2022-05-26 14:58点击次数:391

Why Americas baby formula crisis is an entirely self-inflicted problem


In the two years since COVID first arrived in the US, Americans have had to get used to things being out of stock. Refrigerators, stoves, washersat various points, global supply-chain issues have meant that each of these has been tough to come by. But while those stock-outs may have been annoying, Americans today are dealing with a shortage thats actually serious: a dearth of infant formula. In the first week of May, the national out-of-stock rate for infant formula was 43%, and theres no sign that things have improved since. And this supply-chain problem is different from those earlier ones in two ways. First, formula is not a product you can afford to wait for. (Babies need to be fed!) Second, this problem is largely self-inflicted.


The proximate cause of the shortage was the shutdown of Abbott Laboratoriess formula factory in Sturgis, Michigan, and the companys voluntary recall of powder-formula products made there, after FDA inspectors found a bacteria called Cronobacter inside the plant. (Months earlier, four infants who consumed formula from the factory had become ill with Cronobacter infections, and two had died, though Abbott says that the illnesses were not caused by consuming its products.) But the reason that shutdown was so consequential is that weve created a system in which almost all the formula consumed in the US is made by a small number of companies in a small number of factories; taking just one of them offline has massive ripple effects across the economy. Parents in Canada and Europe arent having any trouble finding baby formula. Its only American parents who have been left scrambling.


The numbers behind the crisis are pretty straightforward. Three companiesAbbott, Mead, and Nestleaccount for the vast majority of formula sold in the US, and Abbott alone has more than 40% of the marketand 98% of the formula sold in the US is made in the US In other words, there is essentially no foreign competition. While countries like Germany and Switzerland have robust infant-formula industries, their companies sell almost nothing here directly.


Thats not because of a lack of demand for or interest in European baby formula; on the contrary, you can read myriad stories online about American parents going to great lengths to import formula made by companies like HiPP and Holle. Instead, there are no almost-legal imports from Europe because we have a tariff and regulatory system effectively designed to keep them out.


That system starts with tariffs. Imported baby formula is subject to a tariff thats typically 17.5%. On top of that, theres an abstruse tariff-rate quota system, which means that once a certain amount of formula is imported from a country, it gets slapped with an extra tariff in addition to the original one. So any foreign-formula manufacturer who wants to sell its products in the US is going to be at a serious cost disadvantage to the Abbotts of the world.


To even get to that point, though, foreign-formula manufacturers have to satisfy not only the FDAs nutritional requirements but also the agencys surprisingly detailed labeling requirements. The FDA doesnt officially approve infant formulas (the way it approves, say, drugs). But any product that doesnt meet its ruleswhich include things like how ingredients should be listed on the labelcant be sold in the US.


None of this is because European infant formula doesnt meet US standards: A 2019 study of 13 brands found that all of them met 15 out of 16 nutritional requirements. Indeed, the EU has its own nutritional requirements, which have actually been updated more frequently than those in the US.


The key here is that all these restrictions fit together to keep foreign producers out of the market. The economic incentives to go to all that trouble and expense are small because the tariffs and tariff-rate quotas limit their potential sales and profits. So theyve understandably chosen not to enter the US market, leaving it to the big domestic players.


It should be said that the motivation behind the FDA requirements is understandable. But in practical terms, the concern with safety has become a recipe for protecting the current oligopoly of formula manufacturers in the US And this is not a problem only in the infant-formula market. You can see a similar phenomenon at work in the generic-drug market, where FDA rules often mean that US consumers have only one choice of drugand have to pay through the nose for iteven when there are multiple versions of the drug being made in Europe.


In a broader sense, what the infant-formula crisis speaks to is the fact that setting up barriers that make it harder for Americans to buy stuff from the rest of the worldwhich is something Donald Trump did a lot of, and that Joe Biden has done little to roll backmakes the US economy more vulnerable, not less, to supply shocks. Free trade has become oddly unpopular in Washington, D.C. over the past six years. But the infant-formula market could use a lot more of it.


来源:Fast Company


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