The Start of the Alliance
Israel is an independent nation found on the southwestern portion of Asia. Before it actually gained its independence in 1948, it went through tough times. Immediately after it had its freedom, the resources were scarce and rationing was imposed. Economic growth was a bit lagging behind until the 1950s when overseas capital became readily available for investment. From the said period to 1973 the Gross National Product (GNP) grew by 10% yearly.
After 1973, the growth decreased sharply due to several reasons. Inflation, currency devaluations and the world oil crisis all contributed to the downfall. Military expenditures were also seen as one of the causes. In the mid-1980's, Israel faced a huge foreign debt and a severe deficit in its balance-of-payments. This led the government to introducing economic austerity measures.
Tel Aviv and Haifa are two of the country's principal manufacturing centers although industrial facilities are well-distributed throughout the nation. Major industries include food processing, textile manufacturing, chemicals, fertilizers, machinery, armaments, electrical goods, precision equipment and electronics. The export-oriented industry focuses on diamond cutting and polishing.
Since 1948, cultivated and irrigated land increased. This was due to the creation of new communal and collective settlements. Expansion of poultry and dairy farming as well as increased output of citrus, grapes, cotton, olives, vegetables and flowers contributed to the economy's progress. Important export items along this category include Jaffa oranges and vegetables.
In the Israel trade balance, imports usually exceed exports thus a deficit is seen. To make up for the negative results of trade, foreign investment, tourism and financial aid are well promoted by the government. In fact, Israel is one of the nations which enjoy trading privileges in the European Economic Community (EEC) and with the United States.
Adding to the flourishing trade relations between the US and Israel is the former's commitment to the security of the latter. When Israel was founded in 1948, US played support to the changes it had to adapt especially that it was still starting to make a name for itself in world trade. These two countries have strengthened their historical and cultural ties through the years.
Another major role portrayed by the US was seen in the peacemaking procedures between Arabs and Israelis. Also in the record is the increased trade relation between the two nations. Technology efforts and bilateral science as well as the US-Israeli Educational Foundation and the Joint Counterterrorism Group contribute to a prospering friendship.
Major Exports and Imports Between the Two Nations
The primary commodities exported by Israel to other nations in the world include machinery and equipment, cut diamonds, agricultural products, software, chemicals, textiles and apparels while its primary imports are comprised of raw materials, military equipment, rough diamonds, fuels, consumer and investment goods and grain. Its major export partners are US, Belgium and Hong Kong. Israel's major suppliers are US, Belgium, Germany, the United Kingdom, Switzerland and China.
The US Census Bureau recorded total US exports to Israel for the ten-month period ending October 2008 at $12.43 billion. The imports of the former from the latter amounted to $19.19 billion for the said time frame. The same American agency gathered the following trade product data for 2007:
Trade Agreements Between The Two Nations
- Israeli Exports to US. The goods coming from Israel sold in the US territory made raves on the charts. In fact, a total of $20.81 billion had been recorded for 2007. Along this line, uncut or unset gem diamonds topped the charts with total earnings of $9.49 billion which is almost 45.60% of the year's round-up. Other remarkable goods on the list were: medicinal, dental and pharmaceutical preparations; telecommunications equipment; all types of complete civilian aircraft; other scientific, medical and hospital equipment; electric apparatus and parts; engines for civilian aircraft; US goods returned and reimports; measuring, testing and control instruments; and other military equipment. The last product made sales of $271.30 million which is equivalent to nearly 1.30% of the year's total.
- Israeli Imports from US. The products sent by US to Israel had their fair share in the market as well. In 2007, the total went as high as $13.02 billion. Gem diamonds were found on top of the listing with earnings amounting to $4.89 billion which was equivalent to approximately 37.56% of the year's total. With gem diamonds were other products like: civilian aircraft; complete military aircraft; civilian aircraft parts; other industrial machines; plastic materials; telecommunications equipment; tanks, artillery, missiles, rockets, guns and ammunitions; other petroleum products; and parts for military-type goods. Parts for military-type goods made $283.37 million which is 2.18% of the total imports of Israel from US for 2007.
- Fastest-Growing US Exports to Israel. The United States' exports to Israel made a big difference from the sales it had in 2006. Under this category, civilian aircraft which earned a total of $485.87 million impressed the market with 1,071.09% higher mark than its performance in 2006. Other commendable products were: sorghum, barley and oats; raw cotton; manufactured wood supplies; and unmanufactured agricultural industry products. The last items made sales amounting to $12.55 million in 2007 which is largely tracked at an increase of 334.09% when compared to its earnings in 2006.
- Fastest-Growing US Imports from Israel. The goods from Israel boomed in the US market in 2007 compared to its shares in 2006. With the long list of traded products, drilling and oilfield equipment and platforms led this chart with a total of $58 thousand or an increase of 2,900%. Other notable items were: unmanufactured steelmaking and ferroalloying materials; motorcycles and parts; specialized mining and oil processing equipment; and paper and paper products. The last commodities were sold for a total of $3.68 million in 2007 which is 678.08% higher than its sales in the US market for 2006.
Since Israel and the US committed to have a prosperous trading relationship, they have also signed several trade agreements. The pacts made provided more room for improvement as well as more efforts to do business. Here are the significant treaties that the government of both nations entered into:
Trade Barriers Between The Two Nations
- Israel Friendship, Commerce and Navigation Treaty. This was the earliest trade agreement entered into by these two nations. It was signed on August 23, 1951 and was implemented on April 3, 1954. Other than commerce, friendship and economic relations, the pact focused on cultural, religious and social aspects. It was also made for mutual interest, beneficial investments and equal rights and privileges accorded to nationals and companies of the two governments.
- Israel Free Trade Agreement. The free trade agreement was signed and entered into force on August 19, 1985. Aside from promoting mutual relations and historical friendship, the pact is a sign of the determination of both countries to strengthen and develop their commercial relations. The US's major part in the treaty geared on contributing to the harmonious growth of Israel as it was still in the process of development during that time. The FTA also removed barriers to trade between Israel and US. It specifically restricted the imposition of custom duties on imports and exports going to and coming from both nations.
- Israel Opening Market Measures Agreement. This agreement was undertaken on June 14, 1998 to further open both markets to products coming from each other's territorial jurisdiction. One vital point contained in this treaty is the opening of the telecommunications services and products making Israel eligible for this commerce.
Though guided with several treaties with a free trade agreement included, several issues contributed to disputes between these two nations. The list of barriers included a 1996 report on the malpractices when it comes to importing pistachio nuts. The US had pledged and provided evidences on the illegal importation of Israel of the said commodity from Iran. Another party contributory to the allegations was the European Union.
Under this war on this product, US accused the importation department of Israel of being inefficient for not being able to detect illegal interference by Iran on pistachio nuts. The Israeli laws and standards specify restriction of any imports coming from Iran. Thus, in fact and in paper, Israel broke national law leading to great effects on US interests over the commodities of Israel.
Future Trade Opportunities Between The Two Nations
The above case was solved after Israel adapted measures suggested by the US. Israel apologized for not being able to detect the imports coming from Iran. Since most of the pistachio nuts imported by the country come from Europe, it was difficult to tell which one comes from Iran. The Israelis welcome suggestions of US on the detection of the imports through visual, volume and chemical identification.
Much had been said about this problem. Since the dispute came to the better end of both countries, it is more desirable to look at more trade opportunities between the two nations. To begin with, trade fairs are oftentimes conducted by Israel. This is a good venue for the US to see which among the products of the Asian nation are competitive enough in the market.
Investment opportunities in Israel are also handful hence all countries in global trade are enticed to join. Accessing the list of these opportunities is made possible by www.israelemb.org. In the same site, you may also access some of the vital industries of Israel including banks and other financial institutions, research and development, association of software houses, science and technology, and industry associations.
US-Israel Trade References