The blue-and-white lie

Dudu Topaz donned a “Blue-and-White” campaign T-shirt for his Independence Day television special and played the pitch man. “So I’m in the supermarket,” he said, looking over at Industry and Trade Minister Dalia Itzik, “and I see two products on the shelf – one foreign, and one Israeli. I buy the Israeli one…”

“And hundreds of Israeli jobs are saved,” Itzik declared. “It’s that simple.”

Simple? Hardly.

The problem of Israel’s 256,000 unemployed is far more complicated than the campaign run by Itzik and the Manufacturers Association makes it out to be. What Itzik doesn’t mention is that an unofficial boycott of foreign products – which is the essence of this drive – will certainly displace workers involved in the sales of those products. And there are thousands of people in fields such as hi-tech who will remain unemployed no matter how many Israeli goods are sold. But even those who could be helped by this effort will ultimately suffer its undesirable side effects.

Combatting the preference for cheaper, higher-quality foreign goods inevitably means imposing tariffs to make them less competitive. That path leads to policy disasters such as England’s corn laws, which protected domestic produce from cheaper foreign competition. The burden on consumers nearly strangled Britain’s economy, “saving” jobs in the short run but in the long run costing thousands their daily bread. 

here’s also the possibility of a backlash. India, for example, may rightly wonder why Itzik signed a trade deal with it in January if she’s only interested in “blue-and-white” products. The European Union, which is beginning to reverse the damage caused by its past protectionist policies, will not be impressed either. If other countries were to institute the measures implicit in this campaign, Israeli companies with thriving foreign sales but relatively minor domestic markets, such as Teva Pharmaceutical Industries and Elbit Systems, could suffer terribly.

Baruch Leshem of the Industry and Trade Ministry who is leading the campaign, insists the campaign is consistent with free market ideals. He says the ministry will not propose taxes be levied on foreign products in order to make Israeli goods more attractive to consumers. It is simply “suggesting,” he stresses, that we all buy Israeli products whenever possible.

Leshem says the current flood of firings can be stanched if sales of Israeli product increase 20 percent as a result of the campaign. While the ministry says it opposes open intervention in the market, that’s a huge figure to reach with a mere “suggestion.”

The real question that must be addressed by any effort to improve the economy is this – how does this plan make Israeli firms more competitive?  On this score, the “blue-and-white” campaign draws a blank. It’s an initiative that depends on good intentions rather than good ideas.

“This campaign won’t contribute a thing – certainly not jobs,” says Robi Nathanson, chairman of the Israel Institute for Economic and Social Research. “It contradicts all the progressive steps necessary to improve the economy and create jobs.”  That the economy can be saved by patriotic sentiment alone is “so funny that it doesn’t move anyone,” Nathanson says. “It’s a ridiculous 1940s-1950s mentality reminiscent of the time when the Israeli economy had to be created.”

The “Only Israeli for me” refrain smacks of anti-globalization, too, Nathanson says. He claims a product’s “nationality” is meaningless when “cotton is grown in Egypt, the fibers are woven in Thailand, the fabric is tailored in Italy, and the finished garment is sold in Israel.” Some argue the government should actually encourage Israelis to buy superior foreign goods.

“Pressure to compete in the world market will ultimately make Israeli manufacturers better,” says Daniel Doron, director of the Israel Center for Social and Economic Progress. Attempts to impose market conditions in the name of patriotism make our companies slothful, he cautions; they prevent the innovation and prowess developed by firms that have to confront competitors. Also, it limits freedom. “The consumer must be the one to decide [which products he prefers], not the government,” Doron asserts.

The definition of “Blue-and-White” products is becoming ever fuzzier – so much so that some contend the notion of a “Blue-and-White company” is more important. Joseph Shostak, director-general of the Federation of Israeli Chambers of Commerce (FICC), points out that apparel firm Delta Textiles may have moved its manufacturing operations to Egypt, but its profits remain in Israel. And when Castro moved its facilities to the Far East, it was able to vastly expand its domestic retail network, which employ hundreds of Israelis.

Companies such as Strauss and Osem simply repackage many foreign products. If the “Only Israeli for me” concept were taken to its logical conclusion, we’d have to stop buying many of their products as well. Several labor organizations have already begun to clamor for increased protection.

“There are no limits to the demands” of Israel-only production, Shostak says, and that simply isn’t feasible.  So far, most businessmen aren’t getting caught up in the jingoist fervor.  “No manufacturer would blame someone for buying cheap foreign raw materials instead of more expensive or lower quality Israeli raw materials, because he is making an economic choice,” he explains. “In the end, he has to consider the consumer.”

In their race for public attention, Itzik and the Manufacturers Association have failed to do just that. Fortunately, someone does have consumers in mind. When Itzik approached the FICC to get top businessmen on the bandwagon, Shostak says, the major marketing chains bristled at the campaign. They know the key to prosperity lies elsewhere.

“What is necessary [to strengthen the economy] is to have an open, global, competitive market. Only then will Israeli products have lower prices and higher quality,” asserts Shostak.

In the end, he concludes, that is more important than patriotism, and more sensible.

“The consumer is smarter than that.”

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