The Israeli Economy at a Glance
Foreign Trade Policy – 1995

Ministry of Industry and Trade
Foreign Trade Administration

For half a century, Israel has been isolated from her regional environment, forging her economic alliances overseas. Therefore, in the past, Israel’s export targets and trade partners have been nearly exclusively on the European and American continents.

Currently, the main goal of Israel’s foreign trade police are:

  1. Promotion and expansion of Israeli exportation to all foreign markets
  2. Expansion of business and industrial alliances with actual trade partners while forming new alliances with potential trade partners.

W.T.0 – WORLD TRADE ORGANIZATION

Israel has been a member of GATT since 1962 and has taken an active part in the Uruguay Round negotiations. The Israeli government recently ratified the Uruguay Round Agreements, to which only 23 countries acceded, including the expanded agreement on government procurement. A special inter-ministerial committee was appointed to study the legal and economic implications of this development and to formulate recommendations for the necessary legislative and regulatory adjustments.

EUROPE

EU

In 1975, Israel reached a Free Trade Area Agreement with the European E.U. Community (today the European Union), As a result of this agreement Israel’s existing ties with Europe have expanded and strengthened. Europe has been Israel’s traditional trading partner.

New negotiations to update this Free Trade Area Agreement with the EU have been ongoing now for over a year. As a result of these negotiations the EU has agreed to allow Israel access to its R&D programs. Progress has been made elsewhere in the negotiations as well, particularly with regard to rules of origin, agriculture and food products, and government procurement. (The new agreement underwent a ratification process between 1996-2000, and entered into force on June 1, 2000.)

International political developments such as the emergence of the Eastern European countries as free market economies, a newly-unified Germany, and the recent accession of three formerly EFTA countries to the European Union have brought striking changes in Europe, Israel has had to make significant adjustments to its foreign trade policy on the continent, including negotiation with the EU, for more advantageous agreements and the inflation of steps for new foreign economic and commercial agreements with EFTA and the Eastern, European countries.

EFTA

In 1992, Israel signed a Free Trade Area Agreement with the seven then EFTA countries. This Free Trade Area Agreement was fully implemented on January 1, 1993, and was a natural complement to the existing agreement with the European Union. Sweden, Austria and Finland acceded on 1.1.95 to the E.U. Therefore, Israel’s relations with them are now within the framework of the FTA with the European Union. Israel relations with Switzerland and Norway remain under the EFTA agreement.

EASTERN EUROPE

Israel’s diplomatic and economic relationships with the countries of Eastern Europe have changed dramatically in the past 30 years. In 1967, Israel’s only diplomatic relations in the region were with Romania. Now, after the establishment of diplomatic relations with all of the countries of Eastern Europe, Israel is participating in intense trading activity all through the region. In addition, Israel has recently signed MFN agreements with many Eastern European countries.

We are currently at various stages of negotiation for Free Trade Area Agreements with Poland, Hungary, the Czech Republic, and Slovakia. The basis of these agreements is to ensure that Israeli exports are not disadvantaged in any of the aforementioned markets as a result of an association agreement with the European Union and EFTA.

Among the countries of Eastern Europe, Israel’s export growth to Russia has been outstanding. In 1991 exports first began, and by 1992, reached $43 million. They grew to $118 million in 1993, and US $191 million in 1994. Israel’s entry into this market has been eased by the expertise of its new immigrants from this region, a great number of whom have extended knowledge and experience in handling business there.

NORTH AMERICA

USA

Israel enjoys a significant relationship with the United States of America. In addition, the United States is Israel’s prime trading partner.

A Free Trade Area Agreement with the U.S. was concluded in September 1985.

Israel’s Free Trade Area Agreement with the U.S. was implemented in stages, and came fully into force on January 1, 1995. The agreement had a markedly positive effect on bilateral trade, with the volume of trade increasing by 200% between 1985 to 1995.

Following a public initiative by Prime Minister Rabin and President Clinton, the Israel Science and Technology Commission was established in January 1994. The Commission operates under the joint chairmanship of the U.S. Secretary of State and Israel’s Minister of Industry and Trade.

OTHER NORTH AMERICAN COUNTRIES

With the signing of the N.A.F.T.A. agreement, and its effect of consolidating the United States, Canada, and Mexico into one entity for many trading purposes, Israel’s goal is to negotiate with the parties to the agreement so as to update and improve our trading relationships in light of the new regional situation. Negotiations with Canada for a Free Trade Area Agreement are now proceeding and considerable progress has already been made. Discussions with Mexico are still at initial stages. The conclusion of Free Trade Area Agreements with Canada and Mexico would enable Israel to trade tariff-free with all of North America.

SOUTH AMERICA

Due to restrictive trade policies in various countries in the Israel’s trade with Latin America was minimal when compared with her other trading partners. However, as the situation has improved Israel has begun to concentrate more effort into penetrating American market. Last year, exports to the South American market rose by 28%. We are studying the implications of the MERCOSUR Trade Agreement and the other regional agreements in Latin Some of the more important developments will be in the ways that the MERCOSUR Agreement will effect bilateral trade and the implications of a possible alliance between the parties to the MERCOSUR Agreement the NAFTA Agreement and/or the European Union.

ASIA AND OCEANIA

In 1985, Israel’s commercial and economic relations with Asia were still in their infancy. However, the political changes in our region enhanced the accessibility of the Asian market while increasing interest in doing business with Israel.

For example, there has been a marked improvement in Israel’s economic relationship with Japan. Numerous delegations of leading industrialists and senior Israeli and Japanese officials have met in both countries. In addition, Israel has "GSP" status on the Japanese market, implying Israel’s advantageous access to the market with reduced tariffs on many items.

Since the inception of trade agreements with China and India granting MFN status to Israel, the Asian market has emerged as a priority target for Israel’s foreign trade policy, a process fuelled by the Israeli business community’s interest in the region’s potential.

Israel has maintained good trade ties amid a favorable trade balance with Australia and New Zealand.

AFRICA AND THE MIDDLE EAST

In recent years, the diplomatic relations between Israel and most African states were resumed. The most significant diplomatic ties with regard to Israel’s potential trade are with the following countries: South Africa, Kenya, Nigeria, Ghana, Zambia, the Ivory Coast, Tanzania, Zaire, and Cameroun. We are now working towards strengthening our presence in these countries.

Israel maintains trade relations and a trade agreement with Egypt. In January 1995, trade relations with Egypt were advanced to a normalized status. Israel released Egypt from the list of countries which require a license to import to Israel, and this development will enhance future trade with Egypt. Aside from the renewal of the periodic joint committees on trade issues, we are engaged in regional multilateral discussions regarding the future development of the Middle East. Regional Trade Ministers met recently in Taba to discuss various potential cooperative efforts, including the creation of a regional infrastructure for future trade, environmental conservation, and other topics of mutual interest. Offices of "economic interest", as opposed to official diplomatic offices, are being opened in Tunisia and Morocco to explore various possibilities that can be implemented when the time is right.

Economic relations with the Palestinian Authority are conducted on the basis of the Paris Agreement of April 1994. According to this agreement, the Authority is part of a customs union with Israel. The leading principle of the agreement is harmonized customs and standards, including certain exceptions by predetermined quotas, for trade by the Palestinian Authority with Arab countries.

Israel and the Hashemite Kingdom of Jordan are presently in the midst of negotiations, whose aim is a trade agreement between the two countries. We expect this agreement to be finalized shortly. The conclusion of this agreement will contribute greatly to bilateral trade and spark business opportunities for both parties.