The United States and Israel are near agreement on a free-trade pact that within 10 years will erase all tariffs between the two nations, Reagan administration and Israeli sources said yesterday.
The major issues were reported to be resolved, and the negotiators are "tying up loose ends" on the pact, which was called more than 99 percent complete. Under the agreement, some products will become duty free as soon as Congress acts, probably early this spring, while import-sensitive items such as textiles, footwear, some farm goods and electronics will take 10 years to reach a duty-free stage.
The idea of free trade between the two countries was one of a number of military and economic concessions made by President Reagan during his November 1983 meeting with then-Israeli prime minister Yitzhak Shamir, in an effort to help Israel's sagging economy and strengthen strategic ties between the two nations.
Israel's economic situation has worsened in the past 14 months, and Defense Minister Yitzhak Rabin began talks here yesterday on requests for increased military and economic aid. Israel's request for an emergency gift of $800 million on top of $1.9 billion in economic aid for 1986 is now under consideration by the Reagan administration.
The free-trade agreement is unlikely to have an immediate impact on Israel's economic problems, said Dan Halpern, economic minister at the Israeli embassy and the key negotiator for his country. But the pact will help Israel's long-term economic prospects by increasing its exports to the United States and by directing more American investments to the country, he added.
"I think the whole package is a good one. This package can work only if it is of mutual benefit. A trade agreement that is not mutually advantageous will not last more than a few years and we want this to last forever," Halpern said.
Israel already has a free-trade pact with the European Community, the second-largest market in the world behind the United States.
Administration sources said the agreement was reached last week after a break in a logjam in the negotiations over requests by both countries to delay duty-free status for products that each considered especially sensitive to import competition. In the end, the phasing in of sensitive products was negotiated on an item-by-item basis.
The pact will not be made public or signed, however, until key congressmen and private-sector advisers from affected industries in this country have a chance to review the agreement. This process is likely to be completed within 45 days, administration trade officials said. Then the agreement goes to Congress, which has 60 days to either approve or disapprove it with no amendments allowed under a fast-track approach for the bill.
The agreement also needs approval by Israel's cabinet and is likely to be presented to the finance committee of the Knesset, the Israeli parliament, Halpern said.
Before U.S. Trade Representative William E. Brock won congressional approval last fall to negotiate the pact, he had to promise that import-sensitive industries would be given time to adjust to Israel's new duty-free status. Israel also had its own sensitive list, including some electronic products that it feared would be swamped by more competitive American imports.
The products considered most sensitive by Americans -- basically farm goods such as processed tomatoes, orange and grapefruit juice, olives, garlic and dehydrated onions and some forms of jewelry -- don't reach duty-free status for 10 years, with no tariff reductions at all in the first four years, sources said.
Textile products from both countries also take 10 years to reach duty-free status, but there will be tariff reductions during that period, starting with an immediate 20 percent decrease. Another group reaches duty-free status by 1987 while some products will become duty free as soon as Congress and the Israeli cabinet approve the pact.
U.S. negotiators pressed Israel to end its export subsidies and tightened its ability to raise tariffs for balance-of-payment reasons, which is allowed by international trade laws, administration trade sources said.
The United States is Israel's largest trading partner, with $3 billion worth of commerce between them in 1983.