An update for American exporters on the U.S.-Israel Free Trade Area Agreement

Business America, Jan 14, 1991 by Cherie Loustaunau

An Update for American Exporters on the U.S.-Israel Free Trade Area Agreement

Regional security concerns, a flood of Soviet immigrants into Israel, and the rising price of oil clamor for attention when U.S. exporters look at the Middle East. They do not focus on the U.S.-Israel Free Trade Area (FTA) Agreement amid these overwhelming political and economic concerns. Consequently, they are missing some significant opportunities to expand their businesses overseas. While total annual U.S.-Israel bilateral trade seems to have leveled off at $6 billion, the resolution of several issues negotiated between the United States and Israel under the FTA is opening new opportunities for American companies that are willing to take a look at this $15 billion-a-year market.

U.S. manufacturers of consumer products may be the primary beneficiaries of these changes. For instance, after lengthy discussions in the meetings of the Joint Committee of the FTA, Israel has begun implementation of its commitments on licensing U.S. products for import into the country. This means that licenses are not required for most American products, and where they are required, most are issued automatically, i.e., within 14 days after the application was submitted. U.S. manufacturers of clothing and shoes are the primary beneficiaries of this change.

In another example, the Knesset passed a law in September that implements an agreement the Israelis made in our October 1988 Joint Committee meeting to phase out the use of the TAMA (a percentage uplift in the imported price of the product) when assessing the purchase tax on imports. The phase-out began Jan. 1, 1991, and will be completed by 1995. This change is especially beneficial to U.S. manufacturers of household appliances, cosmetics, and many other items which compete with locally-produced products.

Though not a subject of negotiation in the FTA, Israel's plans to change the purchase tax on automobiles will make U.S. cars more competitive in the Israeli market. Sales of U.S. cars and vans have already picked up, with exports of more than $3 million through August 1990--that is over $3 million more than we sold in Israel in 1989! The Israeli government's decision to allow the use of unleaded gasoline has created another market for a U.S. product and should further improve automobile sales. We sold Israel over $6 million in unleaded gasoline last year versus zero in 1989.

The external factors affecting Israel's economy are also creating new opportunities for American companies. Higher oil prices could accelerate Israel's conversion to the use of more coal and thereby accelerate U.S. exports of coal. Through July this year, even before the sharp increase in the price of oil, U.S. coal exports to Israel had reached almost $17 million, $4 million more than in all of 1989.

In the construction industry, the housing shortage caused by the tremendous flow of new immigrants to Israel has opened a vast market for the sale of U.S. pre-fabricated housing, building materials and supplies, and high-technology construction techniques. We were able to negotiate the elimination of Israel's remaining tariffs on U.S. housing and building materials and make U.S. products in this area competitive with those from the European Community. In addition, Israeli companies want U.S. joint-venture partners to help them take advantage of this unique opportunity.

The influx of Soviet and East European immigrants, many of whom are skilled engineers and scientists, will over the longer term also contribute to a larger market for those products the United States has always sold successfully in Israel. These include metalworking machinery, computers and peripherals, software, process control equipment and machinery, and telecommunications equipment. To help U.S. exporters take advantage of the Israeli market for these products, the U.S. Department of Commerce is organizing a pavilion in the international trade fair, "Technology '91," in Tel Aviv in June 1991. You can obtain more information on participating in this exhibition by calling the Department of Commerce on (202) 377-0314.

The United States and Israel have not finished with our discussions in the FTA Joint Committee meetings. We meet twice each year and we continue to have a full agenda. Among other things, the United States is pushing Israel to discontinue the use of certain standards requirements, which we feel unfairly block the sale of U.S. products. Israel would like to see a more open U.S. government procurement market. Both sides hope that after the end of the Uruguay Round multilateral trade negotiations, we can negotiate an accelerated reduction in the remaining tariffs under the FTA.

More detailed information on the market for your product in Israel and on how it is treated under the FTA can be obtained from the Israel Information Center, Room H2039, U.S. Department of Commerce, Washington, D.C. 20230; tel. (202) 377-4652, fax (202) 377-5330. Write or call to find out how your company can take advantage of the U.S.-Israel Free Trade Area Agreement.