March 8, 2016 Print

Photo credit: Yaniv Ben-Arie (License: CC BY-SA 2.0)

Basic necessities like food are made more expensive by government intervention in agricultural production and food markets, but Israel-based Atlas Network partner the Jerusalem Institute for Market Studies (JIMS) has helped bring about substantial reform through its influential studies calling for deregulation. Israeli Finance Minister announced in late February that the country would lower tariffs, eliminate central agricultural planning, and rescind several food-related regulations.

“For the past 5 years, JIMS has argued that that high food prices result from protectionism, regulation and lack of competition,” JIMS announced in a release. “Today, the government announced that free trade will be more seriously implemented in the food market, introducing greater competition and lowering prices for all.”

In its study of agricultural subsidies, JIMS found that average households in the bottom 20 percent of Israel’s income distribution spend an extra 1,166 shekels (more than US$425) per year on food expenditures because of those subsidies. Ending indirect agricultural support could save Israeli consumers up to 3 billion shekels annually, the study found. Another JIMS study found that the consumer price for cottage cheese in Israel had risen 10 times as fast as the price of milk, largely because the dominant industry producers formed a protected cartel.

A JIMS study analyzing the high price of olive oil in Israel found that the market distortions have largely stemmed from the monopoly position that the Israeli Olive Board holds over olive oil importation. Still another JIMS study found that honey in the United States is only 28 percent of the average Israeli price, while honey in Canada, Mexico, Argentina, and China is sold at only 15 percent of the price of Israeli honey. Israel’s inflated honey prices are largely attributable to the country’s centralized industry policy.

The new Israeli food and agricultural reforms will end planning and supervision in the dairy and egg industries, eliminating anti-competitive regulated production and price controls; will abolish import tariffs on almost all fresh food products; will cancel the high import tariff on honey, opening the market to further international competition; and will eliminate agricultural boards that have caused Israeli food prices to soar significantly higher than most other countries in the Organisation for Economic Co-operation and Development (OECD).