Removing Tuna Can Tariffs Cuts Consumer Prices by Only 1.1% in Israel
Israel's effort to reduce tuna can prices by eliminating import tariffs and opening the market has resulted in a minimal 1.1% price drop for consumers. According to research by economist Shlomit Arbel from the Arlozorov-Yesodot Forum, the total savings for Israeli households in 2023 amounted to approximately 21.8 million shekels, or 3.35 shekels per person annually. Despite tariff removal, market concentration remains high, with the top three suppliers maintaining about 75% market share and higher prices compared to smaller competitors.
The tariff on tuna cans previously included a fixed component of 3.51 shekels per kilogram and a 12% ad valorem tax. These tariffs were gradually reduced from 2013, with the fixed component fully removed by early 2016 and the ad valorem tariff phased out by early 2024. Tuna in vegetable oil, the focus of the study, accounts for roughly 65% of domestic sales, with both local producers and importers active. Since 2013, local production has shrunk from 85% to about 20% of the market, as some manufacturers shifted to importing, exemplified by Diplomat's closure of its Tiberias plant in 2019 and outsourcing production overseas.
Arbel's study analyzed price changes over three periods: 2013-2017, 2013-2019, and 2013-2023. It found a significant positive correlation between consumer prices, the fixed tariff component, and global raw material prices, though the tariff's impact on prices diminished over time. Comparing Israeli prices to those in France suggested additional unidentified factors influencing prices beyond tariffs and raw material costs. The research also noted that small parallel importers have limited market influence due to their opportunistic purchasing models and hold less than 1% market share.
The study highlights that despite OECD recommendations to accompany trade reforms with thorough economic analysis, Israeli governments have historically implemented tariff reductions without sufficient research, raising questions about their effectiveness in lowering consumer prices. Tuna cans are considered a staple food, and the Kadmi Committee report from 2012 specifically recommended significant tariff cuts on processed food products, including tuna cans, to enhance competition and reduce prices. The Ministry of Finance stated that tariff reductions aimed to effectively lower consumer prices and boost local market competition.
