One year ago today, Abbott Nutrition issued recalls of infant formula produced at its plant in Sturgis, Michigan. At the same time, Abbott closed the factory leading to a nationwide crisis—the supply shock couldn’t be remedied by the two other major U.S. formula‐makers, rigid policies prevented imports from filling the gap, and parents began hoarding supplies. In May 2022, national weekly out‐of‐stock rates reached 74% and continued to climb, reaching over 90% in June.
Since then, national out‐of‐stock rates have improved (thanks in large part to temporary trade liberalization) but many parents are still having trouble finding formula in stores. Scott Lincicome and I lay out why the formula crisis was unique, and why it was different from other products that experienced shortages:
The combination of high trade barriers, onerous domestic regulations and restrictive government contracts has created a concentrated and sclerotic U.S. formula market that collapsed when a single factory shut down and still hasn’t fully recovered. Tellingly, the federal government’s emergency actions to alleviate the formula crisis targeted these very policies. Congress suspended baby‐formula tariffs through the end of 2022. The FDA exercised its “enforcement discretion” to approve eight new foreign manufacturers to sell formula until 2025 without meeting all U.S. regulations. The Agriculture Department allowed WIC recipients to use their benefits to buy noncontract formula brands, including imports, until mid‐2023. And President Biden’s Operation Fly Formula commissioned military aircraft to deliver formula from abroad.
In all cases, the federal government implicitly recognized how freer markets can boost economic resilience and how protectionism and excessive regulation undermine it. Yet Congress and the executive branch haven’t made these reforms permanent. Tariffs are now back in force, even as discrete shortages persist.
Disruptions are both inevitable and necessary in a modern economy because growth often comes with growing pains. But eggs and children’s medicines, which are less regulated than infant formula, both bounced back quickly from recent supply shocks. A relatively free and open market not only lowers costs today but protects against long‐term shortages tomorrow.
Congress should use today’s anniversary to consider prioritizing permanent reform to the trade and domestic policies that directly exacerbated the infant formula crisis. For recommendations, an excellent place to start is here.
