Where the shekel stops / Wriggling on the tuna packers' hook
Chairman of the Manufacturers Association Shraga Brosh says function of government is to take care citizens' welfare, but his rhetoric grinds to a halt when it reaches industrialists' pockets.
"The function of government is to take care of the welfare and appropriate living conditions of the citizens," said Shraga Brosh this week. As for the Israeli case, he expressed confidence that a socioeconomic plan could be put together that would significantly lower the cost of living.
Brosh, the chairman of the Manufacturers Association, is certainly articulate. On Sunday he was crystal clear in his call on government to do something about the cost of living.
But it turns out that Brosh's clarity becomes muddied when it comes to the interests of his industrialist colleagues, whom he represents under the umbrella of the Manufacturers Association. Reducing the cost of living in Israel is a public concern of the utmost importance - until it reaches the industrialists' pockets, which is where Brosh's rhetoric grinds to a halt.
Listen to the story of three industrial concerns: Poseidon, Starkist (Yona ), and Filtuna - tuna packers. Or packaging companies. Or canners. Since Israel's territorial waters are blessed with many things but not tuna, the fish sold here in cans is imported, mainly from Thailand. The tuna is imported in two forms: frozen slabs in great big bags as a raw material for industry, and cans.
Customs is paid on frozen fish. On the cans, the levy is 12% plus NIS 3.50 per kilo. Importers say the aggregate tax on the most popular fish is 40% to 50%, increasing the price per can by about NIS 1.50.
The result of the heavy customs levy is that almost no cans are imported and the tuna you buy at the store is canned here. Since the entire process is packaging, the added value of that activity is very low. Accordingly, the number of people working in tuna canning in Israel is very small - between 400 to 800, based on whom you ask.
Yet for the sake of those few hundred workers, who we may assume aren't making money hand over fish and whose labor contributes nothing to the greater economy, the Israeli consumer pays through the nose for canned tuna. That's because the three tuna packers are protected from imports by the high customs tax.
Naturally, this is just an example. The tuna packers are not alone. The growing popularity of sparkling wine is due in no small part to cheap imports, because the world has a glut of the stuff. The cheap competition did not escape the eye of Israel's winemakers, who made sure to have Israel change its policy on taxing imported fizzy vino. Until a year ago the customs tax on sparkling wine was capped at NIS 1 per liter. From this year it's NIS 3.75 per liter, an increase of 275%. Why? Because.
Tug of war with himself
Brosh is good at yelling at the government to lower the cost of living, but when it comes to the manufacturers' interests - he's just as good at pushing the government in exactly the other direction. He gets the government to protect industrial interests instead of the consumer.
For instance, in the Knesset Economics Committee's discussions on food prices this week, the director-general of the Industry, Trade and Labor Ministry, Sharon Kedmi, was asked a direct question about customs on frozen tuna. He answered that his office was looking into the matter but that he was inclined not to lower the tax because of the potential harm to employment at the tuna packing plants.
Again, this involves a small number of laborers doing work that generates practically no added value to the economy. But Kedmi would rather allow the tuna packers to hold the tuna-consuming Israeli captive than take aim at industry's interests. With that Kedmi has certainly added new depth to the name of the ministry he runs - Industry, Trade and Labor.
From 1988, Israel has had a strategic policy of exposing the economy to competing imports. This policy has caused great pain to plenty of branches. The textile industry, almost all of it based in the country's outskirts, has effectively been wiped out. Tens of thousands of people have lost their jobs. Some have never found work again, including Arab seamstresses. Back in their villages, they never left again.
Despite the heavy human cost, Israel hailed the policy of exposing the economy to exports as one of its most important strategic moves. Twenty years later, when the great financial crisis erupted, Israeli exports survived the deluge with honor, in part because of its competitiveness: The absence of protectionist tax forced it to become more efficient and adaptive.
It is regretful to see this strategic wisdom vanish when it comes to protecting local food manufacturers, including niches with almost no workers or added value. But that's how it is when the manufacturers' interests supersede those of the consumer.
"The protection isn't for industry, but for agriculture," Brosh said in response. "It's important to protect Israeli agriculture because there are things the country has to have, that must not go extinct. Just as you can't import an army, you can't import agriculture."
The Tax Authority commented that the tuna industry needs protection because of the high number of people it employs, mainly in the country's outskirts. "As for sparkling wine, because of the huge increase in imports, the local industry reported damage to the consumption of white wines." As the initial tax had been low, the Tax Authority said, it was decided to increase the tax to NIS 3.50 per liter.