Finance Minister Moshe Kahlon.
(photo credit: MARC ISRAEL SELLEM)
Finance Minister Moshe Kahlon will postpone an agricultural reform that includes lowering protective import barriers for a week, according to the Farmer's Federation
Following a meeting between the group's secretary general Meir Tzur, Kahlon agreed to allow the farmers to propose an alternate plan that would address both farmers needs and the goal of lowering housing costs.
Earlier in the day, Knesset finance committee chairman MK Eitan Cabel (Zionist voiced sharp criticism of a farming reform that Finance Minister Moshe Kahlon and Agriculture Minister Uri Ariel proposed Wednesday).
"In the past they already broke apart agriculture boards and the prices continued going up, and in the end there wasn't a single problem solved through making headlines in newspapers, therefore I intend to call a meeting very soon to discuss the topic."
The plans, which Prime Minister Benjamin Netanyahu enthusiastically approved in a message Tuesday, follow OECD recommendations to eliminate a slew of agricultural boards that serve as intermediaries between farmers and the markets.
The boards, which enforce government-set quotas, become the sole source of the particular product in question, whether it be raw milk, eggs, nuts, or other products. Combined with price controls and prohibitive import tariffs, the boards are one reason most food prices in Israel are significantly higher than in the OECD.
The proposal would, instead, offer direct compensation to farmers and lower import barriers.
The farmers came out strongly against the proposals on Tuesday.
Cabel also warned about taking action that could endanger the supply of food around the upcoming Passover holiday season in April.
But Uriel Lynn, the President of the Federation of Israeli Chambers of Commerce, a business association, said that reforms were long overdue and should even go further, completely eliminating import tariffs on food.
Import tariffs on garlic, he said, stood at 340%, on pears at 4285, on dates at 560%, and potatoes (from May to June) at 634%.
"These unimaginable duties prevented imports, and when there is no competition from import there is no real competition," he said. The taxes should be gradually dropped and replaced with subsidies to the farmers, he added.
Ofer Klein, from Harel Financial, noted that the reforms may have an effect on Israel's monetary policy. Though it was too soon to tell, he said, strong reforms could further lower inflation, which is already in negative territory. The Bank of Israel has swept aside negative inflation as the result of temporary shocks, and the reform would fall under that category as well.
But some analysts say that regularly falling prices could spook the bank, and cause it to lower its interest rate.