Trade with Europe: Bad Deal for Israel. ISRAEL FIRST.

As outlined in a recent article on VonNaftali, Israel has had a negative trade balance with the hostile and interventionist EU for a decade (2013-2023).

Current figures from 2024 show that this is not a good deal for Israel. Israel has even slipped into one-sided dependence. This must be changed quickly.

The most important basis between Israel and Europe is the EU Association Agreement with Israel. Let us take a look at this agreement. The Euro-Mediterranean Association Agreement between the EU and Israel (Euro-Mediterranean Association Agreement) was signed in 1995. It entered into force in June 2000. The framework has a political dimension and an economic dimension.

Free Trade?

In principle, the agreement is based on a kind of free trade zone. Of course, it is not a true free trade zone, as the list of EU goods that can be imported into Israel duty-free or at a reduced tariff is regulated by quotas or a lower tariff rate of 10% to 25%.

Note: These tariffs are the reduced ones! Now, you know why the costs of living are that high (about 40% of the OECD average). The high cost of living in Israel is a result of restrictive import restrictions. This treaty does not work to the advantage of the people of Israel. For some Israeli elites, yes.

This ensures that Israeli consumers continue to pay high prices. Some of the oligarchs are happy with that. And the unelected deep state, too. The justification for this is the protection of the domestic economy, which is economically nonsensical. In effect, you have expensive and protected economic sectors. Some oligarchs are happy with that.

This is one of the serious negative effects of this agreement: It co-creates the high living costs in Israel. Instead of seeking alternative sources of supply or bringing innovation to the protected sectors, usually kibbutz-based sectors, or simply acknowledging that certain products cannot be produced economically in Israel, existing ones are preserved by protective measures.

This is a structurally disadvantageous effect for Israel, which the population pays for with high living costs. Some oligarchs are happy with that.

And let us take a look at the agricultural trade between Israel and the EU for 2024. The volume of agricultural trade is not very large. In 2024, Israeli exports of agricultural products to the EU amounted to 979 million Euros. Conversely, the EU exported agricultural products worth 2.9 billion Euros to Israel.

Protecting one’s own agriculture looks different. Israeli exports of agricultural products can also be established in other markets, such as the USA. About a trade agreement that generates less than a billion Euros in agriculture and disfavours Israeli agriculture by roughly three times, we can say: That’s a bad deal. And, this deal does not foster free trade (but quota trade).

Bad Structure I – The Economic Dimension

But if we leave this structural intra-Israeli dimension aside, it is quickly apparent that this agreement is not working to Israel’s advantage at all.

2024, the total trade in goods amounted to 42.6 billion Euros. EU imports from Israel: 15.9 billion Euros, mainly machinery, chemicals, and manufactured goods. Great.

However, EU exports to Israel were 26.7 billion Euros in machinery, chemicals, and manufactured goods. In short, again for 10 years, a deficit of 10.8 billion euros. That’s not a good deal. That’s a bad deal.

But that’s not all. Trade in services amounted to 25.6 billion euros in 2023 (last available figures). The EU imports Israeli services worth 10.5 billion Euros, but the EU exports services worth 15.1 billion Euros. Again, a deficit of 4.6 billion Euros.

But that is not all of the disadvantages: the structure of the EU Association Agreement is driving Israel into one-sided economic dependence. The EU is Israel’s largest trading partner (32% of Israel’s total trade in 2024), while Israel is the EU’s 31st largest partner (0.8% of EU total trade).
In Summary this deal produced a deficit of 15.4 billion Euros. That’s bad and insane.

Bad Structure II – Harmed Sovereignty

Israel is feeling the effects of this economic dependence and is being politically blackmailed by the EU over the “Palestine” issue. Israel is thus easy prey for anti-Israel lobbyists. This one-sidedness must end.

If trade is so one-sided, then it is clear that we must speak of dependency. Your largest trading partner can blackmail you easily, as we see it daily. There can be only one answer: Israel first.

Finally, this EU Association Agreement is directed against Israel’s sovereignty. Why? Goods from Judea and Shomron do not receive preferential tariffs. Let us leave aside the fact that this agreement is de facto not preferential to Israel. So, by structure, Judea and Shomron are at a gross disadvantage. This insanity must end.

A so-called “technical agreement” with Israel, which has existed since 2004 (last updated 2023), ensures this outrageous attack on Israel’s sovereignty. The agreement was reached between the Directorate-General for Taxation and Customs Union of the European Commission (DG TAXUD) and the Israeli Ministry of Finance Tax Authority.

The European Association Agreement harmed Israel economically and politically and blocked innovation in some sectors. After all, the EU doesn’t supply anything that the US can’t. And the US market is large, very large. More is possible. Yes, Israel has alternatives.

Concluding sidenote: Israel doesn’t need Europe. Europe has nothing to offer Israel that Israel can’t obtain itself or from its allies. But Europe needs Israel because Israel produces the best weapons and intelligence in the world. Agreed, Israel is strong and the economy is strong, as PM Netanyahu stressed today. But Israel can be stronger, better, and more affordable for the citizens of Israel. No more blackmailing by Europe.

In summary, this agreement is politically and economically detrimental to Israel. It is one of the driving factors behind the high cost of living in Israel and hinders sociopolitical reforms. Israel is bleeding with this agreement: trade deficit, high cost of living, and reduction of political sovereignity. Europe is currently threatening trade sanctions against Israel. All I can say is: Yes, please, do it. It will cost the EU billions. And it will finally free Israel from the gagging contract of the EU agreement, which only brings disadvantages.
This agreement is a bad agreement. Israel First.

Sources deployed:

https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:22000A0621(01)

https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/israel_en

Click to access agrifood-israel_en.pdf

https://taxation-customs.ec.europa.eu/eu-israel-technical-arrangement_en

Pic AI-generated. Illustrative.