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Israel and U.S. to Air Complaints over Free Trade Area Agreement

June 22, 1988
See Original Daily Bulletin From This Date

Israel and the United States have formed two working groups to handle complaints each country has about the other’s trade practices, U.S. and Israeli officials said Monday.

The decision was made during their annual talks June 8-9 on the 1985 U.S.-Israeli Free Trade Area agreement. Both working groups will meet later this month for the first time, with an Israel-based group hearing U.S. complaints and a Washington-group listening to Israeli gripes, an Israeli Embassy official said.

At that meeting, the United States sought the removal of Israeli purchase taxes on certain U.S. products and raw materials manufactured or sold in Israel, as well as two taxes assessed at customs, the “harama” and “tama,” which are based on prices on the Israeli market.

Those taxes, the United States argued, raised the prices of U.S. goods to noncompetitive levels, and ran counter to the 1985 accord as well as the General Agreements on Tariffs and Trade, which Israel also signed.

An Israeli Embassy official said, however, the those problems existed before the 1985 FTA agreement, and that his government was showing “good will” and making a concession in deciding at the meeting to reassess those practices.

A State Department official, however, disputed that claim. He agreed that the harama and tama levies existed before the FTA agreement, but said that their “levels have changed since the FTA went into effect.”


Another Reagan administration official said that when the FTA agreement was negotiated, the United States “reserved the right” to complain about those taxes when they adversely affected U.S. imports because of changes in the rate of inflation.

The Israelis had gripes of their own. Their complaints were not with the 1985 FTA agreement, but with government procurement provisions, mainly dealing with defense.

The Israeli official said that the FTA agreement provides preferential treatment for some goods procured by the other government, but he said every barrier in that area should be eliminated.

The official applauded amendments to the recently approved omnibus trade bill, including an “anti-dumping” measure sponsored by Sen. Daniel Moynihan (D-N.Y.).

That measure protects Israel against U.S. penalties levied when other countries dump products on the U.S. market, or use their own export or manufacturing subsidies to challenge industries in the United States.

A second provision mandates that the FTA’s provisions take precedence in any U.S.-Israeli dispute over differences between the FTA and the trade bill.

The Israeli official said that in FTA talks, Israeli has an additional burden.

While the United States can bring disputes directly to the Prime Minister’s cabinet, Israel has to negotiate with both Congress and the executive branch. Congress, he said, and not the administration, is often the “watchdog for the FTA with Israel.”

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