RESTRICTED  
  
WT/TPR/G/ 376 
12 June 2018 
(18-3634) Page: 1/19 
Trade Policy Review Body  Original: English  
 
TRADE POLICY REVIEW  
REPORT BY  
ISRAEL 
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the 
Marrakesh Agreement Establishing the World Trade Organization), the policy statement by Israel  is 
attached.  
 
 
Note: This report is subject to restricted circulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Israel . WT/TPR/G/ 376 • Israel  
 
- 2 - 
 
  Contents  
1   THE ISRA ELI ECONOMY: RECENT DEVELOPMENTS  ................................ ......................  3 
1.1   Main Developments  ................................ ................................ ................................ ..... 3 
1.2   Foreign Trade ................................ ................................ ................................ ..............  5 
1.3   Israel's Monetary Policy  ................................ ................................ ................................  9 
1.4   Employment and the Labour Market  ................................ ................................ .............. 10 
2   FOREIGN INVESTMENT  ................................ ................................ ..............................  10 
3   STRUCTURAL AND SECTO RAL REFORM INITIATIV ES ................................ .................  11 
3.1   Main Initiatives  ................................ ................................ ................................ .......... 11 
3.2   Reducing the Regulatory Burden and Regulatory Impact Assessment (RIA)  ....................... 11 
3.2.1    Regulatory impact assessment  ................................ ................................ .................. 12 
3.2.2    Standardization  ................................ ................................ ................................ .......12 
3.3   Antitrust and Competition  ................................ ................................ ............................ 12 
3.4   Digital Israel  ................................ ................................ ................................ .............. 14 
4   TECHNOLOGICAL INNOVA TION  ................................ ................................ .................  14 
4.1   Resear ch and Development  ................................ ................................ ......................... 14 
4.2   Israel NewTech  ................................ ................................ ................................ .......... 16 
4.3   Digital Health  ................................ ................................ ................................ ............. 16 
5   ISRA EL'S TRADE POLICY  ................................ ................................ ...........................  16 
5.1   Introduction  ................................ ................................ ................................ ............... 16 
5.2   Trade Policy  ................................ ................................ ................................ ............... 17 
5.3   WTO ................................ ................................ ................................ ......................... 17 
5.4   Bilateral Trade Agreements  ................................ ................................ .......................... 18 
5.5   Unilateral Trade Liberalization  ................................ ................................ ...................... 19 
5.6   Conclusion  ................................ ................................ ................................ ................. 19 
 
  WT/TPR/G/ 376 • Israel  
 
- 3 - 
 
  1  THE ISRAELI ECONOMY: RECENT DEVELOPMENTS  
1.1  Main Developments  
1.1.  The State of Israel is an open, industrialized democracy. Since 1990, Israel has seen 
improvements in most economic indicators . Gross Domestic Product ("GDP") increased on average 
by 3.3% annually from 2012 through 2017. This rate has exceeded the average growth rate of 
many advanced economies.  
1.2.  The Israeli economy grew at a healthy pace in 2017 as consumption has led the economi c 
growth in recent years and is expected to contribute to growth in the medium term. In the first 
quarter of 2017, GDP increased at an annual rate of 1.1% (as a result of a correction due to large 
scale car purchases in fourth quarter of 2016), however, it  followed by an increase at an annual 
rate of 3.1%, 3.9% and 3.6% in the second, third and fourth q uarters of 2017, respectively. In 
addition to GDP, there were significant improvements in the labor market with a notable decrease 
in the unemployment rate a nd an increase in the participation rate. In 2017, GDP per capita stood 
at a level of $36,250, ranking Israel 23rd among OECD countries. GDP is expected to grow by 
3.4% in 2018 and by 3.5% in 2019, according to  the Bank of Israel's forecast.  
1.3.  Since 1990s, I srael’s fiscal and monetary policies have been formulated and coordinated with 
the overarching goals of enhancing economic growth, reducing tax burden, narrowing the 
Government’s fiscal deficit, and maintaining low levels of inflation. The efforts made b y the 
Government to reduce the cost of living in Israel have also influenced the rate of inflation (year -
end compared to previous year end), which stood at 0.4% in 2014, -1.0% in 2015, -0.2% in 2016 
and 0.1% in 2017.  
Figure  1: CPI Inflation Rate (year end- compared to previous year -end)  
 
Source:  Israel Central Bureau of Statistics (CBS).  
1.4.  As presented below in Figure 2, since 2013, the budget deficits are maintained below the 
ceiling which was also lowered between 2013 and 2015 . The budget deficit amounted to 2.0% of 
GDP in 2017, well below the budget deficit target of 2.9% for that year.  
 
  
2.4%
-0.1%3.4%3.8%3.9%
2.7%
2.2%
1.6%1.8%
-0.2%
-1.0%-0.2%0.1%
-2.0%-1.0%0.0%1.0%2.0%3.0%4.0%5.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Figure 1. CPI Inflation Rate (Year end -compared to previous year end)
Source:   Israel Central Bureau of Statistics (CBS).WT/TPR/G/ 376 • Israel  
 
- 4 - 
 
  Figure 2 : Central government budget deficit as % of GDP  
 
Source:  CBS, MOF.  
1.5.  The public debt measured as percentage of GDP, which in the past was considered a 
substantial liability to the Israeli economy, continued to decrease gradually during the past 6 years 
reaching a historical low of 61.1% in 2017. This indicator was consecutively reduced every year 
since 2009.  
Figure 3 : Public debt as  % of GDP  
 
Source:  MoF, CBS, The Chief Eco nomist Department c alculations.  
1.6.  In March 2018, the OECD published an Economic Survey1 on Israel which also addressed 
various aspects of the Israeli economy. The findings were summarized by the following:  
 Israel’s economy continues to perform well both in terms of macroeconomic and fiscal 
outcomes. Growth has averaged 3.3% since 2000, higher than in many OECD countries. 
The external surplus is comfortable, and the public debt -to-GDP ratio, already well below 
the OEC D average, is still falling. This success is largely attributed to a long history of 
effective macroeconomic policy settings and bold structural reforms, including the 
successful absorption of the wave of immigrants from the former Soviet Union, the 
                                                
1 OECD (2018), OECD Economic Surveys: Israel 2018, OECD Publishing, Paris. 
http://dx.doi.org/18.1787/eco_ surveys -isr-2018-en. 
3.3%
1.7%
0.9%
0.0%2.1%4.8%
3.5%
3.1%3.9%
3.1%
2.7% 2.1% 2.1%2.0%
1.5%6.0%
5.5%
3.0%
2.0%4.7%
3.0%2.9% 2.9% 2.9%
0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Actual CeilingFigure 2. Central government budget deficit as % of GDP
Source:   CBS, MOF.
97.9%
95.9%
93.9%95.6%
89.6%
79.5%83.7%90.2%92.9%
91.3%
88.2%
80.2%
73.1%
72.2%74.8%
71.0%
69.0%68.4%
67.0%66.0%
63.8%
62.4%
61.1%
60%65%70%75%80%85%90%95%100%105%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Figure 3. Public debt as % of GDP
Source:   MOF, CBS, The Chief Economist Dept. calculations.Global 
Economic 
CrisisWT/TPR/G/ 376 • Israel  
 
- 5 - 
 
  promot ion of venture capital financing for the nascent high -tech sector and the 
liberalisation of higher education, all dating back to the 1990s, as well as improvements in 
work incentives in the early 2000s. These good results are expected to continue, thanks t o 
the persistently dynamic high -tech sector and the forthcoming development of new gas 
fields. Against this backdrop, Israelis remain on average more satisfied with their lives 
than residents of most other OECD countries, even though wellbeing results are mixed in 
several respects, including the environment. They enjoy remarkable health and labour 
market outcomes, with historically low overall and long -term unemployment rates. 
Employment growth has been the main factor reducing the gap in average living sta ndards 
with the most advanced countries these last 15 years.  
1.2  Foreign Trade  
1.7.  Exports of goods and services2 remain a crucial element of the economy's overall 
performance and competiveness. The Israeli exports of goods and services reached an historical 
high of $102.3b in 2017 compared to imports of $96.7b (a surplus of $5.7b following a surplus of 
$6.6b and $9.0b in 2016 and 2015 respectively).  
1.8.  The annual growth rate of exports of goods and services in 2017 stood at 6.4% after a 
growth rate of 2.9% in 2016 an d a decline in 2015 of 5.9%. Services continue to constitute a large 
share of Israeli export and in 2017 constituted 43.3% ($44.3b) of total export, and goods 
constituted 56.7% ($58b) of total export (see figure 4). Export of goods grew by 3.3% and export 
of services grew by 10.8% in 2017.  
Figure 4:  Export s of goods and services in millions of dollars  
 
Source:  Israel Central Bureau of Statistics.  
1.9.  Import of goods and services grew by 7.9% in 2017 after a further growth of 6% in 2016. 
Import of goods grew by  6.3% in 2017 and import of services gr ew by 11.9% in 2017 
(see Figure  5). 
                                                
2 Figures in this section are adjusted to BOP.  
63,527 56,683 56,171 58,010 35,832 
36,826 40,004 44,322 
020,00040,00060,00080,000100,000120,000
2014 2015 2016 2017Figure 4. Exports of goods and services in millions of dollars
Source:   Israel Central Bureau of Statistics.WT/TPR/G/ 376 • Israel  
 
- 6 - 
 
  Figure 5: Import s of goods and services in millions of dollars  
 
Source:  CBS. 
1.10.   In 2017, the USA remained Israel's top expor t destination market for goods3 with a total of 
$11.2b, the  United Kingdom is the second export destination market with a total of $4.8b and 
China is the third destination with a total of $3.1b exports of goods. In terms of trading blocks, the 
European Union remains Israel's biggest export destination market (see Figure 6). Israeli export of 
goods to the European Union grew by 19.8% in 2017. The European Union is also the biggest 
origin of import to Israel, with $26.4b in 2017.  
Figure 6: Export s of goods (excluding diamonds) by region in millions of dollars  
 
Source:  CBS. 
1.11.   The composition of Israel’s trade in goods reflects the industrialized nature of its economy. 
In 2017, exports of goods consisted primarily (85%) of manufactured goods section (industry 
related), which includes the dominant high -tech sector (s ee figure  8). This Industry related export 
grew by 3.3% in 2017. Raw materials and capital investment, including fuels and diamonds, 
comprised 80% of imported goods (see figure 8).  
 
                                                
3 Export of goods in this section exclude diamonds.  
70,171 
59,981 63,535 67,519 24,363 
24,554 26,047 29,137 
020,00040,00060,00080,000100,000120,000
2014 2015 2016 2017Figure 5. Imports of goods and services in millions of dollars
Source:   Source: Israel Central Bureau of Statistics.
1,299 1,012 823 862 9,845 11,323 
10,000 
8,486 11,548 11,978 12,466 12,259 15,289 
13,455 13,232 15,851 
2014 2015 2016 2017Africa Asia North America EUFigure 6. Exports of goods (excluding diamonds) by region  in millions of dollars
Source:   CBS.WT/TPR/G/ 376 • Israel  
 
- 7 - 
 
  Figure 7: Imports of goods (excluding diamonds) by region in millions of d ollars  
 
Source:  CBS. 
Figure 8: Export s of goods in 2017 (figures in millions of dollars)  
 
Source:  CBS. 
329 269 239 264 13,780 13,038 15,099 15,880 
8,125 7,840 7,868 7,731 21,862 
20,876 25,454 26,444 
2014 2015 2016 2017Africa Asia North America EUFigure 7. Imports of goods (excluding diamonds) by region  in millions of dollars
Source:   CBS.
Industry excl. 
diamonds, 45,195, 
85%Agriculture, forestry 
and fishing, 1,188, 2%Diamonds, 6,726, 13%Figure 8. Export of goods in 2017 (figures in millions of dollars)
Source:   CBS.WT/TPR/G/ 376 • Israel  
 
- 8 - 
 
  Figure 9: Import s of goods in 2017 (figures in millions of dollars)  
 
Source:  CBS. 
1.12.   Trade in services continues to grow and constitutes a substantial part of Israel's foreign 
trade.  In 2017, the majority (76% or $33.6b) of Israeli exports of services was in the "Other 
business services" sector, which includes research and development, information services, 
telecommunication services, computer related se rvices, services between related enterprises and 
others (see figure 10). Exports in this sector grew by 9.6% in 2017, after a further increase of 
13.8% and 5.0%  in 2016 and 2015 respectively.  
1.13.   The second largest sector of Israel's exports of services is tra vel services, which increased 
substantially by 15.2% in 2017 and reached $6.5b . 
1.14.   The United States remained Israel's top services export destination (35% of total export of 
business services) followed by the European Union (24% of tota l export of business s ervices).  
Figure 10: Export of Services 2017  
 
Source:  CBS. 
Raw materials,  28,336 , 
42%
Consumer goods,  
13,664 , 20%Investment goods,  
12,087 , 18%Fuels,  7,602 , 11%Diamonds,  5,755 , 8%Ships & aircrafts,  
499 , 1%Figure 9. Import of goods in 2017 (figures in millions of dollars)
Source:   CBS.
Travel services,  6,594 , 
15%
Transportation services,  
4,067 , 9%
Insurance services,  
37 , 0%
Other business services,  
33,612 , 76%Government services,  
13 , 0%Figure 10. Export of services in 2017 (figures in millions of dollars)
Source:   CBS.WT/TPR/G/ 376 • Israel  
 
- 9 - 
 
  1.15.   On the import side, "Other business services" comprised 46% of imported services, and 
grew by 18% in 2017. Travel services comprised 26% and transportation services consisted 25% 
of imported servi ces (see figure 11).  
1.16.   The United States is the main origin of imported “other business services” to Israel (28% of 
total imports of “other business services”) followed by the European Union (26% of total imports 
of “other business services”).  
Figure 11: Imp orts of services 2017  (figures in millions of dollars)  
 
Source:  CBS. 
1.3  Israel's Monetary Policy  
1.17.   Since 1985, when the "Economic Stabilization" Plan was adopted, (in order to deal with the 
hyperinflation crisis of that time), Israel has made significant progress in stabilizing inflation 
through effective implementation of monetary policy by the Bank of Israel, together with fiscal 
restraint and trade liberalization promoted by the Government. Since 2001, the annual inflation 
target rate has been set at 1% -3%. 
1.18.   In response to the 2008 crisis the Bank of Israel implemented in 2009 an expansionary 
policy, resembling the policies adopted in many other countries. The Bank implemented its policy 
by using three important tools: (1) setting the interest rate, the p rincipal tool in managing Israel's 
monetary policy, within the framework of an inflation target; (2) purchasing foreign currency in 
the market; and (3) purchasing government bonds in the secondary market. The rapid interest 
rate-cutting resembled exception al measures which were taken by other countries, in order to 
confront the implications of the financial crisis and to minimize the risk of sliding into a 
deflationary environment while supporting  activity and market stability.  
1.19.   In recent years the Bank of I srael is maintaining a very accommodative policy, keeping its 
official interest rate at a historically low level of 0.1% since March 2015. The authorities also 
intervene in the foreign exchange market to limit fluctuations and excessive appreciation that 
would result from the extraordinarily accommodative monetary policy settings by the world’s 
major central banks. These interventions come on top of currency purchase to offset the 
exchange -rate pressures from expanded natural gas production. The result of p ersistent 
intervention is that the Bank of Israel has foreign -currency reserves of US $118 billion (34.5% of 
GDP), one of the highest GDP shares amongst developed countries. Since November 2015 the 
Bank of Israel has also provided forward policy guidance to  influence investor expectations: this 
accommodative policy is thus expected to be maintained as long as necessary to entrench inflation 
within the 1 -3% target range. Although shorter -term inflation expectations are below 1%, they are 
well anchored to the target beyond this horizon, indicating monetary policy credibility . 
Travel services,  7,514 , 
26%
Transportation services,  
7,328 , 25%
Insurance services,  588 , 
2%Other business services,  
13,417 , 46%Government services,  
291 , 1%Figure 11. Import of services in 2017 (figures in millions of dollars)
Source:   CBS.WT/TPR/G/ 376 • Israel  
 
- 10 - 
 
  1.4  Employment and the Labour Market  
1.20.   Since 2012, the labour market continued its constant improvement (that started during the 
second half of 2009). The unemployment rate has gradually decreased, reaching a historical low of 
4.2% at the end of 2017. The participation rate remained relatively stable throughout 2016 and 
2017, standing at 64.0% at the end of 2017.  
1.21.   In recent years the labour force participation rate (the labour force as a pe rcentage of the 
population ove r the age of 15) is growing and stood at 64.1%  in 2016, similar to the rate in 2015, 
continuing the gradual upward trend that started in 2002 when it stood at 59.4%. The general 
participation rate was also positively affected by the growing participation rate in the ultra -
orthodox and Arab populations which in the past had very low participation rates. The increase in 
the participation rate and the number of Israelis employed is attributed to, among other factors, to 
overall ec onomic growth and the successful implementation of the Government’s policy to cut 
transfer payments and lower taxation on labour.  
Figure 12 : Participation rate and unemployment rate in Israel, age 15 and older  
 
Source:  CBS. 
2  FOREIGN INVESTMENT  
2.1.  During the period covered by the current report, Israel has reinforced its global position and 
image as an open economy with favourable environment for foreign investment.  
2.2.  Foreign investment inflow into Israel continued to grow in the past few years. Net foreign 
investment in Israel totalled $18.57 billion in 2017 and $17.86 billion in 2016. These figures 
include direct foreign investment, investment in Israeli securities traded both on the Tel Aviv Stock 
Exchange (TASE) and on foreign exchanges, direct credit to the public sector and to residents, 
trade finance and credit to suppliers, and deposits by non -residents in Israeli banks.  
2.3.  Economy -wide investment is primarily affected by the long -term real interest rate and the 
economy’s risk premium. An increase in investme nt is the key to sustainable growth as well as the 
continued decline in the rate of unemployment. In light of the falling interest rate over the past ten 
years and the decline in the country’s risk premium, foreign investment in the Israeli economy 
amounte d to a total of $104.1 billion in 2015, up from $93.3 billion and $88.2 billion in 2014 and 
2013 respectively. Israel's assets abroad grew by about $9.7 billion in 2015, to a total of 
$89.4  billion.  
2.4.  Israel’s balance of payments and international investment  position vis -a-vis the rest of the 
world is relatively strong: It has a current account surplus and its gross debt is relatively low. In 
addition, Israel’s composition of liabilities is favourable, with most liabilities in the form of equity 
instruments a nd only a small portion in debt instruments most of which are denominated in 
10.1%10.7%11.6%12.0%
11.7%
10.3%
9.7%
8.7%
7.4%8.9%
8.0%7.0% 6.9%
6.2% 5.9%
5.3%
4.8%
4.2%64.0%
57%59%61%63%65%
4%6%8%10%12%14%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Unemployment Rate participation rateFigure 12. Participation rate and unemployment rate in Israel, age 15 and older
Source:   CBS.WT/TPR/G/ 376 • Israel  
 
- 11 - 
 
  shekels and are therefore not exposed to foreign currency risk. The high level of foreign currency 
reserves and the balance in the current account also contributes to stability. T he current account is 
expected to improve further in the medium -term due to the replacement of energy imports with 
local natural gas.  
2.5.  Israel has investment protection agreements with 37 countries and double taxation treaties 
in force with 54 countries.  
3  STRUCTURAL AND SECTORAL  REFORM INITIATIVES  
3.1  Main Initiatives  
3.1.  During the pe riod covered by the report the G overnment continued to initiate various 
reforms, with the aim of enhancing competitiveness and performance of the economy. As it is 
customary in Israel, f or many proposed reforms, the Government initiated the convening of an ad 
hoc committee of experts which held deliberations including a process of stakeholders' hearings. 
The hearings are followed by the submissions of draft recommendation s for the conside ration of 
the G overnment and Knesset (as necessary). The process concludes with the adoption of final 
recommendations and, if relevant, ena ctment of the appropriate laws.  
3.2.  The underlying reason for many of the reforms is the G overnment's effort to reduce th e 
relatively high cost of living in Israel as well as trying to reduce the burden of regulation. 
Considering the fact that Israel is a relatively small economy that is dependent on trade, some of 
the most important reforms carried out during the past few y ears were of an import liberalization 
nature and were meant to facilitate the process of importation to Israel in various sectors of goods 
and services. For some of these reforms there are already results in the form of reduction in prices 
of goods, increa sed competition and positive feedbacks from importers.  
3.3.  Those reforms include, among others, several rounds of unilateral tariff reductions, 
liberalizing and streamlining the process of placement of non -sensitive food in the market, a 
reform of the spare ca r parts' market, and liberalizing imports of some telecommunication 
equipment. Several reforms are underway in the financial services sector in order to increase 
competitiveness, allowing the adaptation of new products and technologies while safeguarding t he 
system.  
3.2  Reducing the Regulatory Burden and Regulatory Impact Assessment (RIA)  
3.4.  In October 2014, the Government of Israel approved a resolution for a plan to improve 
regulations and to reduce the existing bure aucratic burden of regulations.  
3.5.  In its resolut ion, the G overnment recognized that regulation is a central tool for encouraging 
the economy and advancing society. Maintaining a developed regulatory system is the basis for an 
advanced, developed country, helps protect vital public interests and allows f or the existence of a 
modern, efficient and prosperous economy. However, good regulation must reflect a balance 
between protecting the public interest on the one hand, and superfluous regulation which burdens 
the economy and could prove detrimental to heal thy market activity, on the other hand. The 
purpose of the resolution was to bring about a reduction in the regulatory burden, and to create 
the correct balance between vital governmental interventions while leaving roo m for market forces 
to operate.  
3.6.  The p lan detailed in the resolution includes two central components: the first – reducing the 
regulatory burden of existing regulation, and the second – carrying out an assessment of the 
expected impact of regulation before formulating new regulation named Regu latory Impact 
Assessment (RIA).  
3.7.  The plan to reduce the existing regulatory burden will be implemented in such a way that 
within five years, there will be a reduction in the regulatory burden by all regulators in the 
Government. Each ministry is instructed to review regulations under its responsibility with the aim 
of eliminating unnecessary regulations or amending them.  WT/TPR/G/ 376 • Israel  
 
- 12 - 
 
  3.8.  The annual plan of each ministry should achieve 25% reduction in the aggregate 
administrative costs of the regulators, so that at the end o f the five years, 25% of the overall 
administrative costs will be reduced.  
3.2.1   Regulatory impact assessment  
3.9.  As of January 1, 2016, the requirement to conduct a regulatory impact assessment (RIA) is 
applied to any governmental legislative initiative, whether it  is primary or secondary legislation.  
3.10.   In light of the resolution, the Governmental Handbook for Regulatory Impact Assessment 
was issued before the entry into force of the requirement.  
3.11.   A RIA is conducted before formulating the regulation itself,  at the pol icy planning stage. If 
the regulation undergoes changes in the Knesset or one of the Knesset committees, the ministry 
will not be required to edit and publish a new RIA.  
3.12.   In order to avoid performing a complex process on negligible regulation, the responsib le 
minister may exempt a specific regulation from the requirement to perform a RIA process in cases 
where the impact of the regulation on the targets of the regulation or on other public interests is 
negligible.  
3.2.2   Standardization  
3.13.   The Government of Israel has  been working for some time to reform aspects of Israel's 
standardization system. This includes an ongoing effort to adopt international standards, and to 
base checks of conformity assessment on a risk based analysis. In addition the Government has 
withdra wn the exclusivity of performing product testing granted in the past by law only to the 
Standards Institution of Israel (SII). SII is the country's national standards body. Its 
Standardization Division coordinates the preparation of Israeli standards throu gh technical 
committees, comprised representatives from all sectors of the Israeli economy and society (as 
appropriate). The product testing laboratories carry out testing of domestic and imported products 
for compliance with the relevant Israeli mandatory  standard, The reform passed in December 
2016, contains several fundamental measures that aim to reduce the cost of imported goods, 
provide better and quicker service to importers and encourage greater participation of small and 
medium size enterprises in standardization process by ensuring equal representation for all sectors 
of the economy.  
3.14.   The two main structural changes are:  
 Eliminating the monopoly of the SII in testing imported goods by opening the market for 
competition to other recognized, private, independent laboratories.  
 Revision in the composition and budget resources of SII in the area of the technical 
committees. The expectation is that the change will enable wider representation of 
different stakeholders and will encourage the committees to ad opt international standards 
that do not include any national deviations.  
3.3  Antitrust and Competition  
3.15.   During the work on several reforms, an analysis of the market (as a whole or in specific 
sectors) showed that one important reason for the high cost of livin g in Israel is the concentration 
of players in the market. It was therefore agreed that some changes in the antitrust laws and 
other relevant regulations were necessary in order to increase competition, strengthen the ability 
of the Antitrust Commissioner (the “Commissioner”) to enforce the law and to reduce the 
centralization level in the business environment in Israel. The reforms  that followed may be 
divided into three groups:  WT/TPR/G/ 376 • Israel  
 
- 13 - 
 
   New primary legislation:  
(1) Enactment of the "Promotion of Competition and the Reduction of Concentration 
Law" of 2013 which aims to reduce the level of concentration in the Israeli market 
including by an establishment of a Centralizat ion Committee that advises the 
Government on licensing and other rights granted to key entities in t he economy; 
publication of lists of entities which are considered as concentrated, and setting an 
obligation for the regulators to take into consideration the level of industry 
competition in the process of allocating rights, and to consult with the Antitr ust 
Commissioner regarding certain rights which have a significant impact on 
competition.  
(2) Enactment of the "Promotion of Competition in the Food Industry" Law, 2014, that 
regulates the activity of suppliers and retailers. The law prohibits behaviours that 
may strengthen their market power or reduce competition between them. In 
addition, the law addresses problems concerning the lack of regional competition in 
the food and consumer goods sectors, by requiring large retailers to obtain the 
Commissioner's appr oval in order to open additional branches in geographical areas 
in which the Commissioner considers lacking in competition.  
 Amendments to existing Laws:  
(1) Amendment No. 12 to the Restrictive Trade Practices Law of 2011 which grants the 
Commissioner the autho rity to establish directives for the prevention of harm to 
competition or for the improvement of competition in a market in which an oligopoly 
exists.  
(2) Amendment No. 13 to the Restrictive Trade Practices Law (Financial Sanctions) of 
2012 – which grants the Commissioner the authority to impose financial sanctions in 
an administrative proceeding for violations of the Restrictive Trade Practices Law.  
(3) Amendm ent No. 14 to the Restrictive Trade Practices Law (Amendment – Exemption 
for Agricultural Produce) from 2014 – The amendment reduced the statutory 
exemption to restrictive arrangements in the agricultural sector.  
(4) Amendment No. 15 to the Restrictive Trade P ractices Law (Legislative Amendments 
– Increasing Competition) from 2014 – As part of the amendment to this law, the 
Antitrust Commissioner has been given the authority to conduct market 
examinations in economic sectors, while examining the existence of ma rket failures.  
(5) Amendment No. 16 (Legislative Amendments – Increasing Competition) from 2014 
where an Antitrust Tribunal is authorized to instruct a monopolist or a member of an 
oligopoly to sell an asset held by them, following an appeal by the Antitrust 
Commissioner to the Tribunal, if it is found that this can prevent harm or likely harm 
to competition.  
 Class exemptions:  
(1) Class exemption for operating arrangements concerning international maritime 
transport, from 2012;  
(2) Class exemption for arrangements betw een air carriers concerning the marketing of 
flight capacity to destinations subject to open skies agreements, from 2012;  
(3) Class exemption for non -horizontal arrangements that do not include specific price 
restraints, from 2013;  
(4) Class exemption for actions and arrangements concer ning consumer price from 
2014;  WT/TPR/G/ 376 • Israel  
 
- 14 - 
 
  (5) Class exemption for actions and arrangements concerning the arranging of goods at 
a large retailer's store from 2014;  
(6) Class exemption for joint ventures for marketing and supply abroad of defence 
equip ment from 2015 (amended in 2017);  
(7) Amendment of class exemption for arrangements between air carriers, from 2013.  
3.4  Digital Israel  
3.16.   Digital Israel is the G overnment national initiative that focuses on harnessing the potential 
of the digital revolution to advance information and communication technologies for the benefit of 
accelerating economic growth, reducing socio -economic gaps and making government smarter, 
faster, and more accessible to citizens.  
3.17.   The Government intends to leverage the country’s start -up environment to greatly improve 
governmental and business services, ensuring they are delivered in the most advanced methods. 
To this end, in 2013, the Government adopted a resolution on establishing the "Digital Israel" – a 
national initiative", to set in motion a coordinated effort to realize the potential of advanced 
technological infrastructures.  
3.18.   As part of the "Digital Israel" national initiative, an advanced fibre -optic infrastructure will 
be deployed in Israel, enabling Israeli homes and businesses  to connect to the internet at a speed 
of up to 1,000 MB. This infrastructure provides an opportunity for making a quantum leap in the 
area of digital services in the public and business sectors. The mechanism for implementing the 
Government resolution inc ludes the Coordination Bureau in the Prime Minister’s Office which 
formulates a national digital plan in this area.  
4  TECHNOLOGICAL INNOVA TION  
4.1  Research and Development  
4.1.  Israel maintains its strong position in innovation related parameters and excels on an 
international scale in particular in such areas as total expenditure on R&D as share of the GDP, 
venture capital availably, number of patents per capita and quality of research institutions. Foreign 
investment in R&D accounts for 57% of the total Business R&D and 84% of the investments in 
R&D comes from the business sector; these two indicators reflect the attractiveness of the Israeli 
research environment and strong business driven innovation eco -system that also helps create a 
business environment which i s conducive to entrepreneurship and favours risk - taking.  
4.2.  According to Israel's Central Bureau of Statistics (CBS), the High -Tech sector accounted for 
301,000 jobs in 2017 (11.6% of total employed in the Israeli market). However, the High -Tech 
portion of I srael's industrial exports (including services) in 2017 was 50%.  
4.3.  The competitive advantage of the Israeli High -Tech sector is based on various factors, 
notably an innovation culture and infrastructure that benefits from the world's highest 
expenditures, 4. 3% as a share of GDP, for civilian R&D. As for 2017 there were about 5,000 start -
up companies in Israel and over 300 foreign R&D centres of Multinational Corporations.  
4.4.  In 2017, Israeli high -tech companies attracted $5.2 billion from local and foreign ventu re 
investors. This is an 8% increase from $4.8 billion which were raised in 2016 and a 21% increase 
from $4 .3 billion raised in 2015 (see F igure 1 3). WT/TPR/G/ 376 • Israel  
 
- 15 - 
 
  Figure 13 : VC investments in Israel (US$ billions)  
 
4.5.  In 2017 the total amount of Israeli companies’ exits reached a record high of $24 billion 
including the purchase a company in the field of car accidents prevention systems and autonomous 
driving, in the amount of $15 billion, which was the highest purchase of an Israeli company up to 
date. 
4.6.  One of the most su bstantial developments in Israel in this field since the last Trade Policy 
Review was the establishment of th e Israel Innovation Authority. The Authority was set up on the 
basis of the Office of the Chief Scientist in the Ministry of Economy and Industry. The objective 
was to fulfil the missions assigned to it by the R&D Law in a more conclusive way, and to provide 
more efficient and high -quality service to the Israeli innovation community. In order to do so, the 
Authority operates with a structure of "inno vation divisions" that allocate a cumulative budget of 
approxima tely NIS 1.6 billion each year.  
4.7.  The Start -up Division offers unique tools to support the early development stages of 
technological initiatives. These tools assist entrepreneurs and start -up co mpanies in developing 
their innovative technological concepts at the pre -seed or initial R&D stages, transform their ideas 
into reality and reach significant milestones.  
4.8.  The Growth Division operates a wide range of incentive programs that promote technolog ical 
innovation of mature and growth companies. This division contributes to the promotion and 
preservation of competitiveness and technological leadership of companies, as well as the increase 
of their growth rates and potential.  
4.9.  The Technological Infrast ructure Division focuses on collaboration between industry and 
academia to produce advanced technologies and innovative products. The incentive programs 
offered by this division promote cooperation, exchange of knowledge and experience, and 
development of generic ground -breaking knowledge by an integrated group of researchers from 
academia and industry. These incentive programs seek to strengthen the long -term technological 
advantages of Israeli industry in the face of fierce international competition.  
4.10.   The Advanced Manufacturing Division focuses on promoting the implementation of R&D and 
innovation processes in companies in the manufacturing sector, in order to strengthen their 
competitiveness in the global arena and improve productivity across a variety of industrial sectors. 
The programs offered by this division aim to boost manufacturing -oriented industries and 
encourage the owners of mainly small and medium sized factories to develop products, 
technologies and manufacturing pr ocesses to realize these goal s. 
4.11.   The Societal Challenges Division focuses on improving productivity through technological 
innovation in the public sector and social organizations. This division is also responsible for R&D 
aimed at dealing with social and environmental challenges, including the diversification of the 
0.01.02.03.04.05.06.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Local VC's Foreign VC'sFigure 13. VC investments in Israel (US$ billions)
60%87%
85%
84%
76%
73%70%
63%64%62%
61%84%
40% 13% 15%16% 24%27%30%37% 36%38%39%16%WT/TPR/G/ 376 • Israel  
 
- 16 - 
 
  population employed in the hi -tech industry and the creation of appropriate technological solutions 
for disadvantaged populations in Isr ael and abroad.  
4.12.   The International Collaboration Division is responsible for creatin g bridges to new 
international markets, building platforms for cooperation in innovative R&D, and attracting 
strategic foreign stakeholders to Israel, all while creating competitive advantages for the Israeli 
industry in the global market. These initiative s are made possible through an array of bilateral 
cooperation agreements and bi -national funds that support joint R&D and projects between 
international partners.  
4.2  Israel NewTech  
4.13.   With the aim of responding to increasing global environmental challenges and t he water 
shortage in Israel, the G overnment continued "Israel NewTech" national program, focused on 
water and renewable energy technologies respectively. This pioneering national program is led by 
the Ministry of Economy and Industry, and is supported by a  number of additional government 
agencies. Israel NewTech helps to advance the water and sustainable energy sectors by supporting 
academia and research, encouraging implementation of novel solutions in the local market, and 
promoting those solutions in the  international arena.  
4.3   Digital Health  
4.14.   Designed to improve medical care, enable the country to better cope with the health 
challenges of the 21st century, and promote medical research with clinical data, Israel’s national 
digital health initiative aims to c hange the way healthcare is delivered, and to open opportunities 
for more research in this area.  
4.15.   For the last three years Israel has been building a comprehensive digital health 
infrastructure, positioning its public health system in the front of the new d ata-driven medical 
world. The goal is to enable the system to cope successfully with the challenges that health 
systems face worldwide: aging population, overcoming chronic diseases, an unhealthy lifestyle 
etc., all of which puts the health care system und er growing pressure.  
4.16.   The transformation of the healthcare system by leveraging digital technologies is a national 
goal, which is prioritized and promoted by the Prime Minister and various government ministries. 
Dedicated teams have been working in three ar eas to consolidate Israel’s digital health project.  
4.17.   The first is to complete the missing clinical information regarding the patient’s medical 
history by collecting and fusing data from all possible sources and using a Health Information 
Exchange national platform. The goal is to allow every physician, including those who work in 
small and distant clinics, to receive all relevant medical information about their patients in order to 
make the best medical decision in real time.  
4.18.   The second is to synchronize al l administrative and medical data regarding patients between 
all medical institutions, and enable secure data sharing between different health organizations. 
Ultimately, the goal is for the patient not to have to hold or deliver any paper, whether it is a 
payment commitment or medical summary.  
4.19.   The third element is to promote analysis of the medical information for the benefit of 
medical research, using Big Data analysis tools, without compromising the privacy of the patients. 
Big data analysis of multi -omics data may lead to new discoveries in personalized medicine and 
preventive medicine, and here the goal is to enable an end -to-end process which begins with 
academic research and ends with services, products and methodologies which can be implemented 
at the  Israeli public health system.  
5  ISRAEL'S TRADE POLIC Y 
5.1  Introduction  
5.1.  International trade plays a vital role in the economy  of the State of Israel. Indeed , the Israeli 
economy has integrated into the global trading system in a rapid and efficient manner, by WT/TPR/G/ 376 • Israel  
 
- 17 - 
 
  implementing multilateral and bilateral trade agreements, as well as by pursuing a unilateral 
process of trade liberalization and structural reforms. Israel’s surplus in its Current Account 
amounted to 2.8% of GDP at the end 2017. In addition, in 2017 impo rts represented 27% of the 
resources of the Israeli economy while exports represented more than 29% of the uses.  
5.2.  The Israeli economy has undergone a substantial process of structural reforms, so that in a 
relatively short time the Israeli economy has devel oped into a liberalized market  place, trading in a 
wide range of manufactured goods and services worldwide. Intense entrepreneurial activity 
became the hallmark of the business environment, attracting the attention of foreign and local 
investors. The Israe li technological, research and knowledge based industries have gained 
worldwide recognition and have served as  an engine for economic growth.  
5.2  Trade Policy  
5.3.  Israel's trade policy objectives are as follows:  
(1) Continued integration of the Israeli economy into th e global trading system, through the 
use of policy instruments that relate to trade in goods, services, investment, competition, 
environment, intellectual property, and others.  
(2) Promote and maintain Israel's exports competitiveness by expanding and updating  the 
network of international agreements designed to promote trade, facilitate market access, 
eliminate non -tariff barriers and encourage long term economic growth.  
(3) Increase the efficiency of resources' allocation, by enhancing reforms that aim at the 
introduction of greater competition and increased transparency in the dome stic market and 
to support the G overnment’s initiatives to reduce the cost of livin g for the welfare of 
consumers.  
(4) Create an attractive climate for investors, business  people, and consum ers. 
5.4.  Israel's trade policy is enhanced by a wide range of international agreements and commercial 
arrangements with individual countries and international bodies. In recent years, the Government 
of Israel has been pursuing its international trade policies in a well -coordinated effort, along three 
paths in parallel: multilateral, bilateral and unilateral. Israel believes in the primacy of the WTO 
multilateral system as the prime tool for the expansion of trade and global prosperity. At the same 
time, Israel believes that its regional and bilateral Agreements, concluded within the framework of 
Article XXIV of GATT 1994, complement its multilateral obligations and allow further trade 
liberalization. Indeed, opening up to foreign competition through bilateral ag reements has paved 
the way to the extension of greater liberalization vis-à-vis other WTO member countries.  
5.3  WTO  
5.5.  Israel is a founding and active member of the WTO. Israel strongly supports the fundamental  
principles and norms of the WTO rules based system,  i.e., non -discrimination; transparency; 
consensus based decision -making; promoting competitiveness and free trade through discouraging 
unfair trade practices and progressive liberalization; and special and differential treatment for 
developing countries a nd LDC’s. Israel believes that full observance of the above -mentioned 
principles and norms is imperative for the goals of the WTO to be attained for the benefit of all. As 
such, they should be respected by all existing WTO Members and future acceding count ries. This is 
why Israel reaffirms its full commitment to uphold the WTO agreements and its preeminent role in 
advancing trade liberalization and promoting economic growth. Nevertheless, Israel also 
acknowledges the reality and the need to find new approac hes to advancing trade liberalization 
and promoting economic growth.  
5.6.  Since Israel’s last TPR, WTO Members negotiated and concluded the Trade Facilitation 
Agreement (TFA) , the first multilateral agreement since the establishments of the WTO. Israel 
took an active role in the negotiations and an ambitious approach in its implementation, having 
notified all its commitments under Category A. In the same spirit, Israel was one of the first few 
countries to notify and modify its schedule of commitments, implement ing the Nairobi Ministerial 
Decision on Export Competition . Israel’s engagement in the multilateral trading system and the WT/TPR/G/ 376 • Israel  
 
- 18 - 
 
  Doha Development Round (DDA) is further exemplified by the support and participation in other 
initiatives that unfortunately have not  come to fruition yet, such as the fisheries subsidies 
negotiation. Israel is also making efforts to advance negotiations and support the multilateral 
trading system through different fronts and configurations — including actively participating in 
groups, such as, G -10 (agriculture), Friends of Anti -Dumping Negotiations (FANs) and Friends of 
the System (FoS). Israel will continue to advance trade liberalization and promote economic 
growth through the existing MTS initiatives as well as any other new approac hes with this aim.  
5.7.  Israel took an active role in two plurilateral initiatives that have been negotiated and 
concluded under the auspices of the WTO since our last TPR, namely the revised Government 
Procurement Agreement (GPA)  and the expansion of the Infor mation Technology 
Agreement (ITA) . The revised GPA was concluded in time for the eighth Ministerial Conference 
and was ratified by Israel in 2014. This agreement is gaining wider support between other WTO 
Members, as evidenced from the slate of recent acce ssions and those currently in the process of 
acceding. Israel hopes that the GPA becomes more widely accepted in the near future to reflect 
greater geographical representation. Israel also took an active part in the negotiations of the 
expansion of the ITA  that was concluded by over 50 Members at the Nairobi Ministerial Conference 
in December 2015, and now covers over 201 tariff lines valued at over $1.3 trillion per year – 
market access of which all the WTO membership can benefit from.  
5.8.  Unfortunately, some of the plurilateral initiatives Israel also took part in have failed to 
materialize, notwithstanding the intensive work by all participants. These plurilateral initiatives 
include the Trade in Services Agreement (TiSA) and the Environmental Goods Agreement  (EGA). 
TiSA aims to achieve an ambitious outcome, compatible with the GATS, that would attract broad 
participation and that could be multilateralized in the future. EGA seeks to eliminate tariffs on a 
number of important environment -related products with the objective of helping to achieve 
environmental and climate protection goals. The benefits of a potential EGA would be extended to 
the entire WTO membership, which show how some plurilateral initiatives can have an effect on a 
multilateral level. At the moment the future of these initiatives remains uncertain, but Israel 
remains open and willing to continue wo rking towards their conclusion.  
5.4  Bilateral  Trade Agreements  
5.9.  Bilateral agreements have been an important pillar of Israel's trade policy. Bilateral in itiatives 
are useful as a supplementary way of achieving substantial results more rapidly than would be 
possible at the multilateral level. They provide a particularly effective alternative when they are 
conducted, as has been the case for Israel, with the  country's main target markets. Israel’s 
bilateral trade agreements cover substantial, however decreasing portion o f Israel’s international 
trade.  
5.10.   Israel has had free trade agreements with its major trading partners for many years - with 
the European Union  since 1975, with the United States since 1985, as well as wi th the EFTA States 
since 1993. In November 1995, Israel and the European Union concluded a more comprehensive 
agreement to cover wide aspects of economic relations beyond trade in goods, enabling  Israel’s 
participation in the European Union’s Research and Development Framework Programs. The 
agricultural market access in Israel's agreements with the EU as well as with the U .S. is being 
further liberalized from time to time. A recent update with the  EU became effective as of 
2010.Other free trade agreements include: Israel -Canada (1996), Turkey (1997), Mexico (2000) 
and the MERCOSUR bloc (2007). Israel also concluded free trade agreement negotiations with 
Colombia in 2013 and with Panama in 2015. The  Agreement with Colombia was signed and is in 
ratification process, while the agreement with Panama is not signed yet. The purpose of these 
agreements was to further open markets and to maintain Israel's exports competitiveness in 
European, North -American and South -American markets. In addition, an update of the free trade 
agreement with Canada was recently completed (awaiting signature and ratification) and the 
agricultural part of FTA with EFTA is being updated to provide a more liberalized trade in this 
sector  
5.11.   Continuing this strategy, Israel is looking at new initiatives to expand its market access to 
other countries through either multilateral or bilateral agreements and is currently negotiating free 
trade agreements with China, Korea, India, Ukraine, V iet Nam a nd The Eurasian Economic Union.  WT/TPR/G/ 376 • Israel  
 
- 19 - 
 
  5.12.   As customs duties are declining, Israel is looking for ways to remove non -tariff barriers as 
well. To that end Israel has concluded varied types of Mutual Recognition Agreements with the EU 
(a framework agreement wi th an Annex on pharmaceuticals), and with Canada (on telecom 
equipment). A similar agreement on tele com was signed with the U.S.  
5.13.   Economic relations with its neighbours in the Middle East are of pa rticular importance to 
Israel. Initiatives named Qualified I ndustrial Zone (QIZ), operating under the framework of the 
Israel -U.S. free trade area agreement, have been concluded with Jordan (1997) and Egypt (2004). 
The QIZ Agreements have contributed substantially to the bilateral growth of trade between Israel 
and Jordan on the one hand and Israel and Egypt on the other hand. Israel holds that trade 
mechanisms have the potential to enhance cooperati on and stability in the region.  
5.5  Unilateral  Trade Liberalization  
5.14.   Israel continues to pursue trade liberalization as par t of its general economic policy.  In 
recent years, as part of  the Go vernment’s review of tariff and non -tariff measures and in an effort 
to reduce the cost of living, Israel has eliminated tariffs on more than 1,300 tariff lines (at HS 8 -
digit level) on ma ny consumer goods, where the prior level of customs duties had been in the 
range of 6 -12%. The reductions are worth over $150 mil lion in annual customs revenue.  In 
addition, in the past few years, Israel introduced new voluntary Tariff Rate Quotas of subst antial 
amounts, open for all WTO members, for a number of highly demanded food and agricultural 
products such as fresh and chilled beef, hard cheese and olive oil. For some of the product, the out 
of quota  duty rate was reduced as well.  
5.6  Conclusion  
5.15.   Since it s inception, Israel has been highly dependent on international trade as a means for 
economic growth and development. Throughout the years, and particularly in the last twenty 
years, Israel has developed and keeps on expanding an integrated network of inter national trade 
agreements, in which bilateral, regional and multilateral trade agreements work in harmony and in 
a joint effort to promote trade and facilitate market access in Israel’s export markets, as well as to 
increase competition and efficiency in t he allocation of re sources in the Israeli economy.  
__________