As Israel forges forward with rural development, while facing the pressures of urbanization, the country could potentially benefit from purchasing more agricultural produce abroad, an expert said at a Beit Dagan conference on Thursday.

“You don’t have to be self-sufficient and there is a thing called international trade,” said Prof. Allan Buckwell, senior researcher at the Institute for European Environmental Policy in London.

Buckwell was addressing a conference on “The Importance and the Role of Rural Development in the Framework of Public Support to Agriculture,” in which European and Israeli experts and government officials gathered to discuss the future of rural development in Israel.

Part of an 18-month, EU-sponsored twinning project between the Israeli Agriculture Ministry and several European counterparts, the partners say they aim to shape rural development policy in a way that will boost agricultural competitiveness as well as support the income of farmers through diversification into other sectors, such as agro-tourism.

Launched in February 2013, the twinning project has brought together Israeli agricultural officials and experts with their counterparts, particularly in Italy and Germany.

While Thursday’s conference occurred in attempt to enhance general awareness on rural development, officials also explored how legislation in this sector might generate increased social and economic opportunities if integrated with other national policies.

In order to optimally develop the rural sector, countries must shape robust policies that incorporate long-term visions of sustainable development and include, but are not limited to, strengthening agriculture, experts agreed.

“The exchanges that are happening are not a one-way street,” said Ambassador of the EU to Israel Lars Faaborg-Andersen. “The starting visits to Bavaria and Sicily opened the eyes of Israelis, just as Israeli agriculture is always [an] inspiration to their German and Italian colleagues.”

While maintaining a strong agricultural sector is still critical to Israel’s growth and its rural development, the country faces a growing population and rising income, making “the loss of agricultural land inevitable,” Buckwell remarked.

Population pressure has led to a rising opportunity cost – the loss of potential gain from other alternatives – of agriculture, and thereby a high price food exchange on domestic products, according to Buckwell.

Although Israel may enjoy – and for security reasons may even rely upon – its strong domestic food supply, increasing the amount of imported products could lead to cheaper shelf prices, he said.

“Food security through trade is an issue that could sound different to Israeli ears and British ears,” Buckwell acknowledged. “We gave up two centuries ago on producing food on our little island. We buy from wherever is cheapest.”

“These are choices about long-term security of supply,” he added.

Buckwell stressed, however, that he is absolutely not suggesting that Israel vacate good agricultural land. But the fact of the matter remains that “citizens will vote for what is priced lower,” he explained.

“I’m not suggesting that you suddenly throw open your borders,” he said. “I’m simply saying that in the long run you will double your population again and you have to understand how you are going to need to feed them, and I’m simply suggesting that more will come from abroad.”

Even if less farming occurred within Israel, Buckwell said that due to the rising population, it is unlikely that the country would find itself with open space that serves no purpose.

However, Israelis could benefit from more of their open space being converted for recreational and environmental protection use, he said.

“People want green spaces when they live in cities,” he added.

Previously extensively farmed areas could also provide environmental services, and in Europe officials are working to convince the public to pay for them, Buckwell said.

There are ways of supporting systems that are less intensively agricultural but have other advantages, such as preserving biodiversity.

“The bonanza of farmers in Europe is done” Buckwell said. “We are on a downward trajectory.”

Officials therefore need to recognize the variety of features that rural areas have to offer in addition to agriculture, and use policies to intervene positively, he said.

The EU’s Common Agriculture Practice policy now not only includes a direct pillar for agricultural market support from the EU, but also a second pillar, co-financed by participant countries, which focuses on several aspects of rural development, including agricultural competitiveness and environmental management.

“Rural areas don’t just have disadvantages,” Buckwell said.

“The quality of life, most people think, is higher in many ways – clean air, quieter. They also have a sense of cohesion and are closer to nature, things that people value.”

Diversification of business opportunities can help improve quality of rural life, and farmers can benefit by taking advantage of the uniqueness their regions have to offer and selling their wares as local specialty products, Buckwell added.

Another way to improve the lives of residents of rural areas is by attracting visitors to their regions, explained Italian Ambassador to Israel Francesco Maria Talò.

“This is the concept of agro-tourism,” Talò said.

“More and more people are enjoying holidays in little farms everywhere in Italy.

“This is the way to not only preserve the farming industry but also the landscape and the environment.”

Israelis give more than NIS 4 billion a year in subsidies to farmers – Jersualem Post

01/21/2014 23:29
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On the one hand, consumers are experiencing high food prices, and on the other taxpayers and consumers are required to give huge subsidies to the agricultural sector.
Israel Photo: Wikicommons

Something illogical is happening in Israel: On the one hand, consumers are experiencing high food prices, and on the other taxpayers and consumers are required to give huge subsidies to the agricultural sector.

Agriculture was a top priority for the State of Israel during its early years and was needed to develop specific areas of the country for geopolitical security, avoid food shortages and provide employment for new immigrants.

Although agriculture today represents only 2.6 percent of the GDP and 6% of the work force, the same policies protecting agricultural producers are still in effect and are hurting consumers and taxpayers.

From struggling in the early years of the state, the agricultural sector is today flourishing and doesn’t need more subsidies from Israeli citizens. Israel produces 95% of its own food requirements and the total export of agricultural fresh produce and processed food has almost doubled from $1.2 billion in 2003 to $2.4b. in 2012. Agricultural exports have increased over the past 20 years by 3% annually, growing at a faster pace than any other sector of the economy.

Exports are flourishing partly because Israeli citizens are de facto subsidizing foreign consumers. By various mechanisms such as compensation for surplus production, subsidized water prices, investment support and direct payments, Israeli producers can export products at below-market prices; the difference being paid by Israeli consumers and taxpayers.

While the overall level of agricultural support has been falling, the OECD shows that the share of the most distortive types of support has increased over the past two decades. High barriers to import for agricultural commodities have pushed domestic prices above international levels and resulted in high market prices.

High tariffs on imports of the majority of agro-food products is the most costly policy to consumers. Average tariffs in the dairy sector are 108% and can in some cases reach 160%.

The current level of agricultural producer support, an indicator of the annual monetary value of gross transfers from consumers and taxpayers to support agricultural producers in Israel is 17% of farmers’ gross receipts, below the OECD average of 23%, but considerably higher than in the United States (10%).

However, transfers from consumers alone, a measure of the cost to consumers arising from policies that support agricultural producers by raising domestic prices, is higher in Israel at 18% compared to the OECD average of 13%. Looking at specific products, the impact on consumer prices at farm gate is even higher and reaches 35% for milk, 16% for eggs and 42% for beef and veal.

The typical Israeli household’s monthly budget for food is NIS 2,251 or 16.1% of its total expenditures.

However, the poorest households spend relatively more on food and their food expenditures represent 22.2% of their total budget. Taxing consumers through barriers to imports actually hurts the poorest much more than the well-off households. Every year the poorest 20% of households transfer NIS 517 million to farmers by paying in excess of the competitive price.

Interestingly enough, farmers are quite well off economically and in 2008 agricultural incomes were about 50% higher than the national average. It is a typical case of the poor subsidizing the rich! Our government and policy makers are well aware of this problem. Ahead of deciding whether or not to allow Israel to join the OECD, a report recommended Israel privatize agricultural land, raise water rates, and reduce protectionist quotas on agricultural imports.

But the farmer lobby is so powerful in Israel that the government is more heavily involved in the agriculture sector than in virtually any other sector, mainly through protectionist quota policies. Israel’s import tax on agricultural produce is three times higher than that levied on non-agricultural products.

Reduction of indirect support and import barriers would not only lead to significant savings for consumers, but would also increase productivity and competitiveness, which would lead to further price declines.

Farmers themselves will benefit from an increased demand due to lower prices which will in turn increase their revenues.

Corinne Sauer is executive director of the Jerusalem Institute for Market Studies, Shaul Kirshenbaum is a research fellow there.