The Histadrut's Method: Write a Study, Reach Conclusions, and Publish the Opposite

A new study by the Arlozorov-Yesodot Institute, a research body within the Histadrut, in cooperation with the Histadrut Consumer Authority, presents the reduction of customs duties on tuna as a failure. But a deeper examination of the study's own data reveals a completely different picture: in relation to the high price level prevailing in the Israeli market, the duty reduction was actually a significant success.

But the tuna story is just the tip of the iceberg. The gap between the data on the ground and the Histadrut's conclusions is not accidental. It is a recurring method: often, when the reduction of customs duties and opening to competition are on the agenda, the Histadrut's research bodies create a narrative framework of "reform failure." Instead of serving the public choking on the cost of living, this mechanism seems to operate to represent other interests.

When the economic advantage disappears

The story began more than a decade ago, in 2013, when the customs duty on the import of canned tuna was gradually reduced, with the aim of lowering their price and easing the rising cost of living. It is important to understand what the duty reduction changed: in Israel, there is and has never been tuna fishing - all tuna eaten in the country has always been imported from abroad. Before the reform, the Israeli factory of StarKist and Diplomat (which has since closed) imported the fish in large commercial packages, and its only role was to repackage them into cans intended for the Israeli consumer.

As soon as the duty on the finished cans themselves dropped, this economic advantage disappeared: it was no longer profitable to import in bulk and maintain a local packaging line, because it was possible to import the finished cans directly from the world, exactly as is done everywhere else, and at a similar or cheaper price. Thus, the local packaging stage became redundant, and the Israeli market was exposed to a wider and cheaper variety of products.

"Negligible decrease". Is it really?

According to the study, between 2013 and 2023, the actual price of tuna fell by only 1.1% - an amount that the researchers describe as "negligible." But this number reflects a partial picture: the global price of tuna actually rose during this period and pushed the price upward, partly due to the rise in raw material prices, while the effect of the duty itself - that is, the isolated effect of the duty reduction, without the global price increase - is estimated at about 6% cheaper. In other words, without the duty reduction, the price of tuna in Israel would have risen instead of falling.

To understand the significance in relation to the broad market, one must compare it to the general food price trend: in the same period, the food price index (excluding fruits and vegetables) rose by 13.4%. That is, while the rest of the food basket became significantly more expensive, the price of tuna remained almost unchanged - thanks to the duty reduction that offset the global price increase.

The study proves the opposite

The study itself reveals another interesting fact: between 2013 and 2020, the price of tuna did indeed fall, but between 2020 and 2023 it actually rose - until it stabilized at a level slightly lower than it was at the beginning of the period. Apparently, one could interpret this turn as a result of the closure of the StarKist factory in Israel, but the real explanation is much simpler: the global price of tuna rose. The data presented by the Arlozorov Forum itself shows a jump of tens of percent in the price of raw tuna during this period.

There is no reason to assume that local packaging in Israel would have prevented this rise, since the raw material - the canned tuna itself - is completely identical between the two scenarios. In other words, what was called "Israeli industry" was not an independent industry at all, but a code name for a local factory of a large global manufacturer (StarKist) - a factory whose only role was processing and repackaging, and which profited at the expense of the Israeli consumer as long as the duty protected it from foreign competition.

Dramatic impact

Upon reviewing the original analysis of the Arlozorov-Yesodot Forum, from the Histadrut, clear proof of the success of the duty reduction is revealed. The study found a statistically significant impact: every shekel removed from the duty translated into a reduction of 74 agorot in the consumer price. Moreover, when the study compared the consumer price in Israel to the price that rose in France (as a representative of the global price), the impact turned out to be even more dramatic - every reduction of a shekel in the duty lowered the consumer price in Israel by 86 agorot. In the Arlozorov Forum's own study, they note that the price in France in the relevant period rose - while in Israel it fell.

This is an unequivocal result, which leads to a conclusion exactly opposite to both the spirit of the study and the headline published about it: the duty reduction lowered the price. This result can also be seen on the ground, in the variety created in the market and the line of private brands added to the supply on the shelves.

Confirmation of this can also be seen from the Competition Authority's check from 2022: "Significant impact of the reduction of customs duties on imported packaged tuna products, whose consumer price fell following the reduction of duties, a greater decrease than the duty reduction itself [...] it is evident that the reduction of duties led to an aggregate saving of about 38 million shekels per year in household expenses on tuna products, compared to a loss of government revenue from duties estimated, in a conservative estimate (upper limit), at a scope of about 11 million shekels per year [...] and after the reduction, the variety of products and brands marketed to the consumer in food retail chains increased, and entries of new suppliers into the industry and a decrease in the level of concentration in the supplier segment were recorded".

All this did not prevent the study from publishing that "the increase in competition, as far as it occurred, was limited and did not lead to an effective decrease in the consumer price [...] and the reform led to a dramatic reduction in local production, which affected employment opportunities in the periphery".

The study itself did not deal at all with employment in the periphery, and the one who did deal with it at the time is Galit Ben Naim, then a senior manager in the Chief Economist's Division at the Ministry of Finance and today the Deputy Chief Economist. In a position paper she published in real time, she wrote: "The contribution of the tuna industry to employment in the periphery is marginal. The total number of employees in these factories is only about 400, while these workers are characterized by high employment mobility and relatively low periods of unemployment". Most of these workers, according to the check conducted by Ben Naim, found alternative work in less than a year.

Not the first time

The current study joins a series of studies published by the Arlozorov-Yesodot Forum with the aim of opposing the opening of the economy to competition from abroad. Last May, the Histadrut approached Minister of Agriculture Dichter with the aim of stopping the import of chicken from Brazil. This is at a time when the Histadrut organizes workers in factories that will compete with this: Milouof and Of HaGalil.

Studies by the Arlozorov Forum and others, such as a publication by the Ministry of Agriculture against removing price controls, were published in the competing newspaper Calcalist, accompanied by very little criticism regarding the interests of the research institutes themselves. However, the facts cannot be changed - and the check conducted in the study actually led to a result opposite to that which appears in its summary and the headline published about it. In practice, this case joins a list of similar successes in duty reductions and opening imports.

As reported in Globes in the past, the reduction of duties on fish led to a drop in the price of frozen fish relative to other food prices, opening to imports from Costa Rica cut the price of pineapple in half, and a Mashrokit check discovered that Minister of Agriculture Avi Dichter was not accurate when he claimed that the price of garlic did not fall due to the duty reduction - in practice, the price fell by 26%.

This is also not the first time that the competing newspaper Calcalist has published articles in a similar pattern: another article on an Arlozorov Forum study supposedly presented a positive impact for price controls, a review by the Ministry of Agriculture was presented as a supposed failure of opening butter imports and removing controls on it, and several articles were also published with negative headlines about cheese imports with duty exemptions.

Conclusions

From all this, two conclusions arise. The first: opening to imports, when done fully and removing all barriers, succeeds in practice in lowering consumer prices and easing the rising cost of living. The second: there are quite a few factors interested in proving with signs and wonders that exposure to competition does not lower the price for the consumer - even when in practice it does. Some of them have a clear interest in this.

Responses

From the Arlozorov Forum, a response was received: "The claim that the study presents the duty reduction as one that did not lower the price of tuna for the consumer is incorrect. The question that the study seeks to examine is broader - what were the results of the reform over time, and did it achieve its goals beyond the initial impact on the price. In the decade examined in the study, the consumer price of tuna remained at a similar level and even fell, depending on the method of measurement. At the same time, local production shrank and the market remained concentrated. Therefore, presenting the reform as a clear consumer success based on the mere fact that part of the duty reduction was passed on to the price does not reflect the totality of the findings. The price that would have been obtained in a scenario without reform is unknown, and there is no professional way to determine in retrospect that it would have risen by a certain rate. Such a comparison is a hypothetical scenario, and not an empirical finding."

From the Histadrut, a response was received: "The experience with import reforms in recent years proves that lowering customs duties without control mechanisms did not lower the consumption basket for the citizen. Responsible policy must look at the economy holistically - lower product prices, but at the same time ensure food security, blue-and-white production, and employment, exactly as is customary in the world. The fight against the cost of living and the importers' cartels is at the top of our priorities, and we will continue to promote grounded steps that really reach the public's pocket".

No response was received from Calcalist.

*** Full disclosure: Calcalist from Yedioth Ahronoth and Globes are competing newspapers