From what I know, it is because of export control and regulation.

Nutricia, the Dutch milk powder company, cannot easily sell Dutch milk powder to China because import/export regulations don't easily allow them to do so. So they opened a store in China. But because of Chinese food regulations they cannot use the original formula. But consumers distrust the Chinese store because the formula has been altered. So people keep buying "real" Dutch milk powder fron smugglers.

I don't know if the factories are manufacturing enough, or capable of ramping up to do so. It's a huge increase in demand. I heard of similar problems in Australia.

Because it's baby formula, produced here, and rather vital. Government is _not_ going to stand idly by if it disappears from stores because some other country bids more.

It's called "civilisation"

Civilization is to deny milk powder to people who want to pay for it, just because they are from another side of a border?