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Israel Signs Trade Deal with UAE, Its First Ever Free Trade Agreement in the Middle East

Israel and the United Arab Emirates signed a historic free trade agreement on Tuesday, May 31, marking the first deal signed between Israel and a Middle Eastern nation. The deal was signed amid rising tensions in the region, with skirmishes occurring between Israeli and Palestinian groups mere days before the announcement.

The formation of the trade deal was one of the quickest in Israeli history– formal ties between Israel and the UAE were only established in 2020, and representatives for both countries met in December 2021 to begin talks about a potential deal. UAE’s eagerness to sign the agreement highlights the willingness of some Arab leaders to see Israel as an economic partner rather than an adversary, the latter being a stance previously maintained for decades by nearly all Middle Eastern nations.

Included within the deal is the elimination of tariffs on 96% of goods traded between Israel and the UAE over the next 5 years, with emphasis given to medical goods, cosmetics, plastic items, agricultural products, and jewelry. The annual valuation of trade between the two countries was pegged at $885 million in 2021, however economists expect the annual value of trade to increase to $10 billion within 5 years as a result of this agreement.

Questions had swirled around the status of the deal just days prior, as violence reignited between Palestinians and Israeli nationalists, including the desecration of Al-Aqsa, an Islamic holy site. In response, the UAE issued a statement condemning the actions of “extremist settlers” and urged Israel to hold its citizens accountable. Apprehensions further increased when media outlets were suddenly barred entry from the FTA-signing event, prompting concerns that the deal would not materialize, however diplomats announced the deal’s finalization just hours later.

The shift in relations between Israel and the Middle Eastern countries also extends to Bahrain and Morocco– both signed defense agreements with Israel in 2020, and significant steps have been taken to improve Israel’s relationship with Sudan. Egypt, Israel’s oldest partner within the region, has begun to revamp its alliance with Israel as well– though a peace deal was signed by both nations in 1979, the partnership remained chilly until Israel began normalizing its relations with other Arab nations in 2020.

The UAE is also extending its trade relations beyond its usual scope– in addition to Israel, the oil-rich nation signed a trade deal with India in February of 2022, and is currently negotiating bilateral economic agreements with six other countries: South Korea, Kenya, Turkey, Ethiopia, the United Kingdom, and Indonesia.

How Allyn Can Help

At Allyn we have the experience, systems, and best practices in place to help guide clients through developments regarding supply chain developments and international trade. If your business has inquiries regarding the new trade agreement between Israel and the UAE, Allyn International is able to provide effective guidance. If interested, please contact us at trade@allynintl.com.

Contributor: Jennifer Nowicki


About Allyn International

Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North and South America, Europe and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A., Shanghai, P.R. China, Prague, Czech Republic, and Dubai, U.A.E. For more information, visit www.allynintl.com.

 

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