UAE-Israel trade could reach $4bn after countries ratify deal

Reuters

• UAE-Israel Business Council’s Dorian Barak assesses relationship
• Comprehensive economic partnership agreement accelerates 

Bilateral trade between the UAE and Israel could touch $4 billion next year after both governments ratified their comprehensive economic partnership agreement (Cepa) on Sunday.

That’s the view of Dorian Barak, co-founder of the UAE-Israel Business Council, who told AGBI that the deal “builds on the unprecedented interest among Emiratis and Israelis in taking this relationship to new levels”.

Following the Cepa ratification, Thani Al Zeyoudi, the UAE’s minister of state for foreign trade, tweeted: “Non-oil trade between UAE and Israel hit $2 billion in the first nine months of 2022, up 114 percent from the same period in 2021.”

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The tweet said that the agreement “will accelerate this progress as we create opportunities in key sectors such as advanced technology, renewable energy and food security”.

Barak agreed, forecasting that trade between the two countries will reach $3.5 billion to $4 billion in 2023, and will exceed $5 billion in 2025.

“The UAE-Israel Cepa will have far-reaching effects on trade between the countries, which has already reached an annualised rate of about $3 billion, including goods and services,” he said.

“By eliminating or reducing tariffs on nearly all products, Cepa builds on the unprecedented interest among Emiratis and Israelis in taking this relationship to new levels.

He added: “The UAE has become the most important hub for Israeli businesses that are focused on the markets of the Greater Middle East, India and Asia. In economic terms, it represents a seismic shift in Israel’s position in the region.”

The free trade agreement, which was first signed in May, offers unprecedented economic benefits for both parties by lowering or eliminating tariffs on more than 96 percent of tariff lines and 99 percent value of trade, enhancing market access for exporters, attracting new investment, and creating opportunities in key industries, including energy, environment, and digital trade. 

The deal will also support service sectors such as hospitality, financial services, distribution, and construction and provide a platform for small to medium-sized enterprises in both countries to expand internationally.

It is expected to advance bilateral trade beyond $10 billion within five years and add $1.9 billion to the UAE’s GDP within the same time period. Total UAE exports are expected to increase 0.5 percent by 2030.

It represents a remarkable transformation. For decades after Israel’s founding in 1948, Gulf countries including the UAE shunned the Jewish state in solidarity with the Palestinians opposing the state.

The signing of the Abraham Accords, named after Abraham to emphasise the shared origin of belief among Judaism, Islam and Christianity, in 2020 marked the first public normalisation of relations between an Arab country and Israel since that of Jordan in 1994.

The UAE-Israel Business Council was established in the summer of 2020 by business and public sector leaders from the UAE and Israel to help foster shared opportunities, economic cooperation and business partnerships between Emiratis and Israelis. 

In May, Abdulla Bin Touq, the UAE’s minister of economy, said the agreement symbolised “something greater than business; the importance of building meaningful partnerships”. 

The success of the relationship – kickstarted by the agreement signed by the Emirati and Bahraini foreign ministers, the Israeli prime minister and US president on the South Lawn of the White House in Washington DC on September 15 2020 – has taken even its biggest supporters by surprise.

“We expected trade to rise to around $500 million per year for the first five years following the peace agreement,” Barak told AGBI earlier this year.

“It has been more than double that figure, which is a testament to both countries’ leadership’s focus on this important relationship, but also on a strong people-to-people connection that has been forged by the two nations.”

The UAE-Israel deal is part of a series of initiatives that the UAE has launched to build a stronger, more resilient economic future.

Trade deal negotiations are due to start in a matter of weeks with Ukraine and follow the conclusion of other Cepas with India and Indonesia.

The UAE is also in trade talks with Turkey, Georgia and Cambodia, as part of its strategy to double its economy to $817 billion by 2030.