Facing a National Shortage of Baby Formula, Trade Officials Opposed a Plan to Boost Imports

by Heather Vogell

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As U.S. parents struggled to find baby formula during a nationwide shortage in May of 2022, the Biden administration frantically sought ways to restock empty store shelves. Among the options was lifting steep tariffs on formula imported from other countries.

But as White House lawyers drafted a proclamation to remove the import tax, one federal agency resisted: the Office of the United States Trade Representative.

With supplies of baby formula falling precipitously across the country after a major production plant shut down, staffers from the USTR repeatedly argued against lifting the tariff on imports, citing, in part, a concern that it would raise “lots of questions from domestic dairy producers,” according to documents obtained by ProPublica. Cow’s milk is a primary ingredient for most baby formula, and the dairy industry has long supported protections for U.S. manufacturers.

“Situation at retail appears to be a combination of transportation/shipping and panic buying by consumers, not an issue of inadequate domestic production,” wrote Julie Callahan, an official with the USTR, in a May 11 email to an official with the National Security Council, which was helping coordinate the administration’s response.

The next day, she told colleagues, “I tried to convey to NSC in very strong terms yesterday that removing tariffs from infant formula will not result in increased access to infant formula for U.S. consumers.”

The White House never released the proclamation, and the tariffs stayed in place for 10 more weeks, until Congress suspended them temporarily on July 21.

That delay was too long, according to a new report from the National Academies of Sciences, Engineering and Medicine.

“Such action should have happened more quickly,” the report said, a finding that raises questions about the assessment from the president’s chief trade advisers. A panel of experts found “suspending tariffs was helpful for bringing product into the United States during the shortage.”

In fact, the report recommended Congress create a “trigger rule” to automatically suspend import taxes again if the market is substantially disrupted. “Quick removal may be important to providing rapid response in the future,” said Katheryn Russ, a member of the expert panel that produced the report and an economics professor at the University of California, Davis.

It’s unclear why the White House did not issue its proclamation; it did not answer our written questions about the subject.

A spokesperson for the USTR, however, defended the administration’s response, saying in a statement that it “was committed to using all tools, including trade tools, to address the formula shortage and ensure American families were able to access infant formula.” Officials were in close contact with Congress, which ultimately voted to remove tariffs with the administration’s support, it said.

“To be clear, any implication that USTR stood in the way of addressing the crisis is completely false,” the statement said.

This year, ProPublica detailed how the U.S. government has repeatedly used its diplomatic and political power to advance the interests of formula manufacturers overseas, thwarting public health measures around the globe that posed financial threats to the companies’ business. But the documents from the height of the U.S. formula shortage show some of the same trade officials — at the USTR in particular — flexed that muscle to protect the formula industry and its allies at home, even during a national emergency that put children at risk.

The crisis escalated quickly in early 2022, after Abbott stopped formula production at its Sturgis, Michigan, plant, which had been making 20% of the formula sold in the U.S. Four infants had fallen ill or died after drinking formula made there, and federal inspectors later found bacterial contamination and lax safety protocols at the plant. By April, nearly a third of the normally available formula products were out of stock. By late May, that number was 70%.

The shortage caused widespread panic. Many infants who had to switch formula brands because of it developed symptoms such as fussiness, spitting up or diarrhea, and nearly half of parents in one survey said they’d resorted to at least one unsafe feeding practice, such as watering down formula.

Jennifer Smilowitz, a researcher at the University of California who studied the impact of the shortage, called those findings “alarming.”

“Parents were not offered many safe alternatives,” she said.

The U.S. struggled to replace the lost production with foreign imports in part because of strict regulations on nutrition and safety as well as high tariffs that rise at greater volumes.

The new report said those “extremely high trade barriers” leave the U.S. formula market “almost completely closed to imports” — a condition that endangers supply when a major domestic producer encounters trouble. The U.S. normally produces 98% of the baby formula that consumers here use.

To encourage more imports in 2022, the Biden administration — which was also flying in formula from Europe — readied a plan for tariff relief, records show.

“My understanding is that there is a trade proclamation that would temporarily suspend tariffs on baby formula imports,” an administration lawyer wrote in a May 15 email thread. The White House Counsel at the time, Stuart Delery, wrote five minutes later: “We were instructed to prepare a proclamation to be ready for tomorrow, which we have done.”

When Callahan, the USTR official, responded, her concern focused on the companies that would be affected by the measure. The biggest dairy industry groups, she said, should be given “a heads-up right before any press release goes out, so that they don’t feel blindsided.”

Trade officials were also unhappy with the Department of Health and Human Services, which, according to the records, appeared to be criticizing the formula tariffs in conversations with congressional leaders.

“We are hearing from the Speaker’s office that HHS is blaming a 17 percent tariff on formula as the reason for the shortage,” wrote USTR official Allison Smith to colleagues on May 16. “Obviously, that’s a problem.”

She added: “Definitely want to push back on messaging coming from HHS and generally fill the information void.”

Later that day, USTR staff circulated draft talking points saying the administration was “pursuing all avenues” to increase the availability of formula and that domestic companies had ramped up production. The document did not mention cutting tariffs as an option and suggested officials dodge questions on the topic.

“If asked on tariff reductions,” it instructed, say: “We are hoping that this additional action taken by the Biden Administration will result in easing of the current supply shortages.”

Callahan, Delery and Smith did not respond to requests for comment. Neither did the Department of Health and Human Services.

As Congress began to consider acting, dairy and formula trade groups weighed in.

The National Milk Producers Federation signaled a willingness to embrace “time limited flexibility for imports during this specific crisis,” according to a USTR email, which quoted a message the dairy group had sent Capitol Hill. But the group warned: “We wouldn’t support a permanent or long term” lowering of tariffs.

That position appeared to align with the Infant Nutrition Council of America, a formula trade group, which dramatically ramped up its lobbying at the time, records show. “INCA members did not oppose the temporary lifting of tariffs during the 2022 shortage,” the group said in a statement.

Abbott said it also supported suspending import taxes “during times of shortage, so long as those products are held to the same stringent quality and testing standards as products manufactured in U.S. facilities.” In a statement, the company said that “no sealed, distributed product from our facilities have tested positive for the presence of Cronobacter sakazakii,” referring to the type of bacteria that made the four infants ill.

The bill to lift tariffs for imported baby formula was enacted in July 2022. Under the legislation, the exemptions would expire at the end of the year.

“The legislation’s time-limited nature was to make sure that the United States doesn’t create a permanent dependence on formula produced in foreign facilities,” Shawna Morris, an executive vice president for the National Milk Producers Federation, said in a statement.

The new report from the National Academies of Sciences, Engineering and Medicine found that formula’s availability remains at risk. Among the reasons: concentrated production among a handful of companies and a lack of understanding by federal officials and formula makers of both the risks the U.S. formula supply faces and the investment needed to prevent such disruptions.

The analysis urged federal officials to cut red tape during emergencies, develop risk management plans to address supply threats better and encourage the modernization of U.S. formula plants.

The report also advised studying removing formula tariffs or lowering them for U.S. manufacturers with plants in other countries. Russ, the panel member, said policymakers need more information on what would happen if trade barriers such as tariffs were removed long term. The U.S. industry might relocate overseas as a result, for instance, which she said might make it harder to address supply chain disruptions.

The panel said it intended its recommendations to help “ensure that the United States is better positioned to respond to any future shortage.”

The Infant Nutrition Council said its members are reviewing the report and will work with federal officials to ensure there’s an adequate supply of safe formula.

A bipartisan group of senators introduced legislation to eliminate the taxes on some foreign formula permanently last year, but it has not progressed. The National Milk Producers Federation opposed the bill, saying, “Congress should focus its efforts instead on better supporting the American companies, workers, and farmers who supply nearly all of this country’s formula and formula ingredient needs.”

The dairy group told ProPublica that it would also fight a proposal to create a “trigger rule,” as the report recommended, that automatically lifts tariffs in a crisis, saying, “Congress has shown it can act swiftly when needed.”

This content originally appeared on ProPublica and was authored by by Heather Vogell.