Commentary: The U.S. – Israel FTA took effect on September 1, 1985, and was the first free trade agreement signed by the United States with another country. The FTA eliminated duties on manufactured goods as of January 1, 1995. It also allowed the United States and Israel to protect sensitive agricultural sub-sectors with non-tariff barriers, including import bans, quotas, and fees.
Note: The United States and Israel signed an agreement on agriculture in 2004.
The U.S. – Israel FTA is outdated by today’s standards because it has detailed obligations only on merchandise trade while the more recent FTAs include detailed obligations on agriculture, services, investment, intellectual property protection, standards, transparency, and rule of law.
Benefits of the FTA:
Investment: U.S. investment in Israel in 2004 data reached $6.7 billion, representing 49% of all foreign direct investment in Israel. U.S. companies have invested primarily in the Israeli communications, software, and life sciences sectors.
Services: The FTA includes 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.
Government Procurement: The FTA includes an agreement to eliminate all restrictions on government procurement, and calls on Israel to relax its offsets requirements for government agencies other than the Israeli Ministry of Defense. However, American companies are concerned about government procurement process, including the lack of transparency in the evaluation of tenders, lengthy tender procedures stemming from a lack of preparation, and the use of negotiated agreements or directed contracts rather than public tenders.
IPR: The FTA reaffirms obligations under bilateral and multilateral agreements relating to intellectual property rights. However, Israel was elevated to the Priority Watch List (PWL) in the USTR’s 2005 Special 301 due to continuing concerns regarding its policies on data protection for proprietary test data.
Prepared by the International Trade Administration
Market Access and Compliance