The U.S.-Israel Free Trade Agreement: Hold the Celebrations

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The U.S.-Israel Free Trade Agreement: Hold the Celebrations

By Colin MacKinnon

September 1, 1995 is the 10th anniversary of the U.S.-Israel Free Trade Agreement. The agreement was hailed in 1985 as a great step forward in U.S.-Israeli trade relations that would eliminate trade barriers, snare a bigger chunk of the Israeli market for U.S. companies, and--don't laugh--help wean Israel away from its reliance on U.S. taxpayer aid.

When last we looked at the FTA ("The U.S.-Israel Free Trade Agreement: Aid Instead of Trade?", WRMEA September/October 1993), none of this had happened. How about today, on its tenth anniversary? Should anybody celebrate?

Well, no. There have been one or two pieces of good news: flat out import duties on U.S. goods entering Israel are gone and that's fine. And regulations that discriminate against U.S. automobiles (Israel puts a duty on engine size rather than value of the vehicle) are to be eliminated next year.

But the FTA still is tilted in Israel's favor and will stay that way indefinitely unless either the Clinton administration or Congress lights a fire under the Israeli government. Neither eventuality is likely with U.S. elections in the offing.

Meanwhile, here's how the FTA with Israel discriminates against the U.S.:

For starters, duties aren't the only way to discourage imports. Israel also has plenty of so-called non-tariff barriers, and all of those the U.S. was complaining about two years ago still are in effect. Here's a sampling:

TAMA. TAMA (a Hebrew acronym for "additional rate of increase") is an artificial price increase that Israeli officials, by methods known only to themselves, apply to foreign goods. When an item--say an American washing machine--comes into Israel, customs officials are supposed to guess at the price it will fetch in downtown Tel Aviv and use that guess to slap on a local purchase tax.

Nobody knows how the guessing works, but it often seems to result in a price tag on the showroom floor that's higher than that of a comparable Israeli product. Both U.S. manufacturers and Israeli consumers are hurt by this.

Israelis claim that TAMA puts the same taxes (not tariffs, mind you) on Israeli goods and hence is neither discriminatory nor illegal under the FTA. But U.S. officials don't think so. In any case, when U.S. officials try to nail down how TAMA works, Israeli officials stonewall.

Copyright inadequacies. Israel's copyright law is based on UK legislation dating from 1911. The law needs modernizing. It doesn't explicitly protect computer software, for example, except as "literary works," a pretty strange category into which to put a spreadsheet program, but there is no other. The law doesn't recognize rental rights for sound or video recordings, either. U.S. officials also say that policing and enforcement are poor.

Such inadequate copyright protection hits the U.S. where it hurts. Software, pharmaceuticals, and sound and video recordings, all products that require strong copyright protection, are major U.S. exports.

Standards. israel insists on strict metric packaging, not just labeling. If you're selling corn flakes, your package must not only say how much the corn flakes weigh in centigrams (American packages do), the package itself must be in a standard metric size--250 or 500 grams or whatever.

Supersol, a leading Israeli supermarket chain, put on an "American Food Festival" recently during which it promoted U.S. products, apparently with great success. But the chain had to get special permission to import American packaged goods, and after the festival, when it tried to import some of the more popular items on a regular basis, it could not. Israeli officialdom would not allow the English-sized packaging. Score another for the Europeans.

What all these barriers do--TAMA, the copyright laws, standard requirements--is make it hard to import U.S. goods into Israel.

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