Israel WT/TPR/S/157 
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II. TRADE AND INVESTMENT REGIME 
(1) INSTITUTIONAL FRAMEWORK  
1. Israel has no formal constitution; several constit ution-like laws, formulated in "basic laws" , 
and a series of decisions by the Supreme Court lay down the foundations for government and the 
rights of individuals.1  Legislative authority rests with the Kn esset (the unicameral parliament), with 
120 members elected by universal suffrage for four years (subject to dissolution), on the basis of 
proportional representation.  The Chairperson and the Vice-Chairperson of the Knesset are elected by 
its members.  The Knesset's functions are to legislate, oversee government operations, and approve 
the State Budget.  The current Knesset has representatives of 15 parties.  The Knesset also elects the State Comptroller, who audits and reports on the assets, finances, and obligations of the State 
(including the operations of Ministries, the Central Bank, state-owned enterprises and institutions, 
local authorities, and other agencies subject to inspection by law).   
2. The President, head of State, is elected by th e Knesset for a (non renewable) term of seven 
years.  Presidential duties include calling on a Kn esset member to initiate the process of forming a 
new government, signing laws adopted by the Knesse t, and appointing the Governor of the Central 
Bank.  The next parliamentary elections are scheduled for 21 November 2006.   However, as at 
November 2005, a crisis in the governing coalition increased the possibility of early elections.  
3. Executive powers lie with the Government, led by  the Prime Minister.  As established by the 
basic law on the Government, the President gives one of the Members of Parliament (usually the head 
of the largest party) the instruction to form a Government.  The Government takes office after 
receiving a vote of confidence in the Knesset.   
4. The judicial branch is divided into general law courts and tribunals.  There are three levels of 
general courts: magistrate, district, and the Supreme Court, which try both civil and criminal matters.  
The Supreme Court, on the basis of a basic law, may overturn a law passed by the Knesset if it finds it 
to be in direct contravention of the basic law.  The Supreme Court also serves as a High Court of 
Justice and tries cases against the Israeli Government.  All tribunals are supervised by the Supreme 
Court, which has the ultimate authority.  Judges are appointed by the President on the 
recommendation of a committee of nine members comprising the President of the Supreme Court
2, 
two other Supreme Court judges, the Minister of  Justice, an additional minister, two Knesset 
members, and two members of the Israeli Bar Association.  
(2) TRADE POLICY FORMULATION AND IMPLEMENTATION  
5. In general, policies, including trade policies,  are formulated and implemented through the 
adoption of laws.  Bills may be initiated by the Go vernment or individual me mbers of the Knesset. 
They generally go through three readings before thei r adoption by the Knesset.  After the first reading 
the bill is referred to the appropriate committee for di scussion;  in the second, it is reviewed in plenary 
session;  and in the third reading, a final vote is taken.  Thereafter the President, the Prime Minister, 
and the minister concerned sign the bill into law.   
                                                      
1 The basic laws are on the Knesset, State Lands, the President, the Government, the State Economy, 
Israel Defence Forces, Jerusalem, the Judiciary, the State Comptroller, Human Dignity and Liberty, and Freedom of Occupation. 
2 The most senior Supreme Court judge is generally appointed as the President of the Supreme Court. WT/TPR/S/157 Trade Policy Review 
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6. The framework for trade policy formulation and implementation has remained broadly 
unchanged since Israel's last TPR in 1999.  The Ministry of Industry, Trade and Labor3 (MOITAL), 
through its Foreign Trade Administration, is the main body in charge of the formulation and 
administration of trade policy.  This includes conducting and coordinating international trade negotiations, proposing tariff changes, establishing trade controls and rules of origin, administering 
quotas on products, and conducting anti-dumping, countervailing, and safeguard investigations.  
Depending on the subject, other relevant ministries may be involved (such as the Ministry of 
Agriculture or the Ministry of Finance), as well as specialized agencies.  Inter-ministerial committees 
are established in specific cases requi ring deeper multi-agency examination. 
7. The Government consults regularly on trade-rela ted issues with private-sector organizations 
such as the Israeli Chamber of Commerce and the Manufacturers' Association of Israel.  For 
consultative purposes, the MOITAL has established the Foreign Trade Forum, which meets on a 
bi-monthly basis; it is composed of representatives of the Manufacturers' Association, the Chamber of 
Commerce, the Israeli Export and International Coopera tion Institute, the Ministry of Finance, and the 
Ministry of Foreign Affairs.  The Israeli Export and International Cooperation Institute also works 
closely with the Government on export promotion.  Regarding consumer protection, the Ministry has 
established a bi-monthly Consumer Forum comprising representatives of consumer organizations, the 
Ministry of Justice, the Manufacturers' Associati on, the Chamber of Commerce, and the Advertisers' 
Association.  Consultations with representative s of consumer organizati ons, manufacturers, and 
importers are carried out by the Standards Commissioner before any change in compulsory standards. 
(3) T
RADE POLICY OBJECTIVES  
8. As a small country with limited natural resources,  Israel is highly dependent on foreign trade 
as an engine for the growth and the further development of an innovative, competitive, and outward-
looking economy.  It believes that economic growth , peace, and security ar e mutually supportive.  
Israel seeks to liberalize its trade regime on an  MFN basis through WTO negotiations, on a bilateral 
basis through reciprocal agreements, and on a unilateral basis through autonomous initiatives.   
9.   Regional initiatives should serve as a catalyst to even greater openness and cooperation at 
the multilateral level.  Israel is seeking further multil ateral liberalization of the non-agriculture sector, 
where it maintains a generally open approach.  In agriculture, however, protection rates and domestic 
support remain substantial, to address, according to  the authorities, various non-trade concerns.  With 
regard to services, Israel seeks fu rther multilateral liberalization, and is ready to take on substantial 
commitments, subject to reciprocal commitments by its  trading partners. Moreover, Israel continues, 
on a unilateral basis, to dismantle import tariffs, in particular on non-agricultural products, and to 
eliminate non-tariff barriers. 
10. Israel is exploring the possibility of free-trade agreements with newly industrialized countries 
in Asia and Latin America.  Howe ver, further steps in this regard depend on developments in the 
multilateral area. 
(4) MAIN TRADE LAWS AND REGULATIONS  
11. International agreements do not carry the force of  law in Israel.  Several domestic laws have 
been amended to reflect Israel's international comm itments.  Nonetheless, in the case of conflict 
between an international agreement and domestic law,  the provisions of the domestic law prevail.   
                                                      
3 In 2003, "Labor" was added to the purview of the former Ministry of Industry and Trade. Israel WT/TPR/S/157 
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12. There have been no significant changes to Israel's  main laws in the area of trade and related 
policies since its last TPR in 1999 (Table II.1).  The main legislation related to international trade is 
the Import and Export Ordinance of 1979, which provides the legal basis for the regulation and 
development of foreign trade.  The Licensing of  Imports Order of 1939 has substantially been 
superseded by the Free Import Order of 1978, whic h permits the free importation of all commodities, 
except those listed in its Annexes 1 (non-automatic licensing), 2 (specified conditions apply) and 5 
(prohibited goods) (Chapter III(2)(v)).  The Customs Ordinance of 1957 regulates customs 
administration, control, documentation, warehousing, valuation, payments of duties, drawback, and 
legal procedures.  The Customs Order (Regulation of  Imports) of 1986 regulates imports of a number 
of products;  Annex 1 establishes conditions for the import of a list of products, mainly agricultural 
products and dangerous chemicals, arms and mu nitions, while its Annex 2 lists goods that are 
prohibited from entry into Israel. 
Table II.1 
Israel's main legislation related to trade, June 2005 
Area Legislation 
General trade legislation Import and Export Ordinance of 1979  
  Import regulations Free Import Order of 1978 (for free importation of products, except those listed in Annexes 1, 2 and 5), a nd 
Licensing of Imports Order of 1939  
  Export regulations Free Export Order of 1978 (for free exports of products with the exception of a list of products for which  an 
export permit is required) 
Customs Customs Ordinance of 1957 (on customs administration, control, documentation, warehousing, valuation, 
payments of duties, drawback, and legal procedures), and the Customs Order (Regulation of Imports) of 
1986 (on imports of a list of products) 
Anti-dumping, countervailing, and safeguard measures Trade Levies Law of 1991 (on anti-dumping and countervailing duties);  no legislation on safeguard 
measures within the meaning of Article XIX of the GATT and the Agreement on Safeguards 
Taxation Purchase Tax Law of 1952 
Free zones Free Port Zone Law of 1969, Eilat Free Trade Zone Law of 1985, and Free Export Processing Zone Law of 
1994 
Investment incentives 
and state aid Encouragement of Capital Investments Law of 1959, Encouragement of Capital Investments Law 
(Agriculture) of 1980, Encouragement of Investments (Capital Intensive Companies) Law of 1990, 
Encouragement of Industrial Research and Development Law of 1984, Encouragement of Industry (Taxes) Law of 1969, Income Tax Law (Adjustments  for Inflation) of 1985  
Standards Standards Law of 1953 
Sanitary and phytosanitary measures Animal Diseases Regulations of 1972 (Transfer Arrangements for Cattle);  Animal Diseases Regulations of 
1974 (Meat Importation);  Animal Diseases Regulations of 1975 (Micro-organisms, Vaccines and 
Transmitters);  Animal Diseases Regulations of 1988 (Import and Export of Animal Products);  Animal 
Diseases Regulations of 1996 (Feeding of Animals);  Regulations for the Control of the Export of Animals and Animal Products of 1998 (Fish, Ostriches, Honey and Milk and Products Produced therefrom, and Egg 
Products);  Plant Protection Law of 1956;  Plant Import Regulations of 1970;  Seed Law of 1956;  Seed 
Regulations of 1975 (Control of Imports);  Public Health Regulations of 1997 (Food, Pesticide Residues)     
Government 
procurement Mandatory Tenders Law of 1992 (together with several regulations on preferences to domestic industries, 
certain regions, and local sub-contracting) 
Competition Restrictive Business Practices Law of 1988 and Regulations of 2004, Consumer Protection Law of 1981 
Price controls Law For the Supervision of Prices of Goods and Services of 1996 
Intellectual property 
rights Copyright Law of 1911;  Copyright Ordinance of 1924;  Copyright Order (Berne Convention) of 1953; 
Copyright Order (Universal Copyright Convention) of 1955;  Performers' and Broadcasters' Rights Law 
of 1984;  Trademarks Ordinance of 1972;  Merchandise Marks Ordinance of 1929;  Appellations of Origin (Protection) Law of 1967;  Plant Breeders' Rights Law of 1992;  Protection of Integrated Circuits Law of 
1999 
Investment Capital Investment Law of 1959  
Source : Information provided by the Israeli authorities.  WT/TPR/S/157 Trade Policy Review 
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(5) INVESTMENT REGIME       
13. Israel has a generally open investment regime, with most activities open to private investment 
(both foreign and national).  The main exceptions are telegraph services and delivery of postal items 
below 500 g, over which the Israeli Postal Authority has monopoly rights .  Restrictions also apply to 
international fixed telecommunications services (up to 74% foreign equity pa rticipation is allowed) 
and wireless telecommunications serv ices (up to 80% foreign equity participation).  In tourism, 
ownership of hotels, travel agencies, and tour operators is restricted to Israeli-registered companies, 
while tourist guide services are restricted to Israeli residents or citizens.  In addition, travel agencies 
are required to employ at least one Israeli-licensed travel expert.  
14. Foreign-owned companies are entitled to own or le ase land.  However, before acquiring land 
rights, they must receive prior approval from the Israeli Land Administration, following a 
recommendation from the Committee for Urban or Agricultural Land.4  Approval is normally granted 
for business purposes.  As at November 2005, the legal regime governing land rights was under 
review. 
15. There is no approval or registration requiremen t for investment in Israel, except for those in 
place for certain enhanced benefits to foreign investors (see below).  There are no restrictions on the 
repatriation of profits or capital.  Both resident s and non-residents may purchase any security traded 
on the Israeli stock exchange and purchase cer tificates of participation in mutual funds. 
16. Israel encourages both local and foreign investme nt by offering a wide range of incentives 
and benefits.  However, the Government provides enhanced incentives to foreign-owned companies, thereby discriminating against Israeli-owned companies.
5  Investment incentives are outlined in the 
Law for the Encouragement of Cap ital Investment.  They include grants, tax incentives (rebate on 
profit tax), research and development support, wage financing, and training support.  The incentives 
offered depend on the location of the company, as we ll as on the type of activities;  preference is 
given to industrial, tourism, and agricultural projects.  Special emphasis is put on high-tech companies 
and R&D activities (Chapter III(4)(i)).   
17. In addition to the benefits available to all i nvestors, the Government provides additional 
incentives to "approved" investors,  i.e. additional tax benefits within  the framework of Israel's main 
state-aid programme, the regional aid programme .  Such investors must apply for "approved" 
enterprise status.  Before incentives are accorded, the project is examined by the Investment 
Promotion Centre, which determines the admissib ility of applications.  To receive "approved" 
investment status, a project must consist exclusivel y of fixed assets;  the company must finance at 
least 30% of the approved project with capital equi ty paid in cash;  the project must be completed 
within three years of the grant's approval;  and at least 25% of the work must be completed within one 
year.  The approval procedure takes about five months on average.  The share of "approved" 
investment in total investment is about 27%. 
18. The amount of tax reduction for "approved" companies depends on the share of foreign 
ownership (Table II.2). While the company tax rate is 25% for an approved company owned by a 
local investor, the rate for approved foreign invest ors varies between 10% and 20%, depending on the 
percentage of foreign ownership; the standard rate is 34%.  The tax benefits for an approved 
enterprise are granted for a period of seven consec utive years, starting in the first year the company 
earned taxable income, provided that 14 years have not passed since the approval was granted, and 
                                                      
4 OECD (2002). 
5 The status of "foreigner" or "Israeli" depends on the country of residence rather than on citizenship. Israel WT/TPR/S/157 
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that 12 years have not passed si nce the enterprise began operation.6  Tax revenue forgone for 
approved investors amounted to NIS 400 million in 2004, up from NIS 300 million in 2001. 
Table II.2 
Rates of taxation applicable to various types of investors 
(Per cent) 
 Percentage of foreign ownership 
 0-49 
(local investor) 49-74 74-90 90-100 Company that is not 
an approved 
enterprise 
Company tax rate 25 20 15 10 36 
Dividend tax  11.25 12 12.75 13.5 16 
Total tax on distributed income 36.25 32 27.75 23.5 52 
Source : Ministry of Industry, Trade and Labor (2004), The Israeli Economy at a Glance . 
20. To facilitate and promote foreign investment in  Israel, the Government has set up Invest in 
Israel (formerly the Investment Promotion Center) in the MOITAL, an investment marketing agency 
designed to be a "first-stop shop" for foreigners interested in investing in Israel.  Invest in Israel's 
tasks include: 
− arranging business trips to Israel  for foreign companies seeking st rategic local partners as well 
as investment opportunities; 
− providing foreign company representatives with customized pre-visit briefing material, 
including a preliminary research of Israeli companies and technologies that might be of 
interest, and personalized servic es during their visit;  and  
− providing a wide range of services to the fo reign entrepreneur including arranging meetings 
with relevant parties, providin g detailed information on various production costs, assessing 
site location, and resolving potential technical /management problems with local authorities 
and the like.  
21. There are no restrictions on outward investment.  However, Israeli companies are required to 
report activities abroad that involve money transactions with foreign residents or banks. 
22. Israel has concluded investment protection agreements with 29 countries.7  Investment 
agreements with a number of other countries have been negotiated, but not yet ratified 
(November 2005).8  Israel is a member of the Multilateral Investment Guarantee Agency (MIGA).  It 
subscribed to the OECD Declara tion on International Investment and Multinational Enterprises in 
September 2002 and is an observer in the OECD's Investment Committee.  Israel is a party to a 
number of double taxation treaties, most of whic h are drafted in accordance with the OECD model, 
covering most international aspect s of income and capital gains tax.  Treaties in force cover 34 
countries.9   
                                                      
6 If at least 25% of an enterprise's shares are owned by foreign investors, the enterprise is eligible for a 
benefits for ten years. 
7 Albania, Argentina, Armenia, Belarus, Bulgaria, Croatia, Cyprus, Czech Republic, El Salvador, 
Estonia, Georgia, Germany, Hungary, India, Kazakhstan, Korea, Latvia, Lithuania, Moldova, Poland, Romania, 
Slovak Republic, Slovenia, Thailand, Turkey, Turkmenistan, Ukraine, Uruguay, and Uzbekistan. 
8 China, Ethiopia, Mongolia, Peru, Serbia-Montenegro, and South Africa. 
9 Austria, Belarus, Belgium, Canada, China, Czech Republic, Denmark, Finland, France, Germany, 
Greece, Hungary, India, Ireland, Italy, Jamaica, Japan, the Netherlands, Norway, the Philippines, Poland, WT/TPR/S/157 Trade Policy Review 
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(6) TRADE AGREEMENTS  
(i) World Trade Organization 
23. Israel has been a contracting party to the GATT since 1962 and an original Member of the 
WTO since 1995.  It grants at least MFN treatme nt to all WTO Members, and to non-WTO Members 
with which it has MFN trade agreements.  Israel has not been a defendant or complainant in any 
dispute under the WTO.  Since its last TPR in 1999 , it has, however, reserved third-party rights in 
three cases relating to Sections 301-310 of the Unite d States' Trade Act of 1974, to Canada's Patent 
Protection for Pharmaceutical Products, and to the United States' Byrd Amendment concerning anti-
dumping measures.10  Notifications made by Israel to th e WTO since 1999 are listed in Table II.3. 
24. At the Doha Ministerial in 2001, Israel underlined its commitment to a new round of trade 
negotiations with a clear development profile.11  Its position on the Doha Development Agenda was 
reiterated at the Cancún Ministerial Conference in 2003.12  Under the Doha Development Agenda, 
Israel has submitted various proposals on rules, in conjunction with other WTO Members.13  In 
agriculture, Israel recognizes the long-term object ive of establishing a market-oriented trading system, 
but considers non-trade concerns to be an essential elem ent of this sector:  they should be an integral 
part of any future multilateral agreement.  With regard to market access for non-agricultural goods, 
Israel supports ambitious plans for tariff reductions in both developing and developed countries;  it 
also believes that more progress needs to be achie ved in the elimination of non-tariff barriers.  In 
services, Israel seeks further multilateral liberaliza tion and was one of the first Members to submit its 
initial offer in the framework of the services negotiations. 
25. Israel participated actively in the negotiations on basic telecommunications and financial 
services, and has signed the Fourth and Fifth Protocol s to the GATS.  It is party to the Information 
Technology Agreement and to the plurilate ral Agreement on Government Procurement. 
                                                                                                                                                                     
Romania, Russia, Singapore, Slovak Republic, South Africa, Korea, Spain, Sweden, Thailand, Turkey, the 
United Kingdom, the United States, and Uzbekistan. 
 10 WTO documents WT/DS152/R,  22 December 1999;  WT/DS114/R, 17 March 2000;  and 
WT/DS217/R, 16 September 2002. 
11 WTO document WT/MIN(01)/ST/101, 12 November 2001. 
12 WTO document WT/MIN(03)/ST/45, 11 September 2003. 
13 WTO documents TN/RL/W/6, 26 April 2002;  TN/RL/W/10, 28 June 2002;  TN/RL/W/18, 
4 October 2002;  TN/RL/W/28, 15 November 2002;  TN/RL/W/28/Rev.1, 22 November 2002;  TN/RL/W/31, 
25 November 2002;  TN/RL/W/46, 24 January 2003;  TN/RL/W/45, 27 January 2003;  TN/RL/W/63, 
12 February 2003;  TN/RL/W/76, 19 March 2003;  TN/RL/W/83, 25 April 2003;  TN/RL/W/93, 2 May 2003;  TN/RL/W/113, 6 June 2003;  TN/RL/W/119, 16 June 2003;  TN/RL/W/171, 15 February 2005;  
TN/RL/W/174/Rev.1, 7 April 2005;  and TN/RL/W/181, 25 May 2005. Israel WT/TPR/S/157 
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Table II.3 
Israel's notifications under the WTO Agreements, November 2005 
WTO Agreement Description of requirement/content WTO document and date (latest document if recurrent) 
Agreement on Agriculture  
Article 18.2 Domestic support  G/AG/N/ISR/37, 30 August 2005 
Article 10 Export subsidies G/AG/N/ISR/36, 8 November 2005 
Article 18.2 Imports under tariff quotas G/AG/N/ ISR/39, 16 September 2005 
 
Article 5.7 Special safeguards G/AG/N/ISR/38, 16 September 2005 
 Administration of tariff quotas G/AG/N/ISR/27, 26 March 2003  
  G/AG/N/ISR/27/Corr.1, 4 November 2003 
Agreement on Implementation of GATT Article VI (Anti-dumping)  
Article 16.4 Semi-annual report G/ADP/N/132/ISR, 28 September 2005 
GATT   
Article XXVIII:5 Notification of Schedule XLII G/MA/79, 3 November 1999 
Agreement on the Application of Sanitary and Phytosanitary Measures 
Article 7, Annex B Emergency measures G/SPS/N/ISR/4-6, 27 March – 15 May 2001 
Agreement on Subsidies and Countervailing Measures  
Article 16.1 and 
Article 25 Notification of subsidies G/SCM/N/71/ISR, 4 July 2005 
G/SCM/N/95/ISR, 4 July 2005 
G/SCM/N/123/ISR, 4 July 2005  
Article 25.11 Semi-Annual Report G/SCM/N/87/Add.1, 18 October 2002 
Agreement on Technical Barriers to Trade  
Article 10.6 Voluntary and mandatory standards G/TBT/N/ISR/32-119, 16 January 2004 - 12 October 2005 
Agreement on Trade-Related Aspects of Intellectual Property Rights   
Article 63.2 Laws and regulations IP/N/1/ISR/C/1-9, 14 March 2000 
Article 63.2 Main dedicated intellectual property laws 
and regulations IP/N/1/ISR/D/1, 14 March 2000 
IP/N/1/ISR/G/1-2, 14 March 2000 
 IP/N/1/ISR/I/1-3, 14 March 2000 
IP/N/1/ISR/L/1-2, 14 March 2000 IP/N/1/ISR/P/1, 14 March 2000 
Article 1.3  Eligibility criteria for protection provided by 
the Rome Convention IP/N/2/ISR/1, 22 March 2000 
Article 69 Notification of contact point IP/N/3/Rev.7/Add.1, 23 February 2004 
 Checklist of issues on enforcement IP/N/6/ISR/1, 20 April 2000 
GATT (Article XXIV:7)  
 Agreement with EU WT/REG110/N/1, 7 November 2000 
 Agreement with Mexico WT/REG124/N/1, 8 March 2001 
 Agreement with Bulgaria WT/REG150/N/1, 14 April 2003 
 Agreement with Romania WT/REG199/N/1, 25 April 2005 
Source: WTO documents.  
(ii) Preferential trade agreements 
26. Israel has continued to expand the coverage of bilateral free-trade agreements since its last 
TPR in 1999, by expanding existing agreements, and by signing new ones with Mexico, Romania, and Bulgaria.
14  In addition, Israel has preferential agreem ents with Canada, the European Union, the 
                                                      
14 Israel has notified its new preferential agreements to the Committee on Regional Trade Agreements:  
WTO documents WT/REG124/N/1, 8 March 2001;  WT/REG150/N/1, 14 April 2003;  and WT/REG199/N/1, 
25 April 2005. WT/TPR/S/157 Trade Policy Review 
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European Free Trade Association, Jordan, Turkey, and the United States (Table II.4). 15  Bilateral 
tariff quotas on agricultural products are described in Table AIII.4.  Israel has not been involved in 
any trade dispute under its free-trade agreements during the period under review.  It is not currently 
negotiating any free-trade agreements (FTA).  Nonetheless, as at November 2005, Israel and MERCOSUR were negotiating a Framework Agreement on Trade, aimed at creating the conditions and mechanisms to negotiate a free-trade agreement.  The two parties intend to start negotiations on 
an FTA during 2006. 
Table II.4 
Israel's preferential trade agreements, June 2005 
Trading 
partner Date of agreement  
(entry into force) Major provisions on trade in goodsa Other major areas of cooperation 
(excluding WTO commitments) 
Bulgaria 8 June 2001 
(1 January 2002) Phased tariff reduction on industrial products (duty free 
since 1 January 2004) 
Tariff quotas on some agricultural products Safeguard measures, dispute settlements, 
intellectual property, government 
procurement, and state aid 
Canada 31 July 1996 
(1 July 1997) Duty free on industrial products since 1 July. 1999 
Further market access for agricultural goods was 
implemented in November 2003  Competition, safeguard measures and 
dispute settlement 
European Free 
Trade 
Association  17 September 1992 
(1 January 1993) Duty free on all industrial goods since 1 January 1993c 
Duty free on some fish, marine and processed 
agricultural products (bilateral agreements covering some 
agricultural products) Competition, state aid, state monopolies, 
intellectual property rights, government 
procurement, services and investment 
European 
Union 20 November 1995 
(1 January 1996)b Duty free on all industrial products and some agricultural products since 1 January 1989 with further concessions 
in agricultural products since 1 January 2004 
Tariff quotas on some agricultural goods Competition, state monopolies, 
intellectual property rights, government 
procurement, and dispute settlement 
Jordan December 2004 
(23 September 
2005) Phased tariff reduction on industrial products  Trade co-operation, intellectual property 
rights, safeguard measures, customs 
cooperation 
Mexico 10 April 2000 
(1 July 2000) Phased tariff reduction on industrial products (duty free 
since 1 January 2005) Tariff quotas on some agricultural products Safeguard measures, government 
procurement, competition policy, monopolies, and state enterprises 
Palestinian Authority 29April 1994 
(29April 1994) Customs and standards union Movement of Labor, tourism, insurance 
Romania 30 January 2001 
(1 July 2001) Phased tariff reduction on industrial products (duty free 
since 1 January 2004) 
Tariff quotas on some agricultural products    
Negotiations on further liberalization of trade in agriculture products started in February 2005.   Safeguard measures, dispute settlement, 
intellectual property, government 
procurement, and state aid 
Turkey 14 March 1997 
(1 May 1997) Phased tariff reduction on industrial products (duty free 
since 1 January. 2000)c 
Tariff quotas on some agricultural products Competition, state aid, state monopolies, 
intellectual property rights, safeguard measures, government procurement, and dispute settlement 
United States 22 April 1985 
(1 September 1985) 4 November 1996 (4 December 1996) Duty free on all industrial products since 1 January 1995 
Tariff quotas on some agricultural products Further market access for agricultural goods was implemented in January 2004 Infant industries, balance of payments, 
government procurement, and dispute settlement 
a See also Table III for details on preferential tariffs. 
b The trade agreement replaced a 1975 trade accord, which in turn replaced a trade accord signed in 1970. c Products not included are those currently under HS Chapters 25-97. 
Source :  WTO Secretariat, based on informatio n provided by the Israeli authorities.  
(a) European Union 
27. The European Communities was the first trading partner with which Israel signed a 
preferential agreement.  As a result of various am endments to the agreement, originally signed in 
1975, trade in industrial products has been tariff-free since 1989.  In 1995, Israel and the European 
                                                      
15 Information about Israel's free-trade agreements is available online at:  
http://www.moit.gov.il/NR/exeres/C3AFB803-731C-4668-BEB2-59838FB3C9C6.htm (14 November 2005). Israel WT/TPR/S/157 
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Communities signed an Association Agreement, which replaced the 1975 preferential agreement.  In 
July 2003, two new protocols on agriculture were sign ed;  they entered into force in January 2004.  
These protocols cover a wider list of agricultural products, extend some of the existing duty 
reductions, and expand various existing tariff quotas. 
28. Since 1 May 2004, the Agreement has been extende d to the new EU members;  until that date, 
Israel had bilateral free-trade agreements with five  of the ten new EU members (the Czech Republic, 
Hungary, Poland, the Slovak Republic, and Slovenia).  As a result of the EU enlargement, the two 
parties signed a Protocol to the Association Agreement with various country-specific agricultural 
provisions. 
(b) United States 
29. The free-trade agreement between Israel and the United States entered into force in 
September 1985.  Their trade in industrial produc ts has been duty-free since 1995.  Under an 
amendment to the U.S.-Israel Agreement signed in Oc tober 1996, the two parties entered into a five-
year programme of gradual improvement of agricultural market access;  following further 
negotiations, they agreed on additional improvements, which entered into force on 1 January 2004.  These include the expansion of tariff quotas and preferences, and the extension of duty-free treatment 
to additional agricultural goods.  In this context, the United States offers Israeli products, the same 
overall average tariff as Canadian and Mexican pr oducts, the lowest (0.7% in 2002) among all its 
trading partners.
16 
(c) Canada 
30. The FTA between Israel and Canada, signed in July 1996, entered into force in July 1997.  It 
provides for duty-free treatment of industrial produc ts and tariff reductions on agricultural and fish 
products.  Following bilateral negotiations, furt her market access for agricultural goods was 
implemented in November 2003.  An amendment to the agreement concluded in 2001, allows for the 
transhipment of goods through the United States, under certain conditions.  It also allows for minor 
processing in the United States without losing the original status.  In particular, processing should not 
increase the transaction value of the goods by more than 10%. 
(d) EFTA 
31. There have been no changes to Israel's preferential agreement with the European Free Trade 
Association (EFTA) since 1999.  The agreement calls for reciprocal free trade in all but four industrial 
goods (HS codes 35.01, 35.02, 38.24, ex38.25), and in some fish, marine, and processed agricultural 
products.  It also contains evolutionary clauses providing the basis for the future development of the 
agreement and its extension to cover new sectors. In  July 2005, two decisions entered into force with 
regard to the Protocols to the Agreement:  Protocol  B, on rules of origin, was amended to allow for 
Pan-Euro-Mediterranean cumulation, and a new Protocol E lays down the rules on mutual 
administrative assistance in customs matters.  Is rael also has bilateral trade agreements with 
individual EFTA member states;  these improve the parties' access to the respective markets either by eliminating or reducing tariffs on some agricultural products.  
(e) Turkey 
32. Israel's free-trade agreement with Turkey ente red into force in May 1997.  Tariffs on most 
industrial goods have been duty-free since January 2000;  exceptions include casein, albumins, 
                                                     
 
16 WTO (2003). WT/TPR/S/157 Trade Policy Review 
Page 18 
 
 
dextrins, finishing agents, natural cork, flax, and hemp.  Various agricultural products are subject to 
tariff quotas.  For the purpose of implementing the Pan-Euro-Mediterranean cumulation of origin, the 
agreement's protocol on rules of origin was amende d in July 2005.  The amendment is yet to be 
implemented. 
(f) Mexico  
33. Israel's free-trade agreement with Mexi co entered into force in July 2000.17  Under the 
agreement, tariffs on industrial products (with the exception of HS codes 35.02 and 35.05) were 
eliminated gradually by January 2005.  Various ag ricultural products are subject to tariff quotas. 
(g) Bulgaria and Romania 
34. Israel's free-trade agreements with Bulgaria  and Romania entered into force in January 2002 
and July 2001 respectively.  Under the agreements, tariffs on most industrial products were eliminated 
by January 2004.  Exceptions include HS codes 35.0190, 35.02, and 35.05.  Various agricultural 
products are subject to tariff quotas.  Negotiations for further liberalization of trade in agricultural 
products started in February 2005.  For the purp ose of implementing the Pan-Euro-Mediterranean 
cumulation of origin, the protocols on rules of orig in in both agreements we re amended in February 
(Romania) and September (Bulgaria) 2005. 
(h) Jordan 
35. A new Protocol to the Agreement on Trade and Economic Coopera tion with Jordan was 
signed in December 2004, replacing a 1995 version.  According to the authorities the protocol 
provides for duty-free access to more than 80% of Jordan's exports to Israel and more than 50% of 
Israel's exports to Jordan (in 2003 figures).  The ta riff reductions are listed in Annex 1 to the Protocol 
in six tables.  Table 1 contains more then 2,200 tariff items exempted from customs duties both in 
Israel and Jordan as of 20 September 2005.  Table 2A lists goods exempted from customs duties when 
imported into Israel.  Table 2B lists agricultural goods and items considered sensitive which, upon 
import into Israel, are either subject to a 50% reduction of customs duties (Group 1), or for which 
customs duties are phased out by 2010 (Group 2) .  Table 3 lists agricultural goods and items 
considered sensitive which, upon impo rt into Jordan, are either subject to a 50% reduction of customs 
duties (Group 1), or for which customs duties are phased out by 2010 (Group 2).  In addition, the new 
Protocol introduces comprehensive annexes regarding rules of origin, including provisions on 
bilateral and Pan-Europ ean cumulation.    
(iii) Other arrangements 
(a) Protocol on economic relations with the PLO 
36. Israel has a Protocol on Economic Relations with the Palestine Liberation Organization 
(PLO), which was signed on 29 April 1994.  It pr ovides for duty-free movement of goods between 
Israel and the areas under economic  jurisdiction of the Palestinian Authority (PA), as well as common 
customs and standards measures for the two parties.18  Clearance of customs revenues and fees levied 
on imports is conducted by the administratio n of the place of final destination.   
37. The PA has the right to determine, independently, the rates of customs and other charges on 
imports of specified quantities of commodities referred to in lists A1  (30 items at the HS four-digit 
                                                      
17 The text of the agreement is contained in WTO document WT/REG/124/1, 7 August 2001.  
18 For the provisions of the Protocol not related directly to trade, see WTO (1999). Israel WT/TPR/S/157 
 Page 19 
 
 
level) and A2 (23 items), with no restrictions on quantities of goods referred  to in list B (various 
specified tools and equipment).19  The quantities the PA may import from lists A1 and A2 are 
determined according to Palestinian "market needs",  and for any quantities exceeding the agreed 
quotas (currently cement and sheep meat) the duties are the Israeli tariffs.  All other PA imports are subject, as a minimum, to the same level of cust oms duties and other charges that apply to Israeli 
imports.  The PA's customs tariff rates may not be lower than the Israeli rates, in order to prevent 
leakage of imports from one area to the other.  Regarding standards (including sanitary and 
phytosanitary measures) and licensing, Israeli import policy applies to all PA imports, except for the 
quantities agreed to per lists A1 and A2.  
(b) Trade agreements with Jordan and Egypt 
38. With a view to strengthening regional economic cooperation and trade relations, Israel signed 
an agreement with Jordan in November 1997.  There is no formal link between this agreement and 
Israel's FTA with Jordan.  The agreement, in for ce since 1998, establishes "qualified industrial zones" 
in Jordan.  Under the umbrella of the U.S.-Israel Agreement, goods from these zones enjoy duty-free 
access to the United States, provided that they comply with all the requirements of the Israel-U.S. Free Trade Agreement and that at least 8% of thei r components are of Israeli origin.  Trade between 
Israel and Jordan has increased substantially as re sult of this accord, from US$35 million in 1998 to 
approximately US$200 million in 2004.   
39. Israel signed a trade protocol with Egypt on 14  December 2004, which entered into force in 
February 2005.  Designed in the style of the tr ade protocol with Jordan , it establishes qualified 
industrial zones in Egypt under the umbrella of  Israel's Agreement with the United States.  The 
authorities expect this protocol to strongly increase trade between Israel and Egypt.  Preliminary data 
on the first nine months of the implementation of the agreement indicate that trade between Israel and 
Egypt has increased more than two-fold over the same period in 2004. 
(c) MFN trade agreements 
40. Israel has MFN trade agreements with fi ve non-WTO Members (Kazakhstan, Russia, 
Ukraine, Uzbekistan, and VietNam).  The main objective of these agreements is to establish basic 
principles for the conduct of economic a nd trade relations between the parties. 
(d) Generalized System of Preferences 
41. Israel does not grant preferences under the G SP, nor do its exports receive GSP treatment 
from any other country. 
                                                     
 
19 List A1 includes 30 goods whose source (or the source of at least 30% of their value added) must be 
an Arab State, and for 13 of these items, the source must be either Egypt or Jordan (indicated in the Agreement 
as originating in JE):  live sheep, dried yoghurt, dried legumes, rye, barley, corn, rice, palm kernel oil, sugar, 
cacao, silica and quartz sands, cement (JE), phosphatic fertilizers (JE), potassic fertilizers (JE), phosphatic and 
potassic mixed fertilizers (JE), cotton, carpets (JE), unwrought aluminium, aluminium waste and scrap, 
aluminium powder and flakes, bars and rods of iron or non-alloy steel (JE), other bars and rods, gas and fuel stoves (JE), air conditioners (JE), household refrigerat ors and freezers (JE), dishwashers (JE), washing machines 
(JE), electric space heaters (JE), and televisions sets (JE).  List A2 includes a number of goods repeated from list 
A1 plus: live sheep, beef, frozen beef, dried legumes, coffee, tea, wheat and meslin, rye, barley, corn, rice, 
wheat and meslin flour, sesame seeds, palm kernel oil, sugar, cacao, silica and quartz sands, cotton, cigarettes, 
alcohol, iron, and cement.