Response to – Can China Replace the United States in Israel?

As the US – China competition has deepened during the past year, Israel has responded proactively to American concerns about Chinese acquisition of Israeli technology. This includes a strengthened review process for investments in Israel. Furthermore, Jerusalem acted swiftly with a security review when Washington expressed worries over China’s investment in the new section of the Haifa Port.

As America’s closest ally, Israel has no military-related exports and technology transfers to China. Economic relations between the two countries are concentrated overwhelmingly in agriculture, environment, infrastructure and other purely civilian spheres. Meanwhile, the Israel-American relationship never has been stronger. Israel’s growing relations with China take that into consideration.

Yet in his recent article “Can China Replace the United States in Israel?” Daniel J. Samet seems unaware of how carefully Israel conducts it affairs with China. When he writes, “In the wake of the United States and China’s phase one trade deal, the latter is quietly trying to strike an agreement of its own with Israel”, his language implied an illicit activity is taking place when in fact, the “secret talk” Mr. Samet references, is simply a Free Trade Agreement (FTA).

This negotiation was launched following a feasibility study conducted in 2014, that has since had its fair share of media coverage.

Samet indicates that the agreement will put Israel in China’s camp, pulling it away from the US. However, Free Trade Agreements are designed to expand options and open doors not close them. Nor are they invitations to exploit each other’s economies. They are mutually agreed upon and are typically implemented after a long negotiation process with positive results. The FTA between Israel and China could lead to benefits for Israel as there were for Chile, Peru, and ASEAN, that negotiated tariff concessions with China weighted in their favor.

Another example of a successful FTA negotiation with China is Switzerland, which managed to secure a commitment to protect intellectual property. In fact, the agreement also renders Swiss patents as automatically recognized in China, saving Swiss companies the hassle of dealing with complicated procedures of registering products in China. Such developments indicate that the FTA negotiation with China offers important potential opportunities for Israel.

While Mr. Samet is correct in suggesting that an FTA may increase access to Israel’s tech sector, he fails to note that it could also include more protection for Israeli tech firms that are currently operating or wish to operate in China. A well-negotiated FTA could simultaneously provide security for Israel and take into consideration Israel’s irreplaceable relationship with the US.

Samet’s comment that Israeli technology could “enhance China’s expanding surveillance state,” implies that Israel ignores the implications of sensitive tech sales. This could not be further from the truth. Ever since Jerusalem canceled a sale of advanced military technology to Beijing a decade ago at Washington’s request, Israel ceased all subsequent military sales to China.

Mr. Samet goes on to argue that an FTA “would make Israel more economically dependent on China—right now Israel’s second-largest trade partner—and as such beholden to the Communist Party in not only commerce but also politics and security.”

But it is not Free Trade Agreements that lead to economic dependence, rather, a failure to diversify trade and investments. Bilateral trade between the US and Israel is almost four times more than the estimated $13bn with China. The U.S. remains Israel’s largest business partner, with total goods and services traded in 2016 reaching upwards of $47bn – which when combined with Europe accounts for 60% of Israel’s bilateral trade.

In recent years Israel has also improved its trade relations with many of China’s neighbors, including Japan, South Korea, Vietnam and India. Samet suggests that Israel is conceding to China. Yet when the China – India border conflict was at its peak, Modi, India’s Prime Minister, visited Israel and signed a multi-million dollar arms purchase from Jerusalem. The deal was unaffected by China’s protestations and strongly worded suggestions that Israel refrain from providing military equipment to its border rival. Bilateral trade between Delhi and Jerusalem now stands somewhere between $5-6bn. In short, Israel is far from becoming dependent on China, regardless of whether or not there is an FTA.

Nor is Israel beholden to China. When it sees fit, Jerusalem blocks deals with Middle Kingdom. This was the case regarding China’s interest in purchasing Israel’s major insurance companies, Phoenix and Clal. Due to concerns over data protection, Israel’s regulators blocked the deal. Furthermore, unlike other US allies, Israel will not implement 5G with China’s Huawei.

American officials like National Security Advisor John Bolton and Secretary of State Mike Pompeo have, as Samet explains, raised concerns over elements of China-Israel cooperation. However, Samet fails to clarify that the concerns of the US administration are focused on areas of national security. Jerusalem’s response was to take them very seriously. At the same time, Washington has not asked Israel to cease economic cooperation with China. In fact, it encourages engagement where it does not impinge on security. This resonates with Israel, a nation with a clear understanding of its own national security priorities.

Samet aims to prove that Israel is moving to the China camp by noting that 66% of Israelis have positive views of China. However, this number is presented out of context and is therefore misleading. In fact, 66% represents a stark drop from the results of a nationwide survey in 2017 conducted by SIGNAL, an Israel based China-Israel research organization, when approximately 90% of Israelis expressed positive views of China. The decline can be attributed to international news about projects of the Belt and Road Initiative where deep debt led to the transfer of control of national infrastructure to China such as with the port at Hambantota in Sri Lanka. Also affecting public opinion were reports of China’s influence efforts in Australia and New Zealand and the cancelation or renegotiation of BRI projects in the UK, Malaysia and Myanmar.

While Samet insinuates that ties are contentious between Israel and the US due to the Jerusalem-Beijing connection, the relationship is actually rather clear on all three sides: the US and Israel continue to strengthen and deepen their broad historical relationship, while Israel and China seek to engage in cooperation that does not compromise the close friendship between Washington and Jerusalem.

Author:Carice Witte Founder and Executive Director of SIGNAL
Published: 19-03-2020