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Israel International Relations: The Israel-EU Trade Association Agreement

(November 20, 1995)


The Association Agreement between Israel and the European Union was signed in the presence of the Foreign Minister of Israel and the Foreign Ministers of the EU on November 20, 1995.

The preamble to the Agreement includes a declaration that the European Union, the member states and Israel are interested in promoting the integration of Israel's economy into the European economy. The Agreement underwent a ratification process between 1996-2000, and entered into force on June 1, 2000.

The political section of the Agreement institutionalizes the existing political dialogue and extends it to other areas of dialogue. To date, political dialogue at ministerial level was usually conducted several times a year, often within the framework of forums of foreign ministers. These contacts took place on an ad hoc basis, and were not anchored in a formal agreement. The Association Agreement determines that regular meetings will take place once a year at several working levels, from the most senior ministerial level to that of officials.

The commercial section of the Agreement regulates the flow of trade in manufactured and agricultural products (in 1999, the mutual volume of trade totaled $22 billion). The Agreement maintains the free trade area established in 1975, and improves the terms of trade in manufactured and agricultural products. This section deals also with an easing of the terms of trade with regard to procedures and tariffs.

A new element in the Agreement is the section dealing with liberalization of the services and capital market and the right of establishment of firms. This section anticipates the future formulation of bilateral trade rules, based upon international developments within the WTO framework.

The section on cooperation deals with a wide range of fields, including law, internal security, environment, education and infrastructure. Most of the areas of cooperation are new and reflect the mutual aspiration to expand the application of the primarily trade-related agreement of 1975 to economic and other areas as well.

The Agreement created formal structures such as the Association Council, headed on the Israeli side by the Foreign Minister, which is to meet once a year. Also set up was the Association Committee, headed by the Director General of the Ministry of Foreign Affairs. In addition, sub-committees at expert level have been set up for the discussion of professional matters, such as the opening of negotiations on economic issues (mutual recognition and accumulation). The Association Agreement also establishes mechanisms for its effective and ongoing implementation, including mechanisms for the prevention of disagreements.

The Convening of the Association Council

On June 13, 2000 the Association Council between the European Union and Israel held its first meeting in Luxembourg, headed by Foreign Minister Levy and the Foreign Ministers of the EU, marking the entry into force of the Association Agreement between Israel and the EU. Foreign Minister Levy addressed the Association Council, and referred in his speech to Israel's wish to enhance its ties with Europe in all spheres.

The Advantages of the Association Agreement for the State of Israel

The Association Agreement provides Israel with many advantages in its relations with the EU, both in the political sphere (establishment of an institutionalized political dialogue at the most senior levels) and in the economic sphere, as a result of the liberalization of the possibilities of trade, and particularly Israeli exports to Europe. Within the framework of the Agreement, Israel will be able to continue improving its economic status in relation to Europe, particularly in the field of new technologies in which it specializes.

Political Contacts during the Association Council Meeting

In the course of the meeting of the Association Council, Foreign Minister Levy held political meetings with the following leaders: the President-in- Office of the EU Council, Portuguese Foreign Minister Jaime Gama; EU High Representative for Common Foreign and Security Policy, Javier Solana; the EU Commissioner for External Policy, Chris Patten; and the President of Malta, Prof. Guido de Marco. Regional and bilateral issues were discussed in the meetings. The Foreign Minister also held a press conference together with Foreign Minister Gama and EU Commissioner Patten.

Signing of the Framework Agreement with the European Investment Bank

The European Investment Bank, one of the European Union institutions, was founded in 1958, and is located in Luxembourg. It provides credits and guarantees for the funding of up to fifty percent of investment in projects which the EU seeks to promote in domains such as infrastructures, energy, industry, services and agriculture.

The EIB was established for non-profit purposes, and its budgetary resources are derived from the funds of EU member states, on the basis of each state's GNP. In 1999, the funds at the disposal of the Bank totaled EUR 100 billion. Overall, the loans and guarantees granted by the EIB do not exceed 250 percent of its equity.

The EIB - General Activity

Most of the activity of the European Investment Bank is within the EU, although it also contributes to EU development policy. Thus, in the early 1990's, the Bank began to grant loans and credit to the countries of Central and Eastern Europe. In addition, within the context of the Mediterranean policy of the EU, the Bank reached financial framework agreements to provide credit to twelve of the Mediterranean countries participating in the Barcelona Process.

Bank Activity in the Mediterranean Context

The Barcelona Process does not have direct budgets for projects in the domain of infrastructures, and the EIB therefore acts as a European "tool" in this sphere. In the last five years, the Bank has channeled more than EUR 3.3 billion to the Mediterranean countries. In 1999 alone, the EIB signed agreements for a total sum of EUR 802 million with the Mediterranean states.

The European Investment Bank began its activity in the Mediterranean region in the mid 1970's. Israel and the EIB signed the initial financial protocols at that time, and the Framework Agreement just signed constitutes a continuation of these protocols.

The Agreement - The Israeli Context

On June 13, Foreign Minister Levy and the President of the EIB, Philippe Maystadt, signed a Framework Agreement, enabling the European Investment Bank to grant loans for Israeli projects related to the Barcelona Process, including infrastructure and environmental projects. The Agreement thus institutionalized the ties between Israel and the Bank.

Recently, the Israel Electric Company expressed interest in receiving loans from the EIB for a project involving the conversion of utilities to gas. A loan totaling EUR 22 million for the Israel Airport Authority is also in the pipeline (from funds that were allocated but not utilized, in an earlier financial protocol). In the past, the Bank has provided assistance in the financing of a drainage project in Nahal Soreq.

Sources: Israeli Ministry of Foreign Affairs