MKs debate Kedmi ideas on food industry

Members of the Knesset Finance Committee expressed skepticism on Monday over the Kedmi report’s conclusions on the food industry, with some speculating it could lead to mass layoffs without achieving its actual goal of reducing prices.

Committee chairman Moshe Gafni (United Torah Judaism) advised MKs to take into consideration the damage the report’s conclusions, if implemented, could cause to the lower class. He said that if the Treasury decides to go ahead with a “sweeping measure” of import tax reductions, his committee will not support it. He gave the example of the removal of barriers to textile imports in the 1990s, saying that it led to the closure of factories in Ofakim from which the city has still not recovered.

“What is required is root canal treatment; otherwise, we will miss the real aim,” Gafni said.

“There must be an examination of how a handful of people make so much money, benefit from economic concentration, produce massive profits, play the simultaneous role of manufacturer and seller, don’t pay the required taxes and yet the government for its part opposes a tax on the rich.”

The Kedmi Committee submitted its final report two weeks ago, recommending that the government introduce measures to restrict the market share of leading suppliers, encourage small businesses and remove import barriers. The committee was established by the government one year ago, following the outbreak of a consumer revolt against dairy manufacturers.

The report recommended regulating supplier-retailer relations through measures such as prohibiting suppliers from purchasing shelf space. It proposed a series of steps for dealing with over-concentration in the supply sector, including removing barriers to market entry and providing incentives for existing small businesses. For the retail sector, the report proposed increasing the number of competitors through measures including reducing regulatory barriers to opening new supermarkets in regions already suffering from high concentration.

Industry, Trade and Labor Ministry director-general Sharon Kedmi, who headed the team that wrote the report, told the finance committee that there were many reasons Israeli food prices were higher than in the rest of the OECD and that not all of them were easily solvable. He listed the fluctuation of the shekel, the cost of koshering factories, and the high cost of ensuring that food is safe. He said food safety has been a big issue ever since the 2003 Remedia formula affair, which led to the deaths of three infants and injury to at least 20 others who suffered from malnutrition because crucial ingredients were missing from the company’s baby formula.

MKs Miri Regev (Likud), Faina Kirschenbaum (Yisrael Beytenu) and Shai Hermesh (Kadima) all criticized the proposal that import duties be removed, warning that it would likely damage Israeli industry. MK Avishay Braverman (Labor) said the problem was not the duties, but rather the existence of monopolies and close cooperation between the major manufacturers.

MK Tzion Pinyan (Likud) took an opposing view to most of his colleagues, saying, “We are the only country in the world where duties keep going up and now that the time has come to reduce them, we are opposing it. We must examine which measures will cause less damage, and head in that direction.”

Manufacturers Association director-general Amir Hayek said he supports removing duties in a controlled manner, while taking into account existing trade agreements, “so that we do not end up being the only suckers.”

“When our partners open up their markets to us, we too will open ours. We must not import unemployment. The costs of the Kedmi report’s errors are too high,” he added.

Federation of Israeli Chambers of Commerce vice president Arie Zayef called the report’s conclusions “acceptable,” saying that the reduction of import duties on food is the best way to create competition and lower prices. He rejected recent calls by politicians, including Kadima MK Shaul Mofaz, to introduce differential value-added tax for food products, adding that “there are other industries that are no less important, such as the medicine industry.”