Israel Economic Snapshot

Economic Forecast Summary (December 2021)

Economic activity rebounded strongly in 2021 and GDP is projected to grow robustly by 6.3% in 2021, 4.9% in 2022 and 4% in 2023. The progressing booster vaccination campaign, a gradually recovering labour market and fading uncertainty will support domestic demand. Strong growth of high-tech services exports will continue. The recovery could be slower if the health situation deteriorates again, or the increase in inflation is stronger or more persistent than assumed in the projections. Growth could be stronger if accumulated savings are withdrawn more quickly.

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The Drivers of Supply Chain Resilience

The pandemic has shown the vitality of supply chain resilience. Dr Yueh explains what trends should be considered going forward in building back supply chains around the world. Banner image: Shutterstock/Travel mania

Regional trade agreements

Regional trade agreements are evolving – why does it matter?

Making trade work for all

In the wake of uncertainty and tensions in the trading system today, alongside heightened public concerns about globalisation, open trade is under threat. 

Where do my things come from? How trade works today

When we think about international trade, we traditionally think about a person or company producing all elements of a product in their home country and then exporting a final product to a consumer in a different country.

Challenges and opportunities in trade

The tensions we are now seeing in the international trading system have been building over decades. Many people are concerned that not everyone is playing by the agreed multilateral rules, that high levels of state support and protection remain in key sectors, and that new multilateral rule-making is not keeping pace with the business realities of today. Against this background, protectionism is on the rise.

But if the overwhelming consensus among economists is that trade is good for firms and families alike, and people trade because it is in their interest to do so, how did we get here? And how can the OECD support policy makers as they build a more open, inclusive and sustainable trading system?

Current challenges facing global trade, and how we got here
Current concerns about the trading system focus both on areas where multilateral trade rules exist but where fair international competition is hindered by continuing high barriers and state support, and areas where trade rule-making has not kept pace with changes to the global economy. Both these “gaps in the rulebook” are highlighted in calls for reform and modernisation of the World Trade Organisation (WTO), across both its monitoring and transparency and its negotiating functions.

Market distortions remain significant in key areas of global trade. For example, notwithstanding the 1995 WTO Agreement on Agriculture, agro-food products overall face higher trade barriers than industrial goods. Tariffs applied to agricultural products are on average three times higher than for industrial goods. Agro-food products are also more likely to face non-tariff measures. These include quotas (banned for other products) as well as regulations which, while aimed at legitimate public policy objectives, can nonetheless sometimes be more trade restrictive than necessary to achieve that objective. Support to agricultural producers remains high, with over two thirds provided via meaures that distort production and trade strongly. There is significant scope for reform of agricultural markets and trade, with considerable gains from even partial reform.

There are also growing concerns about rising government support across a range of industrial sectors, and that current trade rules on industrial subsidies are not able to effectively tackle this support and that new rules are needed to ensure a level playing field.

Part of this concern is related to rapid internationalisation of state-owned enterprises (SOEs). In some countries, SOEs benefit from preferential domestic treatment, or from cheap finance, including from commercial lenders perceiving an implicit government guarantee. While this can sometimes be justified within their national jurisdiction where there are public services these SOEs are expected to perform, the internationalisation of their operations calls for action to maintain a healthy competitive environment.

There are also important areas where multilateral rules are not keeping pace with changes in the global economy. A good example of this is trade in services. Since the 1995 WTO General Agreement on Trade in Services (GATS) the world has evolved dramatically, as a result of technological advances, changing business practices, and deeper global integration. New commitments and updated rules for services trade are needed that reflect 21st century trade.

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Why open markets matter

People trade and governments open markets because it is in their interest to do so. Trade and market openness has historically gone hand-in-hand with better economic performance in countries at all levels of development, creating new opportunities for workers, consumers and firms around the globe and helping to lift millions out of poverty. Relatively open economies grow faster than relatively closed ones, and salaries and working conditions are generally better in companies that trade than in those that do not. More prosperity and opportunity around the world also helps promote greater stability and security for everyone.

So does trade really benefit ordinary people?

Trade has contributed to lifting hundreds of millions of people out of poverty: the share of the world's population living on less than PPP USD 1.90 per day fell from around 35% in 1990 to less than 10% in 2015. Evidence on the impact of trade on poverty in developing countries over 1993-2008 shows that the change in the real income of the bottom 20% of the population is strongly correlated with the change in trade openness over the same period. Developing and emerging economies are playing a more important role today in trade than ever before, contributing to declining inequality among countries (though not always within countries).

Trade has delivered unprecedented access to goods and services, with a revolution in the availability of goods for low income households. Take the cost of purchasing a television set, for example: between 1980 and 2014, the price of a roughly comparable TV set fell by 73%, in part as the result of ambitious trade liberalisation efforts – and the smart television sets we buy today are vastly better than those available in the 1980s. Lower prices are particularly beneficial for poor households, which spend relatively more on heavily-traded products (for example, staples such as food and garments).

Not only does trade lower prices, it also provides jobs for millions of people around the world. In a large country like the United States, around 10% of the workforce is involved in producing goods and services that are exported and consumed abroad, which amounts to around 14 million American jobs. The share goes up to 20% for France, almost 30% for Germany, and 47% for a small open economy like Ireland.

Across all countries, the share of jobs that rely on trade is significantly higher when taking into account “indirect” exports (when a person or company sells a good or service to another actor in the domestic market that uses it as an input in its exports). In some countries like China these can out-number jobs in the exporting industries themselves. These indirect export channels are especially important for smaller firms.

Trade also plays a role in raising incomes and improving overall working conditions. Exporters in the United States, for example, on average pay wages that are 6% higher than non-exporters. And whether the measure is injuries on the job, child labour, informality, or effects on female labour, open economies significantly out-perform closed ones, and labour rights are generally better respected.

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Market analysis tools

A key challenge for exporters is the scarcity of reliable trade information on markets.

Payment of taxes on personal imports

Value Added Tax (VAT), purchase tax and customs duties apply to some instances of personal import of products to Israel.

Tips for going about a personal import in the right way

Verify with the overseas supplier that it specifies the real value of the goods on the invoice

Israel Standardization Policy

National standardization policy includes: determining standardization priorities, initiating and changes in existing standards, proclaiming standards as mandatory and removing mandatory status, inter-ministerial coordination regarding standardization and adopting international standardization.

International Entities Dealing with Trade and Dumping

Various entities worldwide promote fair trade and act against dumping.

What is personal import?

According to the Free Import Order, an import is considered personal import if it has been proven, to the satisfaction of the Tax Authority’s Director General or Deputy Director General, that the goods are imported not through a dealer, not for supply, production or provision of services, and at a reasonable quantity for the individual’s personal or family use (see article 2(c)1 of the Free Import Order, 2014).

Tariff and VAT

Where can I find the customs tariff?

Import Exemptions and Mitigations

In specific cases it is possible to obtain an exemptions from import license, approval or permit. This does not apply, of course, to goods prohibited for import pursuant the Customs Tariff Order.

Are there import requirements or terms?

The Ministry of Economy and Industry updates and amends the Free Import Order and Free Export Order to include all the technical

I want to import a product. What should I do

Generally speaking, import to Israel is free. Any person can import without an importer license or an import license/approval. However, some products require importer registration and an import license or approval, to supervise the products’ quality and to protect public health and safety.

Importer Guide

This guide is intended for citizens attempting import, whether personal or commercial, for the first time, and provides detailed explanations for frequently asked questions.

Making information accessible to importers and exporters

The EuroMed Trade Helpdesk constitutes a tool to provide accessibility to information on regulation, legislation, customs and other topics.

Import Administration

The Import Administration works to promote competition and reduce the cost of living through promotion and diversification of imports.

The administration operates on a variety of intra- and inter-ministerial fronts, which include lowering import barriers, reducing regulation in import procedures, granting import licenses, initiating activities to diversify import channels, promoting import reforms, distributing tariff-free quotas, encouraging parallel imports and more, all with meeting the consumer's needs and lowering the cost of living as an objective.

The administration's activities focus on the following areas:

• Conducting economic investigations on trade offenses, market flooding, and unfair trade.

• Distribution of about 150 different quotas for importation of processed food with customs exemption.

• Facilitating importers by distributing thousands of import permits for exemptions from meeting standards.
• Distribution of licenses to import dangerous weapons and toys.
• Running the ONE STOP SHOP hotline – for all importers' inquiries.
• Encouraging imports as a tool to increase competition.
• Making relevant knowledge accessible to importers and consumers.
• Concentrating on import policy, formulating measures to remove import barriers and implementing the ministry's policy on import.

Import management and control

This area deals with the ongoing work of handling importers' inquiries for permits, licenses and exemptions (2C2) for importation in accordance with the Ministry of Economy's duties under the Free Import Order and other laws under the ministry's authority (apart from import exemption permits for export and regulatory approvals). The Import Management and Inspection Unit provides approximately 30,000 import permits per year and consistently improves the process of granting import permits with a focus on short handling time, accessible service and professional care as a means of reducing regulatory burdens and making importing to Israel cheaper.

Trade Levies

Under the 1991 Trade and Defense Law, the administration is responsible for protecting the local economy against unfair trade practices, and for protecting against possible international trade wars, in accordance with agreements signed by Israel within the World Trade Organization.

The Administration is authorized to operate four types of levies: the flooding levy, the comparative levy, the defense levy, and surcharge. The Director of the Import Administration is also the Commissioner of Trade Levies, and has the powers to conduct investigations and make decisions, as well as the Economic Affairs Advisory Committee on these levies, and the minister himself.

The flooding levy is imposed on imports that are flooding the market, as a general rule – imports whose export prices are lower than their prices in the country of origin, which causes real damage to the productive industry in the country. A comparative surcharge is imposed on exports to Israel subsidized by the government of the exporting country and causing real harm to the productive industry in the country. The surcharge is imposed in various cases as prescribed by law. A defense levy (safeguard) is imposed when a substantial increase in imports in a particular industry causes serious damage to the productive industry in Israel, and considering the benefits to the economy arising from imports.

Local producers representing the Israeli producers' industry can file a complaint of trade surcharges against importation at flood pricing, a supported price or an increase in imports that cause damage to the local industry. Such a complaint must be based on apparent evidence and include ongoing and up-to-date data demonstrating the harm caused to the local industry.

The commissioner, after investigating the complaint, submits the findings of his inquiry into the flood pricing or supported pricing to the Advisory Committee, which hears the parties and submits its conclusions and recommendations to the Minister of Economy. It is the Minister of Economy who has the final word on whether to impose a levy, at what rate and for what period of time. The commissioner must submit his findings in the inquiry of safeguards directly to the Minister of Economy. The Commissioner of Trade Duties offers help to local manufacturers by filing a complaint / application and fulfilling the requirements applicable to them by law.

The decision of the Minister of Economy to impose a flooding levy, a comparable levy, a surcharge or a safeguard levy is subject to the consent of the Minister of Finance and the approval of the Knesset Finance Committee.

Import management

Granting of exemptions from the presentation of a standard in accordance with Section (2) (c) (2) of the Free Import Order:

• Import for self-use
• Donations
• Import of military equipment intended for a government body
• Import of professional audio and video equipment
• Import of samples for display and market testing
• Import for use in the manufacturing process
• Import of spare parts
• Import of medical equipment
• Import of computers, computer equipment, printers, copiers and electric musical instruments
• Import of external power supplies into computer equipment

Granting weapons and firearms licenses

The division distributes import licenses for cold weapons, hot weapons, as well as dangerous toys such as Airsoft and Paintball. These licenses are distributed according to strict criteria while implementing online information systems to improve service and promote professional collaborations with the Customs, the Israel Police and other agencies to prevent smuggling and violations in the field. The division also conducts reviews and traning for importers in the field.

Distributing customs-free quotas for imports of food products

The Import Administration, through the Customs Committee of the Ministry of Economy and Industry, distributes approximately 150 different quotas each year for import of duty-free food items in accordance with Director General 2.7, under the International Trade Agreements of Israel and voluntary quotas.

In recent years, the commission, headed by the Director of the Import Administration, has begun to distribute quotas through competitive proceedings to increase the impact on prices in the economy in industries where non-competitive market conditions or shortages result in price increases. In this way, tariff-free food quotas of cheese, butter, fresh meat and olive oil are currently being distributed in competitive proceedings to importers who undertake to sell the products at the lowest cost to the consumer.

These quotas have a clear and immediate impact on increasing competition and reducing food prices in the given category.

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