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Israeli Plan to Encourage Exports May Be Bitter Medicine for Industry

April 2, 1991
See Original Daily Bulletin From This Date

The Israeli government unveiled sweeping new plans Monday to open domestic industry to the chill blast of foreign competition.

The plan to encourage imports, presumably putting Israeli producers to the test, was hailed by government officials as the most important economic program in the past decade.

But it sent shockwaves through the Histadrut, Israel’s trade union federation, and the Industrialists Association, which rarely see eye to eye on most issues.

Both have voiced grave misgivings. They said the plan would make it difficult for them to reach agreements with the government on wage and price policies designed to boost employment and peg inflation.

The new plan was approved by a special ministerial committee acting with full Cabinet powers. It provides for an initial, administrative step on Sept. 1, just four months away.

On that date, much of the bureaucratic red tape binding imports will be removed. The procedure for obtaining import licenses from the government will be dramatically simplified.

The more fundamental economic dimension of the plan will unfold gradually in five to seven years. During that period, customs duties on imports will be reduced steadily to the point where no imported commodity will bear a duty higher than 12 percent.

Government officials said Monday that almost all of Israeli industry will be exposed to free foreign competition by the end of five years. The exceptions are the textile and timber industries, which require longer protection. Their tariff barriers will come down only after seven years.


The officials conceded that the plan contains some bitter medicine. Certain industrial enterprises will be hard hit, causing increased unemployment and dislocation in some instances.

But officials contend the overall plan will promote efficiency and increase the productivity of Israeli industry as a whole, putting it on a competitive basis at home and abroad.

The long-term result will be to boost employment opportunities for immigrants and others in existing and new industrial concerns, they said.

However, the chairman of the Industrialists Association, Dov Lautman, said the program fails to grapple with “the one really basic challenge facing the country: the need to absorb the olim and provide them with employment.”

He accused the government of tackling the economy in piecemeal style without an overall philosophy. Lautman has recently called for a steep devaluation of the currency, coupled with a tough policy on wages and prices.

The new plan harmonizes with Israel’s desire to integrate as closely as possible with the European Community.

Previous agreements between Israel and the E.C. provided for gradual tariff reductions. These will now be extended to other parts of the world.

Treasury officials said they expect pressure from industrial lobbies to block or scale down parts of the plan. They predicted, however, that the government would stand firm, since the decision has broad Cabinet support.

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