Just two years after ending their almost 50 year boycott of Israel, on the 31st of May the United Arab Emirates became the first Arab country to sign a free trade agreement with Israel. Abdulla Bin Touq (United Arab Emirates Minister of Economy) and Orna Barbivai (Israel Minister of Economy) met last week to sign this document and put the agreement into effect. This involves 96% of tariffs being either removed or reduced, covering a plethora of goods including food, medicine, jewelry, fertilizers and other chemicals. This leaves agriculture as the only remaining sector that still faces substantial barriers. Some of these tariffs will be waived immediately, with the rest being removed within 5 years.
The bureau of statistics estimates that this agreement will increase trade between the two nations from $1.2 billion to $10 billion in a 5 year time period. It is expected that UAE’s exports to Israel will increase by a margin of 0.5% by 2030 and that 1,000 Israeli owned companies operating from or through the UAE will exist as a result of the FTA. It is projected that this free trade agreement will add $1.9 billion to the nation’s economy in just half a decade.
Beyond boosting economic activity, this will decrease the cost of goods on a consumer level. For example, prior to the tariff decrease, there was a 12% customs duty applied to common cosmetics like shampoo, sunscreen, and deodorant as well as a 6% tariff on textiles which increased the cost of clothing. This tariff cut will allow business owners to increase total revenues, without increasing costs of production.
Consequences of this agreement are not isolated to Israel and the UAE. Israel now has access to trade within Dubai, a major player in the global economy. Israelis look to Dubai as a hub for engagement with the broader Middle East into the future.
Sources: CNBC, CNN, and Times of Israel
