USA-Israel economic relations: Opportunity and success

Economic ties between Israel and the US are stronger than ever, and getting even stronger. This is crucial to note in these turbulent times.

Our strong economic ties are based largely on our shared values, our mutual proclivities for entrepreneurship, creativity and enterprise, and the resulting strong innovation ecosystems embodied by tech hubs like Silicon Valley and our own “Silicon Wadi.”

A few key facts illustrate why the U.S. is and will continue to be Israel’s most vital economic and trading partner for many years to come:

• Israel is the United States’ oldest free trade agreement partner (30 years).
• Trade between Israel and the US stands at almost $40 billion a year, triple what it was less than two decades ago.
• Over 1,000 Israeli companies are active in the U.S., creating over 100,000 American jobs in over 40 states.
• Iconic American firms such as Intel, Google, Apple, GM, Microsoft, eBay, Lockheed Martin, IBM, GE, Motorola, Cisco and dozens more have all opened R&D centers in Israel. For many, it is their only R&D center overseas – a testament to Israel’s global standing as an international hub of innovation.
• Israel is the third most represented country on the NASDAQ (after the U.S and China). Israeli IPOs on Wall Street this year have hit record numbers.
• Israel is one of the America’s top 25 export destinations.

To give this ever-strengthening relationship some historical perspective, economic ties between our two nations reached a significant milestone in 1985, when President Ronald Reagan signed the historic Free Trade Agreement. He famously said, “The Free Trade Area Agreement symbolizes once again our two countries’ deep community of interest and our shared values and aspirations for a better future. It underscores the importance of Israel to the United States as an ally, as a trading partner, and as a friend.”  

The Free Trade Agreement has been enormously beneficial for both countries, providing a stable, yet flexible environment for developing business relationships across a plethora of industries.

Another extremely fruitful area of collaboration between Israeli and U.S. business is in the area of research and development. There are three major joint US-Israel research and development foundations, the largest of which is The Israel-U.S. Binational Industrial Research and Development Foundation (BIRD). Since its establishment in 1985, the BIRD Foundation has granted $301 million to hundreds of joint Israeli-American projects. These projects have directly and indirectly generated $8 billion in sales.

Another avenue of activity which has been making headlines over the last several years is the acquisition of Israeli technology companies by U.S. firms looking for the latest innovations in a wide variety of fields.

Prominent examples include: the acquisition of navigation app Waze by Google for around $1B; the purchase of motion sensor startup PrimeSense by Microsoft for use in its gaming systems; the $1B purchase by IBM of Trusteer, a leading provider of advanced malware and fraud protection solutions; Apple’s acquisition of chipmaker Annobit, which was repurposed as Apple’s first R&D center outside of the U.S.; and Facebook’s acquisition of mobile app analytics company Onavo, which also became the anchor for Facebook’s R&D center in Israel. The list goes on, with U.S. M&A activity in Israel reaching a new peak in 2015.

Economic relations between Israel and the U.S. are also flourishing on state and municipal levels. One prominent example: Prime Minister Benjamin Netanyahu recently signed an historic agreement with California Governor Jerry Brown to export Israeli water technology to help overcome the Golden State’s deepening drought conditions. One result of this agreement is that the Carlsbad desalination plant is utilizing Israeli technology to provide 300,000 Californians with clean water, generating around $50 million annually for the region’s economy. Similar examples can be found throughout the country.

When discussing U.S.-Israel economic ties, President Barack Obama stated, “…that partnership is creating new products and medical treatments; it’s pushing new frontiers of science and exploration. That’s the kind of relationship that Israel should have — and could have — with every country in the world.” 

For now, that special relationship is reserved for one country alone – the U.S. We at Israel’s Foreign Trade Administration are doing our utmost to ensure that the ties between our two creative, innovative economies will only grow.