American and Israeli trade officials said yesterday that the two nations' Free Trade Area Agreement will go into effect Sunday with the first of a series of tariff reductions and eliminations.
At a joint press conference at the Israeli Embassy, Assistant U.S. Trade Representative Doral Cooper and the embassy's economic minister, Dan Halperin, hailed the reciprocal agreement, the first such two-way free-trade pact for the United States, as the beginning of a new era of U.S.-Israeli economic cooperation.
Under its terms, all trade between Israel and the United States, including services, will be free of tariffs and non-tariff barriers by 1995. In addition, both countries agreed to strengthen intellectual property rights, protecting trademarks, patents and intellectual property of all kinds.
Israeli Ambassador Meir Rosenne contrasted the agreement with the more general trend toward worldwide protectionism. Halperin added: "We are talking here about using carrots, not sticks."
To publicize the new opportunities for American businessmen, the Commerce Department opened a new Israeli Information Center in Washington, and scheduled 20 trade seminars across the country beginning in Chicago on Sept. 18.
U.S. exports to Israel last year were about $1.8 billion, $200 million more than imports from Israel. James B. Kelly, a Commerce Department official, said that Israel represents "over a $2.2 billion market for U.S. exporters."
Officials on both sides suggested that the trade could bulge well over that figure. "This is just a framework, and it will only work if investors and traders make use of it," Cooper said.
Much of the two-way trade between Israel and the United States is already tariff-free because Israel enjoys the Generalized System of Preferences for smaller nations, while the United States gets "most-favored nation" treatment from Israel. The real importance of the treaty, Halperin said, is that it opens up untold possibilities for free trade in goods and services never before exchanged by the two countries.
To get the agreement, Halperin said, "we had to pay a price; we undertook to phase out export subsidies in six years." But Halperin told reporters that Israel had already abolished all export subsidies within the past two months.
Cooper said that the agreement provides "a unique opportunity and a unique event for the United States," which, until the Israelis broached the idea to former U.S. trade representative William Brock in early 1981, had focused on negotiating multilateral trade agreements in accordance with the General Agreement on Tariffs and Trade (GATT).
Cooper explained that American interest in a bilateral trade deal with Israel was stimulated by two factors: first, the existence of a similar agreement between Israel and the Common Market, which put U.S. companies at a disadvantage in trading with Israel; and the fact that between 1981 and 1983, "we didn't have much luck in moving the multilateral trading system along toward liberalization. We were not going to wait, therefore, for the lowest common denominator. We could not get the GATT, multilateral trading system off the ground.
"So we decided to begin by small steps, to negotiate with those countries that were willing to sit down" and discuss trade concessions.
Cooper said the United States is still discussing an FTA agreement with Canada, but is not pursuing such bilateral deals as an alternative to multilateral negotiations, prospects for which are now brighter, she said.
Both Cooper and Halperin noted that because Israel will now have free-trade relationships both with the United States and Europe, there is the prospect of expanded sales by American companies to the European market through joint ventures with Israel. The U.S. companies can ship components duty-free to Israel, where they can undergo further fabrication for transhipment duty-free to Europe.
In answer to a question, Halperin agreed that it was also possible for European producers to expand sales to the United States by taking reverse advantage of the system. But he said that American companies had expressed much greater interest in investing in Israel than had European companies.
The new tariff reductions will eliminate all duties on miscellaneous manufactures; transportation equipment; electrical machinery; all nonmetallic minerals, except fuels; certain other machinery and fabricated metal products. Also on Sunday, there will be 20 percent reductions for food products, chemicals, apparel and textile products, with further cuts in later stages. Reductions on other goods do not begin until Jan. 1, 1990.