BUSINESS
Israel Fears Being
Left Out Of Europe In 1992
JOEL BAINERMAN
Special to The Jewish News
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FRIDAY, JANUARY 26, 1990
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sraeli government offici-
als used to take great
pride in declaring that
foreign firms should establish
manufacturing facilities in
Israel because it is the only
country in the world to have
free trade pacts with both the
U.S. and the EEC.
With the upcoming integra-
tion of the EEC in 1992,
however, Israel's special rela-
tionship with the EEC will be
diminished.
Not many Israeli companies
have realized that if they
can't reduce delivery price
of exports to Europe, they
will lose current clients
there. There is the idea
that somehow 1992 will
have an influence only on
high tech exports. In 1988,
Israeli industry invested a
paltry $13.9 million, down
from $18.4 million in 1987. In
1989, $37.8 million was in-
vested, of which $29 million
has come from one firm.
Traditionally, the EEC has
been Israel's major trading
partner. But this trend is
changing. For instance, in
1988, EEC countries absorb-
ed 22 percent of Israeli ex-
ports and comprised 53 per-
cent of its imports. Yet in the
first three quarters of 1989,
Israel exported $2.4 billion to
the U.S., a rise of 12 percent
compared to the correspond-
ing period in 1988, while ex-
ports to Europe grew by only
4.3 percent. Israeli imports
from the U.S. rose 14.5 per-
cent to $1.8 billion, as im-
ports from Europe fell 2.1 per-
cent. The direction of trade
has some government officials
worried as they see in the
trend a weakening of Israel's
standing with the
Community.
"As the world moves away
from GATT toward major
trading blocks, Israel should
begin asking itself, 'which
trading block will she belong
to?' " says Alfred Tovias, a
senior lecturer at the Depart-
ment of International Rela-
tions at Hebrew University in
Jerusalem. "The worst situa-
tion would be to find itself in
one of the blocks, but not the
most suitable one."
Deputy Minister of Finance
Dr. Yossi Belin has sharply
criticized his government for
its "national negligence" in
not preparing the Israeli
economy adequately for
Europe 1992. He says that in
not recognizing the expected
changes in the unified Euro-
pean market, the Israeli
economy is in danger of being
left behind.
He has proposed that the
government establish a
special embassy to the EEC
and called on it to invest ad-
ditional resources in helping
Israeli companies understand
how the process of public pro-
curement tenders in EEC
countries are done, par-
ticularly in the electronics
and telecommunications
sectors.
Max Livnat, of the Foreign
Desk of the Ministry of In-
dustry and Trade, says that
for Israeli companies to com-
pete the Bank of Israel must
ease foreign currency restric-
tions and liberalize capital
movement to facilitate Israeli
direct investment in local
European subsidiaries.
Yitzhak Ozoury of the EEC
desk of Israel's Foreign
Ministry adds that Israeli
banks and financial institu-
tions will have to become
more flexible to meet the
newly created credit and
financial needs of Israeli com-
panies. They will do an
increasing share of their
business activities will be
conducted on European soil.
Some Israeli industrialists
say Israel should be worried
more about economic integra-
tion in the EEC rather than
exports to that market.
"Mergers must be en-
couraged in Israel to give
companies the critical mass
required to establish sub-
sidiaries in Europe," says
Moshe Ortasse, head of Israel
Aircraft Industries' elec-
tronics division.
While Israeli industry must
prepare itself for 1992, the
Israeli government must also
act. During a round of recent
talks between Economics
Minister Yizhak Modai and
French Foreign Affairs of-
ficials, the French delegation
supported Israel's claims to
be given the same treatments
and agreements as European
Free Trade Association (EF-
TA) countries.
For instance, Israel wants
the Israel Standards Institute
certificates to be recognized
by the EEC, as similar type
institutions are in EFTA
countries. Recently EEC
government procurement was
opened to Israeli companies
for the first time comprising
20 percent of the EEC market
which until now had been
closed to Israeli firms.
Gynn Morgan, EEC am-
bassador in Israel believes
that Israel should use the
1975 Free Trade Agreement
it already enjoys with the
EEC as a "bedrock for any
future relationship."
Israeli trade officials reject
this, claiming it could no
longer depend only on this
agreement as it has created
$3.5 billion trade surplus in
the EEC's favor. They say
Israel is the only country in
the Mediterranean to have
given trade reciprocity to the
EEC and now is asking for a
reciprocity agreement on
services.
The claim often heard is
there is not as much of an
Israeli presence in Brussels,
as there is in Washington. It
seems the Israelis have not
yet realized that Strassbourg
and Brussels are the two new
centers where much of their
future economic destiny lies.
To fill this vacuum, the
leadership of the Jewish com-
munities of Belgium, Britain,
Germany and Spain are in
the process of establishing a
lobbying office on Israeli-EEC
affairs, similar to the role
AIPAC, the Israeli lobby
group, plays in the U.S. Con-
gress. The organization will
also represent the Jewish
community within the EEC.
Perhaps the ultimate solu-
tion, according to Tovias, is
for Israel to simply apply for
EEC membership.
"Why should Malta,
Cyprus, and Turkey be con-
sidered future candidates for
membership in EEC but not
Israel," he opines. "Israel's
GNP per capita is $6210,
larger than four out of 12
EEC members. In
technological, scientific, and
medical fields, Israel could
probably contribute more to
Europe than some EEC
members. Putting its pro-
blems with the Palestinians
aside, Israel's membership in-
to the EEC seems almost
natural."
❑
[IN BRIEF]
SAM KREIS, vice president
of the construction lending
group for Comercia, and
STEVEN VICTOR, an at-
torney and apartment
owner/manager, were recent-
ly named associate members
of the year for the Builders
Association of Southeastern
Michigan.
Other award recipients
were developer MARK
JACOBSON, Ralph Manuel
Assoc. Chairman DENNIS
builder
DICKSTEIN,
HERBERT LAWSON and
(