WORLD TRADE  
ORGANIZATION  WT/TPR/M/157 
15 March 2006 
 (06-1150) 
Trade Policy Review Body 
1 and 3 February 2006  
 
 
 
TRADE POLICY REVIEW 
 
ISRAEL 
 
Minutes of Meeting  
 
Chairperson:  H.E. Mr. Don Stephenson (Canada) 
 
 
Page 
 
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3  
II. OPENING STATEMENT BY THE REPRESENTATIVE OF ISRAEL 4  
III. STATEMENT BY THE DISCUSSANT 6  
IV. STATEMENTS BY MEMBERS 9  
V. REPLIES BY THE REPRESENTATIVE OF ISRAEL AND ADDITIONAL 
COMMENTS 14  
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 19  
 
 
Note:   Advance written questions by WTO Me mbers and the replies provided by Israel are 
reproduced in document WT/TPR/M/157/Add.1 and will be available online at:  
http://www.wto.org/english/tr atop_e/tpr_e/tp_rep_e.htm.  
   WT/TPR/M/157 
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  I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 
1. The third Trade Policy Review of Israel was he ld on 1 and 3 February 2006.  The Chairperson 
(H.E. Mr. Don Stephenson) welcomed  the delegation of Israel, headed by H.E. Mr. Udi Sheintal, 
Vice-Director General in the Ministry of Industry, Trade and Labor, and the discussant H.E. Mr. Ronald Saborío Soto (Costa Rica).  As usual, the discussant would speak in his personal 
capacity and, in accordance with established proce dures, had made available in advance a broad 
outline of the themes he intended to raise (document WT/TPR/D/133). 
2. The Chairperson recalled the purpose of the Trad e Policy Reviews and the main elements of 
the procedures of the meeting.  The Report by Is rael was contained in document WT/TPR/G/157 and 
that of the Secretariat in document WT/TPR/S/ 157.  Copies of advance written questions, submitted 
by:  Turkey; Canada; Japan; Korea, the Europe an Communities; New Zealand; Argentina; the 
United States; and Brazil had been transmitted to th e delegation of Israel.  These questions and the 
replies provided by the delegation of Israel are reproduced in WT/TPR/M/157/Add.1. 
3. From both Reports, it was clear that during th e period under review, Israel had implemented 
ambitious structural reforms with a view to reduc ing state intervention and enhancing competition.  
Largely supported by the reforms and innovation, recent economic growth had been mainly export 
led.  During the period under review, Israel had c ontinued liberalizing its trade regime, albeit at a 
somewhat slower pace than during the previous six-y ear period.  While nearly half of all tariff lines 
now carried the zero rate, import duties in  agriculture remained relatively high. 
4. Israel had further expanded its network of preferential trade agreements.  Given the relatively 
high importance of regional and bilateral initiatives in Israel's trade, he was convinced that it would 
soon take further steps to substan tially liberalize its MFN regime.   
 WT/TPR/M/157 
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  II. OPENING STATEMENT BY THE REPRESENTATIVE OF ISRAEL 
5. The representative of Israel
 welcomed the opportunity to review recent developments in the 
Israeli economy and its trade policy in the framewo rk of the Trade Policy Review Mechanism.  
6. Israel had experienced substantial and meani ngful changes since 1999. A number of negative 
factors had converged between 2000 and 2002, including the security unrest in the region, which 
negatively affected tourism, the global technology slump, which slowed investments in high-tech 
companies, and the global economic slowdown, which negatively affected Israeli exports.  
7. An economic recovery began in 2003 and was the result of several factors, including 
increased macroeconomic stability, a recovery of the global economy, the implementation of structural changes, and a relatively calm security situ ation.  The recovery had been characterized by a 
positive and significant structural change in the co mposition of GDP, as seen in the increase in the 
private sector and the decline of government services. 
8. The Government's economic and trade policies had been aimed at creating conditions for 
economic stability, sustainable growth, and further inte gration into the international trading system in 
the face of domestic, regional, and global economi c developments. This had been implemented 
through policies aimed at reducing Government inte rvention in the market, strengthening fiscal and 
price stability, and increasing the competitiveness and e fficiency of the Israeli economy.  The reforms 
had involved privatization, the fore ign exchange market, labor market and tax reforms, investment in 
infrastructure, and liberalization of trade policy. 
9. Israel had deepened and expanded its network of  bilateral and regional agreements.  It had 
also invested in the development of regional ec onomic cooperation. These agreements also called QIZ 
protocols, aimed at creating economic cooperation and supporting stability and peace in the region, 
had contributed significantly to the growth of trade and business cooperation between the respective 
parties. 
10. Israel continued to explore new initiatives to e xpand its market access to other countries (Asia 
and Latin America) through multilate ral or regional agreements. Is rael and MERCOSUR had signed a 
Framework Agreement on Trade aimed at creating th e conditions and mechanism to negotiate a free-
trade area agreement. 
11. Israel was committed to the multilateral trading system and had full respect for the 
fundamental principles and norms of the WTO.  It had faithfully implemented its Uruguay Round 
obligations, as well as the TRIPs Agreement since 2000.   Israel had also taken voluntary liberalization 
measures beyond the level of its commitments. 
12. Israel's applied MFN tariffs were generally  low. As an economy based on innovations and 
development of new technologies, Israel had invested a lot of time and effort in creating an advanced 
intellectual property environment.  In January 2000, the Standards Law was amended, so as to comply 
with the WTO TBT Agreement, requiring the adoption of international standards wherever possible.  
13. To further ease trade regulations the Governme nt had changed import approval procedures. 
The goal of this change was to ease the inspections for standards conformance of imports, subject to 
increased market surveillance and enforcement. A graduated scale of  inspection levels for imported 
commodities had been set according to the level of ri sk to public health and welfare posed by the 
imports.  
14. Israel attached great importance to the current  multilateral negotiations mandated by the Doha 
Development Agenda (DDA), and was of the view  that it was imperative to reach timely and  WT/TPR/M/157 
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  successful conclusion of these negotiations.  Isr ael welcomed the progress made in the Hong Kong 
Ministerial Conference and commended the decision on duty-free and quota-free treatment for LDCs.  
15. Israel had also pursued unilateral trade policy liberalization. An import policy department had 
been established within the Foreign Trade Administrati on to explore ways to further facilitate the flow 
of trade into, and out of, Israel.  Since July 2 003, Israel had gradually lifted its import licensing 
requirements from WTO Members that had no diplomatic  relations with it or that restrict imports 
from Israel into their markets. As such, Israel did not apply any restrictions on imports from any WTO member country and had aligned its policies with th e non-discrimination rules of the WTO.  As Saudi 
Arabia had recently acceded to the WTO, Israel had started the process of exempting imports from 
Saudi Arabia from import licensing requirements.   
16. The Israeli economy was favoured by a number of positive factors:  an educated and highly 
skilled work force;  a strong spirit of innovation,  initiative, and entrepreneurship; scientific and 
technological strengths;  favourable conditions in its balance of paym ents and external debt position; 
large foreign currency reserves;  a high return on investment in physical capital;  a well-developed 
and balanced infrastructure of institutions;  and a comprehensive and well coordinated network of 
multilateral and bilateral trade agreements, that facilita ted Israel's integration into the global economy. 
17. These factors, supported by regional political stability and, together with a strong 
commitment of the government of Israel to ma croeconomic stability and the multilateral trading 
system as a precondition for attaining sustainabl e long-term economic growth, would enable the 
economy to achieve its potential in coming years. WT/TPR/M/157 
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  III. STATEMENT BY THE DISCUSSANT 
(1) Economic environment 
18. The discussant
 stated that Israel was a high income economy with an export-led base of 
economic growth. However, because of Israel's hea vy dependency on internatio nal trade, its economic 
growth declined between 2000 and 2002, due to negative factors that affected its exports.  
19. Israel began experiencing an economic recove ry in 2003 with accelerated growth rates 
attributed to both external (global recovery) and in ternal factors (fiscal budgetary restrains and an ease 
in monetary policy).   
20. During the period under review, the Government faced market confidence problems related to 
its ability to control its public debt. In 2003,  the Government launched tax reforms to boost 
investment and followed a policy of fiscal discipline to reduce its fiscal deficit in 2004.  He requested 
information on how  the Israeli Government planned to sustai n such policies, in particular how it 
would manage the tax reforms in case of an economic  downturn.  The Government also attributed the 
economic recovery to its structural reforms;  in particular, it highlighted progress made in its 
privatization policy,  though there we re still 95 government-owned companies.  
21. Israel had proven a strong commitment to the WTO and to the implementation of its 
obligations;  it had also joined two important plur ilateral agreements:  the Government Procurement 
Agreement and the Information Technology Agreem ent.  Israel participated actively in the 
negotiations, supporting ambitious ta riff reductions in non-agriculture market access negotiations, and 
had submitted various proposals on Rules.  In services,  Israel had been an active participant, in 
particular in the negotiations on telecommunications and financial services.  In agriculture, Israel 
considered non-trade concerns essential.  In this cont ext, he asked to what extent Israel’s non-trade 
concerns were  predominating in its trade policies rather th an the long-term objective of establishing a 
market-oriented system. 
22. Israel sought to liberalize its trade regime on an MFN basis through WTO negotiations, 
bilaterally through reciprocal agreements, and unila terally through autonomous initiatives.  Israel had 
expanded the coverage of existi ng agreements and, although it was not currently engaged in 
negotiations, it was exploring the possibility of new free-trade agreements with newly industrialized 
countries in Asia and Latin America.  He asked about  Israel's intention to liberalize the remainder of 
its trade on an MFN basis.  Israel had MFN trade agreements with five non-WTO Members, and it did 
not grant preferences under the GSP system, nor did it receive GSP treatment for any of its exports .  
He asked if Israel planned to grant duty-free and quota-free market access to LDCs, based on the 
Hong Kong Ministerial Declaration. 
(2) Trade policies 
23. Israel's trade liberalization had been slower dur ing this review period than the previous one;  
the average applied MFN tariff had fallen from 10.8%  in 2000 to 8.9% (a modest 17.5% reduction).  
Israel had bound 76% of its tariff lines, with bound rates ranging from 0 to 560% in agriculture and 
from 0 to 170% in non-agricultural goods.  He requested information on  why some applied MFN rates 
were higher than the corresponding  bound rates and asked why non- ad valorem duties continued to be 
imposed on some products although most  of Israel’s bound duties were ad valorem . Israel was 
seeking further multilateral liberalization with an  ambitious approach towards non-agricultural 
products;  however, agriculture continued to be highly protected. 
24. The imposition of the "safeguard levy" was used as  an instrument to enhance the flexibility of 
the tariff system.  This levy was imposed for a wi de range of circumstances, such as to regulate  WT/TPR/M/157 
 Page 7 
 
 
  production as well as to protect production against injury caused by imports, and did not require the 
approval of the parliament.  He requ ested Israel to elaborate on the use of such border taxes, and other 
internal taxes, since it had committed itself not to impose other duties and charges on imports.  Israel 
had lifted its general prohibition on imports from a number of countries;  import licensing was still in 
place for some of them.  On anti-dumping issues, Israel had imposed definitive anti-dumping 
measures in five cases and initiated eight anti-dumping actions.  Israel had issued more than one anti-
dumping case per year (on average) and had not taken any safeguard measures.  He asked why Israel preferred to adopt anti-dumping measures rather safeguard measures. 
25. On agricultural subsidies, Isr ael continued to grant a large amount of support, including 
export subsidies, and still had a sch eme of export insurance in place.  State aid had gradually shifted 
from regional development to SME support.   
26. Public procurement was an important issue to  address as Israel's regulations favoured local 
suppliers by granting price preferences.  Also, g overnment agencies and state-owned companies were 
required to follow an offset policy designed to promote national manufactures.  The amount that 
foreign tenders were required to o ffset was considerable.  State-owned companies remained extensive 
in Israel although the Government had engaged in an ambitious priva tization plan.  He asked to what 
extent the privatization plan had provided meaningf ul divestiture of state-ownership, or whether the 
State still owned a majority in many of these companies.  On IPR, Israel had amended its legislation to be TRIPS compliant. 
(3) Sectoral policies 
27. The sectoral composition of Israel's economy had continued its shift away from agriculture 
and manufacturing towards services.  In the services sector, telecommunications were being 
privatized whereas the financial sector remained c oncentrated with the stat e still holding shares in 
major banks.  The discussant requested informati on on further reform in the financial sector.  
28. Agriculture remained the most protected sector;  however the contribution of agriculture to 
Israel's NDP and employment remained limited.  Th e share of agriculture to total merchandise exports 
had dropped dramatically. The Government largely supported agricultural production through 
subsidies and tariff protection, with an average MF N rate of 31% and very high tariff peaks. While 
agriculture protection had increased, output ha d dropped substantially.  He asked how the 
Government intended to sustain this situation. A co st-benefit analysis could be desirable to determine 
the high cost of agriculture subsidization. 
29. One of the most concerning aspects in Israel's  trade policy was the substantial increase in 
tariff rates on imports of fruits, vegetables, a nd related products. Tariff peaks remained high and 
dispersed.  He asked how Israel intended to address th e issue of agriculture subsidies, high tariff rates, 
and extremely high tariff peaks on some products, gi ven that the Doha Round called for a lowering of 
all these forms of protection.  The manufacturing sector accounted for 65% of merchandise exports in 2004, with electronics and communication equipmen t being the main exports. Most manufactured 
imports entered Israel duty-free as a result of Israel's free-trade arrangements, and for imports from 
other sources manufacturing tariffs were modest. There was still some concern on a few selected industries where tariffs remained high such as f ood, beverages, clothing, footwear, furniture, and 
plastic. High-tech industries, which were export oriented, had lower than average tariffs, while 
traditional slow-growing industries had higher tariffs.  High-tech imports with the lower tariffs came 
from industrialized free-trade partners, while the indus tries with the most protection were those whose 
imports come from developing countries.  He asked how Israel intended to ad dress this developmental 
concern and offer better market access opportuniti es in manufacturing to developing countries. WT/TPR/M/157 
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  30. The energy sector remained a legal state monopoly despite steps to open the generation 
market to independent power producers (IPPs). The main concern was that the electricity monopoly, 
which was 99.8% state-owned, controlled all transm ission and distribution of electricity.  Thus, the 
IPPs would still have to go through the state-owne d company for transmission and distribution. This 
could explain why the reforms to open the production of electricity had proved ineffective;  IPPs 
currently generated only 0.4% of Israel's total el ectricity production.  He requested information on  the 
state of reforms in this key sector and the Governme nt's intentions on opening up the transmission and 
distribution markets along with the production market. 
31. The discussant congratulated Israel on its  good results on economic stabilization and its 
strong support of the WTO and the Doha Round negotia tions.  Israel had implemented a serious trade 
liberalization process that he hoped would be enhanced during the current multilateral trade 
negotiations, in particular, with regard to areas in  which trade was still very limited. He encouraged 
Israel to continue its trade liberalization path.  WT/TPR/M/157 
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  IV. STATEMENTS BY MEMBERS 
32. The representative of Turkey  stated that economic well being, trade openness, peace and 
security were mutually supportive and had been evident in Israel's overall economic and trade 
relations. She noted with satisfaction that the G overnment was committed to the Economic Recovery 
Plan of 2003 regarding economic deve lopments.  Turkey had also been  following with great interest 
the active role Israel had been taking in the Doha  Development Round;  Israel's commitment to the 
multilateral trading system was an extension of its e fforts to integrate into the global trading system. 
She noted that, with certain exceptions, Israel had a liberal investment regime.  
33. She was pleased to note that the Israeli author ities intended to change the "wharfage fee" so 
that the same level of duty applied to exporters and importers.  She requested further information on 
this new pricing policy.  Concerning kosher certific ation, the certification procedure needed to be 
simplified and made less costly to avoid creating a no n-tariff barrier. She drew attention to complaints  
received by the Turkish authorities from their exporte rs who facing rigid requirements delayed the 
release of goods.  Further expansion of the scope  of the free-trade agreement between Turkey and 
Israel could have positive results by increasing bila teral trade.  Tourism and construction were  
potential  areas of further cooperation. 
34. The representative of Canada  stated that Israel was one of Canada's largest and most 
diversified markets in the region.  Canada's tr ade and commercial priorities for Israel included 
expanding the product coverage under their free-tr ade agreement and amending the agreement to 
bring it into line with the Harmonized System.  Th eir bilateral agreements also served to strengthen 
their trade relations, for example, the Agreement on Bilateral Cooperation in Industrial Research and 
Development delivered through the Canada-Israel I ndustrial Research and Development Foundation.  
He congratulated Israel on its 2003 economic refo rm plan, which had contributed to the positive 
economic performance in the last two years. He no ted that Israel had put in place trilateral trade 
agreements, which would continue to contribute to regional economic inte gration and to regional 
stability.  He noted that Israel had demonstrated  its commitment to meeting its WTO obligations.  
35. The representative of Japan  stated that the economy of Israel  had been recovering remarkably 
following the privatization of some major state-ow ned companies, the abolition of foreign exchange 
controls, and the liberalization of capital movement . Israel was well known for its competitiveness in 
high-tech industries and had great possibilities for fu rther growth in these industries through attracting 
more investment.  However, the current instab ility in the Middle East was disrupting further 
investment in Israel by foreign countries, a nd Israel needed peace and stability for further 
development of the economy.  Japan shared the view s with Israel concerning agriculture negotiations, 
as G10 members, and hoped to continue cooperativ e relations with Israel in order to make 
constructive contributions to the negotiations.  
36. Japan welcomed Israel's signature of the Fourth  and Fifth Protocols to the GATS.  However, 
liberalization of transport and distribution ser vices would contribute strongly to enhancing the 
efficiency of these services as well as the compe titiveness of the manufacturing sector.  Japan hoped 
that Israel would make further commitments in thei r next offer.  Japan appreciated that Israel had 
continued to implement trade liberalization by re ducing average applied tariffs, but there was still 
room for improvement;  Israel needed to increase the number of bound tariff lines. Japan was pleased 
that Israel had presented a bill to enact a new and comprehensive copyright law in 2005, and hoped that Israel would continue to strengthen the enforcement of IPR protection.  
37. The representative of Korea
 stated that Israel had shown healthy economic growth and that 
structural reforms, including streamlining the public  sector and enhancing comp etition, had helped to 
improve economic performance.  Is rael depended heavily on interna tional trade and Asian countries 
had become increasingly important trade partner.  It had maintained an open trade regime, and had WT/TPR/M/157 
Page 10  
 
  continued to liberalize trade and investment. Howe ver simplifying the tariff structure, increasing the 
coverage of tariff bindings, and addressing applied rates exceeding bound rates would enhance the 
predictability of the tariff regime.  Further reductio n in MFN rates would also help to promote trade 
with non-FTA partners and hence to diversify Israel 's trade relationships.  Korea welcomed Israel's 
efforts to enhance competition in  the services sector through privati zation and trade liberalization and 
would appreciate further elaboration on its plans fo r further services liberalization and for the removal 
of the MFN exemptions maintained in a few services s ectors.  Israel applied a very strict set of rules 
for foreign professionals to obtain a visa to work in the country or to extend an existing visa. 
38. The representative of th e European Communities
 noted that Israel was enjoying a period of 
economic growth and that most credit should go to Israel's strong commitment to its economic 
recovery plan and active measures to stimulate growth  and development.  Israel had pursued a number 
of structural reforms, since its last Review, and tr ade liberalization had played a very important role. 
The opening of the Israeli market had been flanke d by tax reforms and the launch of an ambitious 
privatization plan.  Israel seemed  to have overcome a great number of challenges, and as a result, had 
enhanced its export performance and experienced an im portant upturn in the levels of foreign direct 
investment.  Manufacturing was very advanced but further market liberalization and openness to both 
imports and exports could increase efficiencies and reduce costs for the industry.  Israel, with its strong economic position and advanced level of development, could take  a leading role in the region, 
thereby helping other to share its success.  The EC was closely linked to this process, via its 
Association Agreement with Israel, which covere d not only trade but also political, economic, and 
social priorities.  The representative requested in formation on Israel's trade policy plans for the 
Meditarrenean region, in particular with regard to the liberalization of trade in services, and the role 
Israel saw in this for the WTO and the DDA.  Th e importance of integrating trade into national 
development strategies could not be  overstated and Israel's account of related social and labour issues 
was particularly interesting.  The EC encouraged Israel to continue exploring the link between trade 
and employment and social matters. 
39. The representative of New Zealand
 noted that, like Israel, it was clearly benefiting from the 
ongoing process of structural and other reforms to enhance trade including market access, in line with WTO guidelines.  Recently steps had been taken to  lift its general prohibition on imports from WTO 
Members that did not have diplomatic relations with  Israel.  New Zealand welcomed Israel's move to 
further align its technical regulations to internati onal standards.  Agricultural tariffs remained high, 
and thereby constituted a significant barrier to trade;   and the representative sought information about 
prospects for reform in this sector.  New Zeala nd was at a competitive disadvantage in the Israeli 
market in suspended ceilings, as parties to pref erential agreements enjoyed duty-free access.  She 
noted that Israel continued to expand the coverage of bilateral free-trade agreements, and that this was 
an example of where preferential arrangements affected other, MFN suppliers..  
40. The representative of Argentina
 noted the important reforms and efforts by Israel, which had 
increased the effectiveness of the economy and in creased competitiveness. He  noted with special 
interest that this economic growth strategy was based on exports especially of technology-intensive 
products and services.  The great challenge for Israel  was to continue this strategy to open up its 
market and broaden the sectoral coverage of trade liberalization to favour better resource allocation 
and to maintain the economic growth.  Argentin a was concerned by distortions through tariff 
protection, particularly in agriculture, includi ng tariff peaks and unbound tariff lines.  The Doha 
Round was the appropriate framework to improve tr ansparency of the Israeli trade regime.  He 
encouraged the Government of Israel to make the SPS regime more transparent to avoid the creation 
of unnecessary technical barriers to trade.  He welc omed Israel's increasing interest in Latin America 
as shown by the agreement with MERCOSUR, which would enable a move towards a free-trade area. 
41. The representative of the United States  stated that the economic relationship between Israel 
and his country was positive and growing across se veral dimensions.  The United States was the  WT/TPR/M/157 
 Page 11 
 
 
  largest destination for Israel's exports and the largest  single source of its imports.  Much of their two-
way trade and investment was concentrated in high-value-added products and services, which had 
helped to develop competitive technology-based in dustries in their economies.  He recognized the 
continuing importance of structural reform to re duce the role of the st ate and strengthen the 
competitiveness of key sectors.  Barriers to trade rema ined in Israel, notably in the agriculture sector. 
The agriculture sector was sustained by extensiv e intervention and it prospered despite difficult 
climatic conditions.  He requested information on  the Government's plans for structural reform, 
particularly on market access. 
42. The United States recognized Isr ael's desire to strengthen its  protection of intellectual 
property and requested confirmation that Israel pr otected undisclosed pharmaceutical data from unfair 
commercial use and that it protected trade mark ow ners from confusingly similar marks and, later, 
geographical indications.  On government procur ement, he requested information on any new 
initiatives to improve the transparency of Israel 's procurement process, such as creation of a 
centralized website with procurement informati on or the appointment of an overall procurement 
contact point.   The United States urged Israel to make timely notifications to the WTO and looked 
forward to learning more about Israel's use of licensing. He noted that voluntary standards and 
technical regulation had become an important fact or in determining access to Israeli markets, and 
requested more information about the developmen t of voluntary standards in Israel and their 
transformation into mandatory technical regulations. 
43. The representative of Brazil  commended Israel for the recent recovery of its economy;  
inflation remained under control, the external cu rrent account had improved, and external debt was 
manageable.  However, unemployment was rela tively high and he hoped that the ongoing reforms 
would help to build the foundation for sustained eco nomic performance.  Isra el depended heavily on 
international trade, and the geopolitical situation in  the Middle East had impeded trade between Israel 
and its neighbours. Israel's overall institutiona l framework for trade policy formulation and 
implementation had remained broadl y unchanged.  It had a generally liberal investment regime and 
had continued to expand the coverage  of its bilateral free-trade agre ements.  The agriculture sector 
was protected through high tariffs as well as other gove rnment interventions, including subsidies.  
MFN applied tariffs on 11 lines at the HS eight -digit level exceeded bound tariffs.  Continued 
structural and trade reforms would contribute to better resource allocation in Israel's economy and 
enhance the predictability and transparency of the trade regime.   
44. The representative of India  noted that the Government of Israel had taken important steps to 
make the trade regime open and transparent.  I ndia's trade with Israel had been increasing and 
diversifying;  an Indo-Israel Trade and Economic Committee existed at the official level to discuss 
issues relating to bilateral trade and commerce.  Arrangements for bilateral cooperation in various 
trade-related spheres had been concluded and a joint group had been established to follow up 
implementation of various measures to improve tr ade. He hoped to continue the cooperation in 
different areas of the WTO negotiations. 
45. The representative of the Dominican Republic  noted that Israel had undertaken privatization 
in energy, telecommunications, and air transport, which had been very successful.  Israel had also taken great strides in its integration into the worl d trading system by signing several bilateral trade 
agreements and through its active participation in the WTO.  He highlighted the quality of Israel's 
labour force, policies and education, and encouraged  Israel to continue its privatization programme, 
which had been very fruitful.  
46. The representative of China
 noted with pleasure Israel's achievements of economic 
development and ambitious reforms, and hoped that  these achievements would be further expanded.  
Both countries had been enjoying rapid development of bilateral trade and ec onomic relations and had 
developed extensive cooperation in the fields of t echnology, finance, and contracting services.  China WT/TPR/M/157 
Page 12  
 
  was pleased to note the Israeli authorities' efforts to  enhance the transparency of its fiscal, financial, 
and trade policies. He sought clarification on the exact approval procedures for establishing a foreign 
bank or branch in Israel. 
47. The representative of the Chinese Taipei
 stated that Israel's economy was export-oriented and 
depended very much on international trade.  The va lue of two-way trade between Israel and Chinese 
Taipei had increased thanks mainly to high-tech  products.  Both were very committed to the 
multilateral trading system.  In agriculture, they sh ared the conviction that non-trade concerns should 
be an integral part of any future multilateral agr eement.  Chinese Taipei was pleased that due to the 
improvement in the security situation and a fa vorable global environmen t, Israel's economy had 
recovered from its previous slowdown.  Israel had a liberal trade and investment regime, except in the 
somewhat protected agriculture sector.  In 2005, its average applied MFN tariff was 8.9%, down from 
10.8% in 2000.  MFN tariff rates on non-agricu ltural products were generally lower (5.1% on 
average), although the binding coverage was only 73%, while the average MFN tariff on agriculture 
remains at 32.9%.  On the other hand, for 11 tariff lines, applied MFN rates exceeded the corresponding bound rates.  He therefore requested Is rael to abide by its WT O commitments.  Israel's 
services sector had grown due to a series of ambitious structural reforms and there had been special 
efforts to lower tax rates, strengthen banking ins titutions, liberalize the foreign exchange system, and 
cultivate a well-educated and skilled labour force. 
48. Chinese Taipei was pleased that Israel had lifted its general prohibition on imports from WTO 
Members with which it had no diplomatic relati ons or that prohibited imports from Israel.  
Nonetheless, it had some concerns that the extensiv e preferential trade agreements between Israel and 
some of its trading partners may have resulted in the erosion of th e non-discrimination principle of the 
WTO.  He strongly believed that a successful outcome  to the Doha Round would pave the way for a 
continuing strong economic performance by Israel in the coming years.  Chinese Taipei urged Israel 
to reduce its indirect taxes of VAT and purchase tax,  and to rectify the unfair collecting the wharfage 
fee on imports. 
49. The representative of Colombia
 expressed admiration for Israel's economic performance and 
the position it had achieved in such a competitive world.  The production, processing, and transformation of industrial and high-tech goods re flected the results of a good domestic policy that 
was also well adapted for entry in to the international market.  Isra el had conducted a policy to attract 
foreign investment, which explained the new industria lization.  True agricultural reform in Israel 
would be highly desirable with the elimination of exports subsidies, substa ntial reduction of domestic 
support, and reduction of high tariffs and non-tari ffs barriers.  A more pro-active approach to 
liberalization of agriculture in Israel would cont ribute to the success of the Doha Development Round 
and to achieving Israel's main objective of gr eater opening in services and in industrial goods. 
50. The representative of Mexico
 noted the excellent trade relations between Israel and Mexico 
which had become much closer since the trade agreement signed in 2000.  This agreement had 
contributed to the promotion of trade, facilitate d market access, and in creased competitiveness and 
efficiency in resources allocation for both economies. 
51. The representative of El Salvador  congratulated Israel for having established transparency and 
coherence in its trade policy.  Service exports had grown, and Israel had integrated into the world 
trading system by liberalizing its markets and eliminating major trade and tariff barriers.  The conclusion of free-trade agreements showed the clear objective of an open market policy and of 
maintaining competitiveness of exports.  He stated that with the Economic Stabilization Plan Israel 
had made important progress in terms of monetary po licy, fiscal restraint, and trade liberalization.  
Israel had a very balanced agricultural policy, wh ich guaranteed the sustainability of the sector.  He 
commended Israel for being one of the main users of the patent system and for maintaining and preserving the lowest rates of business software piracy in the world.   WT/TPR/M/157 
 Page 13 
 
 
  52. The increased penalties for counterfeiting, th e imposition of penalties on companies that 
violated trade mark rules, and legislation allo wing adhesion to the Madrid Protocol were positive 
signs.  Israel's WTO-compatible reforms gave legal security to investors.  
53. The representative of Bulgaria  appreciated the opportunity to assess Israel's trade and 
economic policies and their impact on the multilatera l trading system. Major structural reforms had 
been introduced and significant progress had been made in privatizing state-owned enterprises.  
Israel's economy had continued to be highly ex port-oriented and was among Bulgaria's leading 
trading partners in the Middle East region.  They  had signed a number of bilateral agreements and 
their economic partnership and trade relations coul d be further strengthened by expanding bilateral 
trade.  Bilateral trade agreements had been used  as a complementary and useful tool for market 
liberalization and Israel remained an active and constructive participant in the ongoing DDA 
negotiations. WT/TPR/M/157 
Page 14  
 
  V. REPLIES BY THE REPRESENTATIVE OF ISRAEL AND ADDITIONAL 
COMMENTS 
54. The representative of Israel
 stated that although Is rael's trade balance ha d been in deficit it 
was committed to market economy policies, and did not maintain monetary or macroeconomic 
policies to restrict trade.  Israel had concl uded 19 investment protection agreements, and three 
additional agreements would come into force in the near future. 
55. Israel was in the midst of a significant tax refo rm, which began in 2003.  This reform aimed 
to reduce the tax burden on labour and extend the ta x base on capital-generated income and income 
originating overseas.   
56. With regard to Government holdings in th e banking sector, the largest commercial bank in 
Israel had been privatized several years ago, a nd the majority of the Government's shares in the 
second and third largest banks had been sold in the course of 2005. 
(1) Trade policy 
57. Israel's main trade policy objectives were to c ontinue economic integration into the global 
trading system, promote and maintain Israel's export competitiveness by further expansion of the 
network of international trade agreements, incr ease the efficiency of resources allocation by 
increasing transparency and openness to competition fro m abroad, and create an attractive climate for 
investors, businesspeople, consumers, and the public as a whole. 
58. Israel's trade policy was enhanced by a wi de range of international agreements and 
commercial arrangements.  The Government had been  pursuing its international trade policies in a 
well-coordinated effort along three paths in para llel:  multilateral, bilate ral, and unilateral.  
59. Regarding the NAMA negotiations, Israel s upported the view that all WTO Members, 
developed, as well as developing, should be read y to accept new and meaningful market access 
commitments as well as to  fully bind their tariff lines. 
60. Concerning commitments under its tariff binding s Israel was committed to its Schedule.  
After thorough research and consultations with the S ecretariat, it was found that the applied rate was 
slightly higher than the binding for only 11 tariff lines.  
61. Regarding Israel invoking developing countries st atus, the burden of security expenses on the 
national budget, the vulnerability of Israel's ec onomy to political unrest in the region and its 
implications on its financial markets, industry,  and employment required Israel to maintain 
flexibilities afforded by "developing country" status.  
62. Furthermore, Israel was unique in a number of  characteristics that strongly affected its 
economy: Israel's demography was characterized by large inflows of immigrants, mainly from 
developing countries or economies in transition. Th e absorption of this immigration posed a major 
challenge to Israel's economy. More than 50% of Is rael's land was arid and desert areas. The need to 
settle these areas because of strategic objectives and to  ensure the livelihood of their inhabitants posed 
another significant challenge. 
63. Israel's MFN duties were quite low. Furthermor e, 48.5% of all tariffs lines were duty free. 
This had resulted in an increase in the share of im ports from developing countries into Israel over the 
last decade.  Israel welcomed the decision reached  in the Hong Kong Ministerial conference to grant 
duty-free and quota-free treatment to products originating in LDC's.  WT/TPR/M/157 
 Page 15 
 
 
  64. As regarded bilateral agreemen ts, Israel had been focusing its  attention on Asia and Latin 
America, in the light of the growing importance of these regions in world trade. Israel and MERCOSUR had recently signed a Framework Agreement on Trade aimed at creating the conditions 
and mechanism to negotiate a free-trade-area agreement. QIZ arrangements tended to serve as a catalyst for the creation of business and economic cooperation between Israel and its neighbouring 
countries for the economic benefit of all the parties involved.  
65. Concerning the question raised regarding the stat us of trade relations with the Palestinian 
Authority, the representative noted that the Paris Protocol on Economic Re lations signed between the 
PLO and Israel as part of the Oslo Acco rds in 1995 was still in place and unchanged. 
66. Turning to trade measures affecting imports, he  noted that drawbacks were granted on duties 
paid on imports of raw materials and inputs used in Israel in the production process of goods exported 
from Israel. Drawbacks were not granted for capita l goods or final products  consumed in Israel. 
67. Regarding wharfage fees, Israel was currently carrying out major reforms of the structure of 
the Israel Port Authority, including reviewing the fee system for port services. The new system would 
lead to the elimination of differences in the cr iteria for payment of fees paid by exporters and 
importers. 
68. Israel had not yet incorporated the provisions of  the Agreement on Safeguards into its internal 
legislation. Therefore, Israel had never applied saf eguard measures within the meaning of Article XIX 
of GATT or the Agreement on Safeguards.  Legislati on that was being prepared would incorporate the 
provisions of the Agreement into internal legislat ion.  The "safeguard levy" referred to in the 
Secretariat Report was not a safeguard measure, but rather a form of a customs duty. 
69. Israel used import licensing for reasons of pub lic safety and security, i.e. general safety, 
public health, and protection of the environment.  Regarding sanitary and phytosanitary measures, the 
Chief Rabbinate was the competent authority for issuing the kosher certificates. Israel was doing its utmost to simplify the procedure while at the same time adhering to the rules governing kosher foods.  
70. The process of incorporating standards in technical regulations involved several ministries 
relevant to the area to be regulated. The standardi zation process maintained fu ll transparency within 
the technical standardization committees;  repr esentation in the committees was assured to all sectors 
with economic, consumer or other pertinent inte rests in the standard and the goods or services it 
governed.    
71. The Israel Accreditation Authority, a member of the International Laboratory Cooperation, 
was authorized by law to grant accreditation according to International Standard Number 17025.  The 
Commissioner of Standardization in the Ministry of  Industry, Trade and Labor,  granted approval to 
laboratories holding certification of accreditati on and satisfying additiona l economic, legal, and 
ethical requirements. 
72. As standards and technical regulations had beco me a significant impediment to the free flow 
of goods in international trade, Israel was ve ry interested in negotiating mutual recognition 
agreements in conformity acceptance for goods with it s trading partners, in par ticular with the EU and 
the United States.  
73. Israel's participation in the GPA had not led to a meaningful increase in participation of Israeli 
enterprises in public tenders abroad nor in bids aw arded.  The offset provisions had proven to be the 
most beneficial mechanism, as a significant development instrument for Israeli small and medium-
sized companies. WT/TPR/M/157 
Page 16  
 
  74. Public tenders in Israel were quite open;  around 70% of goods procured came from foreign 
suppliers.  Israel was in the midst of improving tr ansparency and accessibility to public tenders by 
developing an advanced computerized system, covering all tenders issued by government bodies. 
75. Concerning price preferences and preferences for local subcontracting in government 
procurement tenders,  Israel was ready to consid er eliminating these preferences with its trading 
partners  on a reciprocal basis.  
76. Israel welcomed and promoted investments in a ll fields and encouraged both foreign and local 
investors. While Israel did not exclude any sect or from investment incentives the high technology 
sectors were very attractive to foreign and domestic  investors.  Referring to questions raised on 
reforms in the rights of lessees of land administered by the Israel Lands Administration, he noted that 
the outcome of this review would affect all lessees of  land, Israelis and foreigners, in the same way.  
77. Israel had a prime interest in maintaining an  intellectual property law environment that was 
transparent and that ensured adequate and effec tive protection of intellectual property rights in 
conformance with Israel's international obligations , including levels of protection that often exceed 
the levels set forth in the TRIPS Agreement and commensurate with those found in the national laws 
of OECD member states.  Enforcement of intellect ual property rights was effective and continuing.  
78. With regard to geographical indications and trade marks Israeli legislation provided for 
TRIPS levels of protection, includi ng added protection for wines and spirits. Israel was also a member 
of the Lisbon Agreement and granted protection for appe llations of origin consistent with that treaty. 
Resolution of conflicts between trade marks and either appellations of origin or geographical 
indications were, in general, based upon the prin ciple of “first in time, first in right.”  
79. With regard to confidential test data, the Pharmacists Ordinance was amended in 2005 to 
provide substantially enhanced protection for inn ovators of drugs that contained new chemical 
entities.  
80. In 2005, the sections of the Patents Law dea ling with extension of protection beyond 20 years 
were amended in order to clarify the law's original intent with respect to the method for calculation of 
protection extensions.  
81. With regard to copyrights, in 2005 the Gove rnment of Israel published a bill for a new 
copyright law.  The bill had passed its first read ing in the Knesset in 2005 and had been assigned to 
the Knesset's economics committee for public hearings a nd consideration;  the hearings were expected 
to continue for a lengthy period.  
(2) Trade policies by sector 
82. Israel's agriculture had several unique characteristics.  Many small family farms were 
scattered throughout the country producing, under in tensive cultivation, hundreds of agricultural 
products. Agricultural production had grown significantly  in the past 20 years, while using half the 
amount of potable water.  This had been achieved, inter alia , through advanced technology, 
developing new varieties, and exploiting recycled water.    
83. Domestic and export support had been reduced dramatically. Unlike many other countries, 
there was almost no direct support to farmers in Is rael.  Measures applied mostly to general services 
such as research, insurance program mes for natural disasters, water infrastructure, and so forth. 
Moreover, with regard to the trad e balance, Israel's situation was unique since imports of agricultural 
and food products had doubled in a short period. Th is proved that Israel conducted a real balanced  WT/TPR/M/157 
 Page 17 
 
 
  import policy.  The tariff levels provided a safet y net for farmers for some products while also 
allowing imports of other products to increase.   
84. This policy of trade liberalization had turned Israel into a net food importing country. At the 
same time, a significant consumer price reduction ha d been recorded (up to 50%) in many products 
since the implementation of the UR.  He  emphasized that Agrexco no longer had exclusive rights in 
the export of agricultural products. Referring to ques tions concerning products with an element of 
specific tariff, he noted a non- ad valorem  element was included in some products to introduce more 
predictability and stability in the market.  Israel constantly monitored its non- ad valorem  duties, 
depending on world prices, using well-known sources of information to ensure that applied MFN 
tariffs did not exceed bound rates.  
85. The representative stated that Is rael would continue to conduct a balanced import policy with 
regard to market access and tariff rates, thus  ensuring farm profitability along with further 
liberalization,  and reduction in  consumer prices. 
86. In December 2004, the Minister of National In frastructure promulgated new regulations under 
which the "vital services provider" was required to purchase a certain percentage of the electricity 
produced by a co-generation unit of an independe nt power producer, known as  IPP.  This was 
intended to provide a safety net for the IPP.   
87. There was no discriminatory treatment between foreign-owned and a domestically-owned 
financial institutions.  Foreign-owne d financial institutions were allo wed to engage in the trade of 
securities and derivatives and foreign banks were e ligible to acquire a seat on the Tel Aviv Stock 
Exchange.  Israel's Ministry of Justice had drafted proposed legislation that is expected to enhance the 
market for Swaps and Repos;  thus opportunities for foreign players were likely to increase.   
88. Permits from the Insurance Commissioner were required for holdings over 5% of the means 
of control in a pension plan management compan y. The same criteria for obtaining such a permit, 
applied to both residents and non-residents.  R esidents could consume financial services abroad with 
no foreign currency control limitations. Cross-borde r consumption was permitted for advisory and 
other auxiliary financial services. 
89. Cross-border supply of insurance services in Isr ael, including active marketing, was currently 
not permitted.  Residents of Israel were permitted to acquire insurance from a foreign insurer in a 
transaction made outside Israel.  Reinsurance companies were not subject to registration or licensing requirements in order to operate in Israel.  Israe li insurers were obliged to  report to the Insurance 
Commissioner the extent of their e xposure to reinsurance companies. 
90. Regarding questions on transport, there were  no restrictions on foreign companies with 
respect to investment in ground handling.  However,  certain criteria had to be met, which applied to 
foreign companies as well as local ones.  There we re no limitations on foreig n participation in the 
transport of cargo to and from Israel.  
91. Due to physical constraints, there were limitations on access to ground handling activities in 
ports applied both to foreign and local companies.  As to storage/warehousing and freight forwarding 
activities, Israel granted full market access and national treatment once certain professional and security criteria were fulfilled. 
92. The Ministry of Communications, which regulated the provision of telecommunications and 
postal services in Israel, considered the developmen t of effective, efficient competition to be the 
cornerstone of its policy.  WT/TPR/M/157 
Page 18  
 
  93. Israel's telecommunications market was well deve loped, diverse, and competitive, with a high 
measure of use, along with exceptionally high pene tration rates of broadband internet, and a high 
willingness to adopt technological innovation.  Isr aeli consumers enjoyed exceptionally low tariffs, 
especially in markets where effec tive competition had developed.  
94. The Ministry of Communications was working to  increase competition in fixed telephony. As 
part of its efforts to increase competition by loweri ng transition costs for end users, the Ministry had 
mandated number portability in both  mobile and fixed telephony mark ets to be implemented by the 
end of 2006.  Additionally, the Ministry was comm itted to a multi-year frame work of decreases in the 
mobile interconnect rate from its monopolistic star ting point by approximately 50% by 2009. This 
was part of a general move to cost-based orientat ion in price control for regulated segments.  In 
addition, the Ministry had recently opened the terminal equipment market to competition. 
95. The Postal Authority would shortly be reorganized followed by the opening of the entire bulk 
mail market, as well as other market segments ;  the process would be concluded in 2010. 
96. Subject to Israel's GATS commitments, there were no limitations on the temporary entry of 
executives and managers as intra-corporate transfers;  and work permits to intra-corporate specialists 
were issued in compliance with labour market test s.  Furthermore, Israel had established special 
procedures applicable to foreign executives, managers , and specialists seeking work permits in Israel. 
97. The representative of the United States
 stated that Israel had provided responsive and 
informative answers on many of the issues of interest  to the United States.  He noted that a policy 
process was under way to ensure that applied rates did not exceed bound rates, as well as a reform to 
level out differences applying to imports and exports. He also noted Israel's assurance that it would do 
its utmost to submit its notifications to the impor t licensing committee in 2006.  A translated copy of 
the Trade Levies Law had been circulated in th e Committee, and he looked forward to having the 
opportunity to discuss it in more detail.   
98. The representative of the European Communities  thanked the Israeli delegation for providing 
very thorough and comprehensive answers, especia lly on some of its trade policy objectives and 
clarifying some trade policy measures.   WT/TPR/M/157 
 Page 19 
 
 
  VI. CONCLUDING REMARKS BY THE CHAIRPERSON 
99. This third Trade Policy Review of Israel has been both thorough and informative;  it has 
allowed a better understanding of Israel's trade policies and practices, of their evolution over the last six years, and of their outlook. The reports by Isr ael and the Secretariat, and the exhaustive responses 
of the delegation of Israel to the questions by Me mbers, have served as a valuable resource and have 
made a significant contribution to transparency.  We owe the high quality of the review to the 
presence of an impressive Israeli delegation, led by Vice-Director General Udi Sheintal, and to the active involvement of Members.  Our thanks are also due to our discussant, Ambassador Ronald 
Saborío Soto, for his very insightful contribution to our meeting.     
100. Members welcomed Israel's re cent strong economic performance, largely driven by foreign 
trade and innovation, and supported by structural and macroeconomic reform.  Members encouraged 
Israel to pursue its reforms, particularly to furthe r reduce state intervention and enhance competition.   
101. Members appreciated Israel's firm commitment to and active participation in the multilateral 
trading system, including the Doha Development Agenda.  They noted, however, that an increasing part of its trade is taking place under preferential re gimes.  While Members congratulated Israel for 
the steps taken to liberalize its trade regime, they encouraged it to bring its other duties and charges, 
as well as some applied MFN tariffs into line with  its WTO binding commitments.  Referring to the 
sharp contrast between Israel's low non-agricultu ral and high agricultural tariffs, some Members 
encouraged it to undertake tariff reductions on ag ricultural products.  They requested Israel to 
consider improving market access to imports from developing countries.  Members also appreciated 
the unilateral lifting of prohibitions on imports from Members that have no diplomatic relations with 
Israel or do not allow imports from it.   
102. On sectoral policies, Members pointed to the high level of support to and protection for 
Israel's agriculture sector.  Noting that almost all segments of the energy sector are still under state 
monopoly, Members encouraged Israel to take furt her steps to liberalize this sector.  They also 
observed the growing importance of the services sector for the Israeli economy and expressed 
appreciation for its liberalization through, inter alia , the privatization programme.  They were also 
interested in further reform plans that could improve the efficiency of Israel's economy.  
103. Members sought clarification on a number of issues, notably:  import licensing and 
prohibitions;  contingency trade remedies; standard s and technical regulations ; investment and export 
incentives; government procurement;  and protection of intellectual property rights.  
104. Members expressed their appreciation for the r esponses to their questions as provided by the 
Israeli delegation. 
105. In conclusion, Members value Israel's efforts to improve its economic environment.  As a 
small economy based on innovation and st rongly dependent on foreign trade, Israel has a lot to gain 
from a free and open trade environment.  I encourage Israel to continue liberalizing its trade regime, 
both on goods and services, with a view to furthe r improving its transparency and predictability.  
I urge Members to support Israel's reforms by providing greater market access to its goods and 
services. 
__________