The United States and Israel: Partnering for Prosperity

Twenty-five years ago when Congress passed a Free Trade Agreement with Israel, it was the first of its kind.  Previously, our economic and military aid to Israel had dwarfed our trade relationship. 

What few realized back then is that the FTA would serve as a powerful engine for Israel’s economic growth into one of America’s top 20 trade partners worldwide. 

At the time, many of us saw the FTA as a means to bolster Israel’s efforts to break free of the Arab boycott. 

I doubt any of us fathomed how successfully the FTA would serve as a platform for economic integration with Arab neighbors willing to embrace peace.

As an outgrowth of the FTA, products jointly produced between Israel and Jordan or Israel and Egypt in qualified industrial zones can be imported to the U.S. duty-free.

Officially, the U.S. still runs a trade deficit with Israel.  I hope this conference will launch great ideas to close that gap. 

But a strict balance of payments equation fails to measure many other benefits trade with Israel brings to the U.S., such as the vast number of Israeli patents that are being capitalized in U.S. innovations and the success of U.S. companies that use Israel as a base of operations at a crossroads of Europe, Africa, and Asia. 

Israel boasts one of the largest numbers of NASDAQ-listed companies based outside of North America.

This year, the U.S. joined in celebrating Israel’s accession to the OECD.

This isn’t to say that the U.S.-Israel trade relationship has always had a smooth road.  For years Israel was branded by USTR as insufficiently protective of intellectual property rights and placed on the Priority Watch List of USTR’s annual Special 301 report on international IP violations. 

Over time the issue became more and more intractable despite Israel’s passage of laws to protect copyrights, trademarks and patents, and its evolution into a model climate for high-tech innovation. 

Israel was being unfairly criticized alongside major IP violators like China and Russia to an extent that made Israel’s designation appear even more arbitrary and excessive and undercut the credibility and effectiveness of the underlying report. 

I am pleased to say that under the leadership and commitment of the Obama Administration we finally tackled the issue, paving the way for Israel’s conditional removal from the 301 report this past year. 

I look forward to its complete removal from the list early next year.

I took a particular interest in this debate because the greatest sticking point in Israel’s Special 301 listing involved generic competition in medicines.  This is an issue I follow closely because of my work as a co-author of Waxman-Hatch – the legislation that served as the basis for generic drug competition in the United States. 

At issue was how long brand-name drugs should be granted exclusive marketing rights in Israel to compensate for the investment made in the clinical trials necessary to obtain marketing approval. 

Ultimately, the U.S. and Israel reached a resolution that achieved a careful balance to reward innovation while ensuring that Israelis will continue to have timely access to new medicines on an affordable basis.

By the way, Israel is not only the only country that has faced pressure to grant new protections to brand-name drugs at the expense of lower-cost generic alternatives.

Under the Bush Administration, USTR’s citations targeting generic competition in multiple countries skyrocketed without regard to the potential public health impacts of such demands.

I look forward to continue working with USTR Ambassador Kirk to resolve more Special 301 cases related to medicines and ensure that our trade policies are consistent with the U.S. commitment to uphold the Doha Declaration on trade, intellectual property and public health.

All of the issues and programs discussed at today’s conference occur in a larger context – that of the choice between war and peace in the Middle East.

There is so much promise, as exemplified by the FTA – and so many threats.  So much hinges on what happens – not just for Israel but for the Palestinians.

If real peace can be achieved, there is no doubt that Palestinian standards of living – already on the rise today due to improved economic and security management – can increase dramatically.  Palestinians who want a more prosperous future are hopefully seeing some tangible proof of what real peace can bring.

I’ve always believed that bridging the divide between Israelis and their neighbors requires this kind of pragmatism.

In 1979, when Congress considered the legislation approving U.S. economic and military aid to Egypt and Israel to bolster the Peace Accords, I offered an amendment to create the Middle East Regional Cooperation program – which is more commonly known by its acronym “MERC” – to encourage Israeli and Egyptian scientists and researchers to collaborate on projects of mutual concern.

My amendment was the result of discussions with Israeli scientists and scholars who saw an opportunity to join in collaborative research and scientific projects with mutual benefit.  They envisioned a program that would allow Arabs and Israelis to work side-by-side and solve problems jointly as partners and not as rivals, regardless of political developments. 

MERC started very modestly, with a budget of only about $50,000.  Today the program continues to thrive with a budget of $5 million and receives more high quality grant applications than it is able to accept.