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(photo credit: Ariel Jerozolimski [file])
A 10-year quest will come to an end today as Industry, Trade and Labor Minister Eli Yishai is expected to sign a historic free-trade agreement with Mercosur, the South American free trade union, completing a process that began in early 1998 when Mercosur agreed to begin trade negotiations with Israel.
This is the first free trade agreement between Mercosur, which includes Brazil, Argentina, Uruguay and Paraguay, and a country outside of Latin America. Trade between Israel and Mercosur totaled $1.1 billion in 2006, a number that the Industry, Trade and Labor Ministry expects will increase following the signing of the agreement.
Approximately 65 percent of that total comes from trade with Brazil, the central member of the union.
The bloc comprises a population of more than 240 million people and its member countries have a combined gross domestic product of more than $1.2 trillion a year, the Industry, Trade and Labor Ministry said.
Negotiations between Israel and Mercosur stalled with the onset of the second intifada and were only reopened in 2005 by then Industry, Trade and Labor Minister and current Prime Minister Ehud Olmert when he traveled to Brazil and Argentina to meet with senior government and trade officials in those countries.
"We hope and believe that the agreement that is being signed today will be a bridge for Israel into Latin America and that Israeli technology will serve as a basis for the advancement of greater connections between Israel and Latin America," Olmert said ahead of the signing. "This agreement will allow Israel to strengthen its competitive standing against the best and most important economies in the world."
Over the past 10 years, talks between Israel and Mercosur have broken down over failures to come to resolutions on key issues related to Israeli exporters' access to South American markets and the reduction of import tariffs. Over the last two years, representatives from Israel and Mercosur have met eight times in order to resolve the main sticking points in reaching an agreement.
Many countries around the world, including those in the European Union, have attempted to reach free-trade agreements with Mercosur, however, they have not been successful in their efforts mainly because of disagreements over how much to open up Europe's protected farm markets.
"Knowing that this is a very important project, the Industry, Trade and Labor Ministry has been working hard to build the infrastructure needed to complete this agreement," said Industry, Trade and Labor Minister Eli Yishai. "We are talking about not only being able to access Latin American markets, but entering into individual agreements with the governments of Brazil, Argentina, Uruguay and Paraguay - something that will enable Israel to build better and stronger relationships with these countries."
According to details of the agreement, within four years, 70% of all items shipped from Israel to Mercosur countries will not be taxed, with this number increasing to 85% in eight years and 99% in 10 years.
Trade between Israel and South America today is relatively small, something that industry leaders expect to change dramatically following the introduction of the free trade agreement.
"This is a very important agreement and I think that it will definitely accelerate trade between the countries," Uriel Lynn, president of the Federation of Israeli Chambers of Commerce, told The Jerusalem Post. "We should have free trade agreements with every country in the world and my only regret about this agreement is that it has taken so long to complete."
Earlier this year, Tavor Economic Consultants Ltd. said it was chosen by the Industry, Trade and Labor Ministry to evaluate the economic-commercial feasibility of a possible free-trade area agreement to be signed between Israel and India. Since the establishment of a full diplomatic relationship between the two countries in 1992 there has been a significant increase in their trade volume, with more than 50% coming from the diamond industry. Meanwhile, Israel and Turkey, who have had a free trade agreement for about 10 years, expanded it for the first time last March, including clauses on tax incentives for agricultural trade. There have also been talks between senior government officials in Israel and Ukraine about advancing a free-trade agreement between those two countries.
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