The Knesset
The Knesset Photo by Tomer Appelbaum
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The Knesset Finance Committee looked on Monday like it was ready to do battle with the Finance Ministry over the issue of cutting tariffs on imported food, with lawmakers warning that such cuts would lead to layoffs in the food industry and might not result in lower food prices.

"We have to be careful to avoid hurting the local food industry, which will only harm the weakest," said Finance Committee chairman Moshe Gafni (United Torah Judaism ).

"If the treasury decides on sweeping tariff cuts, the finance committee won't lend them a hand. The committee is advancing legislation that will require its approval to lower tariffs."

The discussions came as the government prepares for the Kedmi committee on the food industry to issue its final recommendation. Enough is at stake so that six industry lobbyists attended the session on Monday, even though it took place before the final Kedmi recommendations were presented. Those in attendance represented the Milk Council, Tnuva, Shemen Industries and the retail division of the Chambers of Commerce.

"The government fears taking on the rich. It wants to lower tariffs but it refuses to approve a [tax] surcharge on high-income earners," Gafni said.

Sharon Kedmi said his committee will hold one more hearing before it writes its final recommendations, which will be presented to ministers at the start of next month.

"Food prices in Israel are significantly higher than other OECD countries," Kedmi said. "The Israeli market is very small and there is a high level of [industry] concentration, a small number of players and conditions of oligopoly." Kedmi also cited the failure of private label brands to capture a significant part of the food market. In Israel these brands account for 0-15% of sales, while in the OECD they account for about 50%, he said.

"Government policies also contribute, directly through tariffs, quotas and subsidies, and indirectly through environmental regulations that add to costs."

Amir Hayek, the director of the Manufacturers Association, urged caution, warning that "we will pay a high price" if the Kedmi committee is wrong in its recommendations.

"I'm in favor of lowering tariffs but in a systematic way, by mutual undertakings and trade agreements, so that we aren't taken advantage of. When our [trade] partners open up their markets to us, we'll open our markets to them," Hayek told the committee.

Aryeh Zeif, vice president of the Federation of Israeli Chambers of Commerce, said cutting tariffs on food imports are the best way to ensure competition and lower prices.

"This was proven during the 1990s with the import-liberalization program, which led to significantly cheaper products," he said. But he added, "We need to lower tariffs gradually to give manufacturers time to ready themselves."