Non tariff trade policies meet Joseph Schumpeter: the case of baby milk
- Breast feeding is best, according to the World Health Organization
- Taking that (and therewith the need for long, paid, maternity leave) as a given, baby milk powder sheds an interesting light on the present price centered discussions about international trade: it’s not just about prices. And the present discussion does not take Schumpeterian entrepreneurs (and the regulatory state) serious enough. In 2008 the lack of apt government regulation in China led to the poisoning of 300.000 babies wich were bottle fed with baby milk contaminated with, mainly, melamine. This was of course a boon for foreign high-end baby milk producers, which saw they exports to China soar. Recently, however, China is increasing safety standards for (among other food products) dairy products. This drive includes rigid rules for imported baby milk.
- This caused the Dutch/Chinese/Taiwanese baby milk producer Ausnutria Hypocra to write down 11 million Euro of inventories of already produced baby food. This persuaded them also, however, to beef up investments in a new plant which they already were building to 100 million, to enable this plant to produce baby milk powder (a very complicated product) which complied with the new regulations not only based on cows’ milk but also on goat milk (which contains less allergens).
- As they were investing already, they (led by a 70 year old CEO) are now trying to enter the USA market, which knows even strickter rules of entrance for foreign companies. The clinical trials of the new baby milk, which are needed to gain entrance, are on their way.
The points: international trade was a great comfort for bottle feeding Chinese parents. Non tariff barriers are everywhere – and sometimes the alleged free trade champion USA has the stricktest ones. And dynamic entrepreneurs operating in a high food tech surrounding with an abundance of capital can, guided by regulations, set new product standards. Let’s welcome less USA style share buy backs and whining about regulations and more investments and entrepreneurial spirit! As well as long paid maternity leave.