Jordan Valley Solidarity REPORT Israeli Vegetable Exports to EU

RECENT DEVELOPMENTS INISRAELI VEGETABLE EXPORTS TOMAIN EUROPEAN MARKETS

REPORTSpring 2008

CARMEL lorry travelling between settlements in the Jordan Valley. CARMEL AGREXCO is the largest exporter of Settler's produce grown on stolen Palestinian land to European markets.

Introduction

This report aims to provide an overview of the most recent data available regarding Israelivegetable exports to the EU. It is based on and limited to figures provided by the Israeli CentralBureau of Statistics that do not distinguish between settlement and non-settlement produce.The report examines trade relations between Israel and its main export partners in Europe(Germany, UK, Belgium and Italy), within the larger context of the European market as a whole.In addition to providing the latest figures on vegetable exports, the dynamics within the exportingseason, and the general increase in Israeli exports to the EU and its member states, this paperhighlights developments in Israel's trade deficit with some of its partners, explains the importanceof the diamond trade, and presents statistics on flower exports into the EU.

I.Trade relations between the EU and Israel

The EU is Israel's most important trading partner. Within the EU, Israel's largest export marketsare Germany (21%), the UK (18%), the Netherlands and Italy (both 11%), and France (10%).When the diamond trade is included in Israel’s global exports, this ranking changes: Belgium leadswith 6%, ahead of Germany (4.8%), and the UK (4.3%).

The legal framework of Israeli external trade relations

Free and preferential trade agreements are of vital importance to Israeli exporters. Tariffs and non-tariff barriers are partially or totally abolished on goods entering the partner's market on the basisof reciprocity.The history of economic relations between Israel and European countries shows dynamics ofever-closer integration. Israel signed its first free-trade agreement with the European Communityas early as 1964. At that stage, the EC had only 6 members. With the EC-Israel Free TradeAgreement of 1975, economic cooperation went far beyond normal levels, and includedcooperation in scientific matters intended to facilitate the transfer of technological know-how. In2000, the EC-Israel Association Agreement came into force, providing Israeli exporters withprivileged access to Europe’s ‘Common Market’, and to EU funds.Israel has also signed free trade agreements with the United States (signed in 1985, fully effectivesince 1995), the European Free Trade Association (EFTA, effective since 1993), Turkey, Mexico,Canada (1997), Jordan, and Egypt, and on 18 December 2007, became the first non-LatinAmerican country to sign a free trade agreement with Mercosur.Israel is the only country in the world to have free trade agreements with both the European Unionand the U.S.

What is Israel exporting?

Israel's main exports are weapons, diamonds, manufactured goods and software. In 2006, Israeliexports grew by 11% to just over $29 billion; the hi-tech sector accounted for $14 billion,

a 20% increase over the previousyear. The IT sector makes up asubstantial portion of Israel’sexport of services. In 1997, thisshare (20.1%) was second only toJapan (24%), and much higherthan the OECD average of12.5%. Israel is one of the world'smajor exporters of militaryequipment, accounting for 10% ofthe world total in 2007.In 2004, diamonds polished andcut by Israeli companiesconstituted close to 3% of totalIsraeli exports to Germany; closeto 4% of total exports to Italy, androughly 14% of exports to the UK.The main destinations for Israelidiamond exports, however,remain Belgium and the Netherlands. In 2006, 66% of total Israeli exports to Belgium consisted ofdiamonds.

What is Israel importing?

Israel imports military equipment, investment goods, rough diamonds, fuels, and consumer goods,mainly from the United States (18.6%), Belgium (9.9%), Germany (7.5%), UK (7.6%), Italy (4.8%),and Japan (3.3%), according to 2000 figures.

Trade balance

Israel has traditionally run a large external trade deficit (i.e. imports exceeded exports). The cost ofIsrael's imports has largely been offset by cash grants from the U.S. government and Zionist“charitable” organizations and individuals abroad.

DIAMOND EXPORTS:

Trade history of today's main Israeli export commodity. Israeli diamond exports 1988-2007

(million US$ per month).

Trade balance 1988-2005 (million US$):

The Israeli trade deficit with the EU is steadily shrinking.