Israel, US relations blossom as nations mark 35 years since free trade accord

Landmark pact, which cut tariffs, contributed to development of entire region and to Israel’s recent peace deals in the Gulf, says Israeli Economy Minister Peretz

Illustrative image of the American and Israeli flags. (3dmitry; iStock by Getty Images)
Illustrative image of the American and Israeli flags. (3dmitry; iStock by Getty Images)

Senior government officials and industry leaders from the US and Israel converged online on Monday to celebrate the 35th anniversary of the US-Israel Free Trade Agreement.

In a web forum hosted by the US Chamber of Commerce’s US-Israel Business Council, speakers highlighted the historic nature of the 1985 agreement and emphasized future growth in trade, investment and innovation between the two countries.

“I believe Israel is going to be the most important ally of the United States in the 21st century,” said Ron Dermer, the Israeli ambassador to the US. “And that’s a big statement to make from an ambassador of a country the size of New Jersey, that has all of nine million citizens.”

Dermer said this has nothing to do with a particular US administration or its policies, like on Iran and on peace, but has has everything to do with security and technology, referencing Israel’s capability in both sectors.

Israel’s Ambassador to Washington Ron Dermer, formerly senior adviser to Prime Minister Benjamin Netanyahu (Miriam Alster/Flash90)

Amir Peretz, Israel’s economy minister, praised US-Israeli cooperation in security and economic development that has blossomed as a result of the agreement.

“The impact of the Free Trade Agreement goes beyond the borders of Israel and the US. It contributes significantly to regional development and stability and has strengthened Israel’s cooperation with two of its neighbors — Egypt and Jordan,” Peretz said. “We see evidence of the close cooperation between Israel and the US in recent developments between Israel and the Gulf states, as well, where the United States contributed significantly to achieving the historic peace accord between Israel and the United Arab Emirates, and Bahrain.”

Peretz said beyond the political implication of the Abraham Accords, there is an economic achievement with underlying trade opportunities, and predicts the deal will further enhance close economic ties.

Dermer expressed similar enthusiasm.

“If you combine [the UAE] enormous resources and talents and capabilities, and you combine it with Israeli innovation and technology, I would tell you the sky is the limit but it’s much bigger than that,” Dermer exclaimed. “I hate to be the bearer of good news in the Middle East, but there’s good news in the Middle East!”

The landmark Free Trade Agreement, put into motion under the leadership of Israeli prime minister Shimon Peres and US president Ronald Reagan, was the US’s first bilateral trade agreement and Israel’s second, following an agreement with the European Community a decade prior.

Illustrative: Shipping containers at the Haifa port. Nov 14, 2011. (photo credit: Yaakov Nahumi/Flash90)

Under the agreement, the US and Israel implemented phased tariff reductions, eventually leading to the complete elimination of duties on manufactured goods in 1995. The agreement does allow the US and Israel to maintain some import restrictions, like quantitative restrictions and fees on agricultural products.

Both the US and Israel have received tremendous benefits from the agreement. According to a report by the Ministry of Economy and Industry, between 1984 and 1995, bilateral trade in goods more than tripled from $3.9 billion to $12.4 billion — US exports to Israel totaled $6 billion and Israeli exports to the US totaled $6.4 billion.

The US Department of Commerce puts the total bilateral trade in goods and services at $47 billion in 2019. That same year, Israel was the US’s 24th largest export market for goods and the third-largest in the Middle East — behind the UAE and Saudi Arabia.

Israeli foreign direct investment (FDI) in the US has seen an enormous increase, from $0.52 billion in 1984 to $36.6 billion in 2019 — making up around half of total FDI in the US from the Middle East and North Africa.

On a per capita basis, the US exports more to Israel than it does to the United Kingdom, Germany or Japan.

Microsoft, Cisco, Intel Corp., IBM, Apple and Facebook all opened their first research and development centers outside the US in Israel. Google, Lockheed Martin Corp., eBay and General Electric are among other Fortune 500 companies operating major research and development centers in Israel.

Prime Minister Benjamin Netanyahu (third from left) meets with Intel Corp. CEO Brian Krzanich (to his left) and Mobileye founders Amnon Shashua and Ziv Aviram, respectively first left and first right; (Courtesy: Haim Zach, GPO)

American companies like Intel Corp., Nvidia Corp and KLA-Tencor have spent billions of dollars to acquire Israeli technologies and firms. Just in the past two years these acquisitions have totaled more than $12 billion, Israeli Economy Ministry data showed.

Israeli companies such as Teva Pharmaceutical Industries, Tower Semiconductor, Elbit Systems, IDE Technologies and Strauss Group operate manufacturing centers in the US and employ tens of thousands of Americans.

A large chunk of the forum involved a panel discussion with industry leaders and was moderated by Khush Choksy, senior vice president for Middle East affairs at the US Chamber of Commerce.

The panel featured Mark Isakowitz, vice president for government and public affairs at Google; George Keefe, senior vice president for external affairs and public policy at Teva Pharmaceuticals; and Yoav Intrator, CEO of JP Morgan’s Israel Technology Center.

Conversations focused on the future of US-Israeli trade, investment and innovation — like digital services, health technologies and cybersecurity solutions — and policy ideas to support the anticipated growth.

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