WT/TPR/S/272/Rev.1 Trade Policy Review 
Page 14 
  
  II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 
(1) DEVELOPMENT AND ADMINISTATION OF TRADE POLICY  
1. As a small country, Israel is highly dependent  on foreign trade as an engine for growth, 
innovation, and competition.  Israel is pursing trade liberalization on an MFN basis through WTO 
negotiations, bilaterally through reciprocal pref erential agreements, and unilaterally through 
autonomous initiatives.  It is seeking further multila teral liberalization in non-agricultural market 
access (both tariff and non-tariff measures), where it h as a relatively open regime.  Israel is prepared 
to make substantial commitments on trade in servic es, subject to reciprocal commitments by its WTO 
trading partners.  Israel is exploring the possib ility of concluding additional free-trade agreements 
with emerging countries in Asia and Latin Americ a, with a view to opening new markets for its 
exporters and diversifying its foreign trade. 
2. The framework for the formulation and implementation of Israel's trade policy remains 
unchanged since its last TPR in 2006.  The Ministry  of Industry, Trade and Labor (MOITAL) has the 
responsibility of reviewing proposed  legislation in light of Israel 's international obligations, and 
functions as the WTO enquiry/contact point under various agreements.1  The main revisions of Israel's 
trade-related legislation are in the area of ge neral import regulation (Free Import Order, 2012), 
safeguard measures (2008 amendment to the Tr ade Levies and Safeguard Measures Law), and 
copyright (Copyright Act of 2008).   
3. Since 2006, important sectoral policy initiatives and reforms have been implemented on the 
basis of recommendations by inter-ministerial (extra -parliamentary) committees, all within a period of 
months.  Among the most prominent Comm ittees were the Bachar Committee, whose 
recommendations prompted structural reforms of Israel's capital market (Chapter IV(4)(i));  the Sheshinski Committee, which resulted in reforms of th e tax regime for oil and gas (Chapter IV(2));  
the Shani Committee
2;  and the Trajtenberg and Kedmi Committees (Box I.1).  Committees normally 
publish their working procedures and solicit positions  and information from the public, as well as 
from relevant organizations.3   
4. Legislative bills may be initiated by the Government or individual members of the Israeli 
legislature (the Knesset).  They generally go throug h three readings before adoption by the Knesset.  
After the first reading the bill is referred to the a ppropriate committee for discussion;  in the second, it 
is reviewed in plenary session;  and in the third r eading, a final vote is taken.  The President, the 
Prime Minister, and the minister concerned sign the bill into law.  In the Israeli legal system, in the 
case of a conflict between a WTO Agreement and domestic law, the latter prevails, except for 
government procurement (Chapter III(3)(iii)).  Howe ver, according to the President of the Israeli 
Supreme Court, "The State of Israel is a member of the Law of Nations.  Therefore it is imperative that Israel not be in breach of its international obl igations;  so that where two possible explanations 
                                                      
1 SPS Agreement, Agreement on Technical Barriers to Trade, and Agreement on Trade-Related 
Aspects of  Intellectual Property Rights. 
2 In September 2011, the Shani Committee on In creasing Competitiveness in the Economy appointed 
by the Prime Minister, the Minister of Finance, and th e Governor of the Bank of Israel, submitted its interim 
policy recommendations on a number of corporate governance issues (including control of real companies 
over financial companies, and the control of a public company using a pyramid holding structure).  Ministry 
of Finance online information.  Viewed at:  http://w ww.financeisrael.mof.gov.il/F inanceIsrael/Docs/En/press 
Releases/20110925.pdf. 
3 Government Resolution 3190, 24 February 2008 "Relationship between Government, Civil Society 
and Business Sector - Contributing to obtaining Public Goals". Israel WT/TPR/S/272/Rev.1 
 Page 15 
 
 
  exist in the interpretation of a law, it is desirabl e to choose the interpretation which will bring about 
fulfilment of Israel's international obligation and not one which will result in a breach of it."4  The 
foregoing statement has been quoted in Supreme Court decisions, by lower courts and the advisory committee in the context of anti-dumping proceedings.   
5. Any increase in customs duties and other taxe s requires approval by the Finance Committee 
of the Knesset (simple majority).  Any reduction requi res approval by the Minister of Finance, who 
sends the decision to the Knesset for notice;  acco rding to the authorities, there have been no 
objections by the legislature in recent years. 
6. Israel's constitutional framework remain s largely unchanged since its last TPR.
5  A  n e w  
development is the establishment of a court special izing in economic law.  Israel's first economic 
court began operating in December 2010 as a department in the Tel Aviv District Court, to bring 
amongst other things, greater professional experti se to the enforcement of the Israeli economic 
legislation.  Israel's judicial branch consists of magistrate and district courts, and the Supreme Court, 
as well as tribunals.6 
7. Israel became a member of the OECD on 21 August 2010, thereby embracing open and 
transparent market economy principles.  As part of its accession, Israel's position on OECD legal 
instruments and standards, and the degree of cohere nce of its policies with those in place in other 
OECD countries have been reviewed, including with respect to the transparency of decision-making, 
market access in goods an d services, intellectual property rights, and export credits.7  
(2) PARTICIPATION IN THE WTO 
8. Israel has developing country status in the WTO.  It is a signatory of the WTO Information 
Technology Agreement (1997) requiring participants  to eliminate duties on IT products covered by 
the Agreement.  Israel is party to the plurilate ral Agreement on Government  Procurement (GPA) of 
1994, and has participated in the nego tiations of the revised GPA (Box III.1). 
9. At the WTO Ministerial Conference in December 2011, Israel reiterated its commitment to 
the current multilateral negotiations and expressed c oncern about a rise in trade-restrictive measures.8  
Israel has joined the "Friends of Anti-dumping Negotiations" (TN/RL/W/244) and co-sponsored a 
number of proposals.9  In other areas of the negotiations, Israel has co-sponsored a proposal 
concerning market access for non-agricultural products10, trade facilitation11, and the establishment of 
a multilateral system of notification and registra tion of geographical indications for wines and 
                                                      
4 Statement by the Honourable Justice Aharon Ba rak, quoted in WTO document G/ADP/Q1/ISR/15, 
11 September 2006. 
5 See WTO (2006). 
6 For example, an Antitrust Tribunal at the District Court in Jerusalem has jurisdiction over competition 
cases brought by the Israel Antitrust Authority (Chapter III(3(ii)).   
7 OECD (2011c). 
8 WTO document WT/MIN(11)/ST/117, 16 December 2011. 
9 The proposals advocate, inter alia , prohibiting the practice of "zeroing" (TN/RL/W/215), making the 
application of the lesser-duty rule mandatory (TN/RL/W/2 24) and, with respect to "public interest", requiring 
the authorities to take due account of the comments made by the domestic interested parties (TN/RL/W/222).   
10 TN/MA/W/98, 14 December 2007. 
11 TN/TF/W/167, 6 January 2010. WT/TPR/S/272/Rev.1 Trade Policy Review 
Page 16 
  
  spirits.12  Israel is also a member of the G-10 coaliti on of food-importing members.  It has joined the 
"Real Good Friends" of the plurilateral initiative on trade in services. 
10. Israel's notification record has been mixed.  There is room for improvement in a number of 
areas where Israel has outstanding notification oblig ations, including agriculture, import licensing, 
and regional trade agreements (Table AII.1). 
11. Israel has never been involv ed in a WTO dispute settlement proceeding as a responding or 
complaining party, nor has it participated as third party since its last TPR.  
(3) PREFERENTIAL TRADE AGREEMENTS AND ARRANGEMENTS  
(i) Overview 
12. Israel's network of FTAs includes some of its  main trading partners (EU, United States, 
EFTA, Turkey, Canada, and Mexico), although none curre ntly covers services provisions.  Israel is 
considering expanding the scope of its FTAs with Canada and the United States to include services.  
Since its last TPR, Israel has concluded a free-tr ade agreement with MERCOSUR, which has entered 
into force for all signatories.  Israel and the Eur opean Union have further liberalized their bilateral 
trade in agricultural products through a new Protocol  that entered into force on 1 January 2010.  FTA 
negotiations were launched with India in May 20 10, and with Colombia in March 2012, both are 
intended to cover services.  Feasibility studies have been conducted with the Republic of Korea, and 
with Chile. 
13. Under the Qualifying Industrial Zone (QIZ ) initiative of the United States, goods from 
designated industrial parks in Egypt may be expor ted duty-free and quota-free to the United States.  
Israeli exporters also benefit from this initiative si nce some local content of the goods exported from 
Egyptian QIZs to the United States must be sourced from Israel.  
14. While Israel's trade with its FTA partners gr ew strongly over 2006-2011, in particular exports 
from Israel, the relative importance of trade via regiona l trade agreements declined steadily.  Israel's 
imports from current FTA partners declined from a bout 61% of total merchandise imports in 2006 to 
about 57% in 2011;  and exports to FTA partne rs decreased from about 73% to 65% of total 
merchandise exports.  This evolution reflects an in crease in Israel's trade with (non-FTA) trading 
partners in Asia, notably China.   
(ii) Developments in regional trade agreements 
(a) European Union 
15. Israel's first preferential trade agreement was signed with the European Communities 1975 
(Table II.1).  Trade in industrial products h as been duty free since 1989.  In January 1996, an 
Association Agreement replaced the preferential trade agreement.  Trade in agricultural products was 
liberalized progressively between January 2004 and January 2010.  The new,  2010 protocols replaced 
the positive lists in the old protocols with negative lists of the sensitive products subject to import 
duties.  In addition, there are positive lists of sen sitive products for which tariff quotas are available 
for both parties.  The new protocols are estimated to provide duty-free access for about 95% of 
bilateral trade in processed agricultural products.   
                                                      
12 TN/IP/W/10/Rev.4, 31 March 2011. Israel WT/TPR/S/272/Rev.1 
 Page 17 
 
 
  Table II.1 
Free-trade agreements, 2012 
Trading partner 
(entry into force) Transition to full implementation Rules of origin 2011 Imports/exports 
(US$ million)a  
Canada (1 July 1997) NAMA:  duty-free since 1 July 1999  
Agriculture:  some tariff quotas; further market access for agricultural goods from 
November 2003 Wholly obtained or sufficiently 
worked or processed based on conditions set out in a "processing 
list".  Trans-shipment through the 
United States allowed under certain conditions Imports:  412 (2.2%) 
Exports:  807 (6.9%) 
EFTA  
(1 January 1993) NAMA: duty-free since 1 January 1993 Agriculture:  duty-free for some fish, marine and processed agricultural products;  some tariff 
quotas; bilateral agreements covering some agricultural products  Wholly obtained or sufficiently 
worked or processed based on conditions set out in a "processing 
list" (change in tariff heading and/or added value).  Pan-Euromed diagonal cumulation Imports:  4,099 (7.2%) 
Exports:  1,513 (11.6%) 
European Unionb 
(1 January 1996) NAMA:  duty-free since 1 January 1989 
Agriculture: duty-free for some agricultural 
products since 1 January 1989;  further liberalization effective 1 January 2004 and 
1 January 2010.  Some tariff quotas. Pan-Euromed rules of origin with 
diagonal cumulation Imports:  25,429 (7.1%) 
Exports:  18,774 (7.4%) 
Jordan (23 September 2005) NAMA:  phased tariff reduction; enhanced 
concessions since 2006  
Agriculture: some tariff quotas Pan-Euromed rules of origin with 
diagonal cumulation 
 Imports:  173 (35.2%) 
Exports:  210 (9.0%) 
MERCOSUR (Israel-Brazil:  
1 June 2010) 
(Israel-Paraguay:  
1 June 2010) 
(Israel-Uruguay:  
1 June 2010) 
(Israel-Argentina:  9 September 2011) NAMA:  4,8, 10 years depending on product  
Agriculture:  some tariff quotas Wholly obtained or sufficiently 
worked or processed products, 
conditional on change in tariff heading or a minimum of 50% (60% 
for Paraguay) local content.  Bilateral 
cumulation allowed Imports:  625 (7.6%) 
Exports:  1,050 (13.3%) 
Mexico (1 July 2000) NAMA:  duty-free since 1 January 2005 
Agriculture: some tariff quotas Wholly obtained or sufficiently 
worked based on conditions set out 
in a "processing list" (change in tariff heading and/or added value) Imports: 179 (40.2%) 
Exports: 365 (5.1%) 
Palestinian Authority  
(29 April 1994) Customs Union  None n.a. 
Turkey  
(1 May 1997) NAMA:  duty-free since 1 January 2000 
Agriculture: some tariff quotas Pan-Euromed rules of origin with 
diagonal cumulation   Imports: 2,171 (11.3%) 
Exports: 1,856 (17.7%) 
United States 
(1 September 1985)  
(4 December 1996) NAMA:  duty-free since 1 January 1995 
Agriculture: some tariff quotas; further 
liberalization in January 2004 Wholly obtained or substantial 
transformation with minimum 35% 
of the value of the materials 
produced including the direct costs of processing Imports:  8,708 (8.0%) 
Exports:  19,433 (1.6%) 
a Average annual growth rate 2006-11 in parenthesis. 
b Association Agreement between the European Communities and Israel.  
Source :  WTO Secretariat, based on information provided by  the Israeli authorities; UNSD Comtrade database. 
(b) MERCOSUR 
16. Israel signed an FTA with MERCOSUR in Dece mber 2007 (Table II.2).  Implementation of 
the agreement with Brazil, Paraguay and Uruguay st arted on 1 June 2010, and with Argentina on 
9 September 2011.  The Agreement has not yet been notified to the WTO.  The FTA covers trade in 
goods and related rules of origin, safeguard measur es, SPS measures, technical barriers to trade, and 
dispute settlement, amongst other thi ngs.  The agreed tariff reductions  on industrial and agricultural 
products are asymmetric.  Some tariffs were eliminat ed immediately, others will be reduced gradually 
over periods of four, eight or ten years.  Eventu ally, 97% of Israel’s exports to MERCOSUR and 90% 
of Israel's imports from MERCOSUR will be exempt from customs duties.  On a number of WT/TPR/S/272/Rev.1 Trade Policy Review 
Page 18 
  
  agricultural products, Israel has tariff quota commi tments, some of which are country-specific.  
Bilateral trade flows are still insignificant. 
Table II.2 
MERCOSUR-Israel FTA 
Tariff elimination schedule 
(upon implementation by each member) MERCOSUR Israel 
Items Share (%) Items Share (%) 
Immediate 2,395 24.6 6,674 75.7 
Four years 927 9.5 1,061 12.0 
Eight years 3,447 35.3 136 1.5 
Ten years 2,606 26.7 0 0 
Partial reduction  375 3.8 995 10.8 
Excluded 326 3.3 866 9.8 
Total 9,750 100.0 8,866 100.0 
Source : Israeli authorities. 
(iii) Unilateral preferences 
(a) Generalized System of Preferences 
17. Israel does not grant or receive preferences under the Generalized System of Preferences 
(GSP). 
(b) Qualifying Industrial Zones  
18. In 1996, the United States launched the Qualifyi ng Industrial Zone (QIZ) initiative to support 
the peace process and economic cooperation in the Mi ddle East.  QIZs are designated industrial parks 
in Egypt and Jordan from which goods can be expor ted duty-free and quota-free to the United States.  
According to the authorities, the Jordanian QIZs ha ve not been in use since 2010, following the full 
implementation of tariff concessions (textiles) under the U.S.-Jordan FTA.  The QIZ rules require local content of at least 35%, of which a minimum of 10.5% must be Israeli under the Israel-Egypt 
QIZ agreement.
13  The remaining local content may come fro m either a Jordanian QIZ, Egyptian QIZ, 
Israel, the West Bank and the Gaza Strip, or the United States (a maximum of 15% U.S. content).  Israeli suppliers to the QIZ manufacturers must comp ly with the rules of origin under the Israel-U.S. 
Free Trade Agreement, i.e. a minimum of 35% local content, and substantial transformation.  The QIZ 
initiative has no expiry date and thus does not require renewal by the U.S. Congress.   
19. The Israel-Egypt QIZ agreement entered into for ce in February 2005, resulting in a significant 
increase in Israeli exports to Egypt to US$208 m illion in 2011 (from US $29 million in 2004), of 
which about US$100 million are Isr aeli inputs to Egyptian QIZs.  
(4) F
OREIGN INVESTMENT REGIME  
20. Israel maintains foreign-ownership restrictions in a few sectors, including air and maritime 
transport, telecommunications and broadcasting, en ergy, and tourism, mainly for public interest, 
(energy) security, and cultural reasons (Table AII. 2).  Under the GATS, Israel has scheduled foreign-
ownership limitations on interna tional fixed-telecommunications services (74% foreign-equity cap) 
                                                      
13 For high-tech products the minimum is 7%.   Israel WT/TPR/S/272/Rev.1 
 Page 19 
 
 
  and wireless-telecommunications services (80% foreign-equity cap).14  Israel has investment-
protection agreements with 40 countries.15 
21. In certain sectors, Israeli law imposes nationality and residency requirements on members of 
boards of directors and other personnel, involving in some cases security clearance and approval by 
the regulator (Israeli airlines; electricity genera tion, transmission, and distribution; natural gas 
operations;  domestic fixed-line, radio, mobile, and internationa l telecommunications services;  
television, radio, satellite, and cable broadcasting; and defence corporations).  In the case of domestic 
fixed-line telecommunications services, 75% of the members of the board of directors must be Israeli citizens and residents;  in mobile/international telecommunications services, the majority must be 
Israeli citizens and residents.  
22. Israel does not have a foreign investment law.  There is no special approval or screening 
process for investments by foreigners.  Establishm ent is governed by the Companies Law of 2000.  
Companies must register with the Registrar of Companies (within a month of establishment), the Israel Tax Authority, and the National Insurance Ins titute.  Registration of a business in Israel takes 
about one month, or nearly three times the OECD average, according to the World Bank.
16  I n  
November 2010, the Knesset approved a reform of Israel's procedures for obtaining a business licence 
(Business Licence Law).  The law is to enter in to force once the implementing regulations are 
adopted.  Business licences (perm its) are granted by municipalities.  The renewal period varies from 
one to 15 years, according to category of bus iness and assessment of potential risk.  Various 
government ministries are involved in establishing th e licensing requirements.  Under the reform, the 
government ministries concerned are required to establis h a standardized list of requirements, in order 
to avoid duplication of requirements (with excepti ons where specific licensing requirements exist).  
23. The legal framework for foreign land owners hip has changed since Israel's last TPR 
(Amendment No. 3 to the Israel Lands Law of 5 April 2011).  Foreign-owned companies are entitled 
to own or lease land, subject to prior approval by the Ministry of Housing and Construction through 
the Israeli Land Administration.  The Land Administra tion may agree to bestow or transfer rights of 
land to foreign-controlled companies once an adviso ry opinion has been received from the Minister of 
Foreign Affairs, and the Ministry of Defence.  A ccording to the authorities,  no application has been 
turned down in recent years.  A change from lease to private ownership (except agricultural hand) has 
been allowed (August 2009 amendment to the Isr aeli Land Administration Law).  The Israeli Land 
Administration is implementing the ne w ownership rules in steps.  Private ownership of land is much 
lower than in many other countries (about 7% of the total area). 
24. Within the Ministry of Industry, Trade and Labor, "Invest in Israel" is the Government's 
investment promotion centre for foreign investors.   Various tax and non-tax incentives are available 
for research and development (R&D), including gr ants to launch joint R&D projects with Israeli 
entrepreneurs, or to encourage foreign multinationa l companies to establish financial R&D centers in 
Israel (Table AIII.3). 
                                                      
14 WTO document S/DCS/W/ISR, 24 January 2003. 
15 Ministry of Finance online information.  Viewed at:  http://www.f inanceisrael.mof.gov.il/ 
FinanceIsrael/Pages/en/EconomicDat a/InternationalAgreements.aspx. 
16 World Bank Doing Business online information.  Viewed at:  http://www.doingbusiness.org/data/ 
exploreeconomies/israel/. WT/TPR/S/272/Rev.1 Trade Policy Review 
Page 20 
  
  25. Eligible investments in industrial projects bene fit from assistance pursuant to the Law for the 
Encouragement of Capital Investment, subject to  approval by the Israel Investment Center 
(Chapter III(3)(i)).  Certain tax incentives for large Is raeli or foreign multinational enterprises (special 
preferred enterprises) also require approval from the Is rael Tax Authority.  The standard corporate tax 
rate was 24% in 2011, in line w ith other OECD jurisdictions, but for "special preferred enterprises", 
the corporate tax rate can be as low as 5%.   Israel has double taxation treaties in force with 
48 countries;  most are based on the OECD model.17   
                                                      
17 Austria, Belarus, Belgium, Br azil, Bulgaria, Canada, China, Cr oatia, Czech Republic, Denmark, 
Estonia,  Ethiopia, Finland, France, Georgia, Germany, Greece, Hungary, In dia, Ireland, Jamaica, Japan, the 
Republic of Korea Latvia, Lithuania, Luxemburg, Mexi co, Moldova, Netherlands, Norway, Philippines, Poland, 
Portugal, Romania, Russia, Singapore, Slovakia, Slovenia, South Africa, Sp ain, Sweden, Switzerland, Thailand, 
Turkey, Ukraine, United Kingdom,  United States, and Viet Nam.