Free Trade Agreement (FTA)

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. Signed April 22, 1985, the final phase of the agreement was fully implemented on January 1, 1995. 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.

Since signing the FTA, U.S. exports to Israel have grown from $1.8 billion to more than $9.7 billion, an increase of 335 percent. Roughly one-fourth of all Israeli imports now come from the United States. Meanwhile, U.S. imports from Israel have jumped from less than $2.2 billion in 1984, to more than $16.9 billion in 2005, an increase of 598 percent. The overall volume of trade between the two countries has risen 471 percent, from less than $4 billion in 1984 to more than $26.6 billion in 2005. Israel is now America's 19th leading trade partner.

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.