U.S. regulators have taken first steps toward allowing more baby formula into the country, but shelves remain bare, President Biden’s grasps for solutions, and the FDA’s web of regulations still leaves too many families scrambling to feed their children. After another crisis, few now deny that excessive regulatory caution and clutter can harm Americans. To get a better handle on the situation, we must start with more innovative ways to measure our policies.
FDA rigidity became obvious during the pandemic, when inflexible regulations prevented businesses and entrepreneurs from addressing the public’s needs. Bureaucracy barricaded scientific progress. Many regulations had to be waived or suspended.
We see similar problems with the baby formula shortage. Strict FDA formula guidelines range from labeling requirements to registration timelines, making it difficult for producers to enter the market, provide needed supply, and bring prices down. Overseas producers are especially hindered. Some formulas made in the European Union — the largest producer and exporter of formula — are on a “red list” and are immediately detained upon arrival in the United States.
While the FDA understandably sought to keep illicit formula off shelves, they exacerbated shortages and may have even prevented families from receiving formula that is safer. The EU’s strict nutritional requirements meet or exceed FDA’s and regularly reflect changes in infant health science. The United States has not meaningfully changed its requirements since the Infant Formula Act of 1980. It therefore makes sense why demand for EU-produced formula was so high even prior to the shortage.
This is one example of why comparisons between international regulatory regimes are so important. However, this proves difficult without an objective way to measure and analyze gigantic, sometimes antiquated government codebooks. That’s largely been missing until recently.
In 2012, the Mercatus Center at George Mason University created RegData to help answer these questions. Its artificial-intelligence approach tallies the number of words like “shall” or “must” in America’s federal code that create obligations or prohibitions — essentially counting regulations. It also maps how regulations affect various industries.
RegData has been applied internationally to Australia and Canada and inspired similar efforts from the United Kingdom to Brazil. A common methodology makes objective analysis of the ever-changing, global regulatory landscape much easier. It also further illuminates a key similarity: Regulatory restrictions across the globe are generally growing.
Between 2006 and 2019, regulatory restrictions in Australia more than doubled, compared to 13% growth in Canada and 16% in the U.S. The United States has the highest total number among the three countries, with over ten times more than Canada. Australia, however, has the most per capita rules, significantly outpacing the U.S. and Canada.
The effect of these regulations on the economy is seen in the slowed COVID-19 recovery. Worldwide, economic powerhouses and smaller countries alike struggled to rebound. Even as the academy called for regulatory reform, in many respects, governments continued to expand their codes.
However, the progress we did make was telling. Obviously onerous regulations were halted to enable recovery and innovation — with great results. Most notably, the FDA approval process was streamlined, allowing for vaccines to be developed and distributed in record time. A typical vaccine’s development takes five to 10 years, with two to four involving regulatory approval. “Operation Warp Speed” helped save lives and return life to some semblance of normalcy.
Even as policymakers and special interests fought to preserve the status quo, we got a rare glimpse of the often-obscured costs of many restrictions and a clearer picture of a world with common-sense regulation. Unfortunately, many such restrictions have been reinstated.
The economic literature further demonstrates a positive relationship between streamlined regulatory systems and economic success. British Columbia reduced the quantity of its regulations by 37 percent beginning in 2001. Simultaneously, its economy transformed, notching a growth rate surpassing Canada’s by about 1.1 percentage points in the five-year period following implementation. U.S. states like Idaho, Arizona, and Virginia have also seen immense success with various regulatory reform efforts.
RegData has provided the objective lens necessary to study the size and scope of regulations. COVID-19 gave us a unique test case of some obvious negatives of poorly planned (at worst) or outdated (at best) regulations and the opportunities that can be unlocked by peeling them away.
If done wisely, regulatory reform can put baby formula on the shelves and allow for vaccine approvals to be streamlined without sacrificing safety. It’s up to governments to take advantage.
Patrick McLaughlin is the director of policy analytics and a senior research fellow with the Mercatus Center at George Mason University. Susannah Barnes is a Mercatus MA Fellow.