Israel and China take further step towards free trade pact

China and Israel continue to make progress on a free trade agreement. The Ministry of Foreign Affairs of the People’s Republic of China reports that, at the end of March, a further round of direct talks on the agreement took place between representatives of the Israeli and Chinese governments. This is the eight round of talks since 2016 and the first since November 2019 to be held face-to-face.

According to the announcement by the Chinese Foreign Ministry, the talks covered, among other things, transport of goods, rules of origin, customs procedures, sanitary procedures, ecommerce, the environment, copyright, competition, government procurement, dispute resolution, and legal proceedings.

It is noteworthy that, unlike the Chinese, the Israeli side has released no official announcement about the meeting. A source close to the talks said they were “at an advanced stage of tying up loose ends, and in fact the agreement between the two countries could be signed this year.” Nevertheless, experience of similar agreements in the past, such as the one between Israel land South Korea signed in 2021, shows that the formal ratification process after the signing can take over a year.

China is Israel’s second largest trading partner. The value of trade between the two countries rose 11.6% in 2022 to $24.45 billion. Imports of Chinese vehicles into Israel have contributed significantly to the expansion of trade. In the first quarter of this year, Chinese-produced vehicles took second place in vehicle exports, after South Korea and ahead of Europe and Japan.

About 18,000 vehicles of Chinese manufacture were sold in Israel in the first quarter, representing 17% of the market and a 450% increase over the first quarter of 2022. Israeli vehicle importers are watching the progress of the free trade talks closely, because of the possibility of the abolition of a 7% duty currently imposed on vehicles imported from China. The same duty is imposed on electric vehicles not imported from China but that have Chinese manufactured batteries. Abolition of the duty could to some extent offset the negative effect on prices from the rise in purchase tax on electric vehicles.

Published by Globes, Israel business news – en.globes.co.il – on April 27, 2023.

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