Israel and the United Arab Emirates signed a comprehensive free trade agreement (FTA) on Tuesday – the first such deal between the Jewish state and an Arab country. The agreement, signed in Dubai by Emirati Minister of Economy Abdulla bin Touq Al-Marri and Israel’s Economy and Industry Minister Orna Barbivay, came less than two years after the countries established diplomatic relations as part of the Abraham Accords brokered by the Trump administration.
It’s a big deal for several reasons. First and foremost, it will boost economic ties between the two regional powerhouses, with trade already at an estimated $2.5 billion since ties were normalized. Marri, who forecasts that bilateral trade will hit more than $1 trillion over the next decade, declared that the deal “will create a new paradigm in the region.”
The agreement also serves as a model accord for future FTAs between Israel and Arab countries. Barbivay was spot-on when she hailed the historic importance of the “groundbreaking move,” saying it will serve as an “inspiration for the region” and “generate unlimited opportunities for business, for entrepreneurs from both countries.”
“Together we will remove barriers and promote comprehensive trade and new technologies, which will form a solid base for our joint path, will benefit citizens, and make it easier to do business,” she said, adding that it “can prove to nations and governments around the world that collaboration and dialogue are the best ways to turn challenges into opportunities.”
The Israel-UAE free trade agreement covers everything from regulation and customs to e-commerce and intellectual property rights. Some 96% of products traded between the countries – from food and agriculture to cosmetics and medication – will be exempt from customs duty, many immediately and others gradually.
In a significant step toward sealing the deal in January, Israel’s cabinet approved a joint Israel-UAE R&D fund to support tech projects involving Israeli and Emirati companies. Emirati Minister of State for Foreign Trade Thani bin Ahmed Al Zeyoudi, who flew to Jerusalem last month to finalize the terms of the agreement and forecast that bilateral trade could double to $5b. by 2024, said it constituted “a new chapter in the history of the Middle East.”
“Our agreement will accelerate growth, create jobs and lead to a new era of peace, stability and prosperity across the region,” he tweeted. “Throughout the last 18 months, we have proven what can be achieved when disputes and differences are set aside.”
Israel’s Economy and Industry Ministry said bilateral trade with the UAE reached almost $900 million in 2021 – including products ranging from diamonds and minerals to electrical equipment and transportation materials.
By contrast, Israeli trade with Egypt, with which it signed a historic peace treaty 43 years ago, totaled about $300 million in 2021. Still, Jerusalem and Cairo moved this week to boost economic ties in the next few years, aiming to reach $700m. by 2025.
In 2021, Israel inked new trade and water deals with Jordan, with which it signed a peace treaty in 1994, and the economic ministers of both countries held an important meeting late last year, the first of its kind in more than a decade.
Bahrain, Sudan and Morocco all normalized ties with Israel under the framework of the Abraham Accords, and more countries are expected to follow. They are all good candidates for free trade agreements. As a first step, Israel signed a trade deal with Rabat in February to designate special industrial zones in Morocco.
This is Israel’s 19th FTA, including ones with the United States, the European Union, Canada and Mexico. They are all important, but perhaps none is as significant as the deal signed with the UAE. It is, notably, only the UAE’s second, following one signed with India earlier this year.
All eyes are now on Saudi Arabia, where Channel 12 reported last week that a senior Israeli official had visited amid growing speculation that Jerusalem and Riyadh are moving slowly toward normalizing relations.
The parties reportedly focused on regional security interests that have aligned in recent years over common threats posed by Iran.
Saudi Crown Prince Muhammad bin Salman stated in March that Israel could be a “potential ally.” US President Joe Biden could certainly advance the momentum when he is scheduled to visit both Israel and Saudi Arabia this month. We urge him to do so.