Israel is pushing to upgrade major trade agreements to help boost the country’s growing technology exports.
The Israeli government is in preliminary talks with officials in the U.S. and Europe to lower trade barriers around services, such as cyber security and banking, according to Marc Luban, head of international affairs in the Ministry of Finance’s chief economist office.
The drive to renegotiate global trade deals reflects the ascending importance of Israel’s service industry—driven by the country’s tech sector, whose fintech, cyber security and so-called digital health startups have been flooded with private funding in recent years. Israeli exports of services rose to a record $50 billion last year.
Led by the U.S., countries around the world are trying to bend trade agreements to better serve their interests. And while global trade spats have slowed Israel’s total exports, the effect has been muted on service providers, whose exports are expected to surpass that of goods next year, Luban said.
“We worried very much about goods and agriculture,” but not enough about Israel’s service industry, Luban said in an interview in Jerusalem. “From 2020, Israel will upgrade its trade agreements” with the major trading blocs, he said.
American officials are coming to Israel in the next few weeks to negotiate new trade agreements, including financial services and investment, according to Luban. That could remove red tape for U.S. banks interested in the Israeli market and facilitate visas for skilled workers, he said.
Global corporate giants have tended to overlook Israel as a target for international expansion, partly due to the relatively small size of the market and its reputation of being overly regulated. Many of the world’s biggest banks have offices in Israel, though mainly to serve large companies rather than offer retail services.
Luban wants these new trade deals to push regulators to synchronize local rules with global standards, which would then open Israel up to international competition.
“It’s a kind of pressure on the Israeli regulators,” Luban said.
Progress on new deals has been held up by Israel’s current political paralysis. Earlier this year, American negotiators tried to upgrade their agricultural trade pact with Israel, but those talks had been put on ice until Israel finds a new government.
Israel has made some headway with Europe, starting with a new trade pact with the U.K. signed in February, and it has held initial discussions with the Swiss officials about similarly upgrading ties with the European Free Trade Association, a regional trade group of three other nations including Iceland and Norway.
Talks with the European Union, Israel’s largest trading partner at $38 billion of commerce last year, haven’t yet started, and will be difficult to navigate because various EU bodies will need to sign off on the negotiations, Luban said.
Representatives for the EU and the U.S. Trade Representative didn’t reply to Bloomberg requests for comment.
Switzerland is “prepared to discuss whether a modernization of the already existing agreement between EFTA and Israel in the area of services and other areas would be of common interest,” said Irene Harnischberg, spokeswoman for Switzerland’s economy ministry.
European countries are interested in partnering on topics ranging from water management to cyber security and artificial intelligence, according to David Siegel, a former Israeli diplomat who heads ELNET-Israel, a non-profit organization that focuses on relations with Europe.
“Most, if not all, of our delegations want to have exposure to Israel’s high-tech market,” he said.