Israeli finance minister ends 40% milk import tariff to stop shortage

Meanwhile, Israel's cabinet plans to further change Israel's import system to resemble the European method of regulations and standards.

 Is the price of milk in Israel only going to continue to rise? (illustrative) (photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)
Is the price of milk in Israel only going to continue to rise? (illustrative)

Israel's 40% tariff on milk imports has been canceled until October 7, Finance Minister Bezalel Smotrich announced in a statement to the press on Thursday afternoon.

The decision is geared towards enabling milk imports in order to overcome the current shortage of milk. The 40% tariff led to there being no imports whatsoever. This will not harm farmers, since Israeli milk producers will continue to purchase the set quantities of milk according to the set price, the finance minister said.

Smotrich stressed that he viewed Israeli farmers as being Zionists and patriots, and announced that he intends to broaden the quota of foreign workers in order to ease the "enormous difficulties" farmers face due to a lack of workers.

The finance minister said that the recurring reality of a shortage of milk was unacceptable and that, during the next three months, his office will "examine the effect of the directive [to remove the tariff] on the market" both regarding supply and prices before entering "intensive talks" with all elements of the milk market in order to ensure continuous supply.

A state comptroller audit published in May shed light on the escalating cost of raw milk. The audit revealed that raw milk prices in Israel were approximately 24% higher than the European Union average. Additionally, the price disparity between a liter of regular milk for Israeli consumers and the average price in OECD countries stood at a staggering 77%.

 Finance Minister Bezalel Smotrich speaks during a Knesset faction meeting on May 29, 2023 (credit: MARC ISRAEL SELLEM)
Finance Minister Bezalel Smotrich speaks during a Knesset faction meeting on May 29, 2023 (credit: MARC ISRAEL SELLEM)

Due to the high state-set price of raw milk, dairy producers have been hesitant to increase production and instead prioritize selling dairy products that are not subject to government regulation. Consequently, this preference has resulted in shortages of milk in the market, which may be alleviated by the finance minister's decision.

Better imports across the board?

Smotrich’s attempt to prevent a milk shortage was not the only big import-related announcement on Thursday.

Israel's cabinet will begin to advance a bill sponsored by Economy Minister Nir Barkat that will change Israel's import system so that it resembles the European method of regulations and standards, and thus slash bureaucracy on imports that are overseen by the economy ministry, the prime minister's office stated at the end of the cost of living cabinet's weekly meeting.

The bill will come up in the ministerial committee on legislation on July 23rd, and then head to the Knesset, where it will begin advancing during the Knesset's winter session, which begins in October.

According to the statement, in next week's meeting Health Ministry Director-general Moshe Bar Simantov will present the steps that the health ministry is taking in order to adapt European standards on importing products under the health ministry's responsibility.

The cabinet also heard a review from Bank of Israel Governor Amir Yaron over the steps taken in recent years in order to increase competition in the banking and finance sector, according to the statement.

The Cost of Living Cabinet was formed in early June in order to set “unified government policy” and coordinate between the ministries on the issue, including, among others, “steps to increase competition, reduce [economic] concentration, improving and reducing regulation on different economic sectors and lifting limits on import,” according to the text of the decision.

The committee is led by Netanyahu and includes 12 other ministers, including committee deputy chairman Finance Minister Bezalel Smotrich (Religious Zionist Party), Economy Minister Nir Barkat (Likud), Agriculture and Rural Development Minister Avi Dichter (Likud), Environmental Protection Minister Idit Silman (Likud) and Energy Minister Israel Katz (Likud).

This will mark the latest in a series of recent moves by the government to ease up on import bureaucracy. In January the Israeli government, led by Prime Minister Lapid, announced a massive reform of the country's food standards, which aimed to bring the standards in line with those of the European Union, making imported food cheaper and more diverse for Israeli consumers.

The reform kicked off the cancellation or adjustment of 97 food standards, which will take place over the next four years, allowing for increased competition in the food market and driving down prices.

The decision to establish Israel’s prior standards originally came from the desire to protect the local market and manufacturers, but over time these standards have led to monopolization and an expensive, overly-restricted market. The reform was seen as a significant step in lowering costs and increasing competition, though it has yet to have made a significant impact on the Israeli market in the ensuing seven months.