‘The Public Has Been Prepared for a Long Time’: Bill To Fight Monopolies Gains Traction

With widespread public support for reducing living costs and bolstering competition, economist Eytan Sheshinski backs economy minister's proposed free import law, saying Israeli producers can withstand the ensuing market competition

Israeli Economy Minister Nir Barkat has announced that he plans to introduce multiple legislative measures aimed at reducing prices and dismantling monopolies within the Israeli food and toiletry industries.

One of the main measures that Barkat is planning to pass in the coming winter session is the Free Import from Europe Law, which would even up Israeli product standards with European ones so that “any product that meets European standards will enter the country directly without unnecessary inspections and paperwork at the port,” Barkat wrote in a statement.

“What is good for hundreds of millions worldwide is also good for Israel,” the statement said.

Eytan Sheshinski, the Sir Isaac Wolfson professor of public finance emeritus at the Hebrew University of Jerusalem, said the rigorousness of Israeli standards has been one of the main obstacles to reducing the cost of living in Israel, as it allows local producers to control the market and eliminates foreign competition that might drive them to lower the prices.

Senior Israeli economic consultant Alex Coman said that due to Israel’s small population, it is not profitable for European companies to alter their products to fit Israeli standards.

“For European suppliers, for a small country such as Israel, it’s not worth their while to create a new assembly line or a new product line that will comply with these Israeli standards,” Coman told The Media Line.

Sheshinski said he supports the minister’s proposal and pointed out that a similar policy has been recommended in the past by several economic committees.

“The policy of the economy minister to allow all products that are approved in Europe to be imported to Israel, I support that policy all the way,” Sheshinski told The Media Line.

The objective is a nice objective, but a very challenging one, which I doubt that he will actually manage to accomplish. There’s always a gap between statements and actions.

Coman, however, believes that while the measure would indeed lower prices, the chances of the bill passing are low.

“The objective is a nice objective, but a very challenging one, which I doubt that he will actually manage to accomplish,” Coman said. “There’s always a gap between statements and actions.”

Coman said that for big companies in Israel, forcing compliance with the Israeli standards “is a goldmine,” because it means other companies have difficulty competing with them and they can charge monopoly prices. Because of this, he believes that the major companies will lobby against the bill.

“Barkat is not the first one to come up with ambitious statements, and he is probably not the first one to compromise,” Coman said. “Lobbyists will come up and force him to exclude some standards from the European standard because they are associated with very powerful companies that may be providing financing or related to it.”

However, he said that a potential mitigating factor might be Barkat’s financial status.

“Because Barkat is very rich, maybe he is more immune to that than the previous ones,” Coman said.

On the contrary, Sheshinski does believe that the bill will most likely pass.

“I think this is what the public wants, policymakers want it, and it’s about time,” Sheshinski said.

He did not rule out the possibility of Israeli monopolies opposing the bill.

Monopolies will probably put up some fights, but I think there is a good chance that it will be approved. The public has been prepared for a long time, and a number of committees have recommended this policy, and I am glad that finally, somebody is trying to implement it.

“Monopolies will probably put up some fights, but I think there is a good chance that it will be approved,” Sheshinski said. “The public has been prepared for a long time, and a number of committees have recommended this policy, and I am glad that finally, somebody is trying to implement it.”

Sheshinski said Israel’s economy is strong enough for local producers to withstand competition, despite current economic problems, including the stifling of investment in the high-tech sector caused by the government’s controversial judicial reforms.

Numerous global economists, specialists, and financial institutions have warned that the judicial overhaul plans threaten to end the independence of the judiciary and destabilize the system of checks and balances. This could significantly damage the country’s high-tech industry by heightening the risk to investors, triggering a “brain drain” as entrepreneurs flee to greener pastures, and facilitating corruption, which takes a heavy economic toll.

“The Israeli economy is doing fine,” Sheshinski said. “The impact on local producers is that most of them will either have to reduce prices or be eliminated. Yes, that is what competition does, and that’s what it should do.”

Coman said that if Barkat does manage to pass the legislation and improve the consumer economy, one of the most important issues to the Israeli public, it will likely boost his political career.

“He is an intelligent person who is not very charismatic, but his actions, I think, contrary to the rest of the members of the government, are smart and they are visible to the public,” Coman said. “So it is very possible that once Mr. [Prime Minister Binyamin] Netanyahu leaves the arena and retires, [Barkat could] suddenly be a formidable candidate for prime minister or leader of the Likud [party].”