WORLD  TRADE  
ORGANIZATION  RESTRICTED 
WT/TPR/S/272 
25 September 2012  
 
(12-5070) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
ISRAEL 
 
  
 
This report, prepared for the fourth Tr ade Policy Review of Israel, has been 
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has, 
as required by the Agreement establishing the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), sought clarification from Israel on its trade policies and practices. 
 
Any technical questions arising from this report may be addressed to 
Mr. Willy Alfaro (tel:  022 739 5372), Thomas Friedheim (tel:  022 739 5083), 
and Wolf Meier-Ewert (tel:  022 739 6344). 
 
Document WT/TPR/G/272 contains the policy statement submitted by Israel. 
 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Israel. Israel WT/TPR/S/272 
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CONTENTS 
 
     Page 
 
SUMMARY    vii 
I. ECONOMIC ENVIRONMENT 1 
 (1) M AJOR FEATURES OF THE ECONOMY  1 
 (2) R ECENT ECONOMIC DEVELOPMENTS  2 
 (i) Macroeconomic indicators 2 
 (ii) Balance of payments 6 
 (3) D EVELOPMENTS IN TRADE  7 
 (i) Composition of trade 8 
 (ii) Direction of trade 10 
 (4) F OREIGN INVESTMENT  12 
 (5) O UTLOOK   12 
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 14 
 (1) D EVELOPMENT AND ADMINISTATION OF TRADE POLICY  14 
 (2) P ARTICIPATION IN THE WTO 15 
 (3) P REFERENTIAL TRADE AGREEMENTS AND ARRANGEMENTS  16 
 (i) Overview 16 
 (ii) Developments in regional trade agreements 16  (iii) Unilateral preferences 18 
 (4) F
OREIGN INVESTMENT REGIME  18 
III. TRADE POLICIES AND PRACTICES BY MEASURE 21 
 (1) M EASURES DIRECTLY AFFECTING IMPORTS  21 
 (i) Customs procedures and trade facilitation 21 
 (ii) Tariffs and tariff quotas 22  (iii) Other taxes and charges 26 
 (iv) Import prohibitions and licensing 28 
 (v) Contingency trade remedies 30  (vi) Standards, technical regulations, and conformity assessment 33 
 (vii) Sanitary and phytosanitary measures 36 
 (2) M
EASURES DIRECTLY AFFECTING EXPORTS  37 
 (i) Registration and documentation 37 
 (ii) Export taxes and charges 38 
 (iii) Export prohibitions, controls, and licensing 38  (iv) Export subsidies, and duty and tax concessions 38 
 (v) Export finance, insurance, and assistance 38 
 (vi) Free zones 39 WT/TPR/S/272 Trade Policy Review 
Page iv 
  
     Page 
 
 (3) M
EASURES AFFECTING PRODUCTION AND TRADE  40 
 (i) Incentives 40  (ii) Competition policy and price controls 42 
 (iii) Government procurement 45 
 (iv) State-trading and st ate-owned enterprises 49 
 (v) Trade-related aspects of intell ectual property rights (TRIPS) 49 
IV. TRADE POLICIES BY SECTOR 57 
 (1) A
GRICULTURE   57 
 (i) Main features 57 
 (ii) Policy framework 58 
 (iii) Domestic programmes 59  (iv) Border measures 60 
 (v) Export measures 61 
 (vi) Evolution of support and protection 62 
 (2) E
NERGY    63 
 (3) M ANUFACTURING  65 
 (i) Industrial policy developments 65 
 (ii) High-tech industries 66 
 (iii) Automotive industry 68 
 (4) SERVICES   68 
 (i) Financial services 69 
 (ii) Telecommunications and postal services 73  (iii) Transport 76 
 (iv) Tourism  80 
REFERENCES    83 APPENDIX TABLES   85 
 Israel WT/TPR/S/272 
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CHARTS 
 
     Page 
 
I. ECONOMIC ENVIRONMENT 
 
I.1 Composition of merchandise trade, 2005 and 2011 9 I.2 Direction of merchandise trade, 2005 and 2011 11 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
III.1 Breakdown of applied MFN tariffs, 2012 25 
III.2 Tax revenue distribution, 2010 26 III.3 Anti-dumping procedures, 1995-2011 32 
III.4 Intellectual property-related seizures of imported goods 56 
 
IV. TRADE POLICIES BY SECTOR 
 
IV.1 Level and composition of support to agricultural producers 63 
IV.2 Capital raised by venture capital and private equity funds, 2006-10 68 
 
 
TABLES 
 
 
I. ECONOMIC ENVIRONMENT 
 I.1 Israel at a glance, 2005-11  2 
I.2 Selected economic indicators, 2005-11 3 
I.3 Main components of general government receipts and expenditures,   2005-11    5 
I.4 Balance of payments, 2005-11 7 
 II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 
 
II.1 Israel's free-trade agreements, 2012 17 II.2 MERCOSUR-Israel FTA  18 
 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 III.1 Customs clearance and release time in Israel 22 
III.2 Overview of Israel's Uruguay Round tariff bindings 22 
III.3 Structure of applied MFN tariffs in Israel, 2012 23 III.4 Tariff summary, 2012  24 
III.5 Taxes on imported or domestic goods and services, May 2012 27 
III.6 Import prohibitions, May 2012 28 III.7 Evolution of Israel's Trade Levies and Safeguard Measures Law, 1991 30 WT/TPR/S/272 Trade Policy Review 
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     Page 
 
III.8 Definitive anti-dumping measures in force, May 2012 31 
III.9 Equivalence of Israel's standards with international, regional   or foreign standards, January 2012 34 
III.10 Antitrust law enforcement  44 
III.11 Regulated prices   45 III.12 Key features of Israel's government procurement provisions 47 
III.13 Applications for trade marks, industrial designs, and patents,  
 and patents granted, 1998 and 2005-10 51  
IV. TRADE POLICIES BY SECTOR  
 IV.1 Israel Electric Corporation generating capacity, by types of fuel 65 
IV.2 Distribution of revenues in the communication market, 2007-10 74 
IV.3 Passenger volumes and market shares at Ben Gurion Airport, 2006-10 80  
 
APPENDIX TABLES 
 
I. ECONOMIC ENVIRONMENT 
 
AI.1 Merchandise exports by group of products 2005-11 87 
AI.2 Merchandise imports by group of products, 2005-11 89 AI.3 Merchandise imports by trading partner, 2005-11 91 
AI.4 Merchandise exports by trading partner, 2005-11 92 
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 
 
AII.1 Notifications to the WTO, January 2006 to May 2012 93 
AII.2 Selected foreign ownership limitations by sector, 2012 94 
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
AIII.1 Applied MFN tariff averages by HS2-digit level, 2012 95 AIII.2 Duty concessions and exemptions on commercial imports 98 
AIII.3 Main incentive schemes for research & development, May 2012 99 
AIII.4 Summary of intellectual property protection in Israel, May 2012 101  
IV. TRADE POLICIES BY SECTOR  
 
AIV.1 WTO tariff quotas, 2011  102 
 Israel WT/TPR/S/272 
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SUMMARY 
 
1. Israel has not been spared the effects of the global economic cr isis, but its financial system 
has weathered the crisis comparatively well.  Sin ce its last TPR, in 2006, real GDP growth has 
averaged around 5% per year, only interrupted by a sharp decline in growth in 2009. Recently, there 
are again signs of slowing economic activity. The r esilience and stability of the financial system has 
been attributed, inter alia , to cautious lending and limited exposur e to "toxic" assets by Israeli banks, 
and a conservative supervisory approach by the Ba nk of Israel.  There was no need for any bank 
bailout or major stimulus programme, although th e Government has substantially increased its 
exposure to credit guarantees in order to stimulate e xports.  Public debt as a percentage of GDP has 
been reduced (74% in 2011). 
2. Israel is a high-income country with a GDP per capita of US$31,000 in 2011, up from 
US$17,700 ten years earlier.  Its GDP of about US$240 billion is roughly equal to the size of 
Singapore's.  Some of Israel's main economic cha llenges lie in the high burden of defence spending, 
low labour-market participation among certain commun ities, and resulting income inequality.  Israel 
has been largely dependent on imports for its energy  needs, but major discoveries of offshore natural 
gas may change its economic prospects.   
3. The Israeli economy is dominated by high-tech goods and services.  The main high-tech (non-
defence) activities are in the area of computer components manufacturing, software engineering, medical technologies, and pharmaceuticals.  Israel i businesses also play an important role in the 
world's diamond industry.   
4. One of the core strengths of the Israeli ec onomy is its capacity for innovation, be it in 
agriculture or the high-tech sector.  Expenditure on civilian R&D amounted to about 4.4% of GDP in 
2010, the highest share in the world.  Israel's innovation policy encourages domestic R&D in generic 
and applied technologies, including the developmen t and acquisition of intellectual property rights, 
through a range of incentive schemes.  The availab ility of domestic and foreign venture capital further 
encourages start-up companies.  
5. A significant share of foreign direct investment is made in Israeli start-up companies. 
Investments in the industrial sector benefit from export-contingent incentives.  Israel maintains 
foreign ownership restrictions in a few sectors, including air and maritime transport, telecommunications and broadcasting, energy, and t ourism, mainly for public interest, (energy) 
security and cultural reasons.  There is no special  approval or screening process for investments by 
foreigners.   
6. Israel is a relatively export-oriented economy.  Its trade continues to be affected by the 
geopolitical situation that prevails in the Middle Ea st, which seriously impedes trade between Israel 
and its neighbours.  The European Union and the Unit ed States remain Israel's main trading partners, 
although Israel's trade with Asia continued to incr ease over the review period.  The current account 
has been in surplus since 2003.   
7. Israel pursues trade liberalization through ac tive participation in the DDA negotiations, 
bilaterally through reciprocal preferential agreemen ts, and unilaterally throu gh autonomous initiatives.  
Israel's network of FTAs covers some of its main  trading partners (EU, United States, EFTA, and 
Turkey), although none of its FTAs currently includes services provisions.  Sin ce its last TP R, Israel 
has concluded a free-trade agreement with MERCOSU R, and Israel and the European Union have 
further liberalized their bilateral trade in agricu ltural products.  FTA negotia tions have been launched WT/TPR/S/272 Trade Policy Review 
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with India and Colombia.  Nonetheless, the relative importance of trade via free-trade agreements has 
steadily declined due to the rising importance of trade with Asian countries.   
8. In the summer of 2011, Israel experienced unprecedented popular protests against the high 
cost of living, triggered by consumer complaints about high prices of some dairy products ("cottage 
cheese uprising").  In response, and as part of a pa ckage of reforms, the Government has unilaterally 
dismantled some import barriers.  Applied MFN tari ffs on a range of non-f ood consumer goods were 
eliminated with immediate effect (400 tariff lines at HS 8-digit level).  In July 2012, the Government 
announced a further unilateral initiative to elimin ate or reduce import duties on items such as 
electrical appliances, textil es and apparel, and food. 
Trade policy measures 
9. Israel's average applied MFN tariff is 7% in 2012.   Over half of the tariffs are duty-free lines, 
and less than 5% of tariff lines exceed the 20% rate.  The average applied MFN tariff on non-
agricultural products is relatively low (4.2%), while  tariffs on agricultural goods (WTO definition), 
average 24.5%.  For agricultural products, market-access opportunities are provided, inter alia , by 
duty-free access (i.e. about one third of applied MFN tariffs are zero), preferential tariffs, and over 
100 agricultural tariff quotas (MFN and preferentia l).  Numerous mixed or compound MFN duties 
add complexity to the agricultural tariff regime.  Israel has not yet transposed its Schedule of 
concessions from HS 1996 nomenclature, which makes a comparison with its applied MFN tariffs (HS 2012) difficult because of the difference in nomenclatures.  
10. Since its last TPR, Israel has launched trade facilitation initiatives for authorized economic 
operators and couriers (pre-clearance of air ship ments).  On the other hand, Israel maintains non-
automatic import licensing procedures on a vast rang e of products for various reasons, such as health, 
safety, security, and tariff-quota administration.  Up-to-date notifications would help improve the 
transparency of these import procedures.  In genera l, Israel's notification record has been mixed.  
There is room for improvement in a number of areas where Israel has outstanding notification 
obligations, such as agriculture, regional tr ade agreements, and import licensing.   
11. Israel maintains export licensing and approval (p ermit) schemes but there are no export taxes 
or levies.  Israel has not used export subsidies on agricultural products since 2010.  One export state-trading enterprises is active in the groundnut sector. 
12. Israel has made considerable progress in aligni ng its technical regulations and food standards 
with mandatory standards of international, regiona l or foreign origin.  The Government aims to 
accomplish full harmonization of Israeli technical re gulations with overseas mandatory standards by 
end-2012 (end-2013 for food standards).  Israel has notified three new or revised SPS measures since 
its last TPR in 2006.  The SPS notifications con cern alignment of Israel's phytosanitary import 
requirements with international standards, and an amendment of BSE-related import requirements.   
13. Israel remains a significant user of anti-dumpi ng measures, but overall the incidence of new 
measures remains within the long-term trend.  Duri ng the review period, Israel introduced safeguard 
legislation to implement the WTO Agreemen t on Safeguards and in itiated two safeguard 
investigations.  
14. Israel applies value-added ta x on imported and domestic goods and services currently at the 
rate of 16%.  A number of items, including fruit an d vegetables, are zero-rated.  Certain luxury and 
consumer goods, as well as alcoholic be verages are subject to purchase tax.  For the assessment of 
purchase tax on imported products, Israel uses a type of surcharge, called TAMA, which 
approximates domestic wholesale prices.  A tax reform  for alcoholic beverages is to be implemented Israel WT/TPR/S/272 
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by 2014, whereby TAMA will be can celled and replaced by a specific tax on domestic and imported 
alcoholic beverages alike. 
15. Israel is party to the Agreement on Government  Procurement (GPA) and has participated in 
the negotiations of the revised GPA.  Israel has made a number of market-access commitments that 
enhance the opportunities for foreign companies to compete in its government procurement market. It 
has also undertaken to phase out its offset regime wi th respect to procurement covered by GPA.  It 
will progressively reduce the current 20% offset le vel and eliminate offsets entirely after 15 years 
from the entry into force of the revised GPA for Israel.  The Israeli tenders legislation has been 
reformed since 2006.  
16. Israel has a well developed intellectual property system, which underpins the country's status 
as one of the most innovative economies.  A signifi cant development in Israeli intellectual property 
law is the introduction of the Copyright Act 2007, which, inter alia , replaced the doctrine of fair 
dealing with that of fair use, thus providing a mo re flexible approach to copyright exceptions - an 
exceptional step that few jurisdictions have taken so explicitly.  Israel has reached an agreement with 
the United States to amend certain pharmaceutical IP R provisions relating to patent-term extension, 
patent-application publication, and data exclusivity.  
Sector developments 
17. Israel continues to face competition-related challenges for reasons such as high tariff 
protection (agriculture), the small size of the econo my, a certain degree of geographic isolation with 
little regional trade and language ba rriers, contributing to market-entry barriers.  One of the 
Government's key policy objectives has been to enhance competition in the domestic market.  Since 
its last TPR in 2006, it has made a series of structural reforms in various sectors to strengthen competition in the economy, including in financ ial services, telecommunications, and transport 
services.  Moreover, a reform of the competition la w in the area of oligo polies has been enacted. 
18. The services sector is the leading economic ac tivity in Israel, accounting for around three 
quarters of GDP and employment.  Far-reaching structural reforms have been carried out in Israel's 
financial services sector since 2006, to promote competition and enhance the efficiency of financial 
intermediation.  The capital market reform (B achar reform) has fundamentally transformed the 
landscape of Israel's financial system by requiring ba nks to sell their holdings in mutual and provident 
funds, in order to break up the high level of c oncentration in the sector.  Insurers and other 
intermediaries, including foreign enterprises, have en tered the market for those financial services that 
were traditionally controlled by banks.  The Israe li market has been opened to foreign underwriters, 
investment advisers, and portfolio managers to provide their services in Israel.  
19. The Government has introduced further reforms in the telecommunications market with the 
aim of stimulating price competition and servi ce innovation among operators.  Reforms include a 
substantial reduction of mandatory  interconnection fees;  improved portability;  an incentives-based 
regulatory regime to encourage the establishmen t of wholesale markets for fixed-line and mobile 
telephone services (mandated access to fixed networ ks, mobile virtual network operators), and 
promotion of infrastructure-based competition by granting additional UMTS network licences.  The establishment of an independent regulatory au thority for telecommunications is still under 
consideration by the Government. 
20. Israel is a net-importer of transportation services;  most of Israel's trade is done by sea or air.  
Since its last Review, Israel has further reform ed its port subsector to stimulate competition and 
increase the ports' lagging productivity.  A new port-u ser fee scheme, introduced in  October 2010, is WT/TPR/S/272 Trade Policy Review 
Page x 
  
being phased in, to put an end to imports effectivel y cross-subsidizing exports, and to base the tariffs 
on costs.  The new scheme also encourages night-time cargo handling.  Privatization of Israel's state-
owned port companies began in 2010.   
21. The Government reformed its air transport polic ies, during the review period, to encourage 
more competition between airlines.  The Antitrust Law was amended to remove airlines’ immunity 
from legal scrutiny of commercial arrangements that  are likely to harm competition.  A number of 
anti-competitive code-share agreements have since b een disallowed by the Israel Antitrust Authority.  
The Government has concluded more liberal ai r services agreements with the United States, 
Colombia, and the EU, as well as with other aviation partners to allow for multiple designation of 
airlines on scheduled routes and carriers' freedom to  determine frequency and capacity of flights. 
22. The manufacturing sector contributes about 15% to GDP and employment.  The relatively 
labour-intensive traditional industries, such as the food and textiles industries, have declined further as 
a share of manufacturing GDP, reflecting Israel's comparative advantage in capital-intensive high-tech goods.  The Government's main policy initiatives to strengthen the competitiveness of Israel's 
manufacturing sector include establishing of a more  favourable tax environment for manufacturers 
within the framework of the reform of the La w on Encouragement of Capital Investment, and 
substantially increasing assistance for R&D.  Other policy developments include the sector's greater 
openness to (duty-free) manufacturing imports resu lting from unilateral tr ade liberalization and 
Israel's enlarged network of FTAs. 
23. Israel's agriculture sector is small (about 2% of GDP).  Israel has traditionally been a net-
importer of agricultural products.  Land-intensive cr ops, such as wheat, sugar, and oilseeds are mostly 
imported.  With its mild climate and advanced tec hnologies, Israel has been exploiting its comparative 
advantage in fruit, vegetable, and flower productio n. The Government influences the productivity and 
competitiveness of the agriculture sector, inter alia , through its control over the allocation of, and 
assistance for, basic factors of production (land, wate r, and foreign labour).  For food security reasons, 
the Government has a strong regulatory role, partic ularly in the dairy and egg sectors.  The dairy 
sector is tightly regulated and controlled throug hout the production chain, with measures ranging from 
milk production quotas, to retail price controls of some basic dairy products.  MFN tariffs on dairy 
products average almost 110%.  Overall, Israel's level of support for its agriculture sector is one of the 
lowest among all OECD members. Border measures, not ably tariffs, remain Israel's main instrument 
of support to agriculture.  The "bill" for agricultural support is paid mainly by Israeli consumers - they 
would benefit from the opening of Israel’s fo od markets to more import competition.