The Maturing of Economic Relations
U.S.-Israel economic relations have been an outgrowth of the special political relationship between the two countries and not the result of purely economic factors. These ties have increased in magnitude and become more balanced over time, almost independent of changes in the political environment. The result is that U.S.-Israel economic relations today are quite different than they were at their outset 45 years ago.
Four types of exchanges dominate economic relations between the United States and Israel: financial assistance, trade in goods, investment flows, and technology exchanges. Recent developments in these four areas are presented in Table 5.1. 1 First, the data reveal that economic relations between the United States and Israel have intensified in recent years, growing from less than $1 billion in 1970 to almost $11 billion in 1990. There has been a trend toward increase in all four categories, particularly in commercial flows, which has not been affected by changes in political relations.
Official financial assistance to Israel has been the core of U.S.-Israel economic relations since the country was established in 1948. Initial modest aid flows have grown over the years to the current level of official assistance of $3 billion per year -- $1.8 billion in military assistance and $1.2 billion in economic assistance. In 1992, in response to the significant economic burden Israel faced in absorbing an expected 1 million Jews from the former Soviet Union, the United States agreed to guarantee up to $10 billion over five years in commercial loans to Israel.