Trading Partner Portal: Israel

Israel Trip Blog - Fall 2017Israel Trip Blog – Fall 2017

Overview

Trade Overview

israel_usa_ca_flagsIsrael boasts a highly advanced market economy that consists of a rapidly growing high-tech sector that is supported by a strong venture capital industry. With only a population of 8.38 million, Israel has a gross domestic product (GDP) of $299.4 billion. World Bank

Israel has one of the largest diamond industries in the world and also possesses a substantive service sector. In addition, Israel also remains a world leader in telecommunications and software development. Its main exports include cut diamonds, high-technology equipment and agricultural products, particularly fruits and vegetables. Israel is highly dependent on foreign imports of coal, petroleum, food and production inputs, especially since access to natural resources are relatively scarce.

ca-exports-to-israel-2015Tourism has become a large industry for Israel as a well sought out tourist destination for the country’s religious significance, historical sites and architecture, temperate climate, beaches and unique geography. Despite past security concerns with neighboring countries, Israel attracts millions of tourists annually.

In September 2010, Israel became a member of the Organization for Economic Co-operation and Development (OECD) and has signed several free trade agreements with the United States, European Union, Canada, Mexico, Jordan, Egypt, and Turkey.

In 2016, U.S. exports were over $13.1 billion, causing Israel to be the 21st largest export destination. Main U.S. exports to Israel include miscellaneous manufactured commodities, computer and electronic products, transportation equipment and non-electrical machinery.

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                          Israel – California Trade

In 2016, California exported over $2 billion to Israel, making it the state’s 17th largest export destination. Miscellaneous manufactured commodities is the largest export category for California, with over $1 billion, representing nearly 55.4 percent of all exports to Israel.

Other major export categories to Israel include computer and electronic products, machinery (except electrical), and agricultural products, totaling 15.9, 8.9, and 4.2 percent of all export commodities respectively. U.S. Department of Commerce

Energy SectorAlon Oil is an Israeli Energy company which operates several refineries on the U.S. West Coast, including California. Alon markets energy products in Israel. In addition, Zion Oil, although Texas based primarily, is involved in oil exploration in Israel.

High Tech Sector — The Israeli high-tech industry has been developing and reaching new peaks each year, both in technological achievements and in sales. Intel Israel has been in operation since 1974, supporting five locations throughout the country. In addition, IBM also has several locations throughout Israel

According to the U.S.-Israel Business Initiative, Israel is an ever-growing partner for the United States in generating transformative innovation for American companies while creating high-skilled jobs in the US. Nearly half of the world’s top technology companies have bought start-ups or opened research and development centers in Israel. More than 300 foreign companies have established R&D centers in Israel with more on the way.

Israel’s Amazing World Rankings
It is nothing short of amazing that a small, young country with just over 8 million people in existence for only 69 years can rank so high on so many international comparative indices.
The Times of Israel, April 17, 2017

California Governor Jerry Brown signs anti-BDS bill into law
Newly approved legislation prevents companies that boycott or discriminate against any sovereign country from trading with the state.
Times of Israel, September 25, 2016

Foreign Direct Investment

In 2015, U.S. Direct Investment to Israel was documented at $10.3 billion. Foreign Direct Investment from Israel to the U.S. was roughly $7.4 billion. Bureau of Economic Analysis

Scouting Technology? Follow the Crowd to Israel
By Sherwin Pomerantz, featured in Atid-Edi Ltd, January 27, 2015

California and Israel Sign Pact to Strengthen Economic, Research Ties.
Governor’s Office, March 5, 2014

“Through this agreement, California and Israel will build on their respective strengths in research and technology to confront critical problems we both face, such as water scarcity, cybersecurity and climate change,” said Governor Brown.

ISRAEL HAD A GREAT ECONOMIC YEAR…NOW WHAT?
EDI ECONOMIC BLOG – JANUARY 8 2013 By Sherwin Pomerantz

The basic economic statistics for 2012 are now beginning to surface and it is clear that economically, in spite of the world’s financial doldrums, Israel did pretty well.

From 2009-2012 Israel experienced economic growth of 14.7%, well ahead of most OECD countries (e.g. US – 3.2%, Germany – 2.7%, Australia – 10.7%, Canada – 4.8%) and much better than the general decline in economic growth in Europe of 1.5%. Israel might have had even better results if not for the continued sabotaging of the natural gas line from Egypt which caused the country to replace that source of energy by purchasing fuel from more expensive suppliers. There is, of course, no telling ultimately what will happen with that situation, as much depends on how the political situation in Egypt evolves.

In 2012, Israel demonstrated economic growth of 3.3%, which was more than double the OECD average of 1.4%. The only two major economies of the world that did better than Israel were India, which saw 4.5% growth, and China which experienced 7.5% growth. Coupled with this growth was a decline in Israeli unemployment to 6.9%, also lower than the OECD average of 8%.

Where Israel really did well last year was in tourism. With 2.9 million tourists in 2012 the country set a new annual record and 2013 looks to be even better, given existing travel agency bookings. The single largest group of tourists came from the US, while other significant sources of tourism included Russia, France, Germany and Britain with a growing cadre of visitors from Asia. This will, no doubt, continue to improve as even countries with which Israel does not have diplomatic relations such as Malaysia, are now permitting their nationals to travel to Israel, especially for religious tourism.

The challenge for the country, of course, is to keep these numbers progressing in the positive direction and to leverage Israel’s position as the world’s second largest source of innovation so as to spur continued economic growth. For the moment, large firms worldwide continue their interest in growing their Israel operations. As examples, Google late last year opened a start-up incubator in Israel and Dutch giant Phillips has also announced the establishment of a new R&D center in the country.

All of this, of course, remains quite amazing in the face of continuing political distress among most of Israel’s neighbors which, in Syria’s case, has resulted in large scale fatalities as well. Israel’s added value is its depth of technological capability along with relative political and financial stability.

EDI continues to encourage its clients and prospects to explore opportunities in Israel further, as the firm is uniquely positioned both to assist foreign entities to gain a foothold locally and to assist local companies to locate strategic partners overseas.

Free Trade Agreement

U.S.-Israel Free Trade Agreement

In 1985, President Ronald Reagan signed the U.S.-Israel Free Trade Agreement. It was the first FTA the United States entered into, and has served as a model for many future trade agreements. The FTA eliminates all custom duties between the two countries, and has resulted in a huge increase in the overall volume of bi-national trade to total $38.2 billion in 2014. U.S. exports account for roughly one fourth of all Israeli imports, with a value of over $14 billion. Israeli exports to the United States have also increased since the FTA’s implementation. In 2014, Israeli imports to the United States were $23.1 billion, an increase of over 300 percent since 1985. Israel is the 23rd largest export market for U.S. goods and services.

California exports to Israel were up considerable from $1.2 billion in 2009 to $2.3 billion in 2014, with manufactured goods accounting for the majority of these exports.

USTR Announces Agreement between the U.S. and Israel to Reaffirm Commitment to Expand Bilateral Trade and Investment

Deputy United States Trade Representative Ambassador Miriam Sapiro and Israel’s Director General of the Ministry of Industry, Trade, and Labor, Sharon Kedmi, this week reached agreement on a process to further their shared commitment to expand trade and investment between the United States and Israel. They applauded progress on trade and investment issues since a meeting between Ambassador Kirk and Minister Ben Eliezer in Washington in October 2010, and agreed to a plan that will guide future discussions and develop further as those discussions evolve. They also agreed to redouble their efforts to make further progress ahead of the U.S.-Israel Free Trade Agreement (FTA) Joint Committee meeting, to be held later this fall.

“The Obama Administration places great importance on the relationship between our countries, and we will continue our collaborative efforts to expand trade and investment opportunities for American and Israeli exporters and investors,” said Ambassador Sapiro.

The two sides also agreed to explore ways to realize fully the potential benefits of the U.S.-Israel trade agreement, including through the further liberalization of trade in services and agriculture and the removal of trade-restrictive measures. Ambassador Sapiro and Director General Kedmi also committed to consider cooperation in other areas, including addressing regulatory issues which might be impeding the movement of goods, services and capital between the two countries, in consultation with relevant stakeholders.