UK-Israel relationship to hit new heights amid rocky times
UK-Israel relationship to hit new heights amid rocky times
National security, Brexit, and innovation are all reasons why the UK and Israel have been reassessing their trade relationship, explained Matthew Salter, Director at the Department for International Trade in the UK Embassy
Two countries that have faced a disruptive change in the last half-decade are once again coming together to establish the future of their relationship. Despite changing prime ministers and unstable governments in recent years, Israel and the UK remain dedicated to working on a trade agreement that must consider the potential of both countries while acknowledging the challenge of recent political and social issues.
“All anyone wanted to talk about 20 years ago was the peace process, a two-state solution, and no one was interested, either in the press or general, about the bilateral relationship on trade, science, and more,” explained Matthew Salter, Director at the Department for International Trade in the UK Embassy based in Tel Aviv. “Now, 80% of our focus with countries is on bilateral relationships and trade cooperation.”
It is already a piece of history that the UK voted to depart from the EU, and with that, depart from its trade deals with countries around the world. After formally leaving the bloc in 2020, the country has been on a mission to forge friendships with nations in and out of the EU for better trade, movement, and security. For many countries, the UK replicated its trade agreements and used its one with the EU as a starting point for negotiations with Israel. According to Salter, the agreement is currently “99% goods” and almost entirely neglects services.
“The UK would never have been able to advance that to a more ambitious agenda because the EU wouldn't have wanted to for political or economic reasons,” he explained. Salter moved to Israel 20 years ago and has worked both with the British and Israeli governments in different roles before accepting his most recent position in 2020. “The minute the UK is no longer part of the EU, it can turn around and say ‘where in the world do we want to focus our trade priorities?’”
Israel, as always, is looking to make friends. In its mind, the 1995 trade agreement it signed with the UK (through its EU agreement), can be updated to include new aspects such as tech and innovation, or take advantage of Israel’s service industry which accounts for 70% of its economy. Liz Truss, who visited Israel as UK Trade Secretary and supported this move, has been promoted to the country’s newest prime minister - although her premiership has been plagued with the death of Queen Elizabeth and a desperately unpopular tax policy that led to an embarrassing U-Turn. Despite this, it is largely expected that her successor Kemi Badenoch is set to continue the momentum that is approved by her boss.
Official trade talks between the UK and Israel started before Rosh Hashana, with 13 negotiators from each country articulating their desires moving forward. Salter stressed that “almost every single political leader across the spectrum” in Israel has been pro-UK-Israel, and while a timeline couldn’t be confirmed, it is expected that a trade deal could be confirmed within 6-12 months. For the UK this can be considered a win since Truss has already conceded that trade deals with larger countries like the USA, its biggest individual trading partner, remain unlikely in the "short to medium term".
“The interesting thing about this agreement is because we've done all the easy stuff… now we are doing stuff on innovation, digital trade, exchange of data and regulations for setting up fintech companies, and data privacy, and things that are not what you would have ever dreamt about when thinking of a trade agreement 10 years ago,” Salter shared. Specific details of the ongoing negotiations couldn’t be shared with the press, but it is expected that the new deal will include a slew of updates and opportunities not seen in the current EU agreement. “There's no point in the UK negotiating an agreement with Israel if it's not a very advanced, modern agreement.”
Israel is already showing that it can offer the UK the very innovation that makes Startup Nation so famous. Israeli startup Healthy.IO is based in Leeds and was selected by the NHS to deploy its technology to help patients around the country. Ree, a company that operates in the electric vehicle space, is opening a UK factory and is expected to double its employee headcount. On the other side of that, Israel can enjoy the help of Crossrail International, a British consultancy firm that worked on the new Elizabeth Line and is now helping Tel Aviv with its metro line.
There are still some sensitivities in the new trade agreement that may not be addressed, at least publicly. Despite being a cyber powerhouse Israel is not expected to negotiate terms relating to intelligence and defense technology. It is not in the intelligence alliance Five Eyes along with the U.S., Canada, Australia, and New Zealand, but its defense companies remain an attractive asset for the country when doing trade. The British subsidiary of Israeli giant Elbit Systems was awarded a $100 million contract to provide the Royal Navy with new Electronic Warfare capabilities in 2021.
“The UK is opening up its doors and saying ‘fine we don't care if you're an Israeli company’, the government is open to Israeli know-how and it’s been surprising the press by how welcoming it’s been,” he said.
In the last few years, both the UK and Israel have undergone challenges on a local and global scale. Britain’s bumpy bounce out of the EU has caused it to reach out its hand, and Israel, isolated from its immediate neighbors, has been eager to stretch out and grab it. The agreement between the two countries is about to be updated for the first time in nearly 30 years - this time with new challenges and benefits. Israel can offer its tech and innovation, and the UK can trade freely outside of an organization that still sees Israel as politically toxic.
“At the moment the time between the UK and Israel is very exciting… There are exciting opportunities so it will be an exciting time to be in the UK-Israel bilateral space,” Salter concluded.