This week's American Independence Day is another opportunity to discuss what is commonly referred to as the "special relationship" between Israel and the US. The immediate association attributed to this relationship is in the political, strategic, and military sphere, rather than in economics. But economic cooperation, which began 40 years ago, and has steadily grown, is no less important than the other spheres, and even more so in the limits of today's globalized world.
The US-Israeli cooperation began as a one-way street, in the form of $1.2 billion a year in US transfers to the Israeli government.
Twice in the past, the US came to the aid of the Israeli economy by extending huge loan guarantees: $10 billion in 1992 to help finance the massive immigration from the collapsed USSR, and another $10 billion in 2003 to help Israel emerge from a recession and stabilize the economy. Then-Minister of Finance Benjamin Netanyahu and his team obeyed the key US condition for the 2003 guarantees: to limit the annual increase in government spending to 1.7% of GDP, which acts as a barrier to a budget blowout.
In 1997, Netanyahu, then prime minister, in a wise move, decided to forego the $1.2 billion in annual civilian aid in favor of increased military aid. This was the moment that changed the basic feature of the bilateral relations. It was no longer the supporter and the one supported, but a respected and more equal partnership. The private sectors in the two countries became the dominant aspects of the partnership, and began to take advantage the 1985 Free Trade Agreement more effectively.
Today, we can say with pride that Israel is the US's largest trade partner in the Middle East, excluding US oil imports from Saudi Arabia. Israel is also one of the key emerging markets, which bring significant private investments to the US and contribute to its economy. Technologies developed in Israel are very attractive for US money.
Nonetheless, there is still an asymmetry that bothers Americans: the gap between Israeli civilian exports to the US and the constantly growing US exports to Israel. Access by US companies to Israeli government tenders is still difficult, mainly because of safety issues and standards. The American-Israel Chamber of Commerce is now considering changes in these regulations. Israeli information exclusivity and intellectual property laws, especially in pharmaceuticals, discriminate against US companies. In view of the special relationship, the strong friendship, and for the good of the Israeli economy, the Israeli government and the private sector must concentrate efforts and boost, even double, economic activity with the US within a few years.
It is a missed opportunity when Israeli government and military car fleets are not based on US cars, especially when the shekel is so strong. There should be a preference to US firms over those from other countries in projects such as the "Peace valley" or infrastructure projects.
On the eve of elections in both the US and Israel, it is important to avoid an election economy in Israel which can take the economy off its growth track and lead to inflation and recession. I hope that, regardless of the next US President's political party, there will be no dent in the current atmosphere of support of free trade.
The economic sphere has an important - large and growing - role in the relationship between the US and Israel. I believe that we should do everything, on both political and private levels, to keep developing it.
Danny Ayalon is vice chairman of the Israel-America Chamber of Commerce and the former Israeli Ambassador to Washington.
Published by Globes [online], Israel business news - www.globes-online.com - on July 3, 2008
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