Putting 500 Fish Cannery Workers on the Hook

But the 'tuna tax' is small fry in the bigger context of the high cost of living in Israel.

Our Mediterranean shores are not exactly teeming with fish, unfortunately. Most of the finned creatures we eat are imported, as are 100% of the canned fish sold here. Nevertheless, Israel does have a fish-canning industry, mainly involving tuna.

How does it work? Giant tuna are brought in and processed, mainly in a few canneries in the north and south of the country. The fish are cooked, cut and crammed into cans, which are then topped up with water or oil and are sealed.

Tuna fish - Bloomberg - sourced 5.2.12

Although this industry is tiny and of no significance to the Israeli economy as a whole, it provides employment to 500 Israelis whose jobs are now in jeopardy. Blame the social protest movement, which has taken aim at Israel's high cost of living.

One of the proposals that has been raised in the course of this battle is to reduce import duties on various goods, including canned tuna. If this happens, the retail price of imported tuna could be reduced significantly - good news for Israeli consumers, terrible news for Israeli fish cannery workers and their families. If the cost of importing canned tuna drops, there would be no reason to process the fish here, and many workers would likely lose their jobs.

The global economic crisis has erased tens of millions of jobs around the world and has forced governments to question the wisdom of protectionist trade policies designed to keep jobs within their own borders.

There has been a certain amount of breast-beating lately in the United States over the decades-long migration of manufacturing to the Far East: These are jobs that will never return to America. In Europe, many sectors still enjoy state protection, despite globalization. The Israeli economy has been gradually opening to exports since the late 1980s. While this destroyed the local textile and wood industries, among others, it facilitated growth and brought down clothing and footwear prices.

Tuna processing is a relic of a nonessential branch of manufacturing in Israel. We do not enjoy a relative advantage in it and could give it up. Instead, the state chooses to support the sector for the sole purpose of keeping people on the job in disadvantaged communities such as Tirat Carmel in the north and Kiryat Malakhi in the south.

These low-salaried workers, it must be said, would be hard-put to find new jobs if the canneries were to close.

Because of the difficulty involved in making such a decision, the issue was brought before the Knesset Finance Committee, whose members came out staunchly against the proposal to slash customs duties on imports of canned tuna. Labor MKs Shelly Yachimovich, Avishay Braverman and Amir Peretz, as well as MK Majali Wahabi (Kadima ) and others said the protections must stay in place in order to save local jobs.

We have already established that the sole reason to retain the import fees on canned tuna is to protect the 500 or so jobs that the local fish-canning industry provides. It could be argued that Israeli consumers can afford to subsidize these workers and to continue paying five or six shekels for a can of tuna, instead of three or four.

But we must look at the broader picture. Israeli consumers are already paying a lot in similar fees. There are a whole host of noncompetitive, protected, monopolistic sectors in the economy. The "tuna tax" is the least of the factors contributing to the high cost of living in Israel.

It goes beyond income tax, VAT, purchase tax, property betterment tax, capital gains tax, television and radio fees, driving license fees, gasoline excise taxes, health insurance fees, National Insurance Institute taxes and all the rest. According to the OECD, the price of many products are 30% higher than they should be, relative to Israeli wages. The reason? The premium we pay for having a noncompetitive economy, the "taxes" we pay on our cartels and monopolies, and the regulation that is supposed to keep them in check.

The state is a major player in all this: Its regulatory bureaucracy, the obstacles it put up to competition, all contribute to jacking up the cost of living.

Nepotism tax

The main tax foisted on us by the government over the past several years is what could be called the bungled housing tax. As a result of the state's mismanagement in freeing up land for residential construction, it sold only about half of the parcels it needed to. The outcome was predictable: Low land supply meets unconscionably seductive mortgage terms during the past three years, sending housing prices soaring. Add this to the various yeshiva taxes, some of which go to supporting married men with families, as well as all the other burdens placed on the employed, military-serving middle class, all of them originating in government policy.

There are additional "taxes" we pay as a result of being a noncompetitive economy - the credit card tax, expressed in usurious interest rates; unreasonably high management fees that wipe out a third of our retirement savings; the cellphone tax, expressed in high interconnection fees. Then there is the tribute we pay to the tiny handful of retail chains that rule us and, by paying slotting fees for shelf space, block the entry of lower-priced products. Don't forget the electricity tax, paid in the form of rates that climb every time the Israel Electric Corp. finds a hole in its balance sheet (and despite the fact that its employees are the highest-paid in the country ).

And what about the "bloated and inefficient government bureaucracy tax" that we pay due to the government's failure to implement public-sector reforms?

Last but not least in our list is the nepotism tax we pay to keep generations of siblings, cousins and assorted relatives employed in our air and sea ports.

If you were to ask Yachimovich, she'd say these were terrific tariffs that create jobs. She's right. We create enormous numbers of jobs via the ridiculous amounts we pay for everything from cottage cheese and gasoline to cellphone service and all the rest, but that's what set off last summer's protests - the Israeli public's inability to pay these insupportable fees that fund the parasitic jobs and sectors weighing down the economy.

Were the government to genuinely, forthrightly take on this battery of burdensome taxes, we could easily afford to continue paying the "tuna tax" in order to preserve the jobs of a few hundred cannery workers. Unfortunately, instead of fixing the litany of waste and and other factors contributing to the high cost of living in Israel, the government will send 500 workers home. That's what the government dragged into its net.