Brazil Israel Free Trade Agreement

* Cynthia Kramer is a Brazilian lawyer and business consultant with over 15 years of experience, PHd in International Business from the University of São Paulo. She has worked for the Brazilian government at the World Trade Organization in Geneva, coordinating litigation at the Ministry of Foreign Affairs in Brasilia and at the Embassy in Washington DC/USA. Late last week, Minister of Finance and Industry, Trade and Labor Ehud Olmert met with the governor of the Brazilian state of Sao Paolo, Geraldo Alckmin, to promote a free trade region with the Mercosur bloc (Mercado Comun del Sur), which includes Brazil, Argentina, Uruguay and Paraguay. A framework agreement is expected to be signed in December. Brazil is the first Mercosur country. Israel believes that the signing of the agreement will prevent its exports from damaging trade agreements between Mercosur and other trading blocs and countries, especially the United States, and will boost trade between the parties. The Ministry of Industry, Trade and Labour is also working on a binational R&D fund with Brazil. In addition, the free trade agreement determines the equality of conditions for products manufactured in the country and products imported from the territory of the signatory party (Israel or Mercosur). This is called the principle of national treatment, which was first agreed in 1947 under the General Agreement on Tariffs and Trade (GATT).

The practical effect of this obligation is the possibility of demanding equal treatment/competition for products imported from Mercosur or Israel. The FTA contains other provisions on safeguard measures, commercial products, sanitary and phytosanitary measures, but in general they all refer to obligations under agreements covered by the World Trade Organization (WTO). Egypt signed the QIZ agreement in December 2004, and Egyptian products manufactured in a designated area with 10.5% Israeli inputs can enter the United States duty-free. Exports to the United States under the program are approaching one billion dollars and consist mainly of textiles. For a list of companies and areas eligible for the current Egyptian QIZ, please see www.qizegypt.gov.eg/. All products manufactured in the West Bank and Gaza Strip can also be imported duty-free into the United States. Since the Brazilian and Israeli economies complement each other and are not in competition with each other, there is still a lot of potential to be exploited. The Israeli economy is entirely based on international trade – it imports and exports a lot and with this scenario, Brazil can benefit from a qualified market. Brazil is a strategic country for Israel and, in light of this, we encourage Brazilian and Israeli exporters to further strengthen these trade relations and continue to reap the benefits of the Mercosur-Israel Free Trade Agreement. As we have pointed out, this agreement removes barriers to trade in goods, facilitates their movement and significantly diversifies trade opportunities between countries.

In addition, it generates economic growth, increases technological and R&D cooperation and strengthens cultural, political and social ties. Israel seeks a free trade agreement with the Mercosur bloc In 2008, when the free trade agreement was not yet in force, trade was as important as it was after 2010, when the free trade agreement was in force. The following table shows the evolution of trade flows since 2007 (the first year in which official statistics are available): Describes the bilateral and multilateral trade agreements to which this country has acceded, including with the United States. In December 2007, Israel signed a free trade agreement (FTA) with the Mercosur countries (Argentina, Brazil, Paraguay and Uruguay). This is the first agreement of its kind signed by Mercosur. This free trade agreement entered into force in April 2010 and established, among other things, a list of products whose import duties will be reduced to zero immediately or within 4, 8 or 10 years. This means that by the end of 2020, all products on the respective concession list will be exported free of charge from Mercosur to Israel or from Israel to Mercosur. In order to benefit from this tax advantage, the product must originate in Mercosur or Israel and the company requests its government to issue a certificate of origin accompanying the product for the purposes of the tariff preference to customs clearance from the customs authorities of the importing country. Bilateral trade between Israel and Brazil amounted to $165 million in 2004, of which 58 per cent was Israeli exports. Trade totaled $129 million this year, including $79 million in Israeli exports.

Despite the efforts made by governments to finalize this free trade agreement, Mercosur statistics 1 show that the free trade agreement has not contributed significantly to the increase in trade flows between Mercosur and Israel, which means that companies do not benefit from the tariff preferences and other preferential treatment provided for therein. Some may point to the currency`s impact on the 2016 figures, but it`s time for Israeli companies to take a closer look at the market mercosur represents for its products and try to use the preferences granted by the free trade agreement to increase the flow of trade between Israel and Mercosur. Mercosur companies should also not ignore the opportunities that Israel offers their companies and should also use the free trade agreement to increase trade and increase profits. According to Argentine negotiator and Undersecretary of State for Economic Integration and MERCOSUR, Eduardo Sigal, in four years, 70 percent of all goods traded between the bloc and Israel will be free of import taxes. Sigal added that in eight years, the tax-free trade rate will rise to 85 percent and in ten years to 99 percent. The deal is expected to allow for a significant increase in trade between the bloc and Israel in general. (Mercosul Assina Acordo de Livre Comércio com Israel, G1-GLOBO.COM, December 18, 2007.) (2 February 2008) Following negotiations that began in 2005, MERCOSUR member States, the trade bloc, Argentina, Brazil, Paraguay and Uruguay signed a trade agreement with Israel, the first non-Latin American country to sign such an agreement with the bloc, on 18 December 2007 in Montevideo, Uruguay. In addition to Israel, MERCOSUR has concluded agreements with Bolivia, Chile, Colombia, Ecuador, Peru and Venezuela.

Israel has pursued a liberal import policy. In addition to its Free Trade Agreement (FTA) with the United States, it has concluded free trade agreements with Bulgaria, Canada, the Czech Republic, Hungary, Mexico, Poland, Romania, the Slovak Republic, Slovenia, Turkey, the EU and EFTA (Iceland, Liechtenstein, Norway and Switzerland). In 2011, a trade agreement was signed with the MERCOSUR countries (Argentina, Brazil, Paraguay, Uruguay and Venezuela), and agreements with India and China are under discussion. Israel also has a preferential trade agreement with Jordan and maintains a customs union with the Palestinian Authority. In 2005, the European Union began imposing tariffs on goods produced by Israeli companies in the West Bank. .