The press is full of dire warnings that Israel is isolated and growing more so, and that the boycott, divestment, sanctions (BDS) movement is having a devastating impact on the Israeli economy. It’s no mystery that Israel is politically at loggerheads with much of the world over the disastrous Iran deal, settlements and inaction on the peace process; nevertheless, diplomatic ties remain intact. Moreover, despite the desperate hopes of the BDS campaign, economic ties are flourishing.
Overall, Israeli exports have grown from around $5 million in 1948, to more than $47 billion in 2014. Israel’s largest single trade partner remains the United States, despite political tensions between the political leaders. The total volume of trade in 2014 was $36 billion. In addition, each of the 50 states benefit from their ties with Israel. In 2014 alone, 21 states exported more than $100 million worth of goods to Israel, led by New York with exports of more than $5 billion.
Israel’s relations are even more strained with the European Union and yet trade with the EU exceeds that of the U.S. Roughly one-third of Israel’s imports and exports are a result of trade with the EU. Moreover, total trade with the EU has grown from approximately $21 billion in 2003 to $34 billion in 2013.
Countries outside of the EU, the EFTA-bloc countries such as Denmark, Sweden, and Norway, have taken, or seriously considered economic sanctions against Israel. Still, Israel enjoys a free trade agreement with EFTA-bloc countries and business with these nations remains robust.
The central hub of the BDS movement is in England, but the various votes by academic and trade associations for boycotts have had virtually no tangible impact. In fact, total bilateral trade amounted to a record $6 billion in 2014, an increase of more than 7 per cent from the previous year.
The biggest economic story is the exponential expansion of Israel’s trade with Asia, which will overtake the U.S. as Israel’s second biggest export destination this year. China is already Israel's third-largest trading partner; in fact, since formally establishing diplomatic relations with China in 1992, trade has increased 220-fold from $50 million in 1992 to $11 billion in 2014. In addition, total trade between Israel and Japan reached $2.3 billion in 2014.
Israel’s relations with India have been steadily improving, as evidenced by the planned 2015 visit of Narendra Modi to Israel, which will make him the first Indian prime minister to go to Israel. Since the establishment of diplomatic relations between India and Israel in 1992, bilateral trade and economic relations have grown from $200 million in 1992 to $6 billion in 2013. Between Modi's election in May 2014 and November 2014, Israel exported $662 million worth of Israeli weapons and defense items to India. This export number is greater than the total Israeli exports to India during the previous three years combined.
Israel is also expanding ties with Latin America and has been granted observer status in the Pacific Alliance, an economic trade organization of several major Latin and Central American countries. One country that Israel has had testy relations with because of the bombing of the Israeli embassy in 1992, and the government’s failure to bring the perpetrators to justice, is Argentina. Still, economic relations are growing as evidenced by the Argentine army’s $111 million contract with Israel in 2015 to upgrade 74 tanks made in Argentina.
Israel’s discovery of a large reserve of natural gas off its Mediterranean coast has also opened new opportunities for expanding trade with its neighbors. Jordan, for example, signed a $15 billion deal for Israeli natural gas, and a $1.2 billion agreement was struck with Egypt.
A good example of how politics does not always interfere with economics is the ongoing trade relationship between Israel and Turkey. While once close, ties between Ankara and Jerusalem grew strained as Turkish President Erdogan became more stridently critical of Israel. Nevertheless, the free trade agreement between the two countries is still in effect, and trade with Turkey hit a record of more than $5 billion in 2014, a 50 percent increase over 2009.
One of the countries hostile toward Israel that nevertheless engages in trade is Malaysia. The trade is largely one-sided, almost entirely Israeli exports, but the overall value of trade exceeds $1.5 billion, nearly double what it was as recently as 2012. Similarly, although the amount is relatively trivial, the fact that the value of Israel’s trade with Indonesia is as much as $250 million is another reflection of business trumping politics.
In addition to trade, foreign investment in Israel has grown rapidly despite a brief downturn in 2014. More than 10,000 U.S. companies do business in or with Israel, including all the major high-tech companies. Intel, for example, which already has a large presence in Israel, invested $6 billion in its plant in Kiryat Gat.
Americans and other foreign investors do not invest in Israel because they are Zionists; they do it because it is a great place to do business with a creative and highly skilled pool of talent. Consider just a few of the deals concluded by American companies:
• Warren Buffet invested $6 billion to buy Iscar – his first major acquisition outside the U.S.
• Cisco paid $5 billion for software developer NDS.
• Pratt & Whitney spent several hundred million dollars to buy Blades, one of the world’s largest producers of machine blades.
• Google paid $1 billion for the Waze mapping company.
• IBM bought Trusteer, a fraud prevention company for approximately $800 million.
• Facebook paid $200 million for a startup called Onavo.
• Between 2003 and 2012, 772 Israeli startups were acquired for $41.6 billion.
Furthermore, despite boycott threats, Israelis are not hiding their identification with Israel. According to Economy Ministry figures, 760 Israeli manufacturers labeled their products marketed abroad as “made in Israel” in 2013; that number increased to 1,024 in 2014.
Kristin Lindow, senior vice president at Moody’s Investors Service and Moody’s lead analyst for Israel, told Forbes in February that “the impact of BDS is more psychological than real so far and has had no discernible impact on Israeli trade or the broader economy.” In fact, Moody’s chief economist, Dr Mark Zandi, told Globes in May that Israel has “one of the world’s best economies.” Elaborating, Zandi notes that Israel’s “fiscal situation is better than ever, the debt-to-GDP ratio is low and continues to fall, your economy has been growing for 15 straight years, and there's almost no unemployment.”
So who is being hurt by the BDS movement?
The Palestinians, of course. “The sanctions do run the risk of hurting the Palestinian economy,” Lindow noted, “which is much smaller and poorer than that of Israel.” The campaign against SodaStream, for example, may have made activists abroad feel good, but it was devastating to the hundreds of Palestinians who will probably be fired when the company moves its factory from Maale Adumim to the Negev.