Israel and the EU: Economic Allies
As a highly developed, industrialized state with advanced technology, Israel is a ripe
partner for increased economic integration within the EU. Indeed, in recent years, Europe
has become Israels largest trading partner, with one-third of Israels
total exports going to Europe and more than half of Israels imports coming from there. In
1997, Israeli exports to the European Union amounted to $6.7 billion and its imports from
the EU totaled $14.8 billion. While Israeli exports to the United States total $7.2
billion, Israeli imports from the U.S. amount to only $5.4 billion.
"Israel-EU economic ties are active and close."
Israel-EU economic ties are active and close. Israels political, industrial,
commercial and scientific elates tend to be EU-oriented. Many major Israeli and EU firms
have branches in the others jurisdiction. Close cooperative relationships between
enterprises are also widespread.
Israels economic relationship with the EU dates back to the signing of a simple
commercial agreement in 1964. In the 1970s, Israel began a process of trade liberalization
and of monetary and fiscal reforms on lines advocated by the EU and the U.S. In 1975,
Israel and the then European Economic Community concluded an extensive trade and
cooperation agreement that governed Israel-European relations for 20 years.
The EUS European Council endorsed granting Israel special economic status in the
European Union in December 1994. In a statement, the Council said:
"The Mediterranean represents a priority area of strategic importance for the
European Union.... The European Council considers that Israel, on account of its high
level of economic development, should enjoy special status in its relations with the EU on
the basis of reciprocity and common interest. In the process, regional economic
development in the Middle East, including in the Palestinian areas, will also be
In November 1995, Israel and the EUS 15 member states signed a Treaty of
Association agreement replacing and updating the 1975 trade and cooperation agreement. The
accord, approved by the European Parliament in February 1996, strengthened economic and
political ties between the parties. Economically, the accord expands the existing free
trade zone through updated, more flexible rules and practices. It prohibits the imposition
of customs duties on imports and exports between Israel and the EU, and it commits the two
sides to policies of greater liberalization in agricultural trade. The agreement also
eases restrictions on financial transactions and the flow of capital, and includes new
areas of Israel-EU cooperation including the promotion of culture and education. On the
political level, the agreement calls for regular dialogue at the level of ministers,
senior officials and diplomats.
Israel was also accepted as a fill member of the EUS Fourth Framework Research
and Development (R&D) program the first non-European state to be granted
membership. Initialed in October 1995, the R&D agreement means that Israel can
participate in the EUS R&D committees, Israeli companies can participate in
R&D tenders within the EU and Israeli institutions can participate in EU research
projects. In May 1998, Israel became a member of the EUS Fifth R&D program.
The European Union and Israel signed the Scientific and Technological Cooperation
Agreement in March 1996, according Israel the opportunity to participate in 16 research
programs now financed by the European Union. In return, European scientists will have
access to Israeli-initiated projects. The accord also calls for Israel to contribute about
$37.5 million annually to a program of jointly financed research projects.
In July 1997, Israel and the EU signed agreements on public procurement and
telecommunications, according Israeli suppliers greater access to the $600 billion public
procurement market and the $25 billion telecommunications market.
In October 1997, the Federation of Israeli Chambers of Commerce (FICC) was accepted as
a full member of EuroChamber the Federation of Chambers of Commerce of Europe
(FCCE). The FICC had been seeking this status for some time; until then it had been
participating as an observer.
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