Deploying the full might of the federal US military procurement apparatus to fly baby milk across the Atlantic might seem a rather heavy-handed use of force. But the global snarl-ups in value chains are opening up all sorts of exciting possibilities for government intervention, particularly in the US. Just one problem: there aren’t many signs the Biden administration has grasped the importance of international trade as well as that of shovelling out dollars when securing supplies of vital goods.
In May the president invoked the Defense Production Act — legislation dating back to the Korean war — to fly infant formula from Germany to the US to deal with a sudden shortage of baby milk. It’s a serious health issue, of course, and the kind of market failure where federal government can absolutely play a role. But the use of federal procurement both in this case and when creating Covid vaccines early in the pandemic, while effective in the short term, ignored the international dimensions. Similar problems will quite likely pop up in the government’s efforts to secure other strategically important supply chains like semiconductors as well.
The baby milk shortage doesn’t need more federal spending to overcome market failures in normal circumstances. As Scott Lincicome from the Cato Institute think-tank recently testified to Congress, the crisis was a result of destructive trade, regulatory and (possibly) long-term procurement policy.