McDonald's Wages A French-Fry Battle the Issue of Supplying French Fries to an American Fast-Food Chain Reveals Bigger Debate over Israeli Trade Policy

Article excerpt

TIRING of its fight against Israeli trade restrictions, fast-food giant McDonald's has taken the war into enemy territory to challenge a kibbutz-owned monopoly on frozen french fries.

The local McDonald's franchisee announced last week that the company has struck a deal with local entrepreneurs to build a new factory that will produce french fries just the way the Golden Arches likes them.

The surprise decision caps several months of noisy controversy here over McDonald's application for a government permit to import company-approved french fries for its first restaurant in Israel, due to open in the last quarter of this year in a Tel Aviv suburb.

The application ran into fierce opposition from Tapud, the only Israeli manufacturer of french fries, the 13 kibbutzes that own and supply the factory, and their allies in the Agriculture Ministry. Their demands for protection from foreign competition were successful at a recent Cabinet committee meeting.

That such an apparently mundane issue as supplying french fries to a hamburger chain should have been raised in the Israeli Cabinet illustrates the virulence of the local debate over Israeli trade policy, as the Labor Party government, led by Yitzhak Rabin, takes its first tentative steps toward economic liberalization.

"We have lots of discussion in the government, but I believe that there will be a change in the structure of our economy when we finish our plan" for trade liberalization, says Finance Minister Avraham Shohat.

The plan was launched nine months ago, when the authorities abolished the old system of licenses for industrial imports from areas outside the United States, the European Community, and the European Free Trade Association, with which Israel has signed trade deals in the past.

If the effects have yet to be felt in Israeli shops, explains Zoar Perry, deputy director-general of the Trade and Industry Ministry, it is because "initially we have imposed tariffs of up to or more than 100 percent, which is equivalent to the previous restrictions."

But those tariffs will be cut over the next five years to a maximum of 10 percent, he says, obliging local industrial producers to compete on an almost equal footing with foreign suppliers. …

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