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Last week, a new coalition government was sworn into power in Israel, led by Prime Minister Naftali Bennett and Alternative Prime Minister / Foreign Minister Yair Lapid. Both pledged to focus on critical consensus issues and underscored the importance of strengthening Israel’s cooperation with the United States. While there is no doubt that security and defense issues will continue to dominate U.S.-Israeli policymaking, there is also a growing consensus that trade, investment, and innovation are central issues in our bilateral relationship.
“The Israeli economy is about one main thing, and that is innovation,” said Naftali Bennett, who spoke at the U.S. Chamber of Commerce in 2015 as Minister of Economy.
The U.S. and Israel have built an extraordinary economic partnership based on this innovation. Hundreds of U.S. companies have R&D centers in Israel that produce an amazing array of innovative technologies, and despite accounting for just two percent of the region’s population, Israel is responsible for nearly half of the Middle East region’s foreign direct investment in the United States.
These commercial ties contribute to our economy, support thousands of jobs in the United States and Israel, and drive game-changing innovation. Our economic relationship has been strengthened by innovative public policies, including the U.S.-Israel Free Trade Agreement in1985 and the creation of the three bi-national foundations to support science, technology, and commercial relations in the 1970s. Yet these once pioneering policies are increasingly showing their age as governments around the world are developing new trade and technology pacts and frameworks, and global competition for technological dominance has intensified.
As the new Israeli government begins its work with counterparts in the Biden Administration, both should think boldly about how our two countries can expand economic cooperation to ensure our bilateral innovative, competitive edge for the next generation.
The U.S. Chamber’s U.S.-Israel Business Council offers the following 4 policy recommendations to both governments for consideration:
- Establish High-Level Economic Dialogue: The United States and Israel collaborate extensively on commerce and innovation. But, unlike many other economic partners, the two governments lack a permanent, high-level body charged with taking a holistic policy approach to key economic issues. The two governments should establish a new U.S.-Israel High-Level Economic Dialogue to serve as a flexible, government-to-government platform to deal comprehensively with the full range of bilateral economic, trade, and competitive issues. This platform would raise the level of engagement among both governments and promote a more holistic approach to building a broader and deeper economic and innovation relationship.
- Boost U.S.-Israel digital economy policies and innovation: The coronavirus pandemic dramatically accelerated a global shift to a digital economy. Increasingly, our jobs, education, health care, government services, and beyond, rely on digital technologies that will continue shape the future in endless ways. The U.S. and Israel are among the most digitally connected and advanced countries in the world, yet the U.S.-Israel FTA signed in 1985 preceded the internet and e-commerce. Over the past three decades, however, trade has become increasingly concentrated in industrial, high-tech, and digital products – a trend that will intensify given the technological leaps and myriad applications for artificial intelligence, cybersecurity, and blockchain. Our two governments should update our digital trade rules, enhance our cybersecurity partnership, and expand innovation cooperation in strategic digital areas.
- Grow energy and environmental partnerships: One of the greatest challenges today is the urgent need to combat climate change while providing the energy needed to promote competitiveness and economic growth. Israel’s natural gas resources ensure enough domestic supply of energy for several decades while contributing regional stability, security, and peace. Israel is also world leader in developing technologies that manage water resources, a critical input to economic growth. The U.S. and Israeli governments should strategically expand cooperation to this critical area and partner to solve big global challenges around climate change and energy transition by leveraging existing bilateral R&D funds and launching an interagency working group to focused on expanding the energy, economic, and political potential of the Eastern Mediterranean energy project.
- Institutionalize an expansive U.S.-Israel health care partnership: Defense and national security interests have always been the centerpiece of America’s relationship with Israel. As the world continues to confront the greatest health crisis of our time, protecting our citizens and institutions from harm is extending beyond the battlefield and into the public health domain. The pandemic has also underscored the need for strong collaboration across borders with partners like Israel to drive health innovation, manage issues in our supply chains, and promote economic recovery. Israel is a leading hub for health-related technology and has been a source of innovative therapeutics, diagnostic solutions, and other health IT. While the global pandemic has highlighted the potential for many of these technologies, the need to build stronger U.S.-Israel ties in health care transcends this crisis. Our governments should look to elevate and institutionalize the health relationship through policies, processes, and staffing, streamline regulatory processes, and foster increased research and innovation with health data in both countries.
This is a critical moment for government and business to think deeply and creatively about the future of U.S.-Israel trade, investment, and innovation. Just as our two countries are committed to Israel’s qualitative military edge through U.S.-Israel cooperation, we seek to ensure that our bilateral commercial alliance retains its strategic qualitative economic edge. That requires engagement by the governments and smart upgrades to our policy environment.