India and Israel Talk More Trade

India and Israel are talking about a new trade agreement. They want to trade more goods and work together on advanced technology. This will help both countries grow their economies.
By Newsroom | Business, International Relations |

Negotiations for a Free Trade Agreement (FTA) between India and Israel are gaining momentum, driven by a mutual desire to expand economic ties and foster cooperation in advanced technological sectors. This push comes as both nations engage in broader regional diplomacy, signaling a strategic shift in their bilateral relationship. The intensified talks aim to deepen engagement beyond traditional trade, focusing on areas like artificial intelligence (AI), cybersecurity, and defense.

The current discussions build upon earlier engagements, including the signing of terms of reference for the FTA and a bilateral investment agreement. The proposed FTA is viewed as a two-phase approach, initially focusing on tariff reductions for goods, with later phases dedicated to investment and technology transfer in strategic sectors.

Trade Partnership: A Closer Look

India and Israel have been working to enhance their economic partnership. Key developments include:

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  • FTA Negotiations: Talks for a Free Trade Agreement have been revived after a significant pause.

  • High-Level Visits: Indian Commerce Minister Piyush Goyal has met with Israeli leadership, including Prime Minister Benjamin Netanyahu and President Isaac Herzog.

  • Delegation Exchanges: An Israeli delegation is expected in India to further these discussions.

"We are building economic power together." - Quoted statement attributed to a minister following high-level meetings.

The core of the current engagement centers on accelerating FTA negotiations, with a clear intent to move beyond traditional goods trade towards deeper collaboration in high-tech and strategic sectors.

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Strategic Sectors at the Forefront

While merchandise trade between India and Israel remains modest, the renewed focus on an FTA highlights the potential in strategic areas. The Global Trade Research Initiative (GTRI) suggests that the most significant commercial opportunities lie beyond basic goods.

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  • Areas of Focus:

  • Defense manufacturing

  • Semiconductor design

  • Electronics

  • Water and irrigation technologies

  • Precision agriculture

  • Cybersecurity

  • Frontier research and development (R&D)

  • Drip-irrigation systems

Sectors where India is competitive, such as agriculture, generics, steel, and chemicals, face existing tariff preferences for Israel with partners like the EU and the US. This suggests that gains from the FTA will likely stem from specialized sectors rather than broad-based goods.

The GTRI analysis indicates that the economic momentum will largely come from a limited range of goods, but significant expansion is anticipated in strategic sectors where both economies are already closely aligned.

A Phased Approach to Trade Liberalization

The proposed Free Trade Agreement is envisioned to follow a two-phase roadmap. This structure aims to provide early benefits while allowing sufficient time to address more sensitive aspects of the trade relationship.

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  • Phase One: Focuses on tariff reductions for goods.

  • Phase Two: Will expand to cover investment and cooperation in technology transfer, defense, innovation, cybersecurity, AI, fintech, and precision agriculture.

This phased implementation is seen as a practical way to manage the complexities of trade liberalization and ensure broader economic integration.

The two-phase strategy for the FTA is designed to enable quick gains from goods trade while gradually incorporating deeper cooperation in high-value technological and strategic domains.

Broader Diplomatic and Economic Context

The renewed impetus for the India-Israel FTA is occurring within a broader regional diplomatic push. Both nations are looking to strengthen their economic alliances and connectivity.

  • India's Goals: Reducing dependence on any single market and diversifying economic partnerships.

  • Israel's Goals: Seeking diversified economic alliances.

  • Connectivity Initiatives: The India-Middle East-Europe Economic Corridor (IMEC) is highlighted as a key initiative for expanding connectivity and trade.

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The bilateral investment agreement signed in September further underscores the commitment to deepening economic ties. Israel views India as a crucial part of its strategic economic outlook, and India sees Israel as a vital partner.

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"India is a great bet for us, and we want to be the best partner for India.” - Statement regarding the economic partnership.

The FTA negotiations are intrinsically linked to larger regional economic strategies, emphasizing India's strategic importance to Israel and vice versa, as demonstrated by initiatives like IMEC and bilateral investment agreements.

Expert Insights and Analysis

Commentators note the strategic importance of this renewed focus on economic cooperation. The engagement signals a deliberate effort to leverage the strengths of both economies in cutting-edge fields.

  • Ambassador Reuven Azar expressed high expectations for Prime Minister Modi's upcoming visit to Israel, indicating the potential for significant progress.

  • The Global Trade Research Initiative (GTRI) provides a measured perspective, highlighting both the opportunities in strategic sectors and the limitations in traditional goods trade.

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The current trade discussions are characterized by a strategic reorientation, aiming to harness technological advancements and deepen partnerships in specialized sectors rather than solely relying on broad-based trade expansion.

Conclusion and Next Steps

The ongoing negotiations between India and Israel for a Free Trade Agreement represent a significant step in their bilateral economic relationship. The focus on strategic sectors like AI, cybersecurity, and defense, coupled with a phased approach to trade liberalization, indicates a sophisticated strategy for mutual growth.

  • Key Actions:

  • Further high-level meetings and delegation exchanges are expected.

  • The two nations will continue to define the scope and terms of the FTA.

  • Emphasis will remain on fostering cooperation in advanced technology and defense.

The current trajectory suggests a sustained effort to solidify and expand the economic partnership, aligning with broader regional diplomatic and economic initiatives.

Sources

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Frequently Asked Questions

Q: What is India and Israel talking about?
They are talking about a Free Trade Agreement. This means they want to make it easier to trade goods and services between their countries.
Q: What kind of things will they trade more of?
They want to trade more goods, but also work together on new technology like computers, defense, and farming tools.
Q: Why are they doing this now?
Both countries want to help their economies grow and work together on important new ideas. They are also working with other countries in the region.
Q: What is the plan for the trade deal?
The plan is in two parts. First, they will make it easier to trade goods. Later, they will focus on working together on technology and investments.