Israeli government support for the country's farmers keeps growing despite attempts to open the market to competition, the OECD finds in its chapter on Israel in a report on global agriculture.
Support for prices of agricultural produce is not excessive in Israel by worldwide comparison, but as far as policies that cause distortions in free trade are concerned, Israel is outstandingly bad in comparison with other OECD countries, the report finds. Government support for agriculture in Israel amounts to 0.5% of GDP, or NIS 6.5 billion annually, which is about the OECD average.
Controlled prices, production quotas, and border controls that prevent agricultural goods being brought into the country, are some of the means that the Israeli government employs to protect local agriculture against competition from growers around the world. Customs duties on imported food products currently average 19.1%. This does represent a decline from an average of 27.7% in 2012, but it is still far higher than the average duty on non-agricultural goods, which is 3%. Israel imposes customs duties on 258 imported food products, among them walnuts, wheat, oils, corn, and citrus fruit juices.
The OECD stresses that Israel's customs tariffs are very unequal, an indication of a policy based on protection of local producers. While almost zero duties are imposed on dry food products, other products, such as eggs, dairy products, and certain fruits and vegetables, are subject to very high duties.
Among policy moves in Israel, the OECD mentions the reform agreement in the dairy industry, which is meant to lead to lower prices and to greater efficiency at dairy farms, and the reform in water tariffs.
Israel is a unique case in the OECD in that the government retains almost complete control over factors of production for farmers: land, water, and permits to import foreign workers. The government charges farmers a nominal price for land and a reduced price for water, and awards permits to bring in workers. Some food products in Israel continue to be protected through controlled prices and production quotas.
The OECD says that the controlled prices based on production costs are out of line with prices on international markets, mentioning in particular the target price for milk, the minimum price for wheat, and production quotas for eggs.
The OECD points out that egg and poultry producers in the north of Israel receive direct government support unconnected to their production costs. In addition, the government subsidizes farmers' insurance premiums. The subsidy, through the Insurance Fund for Natural Risks in Agriculture (KANAT), amounts to 80% of the premium for insurance against miscellaneous risks, and 35% of the premium for natural damage risks.
The OECD praises Israel for its substantial investment in agricultural research and development, amounting to a cumulative NIS 325 million in the years 2016-2018. Such investment, the OECD says, has made Israel a world leader in areas such as desert agriculture. On the other hand, as far as the environment is concerned, the OECD points out that the Israeli government has taken no steps to reduce emissions of greenhouse gases from agricultural activity.
Published by Globes, Israel business news - en.globes.co.il - on July 2, 2019
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