On March 28, the House Oversight Committee held part one of hearings on the Food and Drug Administration (FDA) and its handling of the infant formula crisis. Former FDA Deputy Commissioner Frank Yiannas testified that the crisis could have been averted, or at the very least, the magnitude lessened. At Cato, we completely agree.

Unfortunately, Yiannas’ proposed solution was more of what got us into this mess in the first place: overregulation of the formula industry and overbearing FDA authority. Other policymakers argue for much the same.

Yet the infant formula industry’s weakness is not owed to a lack of regulation or FDA authority. In fact, as explained in a recent Cato briefing paper, overregulation of the U.S. infant formula market turned what should have been a temporary headache into a yearlong crisis. After Abbott Nutrition—the largest U.S. infant formula manufacturer—shut down its Michigan factory and nationally recalled its products, several different U.S. laws and regulations prevented other formula suppliers from plugging the hole punched in the U.S. market. Thus, this overregulation left retailers with few to no alternatives to Abbott’s brands, creating a massive supply shock that rippled throughout the country.

The federal government responded in multiple ways and the crisis waned in the fall of 2022. But, as the paper details, the successful responses did the opposite of increase regulation.

First, high tariffs and tariff-rate quotas on infant formula imports, along with onerous FDA rules for formula made abroad, effectively walled off the U.S. market from imports—even ones from large and reputable multinational producers located in highly-competent regulatory jurisdictions like Europe. As a result, a little over 98 percent of all formula consumed in the U.S. in 2021 was made here.

Recognizing this problem, Congress passed legislation last summer to suspend tariffs on most formula imports, and the FDA exercised “enforcement discretion” for a handful of new foreign producers (nine to be exact).

Sadly, this liberalization has mostly expired: on January 1, 2023, the tariffs went back into effect, and the FDA stopped accepting new foreign producer applications on January 6, 2023. (The nine approved companies can stay until October 2025 under this more lenient system.)

Secondly, onerous domestic regulations on formula—higher here than in most other countries and for most other foods—make it extremely costly for new manufacturers to enter the U.S. market. The only new market entrant since 2007, for example, spent more than five years and $190 million to navigate the regulatory process.

Finally, the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), which provides vouchers for low-income Americans to buy only a certain brand of formula (and at a steep discount) at approved retailers, has increased the market dominance of the three large U.S. producers that can meet WIC requirements. As such, when the crisis hit, the USDA temporarily allowed WIC beneficiaries to buy other formula brands, including imported formula. However, this reform expires in June at the latest, and only applies in store, not online.

Following these temporary reforms, the prolonged U.S. formula crisis—not experienced by any other country—began to ease and stock-rates improved. However, problems are now reemerging. As Chart 1 shows, imports rose after tariffs and FDA rules were liberalized, but have since fallen with the return of the prohibitive tariffs.

Now, retailers are warning again about empty store shelves, and consumers are complaining about price increases. Even more troubling, Yiannas warned the U.S. is extremely vulnerable to another major crisis, noting that disasters impacting the supply chain, like another bacterial outbreak or even a tornado, could rock the industry again.

In this regard, he’s unfortunately correct. But the solution isn’t more regulation; it’s deepening and making permanent the very trade, regulatory, and welfare reforms that tempered the crisis last year. Indeed, even the risk-averse FDA recognizes providing pathways for foreign producers to sell in the U.S. creates “more resiliency in the U.S. infant formula supply chain and [reduces] the risk of reliance on too few production facilities supporting the United States.” Yet high tariffs and other barriers remain in force.

If Congress fails to eliminate these barriers and enact other long-term, market-based reforms, America will continue to be uniquely vulnerable to another formula crisis, and one entirely of its own making.