Baby formula crisis is a symptom of ‘managed trade’: experts

Washington –

Another cargo plane laden with European infant formula will arrive in the United States on Wednesday as the White House tries to ease a debilitating shortage – a response that some worry about. Fear can lead to even empty shelves in Canada.

Canada depends on U.S. manufacturers to supply its own formula, and with the Biden administration once again using wartime emergencies to respond to this moment, trade experts and food security both worry about direct impacts.

And while the February closure of a key manufacturing facility in Michigan catalyzed the crisis, the same experts say its foundation lies in the way both countries have jealously defended. their dairy industry in an age of regulated commerce.

“I have been worried since day one about this situation,” said Sylvain Charlebois, a professor of management and food security expert at the Dalhousie University School of Public Administration in Halifax.

“And I actually think the White House is much more proactive than Ottawa in trying to really move products from Europe to North America.”

Health Canada has issued approval for the use of European infant formula in Canada, but the government has yet to take any steps to expedite the introduction of those products into Canadian soil, he added.

Charlebois said the only long-term remedy would be to get production back up and running at Abbott Nutrition’s large facility in Sturgis, Mich., one of the largest in the country, which has been shut down since May. Two due to concerns about bacterial contamination.

The company expects the plant to be back up and running within two weeks, but warns it will take up to two months before its output is fully back on store shelves.

“Once that happens, I think the US market will definitely take precedence over the Canadian market. It’s going to be a while before Canada comes out of this mess,” Charlebois said.

The roots of that mayhem – which Prime Minister Justin Trudeau suggested Tuesday isn’t as bad as headlines might suggest – can be traced back to the persistent strain of US protectionism, interspersed interspersed with Canada’s own jealous guardianship of the domestic market.

“This is basically a dairy product, and so it gets caught up in a bad mix of things,” said Eric Miller, a Canada-US expert and president of the DC-based company. supply management and the whole ugly mix of U.S. dairy export politics. Rideau Potomac Strategy Group.

When the two countries sat down in 2017 to negotiate the US-Mexico-Canada Agreement, then-President Donald Trump was determined to gain broader access to Canada’s dairy market while keeping rivals at bay. Canada manages the supply.

“The primary goal of the USMCA for the U.S. dairy industry as a whole is to ensure greater market access for U.S. products entering Canada and to ensure minimal or no competition from other countries,” Miller said. Canadian products in the US or in third markets,” Miller said.

Canada ended up making relatively modest concessions in the deal, known as the north border as CUSMA, which lifted import duties equivalent to about 3.6% of the Canadian market.

And while Canada is home to a large baby formula factory in Kingston, Ont., it is a Chinese-owned facility that ships 100% of its production overseas for domestic use in China – a facility powered by Canadian labor and subsidized dairy products.

“Cow’s milk, like in the US, it’s partially subsidized – that makes things even worse,” says Charlebois. “The factory itself is also subsidized by Canadian taxpayers.”

Brian Deese, director of the White House National Economic Council, acknowledged in interviews over the weekend that the US formula market is dominated and controlled by a handful of large companies.

Expansion is unlikely in either country: the steadily falling birth rate across North America means it’s not exactly a bull market, and trade restrictions make it unsold. foreign.

“It is not free and open trade, but regulated trade,” said Adam Taylor, founder of Export Action Global, an international trade consulting firm.

“Obviously I’m a freelance trader. Free and open trading is the best way to make sure a lot of these products stay in abundance for everyone. You can add it to the list of things that don’t exist. We’re seeing in real time that there’s something missing.”

Meanwhile, President Joe Biden’s “Flying Formula Campaign” is underway; The first shipment arrives in Indianapolis on Sunday, while Jill Biden, the first lady, is scheduled to arrive next Wednesday at Dulles International Airport.

Biden also invoked the Defense Production Act, a 1950s law passed at the start of the Korean War.

Given the cost and effort so far, not to mention the obvious political ramifications with the midterm elections coming up in November, don’t expect the US to share nervously, Miller suggests. idea.

“When the US invokes the DPA, they don’t want to see 30% of their supply going north of the border.”

He said Tuesday in Vancouver, when he heard Trudeau recount, it could all be an argument: Canada was monitoring supplies and was “working closely” with the US to make sure it got enough to go everywhere. .

“The reality is, we still look as if we’re fine with baby formula,” Trudeau said.

“There are challenges around some of the more specialized formulations for particularly vulnerable children, but we are confident that the work we are doing to secure supplies from elsewhere and ensure that Canadians have those options, that’s fine.”

Health Canada also raised another red flag on Tuesday, this product comes in the form of sunflower oil, a key ingredient entangled in the Ukraine-Russia conflict that supplies half the world. .

The agency said it plans to extend a temporary program, currently set to expire at the end of June, to import more infant formula from Europe and the United States to boost supplies. domestic.

This Canadian Press report was first published on May 24, 2022.

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