Imports Helped Alleviate the Formula Crisis. Why Are We About to Start Taxing Them Again?

A family shops for baby formula at a Walmart in Houston. (Photo by Brandon Bell/Getty Images.)

Dear Capitolisters,

One of this newsletter’s persistent, albeit depressing, themes is that bad policy can linger for years, even decades, after it’s been proven ineffective at best and destructive at worst. There are plenty of examples of this problem—people have even written books about it—but there may end up being no better example than baby formula, a frequent topic of my 2022 scribblings. 

Indeed, just as American store shelves are returning to some semblance of supply normalcy—thanks in no small part to the emergency liberalization of multiple U.S. restrictions on European and other foreign-made formula products—the federal government appears ready to reapply high, potentially prohibitive, taxes on the very imports that helped save the day.

Looking Back at the Baby Formula Crisis

Before we get to that, however, a quick refresher as to how we got here (see this for details): The United States has—thanks to intense lobbying by the politically-powerful U.S. dairy industry—long imposed a complicated system of domestic regulations and “tariff rate quotas” on imports of milk, cheese, and other dairy products. Among those other products are infant formula and its base ingredient, dry milk, and import taxes averaged out to an effective rate of about 25 percent. When combined with the FDA’s onerous regulatory (“non-tariff”) restrictions, which subjected popular formulas approved by competent regulators abroad (the EU, U.K., New Zealand, etc.) to a laundry list of nitpicky rules, the trade restrictions effectively walled off the United States from all foreign formula brands—even ones that many American parents really wanted (and went underground to get). 

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