derek Thompson this week explained the three major causes for why stores are 20 times more likely to be out of baby formula this year than what is typical.
One cause was the shutdown of a Michigan formula plant after bacteria was found there that health officials think might be linked to a rare illness found in four babies, including two who died from it.
Another was the havoc COVID-19 has created for the supply chain, not only for formula but for a lot of other products. During the early stages of the pandemic, consumers hoarded formula, then cut back on purchases afterward as they used up what they had stockpiled. The roller coaster left manufacturers guessing how much formula to produce this year. They guessed wrong and are now struggling to catch up with the soaring demand.
But the biggest causes, says Thompson, are U.S. trade policy and government procurement decisions. High tariffs, excessive regulation and domestically steered government contracts have effectively concentrated with three U.S. companies the production of nearly all of the baby formula consumed in this nation.
Although some of these government policies are presented as safety measures, Thompson suggests that’s mostly obscuring the real intent: to reduce foreign competition for American manufacturers.
For example, he says, regulations of the Food and Drug Administration bar most of the formula made in Europe because of labeling requirements or other technicalities. Yet at least one study found that not only do many European baby formulas meet the FDA’s nutritional guidelines, they might even be healthier than U.S.-made formula since the European Union bans certain sugars, such as corn syrup, and requires the formula to have a higher concentration of lactose, which helps a baby absorb calcium and iron, than does the U.S.
“Buy American” has become a popular slogan in this country, especially with the outsourcing in the past several decades of a lot of the products that were once made in the U.S., such as clothing and other textiles.
But when that slogan gets turned into protectionist policies, it warps the free flow of goods, driving up prices and leaving the country ill-prepared to deal with unexpected shocks, such as a pandemic or a plant shutdown.
Limiting competition in an effort to safeguard American jobs might seem like a good idea until it’s not.