Opportunities in EU-Israel economic relations

Malta's Port considered as a gem in the centre of the Mediterranean - Photo by Melvyn Mangion

Israel holds a significant place in the European Union (EU)’s economic relations. In fact, the EU is Israel’s primary trading partner with total trade amounting to €36 billion in 2019. Formal ties between Europe and Israel can be dated back to the early years of the founding of the state of Israel, thus laying foundation to a strong economic partnership, ever bolstered by a robust social relationship between the two parties.

A new report funded by the European Commission has outlined how Israel can strengthen its ties with the European Union, highlighting the need to change the perception around how the 27-member union operates. Even though the EU is Israel’s largest trading partner, the idea that it is ‘fragmented’ can make it appear difficult for Israelis to penetrate the eclectic framework of laws, languages, regulations, or cultures.

The European Union includes leading countries such as Germany and France, but it also includes small countries like Malta and Luxembourg who still have significant influence within the European Union. With a population of 446 million and thousands of businesses generating millions of dollars, the European Union should not be neglected. However, regulatory navigation within the EU can be perceived as difficult since, even though it is the largest single trading block, it is still comprised of different nations with different goals.

“The EU is by far the first target for Israeli investment, accounting for 40 percent of outward investment, but the same cannot be said about the EU investments in Israel,” explained EU Ambassador to Israel, Emanuele Giaufret. “The EU-Israel Association Agreement provides for bilateral free trade in goods but does not cover investments. That means that investors on both sides face more national barriers and obstacles. That’s why we decided to hire a team of independent consultants to analyze those obstacles behind the relatively low penetration of the Israeli market by European investors and, above all, to provide recommendations on how to change it.”

In recent years, Israel’s recognition as a global innovation hub offering opportunities for companies from around the world has gained traction. With more than 9,000 active companies among a population of 9 million, Israel boasts the largest startup density in the world, the report said.

Some organizations in the EU see Israel as just a small market, a geopolitical island, that is already saturated with players. Others are still concerned about repercussions from the Arab world for publicly working with Israel.

The European Commission aims to relaunch and strengthen the strategic partnership between the European Union and its Southern Neighbourhood partners. In 1995, the Barcelona Declaration launched the Euro-Mediterranean Partnership with the objective to create an area of peace, shared prosperity, and human and cultural exchanges. 25 years on, the Mediterranean region is facing a number of governance, socio-economic climate, environmental and security challenges, exacerbated by the COVID-19 pandemic. The European Council in December 2020 highlighted the need to develop a new Agenda for the Southern neighbourhood and looked forward to the Joint Communication.

The EU and Israel are also working on the European Green Deal. This is another initiative aimed to enhance further the economic relations between the two sides.

The European Green Deal calls for greenhouse gas emissions to be halved by 2030 and complete carbon neutrality by 2050. To help meet these challenging goals, the EU’s Horizon 2020 innovation incentive programme will devote at least 35 per cent of its budget to investments in climate solutions – including through multinational partnerships.

Aiming to be a leading developer of green solutions and cleantech, Israel recycles 92 per cent of its domestic wastewaterfour times the rate of the next highest country, and has pioneered smart agricultural solutions, such as drip irrigation. The country’s track record of developing innovative technologies for better resource management has catapulted it to leading positions in international rankings, such as the Global Cleantech Innovation Index, where it ranks sixth. Israel is home to over 500 cleantech companies, while leading Israeli research universities have also incubated cutting-edge green solutions.

The Israeli innovation is helping advance Europe’s Green Deal goals. From promoting biodiversity to eliminating pollution and enabling more sustainable transportation options, a number of Israeli projects are receiving Horizon funding to meet the climate challenge.

About the Author
Melvyn Mangion is an investor with consolidated experience in the financial services industry and public/media relations. He has served in important roles within the Government of Malta and was also responsible for the euro changeover campaign in Malta.
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