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The Next 25 Years of Israel – United States Free Trade

The Next 25 Years of Israel – United States Free Trade

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Published by IsraelUSTrade
On April 22, 1985, the United States Trade Representative and the Israeli Minister of Industry and Trade signed the U.S.-Israel Free Trade Agreement (FTA). The FTA was the U.S.’s first bilateral free trade agreement and Israel’s second (following Israel’s free trade agreement with the European Community, which was signed in 1975), and has greatly benifitted, and continues to benefit, both countries greatly.

On October 18, 2010 the U.S. and Israel announced a decision to create a work plan to ensure the benefits of the economic relationship are further shared and sustainable.
On April 22, 1985, the United States Trade Representative and the Israeli Minister of Industry and Trade signed the U.S.-Israel Free Trade Agreement (FTA). The FTA was the U.S.’s first bilateral free trade agreement and Israel’s second (following Israel’s free trade agreement with the European Community, which was signed in 1975), and has greatly benifitted, and continues to benefit, both countries greatly.

On October 18, 2010 the U.S. and Israel announced a decision to create a work plan to ensure the benefits of the economic relationship are further shared and sustainable.

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Published by: IsraelUSTrade on Jul 25, 2011
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05/12/2014

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Embassy of IsraelCommercial Mission
O
n April 22, 1985, the United States Trade Representativeand the Israeli Minister o Industry and Trade signed theU.S.-Israel Free Trade Agreement (FTA). The FTA was theU.S.s frst bilateral ree trade agreement and Israel’s second (ollow-ing Israel’s ree trade agreement with the European Community,which was signed in 1975).
Israi Prim Miistr Shimo Prs a U.S. Prsit Roa Raa,who wr i o wh th FTA was si, mt i th Whit Hous’sOa O.
 The Agreement entered into orce inSeptember 1985 ater it was approedby the U.S. House o Representatiesby a 422-0 ote and by a oice ote inthe U.S. Senate. In his remarks aterthe FTA was signed, President RonaldReagan said that “the Free Trade AreaAgreement symbolizes once againour two countries’ deep communityo interest and our shared alues andaspirations or a better uture. It under-scores the importance o Israel to theUnited States as an ally, as a tradingpartner, and as a riend.”Prior to the FTA, Israel benetted romthe Generalized System o Preerences(GSP), which is a unilateral trade preer-ence program that allows goods romdeeloping countries to enter the U.S.duty ree. In addition, beginning inthe early 1970’s, Israel was a recipiento U.S. economic aid. The FTA resultedin the mutual liberalization o bilateraltrade and the eentual elimination o U.S. economic aid to Israel.Under the FTA, the U.S. and Israel imple-mented phased tari reductions cul-minating in the complete eliminationo duties on manuactured goods onJanuary 1, 1995. The FTA permitted the
The Next 25 Yearso Israel – United StatesFree Trade
 
U.S. and Israel to main-tain certain importrestrictions, suchas quantitatie re-strictions and ees,other than customsduties, on agricul-tural products basedon agricultural policyconsiderations. Nonethe-less, oer 90% o U.S. agriculturalexports by alue enter Israel duty ree. To qualiy or preerential treatment under the FTA,manuactured goods must be (1) grown, produced,or manuactured entirely in the U.S. or Israel or (2)substantially transormed in the U.S. or Israel andcontain at least 35% U.S./Israeli content. To meet the35% content requirement, up to 15% o the product’s
Between 1984and 1996 bilateral tradein goods nearly tripled, reach-ing $12.4 billion. Between 1996and 2010, it nearly tripled again, reaching $32.3billion.
alue may originate in the other country so longas the input complies with the FTA’s rules o origin.Goods must also be shipped directly rom one coun-try to the other. The FTA, despite being oer twenty-e years oldand only twenty pages long, proides a stable busi-ness enironment and a exible platorm to urtherenhance the commercial relationship. The FTA estab-lished a bilateral Joint Committee (JC) in order to pro-ide a structure or discussing the enhancement o trade and issues o mutual concern. The JC meets an-nually and is headed by USTR and the Foreign TradeAdministration o Israel’s Ministry o Industry, Trade,and Labor. The JC’s broad mandate has proided theorum to urther liberalize trade in agricultural prod-ucts and establish cooperation on standardization.
A PlATFORM FORRegIOnAl ecOnOMIc cOOPeRATIOn
Th FTA was am i 1996 to sr asth patorm or th Quaiyi IustriaZo (QIZ) iitiati whih sks to our-a rioa oomi itratio a pro-mot prosprity a stabiity i th Mieast. I ra, oy atoris i siatJoraia a eyptia QIZs that mt thmiimum Israi iput rquirmt may x-port uty r to th U.S. throuh th QIZiitiati.Wh th frst QIZ was rat i Jorai 1998, Joraia xports to th U.S. wroy $16.4 miio. Withi 10 yars xportsrom th QIZs pak wh thy aoutor 65% o Jora’s $925 miio i xportsto th U.S.Wh th frst QIZ was stabish i eypti 2004, eyptia xports to th U.S. tota$1.3 biio. By 2010, eyptia xports toth U.S. rah $2.2 biio with QIZs a-outi or 43% o it.
Percentage o U.S. Exports to Israelby Industry in 2010
without diamonds
Fresh and Processed FoodsChemicals and PharmaceuticalProductsPlasticsStones, Glass, and MetalProducts Telecom and ElectronicProducts Transport EquipmentOthersMedical Deices
Percentage o U.S. Imports rom Israelby Industry in 2010
without diamonds
Chemicals and Pharmaceutical ProductsPlastics Textiles, Apparel, and Cloth-ingStone, Glass, and MetalProducts Telecom and ElectronicProducts Transportation EquipmentOthersMedical Deices
 
 The United States–Israel Standardization Dialogue wasestablished in 2007 to create a orum or the two go-ernments and standardization bodies to work togetheron issues such as product standards, testing, labeling,and certication requirements in order to acilitate andurther enhance trade.On October 18, 2010 the U.S. and Israel announced adecision to create a work plan to ensure the benetso the economic relationship are urther shared andsustainable. The work plan will aim to enhance regu-latory cooperation and seek to urther liberalize tradein agriculture and serices. As initial steps under thework plan, the parties agreed to pursue negotiationstowards implementation o aMutual Recognition Agree-ment or conormityassessment o tele-communicationsequipment andto explore waysto acilitate tradeby looking at thereleant customsprocedures andregulations.Both countries benetted,and continue to benet, romthe FTA, as eidenced by the exponential growth o the U.S.-Israel economic relationship since its sign-ing in 1985. Between 1984 and 1996, one year aterthe FTA was ully implemented and ten years ater itwas signed, bilateral trade in goods more than tripledrom $3.9 billion to $12.4 billion, with U.S. exports toIsrael totaling $6 billion and Israeli exports to theU.S. totaling $6.4 billion. Between 1996 and 2010,bilateral trade in goods nearly tripled reaching $32.3billion. In general, about 50% o bilateral economicexchanges are concentrated in trade in goods; 30%are in inestment; and 20% in trade in serices.In 2010, bilateral trade has started to rebound romthe global economic downturn and is up about 13%as compared to 2009 with U.S. exports to Israel up18% and Israeli exports to the U.S. up 12%. Bilateraltrade reached $32.3 billion in 2010 with Israeli ex-ports to the U.S. totaling $21 billion and U.S. exportsto Israel totaling $11.3 billion. The majority o bilateral trade in goods, excludingdiamonds, is concentrated in industrial and hightech items; or example, in 2010, chemicals and phar-maceutical products, plastics, telecommunications,transportation equipment, and electronic productsaccounted or nearly 78% o Israeli exports to the U.S.Similarly, chemicals and pharmaceutical products,plastics, transportation equipment, and telecom-munications equipment and electronic products ac-counted or nearly 65% o U.S. exports to Israel. The FTA has sered as the platorm to spur sig-nicant leels o bilateral oreign direct inestment(FDI). Between 2000 and 2009, U.S. direct inest-ment in Israel totaled $77.2 billion and Israeli di-rect inestment in the U.S. totaled $51.3 billion.In 2009, Israel was among the top 20 supplierso FDI to the U.S. in terms o total and per capita in-estments. Theseinestmentshae createdand sup-port tens o thousandso jobs inboth coun-tries.
8000700060005000400030002000100001992 1996 2000 2004 2009
 TRADE IN SERvICES
 A Potential or Growth:
US–Israel Bilateral Trade in Serices 1992-2009
 Israel is amongthe U.S.’s 12 largest export markets per capita. Despite a population o only 7.5 million peopleIsrael is among the U.S.’s 25 largest export markets by value, ahead o countries such as Russia, Ireland,Spain, and Argentina.
U.S.importsrom IsraelU.S. exportsto Israel Totalbilateraltrade
 
Israeli com- panies such as TevaPharmaceuticals, Tower Semi Conductors, and Strauss operatesignicant manuacturing acilitiesin the U.S. that employ tens o thousands o Americans.

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