Minnesota’s Economic News — W/E 12/8/23
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While in Target the other day, I happened to notice the baby formula section was once again sparse. Noticing this didn’t give me the same nervous and panicky feelings it did just about a year ago during the shortage when formula was essential for my son, but I couldn’t help thinking of all the mothers with babies relying on stocked shelves who now are experiencing similar feelings.
It shouldn’t be this way, and it doesn’t have to be.
To address the supply chain issues that caused the baby formula shortage last year, Congress cut tariffs. And for the second half of 2022 baby formula supply became less of a problem. “In short, the government removed economic barriers and the market solved the problem,” writes Eric Boehm for Reason.
But while effective, it was a band aid solution in need of other reforms. The tariff suspension expired December 31, 2022, and we started 2023 with the return of the baby formula taxes.
And now the shortages and spiked prices have returned too, continues Boehm.
A Forbes investigation into a recent increase in the price of Enfamil baby formula noted that the increases “follow the expiration of the U.S. government’s suspension of infant formula tariffs in January, which opened the door for formula (both foreign and U.S.-produced) to become more expensive.” (Another contributing factor: Reckitt Benckiser, the British-based company that owns the Enfamil brand, issued a recall in February affecting about 145,000 cans of formula.)
This is what tariffs do, Boehm explains. “They are import taxes that protect domestic industries at the expense of domestic consumers, who are subjected to limited supply and higher prices as a trade-off for industrial protectionism.” But prior to the baby formula shortage, the cost to consumers was often invisible. Now, “the costs of this specific trade policy [are] readily apparent.” And the power of special interests.
In this case, it was the dairy industry, which benefits from the anti-competitive tariffs and other regulations that effectively prevent foreign baby formula from being sold in America. As Reason reported in December, the National Milk Producers Federation pushed Congress to reimplement the baby formula tariffs, arguing at the time that “the temporary production shortfall that gripped American families in need of formula earlier this year has abated.”Except, obviously, it hasn’t.
This week, current and former Food and Drug Administration (FDA) officials will go before Congress to “answer questions about the shortage and the agency’s role in worsening it,” Boehm shares. “The fact that the FDA has admitted it played a major role in creating the baby formula shortage in the first place but has steadfastly refused to hold anyone at the administration accountable for those mistakes should temper any expectations of positive changes.”
Where do we go from here if we want a more resilient market? “Let more producers compete on a level playing field — regardless of whether their products are made here or not,” concludes Boehm.
Are tariffs good policy or self-harm policy? Or something in between? Share your thoughts below.
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