13 Aug 2008

Water in Israel

Israel, famous for its highly-efficient irrigation, is running into more troubling problems. Recent restrictions on food trade makes Israel vulnerable to shortages of basic grains. Can it continue to use its irrigation water to grow high-value crops and use sales revenue to buy grains (importing virtual water), or does it have to grow its own grains? The latter option will leave Israel poorer, as it moves away from its comparative advantage (specialty crops, sunshine, close to Europe) and towards self-sufficiency. For a country obsessed by security, the answer is simple:
“The greatest challenge we face is to try and reduce the dependence on the import of grains, whether by increasing local production or whether by making more efficient use of raw materials in feeding livestock,” Mr. Simhon said in an e-mail exchange. “This must be done, despite all limitations, mainly the lack of water.”


“If the desalination and recycling projects are implemented, a lack of water is not expected in 2013,” Mr. Simhon said.

But is such an investment wise for a sector that contributes just 2 percent to the gross domestic product? Some critics suggest that Israel would be better off focusing on conservation.
If technology will not save the day and grains must be grown, then scarce water must be expensive water. If grains are expensive, then Israel will be an attractive destination for countries willing to sell grain. With free trade, Israel would buy grain and return to growing oranges. Without it -- all bets are off.

Many economists are stunned at the "return to autarky" movement among countries suffering from higher food costs. As these countries restrict food exports "to protect consumers," they simultaneously impoverish their farmers and unravel beneficial trade with their neighbors. Less trade tends to make the problem worse by decreasing interdependency and thereby increasing the possibility that countries will be more hostile towards each other. Prices also rise and become more volatile as the expanse of the market shrinks. And thus, the vicious circle spins on.

Bottom Line: Politicians who claim to "protect" citizens by blocking trade are trading short term reductions in price for long-term reductions in security. To paraphrase Franklin, those who would sacrifice prosperity-through-trade for security deserve neither.

hattips to AG and DW


Fixed Carbon said...

Seems to me that there is a spectrum of dim witted ag economic behavior among nations, with those places that restrict exports by fiat vying for the lunacy prize with Argentina, which sought to do so by taxes. Would you economists fill me in here? Which is crazier? (BTW, I'm not a libertarian).

David Zetland said...

Political economy -- screw farmers to keep prices low for city dwellers.

Argentina -- raise taxes on exports to get a "piece" of the action in higher prices. (Not sure if the most recent increase got approved.)

In all cases (and unlike the US, where farmers benefit from largesse), farmers get exploited because it's hard to hide food.

J said...

I live in Israel and am familiar with the water situation here. Wheat is grown mostly as a short winter crop without irrigation, for grain and fourage. The Government is encouraging farmers (mostly in the South) to grow wheat as a way of using land, which otherwise would be left unused. Unoccupied land in Israel is invaded by Beduin pastoralists, who set up buildings and later claim property of the land. Water and politics are inseparable, as you said.

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