Flag of China.
(photo credit: Wikimedia Commons)
As the US election campaign rages, free trade has become a common villain. Republican front-runner Donald Trump continues to insist that America’s trade partners are “killing us” at trade, while Democratic contender Bernie Sanders has called free trade agreements a “disaster.”
Even Hillary Clinton, whose husband signed the North America Free Trade Agreement into law and who laid the groundwork for the 12-nation Trans-Pacific Partnership, has turned against the latter pact. Mostly, they argue that the agreements have cost the US jobs.
In Israel, however, news of opening free trade talks with China, the world’s most populous country and second-largest economy, has raised few concerns of job loss and provoked few finger-wags from opposition politicians.
“Israeli industry in general is a free trader, and I think that the notion among industrialists is that as long as it’s free trade that’s on a mutual basis and we have the opportunity to export our products to China, then it’s a fair deal,” said Ohad Cohen, head of Foreign Trade Administration (FTA) at the Economy Ministry.
It’s true, there are some industries that could be vulnerable to competition from China once an agreement is signed, such as the ever-shrinking textile industry, certain natural resource mining industries, communications hardware, and most traditional manufacturing industries.
But for several reasons Israelis remain unphased at the prospects of losing jobs to China.
One is that Israel’s main industrial markets are abroad, so lowering tariffs on Chinese imports won’t affect the buyers of Israeli goods.
“It’s always important to look at the size of the two markets and to realize that for Israelis, they’re really standing to gain from any trade benefits, because they’re having an opportunity to be exposed with reduce tariffs and reduced regulation to a major market in China,” said Sam Chester, an expert on Israel-China relations working in the commercial drone industry in the city of Shenzhen.
For China, Israel’s 8-million strong population is an insignificant market, and will likely serve as a source of technology more than an export destination.
“The cost to Israeli workers, the cost to Israeli industrialists who may see cheaper Chinese manufacturing goods come into the country, isn’t really very high, so it’s a different context” than the US, Chester added.
With the unemployment rate near a historic low at 5.3 percent, another reason the jobs question resonates less in Israel is that joblessness is simply not the most salient economic problem. High prices are.
“A free trade agreement with China will give the economy a huge boost and will achieve a very important goal of lowering prices to the general public,” said Uriel Lynn, the president of the Federation of Israeli Chambers of Commerce, a business association that helped lay the groundwork for FTA talks on Israeli missions to China.
At any rate, he says, previous free trade deals have not cost Israel jobs.
“True, it will require several factories to increase their efficiency and competitiveness, but we have to understand that increasing exports to China will only create more jobs,” he said. “When you export more, you produce more.”
The Economy Ministry’s Cohen also noted that much can change in Israeli industry by the time an agreement is signed.
“In our experience it takes a few years. It can take two years, it could take longer,” he said. But in working out details on everything form rules of origin and duties to intellectual property rights and dispute settlement mechanisms, Israel will also seek to add a modicum of protectionism, he said.
Israel would seek a longer timeline to phase in competition for Israeli industries that seem vulnerable, he said, to ensure they have a chance to retool or adapt.
Cohen also bristled at the idea pushed by some politicians that opening markets in the East is a tool against the Boycott, Divestment and Sanctions movement, which he noted has not had any significant economic effect on the country.
“Unlike some elements in the government that may refer to that, I think that Israel economically needs to diversify its exports without any connection to BDS. Like any business, you don’t want to rely on one or two customers,” he said.