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25 Years of US–Israel Free Trade

25 Years of US–Israel Free Trade

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Published by IsraelUSTrade
A brief history on the 25th anniversary of the United States - Israel Free Trade Agreement. (2010)
A brief history on the 25th anniversary of the United States - Israel Free Trade Agreement. (2010)

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Published by: IsraelUSTrade on Dec 30, 2010
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Twenty Five Yearsof United States –Israel Free Trade
Embassy of IsraelCommercial Mission
O
n April 22, 1985, the United States TradeRepresentative (USTR) and the Israeli Ministero Industry and Trade signed the U.S.-IsraelFree Trade Agreement (FTA). The Agreement enteredinto orce in September 1985 ater it was approved bythe U.S. House o Representatives by a 422-0 vote andby a voice vote in the U.S. Senate. The FTA was theU.S.’s rst bilateral ree trade agreement and Israel’ssecond (ollowing Israel’s ree trade agreement with theEuropean Community, which was signed in 1975). Prior to the FTA, Israel benetted rom the GeneralizedSystem o Preerences (GSP), which allows or unilateralduty ree import o goods into the U.S. rom developingcountries. In addition, beginning in the early 1970’s,Israel was a recipient o U.S. economic aid. The FTAresulted in the mutual liberalization o bilateral trade andthe eventual elimination o U.S. economic aid to Israel.
 
Under the FTA, the U.S. and Israelimplemented phased tari reductionsculminating in the complete eliminationo duties on manuactured goods on January 1, 1995. The FTA permitted the U.S.and Israel to maintain certain importrestrictions, such as quantitative restrictionsand ees, other than customs duties, onagricultural products based on agricul-tural policy considerations. Nonetheless,over 90% o U.S. agricultural exports byvalue enter Israel duty ree.To qualiy or preerential treatment underthe FTA, manuactured goods must be (1)grown, produced, or manuactured entirelyin the U.S. or Israel or (2) substantiallytransormed in the U.S. or Israel andcontain at least 35% U.S./Israeli content.To meet the 35% content requirement, upto 15% o the product’s value may originatein the other country so long as the inputcomplies with the FTA’s rules o origin.Goods must also be shipped directly romone country to the other.The FTA, despite being twenty-ve yearsold and only twenty pages long, providesa stable business environment and afexible platorm to urther enhance thecommercial relationship. The FTAestablished a bilateral Joint Committee(JC) in order to provide a structure ordiscussing the enhancement o trade andissues o mutual concern. The JC meetsannually and is headed by USTR and theForeign Trade Administration o Israel’sMinistry o Industry, Trade, and Labor.The JC’s broad mandate has providedthe orum to urther liberalize trade inagricultural products and establishcooperation on standardization.The United States–Israel StandardizationDialogue was established in 2007 to createa orum or the two governments andstandardization bodies to work together onissues such as product standards, testing,labeling, and certication requirements inorder to acilitate and urther enhancetrade.Both countries benetted, and continueto benet, rom the FTA, as evidenced bythe exponential growth o the U.S.-Israeleconomic relationship since its signing in1985. Between 1984 and 1996, one yearater the FTA was ully implemented andten years ater it was signed, bilateral trade
About 50% of bilateral economicexchanges are concentrated in trade ingoods; 30% are in investment; and 20%in trade in services.Between 1984 and 1996 bilateral trade ingoods nearly tripled, reaching $12.4 billion.Between 1996 and 2010, it nearly tripledagain, reaching an estimated$32 billion.
The FTA - A Platform forRegional Economic Cooperation
The FTA was amended in 1996 toserve as the platorm or the QualiyingIndustrial Zone (QIZ) initiative whichseeks to encourage regional economicintegration and promote prosperityand stability in the Middle East Ingeneral, only actories in designated Jordanian and Egyptian QIZs thatmeet the minimum Israeli inputrequirement may export duty ree to theU.S. through the QIZ initiative. When the rst QIZ was created in Jordanin 1998, Jordanian exports to the U.S. wereonly $16.4 million. By 2009, Jordanian ex-ports reached $924 million, with QIZs ac-counting or 65% o the total. When the rst QIZ was established inEgypt in 2004, Egyptian exports to the U.S.totaled $1.3 billion. By 2009, Egyptianexports totaled $2.1 billion with QIZsaccounting or 41% o the total.
 
in goods more than tripled rom $3.9billion to $12.4 billion, with U.S. exportsto Israel totaling $6 billion and Israeliexports to the U.S. totaling $6.4 billion.Between 1996 and 2010, bilateral trade ingoods nearly tripled to an estimated $32billion.In 2010, bilateral trade has started torebound rom the global economic downturnand is up about 16% as compared to thesame period o time in 2009. For 2010,we estimate that bilateral trade will reach$32 billion with Israeli exports to the U.S.totaling $21 billion and U.S. exports toIsrael totaling $11 billion.Outside o diamonds and jewelry, themajority o bilateral trade in goods isconcentrated in industrial and high techitems; or example, in 2009, chemicals,plastics, and telecommunications andelectronic products accounted or nearly70% o Israeli exports to the U.S. Similarly,chemicals, transportation equipment,and telecommunications equipment andelectronic products accounted or nearly60% o U.S. exports to Israel.
Israel is among the U.S.’s 12 largest exportmarkets per capita. Despite a populationof only 7.5 million people, Israel is amongthe U.S.’s 25 largest export markets byvalue, ahead of countries such as Russia,Ireland, Spain, and Argentina.
Trade in Services – A Potential for Growth:US-Israel Bilateral Trade in Services 1992-2008
In Millions of U.S. Dollars
Israel has the third highest numberof NASDAQ listed companies, behindthe U.S. and Canada.
A Foundation forBilateral Investment
• Between 2000 and 2008, U.S. DirectInvestment in Israel totaled $67.2billion and Israeli Direct Investment inthe U.S. totaled $44.1 billion.In 2008, Israel was among the top20 suppliers o Direct Investment tothe U.S. in terms o total and per capitainvestments.• Well known U.S. companies such asMicrosot, Berkshire-Hathaway, IBM,and General Electric have extensiveinvestments in Israel, while Israelicompanies such as Teva Pharmaceu-ticals, Tower Semi Conductors, andStrauss are heavily invested in the U.S.
01000200030004000500060007000800019921996200020042008U.S.imports o 
 
servicesrom IsraelU.S.exports o servicesrom IsraelBilateraltrade inservices

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