Background & Overview
by Mitchell Bard
The Free
Trade Agreement (FTA) signed by the United States and Israel in 1985 affords American products the opportunity to compete on an equal
basis with European goods, which all have free access to Israel's domestic
markets. Israel was the first country to conclude a free trade area
agreement with the United States and the FTA served as a model for later
agreements signed between the United States and Canada, Jordan, and Mexico.
The FTA eliminated all duties and virtually all other
restrictions on trade in goods between the two countries. The FTA was
signed April 22, 1985, by the United States Trade Representative (USTR)
and the Israeli Minister of Industry and Trade and was officially entered
into force in September of that year after it was approved by the U.S.
House of Representaives in a 422-0 vote and a voice vote in the U.S.
Senate. The final phase of the agreement was fully implemented on January
1, 1995 when the two countries completely eliminated all duties and
tariffs on manufacted goods.
The FTA also includes a Declaration on Trade in Services,
a non-binding statement of intent to eliminate barriers to trade in
services such as tourism, communications, banking, insurance, management
consulting, accounting, law, computer services, and advertising. The
U.S. and Israel also signed an Agricultural Agreement, to reduce trade
barriers on agricultural products and boost agricultural trade between
the two countries. Finally, the FTA includes provisions to protect American
industry. For example, certain non-tariff import restrictions on agricultural
products are allowed.
Both the United States and Israel have benefitted
immensely from the FTA as can be evidenced in the exponential growth
of their bilateral trade over the past 25 years. Between 1986 and 1996,
the first decade of the FTA's implementation, bilateral trade in goods
more than tripled, from $3.9 billion to $12.4 billion, with U.S. exports
to Israel totaling $6 billion. In the following fourteen years, from
1996 to 2010, the bilateral trade nearly tripled again, rising to an
estimated total of $32 billion. Over this time, U.S. imports from Israel
have jumped from less than $2.2 billion in 1984 to more than $22 billion
in 2010, an increase of 954 percent. Meanwhile, Israeli imports from
the U.S. have risen from around $1.8 billion to more than $13 billion.
Due to the success of the FTA, Israel is now among
America's 12 largest export markets per capita. Despite having a population
under 8 million, ranking just 96th highest in the world, Israel is still
among the U.S.'s 25 largest export markets by value, ahead of much largers
countries such as Russia, Spain and Argentina.
The FTA gives American companies exporting to Israel
an advantage over competitors by virtue of the elimination of all tariffs
on American exports to Israel. In addition, as one of only three countries
(Jordan and Mexico are the others) with free trade agreements with both
the United States and the European Community, Israel can act as a bridge
for international trade between America and Europe.
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