View from U.s.: Nixon’s Economic Policy Not Likely to Affect Israel Over-all

Economic experts, both here and in New York, said today that it was too early to judge the impact on Israeli imports of President Nixon’s announcement last night that the United States would, among other things introduce a 10 percent surcharge on most imports. The Israel Government Investment Authority and Bank Leumi Le-Yisrael were among those declining comment, at least for now. However, a canvas by the Jewish Telegraphic Agency of official American sources here disclosed that the over-all effect on Israeli-American economic relations is not likely to be great. Israel’s exports to the U.S. in 1970 totaled $149.6 million, with diamonds leading the list at $70 million. This year the rate has been somewhat higher–$87 million in the first six months. (In 1969 it was $128.6 million.) The imports from Israel do not seem to be among the exemptions indicated by Treasury Secretary John B. Connally. Therefore, the tariff charge under the new surcharge would amount to $15 million, based on last year’s trade level. (Exports from the U.S. to Israel last year totaled $593 million, and were largely machinery and transport equipment, foodstuffs, chemicals and manufactured goods. In 1969 the total was $456.9 million. In the first six months this year, the sum has skyrocketed to $406,8 million.)

The foreign assistance program is being reduced by 10 percent under the President’s program, but it has not yet been decided whether the cuts will be applied regionally or country-by-country. In either case, Israel is not yet affected by this cutback, since she has not received this kind of “foreign aid” from the U.S. in 10 years. The new Foreign Aid Bill before Congress, calling for $3.2 billion in economic and military assistance, does include Israel, but knowledgeable observers said it was much too early to tell how it will be affected by the President’s 90-day freeze on wages and prices. Economic aid in the form of commodity credits are not believed affected by the new controls, since they are not under the jurisdiction of the Agency for International Development (AID), an arm of the State Department. During fiscal year 1970, which ended June 30, Israel received $50 million in commodity credits and $30 million in credit from the Export-Import Bank.

Capital that Israel obtains from the U.S. through the sale of Israel Bonds and other fundraising campaigns sponsored by American citizens appear definitely outside Nixon’s control program. At the State Department it was pointed out that no controls are envisaged on the flow of capital to foreign countries under the wage-price freeze. The 10 percent surcharge on imports, it was explained, is based on the value of the products and is added to the normal tariff now in effect. Thus, if a commodity is imported at a value of $100 and the present tariff is 5 percent, the commodity would cost the importer $105; but a 10 percent surcharge would raise his cost to $115. Since the freeze blocks any increase in price to the consumer, it was not yet known here who will shoulder the now surcharge costs–the American importer or the Israeli exporter or both. Israel, it was recalled, put into effect a year ago a 20 percent surcharge on most of its imports. Both the Israeli and the American surcharges, a source added, are not intended primarily to raise revenue; rather, to effect an equilibrium in her balance of payments. Both are seen as temporary measures.