PM: Steinitz to check if imports will lower dairy prices

Lindenstrauss says he'll look into deregulation of basic foods; Hasson tells c'tee that public has right to explanation on pricing.

June 20, 2011 15:53
Netanyahu at the weekly cabinet meeting, Sunday.

netanyahu cabinet meeting_311 reuters. (photo credit: Ronen Zvulun / Reuters)


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Prime Minister Binyamin Netanyahu told Likud MKs at a faction meeting on Monday that Finance Minister Yuval Steinitz would check whether opening the dairy market to imports would decrease prices, amid rising protests triggered last week by the high cost of cottage cheese.

“I have a table of [the prices of selected food products over] the past five years, compared to the Consumer Price Index,” Netanyahu said. “It shows that the price of products that weren’t closed to competition decreased less than the CPI and the products that were closed rose in price [faster than the CPI], especially dairy products.

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That’s why I asked the finance minister to check the opening of the dairy market and report back within a week.... This could be a way to decrease the prices of products that Israelis use, and to alleviate the burden.”

Netanyahu was criticized behind closed doors at the faction meeting by MK Haim Katz (Likud), chairman of the Knesset’s Labor, Welfare and Health Committee, who said that instead of opening up the dairy market to competition from abroad, the government should raise the quotas for how much milk farmers are allowed to produce. Farmers say this would be the best way to increase supply.

Most Likud MKs took Katz’s side in the discussion.

Steinitz was not present at the meeting, as he was in Rishon Lezion attending the Israel Democracy Institute’s Caesarea Economic Policy Planning Forum.

A consumer campaign against rising food prices began to take shape last week when tens of thousands of Israelis joined a Facebook page calling for a July boycott of cottage cheese made by Tnuva, Strauss and Tara.

The plan to remove import restrictions was also criticized on Monday by one cabinet member responsible for imports: Industry, Trade and Labor Minister Shalom Simhon (Independence).

“Sometimes we forget to ask those with experience in the matter,” Simhon said, referring to those who work in the agricultural sector.

He made the comments while speaking at a conference on Israeli trade with the BRIC countries (Brazil, Russia, India and China).

Strauss Group chairwoman Ofra Strauss – one of the main targets of the consumer protests – spoke publicly about the issue for the first time on Monday. She said she had not disappeared but that “sometimes there are moments when you just need to stop and listen to what is happening out there.”

Speaking at the Caesarea Public Policy Forum, Strauss said she had never come across public discourse so angry and so omnipresent – to the extent that it took two days just to regain her composure.

“There are definitely moments for reflection that maybe look like disappearance, but there are powerful voices out there, and it is worthwhile in the name of modesty to stop to think about what I have heard – to think about how the product will look tomorrow morning, how high-quality it will be, what is a reasonable price and where I am taking it.”

But she added that the issue was about “much more” than just her company.

“This is part of what is happening in the whole world, not just in Israel – but when it comes to food, it touches everyone in Israel.

The people out there do not look for reasons, commentary or analysis – they call for a solution now.”

State Comptroller Micha Lindenstrauss announced at Monday’s Knesset State Control Committee meeting that he would investigate the Finance and Agricultural ministries’ considerations in deregulating prices.

“Raising prices of basic products that the public needs hurts the weakest members of society,” Lindenstrauss said. “We must avoid hurting the weak and all of the Israeli public.”

Committee chairman MK Yoel Hasson (Kadima) said that the ministries’ joint committee on price regulation owes the public explanations about the way it is run.

“Cottage cheese has become famous,” Hasson said, as an aide handed him a container of the product. “Look, we even have a visual aid.”

He said it was a positive step to deregulate cottage cheese in order to encourage competition.

“I’m in favor of a free market, but there is another consideration: Is there competition in Israel? Does the market’s centralization allow competition to exist?” Hasson asked.

Uri Tzuk-Ram, the Agricultural Ministry official responsible for setting prices, said his ministry is considering renewing the regulation of cottage cheese prices. He explained, however, that “since the deregulation, new and less expensive products were developed.”

Tzuk-Ram noted that the prices of 10 dairy products were currently regulated, including four types of milk, two types of yellow cheese, butter, eshel and gil (two yogurt-like products).

Yigal Achtenberg of Public Trust, a consumer advocacy NGO, told the Control Committee that dairy companies are to blame for rising prices.

“Israel has the best dairy farms in the world and our cows yield more milk than those in Europe, but there still isn't competition because the manufacturers coordinate prices,” Achtenberg said.

MK Uri Ariel (National Union) said “the bottom line is that the government failed, if you look at the results. The Milk Law regulates the milk market, but such laws don’t exist with [other food products], and there lies the central failure.”

MK Yulia Shamolov Berkovich (Kadima) told the committee that “the supermarkets’ audacity has crossed every possible line, and this is just an expression of the government’s swinish capitalism.”

Later on Monday, the Knesset rejected three no-confidence motions drafted by all opposition’s factions, except for the National Union, on the topic of rising food prices.

Bank of Israel Governor Stanley Fischer also weighed in on the debate in a speech at the Caesarea Public Policy Forum. Closing the economy to imports should be avoided, he said.

“Despite all the shouting I have heard about cottage cheese, in most countries a large part of the competition comes from imports,” Fischer said. “If you close the economy to imports, you reduce the competition.

It is natural that every company wants to prevent imports and competition in its field. But we should avoid this situation. We have become a modern economy. This happened when the government allowed imports and we joined the global economy. We can’t expect that in such a small market there will be competition without imports.”

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