By Stratfor - May 18, 2016
A China-Israel free trade agreement (FTA) makes a lot of economic sense.
China is one of the world's leading manufacturing markets, while Israel
is among the leaders in research and development (R&D). The Chinese
want Israeli technology, and the Israelis want the cheaper consumer goods
that the Chinese can make. The countries' economic relationship has
expanded, with bilateral trade climbing to nearly $11 billion in 2015
from $50 million in 1992, and an FTA would accelerate the process.
It is no surprise, then, that the two recently launched formal
negotiations on such a deal. Fewer trade barriers would be good for both
sides, but there are also political and supply chain concerns pushing
them together.
Analysis
An FTA between China and Israel would enable Israel to import cheap
consumer goods from China such as machinery and electronics, and China
would be encouraged to purchase more of Israel's high-end goods. Under
an FTA, it is estimated that exports of Israeli goods to China would be
39 percent higher than in 2015, and China would be expected to export 24
percent more goods to Israel for a total trade increase of almost 30
percent. Israel would see the most immediate benefit because of the
difference in scale between the countries' economies. Israeli gross
domestic product would increase by 0.13 percent from 2015 numbers,
whereas it would increase the Chinese GDP by only 0.003 percent.
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