What does Brexit mean for British-Israel trade?

Britain is Israel's leading export destination within the EU, according to the Central Bureau of Statistics.

Britain's Prime Minister Theresa May welcomes Israel's Prime Minister Benjamin Netanyahu to Downing Street in London, June 6, 2018 (photo credit: TOBY MELVILLE/REUTERS)
Britain's Prime Minister Theresa May welcomes Israel's Prime Minister Benjamin Netanyahu to Downing Street in London, June 6, 2018
While situated far way from the boisterous debates of the House of Commons, governments across the world are intently following every speech and parliamentary vote as the clock ticks down to Britain’s scheduled divorce from the European Union on March 29.
Tuesday’s crushing defeat in Westminster appeared to kill off British Prime Minister Theresa May’s two-year strategy of forging an amicable divorce, in which a status-quo transition period would be followed by Britain operating an independent trade policy alongside close ties to the EU, the world’s biggest market and Israel’s premier trading partner.
Britain is Israel’s leading export destination within the EU, with bilateral trade repeatedly breaking records in recent years, reaching $7.2 billion. in 2016 and $9.1b. in 2017, according to the Central Bureau of Statistics.
These records will be shattered after British exports to Israel soared by some 75% in the first half of 2018. Bilateral trade stood at $4.3b., up from $4b. during the same period in 2017.
Accordingly, with only 10 weeks to go to avoid a no-deal Brexit, Israeli trade officials will be keeping track of every development in the deepening stalemate in London, but are eager to reassure Israeli exporters that there will be seamless continuity in trade. As the British once said, keep calm and carry on.
“In terms of direct trade between Israel and the UK, there is no need for concern,” Yariv Becher, the Economy and Industry Ministry’s commercial attaché in London, told The Jerusalem Post.
“The ministry is working very closely with the UK to make sure there is continuity in existing trade relations between the countries. For exports from Israel to the UK, there will be no fracture – it will be seamless.”
For nearly two decades now, Israeli-British trade has been conducted through the EU-Israel Association Agreement, a legal framework that encourages both political dialogue and economic cooperation.
Britain will no longer benefit from the agreement after Brexit, as will be the case for several dozen other free trade agreements that the EU has negotiated over the last two decades with almost 60 non-EU countries.
In order to ensure a smooth transition of the trading relationship between Britain and Israel, a new UK-Israel Trade Working Group was established and held its first meeting on March 29, 2017 – the same day that the UK invoked Article 50 of the Treaty on European Union to commence its withdrawal process.
The working group was one of the first four to establish a deal in post-Brexit trade, apparently demonstrating the importance placed by Whitehall on the trading relationship with Israel.
The EU’s right to strike trade deals, however, means that no free trade agreement can be signed by the UK before March 29. At first glance, renegotiating trade deals with all previous trading partners would seem to be a lengthy and costly endeavor.
“What the British are saying is that they want to take the existing infrastructure that they have as part of the EU, and sort of replicate the existing agreements... to make sure that there is continuity,” said Becher.
“We are definitely in line with that, and there is cooperation between both sides to make sure it happens,” he said.
Liam Fox, the UK Secretary of State for International Trade and a minister responsible for ensuring trade continuity, visited Israel in November 2018 to discuss post-Brexit trade opportunities, including meetings with Prime Minister Benjamin Netanyahu, major investors and hi-tech companies.
Speaking in September 2018, May expressed her desire to see not only continuity, but the deepening of the UK-Israel trade relationship following Brexit.
“As the United Kingdom forges a bold new future outside the European Union, we will be seeking free trade deals with our partners around the world. And as a great start-up nation, an engine of enterprise, a world leader in technology and a great friend of Britain, I want to see an ambitious free-trade deal between our countries,” May told a United Jewish Israel Appeal dinner in London.
“And as I have said to Prime Minister Netanyahu, I want to build on this – deepening our links in particular in sectors like agriculture, health, science, technology and innovation.”
While May asked party leaders on Thursday to forget self-interest to find a solution, there was little sign that either of the two major parties – which together hold 88% of the 650 seats in parliament – were prepared to compromise on key demands.
No matter the outcome of the months to come, Israeli authorities are eager to assure exporters that it will be business as usual come Britain’s departure from Europe.
Reuters contributed to this report.