Chronicism exacerbates the lack of formula in the baby

Reprinted from internal source

Bad policies make people vulnerable and the current child formula deficit is a recent example. The immediate cause of the shortage was pollution at a factory in Michigan, which could not resume production until June. But the underlying reason is the many bad policies that make the market less competitive. Tariffs, labeling and marketing rules have removed so much competition from the industry that when a withdrawal affects a factory, it becomes urgent for parents across the country.

These regulations give young families less space to roam in times of need – on purpose. Existing companies push for these regulations because they create barriers to entry against potential competitors and reserve market share for themselves. Policymakers need to clean up their mess as soon as possible. Instead, they are going down twice.

Control is a major factor as only four large formula producers control most of the US market. First, WIC-assisted parents are only allowed to choose certain brands. Second, consumers must pay a 17.5 percent tariff on any imported formula, which determines the value of numerous brands outside the U.S. market. This is an excellent arrangement for companies – and for their lobbyists – but it raises prices for families and makes it difficult to increase supply in times of scarcity.

When new formulas enter the market, regulations prohibit sellers from informing anyone about them for 90 days, and even manufacturers may advertise existing formulas of their choice. The first months on the shelf are a make-or-break for many new products, which is why existing producers prefer otherwise meaningless controls. At such times, parents may appreciate hearing about new options.

One of these options is the Toddler Formula, which in many cases meets the nutritional requirements of the Food and Drug Administration for infant formula. However, FDA regulations prohibit many manufacturers from recommending this option.

Even product labels have become an anti-competitive tool. The FDA recently recalled a source saying that European parents are safely giving their children year after year because the label “did not include a statement indicating that extra iron may be needed.”

U.S. Customs recently seized about 600 formulas for labeling requirements from Germany and the Netherlands. The agency’s self-congratulatory press release reads as if it has created a large drug cartel, praising it and the FDA’s “joint efforts to help keep our citizens safe.”

People’s nutritional needs do not change beyond political boundaries. If a formula is safe and nutritious for children in Germany or the Netherlands or any other country, it will be for American children as well. A system of mutual recognition, in which the regulators of comparatively standardized countries automatically approve of each other’s decisions, will help to eliminate and prevent shortages of baby formula and countless other products – at least after they have been taxed.

When policies fail, the right thing to do is to get rid of them But instead, politicians are probably going to create new ones.

President Biden called for the Defense Production Act, a wartime powers law, to be flown from abroad, but only from factories that meet the protectionist FDA regulations. Since, according to the design, most do not, it will have little effect. At least eight senators are interested in a possible no-confidence motion against the industry, which is concentrated in a few companies due to government regulations.

House Speaker Nancy Pelosi wants legislation to increase Washington’s role in supply chain management. The House Oversight Committee is looking at controlling price increases, which would be counterproductive. Many Republicans are inviting conspiracy theories and blaming foreigners who would probably be happy to help, if the regulations allow.

Regulation Why the formula deficit is so bad, but politicians are blaming the market instead. Blaming greedy markets is good for grandstandings and publicity, but there isn’t much free market when it comes to baby formula. So far a healthy response has been Sen. Mike Lee’s Formula Act, which will allow WIC parents to choose their formula brand, refund tariffs, and enforce mutual recognition with trusted allies.

When a withdrawal or deficit occurs, parents will have far more options in the open market than in the current regulatory mess of chronism and protectionism. Only defeated producers, their lobbyists and politicians are looking for other ways to stand in the way of the campaign.

Ryan Young

Ryan Young is a Senior Fellow at the Competitive Enterprise Institute (CEI). His research focuses on regulatory reform, trade policy, distrust control, and more.

He holds an MA in Economics from George Mason University in Fairfax, Virginia, and a BA in History from Lawrence University in Appleton, Wisconsin.

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