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U.S. Commerce Department Names Israel Market of the Month

The U.S. Commercial Service, the export promotion agency of the U.S. Government, featured Israel as the "Market of the Month" for August on the U.S. Government's Export Portal. Israel is the 21st largest export market for U.S. goods and services (two-way trade in 2003 was $19.6 billion). The United States is Israel's largest single country trading partner, and American exports accounted for 20% of the import market. Israel's commercial relationship with the United States has developed rapidly since the signing of the U.S.-Israel Free Trade Area Agreement (FTAA) in 1985. Since 1995, nearly all tariffs on trade between the two countries have been eliminated. Israel has emerged as one of the world's premier centers for high-tech design and research and development, with particular strength in computer software, telecommunications and biotechnology — offering many opportunities for U.S. businesses.

Table of Contents


Introduction: Why Israel?

It might seem difficult at first to separate Israel from its political issues. When many people think of Israel, the Israeli-Palestinian crisis and the media accounts of violence come to mind. However, Israel is a technologically advanced market economy with a highly skilled and well-educated workforce. Cultural life is vibrant, restaurants and beaches are crowded, and there is a lot of business being conducted. The United States is Israel's largest trading partner, and there are opportunities here for U.S. exporters. A recognized leader in high-tech industries, Israel's investment in research and development is higher than any single OECD country. In fact, after the United States and Canada Israel has the most companies listed on the NASDAQ.

Israel's population of 6.7 million lives in an area roughly the size of New Jersey. The business environment and style here will seem familiar to American businesses, but personal relationships can play a relatively larger role within Israel's tight-knit population than in the United States. Israel's per capita income is 75% of the average in OECD nations, and remained strong through the recent economic slowdown.


Economic Overview

Israel and the United States are close allies and rely heavily upon one another for two-way trade. Israel's commercial relationship with the United States has developed rapidly since the signing of the Israel Free Trade Area Agreement (FTAA) in 1985. Nearly all tariffs on trade between the two countries have been eliminated in the past decade. The influx of Jewish immigrants from the former USSR during 1989-99, coupled with the opening of new markets at the end of the Cold War, energized Israel's economy. Growth was a strong 7.2% in 2000, but the bitter Israeli-Palestinian conflict, difficulties in the high-technology, construction and tourist sectors, and fiscal austerity in the face of growing inflation led to small declines in GDP in 2001 and 2002. Although GDP was flat in 2003, the economy has begun to grow again in 2004.

Hi-tech and defense industries dominate Israel's imports, and Israel remains a global center for hi-tech design and R&D. According to Swiss business school IMD International, Israel has moved from 54th to 51st place in economic performance in its IMD World Competitiveness Yearbook 2004. Israel leads the world in the ratio of R&D spending to GDP, in the number of wireless handsets per capita and in the ratio of government spending to GDP. Israel is in eighth place in per capita business spending on R&D, tenth place in total per capita R&D spending, fourth place in entrepreneurship and fourteenth place in spending on wireless. Israel is in 41st place in real GDP growth, ahead of Austria, Norway, Italy, France and Germany. In GDP in per capita dollars, Israel is in 31st place.

In 2003, the government adopted an economic plan that involves investment in infrastructure amounting to about $2.5 billion over the next five years. This plan will provide multiple opportunities for U.S. architectural, engineering and construction firms and investors. Israel depends on imports of crude oil, grains, raw materials, and military equipment. Despite its limited natural resources, Israel has intensively developed its agricultural and industrial sectors over the past 20 years. Cut diamonds, high-tech equipment and engineering services, and agricultural products (fruits and vegetables) are Israel's leading exports.


Israel at a Glance:


6.7 million (20% are Israeli Arabs)

Government Type

Parliamentary Democracy

Languages Hebrew (official), Arabic (used officially by Arab minority) English is widely used by the business community and government officials.
Literacy 95%
Total Area 20,770 square kilometers (slightly smaller than New Jersey)
Nominal GDP $118 billion
Commercial Center Tel Aviv
Export Partners EU (39%), the United States (29%) and Asia (14%)
Trade with U.S. U.S. exports to Israel fell slightly in 2003, from $7 billion to $6.8 billion
Natural Resources Generally limited, but there is some timber, potash, copper ore, natural gas, phosphate rock, magnesium bromide, clays and sand.
Primary Industries
  • Electronic equipment
  • Chemicals & Fertilizers
  • Pharmaceutical Products
  • Rubber & Plastic Products
  • Machinery & Equipment
  • Software


Best Prospects for U.S. Exports:

Israel has emerged as one of the world's premier centers for high-tech design, research and development, with particular strength in semiconductors, computer software, telecommunications and biotechnology. American companies have invested billions of dollars in Israeli high-tech firms over the past few years.

Between 2003-2006, the Israel Electric Company plans to invest over $5 billion in capital expenditures for the electricity sector. Proposed infrastructure and electricity projects include roads, ports, public transportation, electric power stations, telecommunications, desalination and rail upgrade (including the building of new lines and the electrification of the entire network).

1. Electricity and Gas Equipment

2. Defense Equipment

3. Medical Equipment and Disposable Products

4. Industrial Chemicals

5. Telecommunications Equipment

6. Electronic Components

7. Building Products

8. Safety and Security Equipment

9. Non-Prescription Drugs

10. Travel and Tourism Services

For more information on these sectors, please see our U.S. Commercial Service Israel Website


Imports and Exports:

Primary Imports (in $ billions)

Raw Materials
Rough & Polished Diamonds
Consumer Goods
Industrial Machinery/Equip.

Primary Exports (in $ billions)

Polished Diamonds
Chemicals & Refining Petroeum, Excl. Pharma.
Elec. Communication Equip.
Rough Diamonds
Equip. for Control/Supervision

Source: Israel Central Bureau of Statistics and US Dept. of Commerce National Trade Data

Doing Business in Israel

Partnering with a good local representative with contacts in the industry, proven reliability, loyalty and technical suitability is a key factor to success in selling and maintaining a continued presence in the Israeli marketplace.

The U.S. Commercial Service in Israel (CS Israel), with offices in Tel Aviv and Jerusalem, can help you navigate the Israeli market and determine if your product or service is the right fit, as well as introduce you to qualified buyers and partners.

Joint ventures are also one of the most popular methods of cooperation for Israeli firms, especially in technology-related industries. The most common approach used by exporters of equipment and consumer goods is to obtain a local importer/distributor. For much more information about doing business in Israel, please see the American Embassy's Country Commercial Guide.


Trade Promotion Activities and Events

Access numerous regional markets simultaneously through the Access Eastern Mediterranean (AEM) program. At the moment, the six markets are Egypt, Israel, Jordan, Lebanon, Turkey and West Bank/Gaza, although we are currently planning next year's activities and additional countries in the region may join the program. When you participate in the AEM program, we promote your products/services via a unique set of activities:

1) You register just once to explore opportunities in all six markets!
2) Commercial Specialists promote your products to hundreds of local contacts
3) Your products/services are featured on our AEM website
4) Some events include catalog show booths at local industry trades shows
5) We identify potential business partners for you and vet their interest, and you receive one combined Results Report covering all markets

Schedule of Upcoming Eastern Med Events:

- Educational Services (studying in the USA):October 2004 and June 2005
- Telecommunications Equipment and Services: November 2004
- Healthcare/Medical Equipment and Services: February 2005
- Automotive Aftermarket Products and Equipment: April 2005
- Safety and Security Equipment and Services: June 2005

Learn more about this program!


Upcoming Trade Events in Israel

Study USA Week with Egypt (including Embassy Catalog Show)
October 13 - 18, 2004

Telecom Israel 2004 (including Embassy Catalog Show)
November 8 - 11, 2004

Israfood 2004 (including Embassy Catalog Show)
November 22 - 24, 2004

Israchem 2005 (including Embassy Catalog Show)
February 1 - 3, 2005

Analiza 2005 (including Embassy Catalog Show)
February 1 - 3, 2005

High Technologies 2005 (including Embassy Catalog Show)
March 24 - 25, 2005

Building 2005 (including Embassy Catalog Show)
April 4 - 7, 2005

Security Israel 2005 (including Embassy Catalog Show)
June, 2005


CS Israel Assistance Leads to Export Success

The U.S. Commercial Service in Israel helped U.S. firms record $167 million of export success in 2003. A short survey of some of these successes and highlights is available at: Here is just one example:

UltraLife Batteries, Inc. (UltraLife), headquartered in Newark, NY, has been an active client of the Rochester Export Assistance Center for more than fifteen years and is a manufacturer of lithium batteries primarily used in the cellular, mobile, and military markets. UltraLife has used many of the programs and services of the Commercial Service, including the Gold Key Service, International Partner Search, market research, export counseling, and more.

UltraLife used these services to research many different markets, including Israel, Japan and Australia. With the aid of a CS Israel-provided International Partner Search service last year, Ultralife appointed a representative for the Israeli market and signed other two distributors.

The company made an initial $10,000 export sale from this deal. Ultralife's VP for Sales and Marketing wrote, "I want to take this opportunity to express my great appreciation for an excellent job of developing agent/distributor contacts and profiles for Ultralife Batteries. From this start, we have moved Israel to a high priority for business development."

Contact us:

The U.S. Commercial Service in Tel Aviv and Jerusalem provides assistance to U.S. firms interested in doing business in Israel (from Tel Aviv) and the West Bank and Gaza (from Jerusalem). Our Jerusalem office also covers the Israeli Arab market. Our Commercial Service professionals help American companies export successfully by providing professional trade promotion, consultation, market research, and customized contact services.

Michael Richardson
Senior Commercial Officer

U.S. Commercial Service Tel Aviv
Embassy of the United States of America
71 Hayarkon Street
Tel Aviv 63903
tel: 972-3-519-7327 fax: 972-3-510-7215
Email: [email protected]

U.S. Commercial Service Jerusalem
19 Keren Hayesod Street
Jerusalem, Israel 91008
tel: 972-2-625-5201 fax: 972-2-623-5132
Email: [email protected]